Essentra Plans Purchases as Growth Rises on Tobacco Filters

Essentra Plc, the U.K. manufacturer of items from toothpaste tubes to packaging tape, reported an acceleration in revenue growth as it sold improved cigarette filters and said it plans more acquisitions.

Sales rose 9 percent on a like-for-like basis in the first half, with 10 percent growth in the second quarter, the Milton Keynes, England-based company said in a statement today. Total revenue advanced 12 percent in the six months through June to 431 million pounds ($727 million).

Essentra, previously known as Filtrona, is benefiting from tobacco smoking by designing filters that work better and use material that disperses more quickly in water, making cigarette butts more environmentally friendly. At the same time, its laboratories are gaining from testing e-cigarettes. The company reported a 22 percent increase in like-for-like filter products revenue in the first half, the strongest among its divisions.

The manufacturer refinanced and increased banking facilities this month as it seeks more “value-creating acquisitions,” Chief Executive Officer Colin Day said. Essentra has about 250 million pounds available for purchases, he said.

“We feel fairly confident that we will land a couple of acquisition targets this year, across different sectors and different geographies,” Day, 59, said in an interview.

Recent Purchases

Essentra bought Mesan Kilit AS in January to add a Turkish maker of locks, hinges and accessories used in industries such as energy and telecommunications. In May, it completed the purchase of Kelvindale Products Pty, an Australian maker of plastic products. The acquisition prices weren’t disclosed.

The company has begun producing complete e-cigarettes to further capitalize on the consumer trend to use healthier alternatives to traditional cigarettes. Global non-tobacco cigarette sales are predicted to grow 51.5 percent in 2014 to $5.3 billion, and to $51 billion by 2030, according to Kenneth Shea, a Bloomberg Intelligence analyst.

Essentra shares were unchanged at 773 pence at 10:30 a.m. in London, after rising as much as 3.5 percent earlier in the day. The stock has declined about 10 percent this year, valuing the company at 1.8 billion pounds.

Net income in the first half rose about 14 percent to 35.4 million pounds, Essentra said.

Before it's here, it's on the Bloomberg Terminal.