THE consumer-sector really has to be in a serious squeeze when Epping-based plastic packaging specialist Bowler Metcalf reports a drop in earnings. Observers would be hard pressed to find instances in the last two-and-half-decades when the tightly run Bowcalf reported a slip in earnings.
But it seems even Bowcalf could not withstand the combination of higher labour costs, higher material costs, increased energy prices and a softer consumer segment. The company – which also includes a substantial soft drinks bottling operation in Quality Beverages – reported a 6% drop in profits to R55m in the year to end June.
But CEO Friedel Sass stressed the Bowcalf model – built around quality product delivery – was not sacrificed in the profit dip. He pointed out that Bowcalf’s sturdy 11,1% earnings margin to revenue underscored the company’s approach to niche market development as opposed to the commodity business (which has seen falling margins.)
The company’s core plastics packaging operation churned R370m in revenue (previously R383m) which translated into R42m in profits (previously R47m.) Saas described the packaging performance as ‘satisfactory’ under the (difficult) circumstances. He said the company’s strategy of “vertical integration” followed over the past few years was assisting a process of readjustment to a changing market in the core plastics business.
“The operation is continuing its focus on innovative technologies, efficiency and cost improvements as well as expansion of its customer base in different market sectors.”
He said early fruits of this labour were already evident in the past financial year. “The difficult trading period has brought customer and supplier significantly closer and the resultant partnership developments are exciting.”
Sass also added that in the last quarter of the financial year encouraging signs of a rebound in the downstream industries were evident.
“The exchange rate (with regards to combating import finished goods) supportive government participation and firm commitments to SA manufacturing basis by international corporations is driving investments at our customer base. This will benefit both the industry and the plastics converting industries.”
Sass noted that the cosmetic and toiletries industry (which forms the core of the plastics operations) extended its subdued performance - pressurised by a combination of low consumer spend and volume losses due to imported finished goods.
He said recent trading updates by the major supermarket chains also pointed to a continuing slowdown in the FMCG (fast moving consumer goods) market. “The customers of the packaging operation are the major supplier of products to this market and the intense competition is pressurising prices and margins.”
But there is a glimmer of light with Sass reporting that growth in Sub-Saharan markets was gaining momentum.
Packaging sector doyen passes away
CBN was sad to learn of the recent passing of former Bowler Metcalf chairman Horst Sass.
Sass had served on the board of the company since its listing in 1987 and in the capacity as chairman since 1997.
Sass was one of the prime movers at Bowcalf as it developed into one of the most profitable packaging ventures in SA. CBN extends its condolences to his wife Heide and to his children Friedel, Bernd and Gerald.
By Jenni McCann