Highland Spring sees rising costs stunt profit flow

Highland Spring has blamed the impact of rising costs for the decrease in profits experienced by the firm in its most recent financial year.

Highland Spring sees rising costs stunt profit flow

Ochil Hills, Highland Spring's source

The company saw pre-tax profits dive to £520,000 for the year ended December 31st, a decrease from £3.3 million last time, as it struggled with the rising costs of raw materials, particularly for polyethylene terephthalate  (PET) plastic.

The Perthshire-based company’s underlying operating profit also plummeted by 43% to £2.37m.

Rising costs have been a continuing concern for the business, which cited the effects of higher overheads, notably for PET, in its accounts for 2017 and 2016.

While profits fell last year at Highland Spring, owned by Middle East businessman Mahdi Al Tajir and his family, sales remained above £110m.

Highland Spring now sells more than 300 million litres of water annually.

The Herald reports that the results arrived as the company moves to reduce its use of PET plastic after growing concerns were voiced over its impact on the environment. The firm has subsequently set a target of a 20% reduction in the use of the material in its packaging by 2020.

In August, Highland Spring, secured bank funding of £55.5m from HSBC, part of which will support its attempts to make its operations more environmentally friendly.

Highland Spring highlighted that its branded “eco” bottle, which is 100% recycled and recyclable, has now been rolled out permanently across Britain following a trial period in 2018.

The “eco” bottle is now available on the brand’s 50cl, 75cl and kids’ bottled water formats.

The firm also voiced its support for the introduction of a deposit return scheme in Scotland, England and Wales, which it said would improve the availability of “good quality” recycled materials.

Highland Spring also detailed the environmental benefits of the new rail siding it plans to develop next to its main bottling plant in Blackford, Perthshire.

The facility is being planned with Transport Scotland, Network Rail and the Scottish Government. Highland Spring said the facility will enable Highland Spring to transport goods in a “more environmentally-sustainable way” removing around 8,000 truck journeys from the road every year.

The firm said this change would eliminate 3,200 tonnes of carbon dioxide emissions.

Highland Spring also expects to appoint a civil engineering contractor to the project soon.

Mark Steven, chief operating officer, said: “Ultimately, we are on a journey to reach 100% recycled PET across all Highland Spring products. However, we believe there is much work to be done first on increasing recycling rates, recycling infrastructure and ensuring consumers understand that all PET plastic bottles can be recycled, giving them multiple lives, to increase the availability of high quality recycled materials in the UK. Therefore, our environmental ambitions are focused on a target of 50% recycled content in our bottles by 2022, and the continued expansion of our 100% recycled eco bottle range.”

Reporting its results, Highland Spring said it had partially offset higher costs by improving production efficiencies at Blackford, and through a focus on supply chain management.

The company said: “These improved efficiencies also helped us deliver higher levels of customer service and maximise sales in periods of peak demand.”

When asked whether the firm has taken any steps to prepare for a no-deal Brexit, Mr Steven said: “97% of the group sales are in the UK, with the balance of export sales being spread across Europe, the Middle-East, Far East and North America.

“We consider there is a minimal risk of disruption to the ongoing supply of either Highland Spring brands, or retailer brands, produced by the Highland Spring Group in the event of a no-deal Brexit. Like any responsible business, we will continue to monitor the situation as it continues to evolve.”

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