Optimistic Outlook

Despite a decline in folding carton sales during 2002, recent statistics show an up-swing for the folding cartons market.

A PERSISTENTLY SLOW economy, accompanied by higher energy and raw materials costs, put a damper on the 2002 end-of-year earnings of many folding carton converters. But, according to the results of packagePRINTING's Top Folding Carton Converters Survey for 2002, the future is showing signs of promise.

Jerome Van de Water, president of the Paperboard Packaging Council (PPC), reported in a February press release that, at year-end, 2002 saw a 2.5 percent decline in nominal dollars of the overall sales volume for cartons. Despite this decrease, 50 percent of survey respondents said they expect their 2003 profit margins to be greater than last year's, while another 32 percent anticipate their profit margins to at least remain the same.

This optimism may be due, in part, to a recent upward turn in the folding carton industry. After two years of registering negative growth in folding carton markets, June marked the fifth month in 2003 to show year-over-year increases in shipments, according to a July PPC press release. "U.S. folding carton shipments [for June] increased a modest 0.7 percent in sales when compared to June 2002," reported the PPC. "When comparing year-to-date (YTD) data, 2003 shipments have increased 2 percent in value, compared to January through April 2002."

However, the slight relief of recent increases in the volume of shipments has been tempered by market forces which have compressed folding carton orders. "This current upswing may signal a recovery in folding carton consumption," according to the PPC. "However, orders remain weak with YTD 2003 orders down 0.2 percent in value compared to 2002."

One way folding carton converters are looking to try and add to or maintain their bottom lines is through expansion. Many of the folding carton converting companies surveyed—more than 60 percent—plan on expanding their business into new areas, primarily new carton end-use markets and new carton printing processes.

Growth will also be geared toward prepress operations. Nearly three-fifth of all those surveyed expressed intent to expand their prepress capabilities, either in-house or through prepress duties assigned to a trade shop.

Only time will tell if folding cartons will rebound from last year's downturn, but 2003 forecasts remain hopeful, according to Van de Water. "The economists preparing our latest forecasts project a growth rate of 3.6 percent over the next few years, as carton shipments again begin to keep pace with growth in end-use markets."