The son-in-law of billionaire Richard Pratt is planning to turn a small packaging company in Sydney into a $1 billion enterprise.
Raphael Geminder, who is one of the heirs to Pratt’s fortune, worth many billions of dollars, will bankroll an expansion for listed company Pro-Pac Packaging after he raised his stake in the company to 48.3 per cent in the last month, The Australian reports.
Geminder is a one-third shareholder in the family company Visy Group, worth $3 billion, and also controls the $1 billion Pact Group with his wife Fiona.
The Pact Group supplies plastic and steel packaging to the food, household cleaning, pharmaceutical and industrial markets.
Geminder told The Australian the speculation that Pact was looking to obtain a sharemarket float is false.
"The float option is completely dead. It has been off the table for 18 months," he told The Australian.
"We are a private company and intend to remain a private company. Our ability to grow using debt markets is significant and that is what we will continue to do.
"The market conditions are still good for that."
He also has a stake of just under 20 per cent in another listed packaging company, National Can Industries.
Pro-Pac manufacturers and distributes industrial and rigid packaging products, including shrink wrap, packaging tape and boxes, to more than 10,000 customers nationwide.
Current annual revenues sits at $115 million, and Geminder wants to grow the company’s profits even further.
"My intention is to target $1 billion worth of sales in five years,” he said.
“That is aspirational but it is very achievable.
"We see a bright future for this business.
“We see an opportunity to consolidate what is a very fragmented space.
Geminder’s borther-in-law Anthony Pratt, who is the executive chairman of Visy Industries, told a national conference on food security held in Shepparton yesterday that the industry is in desperate need of funding and support for the security of food to be possible.
“We all know that Australia is a land of immense opportunity,” he told the conference.
“We have rich natural resources – productive land, smart people and a relatively stable government.
Our proximity to Asia is also a huge natural asset.
This puts us in the zone of the fastest economic growth the modern world has seen.
In short, we have many of the tools to help meet the global food security challenge and to prosper our local industries and regional communities while we do so.
We have what it takes to feed 200 million people, to quadruple food manufacturing and that should be our goal.
But as this huge, new market opportunity is emerging, productivity growth in parts of Australia’s food production and manufacturing sector is slowing.
The recent long drought certainly has something to do with it, but there are more fundamental issues at play.
The first involves sustainable production at the farm level. Australia needs to embark on a wave of farming innovation such as boosting soil carbon levels, which increases the nutrient supply to plants; better water use efficiency; new crop genetics; promotion of best farming practice; and a serious increase in R&D investment.
Now is not the time for governments to be cutting their budgets for innovation support for the farm and food production sector.
They need to continue to support the many leading Australian farmers who are ahead of the curve in modern sustainability practices such as no-till cropping, irrigation management and on-farm nutrient recycling.
All of which keeps delivering nutrients to the plants in a cost-efficient, productive way.
The second aspect of our food security challenge is expanding our own domestic food manufacturing sector.
While we need to continue to export bulk produce like wheat, wool and meat, we seem to have taken our national eye off food manufacturing.
The country has witnessed the closure of many food manufacturing plants in recent decades, from regional abattoirs, to fruit processing, flour milling and the many industries that supported them.
Recently, Heinz and SPC voted with their feet.
High-profile industry disruptions such as steel or car plant closures attract much media and political attention.
But the loss of much of our food manufacturing capacity has gone largely unnoticed because it happens in small increments.
But over time it has a bigger impact than the closure of a car industry plant.
The irony is that we have a competitive advantage because of the quality of our food – we don’t have such a competitive advantage in cars.
In fact, when BlueScope announced the closure of its Port Kembla tin-plate factory several years ago, the company said the decline in the Australian tinned food sector was a significant factor in its decision.
The difficult truth is that while our bulk food production has increased, our food processing and manufacturing sector has been in a slow decline over the past two decades.
Just a fortnight ago we were told by the Food and Grocery Council that we could lose up to 130,000 jobs in the sector by 2020 unless we take serious action.
Therefore, a key question is how to rejuvenate our domestic food manufacturing sector, with inward investment, new jobs and more value-adding of food right here in Australia.
Manufacturing is something that’s very close to my heart. At Visy, we’re proud to have invested more than $2 billion in domestic manufacturing in this country over the past 10 years.
Most importantly, we are interested in supporting Australian food manufacturing because 70 per cent of our customers are in the food and beverage sector.
For example, last month we announced we were investing more than $80 million in a new beverage canning plant on the Gold Coast – the first investment of this type in Australia for 20 years.
In fact, 90 per cent of employment in Australia’s food production industries is in regional areas just like this.
The Australian farm sector supports 317,000 direct jobs and a flow-through of about 1.6 million jobs across the nation.
In New Zealand, they believe the multiplier is more like 10 times.
Which is why they put so much effort into national food manufacturing – and look at the result for New Zealand dairy today.
Australia needs to pick some national food sector winners of our own, and put the resources into making them world class.
How can we produce enough quality food to feed 200 million people?
Number one: We need accelerated depreciation for new manufacturing investments in food.
Number two: Innovation – the money that’s going for research to government agencies should be going to people like SPC and others who will bring investments forward.
Let me illustrate.
At this high Australian dollar, imports are increasing.
We need innovation funds to help the SPCs of this world do different things that imports can’t, like innovating to make more fresh food [with] increased shelf life.
High-pressure processing is expensive so we need funding to help capital projects get up that, without this help, won’t get up.
SPC takes 20,000 tonnes of pears, so if it can build technology they can work with growers to have fresh sliced pear so we use up the pear over-capacity.
Number three is anti-dumping. Agriculture Minister Joe Ludwig can also help by the burden of proof being flipped on dumping to enable a level playing field.
In America, if there’s an allegation of dumping, the onus is on the offending party to prove they’re not breaking America’s anti-dumping laws.
In Australia – in stark contrast – the onus is reversed so that our affected Australian manufacturers have to prove that they’re being dumped on, and by the time they can gather enough evidence to prove their case the damage has been done and another Australian food product exits the domestic market.
We urgently need a level playing field in this area that affects local businesses so deeply.
Fourth, we need the suspension of payroll tax for food manufacturers.
And last, competition policy should allow consolidation of food companies, which will enable greater profitability and encourage them to stay here.”