British Polythene Industries (BPI) is being increasingly battered by the high oil price and a property market slump, it told investors yesterday.

Shares in the Greenock-based packaging specialist fell more than 5%, or 10.75p, to 234.25p yesterday after it told investors its performance in the first six months of the year was worse than in the same period of 2007.

BPI, led by chief executive Cameron McLatchie, has been grappling with the effect of increases in the price of oil, from which the poly- ethylene it uses in its products is derived. Brent crude was trading as high as a record $146.69 a barrel yesterday.

BPI said it had "coped well" with another period of substantial increases in oil and energy costs.

However, it added: "We have very recently been notified of further substantial increases in raw material costs for July and the late notice from our suppliers will result in margin compression while we pass these costs on to our customers.

"We remain confident that, as with the cost increases of the last few years, we will recover margins as prices stabilise."

It is also facing pressures on the demand side as commercial and residential property construction falls away. But it reported continued demand from the farming industry for which it supplies products such as silage stretchwrap.

"We have experienced a downturn in demand from customers in the UK construction sector and parts of our industrial business are quite weak. However, this has been balanced by very sound demand from agricultural and consumer-related sectors."

BPI will announce its results for the six months to June 30 on August 29.