Historic Fife manufacturer Smith Anderson believes it is set to reap the the benefits of a multi-million-pound investment when it completes its move to Kirkcaldy later this year.
The company, which produces more than two billion paper bags each year and boasts a customer list including fast food giants McDonalds, Burger King and KFC, as well as major coffee firms like Starbucks and Caffe Nero, said revenues rose as it benefited from growth in a market which expanded by more than 5% per annum.
Documents posted at Companies House also revealed how new product innovations also helped the group’s turnover climb by £1m to £21.3m, despite a contract review with its largest customer.
But Smith Anderson warned the market was squeezed by competition from operators in Eastern Europe, France and Germany, and said profits had fallen thanks to ongoing relocation costs.
Chief executive Michael Longstaffe said the company was on the verge of completing its “brave” relocation from Falkland to Kirkcaldy’s Mitchelston Industrial Estate and would benefit from the increased efficiency the new site offers.
In all, the move has cost a sum approaching £3m, with a further £1m having now been spent on a new, and world-leading, paper carrier bag manufacturing machine.
But work at the company’s new premises is not yet complete, with around £500,000 to be invested in the construction of a new warehousing and storage facility by the end of this year.
The last stage of the plan will create a fully-integrated manufacturing and logistics plant, allowing the company to move all its activity to a single site and helping returns through a new focus on lean manufacturing in a specially-designed plant.
Smith Anderson also continued to count the cost of the collapse of a major Norwegian customer late last year, with the impact of shifting stock and unique raw materials still held proving challenging.
Pre-tax profits reached £557,000 during the 12 months to the end of September, down from £977,000 the previous year though Mr Longstaffe said the reduction had been anticipated by managers.
He said confidence was now “high” after the firm, which employs around 200 people, successfully faced down challenges and looks to finalise its move.
Three key director appointments have been made in the last 18 months, bringing fresh blood in operations, finance and sales and marketing functions.
“We are geared for the future and for innovation,” Mr Longstaffe added, praising his workforce.
But the chief executive also warned that the ‘single use carrier bag levy’ proposed by the Scottish Government had the potential to hurt the company.
Mr Longstaffe said many simply did not realise that the new rules, proposed to cut the use of plastic bags by large retailers with a charge of at least five pence per unit, would also apply to paper bags.
“We are still doing all we can to convince the Scottish Government that paper bags should be should be exempt from this legislation, as they are in Europe and as I think they will be in the Westminster proposals,” Mr Longstaffe said.
The Welsh carrier bag levy, introduced almost three years ago, does apply to paper bags and precipitated a 20% fall in their use.
Much of that gap has now been made up, but Mr Longstaffe believes it would be wrong to follow a similar course of action in Scotland for his “100% recycled, recyclable, biodegradable and compostable” products.
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