Profits warning sees Powerflute shares dip sharply
SHARES in Powerflute, the Finnish packaging group co-founded and chaired by Dermot Smurfit, slumped nearly 9pc in London yesterday after it warned that first-half profits will be lower than had previously been expected due to unplanned maintenance on its paper mill. It said that €2m will be knocked off expected first-half profits as a result.
However, it added that it continues to experience "good demand" despite the economic conditions in Europe. The company is listed on London's Alternative Investment Market.
Powerflute's products are used mainly by the food industry and about 90pc of its output is used for shipping fruit and vegetables.
"Demand remained reasonably good throughout the second quarter and the average pricing levels achieved, although lower than in the first quarter, were better than expected," the company said.
"Trading conditions became tougher towards the end of the quarter as the uncertain economic environment affected consumer confidence in key European markets and reductions in recovered paper prices resulted in increased competition from producers of recycled fluting products," it added.
Fluting is the name for the rippled element of corrugated packaging.
The company said that despite those uncertain conditions, it has continued to experience "good order intake" and remains "optimistic" that there will be some improvement in conditions in the seasonally stronger second half.
Powerflute added that there has been an increased frequency of mechanical failures in some of the areas where it has made recent investments.
"An unplanned maintenance stop was taken during the second quarter and based upon performance since then, we are confident that most of the issues have been successfully addressed," said management.
Mr Smurfit and his family own 16pc of Powerflute, while his brother Michael, the former boss of Jefferson Smurfit, owns 21pc.
During the second quarter Powerflute said it looked closely at the potential acquisition of a large, integrated pulp and paper mill. It incurred about €500,000 in due diligence and other costs but withdrew because of what it said were "issues identified" during the course of that due diligence process.