SoftBev dents Bowler’s profit
• Packaging division’s growth well spread among all operational plants
Bowler Metcalf, one of the best-loved small-cap counters on the JSE, has seen a commendable profit performance from its core plastics packaging division spoiled by a sizeable impairment on its investment in soft drink bottler SoftBev.
Bowler Metcalf, one of the bestloved small-cap counters on the JSE, has seen a commendable profit performance from its core plastics packaging division spoiled by a sizable impairment on its investment in soft drink bottler SoftBev.
On Friday Bowler reported a 5% hike in dividends to 19.32c per share after the plastics packaging operations increased turnover almost 15% and bottom line profits increased by nearly a third to R34m.
Bowler CEO Friedel Sass said growth in the packaging division was well spread among all operational plants, with the majority of key projects reaching their production phases.
He said the Gauteng plant expansion resulted in regional activity growth of close to 50% compared with the corresponding interim period in 2016.
Sass said the increased activity in all packaging plants had prompted a focus on the expansion of facilities.
The solid packaging performance was negatively affected by a R70m impairment in Bowler’s significant shareholding in SoftBev. Bowler financial director Grant Bohler said that if the impairment were stripped out, the company would have posted bottom line profits of about R33m. “This is not too dissimilar from the prior year’s profits of R36.8m,” he said.
The dividend increase was testimony to the excellent plastics packaging results and reflected the executive team’s confidence that the issues affecting the SoftBev results would be successfully managed. SoftBev was formed about two years ago when Bowler merged its Cape Town-based Quality Beverages operations with Durban-headquartered Shoreline Beverages in exchange for a major shareholding in the enlarged SoftBev operation.
Bohler said SoftBev faced slowing growth in the carbonated soft drinks market, as well as stiff competition, especially in the Gauteng region.
He added that input cost pressures placed strain on SoftBev’s pricing mechanisms.
“Right now, we are shoulder to the wheel with our SoftBev partners. They are as committed as we are to ensure that the merger objectives are achieved, even if on a slightly delayed timeframe,” he said.
Bohler stressed that both parties had substantial “skin in the game” and that it was in everyone’s best interest to succeed at SoftBev.
Opportune Investments CEO Chris Logan, a longtime Bowler shareholder, said SoftBev had run into the perfect storm of intense competition, stressed consumers and a rocketing sugar price.
He said: “One has to wonder whether the optimal value unlock for SoftBev would be the introduction of a trade buyer who could harvest synergies and introduce a greater array of world-class products.”
Asked about plans for the soft drink bottling investment, Bohler reiterated that the SoftBev merger was the start of Bowler Metcalf’s exit strategy from the beverages industry. “This has not changed. Our first priority is to work with our partners to ensure a successful beverage business. This in itself will create the right exit opportunity, whatever form that may take.”
Looking at prospects for the core plastics packaging business, Bohler said that pricing pressure was tempered by constructive relationships with customers and healthy competition in the sector.