Glass substitution trend helps boost RPC profits

By Rory Harrington

- Last updated on GMT

Related tags: Plastic, Netherlands

RPC Group struck an optimistic note as it announced buoyant half year profits, selected segment expansion and predicted above average future growth for the rigid packaging sector as the trend towards glass substitution continued.

The UK-based rigid packaging company said year-on-year net profits to the end of September jumped by 64 per cent. While sales volumes increase by just 3 per cent, revenue climbed 9 per cent to ₤382m as the company pushed up prices to customers in a bid to offset polymer price hikes.

While RPC reported “substantial growth”​ in demand for coffee capsules, pharmaceutical and personal care products, overall activity levels “have generally been subdued”,​ said company chairman Jeremy Pike.

The rigid plastics outfit said its restructuring programme, which has so far yielded savings of ₤18m, had cost ₤3.1m in the period, down 44 per cent on last year’s ₤5.6m. The latest casualty in this cost-cutting exercise would see its Goor site, in the Netherlands, close by the end of the financial year. The firm said its debt fell by ₤6m to ₤74.2m during the first six months of 2010.

Glass substitution and growth

With its restructuring programme almost complete, RPC said it was “ready to resume a growth programme” ​as it believed the immediate prospects for packaging, and rigid packaging in particular, were good.

“Packaging is generally forecast to grow in line with GDP, with rigid plastic packaging expected to grow at a faster rate due to the continued substitution effect of plastic over glass and metal,”​ said a company statement.

It added it was well positioned to take advantage of the recovery by UK and European economies and would seek to grow “both organically and through acquisition, with a view to increasing market share in its major markets in Europe.”

Segment performance

RPC has manufacturing operations in 11 EU countries and in the US. The business comprises 41 manufacturing sites and converts polymer granules into finished packaging products. It is organised around the three main conversion processes; injection moulding, thermoforming and blow moulding.

Its injection moulding unit saw sales rise 14 per cent and operating profits climb 29 per cent to ₤11.6m. While most gains were seen in the pharmaceutical and personal care applications, sales at the USA production facility increased substantially following the transfer of the fruit bowl business from the Netherlands and further growth in the coffee capsules sector.

The mainly Europe-based thermoforming segment saw “stable performance”​ in the period – with sales increases largely attributable to the pass through of polymer prices to customers. Gains were seen in the margarine and spread market and “new business developments in oxygen barrier packaging (replacing glass and metal) continue to intensify, driven by both environmental and safety considerations”, ​said RPC.

The production of coffee capsules, which is also based on this technology, was significantly increased, with investment in new production machines made at Bouxwiller (France) and Deventer (the Netherlands), it added.

While PET sheet sales were boosted from the development of new applications, mono-layer sheet volumes were hit by the recession and in particular the margin impact of higher polymer costs which form a relatively high proportion of the production costs.

Lightweighting

Blow moulding operations performed well – sales volumes rose and operating profit increased by 10 per cent to £4.2m thanks to “a strong demand in food and a recovery in the personal care sectors”, ​said RPC.

H1 2010 was also characterised by demand for conversion from other packaging materials… including light-weighting and developing ‘glass clear’ containers. “Significant progress” ​in this area was supported by the combination of new polymer grades and improved manufacturing technologies, said the firm.

Related topics: Processing & Packaging

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