IVE TO BUILD $150M-A-YEAR FOLDING CARTON BUSINESS
IVE Group will build a $150m-a-year folding carton business, with major investments planned to drive growth at its JacPak acquisition, and at its Silverwater site.
IVE acquired JacPak, located in Keysborough, Victoria, on 31 October, paying $35m for the $45m a year business, describing it as a cornerstone acquisition. IVE says in the two months it owned the business it performed in line with expectations. IVE has identified that JacPak has the capability within its existing capacity to produce around $15m worth of extra revenue, meaning it will produce some $60m worth of folding carton, which IVE says will generate EBIDTA of $11.9m and net profit after tax of around $3m.
IVE is now looking to build on its packaging capability by investing in new finishing equipment for its Silverwater, NSW, facility, specifically die-cutting and gluing equipment. It plans on leveraging its commercial print operation capability located there – its sheetfed offset presses – and says this will provide the means to generate some $30m worth of packaging capacity in the short term. Implementation will begin in the new financial year.
IVE has three B1 Heidelberg long perfectors at Silverwater for its commercial print operation, as well as a Heidelberg CD74 there. It has another 11 sheetfed presses at sites around the country.
Further investment in packaging capability over the medium term will add the means to produce another $60m worth of printed folding carton, all adding up to a $150m a year business, with production facilities in both Victoria and New South Wales. It aims to reach its target within 3-5 years.
IVE is open to opportunistic bolt-on acquisitions, however the thrust of its folding carton growth strategy is organic. It says the higher margin, shorter run, folding cartons segment offers sustainable returns, and sound growth prospects, for mid-tier players, especially given the sector's current fragmented nature.
According to IVE, the domestic folding cartons market is currently worth $800m, and makes up a core component of the preferred packaging format for large food, beverage, cosmetics and wellness customers, with this segment growing around 10 per cent over the last year.
IVE considers fibre-based packaging as being complementary to the group’s existing product and service offering, and consistent with its long term strategy to continue the diversification of the business into aligned adjacencies. The fragmented structure of this sector also provides an opportunity for IVE to play a leading role in consolidating the sector further, similar to the strategy it has executed in other adjacencies over the last decade.
