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.
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.
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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
Film Supply 2nd ½ 2014 – It’s not just about the price!
Prices for film deliveries through May-June look to be stable which continues the price trends from the 3rd ¼ of 2013. This stability is despite small increases in feedstock prices for all types of polymers in January and February. The strength of Sterling continues to hold sway particularly against the Dollar. This Sterling/Dollar relationship is particularly significant to those film supplies emanating from the Middle East, as the Dollar is the primary trading currency for oil transactions.
This may partly explain how film prices from the Middle East region have remained stable in 2014 despite the imposition of a 6% import surcharge from January on film imports from the region (more protectionism). It may also explain the recent purchase by TI Group of Derprosa; this is in addition to their earlier acquisition of Radici, this now gives them film manufacturing facilities in Europe in both Italy and Spain.
Interestingly, we said in January “It is highly likely that
Food for Thought -A Consultant’s View on Flexibles
We saw this recently and felt it may provide you with food for thought:
As recently as the 1980’s there were four OPP manufacturing plants and two Cellulose producing plants in the UK. Investment subsidies for the building of OPP plants in Italy, subsequently emulated by Turkey, led to the closure of all these plants with the exception of Innovia at Wigton. As a consequence currently all OPP film is imported.
During this transformation period there was a major shift by Supermarkets and Brand owners in the food industry from rigid packs and plain film with labels, towards printed flexible packaging, with laminated film packaging in particular growing exponentially.
As a consequence two major developments occurred:
Spring Time for Film Supply
It’s good to be back! Having been fortunate enough to miss out on much of the UK’s February Monsoon season. Surprisingly for the first ¼ of any year nothing much has changed on the supply side of films. Since I have been away, the push by Polymer suppliers for increased prices on both PE and OPP in January is petering out due to market resistance allied to some over-supply in February. March seems to have followed suit and the market is strangely becalmed with little or no pressure at the moment for price changes in April.
The strength of Sterling against both the Dollar and the Euro has been a factor in creating this stability. As ever at times like this there are signs of some “dumping” at lower spot prices from some different overseas suppliers, these Guys are unlikely to maintain their presence in the UK once the Continent gets busy and/or some of the more unstable economies in the Middle East get back to their more normal demand levels. Currently we are told sales of film to both Egypt and Syria have been affected significantly due to the recent political upheavals.
On a somewhat different (but related) subject, it was interesting to note whilst I was away Treofan announced the installation of a new 30,000 tonne capacity BOPP line in Germany. Whilst we understand this will be predominantly producing “Special films” it is a major departure from the current locations of the new OPP plants in the process of construction.
Film Prices 2014 and Mergers & Acquisition Activity
Polymer suppliers welcomed in 2014 in a similar fashion to the way they left 2013; with a demand for price increases across both PE & PP polymers. Although the amounts involved were only €30-50 Euros per tonne, they follow similar requests for increases in December. At the moment there is no sign of these increases feeding through into the market, but film manufacturers continue to complain about “depressed margins”.
There is undoubtedly a current surfeit of film supply which is holding prices steady, particularly across commodity films. A similar over supply situation would exist within polymer, if we had a competitive market. However, as ever, major polymer suppliers are either closing down current capacity or leaving existing capacity “idle” in order to maintain a demand/supply balance acceptable to them. Thus Basell, Dow and Ineos all currently have “Outages” affecting both PE and OPP polymer supply.
It is difficult to believe this state of affairs can continue indefinitely. Bourge 3 came on stream last year and this will add significantly to the volume of polymer available from the Gulf. This polymer is based on lower cost energy than that in Europe, so prices should at the very least remain stable. In addition crude oil prices are falling and Sterling is stronger against both the Euro & Dollar. In theory all film prices should benefit from these benign influences which are a complete transformation from the circumstances which prevailed as recently as last September. We shall see what the first ¼ pricing structure brings. So for the present we are not buying forward in bulk.