Waiting and watching

South Asia update — Sri Lanka

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A shop in Columbo, Sri Lanka
On the whole the Sri Lankan converters are cautious — for instance one is happy about large investments made two years ago that were hugely successful but also glad about not going forward with a repeat investment. They are content to work with a balance of new technology and old machines until the economy turns around. Some larger packaging companies speak of putting off investment for another couple of years. There is also some speculation as to what the impending IMF infusion of more than US$ 1.9 billion will do to the economy and currency valuation.
Some of the larger printers and converters such as J&FS and Universal Print Care are considerable exporters, particularly of indirect exports of tea, garments, and ceramics. It seems that a significant level of Sri Lankan exports go to oil producing countries in the Middle East, Europe and Russia. There is a feeling in the packaging industry that it is better for the country’s exports if the price of oil remains sufficiently high for these countries to maintain their high level of imports from Sri Lanka. However, there are other threats to traditional trade patterns as well. For instance, Russian importers want to import Sri Lankan tea in bulk and do the bagging, tagging, and value added branding and packaging themselves.

According to Naomal Fernando of J&FS who have several plants for gravure flexibles, offset cartons and value added corrugated packaging — exports have declined by 30 to 40% in the past year. Notwithstanding the expectation that there could be some kind of tourism and business boom after the military defeat of the LTTE in the north, even Fernando seems to be waiting for some significant rise in product volumes that would justify expansion. Presently he is perhaps more engaged in geographically consolidating his three plant locations. However for all his caution Fernando concedes that if you do not make a major investment at least every ten years it is difficult to remain competitive in the printing and packaging industry.

Fernando says that although the export packaging has taken a plunge in the past year, the everyday packaging of FMCG goods has shown resilience. 2008 as a whole was a growth year for J&FS and some of the recent months have been up – soap, foodstuffs, medicines and other day-to-day products have not been affected. In fact this type of ordinary packaging – cartons, pouches, pet, flexibles, semi-rigid and corrugated has even increased in the past few weeks for relief supplies to the IDP camps in the north sometimes funded by international agencies.

When we met Universal Printcare in the last quarter of 2007 they had expanded the Kadawatha plant with a new Heidelberg CD74 6-colour plus coater. A considerable part of this machine’s production is given over to producing cigarette packaging for Ceylon Tobacco. This is packaging meant for the Sri Lankan market that was previously printed in Australia using gravure.  The challenge was to match gravure gold with offset and Universal Printcare has met this challenge in an enormously productive way with a high speed and expensive Bobst autoplaten that die-cuts, embosses, blanks and strips printed board in one process.

At first planned for the packaging of non-food products, the Kadawatha plant essentially has a different set of customers than the Kelaniya plant which contains gravure, flexo and offset presses almost side by side. As David Jeyaraj told us the company has been able to create “virtual plants,” that is it has been able to streamline production for particular high volume customers into a process for which one person has taken charge. This has eliminated multiple layers of management for the process.

Jeyaraj also gave us a partial progress report on Printcare’s plant in Coimbatore. Initiated with the moving of a narrow web flexo press from the Kelaniya plant, another narrow web flexo press, a new Nilpeter 8-colour has been added to that plant. Initially intended to serve some of Printcares’ larger Indian tea tag customers the plant has now gained traction and is attracting other local clientele. While tea tag production in Colombo may still be more efficient especially because of the port and shipping facilities, the Coimbatore plant is not only closer to major customers but also provides back-up and redundancy for both plants. Nevertheless the methodical processes of the mother plant are being transferred and it should be self sufficient within a year or so.