BURNESIDE paper maker James Cropper Plc has warned that its profits will be lower than expected this year because of poor trading by an American subsidiary.

The company said the ongoing Eurozone crisis had also had an impact and warned that its full-year results would be below market expectations.

In the six months to October 1, the company recorded an increased pre-tax profit of £1.4m, after achieving a turnover of £43.9m. But America’s economic climate and the government’s austerity measures there has affected the order book of its subsidiary, Technical Fibre Products (TFP).

The manufacturer said full-year trading was predicted to be ‘significantly lower’ than the previous year as a result, together with the impact of the Eurozone’s troubles on its Speciality Papers division’s second-half trading.

That is despite the division trading ‘well ahead’ of last year's first-half prediction.

Chairman Mark Cropper said the recovery of the Speciality Papers division of the business was ‘encouraging’.

But he went on: “I am mindful that in past years, sales into the Eurozone have accounted for 30 per cent of this subsidiary's turnover and that in recent months its orders from European customers have been running below this level.

“The performance of Speciality Papers in the second half is, therefore, not immune to the unfolding economic events in the Eurozone.”

But Mr Cropper said the forecast was not unusual because of the challenges facing most businesses at present.

He said the company’s future looked positive.

“It’s not changing our long-term outlook at all,” he said. “We are in the midst of our biggest capital investment programme that we have had in Burneside for a generation.

“But it’s very difficult, particularly with what’s happening in Europe, to know exactly what is going to happen with demand for our products.”

He said demand for paper products and materials was ‘holding up’ and had ‘huge potential’.

“I remain very bullish about the prospects for our business,” added Mr Cropper. “We are going to have to work very hard and try and fund new opportunities but I’m confident that we will.”