Converting

Price wars, high input costs and the credit crunch are putting packaging SMEs under increasing pressure as a wave of insolvencies hit the industry's smaller players this month.

Factors including banks withdrawing credit lines, clients demanding lower costs and depleted cashflow due to tough payment terms are pushing struggling companies over the brink, experts believe.

At least five firms either went into administration or closed in the last month. Cases included:

* Cartonmaster, the Cheshire-based pharmaceuticals specialist, was placed into administration with PricewaterhouseCoopers on 28 October but had ceased trading on 24 October, with all 37 staff made redundant;

* Avalon Packaging, the Wigan-based food pack specialist, went into administration with BDO Stoy Hayward on 17 October with debts of £10m. Administrators were hoping to find a buyer for the firm as Packaging News went to press;

* Luxury confectionery packaging company R&M Farhi, ceased trading and was placed in the hands of joint administrators Peter Wastell and Michael Young, partners at Vantis Business Recovery, on October 6. Wastell blamed a lack of working capital;

* Glasgow-based packaging supplier Kellpak and its subsidiary W&M Watson went into administration but were bought by a new company controlled by the same directors;

* Tipografic Print Solutions, the owner of Stockport-based label printer Buckley and Bland, ceased trading on 10 October when all 100 staff were made redundant. BDO Stoy Hayward also acted on the case.

Lansdowne Capital packaging analyst Tim Rothwell said that some of these companies have been "teetering" for a while and the economic situation had "pushed them over the edge".

He added that companies with a strong asset and customer base were "still doing okay," but said that those with high borrowing would find the market very tough.

Nicholas Mockett, partner at Europa Partners, said that margins had been "squeezed by very high input costs".

He added: "It's been very difficult for packaging companies to push through these costs to their customers very
effectively".

BPIF Cartons president John Monks said that firms in food or healthcare were the most likely to ride out the current economic storm, but added: "People in commodity, household appliances, detergents, pets or other markets are going to take a bit of a rubbing."

Contract packers, on the other hand, are experiencing "record months" according to BCMPA chief executive Rodney Steel.

He said that brand owners' apprehension to do work themselves that was "out of the ordinary" during an economic downturn was increasing the likelihood of them outsourcing their packing work.