RPC Group posts ₤7.7m loss on financial crisis and high polymer prices

However, the company, which is a major supplier of rigid plastic packing to the European markets, was encouraged by its 11-percent sales increase to ₤769m, a strong cash performance and good progress on its improvement initiative.

Challenges and costs​

But RPC chairman Jamie Pike outlined a number of significant challenges that impacted the firm’s performance during the financial year ending March 31. Principle among these was the global financial crisis which had hit economic activity levels, he said.

More than half of RPC’s products are sold into the “relatively resilient”​ food sector but even here there were problems as “demand has been slowing down due to destocking ​and in some instances switching to lower value brands”,​ he said in the chairman and chief executive’s report.

Rising input costs, particularly those for polymer prices, were also key. Polymer tariffs increased to their highest ever levels in August 2008 before dropping back in the following months. This affected RPC's thermoforming operations in H1. But business in its Bebo subsidiary was boosted by increased volumes of margarine and spread packs resulting in greater European market share. Outer packaging and energy costs followed a similar pricing trend to polymers, said Pike. However, overall gross margins improved to “sustainable levels​” in the second half of the year.

An area of growth was in supplying packaging to the gourmet coffee sector as sales of Tassimo capsules “continued to demonstrate their strong growth potential”.​

The performance of its oxygen barrier container products was mixed. Demand for fruit bowls was described as “disappointing”​ but the rest of the market – including a major project for baby food and new business in pre-cooked rice and functional foods - continued to develop, said RPC.

The company’s major rationalisation strategy RPC 2010 included the sale or closure of eight plants throughout Europe, including the in UK, Netherlands, Italy and Poland. These and other “cost optimization​” measures aim to improve its Return of Capital Expenditure by four percent, said the firm. The proposed sale of its German-based distribution outfit has been delayed until economic conditions improve.

Strategy and outlook​

Going forward, the group has decided to focus on attractive rigid plastic sector where, it says, it has a strong market position and good long term prospects.

RPC said it is convinced its strong presence in supplying the food sector will bring performance benefits in the coming year. Falling input costs will also ease cost pressures. But the company admitted the continuation of the financial crisis could affect volume demand for its products.

“The major short-term uncertainty that remains is the volume outlook as evidenced by some of our major customers choosing not to publish forecasts for 2009”,​ RPC said.

The company added that it expected medium term growth in rigid plastics to outstrip that of GDP packaging as plastic continues to substitute other material used in packing.