Colorpak is reporting a 10 per cent drop in its sales revenue for the financial year ending June 2013, with the company pointing to the loss customers overseas and the withdrawal from unprofitable contracts.
The trans-Tasman packaging solutions company published its financial results for the year on 5 August, recording a 10.4 per cent fall in sales compared to the previous year to A$171.7 million, but also reporting an 8.8 per cent rise in earnings before interest and tax (ABITDA) to $18.2 million.
The company’s operating cashflow dropped by 21.3 per cent to $13.5 million for the year, while its net equity rose to $71.9 million from the previous year’s $67 million.
In a statement to shareholders, Colorpak said that the 10.4 per cent reduction in sales revenue was due to: “exiting unprofitable contracts and lost customers offshore.”
However, given the company’s rise in earnings despite its fall in operating cashflow, it seems the consolidation and acquisition activity it has embarked on over the past two years is paying off, undertaking a major restructure in 2012, which saw much of its acquired Carter Holt Harvey footprint consolidated into its existing operations.
Colorpak announced at the end of July it was consolidating its Victorian folding carton plants after securing an early termination of the old Carter Holt Harvey site lease in Mt. Waverley. It plans top spend around $24 million to close the site and relocate the operation into its Braeside facility.
“Following the rationalisation of its manufacturing footprint in NSW and Victoria, a leaner stronger, more competitive Colorpak is emerging,” said Alex Commins (pictured), Colorpak managing director.
Prior to the Victorian consolidation, the company also combined its NSW footprint, rolling much of its Villawood operation into its Regents Park facility.
With its consolidation comes new investment, with Colorpak spending on new capital equipment, purchasing a new Roland 700 six-colour press, due for commission at its Braeside site before the end of this year and a new HP digital press ordered for its Flexibles site in NSW, also expected to be commissioned this year.
In a statement to shareholders, Colorpak said:
“The Braeside facility will be the largest, most modern site of its kind in Australia upon completion of the integration in April 2014.
“EBITDA margin grown by 1.9 per cent to 10.6 per cent reflecting positive changes following acquisition.
“A number of key customer contracts have been re-negotiated during the year on more favourable terms than were assumed in the CHH acquisition.”
Despite seeing positive returns from its reduced exposure to post-Carter Holt Harvey acquisition-related expenses and lease expirations, the company claims it is still being impacted by the softness in the retail sector, and could see ‘more modest wage outcomes from May 2014.
In the 12 months leading up to its end of year result, Colorpak reduced its employee headcount from 702 to 668.
For Commins, the year’s financial results reflect the company’s ‘continued progress against the backdrop of manufacturing headwinds’.
“Colorpak has maintained its commitment to be the most efficient, high quality supplier in the folding carton sector, concentrating on market segments which generate sustainable returns,” said Commins. “Our compound sales growth over the past 10 years has averaged 13.5 per cent per annum which is testament to the long term strategy of the company and the dedication of the Colorpak team to provide the best service to customers."