Packaging group Macfarlane has seen its distribution division return to growth, but the group’s profits were hit by rising costs arising from events in the Middle East.

Chief executive Peter Atkinson said it had been affected by increases of between 20% and 40% in the price of polymers which are used in a third of its business.

“It is a level playing field across the industry and there is no other way of sourcing them,” he said. “We have to pass that increase on to our customers.”

The Glasgow-based company said that during the first half it had cut just under 50 posts, about 6% of the workforce but none in Scotland. This was achieved largely through natural wastage and the company had introduced a redundancy programme with a total non-recurring cost of £300,000. No further redundancies are planned.

A similar sum was being added to costs through new regulations, mainly affecting its trade with Europe.

Pre-tax profit for the half-year to the end of June fell 5% to £4.7 million from £4.96m last time, though group revenue increased by 2% to £148.9m (H1 2025: £146.6m) with operating profit of £7.1m (H1 2025: £7.m).

The revival of the Pitreavie business, which was affected by an accident at the plant last year, saw revenues at the packaging distribution division increase to £111.7m (H1 2025: £110.4m) with adjusted operating profit of £5.1m (H1 2025: £4.8m).

Manufacturing operations grew revenues to £40.6m (H1 2025: £39.2m) with adjusted operating profit of £4.4m (H1 2025: £5.0m).

The interim dividend has been maintained at 0.96p per share (H1 2025: 0.96p per share).

At 30 June the group had spent £3.1m of the £4m allocated to the share buyback programme launched in June 2025, buying back 3.8m shares, with the remaining £0.9m expected to be deployed by the end of September 2026.  

The group will allocate an additional £6m to share buybacks to commence in October.  At current market valuations and given management focus on the profit recovery programme, the board believes this is an efficient use of capital.

It said it is looking ahead to high-quality acquisitions as business performance improves. However, the company does not expect any progress until 2028, said Mr Atkinson.

Trading is in line with market expectations for the full year to 31 December 2026, said the company, adding that performance in H2 2026 will benefit from momentum in new business growth, control of operating expenses and build on the return to profitability at the Pitreavie business, while it continues to effectively manage the impact of events in the Middle East.

Aleen Gulvanessian, chair, said: “As we said at our AGM, following a difficult year in 2025, our main focus for 2026 was to start the process of profit recovery.

“I am pleased to report that the group has made progress in the first half of 2026, returning the Packaging Distribution business to organic profit growth, continuing to generate attractive returns from Manufacturing Operations and restoring the Pitreavie business to profitability in the second quarter.

“This performance gives us confidence to maintain the interim dividend and allocate a further £6m to a new share buyback programme.  

“We have also taken decisive action to mitigate the cost impacts arising from events in the Middle East and successfully completed the pension scheme buy-in, strengthening security for members while further reducing the Group’s financial risk.

“Management is focused for the remainder of 2026 on continuing the execution of these actions.”

De-risking the pension scheme in partnership with Royal London was on track, said the company.

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