European containerboard JV eyes growth prospect in a crowded market - analyst
VPK Packaging Group and Klingele Papierwerk have made an offer to buy the Stracel paper plant near the French city of Strasbourg from UPM for an undisclosed amount.
The partners declared they plan to invest €100m into the site with the potential to produce 300,000 tonnes per year of recycled fibre-based containerboard.
The move will see the conversion of the current magazine paper machine to one that produces fluting and testliner between 80 and 130 gsm, on equipment with a width of 8.40 metres.
Klingele and VPK said the venture could be up and running by the second half of next year.
VPK is a group of 33 companies spread across 12 European countries. It has annual sales reaching €700m and a workforce of 3,000 employees. Klingele, a German family owned company, owns one paper mill, six integrated corrugated plants and seven converting plants in Europe and Africa. It post annual sales of € 340m and employs 1,250 people.
The current combined production of the companies amounts to 600,000 tonnes of paper and 1m tonnes of packaging per year.
Growth prospects for lightweight test liner
UK analyst Stephen Harrod, of Wildhorn Industrial, said that despite the general overcapacity in the European cartonboard sector, the JV could be targeting a growth segment in the market.
The acquisition of SCA Packaging by DS Smith has been viewed by many industry experts of an over-crowded market where further consolidation was a strong likelihood.
But Harrod said the move was an interesting one for a number of reasons
“It appears that they are targeting a lack of capacity in lightweight testliners – a market where there seem to be growth opportunities,” he told FoodProductionDaily.com.
The industry analyst agreed that it could also point to a trend of middle-sized companies embarking upon joint ventures as a way of surviving and thriving in an increasingly consolidated and competitive market, dominated by players like DS Smith.
“There is going to be further consolidation in the sector by the larger companies – be this through takeovers or by more joint ventures’” he added.
Looking to the long term
Harrod said the JV was focussed on the long term rather than a short or medium term strategy.
“The Western hemisphere markets are pretty flat at present and this deal is looking at long-term growth prospects, when there will be extra demand for lightweight testliner they plan to produce,” he said.
This appeared to fit with the strategy of the two firms which said: “The realization of this ambitious and challenging project would fit in the strategy of VPK and Klingele to concentrate on production of high value added packaging materials based on recycled paper fibre, and will strengthen VPK’s as well as Klingele’s groups’ position on the long term.”
