Can packaging company Winpack make money and side with ESG concerns?

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Revenue (2021) US$1 billion | profit US$106.3 million

A year’s share price growth 9.5% | P/E ratio (next) 16.1

In many ways, supermarkets and households are ground zero for economic and environmental growth. It is where we decide what to buy, what to eat and what to throw away. “You just walk into a grocery store, and you see all of our packaging,” says Scott Taylor, Winpack’s vice-president and chief financial officer. These include shelves with meats, cheeses, bacon, cat food, yogurt lids, spice containers and more. About 90% of the company’s sales are in the food and beverage industry.

Of course, packaging is now a hot-button issue. “It’s all about sustainability,” says Taylor. So, Winnipeg-based Winpac has set aggressive goals in its annual sustainability report. By 2025, it aims to have 100% of its sustainable product portfolio available, including packaging that contains post-consumer recycled content (PCR), which is recyclable, or which is made from bio-source materials such as starch-based plastics such as potatoes or peas.

Can a packaging company make money and side with environmental, social and governance concerns? Winpack has done both in its 1975 history.

Taylor provides a rapid-fire timeline. Winpak IPOed in 1986 (with the chairman of its Finnish parent, Wihuri International Oy, retaining a 52.7% controlling interest) and then made five key acquisitions from 1988 to 1997. Growth since then has been almost all organic, although in 2019, the company bought New Jersey-based Control Group for US$42.2 million to diversify into pharmaceuticals and cosmetics.

Winpak now has 12 manufacturing facilities in Canada, the United States and Mexico. Wipac, a sister company controlled by the same parent, takes care of Europe. Winpac has some major rivals, including Amcor PLC and US-based Sealed Air Corporation. But Taylor says the overall packaging market isn’t growing much, so Winpak is trying to win customers over by offering better service and superior products.

Financially, Winpak has continued to grow, and profits have exceeded US$100 million each of the past six years. This included strong results during COVID-19. Consumers began cooking more at home and ordering more, but Winpac’s airline, restaurant and hotel businesses collapsed.

Those trends have reversed somewhat. But like manufacturers in many sectors, Taylor says Winpack has recently faced a “three-headed monster”—inflation, labor shortages and global supply-chain disruptions.

The result of all those cyclones? Winpak shares have largely moved sideways since 2015. Taylor thinks “the price should be $45 to $48.” Some analysts are more bullish. CIBC Capital Markets recently set a 12- to 18-month target of $52. Taylor was happy to email me the report.

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Can packaging company Winpack make money and side with ESG concerns?

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