Paper and packaging group Powerflute (POWR:AIM) is firmly back in acquisition mode after completing the integration of Corenzo, the cores and coreboard specialist it bought at the end of December 2014.

Chief financial officer David Walton says the group is always on the lookout for possible acquisitions but it has been busy over the last 12 months incorporating Corenzo into the company.

‘In 2016 we have a strong balance sheet and we’re looking aggressively at acquisition opportunities,’ he says.

Powerflute retained a profit of €27.2 million in 2015, up from €6.3 million in 2014, and the majority of this has been converted into cash, resulting in a €24.4 million reduction in net debt to €37.1 million.

‘We’re in a strong position to invest in the business or make acquisitions,’ says Walton.

The £236 million cap grew EBITDA (earnings before interest, tax, depreciation and amortisation) by 164% to €55.2 million in 2015, driven by its acquisition of Corenzo, a €7.7 million foreign exchange boost and an improvement in underlying market conditions. The proposed dividend has been doubled to 3c per share, news which sends the shares up 1.1% to 84p.

POWERFLUTE (DI) - Comparison Line Chart (Rebased to first)

Walton says market conditions softened in the middle of 2015 and into the third quarter. There was a slight reduction in order book volumes and pressure on pricing, which resulted in a drop in confidence.

‘Confidence is coming back but it’s not yet reflected in pricing. The market is waiting to see whether it’s a mini dip or a long-term downgrade,’ says Walton.

He says packaging is a cyclical business but claims Powerflute’s unique products give it a greater degree of resilience during market downturns.

The paper and packaging division makes semi-chemical fluting – the wavy part on corrugated boxes – and there are only two other producers in the world. Similarly, there are only three other companies who produce cores for factories.

Davy analyst Barry Dixon says it’s likely he will upgrade full year 2016 forecasts by between 5% and 10%.

‘Strong operating performance, combined with positive earnings momentum and a healthy attitude to shareholder returns, makes for a compelling investment opportunity,’ he says.

Issue Date: 08 Mar 2016