North East chemicals manufacturer Thomas Swan & Co says rocketing energy costs "effectively wiped out" the majority of its profits last year.
The Consett-based maker of materials used in the manufacturing of latex gloves and tyres, among other products, saw turnover rise from £37.9m to £44.4m, driven predominantly from overseas. But profit before tax fell to £200,000 from £3.3m in 2022, due to gas costs pushed higher by the war in Ukraine and £3.4m of profits on intangible assets booked in the previous year as a result of the sale of graphene patents to a joint venture with Canadian-based Mason Graphite Inc.
That deal saw the North East firm acquire 33.33% of Black Swan Graphene - a newly set up outfit that aims to establish large scale, commercial graphene production at a factory in Québec. In autumn last year, Black Swan published the results of a scoping study that showed the project would need total pre-production spending of about £26.2m (C$44.8m).
Read more: Teesworks accounts show major increase in revenue and profits
Read more: Sunderland cancer testing firm Arquer Diagnostics calls in administrators
The study also pointed to the potential for the Canadian site to produce 8,200 tonnes of graphene every year. The joint venture has chosen Québec in order to take advantage of what it says is low-cost renewable hydroelectricity.
Despite the impact of costs on profitability, the firm pointed to what it said was a strong balance sheet with assets of £24.5m, broadly unchanged from 2022, and cash of £1.1m, down only slightly from £1.9m. Writing in the accounts, director David Cavet said: "The adverse effects of increasing costs have been minimised as far as possible by fixed-price forward purchase contracts, whilst wide-spread raw material price rises do not affect our ability to remain competitive in the market place.
"The group continues to strive to expand, both by internal growth and by acquisition. The external commercial environment is expected to remain very competitive. However, the directors remain confident that the group's profitable performance will continue in the future. The group continues to invest in its capital equipment to improve both its operating capacity and profitability."
Most Read
Following publication of the accounts, Harry Swan, chief executive officer of the family-owned business, said: “Our strong sales performance in the 22/23 financial year was overshadowed by the unprecedented increase in energy costs caused by Russia’s invasion of Ukraine. While our anaerobic digester generation facility provided some protection against rising electricity prices, significantly higher gas costs effectively wiped out the majority of our profit in the year.
"Despite the ongoing adverse economic headwinds, we continue to work hard to stabilise our existing business to allow us time to grow through new product development. We will also be considering ways to reduce our exposure to any future unexpected increases in gas costs.”