Colorpak has exceeded its 2nd half 2014 financial year’s net profit by $400k in 1st half 2015. It had hoped for more. Its description of the challenges it has been facing may be familiar. There are three primary ones:
“Over the past couple of years, the folding cartonboard packaging industry has been undergoing a substantial change. There has been a sustained buy-side pressure being applied by supermarkets under the banner “cost-down” which is ultimately passed through to primary packaging manufacturers as demands for continuous cost reductions.?Furthermore, another supermarket strategy has resulted in the demise of many specialty brands and the rise of generics, all leading to a contraction in margins for manufacturers. Finally where local manufacturers cannot meet cost targets, a greater proportion of products have been sourced offshore. These factors have created market uncertainty, affected demand and have reduced margins.”
Regardless of the difficulties, Colorpak has achieved an after tax profit of $1.6m for the first half of the 2015 financial year, a $400,000 increase from the previous year. And sales brought $84.15m in income, up from last year’s $82.56m.
“With a falling local currency forecast to prevail in the medium term, we remain optimistic that some pressure may be removed from the supply chain as the threat of off-shoring products and or customers should ease. Against this market backdrop it is encouraging to report that sales were up by 2% versus the prior corresponding period.”
Some of Colorpak’s challenges were unique to the company…
- The integration of its two Victorian sites into Braeside allowed Colorpak to make significant reductions in waste and spoilage and create better process flow but the Braeside workforce faced substantial work process and practices changes concurrent with a wage freeze, and this caused disruption.
- Customer delivery experienced stress when orders were transferred to NSW and to sub-contractors. Freight and disruption costs accompanied the change.
- Higher labour, and other manufacturing, costs and the use of outside sub-contractors also contributed to below target results.
…As are its plans to create growth in the future:
- Colorpak will continue to respond to the rise of private label and generic brands by working with potential and existing customers to provide innovations to their brands.
In October 2014, Colorpak’s Brandpack division partnered and assisted with the launch into Australia of the SFC brand of frozen chicken to retail. The process is ongoing and Colorpak is now assisting SPC with product development and expansion into additional markets with more retailers and in other markets beyond Australia.
- The company has identified major savings through the rationalisation of plants and has been systematically undertaking this work over the past three years. It expects substantial savings will flow from the Victorian rationalisation, although some of these savings will take longer to achieve than originally anticipated.
- Colorpak will continue to adapt to changes in its environment. “We have repeatedly observed the need and logic for further industry rationalisation, and the company monitors all possible options in this regard. We remain alert to opportunities that will augment that position, or enable greater leverage and ”win-win” benefits with our customers.”
