NEW YORK - Plastics packaging companies say they are passing along most of the resin price increases they have been dealt in the past 12 months. ``We've had little choice but to raise prices to protect our margins,'' said Charles W. Coker, chairman and chief executive officer of Sonoco Products Co.
The Hartsville, S.C., company is the nation's leading manufacturer of T-shirt and produce
bags, and makes PET containersand plastic drums.
``Because of the increasing resin costs during 1994, we wereable to successfully lead five price increases'' for T-shirt bags, Coker said.
But the price hikes have contributed to flat performance for many publicly held packaging companies, according to executives at the PaineWebber Packaging Wrap-Up conference, held May 15-16 in New York.
``We have taken the hit that allflexible packaging companies have taken,'' said David H. Hofmann, president and chief executive officer of the ACX Technologies Inc.'s Graphic Packaging unit in Wayne, Pa.
ACX, based in Golden, Colo., is a spinoff of the Adolph Coors Co. brewing empire.
Hofmann said raw materials account for 60-65 percent of ACX's packaging costs, which is within the typical 50-70 percent range for most plastics packaging companies. ACX still is trying to pass along price hikes to its customers, he said.
``That rabbit is working its way through the python,'' Hofmann said.
Some packaging firms have had to swallow at least part of the double- and triple-digit price hikes of the past year.
``We have not been successful in passing all of the increases along,'' said Shawn Sedaghat, president and chief executive officer of Seda Specialty Packaging Corp., a Los Angeles-based mak-er of plastic tubes and injectionmolded closures.
But Sedaghat said Seda suc-cessfully has dealt with higher costs with higher prices, reduced scrap and recycling.
Even when companies pass along increases, the changes can hurt their balance sheets. Even if customers accept price hikes dollar for dollar, the packaging firm's profit margins, determined as a percentage of sales, suffer, said George Staphos, PaineWebber packaging industry analyst.
Staphos was optimistic about packaging firms' ability to win increases from customers, in part because prices for most other ingredients are fairly stable.
``If you're ever going to get a year of packaging price in-creases, frankly, this is going to be the year,'' Staphos said. ``Declining prices, if they are moderate, would be beneficial.''
Donald J. Bainton, chairman and chief executive officer of Continental Can Co. of Syosset, N.Y., predicted just such a drop. Continental Can owns Continental Plastic Containers Inc., a major blow molder.
``We believe in 1995 this trend is going to start to reverse itself. We can't give you a time frame, but sometime in 1995,'' he said, adding that CPC has passed all resin increases on to its clients.
That opinion was not shared by John L. Caffrey, PaineWebber's basic chemicals analyst. He predicts stable prices for the rest of 1995, then increases of 11/2-2 cents per quarter for most polymers in 1996-1997.
Some materials such as PET are in short supply and price hikes are likely. PET demand now is ahead of supply, meaning recent price hikes are related to availability, not raw material prices, said William J. Avery, chairman, president and chief executive officer of Crown Cork & Seal Co. Inc. of Philadelphia.
PET suppliers are racing to build new capacity, and Avery expects supply to catch up to demand midway through 1996. But demand will continue to grow, and Avery expects a shortage again by the end of 1997.