How attractive are UK corrugated packaging manufacturers to investors? This question is worth discussing. In recent years, M&A activities in the global corrugated packaging market have increased, especially in the UK, which makes it stand out from the performance of European countries. In the British corrugated packaging market, there are many participants, large and small. Some of them come from the paper packaging industry itself, while the other part comes from the outside, mainly from some venture capitalists. This has also made a large number of third tier factories in Britain have changed hands, or become part of the growing trend of investment in emerging enterprises. But why?
First, Britain’s withdrawal from Europe has brought trade barriers and import and export restrictions between Britain and other European countries. In order to avoid these costs and restrictions, some ambitious companies and industry “early adopters” from the European continent directly choose to invest in the UK to ease the mutual trade problem between European investors and British manufacturers.
Second, the COVID-19 epidemic has also had an impact on trade and terms in the supply chain. The COVID-19 has encouraged enterprising enterprises to invest in the booming British corrugated packaging market, so as to reduce the efficiency between the UK and the European continent.
Third, investors enter the UK because they have customers in the UK. Quite simply, they want to be close to customers to ensure the best service. Although the supply of products and raw materials has become very tight, it is very important to stay with customers.
Finally, and perhaps most importantly, the corrugated packaging processing market in the UK is regarded as an attractive investment market. From all aspects of statistical data, the corrugated packaging market in the UK is growing year by year, and the profitability has improved significantly in the past 8-10 years, especially in the past 18 months. Investors who want to see their capital get rich returns will consider it a good choice to invest in the UK’s tertiary plants.
There are many factors. First, the industrial recovery of the cost increase in the past 12-18 months. For example, due to the rise in paper prices during the epidemic, the profit margin of the tertiary plants has been restored, thus ensuring the continuous profitability. At the same time, the improvement of efficiency and the increase in the use of automation have helped the UK’s third tier plants reduce costs and enjoy new profit levels.
From large multinational groups such as Smurf Cappa to small private companies, buyers of British third tier factories have noticed the strategic expansion of increasing market share and providing products to customers, or just to improve the profitability of the British market sector.
Smurfit Kappa has strategically expanded the investment portfolio of local small corrugated paper manufacturers, increasing its share in the UK tertiary plant market in the past 3-4 years. Early adopters of investment opportunities in this industry include Klingel Paper and Packaging Group, Schumacher Packaging Group, Modern Carton Group and Zeus Packaging Group. These companies either invested in tertiary plants, or invested in secondary plants or paper mills to enter the British corrugated packaging market.
However, the interest in investing in the corrugated packaging market in the UK even goes beyond the paper packaging industry. More traditional investors have found this growing activity to obtain rich returns, and hope to get a share of it! Anyone who needs to ensure profitability should look at the strategic planning and rising stock price of Smurf Cappa as the vane of market conditions. The rise in stock market value over the past 18 months is a clear sign of support for its strategic plan.
So, will this trend continue? We believe it will. We know that enterprises in Europe, the Far East and the United States have set their sights on the UK tertiary plant market. In fact, the European market has begun to reflect the attractiveness of the UK market. Our economy may fall into recession and interest rates may rise, but there are still investors looking for opportunities. The tertiary plant market is such an opportunity – in fact, we can even say that it is a hot spot in Europe.
As the global demand for sustainability continues to grow, all sectors are encouraging shareholders, investors and packaging stakeholders to turn to paper products and stay away from plastic materials. The market is ready for growth. In addition to the recent rise of Internet shopping and door-to-door delivery, paper packaging is required to ensure successful delivery, which ensures that the industry has made great achievements in sustainable products and mature investment.
Of course, the impact of the Russian Ukrainian conflict combined with the inevitable recession may have a short-term impact, but the industry has been growing continuously in the past five years. We predict that it will recover in 2024 and continue to grow at an annual rate of about 2% in the next 3-4 years. Therefore, the corrugated packaging market still has an attractive market with good long-term growth prospects. Some eager investors hope to ride this growth wave – so far, everything is good. But then comes the supply problem. The needs are there – are there resources to meet them?
Similarly, considering the temperature of the production market of Grade III plants, we will say yes. Several business owners have invested heavily in secondary plants and paper manufacturing in the UK. Although Britain’s trade in selling used corrugated boxes (OCC) to European paper mills is very healthy, the British paper industry led by SAICA has recovered after relying on non British paper mills for decades. Like other newer investors, the UK is ready to be self-sufficient in the supply of recycled cardboard.
This leaves us with a final question: Are the owners of the UK’s third tier plants ready to sell (in whole or in part) their business? As another recession approaches, these business owners deliberately consider sensible proposals to enable them to leave immediately, rather than experiencing another 1970s or 1990s style recession.
In order to prove this, in a recent move, the corrugated box company in Chesterfield, Derby, has been acquired by TNK UK, a subsidiary of Japan United Group. We believe that the owners of the third tier plants are more pragmatic. They are open to offers and it is time to buy.
Post time: Nov-23-2022