Bottom Line: BPB on way back

WHEN BPB waved a far from amicable goodbye to John Maxwell, its chief executive, three months ago the City fretted about the apparent lack of strategy of a one- product company battered by three years of incessant price war in the commodity plasterboard business.

But this has not stopped the shares rising 17 per cent since Mr Maxwell left, outperforming the building materials sector by 8 per cent. Better-than-expected results for the six months to September pushed them 11p higher yesterday to 278p.

However much the market worries about the long haul, in the short term it is difficult to argue with a 60 per cent increase in interim pre-tax profits to pounds 44m.

Earnings per share of 6p were 62 per cent higher and, after last year's cut, the dividend edged up to 2.8p.

That impressive jump, struck from sales just 5 per cent higher at pounds 574m, reflects the impact of BPB's belated attention to costs, which in real terms are only three- quarters of their level in 1990 when Lafarge of France and Knauf of Germany started their ruinous bid for European market share at any price.

Prices fared even worse over the period, all but halving between 1989 and 1992. But, having reached the bottom 18 months ago, the modest improvements since have done wonders for margins.

The return from plasterboard sales has risen from 6.5 to 10 per cent over the past 12 months and 15 per cent is not beyond the bounds of possibility within two or three years.

While a promised new year price rise could be the last for a while in the face of continuing weak construction markets across most of Europe, plasterboard is one of the few genuine growth products in the building sector that will keep volumes moving in the right direction.

That means forecast profits of pounds 95m in the year to March 1994 and pounds 125m a year later look realistic. A prospective p/e of 21, falling to 17, is in line with the rest of the building materials sector but arguably BPB's profits growth is more assured than many of its peers.