Colorpak chief executive Alex Commins has won a three-year contract extension after his company bounced back from a tough 2014 to report a $1.6m profit for the 2015 half-year.
Commins will continue to earn his just over $400,000 base salary but the notice period for terminating his contract has doubled to 12 months, indicating better job security.
Profit for the first six months of FY15 rose 25 per cent from the previous half-year’s $1.2m, and was far better than the $13m loss of the full 2014 financial year, which also had a $15m goodwill impairment charge.
Other results for the packaging printer also dramatically improved from the full year, when sales fell 6.7 per cent and EBIDTA 29 per cent.
Sales are up two per cent to $84.15m and EBITBA up 17.9 per cent to $6.49m compared to HY14. Colorpak also reduced net debt by $2.95m to $36.4m between June and December.
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However, the company says the results ‘have not gone to expectations’ due to lower margins, slower than expected benefits from closing the Mount Waverly plant, slower factory process standardising, and ‘factory inefficiencies’ at Braeside, Victoria.
The directors say in their report that over the past couple of years, the folding cartonboard packaging industry has been undergoing a ‘substantial change’, which has posed some challenging conditions on the company.
“There has been a sustained buy-side pressure being applied by supermarkets under the banner ‘cost-down’ which is ultimately passed through to primary packaging manufacturers as demands for continuous cost reductions,” they say.
“Furthermore, another supermarket strategy has resulted in the demise of many speciality brands and the rise of generics, all leading to a contraction in margins for manufacturers.
“Where local manufacturers cannot meet cost targets, a greater proportion of products have been sourced offshore.”
The directors say Colorpak is responding to the reduced margins and highly competitive environment by cutting costs including rationalising manufacturing sites to Breaside in Victoria, Regents Park in NSW and in Auckland, NZ,
It is also in the midst of significant staff cuts and has frozen wages until July, and is discussing new employments contracts in the new few months.
However, the directors are optimistic that the falling local currency forecast will take ‘some pressure off the supply chain and the threat of off-shoring products’.
“Substantial progress has been made in relation to reduction of waste, spoilage and better process flow, however the targets we had set for ourselves are proving slower to achieve than had been envisaged,” the directors say.
Colorpak also a new 2.5 litre paper cup for the frozen to oven chicken market it says is doing well, and is seeing strong demand for premium and private label ice cream.
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