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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.

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