Bemis reveals plans to close four plants in Latin America in Q2 financial results
As a result, and following its acquisition of Emplal in Brazil last year, the company will close four plants in the region.
Q2 net sales of $1.02bn
The news was discussed in Bemis’ Q2 2016 financial results where Bemis president/CEO, Bill Austen, said its business is beginning to feel the effects of the impact of the economic environment in Latin America and consumers' disposable incomes remain stretched.
“While our product portfolio serves basic needs for consumers, we've started to see a mix shift from higher price point products to those with lower price points. Yogurt is a prime example,” he said.
“While total demand for yogurt packaging in the quarter was strong, we are starting to see some customer shift to simpler style packages; instead of the high end pre-made cups for drinkable yogurt, we saw more demand for films using simpler, traditional packages for yogurt.
“With the potential impact of this shift in mind, we took a hard look at the capacity in the region. The Emplal acquisition came with modern and efficient facilities that provide us the opportunity to consolidate production. Beyond the original Emplal synergy plan to close one legacy facility, we initiated a larger effort in which we'll close a total of four legacy plants in the region.
“We are taking action to maintain our leadership in the region and to ensure we will meet our original target of 10% plus operating margins in our global packaging segment.”
Bemis reported Q2 net sales of $1.02bn compared to $1.03bn last year and total program charges incurred throughout 2016 and 2017 are estimated to be $28m to $30m. Q2 earnings per share were $0.53 from continuing operations.
“Latin America is and will continue to be an important part of our portfolio as the local economy recovers, our business will continue to be well-positioned with the right products, management team and asset base,” added Austen.
Global packaging market
Speaking about the global packaging market, Mike Clauer, VP/CFO, Bemis, said dollar sales were up 4.4% over the previous year. Currency translation reduced sales by 12.6% driven by currencies in Latin America that devalued against the US dollar versus the prior second quarter.
The acquisitions of Emplal and SteriPack contributed about 7.7% increase in sales over the prior year.
“We looked extensively at our manufacturing footprint in Latin America and determined we could close four facilities, which is more than the original synergy plan associated with our Emplal acquisition. The total program will cost between $28m and $30m through 2017,” he said.
According to Clauer, approximately two-thirds of the total program costs are employee related affecting 1,100 jobs.
“We're taking out less efficient, smaller, older legacy facilities that we had within the Bemis portfolio now that we've acquired with Emplal, which has got newer, bigger more modern facilities along with more modern equipment,” said Austen.
“We are taking out older legacy Bemis plans, consolidating and moving that volume to the newer more efficient facilities at Emplal that we acquired. We're also putting a little bit of a footprint onto one of the newer Emplal plants to absorb some of the equipment that we will move.
“So, no losses of customers, no loss of volume and a much more efficient operation when this is all over.”