James Cropper’s Paper & Packaging business has unquestionably improved.

But it has not finished turning around.

That distinction matters.

The division ended FY26 with revenue of approximately £63.1 million, almost unchanged from £63.7 million a year earlier despite losing a major merchant customer that had represented nearly £10 million of annual revenue.

Its adjusted EBITDA loss narrowed from £2.1 million to £0.5 million, while the adjusted operating loss improved from £4.1 million to £1.3 million.

Most importantly, the business crossed into positive adjusted EBITDA during the second half of the year.

That is meaningful progress.

It is also very different from saying the division has already completed its transformation.

The harder stage begins now.

Cost cutting, restructuring and replacement business can stop a specialty paper operation from losing money. They do not automatically create a business capable of earning attractive margins year after year.

For James Cropper, the next question is therefore not whether management can stabilize Paper & Packaging.

It has largely demonstrated that.

The question is:

Can a 180-year-old specialty paper business convert stabilization into sustained profitability without becoming dependent on another round of restructuring?

That is the real test behind managing director Paul Barber’s promise that the company is “not going to stop.”

The £10 million customer loss tells us more than the headline turnaround

Perhaps the most revealing number in James Cropper’s FY26 results is not EBITDA.

It is the revenue that disappeared.

A significant merchant customer informed the company in 2025 that it would stop sourcing certain coloured-paper ranges.

According to the annual report, that decision reduced FY26 revenue by nearly £10 million.

For a Paper & Packaging operation generating roughly £63 million of annual sales, that is a substantial hole.

Yet divisional revenue fell by only 0.9%.

James Cropper says it offset most of the lost sales through growth in value-added sectors, replacement merchant business and renewed penetration of core and commodity paper markets.

That is arguably the strongest evidence of commercial improvement in the entire report.

Losing a large customer can create several problems simultaneously at a paper mill.

It removes revenue.

It lowers machine utilization.

It reduces fixed-cost absorption.

It can distort production scheduling.

And if the lost customer accounted for particular grades or run patterns, the mill may be left with capacity that cannot immediately be redirected elsewhere.

James Cropper did not fully replace the lost business with one new account.

Instead, it appears to have rebuilt volume across several channels.

That is strategically healthier.

But it also exposes another risk.

Customer concentration has not disappeared

James Cropper reports that approximately 50% of Paper & Packaging revenue still comes from its five largest customers.

Some of those customers are merchants serving multiple geographies and end markets, which provides some underlying diversification.

Nevertheless, the concentration remains significant.

This matters because FY26 has already shown what can happen when one large merchant changes sourcing strategy.

A business can be commercially stable while still being structurally exposed to a handful of buying decisions.

That makes management’s decision to deepen direct relationships with key customers understandable.

Barber says top customers now speak with him personally every week and that the company has removed some management layers to shorten decision-making.

That may improve responsiveness.

But the longer-term solution to customer concentration is not simply stronger relationships with the largest accounts.

It is building a broader base of profitable business.

James Cropper’s own strategy points in that direction.

The turnaround was driven more by economics than by sales growth

This is another reason FY26 should be read carefully.

The Paper & Packaging division did not return toward breakeven because revenue suddenly surged.

Revenue was essentially flat.

The improvement came largely from changing the economics underneath those sales.

James Cropper reports approximately £2.1 million of employee-cost savings in Paper & Packaging during FY26 as part of its turnaround programme.

The restructuring included around 70 redundancies across direct labour and support functions, together with a reset of operating shift patterns and a move toward a five-day manufacturing schedule.

Material efficiency also improved.

At Group level, material costs fell from 35.6% to 34.0% of revenue, with the company attributing part of that improvement to material efficiency and waste reduction inside Paper & Packaging, alongside a more favorable Group revenue mix.

Those are concrete changes.

They also tell us something about where the first stage of the turnaround came from.

James Cropper has made the existing revenue base cheaper to serve.

That is often the fastest way to stabilize an asset-intensive paper business.

But there is a limit.

A mill cannot continuously remove headcount and overhead to manufacture its way to long-term growth.

At some point, margin improvement has to come from better utilization, pricing, product mix and higher-value sales.

That appears to be exactly where James Cropper intends to go next.

The ‘3 Peaks’ strategy is really an asset-utilization strategy

Management describes its Paper & Packaging portfolio through a “3 Peaks” model:

commodity papers,

core products,

and technical papers.

At first glance, that sounds like ordinary portfolio segmentation.

Its importance is more fundamental.

Paper manufacturing has high fixed costs.

Machines, utilities, maintenance crews, treatment systems and site infrastructure continue to cost money whether the paper machine is running at 90% utilization or 60%.

For a specialty mill, this creates an uncomfortable trade-off.

High-value niche products may generate attractive margins.

But they may not create enough continuous tonnage to keep expensive assets fully utilized.

