TOMKINS, the engineering group, yesterday joined the growing list of UK companies to acknowledge that rising raw material prices will eat into profits.

The FTSE 100 company said that it remained confident of being able to pass on to customers a substantial portion of input cost increases.

However, it gave warning that the hit on profits from higher raw material prices was likely to exceed the £7 million charge it incurred in the six months to July 3.

Tomkins, which was reporting interim pre-tax profits up 7 per cent to £101.4 million, has input costs of $1.7 billion (£950 million) a year.

Ken Lever, finance director, said Tomkins’s engineered and construction products division had managed to pass on most of its increased costs to customers. The division is the one most exposed to movements in raw material prices.

Mr Lever said that there was no evidence of an end to the price rises. It was impossible to predict the effect on full-year profits, given the company’s diverse customer base, he said.

Tomkins joined other industrial companies such as Bodycote and Rexam, which this week addressed City concerns over rising raw material costs.

Tomkins’s strong interim profits, above City forecasts, were driven by significant improvements in operating margins across its three divisions. Jim Nicol, chief executive, said the result indicated the success of a three-year restructuring, now almost complete, and the group’s continuing Lean Manufacturing drive.

The headline sales figure of £1.5 billion was affected by a £140 million non-cash translational currency hit. About 65 per cent of Tomkins’s revenues arise from the US. Underlying growth was 7.3 per cent.

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