Essel Propack Ltd. claims to be on track in its march toward global domination in the laminated tube sector.
The Mumbai, India-based company reported a 23 percent leap to record sales last year and commands an estimated 32 percent market share globally in that sector. With 20 plants in 13 countries, including a fast-growing U.S. facility, the firm strives to supply half of the world's demand for laminated tubes.
Essel Propack - which also coextrudes nonlaminated plastic tubing - reported a 12 percent rise in 2005 unaudited net profit to 905 million rupees ($20.5 million) on consolidated global sales of 8.23 billion rupees ($186 million). Last year alone it announced plans to invest $15 million in its 3-year-old, Danville, Va., plant; opened a plant in Russia; acquired a British tube maker; and closed, but then reopened, its plant in Mexico. The sales contribution of international operations rose to 68 percent last year, up 3 percentage points from the prior year.
In each of the past two years Forbes magazine has recognized the 2,100-employee firm as one of Asia's 100 best companies with less than $1 billion in annual sales. The publication cited Essel's five-year average of 12 percent return on equity and 19 percent earnings-per-share growth, and pegged its market value as of October at $266 million.
The company, founded in 1984, built its $21 million, 100,000-square-foot facility in Danville in late 2002, specifically to supply all of Procter & Gamble Co.'s laminated tube demand in North America for products such as Crest toothpaste. But the firm has fulfilled its contractual obligations for exclusivity with P&G and now is free to supply other customers from that plant, according to Ashok Goel, vice chairman and managing director.
``We are already scouting for land'' to accommodate further expansion at the 120-person Danville facility, Goel said in an interview after his Feb. 11 pre- sentation at the Plastindia business conference in New Delhi. In May the company announced it planned to invest another $15 million in the plant. Goel said the Danville plant already is the company's third-largest, after India and China. He declined to reveal specific details about the Virginia facility.
Ten months ago, the firm said the expansion would allow it to supply laminated tubes, and caps and closures to P&G, which has a plant about 45 miles to the south, in Greensboro, N.C., as well as to other U.S. toothpaste and cosmetic product companies.
In a Jan. 30 financial results statement, Essel Propack added that capacities at the Danville plant ``have been enhanced to meet the requirements of the new customers who have been tapped. The volumes are expected to grow faster in the U.S. market as the necessary infrastructure is in place.''
Virginia Gov. Mark R. Warner helped clinch the latest expansion deal early last year when he led a state trade delegation to India. Warner approved a $70,000 grant package from the Governor's Opportunity Fund to assist the city with the project. The state's Department of Business Assistance agreed to provide training through its workforce services program, and the Virginia Economic Development Partnership worked with the city of Danville to prepare the state's proposal and negotiate an incentives package that helped secure the project.
Goel - who also serves as president of the Organization of Plastics Processors of India - said Essel Propack shut down its plant in Cuautitl n, Mexico, just north of Mexico City, in early 2005 but reopened it six months later, after a competitor unexpectedly closed its doors.
``Mexican operations are on a turnaround path, firmly supported by a contract from a [multinational] customer,'' the company said. ``The positive results in Mexico are expected from the second half of 2006.''
Goel noted that the restarted Mexican facility currently serves only Mexico; however, the company plans to broaden its sales scope further into Latin America.
Essel Propack bought struggling British firm Telcon Packaging in April, renamed it Essel Propack UK, and said it expects those operations to turn around by the second quarter of this year.
The company also is busy restructuring its Arista Tubes UK operation, which makes coextruded tubes, to align it with the parent company's ``vision to consolidate and grow as a major global player in the plastic tubes arena.'' It bought Arista Tubes in August 2004.
Essel claims the results of all its focused efforts in Europe ``will be evident from the second half of 2006.''
Essel Propack said the laminated tubes plant that it opened near Moscow in March 2005 also is ``going through a stabilization phase,'' while the firm is downsizing its operations in Nepal due to what it called a volatile and unpredictable political situation there.
The company said its China operations, on the other hand, posted a consistent performance, with sales volumes growing in the fourth quarter of fiscal 2005 and further growth projected. Essel set up a wholly owned subsidiary in Guangzhou in 1997 and now operates four plants in that country.
Making laminated tubes efficiently requires a significant scale of production, said Goel, explaining why Essel does all of its laminating at two plants, in India and China.
``Those plants supply laminates to all our plants, where they decorate, print and make tubes,'' Goel said.
Essel Propack became the world's largest laminated tubing supplier in late 2000, when Essel Packaging Ltd. bought the tubing operations of Germany's Propack AG and adopted its current name.