Spanish strike hits Crown profitability

By Guy Montague-Jones

- Last updated on GMT

Related tags: United states dollar, Supply and demand

Crown has resolved a strike at a plant in Seville but the disruption caused has had a negative impact on the profitability of its European drinks can business.

CFO Timothy Donahue told analysts during a conference call on Tuesday that second quarter profit figures coming out of the European business were “short of plan”​ because of a strike at its Seville plant.

Bad timing

The industrial action was resolved on Friday but not before it had taken its toll on profitability, increasing production costs and imposing additional costs related to transport and relocation as Crown worked to keep up with summer demand.

Donahue said: “With market demand being very strong this was an unfortunate time for the labour action to occur.”

CEO John Conway did not put a figure to the total cost of the strike but said second quarter income for the European beverage can business was down on the equivalent quarter last year. This is despite a 7 per cent increase in volumes.

Across the business volume was much improved on last year with global beverage unit volumes up 8 per cent. However, much of this improvement was offset by the pass-through of lower raw material costs and the negative impact of the strong dollar.

These two factors kept total net sales figures down for the quarter to $2,010m compared to $2,055m last year.

Emerging markets

Moving forward, Crown expects to deliver sales growth by expanding its operations in emerging markets. Conway gave this update on forthcoming plans in these high growth regions:

“Beverage and food can capacity additions in Thailand will begin production in this year’s third quarter, and the second beverage can line in our Dong Nai, Vietnam plant will begin operations in the fourth quarter.

“Over the first two quarters of 2011, three additional beverage can lines in Brazil are expected to begin commercial production and the new Hangzhou, China plant is expected to become operational in the third quarter of 2011.”

Related topics: Processing & Packaging

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