Bemis rationalises

- Last updated on GMT

Related tags: Net sales, Marketing, Bemis

Packaging giant Bemis has announced a continuation of its
restructuring strategy following mixed third quarter results. It
seems likely that the move, designed to improve manufacturing
output, will lead to further job cuts. "We have closed three
flexible packaging plants and moved production to our more
efficient facilities," said Bemis president Jeff Curler.

Packaging giant Bemis has announced a continuation of its restructuring strategy following mixed third quarter results. It seems likely that the move, designed to improve manufacturing output, will lead to further job cuts. "We have closed three flexible packaging plants and moved production to our more efficient facilities,"​ said Bemis president Jeff Curler.

Restructuring and charges related to the closure of the plants totaled $10.8 million during the third quarter. Costs included severance pay for those made redundant, fixed asset impairments, equipment relocation costs and other related shut down costs.

And last week, the company announced its intention to close its North Las Vegas, Nevada and Brampton, Ontario roll label facilities. Bemis believes that the closure of these plants will reduce fixed costs and improve capacity utilisation in the pressure sensitive materials business segment.

On the positive side, new investment opportunities to fuel growth in the pressure sensitive materials business segment are being sought. "We have entered into an agreement to purchase a Belgian company, Multi-fix NV, which offers additional coating capacity to our higher margin European graphics product line,"​ said Curler. "We expect this transaction to close within the next 30 days and to bring an additional $15 million in annual sales to our European pressure sensitive materials business."

The company's tough strategy comes on the back of an increase in net sales of 10 per cent for the third quarter of 2003. Acquisitions made during the latter half of 2002 accounted for 7 per cent of this sales growth, with a positive impact from currency translation providing an additional one percent compared to last year.

Flexible packaging, which represents 80 per cent of total company third quarter net sales, reported net sales of $533 million in the third quarter, an increase of 12 per cent compared to the same quarter in 2002. Acquisitions made during the latter half of 2002 accounted for 9 per cent of the sales growth in the third quarter.

Operating profit for the third quarter was $62.6 million, a decrease of $13.5 million or 17.7 per cent from the third quarter of 2002. As a percentage of net sales, operating profit decreased to 11.8 per cent from 15.9 per cent a year ago. In addition, polyethylene product lines have continued to struggle with lower unit volumes, while operating profit in the paper packaging product line remains behind its strong third quarter 2002 level.

"The polyethylene packaging business is working through its third quarter plant closures and expects a seasonally slow fourth quarter, but a less expensive cost structure and an increased focus on value added business mix should deliver improved performance in 2004,"​ said Curler. "Our paper packaging product line has improved profit levels after a disappointing second quarter and is expected to continue to deliver steady to improving profit levels in the future."

Third quarter net sales from the pressure sensitive materials business segment were $129 million, a 4.8 per cent increase from the third quarter of 2002. This segment contributed an operating profit of $4 million, or 3.1 per cent of net sales for the quarter. These results were however below the operating profit of $4.9 million or 4 per cent of net sales recorded in the third quarter of 2002.

Bemis​ is a major supplier of flexible packaging and pressure sensitive materials used by leading food companies worldwide. The company, which reported net sales of $2.4 billion in 2002, employs about 11,600 individuals in 10 countries around the world.

In August 2003, the company received a subpoena as part of the Department of Justice investigation into competitive practices in the pressure sensitive label industry. Bemis is in the process of complying with the subpoena.

Related topics: Processing & Packaging

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