Raw material warning sends Vita into dip: Brokers reduce profit estimates on news of price damage

Click to follow
SHARES in the plastics group British Vita slumped by nearly 6 per cent yesterday when the company warned that rises in raw material prices were hitting profitability.

Brokers shaved their profit estimates, with Smith New Court revising its forecast down from pounds 47.5m to pounds 45m. In 1995 SNC predicts taxable profits of pounds 52m, down from pounds 55m.

The company said: 'As previously indicated . . . raw materials prices, especially in foam chemicals, have increased.'

It said demand for its products had weakened and it was encountering difficulties handing on the raw material price increases to customers. A spokeswoman for the company said the formal Stock Exchange announcement was not intended to be a profits warning. She said the market response was an over-reaction. The shares fell 16p to 259p.

Alongside yesterday's warning about raw material prices, Vita indicated that some parts of its European operations were improving. It said: 'Certain markets, such as the French automotive industry, are beginning to show signs of recovery.'

The company also said that evidence from Spartech, its US subsidiary, was encouraging and that a good start had been made operating a new factory in Poland.

Vita made an acquisition yesterday as well. It has paid pounds 9.5m for Jackdaw, which makes plastics. Among the Lancashire firm's products are nozzles for aerosol cans and heat-resistant components for cars.

Jackdaw had sales of pounds 10m last year. Vita said Jackdaw had a consistent record of profitability, but did not give details.