The Investment column: RPC

Click to follow
The Independent Online
AS A small-cap manufacturer of plastic packaging, RPC is one of a large band of companies which rarely earn plaudits from the stock market, no matter what it does right. Last year the group boosted both profits and earnings per share by 18 per cent, achieved record cashflow and strengthened its balance sheet. Not bad in a year when economic factors threatened the future of companies in the sector.

RPC makes cups, bottles and containers for everything from vending-machine teacups to honey jars. That doesn't sound sexy, but there's substantial room for growth here. The group has successfully shifted into PET, the recyclable alternative to PVC, which is increasingly used by food producers because it looks more attractive than its plastic predecessors.

The strategy of its workaholic chief executive, Ron Marsh, is clear - to expand across Europe by acquisition and become the dominant player in plastic packaging. The group has just purchased an Italian PET producer, Montonate, for 27bn lire (pounds 9.3m). That followed four other acquisitions last year in the Netherlands, France, Germany and Poland.

RPC's record since its 1991 flotation is unblemished. Sales have grown from pounds 40m to pounds 260m. It has never disappointed the market with exceptional items or profits warnings.

Even so, the market still focuses on its status as a manufacturer with high capex needs, and considers it vulnerable to fluctuations in sterling. The former criticism seems misplaced given RPC's strong cashflow. The latter is odd too, as RPC is a pan-European company.

The group is forecast to produce a similar rise in profits in the current year to pounds 21m. At yesterday's closing price of 189.5p, up just 4.5p, it sits on a forward multiple of 10.3 - more than its peers but less than it deserves. Buy.

Comments