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Elopak negatively impacted by conflict in Ukraine, inflation in Q1

Article-Elopak negatively impacted by conflict in Ukraine, inflation in Q1

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Elopak saw revenue growth in Q1, but expects the effects of high raw material prices and stalled production in Russia and Ukraine will continue.

In the first quarter, Elopak, owner of Pure-Pak cartons and other sustainable packaging solutions, faced “rough waters,” including “unprecedented” raw material costs and stalled production in Russia and Ukraine, according to the company’s CEO.

Elopak garnered €2.4 billion in revenue in Q1—a 9% increase compared to Q1 2021—but expects the negative impact of current events on the company’s performance will continue, according to its quarterly report

The company’s CEO, Thomas Körmendi, said Elopak suspended production in Russia in Q1. Some of the company’s domestic production in Ukraine was resumed to maintain supplies of essential goods in the country, he said.

The Coca-Cola Co. and PepsiCo Inc. also suspended certain business activities in Russia in Q1.

“The financial impact from the crisis was limited in Q1, but we have made an impairment of €22 million and expect to see further effects in the near term,” Körmendi said in a press release.

Elopak has continued to pay the salaries of its 336 employees in Ukraine and Russia, despite stalled production, which the company will continue “until further notice,” Körmendi said.

“We are deeply concerned by the suffering caused as a result of the ongoing conflict in Ukraine, and our overriding priority remains the personal safety and security of our employees in the country,” he said in the release.

Increased raw material prices also impacted Q1 performance. The company cited a financial impact of approximately €9 million caused by what Körmendi called “unprecedented high raw material prices” and “inflationary pressure.”

To combat rising raw materials costs, the company said it will increase prices in June, and expects margins to recover in the latter half of 2022. The negative impact of high raw material costs is expected to continue in Q2.

Despite Q1 challenges, the company plans to continue its growth strategy, which included the acquisition of Naturepak in March and recent agreements that will expand its reach in Oceanian and Indian markets.

“With the integration of Naturepak into Elopak financials and continued growth in the [Middle East and North Africa] region, we expect to strengthen our position and deliver improved margins for the group in the second half of 2022. Our strategic priorities in the near future will be to capitalize on the opportunities coming from the Naturepak integration and a stronger footprint in India, and at the same manage the uncertainties around Russia and Ukraine and raw material prices,” Körmendi said.

Rachel Adams joined Informa’s Health & Nutrition Network in 2013. Her career in the natural products industry started with a food and beverage focus before transitioning into her role as managing editor of Natural Products INSIDER, where she covered the dietary supplement industry. Adams left Informa Markets in 2019.

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