UK cosmetics packaging company pulls out of China

The financial burden of setting-up a production plant in China has forced the owners of a cosmetics packaging firm to call in the administrators and sell the business.

PD Group accepted a buy-out offer from the drug delivery firm, Bespak, for the UK arm of the packaging firm, Decorpart. However, PD Group is still in negotiations with another interested party with regards to the sale of Decorpart's Chinese business.

Decorpart is a specialist manufacturer of metal packaging goods, such as lipstick sleeves and jars lids, which began trading in 1977 in the UK before expanding into China last year.

Its UK business had an annual turnover of €18 million and employed 230 people when the owners, hoping to secure the long-term health of the business, decided to build a manufacturing plant in China.

On the back of a Î37 million commercial partnership deal with Alcan Packaging Beauty, Decorpart built a factory in Shanghai in 2006 to produce metal parts that would be assembled by Alcan.

The company expected a minimum of 20 per cent sales growth during 2007, but its plant in China did not become fully operational as early as hoped and needed ongoing funding at a time when the UK business was under financial pressure.

"The UK business is primarily focused on export sales into global markets but has found itself under increasing pressure from competitors based in countries with lower labour costs," said Adrian Wolstenholme from the administrators, Kroll.

Around 60 per cent of Decorpart's output was exported to Europe, the US and Mexico, posing significant problems for the manufacturer as Sterling climbed to a 26-year high against the dollar. A cash flow crisis finally forced Decorpart into administration.

The owners of Decorpart said they had been keen to sell the business quickly in order to maintain customer and supplier relationships.

Bespak bought the ailing UK arm of Decorpart in order to guarantee the supply of a component that it uses to produce its inhalers.

While Bespak has made assurances that none of Decorpart's 245 UK employees will lose their jobs, uncertainty remains as to the future direction of the business.

From now on, as a subsidiary of Bespak, Decorpart will trade under the name of Integrated Aluminum Components and will, for the time being, continue to sell Decorpart's full range of goods.
Source: cosmeticsdesign