Bin manufacturer and supplier Straight has issued a profits warning blaming the high cost of plastics.
The AIM-listed company told the market at the end of July to expect a £0.1 million pre-tax loss for the first half of the year. Revenues increased by 14 per cent to approximately £15 million up from £13.2 million in the first half of 2010. However, this was below management expectations.
In an interview with the Yorkshire Post, Straight chief executive Jonathan Straight revealed that a £1.5 million contract that ended in July was behind the loss. As polymer prices increased, this impacted on the profitability of the contract.
He said: “When you’re in a contract like that, which takes up the machines for a long time, if it’s losing money you’re not able to generate any money.”
After taking the majority of its production in-house when it bought Hull-based injection moulding firm Powell Plastics for £2.9 million in 2009, Straight believes this vertical integration approach has benefitted the company.
He added: “Given what’s happened in the wider market over the last year, it’s really only the strategy of vertical integration that’s allowed us to maintain our margins. Had we not vertically integrated, I think we would be in quite a poor place.”
But he is confident the recent loss is only temporary. He said: “We’ve not made any money in the last six months but that masks what’s going on underneath. It’s accepted from the highest echelons that there’s a short-termism in the market.”