BOWCALF – STILL PACKING SOME PUNCH
PACKAGING GROUP BOWLER METCALF (BOWCALF) has consistently outperformed most – if not all – of its larger peers in the last decade and a half. The group has earned a reputation for reliable and high-quality packaging services, and management is notorious for its no-nonsense attitude when it comes to running operations cost effectively. But Bowcalf’s interim results to end-December showed the first dip in profits since the group listed on the JSE in 1987 – an event that (knowing the fickle sentiment for smaller companies) may prompt questions about Bowcalf’s prospects. OPPORTUNITIES Despite sizeable (as high as 40%) increases in raw material costs hitting its core plastics division, Bowcalf managed to curb the margin squeeze to just 1%. At 17%, the pre-tax profit margin is more than respectable. While the inability to pass on raw material price increases to customers took as much as R5m off bottom line, there seems every chance that Bowcalf could regain lost profits in second half trading. Directors say raw material prices have already softened. • The hike in the interim dividend to 9,1c/share – despite a marked reduction in cash flow – suggest directors are fully confident of a stronger second half showing. RISKS Quality Beverages, the group’s bottling subsidiary, more than doubled profits to R3,3m even though operations were hampered by the nationwide shortage of CO2 during the peak summer months. But can Quality extend this performance through the (seemingly sweltering) autumn and winter seasons?