14 May 1998: Mexican glass maker Vitro SA is reportedly concerned about cheaper plastic bottle prices, which threaten to force Vitro to defend market share on its line of glass bottles, a top executiv…
14 May 1998: Mexican glass maker Vitro SA is reportedly concerned about cheaper plastic bottle prices, which threaten to force Vitro to defend market share on its line of glass bottles, a top executive said. “Definitely, in packaging we have to watch carefully the relationship between the price of glass containers compared to PET (plastic) containers,” Vitro chief financial officer Jose Antonio Lopez said recently. PET, or polyethylene terephthalate, is a resin used to make high-quality plastic bottles notable for their flexibility and durability, and prices for the key feedstock have fallen around the world in line with crude oil over the past five months. Industry analysts said lower PET prices allow its producers to offer more attractive prices to bottlers, which in turn are threatening Vitro“s hold on the market and, at the very least, forcing the glass maker to keep its prices down. Lightweight, sturdy PET containers are a relatively new development in Mexico“s soft drink industry, which had been dominated by long-neck glass bottles made by companies like Vitro. In the soft drink industry, glass now holds 55% of the market compared with a virtual stranglehold a decade ago. “Fortunately for us, the PET packaging (market) is 100% in dollars, so the peso“s devaluation helps glass remain competitive,” Lopez said. Reports say that Vitro“s containers division generated 30% of the company“s US$ 2.525 billion income in 1997. However, profit margins for its container business in the first quarter of 1998 fell to 18.4% from 20.6% in the previous year, Lopez said, noting the decline was unrelated to lower PET prices. In a move to remain on top of the containers industry, Vitro has reportedly planned investments to remove bottlenecks and boost productivity, while experts say the summer heat will encourage Mexicans to grab an extra bottle of beer, made of Vitro glass. Vitro is now facing the entrance in Mexico of the world“s largest and oldest glass maker, France“s Compagnie de Saint Gobain. But Lopez said operating margins for flat glass have recovered to above 20%, spurred by the automobile and construction industries. Meanwhile, the company said its net profit for the first quarter was Pso 60.1 million pesos, compared to Pso 553.9 million in the year-ago period. Earnings per share in the quarter fell to Pso 0.17 from Pso 1.54 in 1997, the company said in a statement. Revenues were Pso 5.103 billion, 2.1% above the first quarter in 1997. Operating profit was Pso 908.1 million in the period, a 1.1% increase. “Operating cash flow was Pso 1.271 billion, a 3.7% rise from the same quarter a year ago,” the company said. In its report to the Mexican Stock Exchange, the company said its integral financing cost was Pso 541.56 million for the quarter, versus Pso 188.56 million. Vitro said it paid Pso 491.27 million in interest in the quarter, while earning Pso 8.23 million. Foreign exchange losses totalled Pso 584.48 million, while monetary gains were Pso 525.96 million. The company said its exports rose 9.2% to a total US$ 165.9 million in the quarter.