Macfarlane to stay profitable despite demand slump
Macfarlane said it expected to stay profitable in 2020 despite demand for its packaging products falling by up to a quarter during the Covid-19 crisis.
Britain's biggest packaging distributor said demand for boxes and labels would fall by 20% to 25% during the second quarter from a year earlier. Customers in sectors such as vehicle manufacturing, aerospace and retail have been badly hit by the economic shutdown, it said.
Chairman Stuart Paterson told Macfarlane's annual general meeting the company expected the second quarter to be profitable but that profit would be well below than in the first three months of the year. The company, whose year ends in December, has furloughed about 30% of its more than 925 employees under the UK's job retention programme.
The Glasgow-based company cancelled its final dividend in March to save £2.8m of cash. Net bank debt has fallen to less than £6m from £12.7m at the end of December helped by £4m of deferred tax and bonuses and board salary cuts. Paterson said there was "significant headroom" on its £30m loan facility with Lloyds Banking Group.
"Based on actions taken to date and current levels of trading, we expect the business to remain profitable in 2020 and to operate within the current borrowing facility," Paterson said.
Paterson reiterated previous guidance that the board remained committed to paying dividends.
"Once trading has recovered in line with more normal levels and we have more clarity about the longer-term outlook, the board's intention is to recommence dividend payments either by augmenting regular dividends or by declaring a special dividend," he said.