As the third quarter of the financial year draws to a close, paper-based packaging companies Huhtamaki, Stora Enso, UPM and Ahlstrom have issued profit warnings on the back of a weakend US dollar and increasing costs.
Yet metal-based companies such as Alcoa and Crown Holdings have reported strong profit growth.
PROFIT WARNINGS
Increasing costs of raw materials, rising energy costs and the weak dollar are being blamed by paper packaging companies for expected drops in third-quarter profits.
Packaging company Huhtamaki Oyj has revised its full-year profit estimate downwards, following weakened volumes and operational results in September as well as softer volume outlook for the remainder of the year.
In an earlier outlook, an improvement in operational result was expected to compensate the previously announced significant reduction in corporate net.
2007's operational result is now expected to be around the same level as 2006 (€138.1m).
Stora Enso Oyj, packaging board manufacturer and one of the world’s largest forest product companies, says operating profit in the third quarter was slightly below the level achieved over the same period last year.
"Continuing high wood and recycling fibre costs and a weakening US dollar had a negative impact on the period," the company says.
It expects similar conditions to continue through the fourth quarter.
Paper, label and wood product manufacturer UPM blames rising wood costs and the strengthened euro for its expected third-quarter profit drop.
However, UPM says the full-year operating profit excluding special items is on track to exceed that of 2006.
Speciality paper and fibre manufacturer Ahlstrom says its full year operating profit excluding non-recurring items is expected to be "somewhat below the 2006 level" of €87.3m.
It blames the fall on weakening demand in its Label & Packaging Papers business.
Despite the overall company outlook, Ahlstrom expects its technical papers and fibre composites businesses to improve their operating profit from 2006.
REVENUE GROWTH
It's not all doom and gloom in the packaging sector, as companies in the corrugated paperboard and metals sector expect increased third-quarter profits.
Retail-ready corrugated case specialist DS Smith says its pre-tax profits for the first half of 2007 have been boosted to £50m by high prices for materials in the second half of the 2006-07 financial year.
DS Smith says its UK Paper and Corrugated Packaging segment had "benefited strongly" from the price increases, which were put in place to recover from a substantial rise in energy and waster paper costs.
It says the likely pre-tax profit for the six months to 31 October is expected to be £50m – well up from £29m for the same period last year.
US metal packaging specialist Crown Holdings has also recorded profit increases across its European packaging divisions.
Specialty packaging profits rose almost £1m to £4m in the three months to 30 September.
Total group profits for the third quarter rose nearly 20% to £153m, driven by diversity of products, firm volumes and emerging markets, Crown says.
Aluminium manufacturer Alcoa reported its third quarter profits from continuing operations have risen three percent to US$558m.
ACQUISITIONS
Gresham Private Equity has bought toothpaste tube manufacturer Betts Global from Permira, Royal Bank of Scotland and the Bank of Scotland in a deal worth more than £110m.
Betts' customers include Colgate, Palmolive, GlaxoSmithKline, Procter & Gamble and Unilever.
Betts's new chairman Paul Bateman, former group operations director for Boots, says the deal will provide the company with the backing to expand into the personal care market and enter new segments.
"The support and firepower of Gresham Private Equity will enable us to invest in our manufacturing facilities," Bateman says.
Source: packaging-technology
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