23^rd March 2022

Trading Update

James Cropper plc (AIM: CRPR)

James Cropper plc ('CRPR' or the 'Group'), the leading advanced materials and paper products group, today issues an update on trading and the impact of worldwide wholesale gas price rises.

As previously announced, the Group has experienced strong demand throughout the year and across all divisions, with over 30% sales growth in the current year to 26^th March 2022, which is ahead of previous market expectations.

However, as a direct result of the wholesale gas price increases impacting Q4 and subsequently, the profitability of the Paper division, our expectations for the full year will be for adjusted* PBT for the Group of £3.5M (FY2021: £1.1M) against previous market expectations of adjusted* PBT of £4.9M.

While the situation in Ukraine has resulted in uncertainty concerning the Paper division's input costs in the short term, the long term opportunity for the Group remains positive, and we are encouraged by our ability to flex pricing to respond to rising input costs. Building on a strong track record of growth, the year is expected to deliver a new sales high across the Group. We continue to maintain a strong financial position, with transformation programmes well in advance to transition away from natural gas across all Group divisions.

The Group has recently secured new credit facilities to support investments and other growth programmes. The £4m Government provided COVID related loan facility, CLBIL, has been repaid in full and undrawn facilities stand comfortably at £20m. 

Technical Fibre Products (TFP)

TFP was nominally impacted during the prior pandemic year and has demonstrated over 20% growth this year, which will exceed market expectations whilst maintaining pre-pandemic margin levels. The outlook for TFP, which is not significantly exposed to energy costs, remains strong.  The new production line, commissioned in 2021 and adding 50% production capacity, is now fully operational and is being utilised to support additional demand from hydrogen markets with further capacity required beyond 2024.

TFP Hydrogen, acquired in January 2021, is performing well compared to our expectations. The strategic rationale for the acquisition has been proven and it has added a significant new set of complementary products and services to TFP's core offerings building further on our hydrogen proposition. Additional production capacity has been introduced in the US in preparation to support local markets. Further hydrogen plating capacity is planned for TFP to meet the needs of strong market demand.

Colourform

Colourform, which had grown by 9% during the previous pandemic year, is expected to have further sales growth of 20% this year. New contracts have been awarded and commercialised in the wine, spirits, and perfume markets, delivering renewable and recyclable packaging to leading global brands such as Ruinart, L'Oréal and Dries Van Noten. The outlook for Colourform, which is not significantly exposed to energy costs, remains unchanged.

The business has invested in product design and print capability and will continue to invest in further capacity and capability.

Paper

Paper was the most significantly impacted part of the Group through the previous pandemic year. Nevertheless, all customers were retained, and demand has quickly returned. With new additional customers and contracts won, sales have grown over 30% in the year.

The start of the Russia/Ukraine conflict and the resulting jump in energy costs has, however, significantly affected Paper, which is by far our most energy-intensive division, The average wholesale gas price has moved from 50p/therm to over 250p/therm, peaking at 800p/therm in Q4. This has materially impacted the recent profitability of the division. Actions have been taken: in addition to recent price increases, a customer energy surcharge is being implemented to mitigate the impact moving forward.

Plans to decarbonise the Paper division have already been made. The plan is to move away from gas entirely by 2030. Towards this end, some technologies have been implemented in the current year. These, combined with additional advances to come this next year, will reduce our carbon emissions and our dependence on gas.

Paper will continue to drive the product portfolio towards higher-value products, supported by investment in additional embossing capacity.

Other information

The financial information on which this trading statement is based has not been reviewed and reported on by the external auditors.

Year-end results

The results for the year ending 26 March 2022 are scheduled for release on 21 June 2022.

*Adjusted for IAS 19 impact

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The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU No. 596/2014) (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.