Soaring energy costs hit Encirc’s gross margins
Glass manufacturer and filler Encirc saws gross margin fall as a result of the “unprecedented” rises in the price of natural gas and electricity, as sales rose by nearly a quarter, it has reported.
In accounts filed at Companies House, the logistics heavyweight reported sales up 23.5% during the 12 months to the end of 31 December 2022, rising to £444.7million, up from om £360.2 million last year. However, as a result of the soaring costs of energy costs, gross margin fell from 20.6% to 10.5% this year, with the company citing the “unprecedented” rises in cost of both natural gas and electricity costs. It said that despite engaging with customers to pass on some inflationary costs and also hedging energy positions, it had incurred “significant levels of cost and margin erosion”.
“Such was the hyper inflation observed and continuance of high pricing in energy markets that operating margins were adversely affected,” it said in its director’s statement, continuing that it anticipated that margins would “restore to historical levels as energy markets settle and contract renewal dates and negotiations are closed.”.
It also noted the highly competitive market around both the price and availability of products, which resulted in “fluctuations” in margins.
The results date from the last financial year, before Encirc doubled its bottling capacity by acquiring bottling-and-distribution company The Park in January 2023 for £30million. The combined business, Encirc Beverages, is now responsible for around a third of the UK’s glass filling, around 400 million litres of predominantly wine, as well as some beer and soft drinks.
This is in line with the company’s plans to “maximise the output from glass production, grow share of the contract filling market and hence grow both turnover and profitability,” it stated in the director’s report.