Hellaby's packaging division secures new contracts

News Release, 20 August 2008

Hellaby's packaging division secures new contracts

Hellaby Holdings subsidiary Elldex Packaging Group is showing strong growth after winning a number of new packaging contracts in New Zealand and Australia.

Todd Valentine, CEO of Elldex Packaging Group says, "In the past six weeks we have secured $2.5 million worth of new business and we are currently in advanced negotiations regarding contracts worth several million dollars which we hope to secure in the next few months."

One of the largest contracts Elldex recently secured is a range of kitchen consumable packaging lines for Metcash. Metcash is a leading Australian marketing and distribution company operating in the food and other fast moving consumer goods categories. It's subsidiary IGA (Independent Grocers Alliance) is a voluntary supermarket network with 1000 stores across Australia. Metcash is an ASX-listed company with revenue of almost $10 billion.

Elldex has also won a significant bread bag contract with Falcones Bakeries, a leading NSW family-owned bread business.

In the last year, Elldex has focused on forming Hellaby Holding's new packaging division. In July 2007 Elldex acquired two additional packaging companies, PPL and Chequer Packaging and set about consolidating them under the Elldex Packaging Group banner.

Prior to the acquisitions, Elldex Packaging were best known as packaging importers and supply chain managers specialising in the supply of packaging to the grocery and retail sectors. The acquisitions added significant manufacturing capability to the group and the business now operates 50% in trading and 50% in manufacturing.

"Our strategy in acquiring PPL and Chequer was to increase our presence in the agri-export sectors. To do this we needed greater local manufacturing capability," says Valentine. "There are a number of core sectors that require the flexibility of local manufacturing to support a significant portion of their packaging requirements. Industries like dairy and meat processing have very specific packaging requirements, many of which can only be produced locally. A number of our customers work to very short lead times which also necessitates product to be manufactured locally," Mr Valentine says.

"We have completed the restructure of the packaging division. This has included the streamlining of the group's manufacturing operations across two sites and centralising the company's importing and supply chain management activities. We are now focusing on growth and actively seeking new business."

Mr Valentine says the Elldex group is trading well despite the slowing economy. The biggest challenge in the foreseeable future is managing raw material costs since plastic packaging products are resin based.

"The price of resin has increased by around 30% over the last year and is 12% up in the last three weeks with no sign of abating. The increase is predominantly as a result of the oil price, but it has also been fuelled by market speculators in Asia.

The raw material cost in flexible packaging products is as high as 60% to 70% of the total cost so the resin price increases and the market volatility have had a significant impact on wholesale prices."

Elldex is making a concerted effort to minimise the impact on its customers but believe significant price increases are inevitable. "We are working closely with resin suppliers to reduce all unnecessary costs in the supply chain. However with resin increases of this magnitude we, along with the rest of the industry, have no choice but to pass them on to our customers," he says.

ENDS

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