THE INVESTMENT COLUMN : McBride banks on volume growth

The flotation of McBride, Europe's largest manufacturer of private- label household products ranging from toothpaste and cleaners, has been priced at 180p-200p, valuing the company at between pounds 315m and pounds 350m when the shares start trading on 7 July. A price of 190p is viewed as fair in the City, though judging the company is difficult as there are few direct comparisons.

Unlike Unilever and Reckitt & Colman, which make branded household products such as Jif and Persil, McBride sells toothpaste and cleaning products to supermarkets like Tesco and Sainsbury to sell under their own brand. If there is a potential cloud on McBride's horizon this is it. The increasingly powerful supermarket groups are putting pressure on their suppliers. This is the position facing own-brand food groups such as Northern Foods and Hazlewood Foods, which have both announced disappointing results in the last two weeks.

The mainb problem is rising raw-material costs such as packaging, which manufacturers are struggling to pass on in higher prices. McBride's advantage is that it is operating in a relatively immature sector that offers plenty of growth. In the UK, 37 per cent of food products are own-label, compared with 20 per cent in household products. While investors can expect McBride's margins to come under pressure in the longer term, this ought to be more than compensated for by volume growth.

The company is forecasting operating profits of pounds 38.5m for the year to June. A flotation price of 190p would put the shares on a forward multiple of 12.9, which is a substantial discount to comparable stocks.

With McBride likely to be given a breathing space before margins comes under too much pressure from the supermarkets, the shares look attractive. Applications in the retail offer must be in by 4 July.