VENTURES: Quality Starts Showing Through
Recent Western Cape Business News
OTTERY-based plastic packaging specialists Bowler Metcalf might have good reason to feel optimistic about its niche soft-drink bottling subsidiary, Quality Beverages.
While enduring some ups and downs over the years, Bowcalf appears to be consolidating more recent successes at Quality Beverages – including what looks like a timely expansion from the traditional Cape stronghold into the Gauteng market.
Bowcalf’s figures for the half-year to end December 2010 show the Quality Beverage filling operations kicking through with a more than four-fold increase in earnings from a 40% rise in revenue.
Bowcalf CEO Mike Brain says the interim performance vindicated the company’s perseverance with Quality Beverages.
Readers may remember that Bowcalf initially started out with a minority stake in Quality Beverages (then controlled by well known Cape Town entrepreneur Sharief Parker), but eventually ended up with outright control of the business.
Brain says Quality Beverages’ revenue increase was a combination of favourable weather conditions and the growth and acceptance of Jive as a brand.
Jive is one of Quality Beverages’ key brands along with Dixie, which prudently positions the company away from the traditional stamping grounds of soft-drinks giant Coca-Cola.
Brain says while the interim percentage rise in earnings was off a low base, the performance clearly demonstrates the advantages of good plant utilisation.
While the year-on-year increase may be off a low base, it is encouraging to see the profits between beginning July and end December growing to R7.7 million from the R5.1 million recorded in the beginning of January to end June period.
In terms of plant utilisation, Brain points out that in December, a factory lease for a 7 500 sq m operating facility in Boksburg was signed.
“We are aggressively pursuing the installation of a new high speed bottling plant, at an anticipated cost of some R32 million.”
He says the new bottling plant is scheduled for commissioning in July to permit Quality Beverages to pursue the Gauteng market off the base already established there.
The effect of a larger market is plain to see in Quality Beverages’ interim top line numbers with revenue topping R175 million.
On an annualised basis that means Quality Beverages’ revenue (for the full year to end June 2011) should shift comfortably through the R300 million mark.
The interim sales of R175 million should also be seen against the R125 million posted in the corresponding interim period in 2009 and the R137 million notched up in the second half of the year to end June 2010.
CBN wonders how significant it is that the revenue from the Quality Beverages operations now generates more turnover than Bowcalf’s core plastics packaging business which managed turnover of R153 million in the six month period.
Obviously the high margin plastics packaging business is several times more profitable than the filling operations – but the soft-drinks side of Bowcalf can now no longer be considered a ‘little sideline’.
Intriguingly Bowcalf – as CBN was going to press – issued a cautionary notice to shareholders. Initial speculation revolved around whether Bowcalf is looking for a deal for Quality Beverages – perhaps looking to link up with food giant Pioneer (which bottles Pepsi, Lipton Ice Tea and fruit juices).
But CBN has heard the cautionary may not be related to Quality Beverages, and may involve a manoeuvre on the packaging side. CBN will keep a beady eye on proceedings.
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