Weaker dollar hits BBA

Aviation services and materials technology firm BBA Group today said it had overcome soaring raw material costs to post a 7% hike in half yearly profits.

However, it said profits would have risen 14% had it not been for the impact on its business of the weaker dollar.

The London-based company, which employs 12,300 people mainly in North America and Europe, said prices of key products such as polyester and cotton were at their highest for 11 years.

Strong demand at its two business divisions helped counter this and the dollar’s weakness, it said.

Although the hike in costs was expected to have some impact on the second half, the group said it expected demand to remain strong in both its businesses, leading to a “satisfactory result” for the full year.

Underlying pre-tax profits rose to £65.7m (€96.8m) in the six months to June 30. Excluding the weakness of the dollar – which had an impact of some £4m (€5.9m) - profits would have risen by 14%. The firm does 64% of its business in North America.

The materials technology division, which manufactures products ranging from nappy linings and household wipes to materials for surgical gowns and train brakes, saw turnover rise by 10%.

Operating profits increased by 5% to £31.3m (€46.1m) after the arm absorbed the increase in raw material costs, which hit profits by around £3m (€4.4m).

The cost of polyester, cotton and polypropylene rose sharply since the end of the last financial year, leading the group to step up its recycling activities.

BBA said: “Prices of polypropylene rose again in August and, whilst there is some expectation that they will fall by the end of the year, the rate and extent of the reduction remains uncertain.”

BBA Aviation, which operates from 95 airport locations worldwide, provides cargo handling, ground handling and other services to the business and commercial aviation markets.

The division was lifted by a 12% increase in fuelling volumes, with strong progress in Europe due to the increase in transatlantic traffic.

Its jet engine repair business also performed well, with orders increasing on a number of engine programmes.

Turnover at the arm fell to £391.4m (€576.6m) from £395.4m (€582.5m), although excluding the impact of currency fluctuations it would have increased by 8%.

Underlying operating profits rose by 11% to £39.6m (€58.3m) at constant exchange rates.

At the bottom line, pre-tax profits increased to £49.9m (€73.5m) from £44.9m (€66m). Shares fell by half a penny to 259.5p.