THE rising cost of its raw materials caused corrugated cardboard box manufacturer TRM Packaging to endure paper-thin margins while enjoying strong organic sales growth.

The firm, which employs 230 people at its Burscough factory, uses 40,000 tonnes of paper a year producing more than 600,000 boxes every day for the giants of the food sector.

Paper prices rose 60% during its financial year, to August, 2010, and the company was unable to “recover the full impact of the increases from customers”.

However, it is working with its customers to restore margins through supply chain initiatives and higher box prices in the first half of 2011.

It also believes that the improvement in the value of sterling should make the UK more attractive to overseas suppliers, which will help to stabilise prices.

Sales rose 12% to £27.6m – and it is looking to grow its turnover by up to 50% in the next three years – although its pre-tax profits fell 70% to £141,000.

Managing director Trevor Maund, who bought the company in 2001, remains committed to a strategy of investing while the economy remains difficult so that it has the capacity to grow when the upturn comes.

In August, it installed a £2.2m addition to its corrugator, which itself cost £6m, in the second phase of a £12m investment plan. This incurred an exceptional cost of £233,000.

Backing for the expansion has come from the commercial banking team at HSBC, in Liverpool, which is providing a £4.5m equipment finance facility and a £6m invoice finance facility.

It also received £1.2m from the Northwest Development Agency through its Grants for Business Investment scheme.

ALEX TURNER