West heads east with new Indian packaging plant

The plant – located in one of India’s special economic zones (SEZ) – will produce metal and elastomeric pharmaceutical packaging components using compression moulding for West’s drug industry customers, both local and those across the wider Asia-Pacific region.

Manufacture of elastomeric components at the 72,800 site is expected to be up and running during by the first quarter of 2015 with sterilisation capacity due to come online the following year. The plan is to have 37,700sqm of manufacturing space by 2023.

In a press statement CEO Donald Morel said: “We are experiencing a very exciting period of growth and business expansion in Asia and we are proud to begin construction of our first facility in India​.”

Packaging business​

West’s packaging business has performed well in recent quarters. In the three months to June 30 revenue grow 6.1 per cent year-on-year to $235.8m, operating profit increased 32.5 per cent and margins grew 4 per cent.

But while the figures look good, the growth was driven by customers’ efforts to stock up ahead of impending launches and to mitigate supply chain risks rather than new business wins which led some observers to suggest that the growth would not be sustained.

One to pass comment was David Windley from Jefferies who said that prices increases West enacted last year will see customers “begin to slow inventory rebuilding” which will slow sales growth in the rest of the year.

In this context, West’s plan to win new customers for its packaging business in Asia make sense, given that a new roster of clients would reduce the division’s vulnerability to customers' inventory building decisions.

If all goes to plan the Indian plant will come online at the same time as two-year stability testing of Crystal Zenith (CZ) syringe is completed at West’s recently expanded facility in Arizona, US, which may be a useful buffer if the pharmaceutical sector does not embrace the new delivery technology as quickly as the firm predicts​.