Integration of Carter Holt Harvey, softening demand, and tough conditions sent profit for packaging group Colorpak down by $2m for the first half of the financial year, but the company says it is carrying out a strategic restructure that will propel it ahead in future.
The half-year to December’s $2.7m net profit after tax falls short of the previous year’s figure of $4.7m. The company posted an EBITDA of $7.4m, its EBITDA margin down from 11.5 per cent to 8.9 per cent. Alex Commins, managing director of Colorpak, says the results have seen impacts from the company’s Carter Holt Harvey (CHH) asset acquisition of 2011, as well as equipment upgrades that it hopes will improve its competitive edge in the medium term.
Alex Commins, managing director of Colorpak
Commins says, “Over the last six months we have undergone our third and final rationalisation after the CHH acquisition of 2011. It has been a large process of integration which has caused a lot of inefficiencies in our natural process, which is why we have not performed to the same level. Following the rationalisation of the manufacturing footprint in NSW and Victoria, a leaner stronger, more competitive Colorpak is emerging.”
Figures have not been helped, Commins adds, by sluggish market conditions and tough commercial demands from customers; he says, “Some of our customers are not pushing their goods through at the same rate – which I think is due to a general softness in the economy.” However, as the Aussie dollar falls and economic activity is expected to pick up, the company says it will be well placed to capitalise on upcoming opportunities and compete with imports.
Colorpak intends to double the capacity of its Braeside manufacturing plant in Melbourne as it brings the former CHH Mt Waverley operations under one roof to create a so-called supersite. The rationalisation is expected to bring in $3m in savings, and improve the company’s competitive position by reducing labour costs, downsizing its occupancy footprint and using its scale to leverage improved input cost purchasing. The move is now 90 per cent complete and is due to wrap up next month.
The packaging manufacturer and printer is also commissioning equipment to the tune of $6m, starting with a new HP digital press and related gear ordered in December for the production of short-run, fast-turnaround products. In February it will add a new highly specified B1 Roland 700 six-colour press to boost productivity, and is adding additional paper cup forming machine, and a new Esko machine to double its capacity in flexographic plate-making out of its inhouse design agency and prepress component management business, Brandpack.
After its rationalisation activities, Colorpak expects its figures to return to margin improvement, with strong free cash flow and further debt reduction. Commins tells AP, “The integration activities will be completed in terms of machine moves by March, then we are giving ourselves another six months to streamline our processes and get things running more efficiently now that we have combined two large organisations together, then back to normal in the 2015 financial year.
“It has been a long journey; three years of hard work grinding it out to shape up the CHH acquisition to something we can make a success of – and we have had great success. These six months have been a bit of a bump in the road in terms of performance, but with the worst behind us we are looking forward to continuing on from here. These restructuring activities are all a necessary part of ensuring a strong future for the Colorpak business, underpinning a strong foundation.”
Colorpak produces folding cartons, paper cups and lids; short-run, fast-turnaround digital cartons and other printed components; printed leaflets, blister and lidding foils, self-adhesive labels, sachets and point-of-sale displays in Australia and New Zealand. It says its most significant market segments are pharmaceutical and healthcare, beverage, food, cosmetics and FMCG – serviced by 650 employees working at its three sites in Braeside, Victoria, Regents Park, NSW, and Auckland.
