THE main business of Filtrona is supplying speciality plastic and fibre products. It makes cigarette filters for tobacco giants such as Altria and British American Tobacco. It also produces the tear tape found on packets of biscuits and cigarette boxes and makes parts for pens and roll-on deodorant balls.

Filtrona was spun off from its parent company, Bunzl, in June and floated on the London Stock Exchange.

Its headquarters are in Britain but Filtrona has manufacturing, distribution, sales and research facilities across 24 countries in the Americas, Europe and Asia. Mark Harper is chief executive and Jeff Harris is chairman.

The two experts below have been selected for their skill in several investment areas. They, or the funds they manage, may buy or sell shares in the companies or sectors that are discussed in this column.

Andy Brough, fund manager at Schroders

Tobacco has been one of the best-performing sectors of the UK stock market over the past five years. Although tobacco consumption may be declining in the West, it continues to grow in emerging markets. As the wealth of these countries has increased, so demand has grown for western-style cigarettes to replace their paper and grass (not that sort of grass) ones. Filtrona is the world’s No 1 independent manufacturer of cigarette filters, with a 5.5% market share.

In this market, special filters represent the fastest-growing area and amount to half the volume produced by Filtrona. They adapt the standard mono- cellulose acetate filter, either to reduce levels of harmful toxins or to improve the taste of the tobacco. The biggest users of special filters are Asian countries, whose tobacco has generally been of a lower quality. This division should be capable of 5%-plus volume growth. The knowhow used to develop cigarette filters has been taken into other fibre technologies and these are now serving a number of interesting growth markets.

Plastic Technologies is the other main division in Filtrona group. Most of the companies in this unit make products whose markets are unlikely to grow faster than GDP. The exception is Globalpack, which manufactures packaging for toiletries and cosmetics in South America and, although it is the smallest of four segments in the division, it offers the fastest growth. The Brazilian beauty market has enjoyed double-digit growth, which should continue, and the company is well placed to take advantage of the growth opportunities in the rest of South America. Overall, Filtrona targets 5% organic growth, which is supplemented by acquisitions. This 5% target has been achieved for the past 10 years, along with consistent double-digit margins. Like its former parent, Bunzl, the company has been successful in buying and integrating its acquisitions. On a p/e of 16.6 times to December 2006, I think the shares are up with events and are unlikely to do much for the next six months.

Judgment: May be a drag on performance in the short term. ()

Tim Steer, fund manager at New Star:

I was meant to meet Filtrona management last Wednesday but, at the last moment, I was told that they had an important client to meet instead. Our meeting has been postponed to mid-December.

Important clients for Filtrona do not come much bigger than Philip Morris and British American Tobacco and, as they say in Glasgow, when you have been to Belgium, torn up parking tickets and kissed pretty girls, when a company cancels you at short notice, something is usually up.

If you read The Sunday Times last week, there were smoke signals that gave you a pretty good idea what that might be. Filtrona is a straightforward company that manufactures niche packaging products, and cigarette filters. It grows its sales by a pedestrian 5% but earnings are dragged back by high research-and-development costs. The shares are not particularly cheap for this low-growth company on 15 times earnings and a submarket yield, but there may be something in the wind.