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PACKAGING – ITS MARKET DRIVERS ANDATTRACTIVENESS AS AN ASSET CLASS
David Powlson & Celedonio Moncayo-Quiros25th November 2015
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25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 2
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PACKAGING DRIVERS
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 3
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PACKAGING DRIVERS – FROM NOW UNTIL 2025
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 4
Pöyry recently completed a large multi-client report on the wider packaging marketthrough The Stationers
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DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 5
THERE ARE KEY QUESTIONS ACROSS THE PACAKGING SECTOR
To understand packaging it is important to have a good perspective on thefollowing questions
· What are the key demand drivers for packaging now and in the future?
· Is sustainability more important than cost?
· How do changes in the retail sector and online shopping change the demand for packaging?
· What are the key technological developments?
· Who are the key stakeholders in the packaging sector?
· What is the growth outlook for packaging?
– By material
– By geography
· What are the expected impacts of substitution in the packaging sector?
· What will the future hold for the packaging sector?
· What are the major challenges that the packaging sector will face over the next decade?
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WORDCLOUD
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 6
Which words do we see? What do we not see?
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TIMELINE OF PACKAGING DEVELOPMENT
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 7
Packaging itself is not new, but there have been a plethora of recent developments,changing the size and shape of the industry
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PACKAGING MARKET SIZE AND SEGMENTATION (BY VALUE)
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 8
Packaging is a USD 670 Billion industry which can be segmented in numerousmethods – two such ways are by material and by region
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PACKAGING GROWTH BY MATERIAL
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 9
There is a positive growth in all packaging materials, however with the rates varyingthen plastics will come to dominate further
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PACKAGING GROWTH BY REGION
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 10
Asia is key – the largest market and the highest growth rate
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KEY DEMAND DRIVERS
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 11
There are multiple demand drivers across the sector: They overlap, interlink andintertwine
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PACKAGING AS AN ASSET CLASS
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 12
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INVESTING IN PACKAGING – BETWEEN A ROCK AND HARDPLACE?Most packaging companies are highly dependent on limited key raw materialsuppliers and most often have a strongly consolidating client base
Raw MaterialSuppliers Customers
Intermediate Suppliersand Converters
Focus: branding and product differentiation, packaging product innovation, productprotection and mutual dependency
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 13
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INVESTING IN PACKAGING – THE PUBLIC MARKETPERSPECTIVEDuring the last three years, investments in fibre-based and plastic packaging sectorhave outperformed the index of European consumer staple and industrial listedcompanies
Fibre based packaging share priceperformance – 2012 to 2015
Plastic and glass & metal based packagingshare price performance – 2012 to 2015
82%
138%
26%32%
-
50
100
150
200
250
300
Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15
Pric
esIn
dexe
dto
100
Cartonboard Containerboard
MSCI EuropeIndustrials Index
MSCI EuropeConsumer StaplesIndex
163%
103%
5%
26%32%
-
50
100
150
200
250
300
Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15Pr
ices
Inde
xed
to10
0
Rigid Plastics Flexible Plastics Glass & Metal
MSCI EuropeIndustrials Index
MSCI EuropeConsumer StaplesIndex
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 14
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INVESTING IN PACKAGING – THE PUBLIC MARKETPERSPECTIVE (continued)In general, Enterprise Value multiples have increased and are close to all timehighs, but trading at relative lower valuations than consumer staple or industrialindexes
Fibre based packagingEV/ EBITDA – 2012 to 2015
Plastic and glass & metal based packagingEV / EBITDA – 2012 to 2015
7.3x7.9x
6.9x7.9x
8.1x
10.6x10.5x
18.0x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x
FY12 FY13 FY14 LTM
EV/E
BIT
DA
Cartonboard Containerboard/Solidboard
MSCI Europe Industrials Index MSCI Europe ConsumerStaples Index
6.1x
9.8x9.0x
10.9x
7.6x8.6x8.1x
10.6x10.5x
18.0x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
20.0x
FY12 FY13 FY14 LTM
EV/E
BIT
DA
Rigid Plastics Flexible Plastics
Glass and Metal MSCI Europe Industrials Index
MSCI Europe ConsumerStaples Index
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 15
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INVESTING IN PACKAGING – THE PRIVATE MARKETPERSPECTIVEExamples of Private Equity Success Stories
Owner pre Private Equity Private Equity
Trade Exit
Trade Exit
Company Private Equity Trade Exit
Private EquityCompany
IPO
Trade Exit
Secondary Exit
Food CartonPackaging
Pharma CartonPackaging
Restructuring
Mid – Cap Private Equity
Large Cap Private Equity
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 16
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INVESTING IN PACKAGING – THE PRIVATE MARKETPERSPECTIVE (continued)Examples of risks that have prevented packaging investments from achievingexpected returns
Key Risks Examples
Risk of Insourcing
Technology/Risk
Regulatory Risk
Over-exposure to aSingle Customer
Culture Shock
• PET containers converted by water companies instead of acquiringthem from converters
• Three-piece cans replaced by mono-bloc aluminium containers• Conversion of paper machines into paper packaging papers
• Returnable PET containers• Mineral oil migration risk
• Exposure to customers with very aggressive cost saving initiatives
• Particularly applicable to Western European or North Americancompanies expanding to new jurisdictions
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 17
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INVESTING IN PACKAGING – M&A TRENDS
What are the key M&A trends
US CompaniesAcquiring in
Europe
PaperCompanies
Focusing Moreon Packaging
Asian Buyersmostly Focus on
Acquisition ofNew PackagingTechnologies
ContinuedConsolidation in
Europe
EuropeanPackagingCompanies
Entering the US
New Entrantsfrom AdjacentIndustries into
Packaging
High EntryMultiples Being
Paid forPackagingCompanies
4
3
2
6
7
8
5
1
EuropeanPackagingCompanies
Expanding intoEmerging Markets
25 NOV 2015DAVID POWLSON & CELEDONIO MONCAYO-QUIROS 18
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THANK YOU!
David Powlson & Celedonio Moncayo-Quiros
[email protected]öyry Management Consulting (UK) Ltd
[email protected]öyry Capital Limited
www.poyry.comCOPYRIGHT©PÖYRY
