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Intertape Polymer Group Inc. shares tumbled 29 per cent Friday after the company's second-quarter profit fell short of forecasts. The company also said that an industry-wide shortage of synthetic rubber - the culprit behind the disappointing quarterly results - will continue to hit sales and profit.

"The impact of the synthetic rubber shortage, which had an impact on both sales and gross margins this past quarter, is expected to continue through the summer and possibly into next year," said Intertape CEO Melbourne Yull.

Intertape tumbled $3.96 to $9.70 in Toronto, on more than seven times its average daily volume. The stock has risen steadily this year, climbing 25 per cent since the start of January.

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The Montreal-based company, which makes plastic and paper-based packaging products, said after the close of trading on Thursday that its second quarter earnings fell to $5.4-million (U.S.) or 13 cents a share from $5.7-million or 14 cents a share a year ago.

The company said profit was dragged down by $1.1-million in costs "associated with manufacturing facility closures" and insurance deductibles stemming from an industrial accident at a plant in Columbia, South Carolina.. Excluding these one-time items, Intertape said it would have earned $6.1-million or 15 cents a share.

Analysts called for earnings of 27 cents a share on average, according to Thomson First Call.

Sales in the three months ended June 30 rose 10.7 per cent to $190.3-million, but citing the shortage of synthetic rubber, the company lowered its sales target for fiscal 2005. It now expects sales between $755-million and $775-million, down 9 per cent to 12 per cent from an earlier estimate of $775-million to $790-million.

Synthetic rubber, which has the elastic properties of natural rubbers, is used to make tires and mechanical goods by the automotive industry, as well as by the building, construction and packaging industry.

Intertape's products include intertape, acrylic and natural rubber pressure-sensitive carton sealing tapes, automotive tapes, ink jet printers and labelling systems. The company's packaging products are used in aerospace, automotive and industrial applications.

Mr. Yull said the shortfall of synthetic rubber hurt the company because it is a key raw material for some of its tape adhesives. "While we were able to satisfy some of our customers' demand with alternative products, we were not able to meet all of their demands. This shortage in synthetic rubber is expected to be rectified by the end of 2005, but it could take longer."

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He attributed the higher sales to price increases designed to recover rising raw material costs.

In addition, the company said it increased staffing due to an organizational realignment that it began at the end of 2004. "The additional staffing costs this quarter are an investment in our new organizational structure which we believe will begin to reap benefits in the second half of this year," Mr. Yull said.

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About the Author
Personal Finance Web Editor

Roma Luciw is the Globe and Mail’s personal finance editor. She has worked at the Globe as a business journalist since 2001, covering stock markets, breaking news, and most recently anything that helps regular Canadians manage their own money. More


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