Business

Winnipeg Free Press - PRINT EDITION

Construction costs faze Winpak

'Out of whack' prices may sink plant expansion

By: Murray McNeill

Posted: 04/26/2012 1:00 AM | Comments: 0

SKYROCKETING construction costs could scuttle plans for a major expansion of Winpak Ltd.'s main manufacturing facility in Winnipeg.

The Winnipeg-based plastic-packaging manufacturer announced last year it was embarking on an aggressive five-year capital expenditure program that was to include an 80,000-square-foot addition to the largest of its two flexible-packaging plants in Winnipeg.

But company president and CEO Bruce Berry said Wednesday the Winnipeg expansion project has been put on hold because of soaring construction costs in Canada.

"Costs have gotten out of whack here," he said in an interview before the company's annual shareholders' meeting at the Fort Garry Hotel.

He said they're a lot higher than in the United States, although he couldn't say exactly how much higher. "But it's significant."

Berry said company officials now think it might make more sense to expand one of the firm's four U.S. plants instead of the Winnipeg unit.

"We have to do it somewhere," he said, adding they hope to make a decision by the end of summer.

But even if the expansion is scrapped, Berry said Winpak is still proceeding with the installation of a new line of manufacturing equipment here that will enable its 500,000-square-foot plant on Saulteaux Crescent to become a major supplier of plastic packaging for specialty meats and cheeses.

He said the new production line will be installed over the spring and summer and should be operational by the fourth quarter this year.

Berry told shareholders the company has committed $160 million over the last five years to capital projects, including $48.9 million in 2010. This year, it plans to spend up to $100 million on plant upgrades and expansions.

In addition to the new equipment it's installing here, Winpak is also expanding its production plant in Montreal and will install new equipment in a new replacement plant in Chicago and in a small facility that will be opening this year in Mexico.

He said the company is still committed to its goal of increasing annual revenue to $1 billion and annual net income to $104.2 million by the end of 2015. Last year, the company reported net income of $63.8 million and revenues of $652.1 million.

Berry told shareholders that to reach those targets, the company needs to achieve compounded annual revenue growth of 11.3 per cent and compounded annual income growth of 12.3 per cent. He said it did better than that last year, and it's off to a good start this year as well.

First-quarter financial results released on Wednesday show first-quarter net income grew 15.4 per cent to $17 million, or 26 cents a share, from $14.7 million, or 23 cents a share, in the same period last year. Revenue was up 15.7 per cent to $171.8 million from $148.5 million.

Winpak manufactures and distributes packaging materials and packaging machines that are used primarily for the packaging of perishable foods and beverages and in health-care applications.

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition April 26, 2012 B4

Factual inaccuracy? Something missing? Help improve our journalism.

Know about news? Share your story suggestions, photos and video.

Spelling error? Punctuation problem? Send us an email if you’ve found a typo.

More Business

Undock

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.