The Canadian company, which provides packaging materials, machines and technical support, profited from the drop in the cost of raw materials that helped increase gross profit margins by 5 per cent.
This resulted in the company posting record Q1 earnings despite a dip in demand, which saw sales fall by three per cent to $120m. The economic environment affected the company’s pharma sector especially but Winpak believes that the situation may be improving.
Winpak said: “The Company is cautiously optimistic that the downturn in customer demand experienced in the last two quarters is reversing as evidenced by an upturn in demand in the last month of the past quarter. It is still too early to tell if this is the start of a longer-term trend but the outlook is more promising than it has been in recent months.”
Raw material costs starting to rise
Although there are reasons to be “cautiously optimistic” Winpak believes that raw materials costs have bottomed out after reaching prices last seen in 2004 and will rise throughout Q2.
This is a consequence of resin manufacturers closing facilities to match falling demand. However, even with these closures increasing raw materials prices Winpak believes it is highly unlikely that costs will reach the peak of Q3 2008 in the near future.
In addition Winpak is anticipating generating additional revenue of $5m to $10m a year once the transition of manufacturing operations from Reynolds Packaging is complete. Winpak acquired exclusive rights to Reynolds’ formulations and drug master file specifications earlier in the year.