Success in passing on input cost increases helped envelope and packaging manufacturer Bong improve its margins in the third quarter of 2022.
The company’s Q3 sales were SEK527 million (£41.6 million), about 20% higher than 12 months ago, although that figure includes positive currency effects of around 5%. Higher prices and rising demand in the Light Packaging division helped gross margins improve to around 22% versus 15.6% in the same quarter last year. This contributed to operating profit in the quarter climbing more than threefold to over SEK30 million. Pre-tax profit was SEK20.1 million compared with a loss of SEK1.9 million in the third quarter of 2021.
In the first nine months of 2022, revenue in the Envelope segment was up by more than 17% (adjusted for currency) as price increases more than offset the impact of continued volume declines. Demand for envelopes in the third quarter was further hit by customers’ inventory destocking. This came after they had upped orders in the first half of the year as a precautionary measure against potential product shortages. This destocking trend is likely to continue throughout the final quarter of the year.
In his quarterly letter to shareholders, Bong CEO Kai Steigleder underlined the strategic role of the company’s core business: “The main target for our Envelope segment remains to be profitable and to generate cash for investment into Light Packaging.”
Steigleder had a somewhat pessimistic outlook for the coming months.
“The economic war on energy due to the Russian attack on Ukraine [has led to] high consumer inflation and an uncertain economic outlook for Q4 2022 – and at least for the first half of 2023,” he noted. “European consumers and businesses are reluctant on spending, which will result in a Europe-wide economic recession in 2023.”