BMO Capital Markets’ latest issue of The Converter offers a detailed analysis of the financial performance of packaging companies in North America and Europe. In looking into the earnings for 25 companies with publicly available financial data on each continent, the investment-banking firm discovered quite a mixed bag. Suffice it to say, for the six measures used, it’s best to be a European paperboard-packaging converter and NOT a North American flexible-packaging maker. Some of the stats:
Five-Year Sales CAGR* – Sales increased across all packaging sectors in both North America and Europe over the last five years through the last twelve months, ending Q1 2011.
- North American sales for the overall industry grew by a median five-year CAGR of 3.8% versus 5.9% for European sales.
- With a median growth rate of 4.2%, the rigid-packaging sector had the highest growth in North America. Paperboard packaging was the highest in Europe with a five-year sales CAGR of 6.7%.
- With median growth rates of 2.7% and 3.0% in North America and Europe, respectively, the flexible-packaging sector had the lowest growth in both regions.
- For North America, 20 companies experienced an increase in sales over the last five years, and five companies experienced a sales decline. In Europe, 23 companies had sales increases while two companies had sales declines.
Five-Year EBITDA* CAGR – EBITDA increased across all packaging sectors on both continents over the past five years. North American EBITDA for the overall industry grew by a median five-year CAGR of 5.8% compared to 7.1% for European EBITDA.
- With median 7.5% growth, paperboard packaging again had the highest growth in North America. The rigid packaging sector was highest in Europe with a five-year EBITDA CAGR of 7.1%.
- With median growth rates of 0.5% and 3.7% in North America and Europe, respectively, flex-pack converters had the lowest growth in both regions.
- For North America, 19 companies experienced an increase in EBITDA over the past five years, and six companies experienced EBITDA declines. In Europe, 21 companies had EBITDA increases while four had EBITDA declines.
*CAGR=combined annual growth rates
*EBITDA=Earnings before interest, taxes, depreciation and amortization
My Thoughts: On average, North American flexible-packaging converters did the least well financially over the last five years, according to the BMOCM analysis. The Great Recession affected the overall industry to some extent on both continents, but slightly less so in Europe than here at home—and even less so for paperboard-packaging converters. There are certainly plenty of reasons for the disparity, but I’m chalking it up, partly, to the heavily plastic-films based flex-pack field. Crude-oil prices tend to fluctuate a lot more wildly than wood pulp, and paperboard has benefitted as well from sustainability trends over the same period.