Vidrala considers how to maintain growth

Vidrala, the fifth largest container glass manufacturer in Europe, has doubled in size, output and profitability through acquisitions. Shareholders voted in June 2005 to change the group into a holdin…

Vidrala, the fifth largest container glass manufacturer in Europe, has doubled in size, output and profitability through acquisitions. Shareholders voted in June 2005 to change the group into a holding headed by the parent company Vidrala, located in Llodio, lava, in northern Spain. Now, having become the most profitable firm in its sector, it is pondering whether its current structure is the best for continued growth. In the last two years the bottle maker has grown significantly through the acquisition of Ricardo Gallo, in the process turning the Portuguese firm back into a profit-making enterprise, as well as two plants formerly owned by Owens-Illinois in Castellar del Valles, Catalunya, and in Crsico, northern Italy. Having taken the acquisitions on board, Vidrala is looking hard at its structure and management model. The one question being asked in company offices is: “if we have grown quickly at maximum profitability, why not continue growing?” Vidrala posted a net profit to September 2005 of EUR 20.6 million, up 29.46% on the same period of 2004. Projected sales for the full year to December 2005 are EUR 300 million; in the year to September 2005 sales were EUR 227.2 million, up 56.4% on the previous year. The firm has recorded yearly double-digit profit growth since 2000 in spite of EUR 175 million in investments under the 2002-2006 plan. In this period Vidrala has gone from two to five plants and 650 employees to 1,400. “We achieved the objectives for 2006 in the strategic plan some months ago”, affirmed Financial Director Jon Ander de Las Fuentes. The development of the strategic plan has come at a time of upheaval in the sector with rumors of acquisitions that could change the European container glass landscape and force Vidrala to take new positions. “First of all, we need to optimize what we have bought. After that the company will decide how to continue growing” the Financial Director said on 3 December 2005. The new subsidiaries contribute something over 50% of total turnover, with the rest coming from the plants in Vitoria and Albacete. In three years, output has gone from 450,000 tonnes a year to almost a million, and keeps growing. In the first three quarters, output has been 55.34% higher than the same period in 2004. Of this increase, 92% corresponds to the new plants and 8% to the improvement at the Spanish plants. “We have maintained margins in spite of the worrying increase in the cost of energy” said De Las Fuentes. Vidrala will continue its emphasis on investments in R&D and on the modernization of its melting furnaces.