Bowler Metcalf poised for revival
Premium packaging specialist Bowler Metcalf says increased sales volumes in its packaging segment helped it stave off the effects of higher material costs in the second half of 2023.
This puts the firm back on a growth trajectory after a tough two years.
This week, the company told investors to expect headline earnings per share (Heps) to rise 42.1%-61.9% to as much as 73.3c — breaking a two-period streak of falling headline earnings.
Bowler Metcalf attributed the improvement from the previous comparative period’s 48.4c to growing sales in the packaging segment, which contributed to improved economies of scale in the factory and warehouse and compensated for additional planned maintenance in the property segment.
The uptick comes after the group reported an 18% decline in Heps for the 2022 first half which was preceded by a 12% dip in the prior comparative six months of 2021.
Many essential raw materials have seen their prices rise significantly in recent years, posing a direct challenge to the profitability of companies that are dependent on them.
Listed on the JSE in 1987, the Cape Town-based company manufactures and sells rigid plastic packaging for the toiletry, cosmetic, household, pharmaceutical and food markets in SA.
The containers and packaging company said its investments aimed at reducing its reliability on Eskom’s power supply have paid off.
It reported that, operationally, the packaging segment has managed higher capacity utilisation than the previous year, which had been significantly affected by load-shedding.
In response to Eskom’s unreliability, Bowler undertook an intense focus on reducing its reliance on this unstable power source and committed more than R50m towards its power supply mitigating strategy.
In the company’s 2023 annual integrated report, group chair Michael Brain lamented that the cost of a two-hour power outage equated to a production loss of more than three hours. When this occurs for longer or more frequently, “the damage is severe”.
“Greater than 20% of working time was spent on powerrelated problems,” said Brain.
CEO Friedrich Sass echoed this sentiment and said managing the failed energy stability challenge was “exasperating and exhausting”.
ALTERNATIVE
The group even had to hold back on new business development as its leadership’s focus was on sourcing alternative energy solutions and controlling operational costs such as waste, labour, electricity and diesel.
“Continuous and high-level load-shedding clawed deeply into operational and customer performances,” said the CEO. The unplanned costs due to the weak rand and load-sheddinginduced failures resulted in the packaging operation’s profit falling 37% from the prior year to R51.3m. Sass said while generators have their mitigating functions, he warned that their running costs are not sustainable for production.
Manufacturing technology, which expedites the production process, enhances efficiency, and improves product quality, requires consistent and reliable energy supply.
SA businesses of all sizes have been forced to be more agile and come up with solutions to ensure their operations can continue amid the near daily power outages.
Bowler has undertaken extensive roof repairs and replacements to allow for an uninterrupted 25-year lifespan of solar photovoltaic power supply. Sass said some relief is expected from the solar energy to be commissioned in the next few months.
Despite the hits the company has taken over the past two years, Bowler Metcalf has continued to pay dividends to its shareholders, which include Camissa Asset Management, Aylett & Co and Old Mutual.
The board has declared a final cash dividend of 24.6c per ordinary share for the year ending June, which equated to a total dividend of 40.40c, a drop of 9% on the prior year.
In 2022 the group acquired specialist packaging business Skye Plastics for R35.3m, granting Bowler Metcalf the opportunity to expand its customer base while adding new products to its offering.