James Cropper slashes annual profit outlook after Cumbrian papermaker’s energy and raw material costs surge
- James Cropper now expects to make £2.3m in annual adjusted pre-tax profits
- Wholesale gas prices were exacerbated by spikes in late July and early August
- Selfridges, Mulberry and Burberry are among its most prominent customers
James Cropper has downgraded profit forecasts by over half as soaring power and raw material costs sharply cut into the group’s margins over the summer.
The paper producer now expects to make £2.3million in adjusted pre-tax profits for the year ending March 2023, compared to a prior forecast of £5.4million, even though demand has continued to expand across all divisions.
Due to surging wholesale gas prices, exacerbated by spikes in late July and early August, the Cumbrian company said its energy costs had skyrocketed by almost 150 per cent this year.
Papermaker: Based in the same village where it was founded, James Cropper is renowned for producing coloured paper for companies across a wide variety of industries
Its raw material outlays, which form a larger share of overall costs, have seen ‘unprecedented inflationary headwinds’ after climbing 20 per cent on the previous year, the group said.
James Cropper has passed on much of these extra costs – worth many millions of pounds – to consumers through price increases and energy surcharges.
Yet the late timing of these measures meant its earnings were still badly impacted, particularly within the paper business, whose customers comprise prominent high-street brands like Selfridges, Mulberry and Burberry.
This was despite the firm’s revenues climbing by 26 per cent in the opening six months of the financial year, including first-quarter growth of 36 per cent.
During the latter period, its Colourform arm successfully won new contracts across the premium wine, spirits, and beauty sectors, while the paper division gained some luxury packaging contracts.
Mark Cropper, James Cropper’s chairman, said: ‘The uncertainty and unprecedented inflationary pressures…have forced us to revise our profit expectations, despite each division showing strong demand and growth in sales.’
James Cropper shares plummeted by 14.6 per cent to £8.50 on Monday, making it one of the ten worst performers on the junior AIM market.
But while the group warned of subdued profits, it does anticipate continued volume expansion this year, buoyed by a full order book and the UK Government’s Energy Bill Relief Scheme providing discounts on electricity bills for British businesses.
In addition, the company said it had enhanced coating capacity within the US-based operations of TFP Hydrogen, an electrochemical manufacturing subsidiary, and embossing and varnishing capacity in the paper division.
Founded in 1845 in the village of Burneside near Kendal, where it still resides, James Cropper is renowned for producing coloured paper for firms across a wide variety of industries.
Since the late 1970s, it has supplied the red paper used in the Remembrance poppies sold by the Royal British Legion, replacing the previous fabric-made poppies.
The firm also pioneered the recycling of disposable coffee cups with its CupCycling technology, which removes the plastic lining from a cup and converts the remaining material back into paper.
According to its website, James Cropper’s recycling plant has enough capacity to upcycle around 500 million cups a year, around one-fifth of all the paper coffee cups thrown away each year in the UK.