Packaging company lifts profit again

But it said rand uncertainty and renewed global financial woes made long-term planning difficult in the fast-moving consumer goods market. "Under the circumstances, (the results) are quite phenomenal," CEO Friedel Sass said on Friday.

The group produces packaging for the toiletry, cosmetic, household, pharmaceutical and food markets.

Bowler Metcalf said all four operating plants showed positive results, including Gad-Tek, a plastics converter that supplies customers in KwaZulu-Natal and the Eastern Cape.

And despite severe market pressures in the year, its Bowler Plastics division performed well. Of the 9.4% increase in revenue, the company said only 3% was related to price increases.

Earnings of the plastics division, at R53,6m, were down 1% on last year.

The group said the cost of raw materials rose between 11% and 21%, while electricity jumped 40%, including from higher production. Labour costs rose 7.8%.

Sass said competition both domestically and from abroad had been fierce. But the group's strategy of diversifying earnings by vertically integrating divisions had proved fruitful. "This means you take a bigger chunk of the whole supply chain, not only producing bottles, but filling and marketing them," he said.

The company had recently come of age in this regard, he said. Its beverage filling operations saw meteoric growth, with revenue up 26% in the period and attributable profit up 115%.

However, several smaller customers in its plastics operations were hurt by market conditions. This left demanding international clients who resisted price rises.

"(The result) was probably a little ahead of expectation," Vanessa van Vuuren, small-cap portfolio manager at Sanlam Investment Management, said on Friday. She said the plastics business was a little flat from a profit view, but the company had produced a good dividend.

Capex of R10m was deferred until the 2012 financial year. But the company said it spent significant amounts on new moulds and engineering solutions, which would benefit competitiveness.

The company's order book is the fullest in 10 years, and it said it was in a position to ensure profitability next year.

The new Boksburg factory will begin production this month.

Source: Business Day