Wednesday, September 30, 2015

Higher costs will reduce the margin of the plastic processing industry

The devaluation of the real, the rising price of electricity bill, the rising costs with labor and the credit more expensive have pressed the edges of the plastic processing industry, criticize business people and representatives of industry associations.
The prospect is that production costs to rise more than the recipe at least until 2018, the President of the Brazilian Association of the plastics industry (Abiplast), José Ricardo Roriz rabbit. In its assessment, there is a lack of investments in the production of the raw material of the segment, the thermoplastic resin, so that there is a lack of suppliers and buyers left.
"In this scenario, in which the Government does not cut its own expenses and tries to raise taxes to finance, the stock market tends to be more attractive than the industry. Current policies discourage investors to put money in the productive sector, "summarizes Roriz, in a note.
In his assessment, dealing with the new challenges will require, among other efforts, a common agenda, with long-term vision.
With a diverse range of customers, the manufacturer Copobras has realized a stable performance of the demand for their products, but I feel a greater compression of the banks. According to the administrative and financial Director of the company, Sergio Carvalho, the recent devaluation of the real and the string of increases in power rates, added to the expenses with higher wages, had a direct impact on production costs.
The Executive points out that the thread of plastic cups, representing 30% of the business of the company, has pressed the results this year. Because it is simpler, he explains, the product is sold in a commodity market, where competition is fiercer.
Flexible packaging sales, on the other hand, were slightly higher compared to the previous year, says Carvalho, while styrofoam trays registered numbers similar to 2014.
"The industrial customers who buy packages are very demanding, especially with the print quality, and in some ways remain faithful to suppliers who already know", says the Director. In this way, the movement within the sector is reduced and production of a buyer is compensated by the increase of some other.
Copobras's net revenue grew by 4.6% in the first half of the year compared with the same period in 2014, reaching the r $ 386,8 million. The company's net profit, however, fell back 85% on the same basis of comparison, with the high of 8% in operating expenses and 22% of the financial costs.
According to Carvalho, the net profit of the company was "heavily undermined by exchange rate variations on unpaid debts passive indexed to the dollar. Also fixed spending pushed the result and the margin, he says, highlighting the wages and spending power.
In the case of electricity costs, the company suffered with an increase of almost 28% as compared to the same period in 2014, says the Executive. He claims that the company is studying alternatives in energy generation, but that at this point the solution is to pass on the price of the products.
The current situation of the exchange rate also represents a problem because the prices of those inputs follow the share price of the international market, according to the Director. The costs of resins arrived to retreat at the beginning of the year, following the fall in oil prices, but now are back to rise in accounting in real. Chadha says, however, that this was not the "villain" of the first half of 2015, with much more concern about the costs of the external debt of the company.
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