Will Good Things Come in Consumer Packages?
Consumer packagers deal with foreign currency and restructure for the future.
Consumer packaging firms--the makers of bottles, cans, plastic wrap, and everything associated--have expanded around the globe during the last few decades, sourcing plants near customers. The global economic downturn has affected their financial results, as demand for consumer packaging has declined alongside demand for consumer goods. If people are buying less beer, they are de facto buying fewer bottles and cans.
Often, firms will decrease pricing to spur volume, in an effort to keep their high-cost production lines at higher capacity. However, the strengthening U.S. dollar has affected these firms' revenues far more than a drop-off in volumes or any declines in pricing. Meanwhile, near-term profits have benefited from this currency move and, in many cases, from lower raw-material costs. During the downturn, the industry has been forced to protect profits, leading to the permanent closing of many manufacturing facilities. Although relative currency values and raw-material costs will always be volatile, the industry should benefit in the long term from the ongoing restructuring.
Mike Taggart does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.