Transpaco, SA’s largest manufacturer of retail plastic bags, is turning to paper to shore up its market share and earnings in the face of growing opposition to plastics.
Consumers and retailers are turning to alternative products amid concerns about the effect of plastic products on the environment and a desire to use more natural products.
The JSE-listed company, which reported a 4% decline in revenue for the year ended June, said at the time the plastics division was hit by home deliveries, the replacement of plastic bags with natural alternatives and some retailers no longer offering plastic bags to their customers.
CEO Phillip Abelheim said Transpaco is expanding its offering to retailers to include paper bags.
“We continue to engage with all interested parties to dispel the misconception relating to the overstated negative impact that retail plastic bags have on the environment,” Abelheim said. “Notwithstanding the above and negative sentiment towards plastic packaging products, the market for retail plastic bags remains sound.”
We have expertise in both the manufacture of paper-based products in our cores division and a deep understanding of the customer side of the business.
— Group chair Derek Thomas
In its most recent annual financial statements the group reported that its bill due to the plastic bag levy had declined to R19.5m from R21.1m in 2023.
The new paper bag operation is scheduled to start production by the end of the year and investment in plant and machinery to produce retail paper bags at Transpaco Cores is expected to benefit the paper division, which accounts for 49% of group revenue.
Group chair Derek Thomas told shareholders the group’s entry into the paper carrier bag market was in response to changing market dynamics and said it had the appropriate tools to make it a profitable offering.
“We have expertise in both the manufacture of paper-based products in our cores division and a deep understanding of the customer side of the business,” Thomas said.
Transpaco produces and supplies plastic and paper packaging materials for the retail, industrial, mining, agricultural, pharmaceutical, and automotive industries.
The Johannesburg-based group’s operations are divided into two primary business segments: paper & board, which has three trading facilities, four manufacturing sites, and distribution centres countrywide; and plastic products, which accounts for 51% of group revenue. The products includes retail plastic bags, retail and industrial refuse bags, pallet stabilisation film, school stationery and general flexible plastic packaging.
Besides switching to paper alternatives, Transpaco is also investing and expanding into non-plastic packaging products and businesses, and investigating alternatives to fossil-based polymers.
Still, all retail plastic bags produced now contain more than 50% post-consumer recycled material, and the company said it would support a circular economy by encouraging customers to use recycled material.
Transpaco said the compulsory inclusion of recycled plastic in all retail plastic bags had helped bring stability and sustainability to the division.
The firm said it was preparing to add capacity to its specialised films division, which manufactures pallet wrap, to relieve capacity constraints.
Added efficiency
To increase efficiency the group’s printed folding carton business, Britepak — which presently operates from four locations — is being consolidated into a single operation.
Competitors in the packaging sector have recorded mixed fortunes. Nampak returned to profitability in the six months to end-March, helped by the sale of noncore assets, while Mpact recorded a plunge in first-half profits largely due to subdued demand and lower selling prices in the period to end-June.
In the past financial year Transpaco paid R43m cash for plant and equipment, while debt payments amounted to R51.8m. An additional R30.6m was spent on share purchases.
The group did not make any acquisitions despite investigating numerous possibilities, but said it would continue to target organic growth and identify and pursue appropriate acquisitions, adding it had a robust balance sheet for this purpose.
Its shares closed at R39.25 on the JSE on Tuesday, giving the company a market capitalisation of just under R1.1bn. The stock is up 10% so far this year.
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