The growing financial activity of private equity companies in the graphics industry was noted in the last column, when we reported the XSYS Print Solutions takeover of Flint Ink. No sooner had CVC Capital Partners been given the green light then we hear that Kirkbi a/s is selling the profitable packaging-related activities of Esko-Graphics. Kirkbi is selling it for an undisclosed price to Axcel, another Danish company. The industrial investment group specializes in buying international medium and large-size companies.
Esko-Graphics was formed in 2002 following the merger of Barco Graphics and Purup-Eskofot. The prepress and computer-to-plate (CTP) technology group soon began focusing on the packaging supply chain, while also offering workflow automation software to commercial printers. At present Esko-Graphics employs around 700 people worldwide and has its operational headquarters in Gent, Belgium. R&D, manufacturing and other facilities are located in Czech Republic, Denmark, Germany, Norway, and the USA. There are local sales and support organizations in several countries throughout Europe, North America and the Asia/Pacific region, including Japan and China, plus global resellers and distributors.
Axcel is buying Esko-Graphics’ packaging business built up from the former Barco business. It has made profits in recent years, in contrast with the discontinued loss-making offset CTP activities. For the full year 2005, Esko-Graphics expects net revenues of more than €110 million ($136.76 million), an increase of 12 percent over 2004. Esko-Graphics’ small-format offset activities are not included in the agreement. Kirkbi will continue to support these operations, but is looking for a buyer in cooperation with the current OEM and distribution partners.
Esko-Graphics’s chief executive, Kim Graven-Nielsen, who steered the group over the past three years, said that after completion of the deal his role passes to chief financial and chief operating officer, Carsten Knudsen. “We have identified many attractive opportunities for Esko-Graphics, a recognized leader in an industry that more than ever is driven by globalization and consolidation,” said Axcel’s managing partner, Christian Frigast. The company was established in 1994 and has a capital commitment of €800 million ($995 million).
The global nature of label production favors consolidation, especially among European and US converters. The latest example is the formation of IlloSpear, which brings together the European operations of Illochroma Labelling Group and the filmic labeling services of Spear, based in Mason, OH, USA, and with plants in the UK and USA. Spear remains an independent company and will be responsible for supplying the product line in North and South America, while IlloSpear sells these products in the rest of the world.
The new company was initially created as a joint venture in November 2003 to develop and sell film based labels to the global beverage industry. Market growth in Europe, Africa, Asia, and South America has led the companies to finalize the relationship with the merging of their European assets. Other important sectors include mineral water, household goods and tobacco products.
Illochroma is a major converter of wet glue and film wrap labels with production facilities in Germany, France, Belgium, Italy, and Poland. Its origins go back to 1898. It is now a fully owned subsidiary of Ackermans & van Haaren, one of Belgium’s leading industrial groups, and operates seven manufacturing sites in six Western and Central European countries. The turnover is €180 million ($223.8 million), and the company employs around 1,000 people. Gravure is used for long run beer bottle labels and for producing OPP film labels for the mineral water and soft drinks markets. Offset also gives good graphic effects for small to medium beverage label runs. Flexo handles the relatively smaller runs for all types of labels, as well as HDPE/LDPE sleeves labels.
Rako Etiketten has bought two Gallus RCS 330 servo-driven platform presses to expand capacity for small and medium sized runs on various substrates at its plant in north Germany. Both modular machines have 12 printing units and installation is planned for October and May 2006. Both offer UV flexo, rotary screen, hot foil and cold foil embossing, separately or in combination. Rako has specified Gallus’s Flying Imprint feature to change text and logos at production speed without expensive downtimes.
The Rako Group was founded by Ralph Koopmann 36 years ago. It now has 60 printing presses and around 700 employees and last year achieved sales of €120 million ($149 million). The group is expanding its international business with sites in France, Ukraine and Croatia, plus collaborations in the UK and Poland.
LPP Ltd., a newly formed company in Manchester, England, has been appointed agent for Aquaflex covering the UK and Ireland. Rotoflex, a Barcelona based manufacturer of forms and label presses, has made a similar arrangement with LPP.
