A number of corporate success stories emerged during the first Covid lockdown, but many proved to have unhappy endings. As we were puffing away on our Pelotons and dialling into Zoom meetings, company valuations were in some cases only temporarily elevated. It is tempting to view packaging company Macfarlane (MACF) through this lens. It benefited from the online spending boom, only for its share price to drop as physical shops reopened. However, Jupiter fund manager Matt Cable believes the company is worth a second look.
The UK packaging industry is dominated by three FTSE 100 companies: DS Smith (SMDS), Mondi (MNDI) and Smurfit Kappa (SKG). Macfarlane, with its market cap of £165mn, is small fry in comparison. This has important implications. Analysts often focus on the benefits of scale when it comes to packaging, and are drawn to companies with global footprints and resilient supply chains. However, it is worth keeping in mind that 90 per cent of Macfarlane’s sales come from distributing boxes, rather than making them.