The packaging industry is expected to maintain in 2022 the pace of capacity expansion and mergers and acquisitions (M&A) seen in the last two years. After the recent arrival of Chile’s CMPC to this market in Brazil through the purchase of Iguaçu Celulose Papel’s industrial and forest assets, foreign groups’ appetite for local operations remains high and new investments are expected to be unveiled.
Besides foreign companies, private equity funds have been studying Brazilian assets linked to the packaging industry, said Alexandre Pierantoni, head of Brazil corporate finance at Duff & Phelps, A Kroll Business. At the moment, the consultancy has two to three mandates to sell in the country, and uncertainties about the growth of the domestic economy have not taken the interest of potential buyers away.
“They are looking at flexible, rigid, corrugated [packaging]. There is an opportunity for acquisition in all segments because many companies are still family-owned and need to invest to grow,” Mr. Pierantoni said.
A few months ago, Duff & Phelps advised Italian flexible packaging company Gualapack on the purchase of the Brazilian company Teruel Embalagens – Papéis Amália, a family-owned company founded more than 50 years ago, specialized in flexographic printing on flexible films.
Last week, CMPC agreed to buy three plants and forests of Paraná-based Iguaçu Celulose Papel for R$946 million, including debts. With such a move, the Chilean company has stepped into the local packaging market as the second largest supplier of paper bags, only behind Klabin.
Large local companies are also monitoring opportunities in this market, which is expected to continue on a consolidation path, and investing in capacity. In paper packaging, besides the recent announcement by CMPC, Klabin bought last year the assets of International Paper in this field, consolidating its leadership in Brazil’s corrugated cardboard box market, with a 24% share.
The Brazilian company, which is investing R$12.9 billion in Paraná to expand its production of packaging paper, is seen in the market as a strong candidate for new investments or acquisitions.
According to Mr. Pierantoni, potential buyers of Brazilian assets have shown interest in particular for niche markets and products with higher added value, such as packaging used in the pharmaceutical industry. “Commodity continues to be important, but niche markets grow more,” he said.
Gabriella Michelucci, head of the Brazilian Paper Packaging Association (Empapel), said the industry’s customers are increasingly seeking intelligent, lighter and more rationalized packaging. “This is expected to be a major breakthrough by 2022,” she said.
At the same time, packaging is no longer seen simply as a means of transporting the product. It is also taking a more active role in the consumer’s experience. More colors and designs and better brand identification are strong trends, Ms. Michelucci added. The initial forecast for 2022 is for an expansion of 1.3% to 1.4% in shipments of cardboard sheets, boxes and accessories in the country, considering a projection of 1.2% GDP growth.
Mergers and acquisitions are heated in general in the country, Mr. Pierantoni said. A survey by Duff & Phelps shows that 1,455 deals were signed between January and November, up 52% year over year, and also a higher figure than that seen in full year 2020, of 1,100 deals. November was the third busiest month this year, with 150 deals.
“Those who know Brazil will keep investing. The risks, even as the political situation, are already priced,” Mr. Pierantoni said. According to a survey by the consultancy, in November, financial investors, such as venture-capital and private-equity funds, were present in 42% of the deals announced in Brazil.
Source: Valor international