Colorpak is delivering a price-point ultimatum to its local suppliers, challenging them to meet its call for a 15 per cent price reduction in their products and services, and establishing new supplier payment terms of at least two months.
In a letter sent to suppliers on 2 July (seen by Print21), Colorpak managing director, Alex Commins (pictured), said the company was instigating a ‘supplier challenge’ seeking a 15 per cent price reduction on existing prices from businesses that supply the company.
The letter requested that the price reduction occur no later than 1 August this year and added that Colorpak was open to ‘any ideas’ that would help to deliver the requested outcome.
According to Commins, the aim of the price reduction request was to help enable Colorpak to maintain its competitiveness in the Australian folding carton industry amid difficult local trading conditions.
In the letter, Commins said:
“You will be aware that manufacturingin Australia is facing increasing pressures to remain competitive against global competition. Customers expect local manufactured prices to match cheaper imported alternatives. In a number of instances, our customers have moved their manufacturing bases offshore to secure cheaper labout and materials. This appears to be an ongoing trend.”
In addition to the call for 15 per cent price reduction from suppliers, the company is establishing payment terms that will see suppliers’ invoices from the beginning of August onwards paid 60 days from the end of month of their lodgment.
In the letter, Commins said that the new payment terms are in response to the current economic environment as well as a ‘general trend’ from large corporate customers.
In early February, the Australian-listed print and packaging company reported a net profit after tax of A$4.72 million for the six months ending December last year, despite recording an $11.37 million drop in revenue for the same period compared to the previous year.
The trans-Tasman print company, which posted a net loss of $-3.23 million after tax for financial year ending June 2012, recorded a six-month revenue of $92.73 million, down from the previous year’s result of $104.1 million for the same period in 2012.