The company was formed by Les Bradley, who previously owned Arpeco UK (at a time when the original Arpeco company manufactured the wide web Impressionist packaging press). Bradley later formed Labelpack Equipment with Fred Osborne to sell and service label printing and converting equipment. This was when the connection with both Rotoflex and Aquaflex was developed. LPP will be responsible for sales, technical service and spare parts supply for the UK and Irish markets for both manufacturers.
As is widely known, Aquaflex received a new lease on life after being acquired by F.L. Smithe Machine Co., of Duncansville, PA, USA. Appointing an agent for the relatively important UK and Irish markets is seen as an important step in its expansion into European and Asian markets. “The rebirth of Aquaflex is an exciting thing to witness,” said Stuart Roberts, Aquaflex VP of international sales. “In just over a year we have made tremendous strides in the US. Our customers are returning to us and sales are very strong due to product innovations and world class service. This is a formula for success that we intend to take worldwide.”
“Aquaflex has always been a respected name,” said Fred Osborne. “The company went through a rough patch, but the product remained strong. Since F.L. Smithe took control, it’s been nothing but good news. Now, it is taking that success and building a strong support base to expand product sales and service globally.”
“Aquaflex has done an amazing turnaround,” Les Bradley added. “There is a new energy in the company and a new determination to be an industry leader.”
Label and packaging groups with interests in Eastern Europe, or indigenous companies themselves, will have noted with interest the announcement by Wal-Mart’s CEO, Lee Scott, that his company is considering entering Poland, Hungary and Russia “in the near future”. Wal-Mart’s latest bid to boost sales outside the USA is bound to bring some big contracts in its wake. Of course, it is not necessarily the type of business that everyone will want to chase, given Wal-Mart’s reputation for screwing suppliers to the wall.
“We now want to be in these countries. It doesn’t matter to us which of these will be the first. We want to be in all of them at some point,” Scott told the Financial Times. He said the expansion would probably come in the form of acquisitions. Wal-Mart is supposed to have a war chest of between $16 and 17 billion with which to make them. No specific acquisition targets have been announced.
Worldwide, Wal-Mart generated $285 billion in sales last year, of which 21 percent came from foreign markets. Scott says he thinks the strategy will raise Wal-Mart’s overseas sales by 1 percent each year, and expects overseas sales growth to equal 30 percent of the company’s total sales growth over the next five years.
The sales organization of Stora Enso’s Global Specialty Papers group is being reorganized to combine its Label Papers and Technical Papers businesses into one sales team. “We have identified growing synergies between the “wet strength” and self-adhesive label markets, both of which were previously supported by separate sales teams,” said Steve Liakos, vice president, sales. The aim is to offer a broader range of speciality papers to meet changing demands in the industry.
The newly combined Label and Technical Papers sales team will focus on products for the food and beverage industries. The group also supplies direct thermal and face papers for layering applications, along with premium thermal transfer and release liner base papers.
As part of the realignment, Eckhard Kallies has been promoted to global sales director, Label and Technical Papers. Kallies will lead the team’s sales efforts from his current location at Stora Enso’s mill in Uetersen, Germany. The Flexible Packaging Papers sales team will remain separate with focus on offering paper based packaging solutions for dairy, snack, confection, pet food, cigarette, pharmaceutical, soap, toiletries, and cosmetic applications. Keith Damarell will continue to lead this team as global sales director, flexible packaging papers, based in Stevens Point, WI, USA.
Not surprisingly, the effects of higher oil and energy prices have begun to feed through to the price of raw materials. All types of global converters and label stock manufacturers can expect many more hikes of the type announced by the Switzerland based Cham Paper Group. From this month it will raise prices by an average of 8 percent, depending upon grade and invoiced currency. It says the hike is essential despite rationalization in all of its mills to offset cost increases.
“The paper industry has serious cause for concern,” the company’s statement recorded. “The cost of raw materials, oil based additives, transport, and energy has deteriorated from month to month, with no sign of relief.” Cham Paper Group has a 260,000-tonne annual capacity for high quality, specialty base papers for flexible packaging, self-adhesive label stock and wet glue labels. It also supplies special grades for various technical and industrial applications. The group has five paper mills in three European countries.