Barrier Packaging Division Favourable financial development The Barrier Packaging division is based on unique knowledge of combining such materials as carton board, paper, foils and plastics to form strong barrier packaging concepts suitable for advanced food, nutrition and healthcare applications. In 2015, sales amounted to 165 MEUR, which was an increase of 8% resulting from focused growth within chosen key applications, such as infant nutrition, healthcare and specialty foods. The division serves mainly two business segments: Performance Packaging and Flexibles. Both segments improved sales and profitability due to their strong customer relations and expertise in barrier technology. Product offering Barrier Packaging is all about ensuring that customers’ products are well protected during their lifecycle. Performance Packaging offers proprietary high- performance, carton-based packaging systems including Cekacan®, Hermetet®, Expresso® and the newly developed BoardioTM and Sealio®. Products encompass material components as well as machinery, and are optimal for packing sensitive powders and mixes such as infant formula, coffee and other branded products that require effective ways of presenting and protecting customer products and increasing their brand value and sales. Under the Flextrus brand, Flexibles offers flexible food packaging with tailored barrier properties that preserves freshness while safely protecting products over a prolonged shelf-life. Flexibles also offers advanced healthcare packaging that meets strict hygienic requirements. It provides materials with the desired appearance and functional properties for such products as chilled foods, bakery products, dry mixes, snacks, woundcare products and pharmaceuticals. The two segments are integrated in terms of innovation and development and have an internal supply relationship. Highlights 2015 In 2015, Performance Packaging signed a new four-year contract with one of its key customers, thus securing substantial material components volumes and growth for the business in the coming years. Performance Packaging also sold several Cekacan systems to key customers within the tobacco industry. The Cekacan packaging solutions allow favourable exposure of the customer’s brand through packaging form, shape and design, along with product protection and logistical benefits. Packaging components production is conducted in plants with high hygiene level. During the year, a new technical platform was developed, including machinery, filling methods and packaging construction and design. Based on this platform, two new exclusive and proprietary packaging solutions, Boardio and Sealio, were launched for selected key customers and received a very positive reception. In 2015, considerable investments, totalling 5 MEUR, were made in product technology platforms, intellectual property, plant upgrades and machinery equipment for high hygiene level manufacturing of packaging components. Flexibles increased in 2015 in both net revenues and EBITDA through its focus and expertise in barrier technology and high level of advanced printing technology. Flexibles increased its share of printed material, thereby strengthening its relations with key customers. During the year, the decision was taken to invest 5 MEUR in new processes, plant upgrades and production equipment. This includes a new flexo press in the Flextrus Lund plant, which will materialise at the beginning of 2016. During 2015, Flexibles also launched a new type of packaging for sterilized medical devices and an improved packaging for hard cheese was introduced in the European market. Market and customers The addressable market for Performance Packaging, which is worth approximately EUR 1.9 billion, is expected to generate substantial growth in the years ahead as brand owners seek to renew their products and brands through packaging innovation. AR Packaging is among the leading players, with customers that include such important brand owners as Danone and Nestlé. Customer relationships are long lasting thanks to the system’s unique nature and the know-how and service provided. The company is mainly active in the European market, but growing rapidly in Russia, USA and parts of Asia. The Flexible packaging market for food is growing at a steady pace at 2% per year while healthcare is expected to grow slightly faster. AR Packaging’s home market is Scandinavia where it is the market leader with a share of about 15%. The total European flexibles market is worth approximately 12.5 MEUR and is fragmented, with few large players and many smaller niche players. AR Packaging has strong competencies in advanced printing, barrier board and plastic polymers. Customers include Arla, Tulip and Mölnlycke, but the main base of customers consists of many small and medium-sized companies. Strong efforts in innovation Barrier Packaging has a strong commitment to innovation and its expertise is centred on barrier control, technical design and food knowledge. During the year, Performance Packaging made considerable investments in the Universe technical platform which has led to the new proprietary packaging systems, Sealio and Boardio. Flexibles focuses on developing improved materials, advanced laminates and new shapes and formats. Among others, mono and renewable materials are in focus. For improved consumer convenience, Flexibles collaborates with manufacturers of packaging machines to find better and more high-quality solutions. Focus for 2016 For 2016, Barrier Packaging will continue to focus on growing its business on a global basis. Performance Packaging will increase its sales organisation in Europe, but also in new markets, such as Asia and USA. Another priority for the year will be the continued launch of the new systems. Flexibles will work closely with its customers for the launch of the newly developed packaging solutions within processed meat, hard cheese and medical devices, among others. Continued focus on pioneering in advanced flexo printing as well as operational efficiency is also on top of the agenda for 2016. Commercial Director Johan Werme (Performance Packaging) and Managing Director Maud Rahm (Flexibles) organised under Managing Director Barrier Packaging Per Nyström. Sales (MEUR) 165 (153) Key competitive advantages for Barrier Packaging are: Close relationship to customers AR Packaging works closely with customers in many respects, including extended technical service and securing high productivity at the customers’ operations. High product quality AR Packaging focuses on high product quality in the form of design, function, food safety and printing quality of the packages. In-depth knowledge of the customers’ products Over the years, AR Packaging has acquired thorough knowledge of its customers’ products, facilitating packaging innovation and systems development.