Colorpak returns to profit

Colorpak has returned to profit despite increasing regional competition and a squeeze on payments by several multinational clients.

The folding cartons giant bounced back from a $3.2 million loss in 2011-12 to post a net profit of $7.5 million for the 12 months to 30 June 2013.

However, that actually represented a 2.2% year-on-year fall in profit once $10.9 million in one-off costs were removed from the 2011-12 result.

Revenue in 2012-13 fell 10% to $174 million due to the cost of exiting unprofitable contracts and clients moving their manufacturing offshore.

The company’s debt position improved, with net debt dropping 15.2% to $33 million and the gearing level falling from 36.7% to 31.5%.

Colorpak went from collecting its debts in 52 days to 48 days – even though some big clients became slower payers.

“There is an increasing tendency for large multinational companies to demand extended trading terms, thereby reducing their debt obligations and effectively passing the burden on to their suppliers,” according to Colorpak.

[Feature: Suppliers tighten trading terms]

“Several of the group’s customers have demanded such terms and the impact will diminish some of the gains that have been achieved from reduced raw material holdings.”

Colorpak said it had performed well in 2012-13 and become more efficient. The year included site rationalisation in Sydney, a 4.8% reduction in staff to 668 and an improved contract with its major board supplier.

It also included the renegotiation of the last of a “a number of unfavourable contracts” that were inherited in the Carter Holt Harvey acquisition and which had unfavourable pre-tax impacts of $6.4 million.

Colorpak forecast further growth in 2013-14 and 2014-15, but warned of price pressures and increasing competition from China, Thailand, Taiwan, Korea, India, Malaysia and Vietnam.

“Industry rationalisation is likely to be an important feature of the industry in the face of continued loss of volume from manufacturers moving operations offshore and the relentless drive by customers for lower input costs in the face of mounting pressures on their businesses to remain viable.”

[Related: More finance news]

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