Disposability has been good to Bic, the French maker of lighters, razors and stationery products. Its shares have risen by an impressive 160 per cent over the past four years as the company has posted steady earnings growth in spite of the odd revenue hiccup. But the possibility that EU trade officials may shortly throw out some 20-year-old anti-dumping taxes, levied on flint lighter imports from China, looked less favourable on Tuesday. Bic's shares – 43 per cent of which belong to the Bich family – lost 3 per cent.
A final decision on the tax, introduced in 1991 at a rate of almost 17 per cent and renewed three times since then, will not be made until December. Needless to say, Bic would prefer to see this retained. But investors may wonder how much damage the tax's removal would do. Even Bic – which still makes lighters in Europe and has no plants in Asia – admits that the anti-dumping measures have been hard to enforce as cheap competing products have entered Europe from other Asian countries such as Taiwan, Indonesia and Vietnam (with perhaps questionable declarations of origin). And the company does have another formidable weapon in its armoury. For years, it has lobbied effectively over the safety issues surrounding some competing lighters.
Bic argues that dumped Chinese lighters are one reason that its market share in Europe – under 30 per cent – lags behind the 65 per cent-plus achieved in the Americas. Even so, group-wide operating margins in this division, which accounts for about a third of Bic's €2-billion ($2.57-billion) annual sales, were a healthy 40 per cent in the first nine months of 2012, more than double those of the stationery and shaver divisions. With the group's shares trading on 17 times consensus earnings for 2012 and 15 times the equivalent 2013 figure, one cannot help feeling that it was time for a breather anyway.