Consol forecasts 15% drop in glass industry sales over next year
In August the company halted a project because of the ban on alcohol sales in lockdown
SA’s biggest glass maker, Consol, has predicted a 15% drop in industry revenues over the next 12 months, citing slow recovery from the Covid-19 lockdown alcohol ban and the possibility of a second wave of coronavirus infections.
Consol is among several companies that called off plans to invest in factories after the ban on the sale of alcohol after the lockdown restrictions choked off sales and left companies scrambling to build cash buffers. The alcohol industry, dominated by AB InBev and Heinken, accounts for about 85% of sales in the R11bn strong glass packaging industry.
“A long road lies ahead for the glass manufacturing industry and the upstream and downstream supply chain in the recovery from the impact of the Covid-19 extended alcohol bans, and the significant impact on profitability and debt,” Consol said in a statement to Business Day.
As a result, Consol is not yet in a position to restart construction on its new R1.5bn plant in Nigel, two months after SA lifted the ban on alcohol sales.
Consol and Isanti Glass — a subsidiary of AB-InBev SA unit SA Breweries (SAB) — make up the bulk of glass manufacturing capacity in SA. SAB said it had cancelled R5bn in planned investments while rival Heineken has said it was rethinking its “expansion ambitions” in SA.
Other companies that have said they are reviewing their investment plans include paper maker Sappi and property giant Growthpoint. This is a bad sign for President Cyril Ramaphosa’s goal of enlisting the private sector to lead SA out of an economic downturn. Ramaphosa has been canvassing investors at home and abroad to raise $100bn (about R1.7-trillion) in investment over five years, which was announced to much fanfare in 2018
“Nonetheless, Consol and Isanti are committed to continue investing in local glass production and, to this end, have re-initiated several projects that are required to reinstate and maintain pre-lockdown levels of glass producing capacity, including several furnace rebuilds and machine replacement,” Consol said.
The combined capital expenditure on these projects over the next few years is expected to total more than R1bn.
“This will, of course, depend on market conditions and the economic recovery of the country, which could take up to two years,” Consol said.
“When we reach this point, Consol will be able to assess the viability of restarting the construction of its planned new R1.5bn glass manufacturing plant in Nigel, Ekurhuleni,” it said.
This plant which is solely a Consol project, in Nigel, southeast of Johannesburg, will add 130,000 tonnes of glass production to Consol Glass’s capacity and will repatriate imports of glass for Coca-Cola, Heineken and AB InBev, should its construction go ahead.
It is expected to create 120 direct jobs, and about 2,600 additional employment opportunities across the value chain, from waste pickers to truck drivers, fitters, computer numerical control machine operators, glass machine operators, electricians and senior managers.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.