BOWLER METCALF

Share price: 800c JSE code: BCF

HOLD PLASTICS PACKAGING SPECIALIST Bowler Metcalf is one of the great small cap success stories on the JSE. IM doubts too many small (or large cap) counters can compare with the returns generated by Bowcalf between 1987 and 2012. Bowcalf’s functional head office tucked inside its factory in Ottery has always reflected the lean and mean operational approach that directors have refused to compromise on for nearly three decades. But even the leanest and meanest manufacturing operation could not offset escalating energy costs, above-inflation increases in labour costs and the inevitable price squeeze from multinational clients.

Under the circumstances Bowcalf’s core plastics packaging division performed commendably in limiting the after-tax profit decline to 2% to R41m off a 10% increase in turnover to R303m in the year to end-June. Considering Bowcalf’s track record there’s no reason to discount the directors’ contention that “Bowler Plastics has been in this cycle before and we are confident we can handle it”.

What does bear close scrutiny is Bowcalf’s decision to bundle its Quality Beverages soft-drink filling operation into enlarged entity SoftBev. Bowcalf will secure a 40% stake in the new soft-drink bottling venture, which looks capable of generating annual sales above R1bn while fortifying profits by rolling out numerous cost saving initiatives. A neat arrangement, but until there is more fundamental fizz on SoftBev we rate Bowcalf as a hold.