Credit crunch strikes

Packaging Professional magazine
,
17 Nov 2008
Closed sign in a shop window

The current economic crisis has hit the packaging industry hard, as several companies have either gone into administration or have made major cutbacks.

Avalan Packaging, based in Wigan, UK, announced in October that it had gone into administration, along with R&M Farhi, a luxury confectionery packaging firm in London, UK, whose orders had plummeted in recent months. Upton Packaging, in Redruth, UK, has also entered administration, although it is still in operation.

International company RPC Group announced plans in September to close at least six plants, including its beauty and personal care packaging facility in Mozzate, Italy. It also intends to sell a further two operations as it focuses more on rigid plastic packaging.

In its third-quarter results published in October, Rio Tinto Alcan postponed its goal of achieving US$10bln from divestments by the end of 2008, which would have been used to counter debts incurred through its 2007 purchase of Alcan. The company is now likely to delay selling its Alcan Packaging division, worth around US$6bln.

Rising raw material, transport and energy costs have meanwhile forced European producer Greiner Packaging International, in Kremsmünster, Austria, to increase its prices. ‘The price of polystyrene alone has gone up by 50% in the past four years’, says Greiner’s CEO Willi Eibner. ‘Price adjustments have become inevitable.’

UK industry analysts Plimsoll Publishing has released a report predicting a series of takeovers and sell-offs in the UK packaging market in the next two years. It notes that larger companies, who are currently making margins of 2.1% or less, are looking to cash in on smaller niche companies which are posting rising profits.

Further information: Plimsoll