Lankem gets more bullish on packaging industry prospects

Invests Rs. 320 m for a further 27.5% stake and  make JF Packaging fully-owned subsidiary

Lankem Ceylon Plc last week invested a further Rs. 320 million to expand its footprint in the flexible packaging industry.

The move was to acquire 27.5% stake in JF Packaging Ltd. for Rs. 320 million. With the latest purchase, JF Packaging becomes a fully-owned subsidiary. In January 2015, Lankem acquired 72.5% stake for Rs. 600 million or around Rs. 813.40 per share. Last week’s acquisition price per share was around 29% lower than what was paid two years ago for the controlling stake.

JF Packaging is one of Sri Lanka’s largest flexible packaging manufacturers and is the supplier of choice for many of the multinational food manufacturing companies operating in Sri Lanka. 

For Lankem the manufacture of flexible packaging is seen as a downstream venture for its industrial chemicals division and expects many synergies as it integrates JF Packaging into its operations. Lankem’s other venture in the packaging industry is Ceylon Tapes Ltd.

Lankem said in FY 2015/16 both companies had performed extremely well. Turnover at JF Packaging increased from Rs. 1.49 billion to Rs. 1.59 billion and profitability before tax rose to Rs. 61.15 million compared to a loss in the previous year of Rs. 145.43 million. Ceylon Tapes saw its turnover growing from Rs. 266 million to Rs. 304.6 million and after tax profit improving to Rs. 39 million from Rs. 22.7 million in FY14/15.

The Lankem Group believes that packaging can be an extremely profitable line of business in the future. “We will not hesitate to support both companies as they build up capability in order to further expand their packaging offerings,” Lankem Group Chairman A. Rajaratnam said in the company’s 2015/16 annual report. He added that these two companies had shown a tremendous scope for growth and avenues for further diversification.