Commodity paper can fill machines.

But commodity tonnes normally offer less differentiation and can expose the producer to intense pricing competition.

James Cropper is trying to balance both.

Its annual report says commodity and core products are intended to support throughput, cost recovery and more stable operations in the near term, while technical papers are expected to become a larger source of higher-value growth over time.

That is a rational strategy.

It is also difficult to execute.

Commodity tonnes can fix utilization—but they can also dilute margin

One of the less obvious lessons from James Cropper’s plan is that a specialist paper producer sometimes needs business that looks less specialized.

This is not contradictory.

Imagine a paper machine with significant unused capacity.

An additional tonne of relatively ordinary paper may carry a lower selling price than a premium coloured or technical grade.

But if the machine, labour and energy infrastructure are already there, that incremental tonne can still contribute toward fixed costs.

At sufficient volume, better utilization can improve the economics of the entire mill.

This explains why James Cropper says it has deliberately re-engaged with core and commodity markets to improve machine utilization and waste recycling.

The danger is obvious.

If commodity growth becomes the dominant strategy, the company risks filling the mill without materially improving returns.

That is why the third peak—technical papers—is so important.

Commodity volume can stabilize the asset.

Technical products ultimately need to improve the value generated by that asset.

Technical paper may be where the real five-year plan is won

James Cropper says its longer-term ambition includes developing technical papers that create a bridge between Paper & Packaging and the Group’s Advanced Materials capabilities.

That could be much more significant than simply selling additional premium paper.

The company’s conventional specialty-paper heritage includes colour, recycled fibre, luxury packaging and creative papers.

Advanced Materials operates in substantially different markets, including composites, aerospace, hydrogen and other technical applications.

The strategic opportunity is to move part of the paper portfolio toward products whose value comes from function rather than appearance alone.

That can mean papers engineered around specific physical, chemical, processing or sustainability requirements.

Technical markets can offer a stronger basis for differentiation than mature graphic-paper categories.

But they also bring longer development cycles.

Qualification can take time.

Customers require repeatable technical properties.

New grades may require capital, R&D and application support.

Volumes can initially be small.

This is why James Cropper’s sequencing makes sense.

Stabilize the existing business first.

Improve utilization.

Then use the stronger operating base to develop more valuable products.

The risk would be trying to jump directly to high-value innovation while the underlying mill economics remained unstable.

The FY26 numbers show why management is not declaring victory

At Group level, James Cropper delivered considerably stronger FY26 results.

Revenue increased 3.6% to £102.9 million.

Adjusted EBITDA rose 33% to £8.9 million.

Adjusted profit before tax increased to £4.7 million.

Net debt fell from £12.9 million to £8.1 million, reducing net debt to adjusted EBITDA from 1.9x to 0.9x.

Those figures strengthen the Group’s ability to invest.

But they also need to be separated from the Paper & Packaging story.

Advanced Materials generated £39.8 million of revenue and £11.4 million of adjusted EBITDA in FY26.

Paper & Packaging, despite being the larger business by revenue, still reported a £0.5 million full-year adjusted EBITDA loss.

That comparison illustrates why restoring Paper & Packaging profitability remains one of the Group’s three core strategic objectives.

The paper division is not being asked merely to grow.

It is being asked to produce a more reasonable financial return from a large existing revenue base.

The previous impairment charges are important context

There is another reason the turnaround language should remain measured.

Paper & Packaging has been through a difficult period serious enough to trigger substantial asset impairments.

James Cropper recognized a £7.2 million non-cash impairment against Paper & Packaging assets in FY25, following another impairment in the preceding period.

In FY26, the company incurred approximately £1.2 million of restructuring costs related to the turnaround programme, with roughly £1.0 million connected to employees.

Those figures matter because they show the scale of the reset.

This was not a minor efficiency exercise.

Management concluded that the cost structure, operational model and commercial position required significant intervention.

The improvement in FY26 should therefore be recognized.

But it should also be judged against the depth of the problems being repaired.

A small positive EBITDA result in one half-year is evidence that the strategy is working.

It is not yet evidence that the business can generate strong returns throughout an economic cycle.

FY27 may be the more important year

James Cropper has already set a clearer test for FY27.

The company expects Paper & Packaging to deliver positive adjusted EBITDA for the full year.

It also says the new financial year began with a stronger order book and continued progress in its operational improvement programme.

That makes FY27 substantially more important than another year of simply reducing losses.

A full-year positive result would show that second-half FY26 profitability was not just a temporary benefit from restructuring timing, seasonal demand or short-term replacement business.

The quality of that profit will matter as well.

Industry observers should watch several variables:

machine utilization,

margin rather than revenue alone,

customer concentration,

technical-paper growth,

material efficiency,

service performance,

and the amount of additional restructuring required.

