Quadpack withstands market uncertainty in FY2023. Quadpack Industries (Euronext Growth: ALQP), an international manufacturer and supplier of beauty packaging, achieved a turnover of €129 million in the financial year ended 31 January 2024. Although down 10% on the prior-year period, operating profitability soared to record levels at €16.2 million. 2023 marked a return to stability, following the volatility caused by global events and the subsequent market reaction. In addition to market normalisation, Quadpack completed the first stage of its business strategy, which prioritised financial resilience. The company's debt was restructured; product and client portfolios were rationalised; and the global industrial footprint was optimised for efficiency and faster turnaround times.
Asset restructuring for greater profitability
Quadpack and its management board decided to discontinue two unprofitable operations for the company. First, due to an unsatisfactory industrialisation process, Quadpack terminated the joint development of bag-in-bottle technology with Inotech Cosmetics GmbH, depreciating the associated tangible and intangible investments. This decision generated one-off negative impacts of €4.5m on EBIT and €2.6m on net income, with no impact on cash flow generation or net debt position.
Second, the closure of Quadpack Plastics in Spain resulted in a one-off loss of €1.6 million. Its operations were unprofitable and its closure has resulted in an optimised and refocused industrial footprint at the Kierspe plant in Germany to better serve customers.
Consolidation of new strategy
Quadpack has laid the foundations for its new strategy for 2023. It focuses on five pillars: offering creative product solutions; delivering an excellent customer experience; optimising its industrial footprint to regionalise production; developing strategic alliances for co-creation; and creating new business lines.
During this first phase, Quadpack focused on long-term profitability. Debt was restructured with a new €38 million syndicated loan, with Deutsche Bank as lead arranger and agent. This agreement allows the company to simplify its financing structure, accelerate repayment of the 2020 Covid loans and pay off the remaining loan for the acquisition of German manufacturer Louvrette in 2019, while providing additional resources to fund future growth.
Organisational restructuring
Quadpack's manufacturing capacity was streamlined during this period. In addition to the closure of Quadpack Plastics and the completion of the joint development project with Inotech, a long-term improvement programme was initiated at the Kierspe plant. This aims to improve efficiency and customer service, using the latest technologies, including Industry 4.0.
Beyond Europe, Quadpack began regional manufacturing in the Americas, thanks to a partnership with a specialist injection moulding company in the US, which will enable it to offer its best-selling airless solutions locally, with faster delivery times and a reduced carbon footprint.
A stronger offer for beauty brands
Production capacity was increased at all European manufacturing plants to meet increased local demand. Quadpack now produces half of all sales. Its portfolio grew substantially, with 80 new products launched, designed to meet the needs and desires of today's beauty brands. Quadpack's Creative Hub is expanding its intellectual property, using in-house talent in partnership with innovation labs.
Innovations introduced in 2023 focused on personalisation and sustainability. ShapeUp Stick is the first of a new platform of packaging formats that dispense products in a customised form, to enhance brand personalisation and consumer interaction. Quadpack's Woodacity® collection was expanded with new types of all-wood packs using patented closure systems. A new line of dip-in packs was launched, with special applicators for make-up and skin care. All new solutions are designed to minimise environmental impact, in line with Quadpack's commitment to sustainability.
Generate a positive impact
2023 was Quadpack's first full year as B Corporation, as the company places its purpose - to care and give back - at the heart of its activities.
It mapped out the complex requirements for regulatory compliance, with a particular focus on the plastics tax in Spain and the proposed EU Packaging and Packaging Waste Regulation. This exercise also allows the company to advise and support its clients as they navigate an evolving legislative landscape.
The company's not-for-profit subsidiary, the Quadpack Foundation, had a multiplier effect, supporting 31 social projects around the world to support disadvantaged young people, with the help of nearly 100 company volunteers.
Strong operating cash flow
Focusing on cash generation, Quadpack achieved a second year of strong operating cash flow, reaching €13.8m compared to €13.0m the previous year. This enabled CAPEX of €5 million and continued deleveraging of net debt, which declined to €37.8 million from €46 million in 2022.
The leverage ratio decreased to 2.3x, a 34% reduction from the previous year's leverage of 3.4x, thanks to considerable improvements in both net debt and recurring EBITDA.