Pro-Pac Packaging's half year results reflect early benefits of synergies following its merger with Australia's largest specialist flexibles manufacturer, Integrated Packaging in November 2017.
The group reports that the integration of the two companies is well underway and synergy realisation (expected to exceed $2 million in annualised synergies) is ahead of schedule. The companies are now operating under a single management structure, which is focused on rationalisation, consolidation and optimisation of the two businesses.
Pro-Pac CEO Grant Harrod said: “The merger with IPG has strengthened our focus in the high growth flexible packaging sector, providing Pro-Pac with a unique opportunity as both manufacturer and distributor. The business can now provide clients with a total packaging solution by combining IPG’s extensive local manufacturing capability and product innovation skills with Pro-Pac’s global sourcing capability as a major packaging distribution business.”
Off a revenue of $158m, it announced $9.55m EBITDA, and $5.95m PBT. In the industrial and flexibles business, which accounts for 84% of the company's turnover post the merger, revenues are up 48.1% to $127 million, with EBITDA up 27.6% to $7.2m (includes two months of IPG results from 6 Nov). In its Rigids division, PPG reports revenues are stable at $30.9 million, with EBITDA up 16.8% to $4.4 million.
Investment in technology is ongoing. The company has recently commissioned a new Macchi five-layer co-extruder at its Kewdale facility and is commissioning two new high speed flexographic printers (KBA Flexotecnica and Windmoller& Holscher) at its Chester Hill plant.
As a result of the merger, PPG is now a leading player in the $2.2 billion flexible packaging segment, which makes up around 10% of the overall Australian packaging market (estimated at $20-22bn)*.
PPG says its future growth will be largely driven by the flexibles market, with demand expected to grow 47% over the next ten years (CAGR of 4%), underpinned by favourable consumer trends.
These trends include:
- a shift towards convenience packaging particular (eg pre-sliced carrots in bags)
- move towards unitisation to reduce product wastage
- move towards shrink wrap as a substitute for crates and boxes (beer and dairy)
- adoption of modified atmosphere packaging (MAP) to reduce food wastage and increase product lifespan in supply chain (fresh produce)
- use of pallet wrapping and stretch hoods to secure loads on pallets
- use of printed bags, shrink wrap and shrink sleeves to improve brand awareness.
Looking ahead, Harrod said the group plans to expand its offering into growth markets such as food processing, agriculture and horticultural packaging, noting that all require local processing supported by an increasing requirement for flexible packaging, driven by consumer demand for greater product freshness and portion control.
“The merger of IPG allows us to establish a new growth platform into the highly fragmented flexible packaging market, where PPG has the opportunity to consolidate and become a market leader,” Harrod added
“We have a strong M&A pipeline of bolt-on opportunities, and are in advanced discussions on a number of these.”
* Source: IBISWorld and PPG management estimates
