Packaging company Macfarlane Group remains positive for the second half of the year despite pre-tax profits falling by half in the first six months.
The Glasgow-based business warned that geopolitical and economic uncertainty meant that it “may need to adapt our business quickly in order to limit the impact upon the group’s results, prospects and reputation.”
It said it is taking action “to manage input cost changes, mitigate operating cost increases, convert our strong pipeline of new business and deliver synergies from the Pitreavie acquisition. The full year outlook for 2025 is in line with market expectations.”
Group revenue rose by 13% to £146.6 million (H1 2024: £129.6m) but adjusted operating profit fell by 22% to £9.8m (H1 2024: £12.5m). Pre-tax profit slumped 49% to £4.96m from £9.7m in the previous period.
However, the interim dividend is held at 0.96p per share and the group is operating well within its bank facility of £40m which runs until 30 November 2027 with options to extend to November 2029.
In its statement, the company the markets in which it operates are changing, with customers increasingly aware of the environmental impact of their packaging.
There are increasing environmental regulatory requirements for packaging suppliers, such as the Plastic Tax introduced in 2022 and the introduction of the Extended Producer Responsibility levy in 2025.
It sees increasing likelihood of disruption to the operations of the group through extreme weather events such as flooding, storm damage and water stress, impacting the business directly and disrupting supply chains.
Investors are looking to invest in companies that demonstrate strong environmental credentials, it said, as the UK Government is commited to net zero carbon emissions by 2050, creating “profound changes” likely to drive the economy.
“Failure to respond to strategic shifts in the market, including the impact of weaknesses in the economy as well as disruptive behaviour from competitors, changing customer needs (e.g. changing customer priorities between online and physical buying) and the increasing regulatory interventions targeted at improving sustainability could limit the group’s ability to continue to grow revenues or potentially contribute to a failure to meet market expectations,” it declared.
“The group’s businesses are impacted by disruption to our supply chains as well as inflationary pressures.
“In particular, changes to commodity-based raw material prices, manufacturer energy costs, foreign exchange movements as well as increased bureaucracy, freight and tariff costs related to imports, lead to increases to supplier input pricing and the potential for erosion of profitability within the group’s businesses if we are unable to pass these onto customers.”
Aleen Gulvanessian, chair, said: “As noted in the trading update on 10 July, market conditions have been challenging in H1 2025 due to economic headwinds and uncertainty.
“Whilst Distribution has experienced weaker than expected demand, delays in new business decision-making and pressure on profit margins, Manufacturing Operations has performed more robustly.
“Manufacturing Operations’ performance was driven by good contributions from the acquisitions of Polyformes Limited in July 2024 and The Pitreavie Group Limited in January 2025 combined with stronger demand from customers, particularly in the defence and aerospace sectors.
“The recently launched share buyback programme will continue as planned.
“Despite the current market conditions, the board remains confident that our strengthened sales team, differentiated customer proposition and proven executional skills mean the medium-term prospects for the group are positive.”
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