Yahoo Finance Plastic is here to stay, boss of packaging giant RPC insists
The boss of plastic packaging firm RPC has insisted it is well positioned to deal with an environmental backlash against the material after its shares plunged following the release of its annual results on Wednesday.
Pim Vervaat said the FTSE 250 firm would be “part of the solution, not part of the problem” as the industry faced growing scrutiny amid fears that single-use plastic is clogging up the world’s oceans.
RPC revealed a doubling of pre-tax profits to £317m for the year to March on the back of a rash of acquisitions that helped it grow revenues 36pc to £3.7bn.
But its shares fell as much as 17pc in morning trade as investors reacted to a slump in free cash flow, down 4pc on the previous year to £229m, behind some analysts' expectations.
Mr Vervaat said the cash flow drop reflected increased capital expenditure, including opening a factory in Shanghai and £9m on the development of a new trigger spray bottle.
He added: “We’re investing for growth and you will see that come through in the top line as well as the bottom line.”
The surge in revenues was mostly down to a clutch of acquisitions in recent years including South Africa’s Astrapak, French bottle-top maker GCS and film manufacturer British Polythene Industries. Organic revenues were up a more slender 2.8pc.
Mr Vervaat said he did not expect plastics to be replaced by metal, glass or paper containers because of “all the distinct advantages of plastic” but said manufacturers would need to design their products to be more recyclable and improve waste management processes.
He said: "Who will benefit from that? I think RPC compared to small competitors. We’ve always prided ourselves on innovation and investment so I think we are well-placed.”
Nicholas Hyett, an analyst at Hargreaves Lansdown, said in light of RPC’s financial performance, the share price drop seemed “harsh”.
He added: “Fortunately RPC, like its packaging, is resilient. A comfortable balance sheet position and plenty of free cash should allow the group to ride out the storm, but investors will have to wait for sentiment towards RPC and its product to improve for a recovery.”
RPC’s shareholders will receive a full-year dividend worth 28p, 17pc higher than last year and the 25th annual increase in a row.
Mr Vervaat said he did not want to speculate on the reason for the declining share price, adding: “As management we just need to keep on delivering, keep hitting the numbers, keep paying out the numbers, keep applying our strict acquisition criteria and I have to believe that at some stage... underlying value will come through.”
