Mergers and Acquisitions Key to Profitability in Europe’s Packaging Industry
Frost & Sullivan finds new ways to increase revenue and strengthen the European packaging industry in fast-growth markets
The European packaging industry's financial performance has been volatile over the 2010-2014 period. While return on equity, along with other profitability and cost metrics has been unstable over the last few years, liquidity and solvency ratios have remained consistent. Going by the current scenario, financial performance is expected to be flat in 2015. To break out of the current situation, companies in the packaging industry are increasingly looking for merger and acquisition (M&A) opportunities in Asia's emerging economies. This will help them increase revenue and strengthen foothold in fast-growth markets.
The new study from Frost & Sullivan, Investment Analysis of the European Packaging Industry, reveals that over the 2010-2014 period, the United Kingdom struck the maximum M&A deals, followed by France and Germany.
“Heightened M&A activity and the implementation of other strategies have increased the interest coverage ratio and improved profitability margins slightly in the European packaging industry,” said Frost & Sullivan Business and Financial Services Senior Research Analyst E. Saneesh. “While the cash and current ratio values for the industry are stable, the average cash conversion cycle has declined, indicating that the operating efficiency of the entire supply chain is improving.”
Further, the European packaging industry has been spending between five and six percent of its revenue on technical innovations and machinery, resulting in consistent earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins ranging from 11 to 13 percent. Industry participants are also focussed on bringing down cost metrics as revenue growth is restricted by price pressures and sluggish end-user demand.
“For further progress, process improvement and product strategies to cater to consumers’ preference for convenient, storable and sustainable packaging will be desirable,” noted Saneesh. “Diversifying into other industries will also be important for packaging companies looking to cope with the volatile business environment.”
Investment analysis of the European packaging industry is part of the financial benchmarking in the chemicals, materials and food industry subscription, which also includes research services in the following markets: investment opportunities in the light emitting diode industry, investment analysis of the European Infrastructure as a Service (IaaS) industry, investment analysis of the European adhesives and sealants market, and working capital management in the automotive industry. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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