National Flexible - Twigg´s Times
With a wealth of experience in the packaging industry at the most senior levels, Barry Twigg - National Flexible´s major shareholder and CEO – shares his thoughts and ideas about the latest trends.
Home Thoughts from Abroad (Apologies to R Browning)
By the time you read this I will have left for sunnier climes and an extended break from the UK’s dreary Winter weather. However, before departing I felt (as is traditional) I should look back at some of the issues raised during 2014 and look forward to their development in the coming year.
As always, the area we considered most relevant in 2014 was
1. Film Prices
I often feel I am a lone voice when the cost of packaging film in the UK is raised and events of 2014 highlighted why I feel this way. In the first ¼ of 2014 the average price quoted for polypropylene polymer was €1405, at half year this price increased to €1500 and as of December it was just €1350. A fall on the year of around 5%. Agreed, some other polymers have fallen 10-15% dependent upon the tracker index chosen but these prices were charged over a period when oil prices have fallen 50% in 6 months!
What is it about the UK Flexibles industry which keeps us immune from falling film prices when we have falling polymer price.
Film Prices 2015 – Where are they heading?
We don’t think that film costs will be falling very far in 2015 and here’s why.
Everyone has read that the oil price has collapsed by more than 30% since June 2014 and that there is now a glut of oil around the world. We also know that all the flexible films we use are made primarily from oil. So the mystery is why have we not seen a collapse in the price of flexible films?
We seem to have exactly the same mystery when we go to the garage to fill up our cars. There has undoubtedly been some reduction in the cost of fuel, but it is miniscule when related to the reduction in the oil price. One of the explanations which has been proffered is that the 30% figure refers to Brent Crude and West Texas which are the benchmark for the highest quality premium oils and that the commodity “stuff” from which film polymers are produced, have not seen falls in prices of
Premier Foods ‘Blackmail’
What a load of nonsense is being talked about Premier Foods desire to have supplier support for marketing campaigns. This type of ‘Supplier Partnership’ contribution is common in the food industry and is a great way for both companies to benefit from increased sales.
Some companies achieve this by escalating rebates, thus the more you sell, the more you payback, others use the Premier Foods approach.
It’s not blackmail, its commercial sense to choose suppliers who want to work as long term partners and invest together in sales growth over others who choose not to provide such support. It’s called Partnership and at National Flexible we value our partnership with Premier very highly.
At their recent Supplier Conference we attended, Premier Foods were very open about their future plans and what opportunities there were for supply partnerships. Most companies would not be as candid or inclusive as they were with the information provided.
M & A Activity – All our yesterdays
It’s good to be back despite the climate change. Not a lot has happened on the film pricing front since I have been away (we will come to why later). But the M & A activity in the UK Flexibles market continues apace, with Coveris adding Learoyd to their Britton and Paragon purchases making them the largest USA convertor operating in the UK.
Here at National Flexible we are at a loss to understand the attraction of the UK converter market to these overseas companies, particularly the Americans. Whilst there is undoubtedly growth in sales demand in the flexible films sector, margins are generally tight and profitability is not exciting when compared with many other business sectors. In addition, there is a constant demand for new capital investment in hardware as new technology improves the quality of print at higher running speeds, with quicker changeovers and smaller runs.
I have no doubt
Coveris buys Learoyd – M & A Activity
I said in January and again in May that 2014 would be a busy year in Flexibles M & A activity.
Whilst we expected the foreign acquisition spree to continue we did not discount UK mergers. The year’s not over yet and there is obviously lots of cash available for corporate expansion. Obviously, the acquirers feel there is lots of profit to be made in packaging, we shall see!
One thing we can guarantee is that National Flexible will remain independently owned by its Management and Staff.
We would love you to share with us any thoughts you may have on the consolidation in the Flexibles market. Whilst there is still lots of choice available this reduces with each acquisition.
LinkedIn – uk.linkedin.com/pub/barry-twigg/53/40b/3a4
Twigg’s Times – http://www.nationalflexible.co.uk/news/category/twigg-times/
Supplier Self Audit Certification – Is it me? Meanwhile Trending Film Prices
Supplier Self Audit Certification – Is it me?
The first chart highlights the exponential growth we have seen in the demand for Supplier Self Audit Certification. Whilst I have raised this growing problem in the past, it has not made the slightest difference (I never really thought it would) but surely at some point, somebody will have to do something to arrest the inexorable increase in Self Audit Certification.
To see the first chart in context please consider the following information
a) Since 2010 National Flexible has had a sales growth of some 30%, yet the demand for Self Audit Certification has grown by some 300%
Packaging Film Price Trend – Through to 2015/More M&A in Flexibles
Three weeks ago we intimated that we would be visiting key packaging film suppliers in Turkey, Europe and the Middle East. Having completed our journey to these far flung international outposts and now having spent some time with some of the UK’s leading OPP and PET film suppliers, we are probably less confident now in the direction of packaging film price trends until the end of the year than we were before we commenced the journey!
Just 4 weeks ago (prior to the visits) there was hardly in a cloud on our future film supply horizon.
Film Price Trends – A Journey of Exploration
Each month, in addition to commenting on current events, we try and extrapolate the various conflicting information we get from the film suppliers and the market and give our forecast on medium term film price trends in flexibles. Currently the emphasis is on ‘Conflict’ as more of the Middle East oil producing countries seem to be embroiled in activities which could significantly affect the price of oil.
STOP PRESS – Basell call “Force Majeure” on European polymer supplies
News on polymer / film prices from Interpack Dusseldorf
LyondellBasell declared “Force Majeure” on polymer supplies from their French operation due to maintenance and shortages of raw material feedstock. This follows similar ‘outages’ and Force Majeure in the 1st quarter from three UK and Polish polymer plants, these supply both OPP and PE polymers. The announcements from Basell and their fellow polymer suppliers are usually a pre-cursor to price increases in flexibles. All the European film companies we spoke to in Dusseldorf indicated that they were awaiting further information on when supplies will revert to normal. Meanwhile Sabic have been seeking a €30/40 increase for June deliveries. Simultaneously Borealis reported bumper 1st quarter profits from their polymer operations.
Meanwhile, back in the UK