CPMC to focus on plastic and paper products

PUBLISHED : Monday, 10 January, 2011, 12:00am
UPDATED : Monday, 10 January, 2011, 12:00am

CPMC Holdings, the packaging arm of mainland food and agricultural products trader Cofco, plans to expand into the plastic and paper packaging sector.

The company reported a 24.2 per cent drop in revenues generated by its key earner - the production of three-piece tinplate cans - which accounted for more than 40 per cent of total revenues during the first half of last year.

CPMC general manager and executive director Zhang Xin was optimistic despite the drop in revenues, saying he expected strong growth in two-piece beverage cans this year would overcome the slower sales in the three-piece product segment.

'About 40 to 60 per cent of beer sold overseas is sold in two-piece cans. But in China these cans account for just 4 per cent of sales, so there is ample room for growth. After all, glass bottles are not so environmentally friendly,' Zhang said at the company's recently opened factory in Hangzhou.

CPMC is now expected to add four more production lines of two-piece cans in Tianjin, Chengdu and Guangdong, with two of the four new lines expected to open by the end of this year. The expansion plans are expected to boost production capacity by 23 billion cans a year.

The increase in output would ease the company's reliance on outsourced production and generate cash for acquisitions, Zhang said.

After its April acquisition last year of International United Group - a Hong Kong-based plastic packaging company - plastic packaging made up just 2.4 per cent of CPMC's total revenues during the first half of last year.

Zhang said the company planned to raise this share to between a quarter and one third of revenue in three to five years.

'The companies [which we will be interested in acquiring] must have a certain scale or influence in the industry, or a certain technology or talents that could complement ours, or their clientele and the allocation of production lines must be beneficial to our development,' he said.

The company is also eyeing opportunities arising from the further integration of the paper packaging business.

Greatview Aseptic Packaging - the world's second-largest roll-fed supplier of aseptic packaging - was among CPMC's targets, according to Zhang.

Contrary to investors' anticipation of a capital injection by Cofco, Zhang said CPMC would not rely on financial assistance from its mother company.

'We account for just a very small portion of Cofco's business, we cannot expect to count on it,' he said. 'On the contrary, it will be more active and healthy for us to expand by ourselves and contribute to our mother group.'

After restructuring of the business, Zhang hopes to lower the share of the metal-can business from about two thirds of total revenues to about 50 per cent.

'Sales of three-piece beverage cans will continue to drop in the next few years as Jiaduobao continues to switch from three-piece to two-piece cans,' he said.

Jiaduobao, the manufacturer of the mainland's most popular herbal drink, Wanglaoji, accounts for nearly one-third of CPMC's business.

CPMC earned 104 million yuan (HK$121 million) in net profit during the first six months of last year, a year-on-year increase of 14.3 per cent.

A new package

After acquiring International United Group plastic packaging, as a percentage of revenue, was: 2.4%