Packaging Growth Indicates Strong 2019

As the plastics industry adjusts to 2018’s higher new orders volumes, capital expenditures in the industry have increased significantly.


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Using the financial data submitted to the Securities and Exchange Commission (SEC) along with forecasts provided by major Wall Street brokerages, Gardner Intelligence has compiled the financial results for 17 publicly-traded firms in the containers and packaging sectors to assess the current and future state of the industry. The results reveal an industry that has experienced eight consecutive quarters of revenues and earnings growth through the third quarter of 2018. Total inflation-adjusted revenue and earnings growth during this time were 12.6 percent and 18.6 percent, respectively. In the latest quarter, the containers and packaging sectors achieved year-on-year revenue growth (known as the “12/12” rate of change) of 9.2 percent. Similarly, earnings before interest, taxes and depreciation (EBITDA) achieved a 12/12 growth rate of 12.2 percent during the same period. These strong results enabled the industry to achieve a profit margin not seen since the great recession.

The industry’s financial success in recent years has also been well captured by the Plastics Processing Index (a product of Gardner Intelligence), which measures fundamental business conditions as reported by plastics processors. Among the six components that constitute this Business Index, 2017 and 2018 data indicate an industry which has rarely expanded faster. The Index since 2017 has been driven in large part by growth in new orders, production and supplier deliveries. Backlog data collected since the first quarter of 2018 suggests that the industry has struggled to raise production levels sufficiently to match new orders growth, resulting in significant expansion of backlogs in the current calendar year.

As the plastics industry adjusts to the higher new orders volumes in 2018, capital expenditures in the industry have increased significantly. The 12/12 rate of change ending in the third quarter of 2018 saw capital expenditures rise by 16 percent. Similarly, the supplier deliveries component of the Plastics Processing Index has experienced unprecedented expansion readings in 2018. Since May, supplier deliveries has been the fastest expanding component of the Index.

Using the aggregated financial forecasts provided by Wall Street analysts for the firms used in this study, the industry in 2019 and 2020 is expected to see on-going but slowing growth in revenues after climaxing sometime during the second-half of 2018. As revenue growth slows starting in 2019, EBITDA growth is also expected to slow in the quarters afterward. However, aggregated projections do not show revenue or earnings growth falling below 4 percent until the third quarter of 2019 and second quarter of 2020, respectively. This suggests that containers and packaging sectors will grow faster than the overall economy for most of 2019.