If EBITDA improves mainly because another layer of costs disappears, the turnaround remains defensive.

If profitability improves while sales mix, utilization and higher-value business strengthen, the strategy becomes much more credible.

The merchant loss may ultimately have forced a healthier commercial model

There is an irony in the FY26 story.

Losing a major customer was clearly damaging.

But it may also have accelerated changes that James Cropper needed to make anyway.

Large merchant relationships can provide useful volume and access to fragmented markets.

They can also create dependency.

When one buyer controls a meaningful part of mill throughput, the manufacturer’s commercial organization can become further removed from the end market.

James Cropper’s response included the launch of the Coloursource range with Winter & Company, replacement merchant relationships and a stronger emphasis on direct customer engagement.

Barber’s comments about removing middle-management layers fit the same pattern.

Faster decisions matter in specialty paper because customers often buy relatively small volumes with demanding specifications and short lead-time expectations.

A mill cannot compete only on papermaking capability.

It also competes on how quickly it answers a development request, resolves a service problem or qualifies a new grade.

That may be particularly important in markets where larger commodity producers have a structural cost advantage.

A smaller specialty producer has to be easier to work with.

Customer intimacy is useful—but operational reliability matters more

There is a limit, however, to what relationship-building can achieve.

Weekly conversations between senior management and key customers can improve communication.

They cannot compensate indefinitely for late deliveries, variable quality or uncompetitive costs.

James Cropper appears to recognize this.

Its FY27 priorities include reliability, asset utilization, quality, service and cost efficiency rather than customer engagement alone.

That is the right emphasis.

Specialty paper customers often tolerate a premium because the product solves a particular aesthetic or technical requirement.

They do not normally tolerate unreliable supply simply because the relationship is close.

The durability of the turnaround will therefore be determined on the mill floor as much as in the sales office.

The balance sheet gives management more room—but capital still has to earn a return

The reduction in Group net debt from £12.9 million to £8.1 million gives James Cropper more financial flexibility.

The Group also completed new financing arrangements after year-end, including a committed invoice-discounting facility of up to £15 million.

That matters because the next stage of the paper strategy may require investment.

Management says it is looking at capabilities needed not just today but a decade from now.

But after several difficult years, capital allocation will need to remain disciplined.

A specialty paper company can spend heavily on a technically impressive new grade or machine upgrade without necessarily creating sufficient demand.

The strongest projects will likely be those that either:

remove a proven production bottleneck,

lower unit cost,

improve flexibility,

or support technical products for which there is already credible customer demand.

That is particularly important in mature paper markets.

Growth cannot simply be assumed because additional capability exists.

The wider lesson is relevant beyond James Cropper

James Cropper’s recovery illustrates a problem facing many smaller and specialist European paper manufacturers.

The market does not always reward heritage.

A mill can have an exceptional reputation, unique technical knowledge and long-standing customer relationships while still struggling with:

underutilized assets,

inflation,

energy costs,

labour intensity,

operational complexity,

and declining traditional markets.

The response cannot always be to close the machine.

Nor can every mill escape into an undefined “specialty” strategy.

Specialty products themselves have to generate enough margin and volume to justify industrial assets.

James Cropper’s 3 Peaks approach is interesting because it acknowledges that reality.

It does not pretend commodity volume is irrelevant.

It uses commodity and core paper to support utilization while trying to build more defensible technical business on top.

That balance may be more realistic than assuming a historic paper mill can immediately reinvent itself as a pure high-margin specialty producer.

“We’re not going to stop” is now a financial promise

Paul Barber’s message is deliberately ambitious.

He wants Paper & Packaging to become one of the industry’s stronger EBITDA performers.

The FY26 results give him a better platform from which to make that argument.

But they also establish the benchmark against which the next stage should be judged.

FY26 Paper & Packaging revenue: £63.1 million.

Full-year adjusted EBITDA: negative £0.5 million.

Second-half adjusted EBITDA: positive.

Nearly £10 million of lost merchant revenue: largely replaced.

Around 70 roles removed through restructuring.

Employee costs reduced substantially.

Machine utilization and product mix still being rebuilt.

That is not a finished turnaround.

It is something more useful:

evidence that a turnaround has begun to work.

The next phase will determine whether the changes have merely made James Cropper Paper & Packaging smaller and leaner, or whether they have made it structurally better.

If the company can move from a £0.5 million EBITDA loss to sustained positive margins while reducing concentration risk and growing technical products, FY26 may indeed prove to have been the inflection point management describes.

If profitability stalls once the initial cost savings have been captured, the limits of the restructuring will become clearer.

That is why FY27 deserves more attention than the celebratory language surrounding FY26.

James Cropper has shown that it can stop the deterioration.

Now it has to prove that the mill can make money without another rescue.

Last Updated on 15/09/2026 by Jota Machinery