Low & Bonar plc is selling off its European polyethylene film business, and plans a £13 million ($22 million) restructuring for its remaining packaging operations in Europe and North America.
L&B plans to partially close its Tyler, Texas, Bonar Inc. heavy-duty PE sack operation and move the production to plants in Calgary, Alberta, and Burlington, Ontario. The Tyler plant is the packaging unit's only U.S. plant.
Norman McLeon, L&B finance director, said the move will cut costs and improve the efficiency of sack manufacturing in North America. The firm will take a $13.4 million charge to write down the assets, move the machinery and lay off an undetermined number of workers.
L&B also is selling three film plants to British Polythene Industries plc. Two of the acquired plants, Bonar Polythene Films Ltd. of Leominster, England, and Bonar Phormium Packaging NV of Zele, Belgium, reported operating profit of $2.35 million and sales of $64.7 million for the year ended Nov. 30. They have a combined film capacity of 88.2 million pounds per year.
The sale also includes Bonar PE Packaging Sp. z o.o, a small subsidiary film extruder in Poland.
L&B plans to balance its business in favor of its higher margin plastics and specialty materials businesses. Even so, when it announced the disposal and restructuring strategy, the company stressed its continuing commitment to packaging. It will focus on core sectors of folding cartons and packaging services in Europe and industrial packaging in North America, the firm announced.
L&B of Dundee, Scotland, is the parent of Burlington-based packaging firm Bonar Inc. and rotational molder Bonar Plastics Inc. of Newnan, Ga.
The Leominster and Zele film plants produce agricultural silage stretch wrap, and the Leominster plant also turns out PE shrink wrap. The Belgian plant also prints PE film for form-fill-seal applications and pallet protection, and converts pallet covers and heavy-duty sacks.
Together, the plants produce around 34 million pounds per year of silage wrap and about 19.8 million pounds per year of shrink wrap, according to BPI.
BPI will pay $13 million for the plants, plus assume about $10.8 million in debt, according to L&B.
``As we continue repositioning the group to achieve consistently higher returns for our shareholders, it was clear that our European film business would be unable to deliver the level of performance we strive for,'' said Jim Heilig, L&B chief executive officer and former CEO of Bonar Inc.
``Clearly, we could use the proceeds more effectively elsewhere,'' he said.
Heilig noted that L&B has made six acquisitions in higher-return businesses during the past 14 months, including additions of rotomolding and specialty material plants across Europe.
``We are currently pursuing additional opportunities,'' he added.
Last year, L&B reported a $5 million drop in profit in the silage wrap business. Sales were ``severely affected by the increasingly competitive market,'' L&B said.
The strong pound sterling and aggressive competition from other European producers have helped seal the fate of the regional packaging operations.
In September, L&B sold off its 50 percent share of an Austrian packaging film joint venture to its local partner.
BPI of Greenock, Scotland, is Europe's leading PE film product manufacturer. In April it bought the PE film and sack businesses of plastic pipe extruder Wavin BV of Zwolle, the Netherlands. This latest buy consolidates its place in United Kingdom and Irish markets and allows it to develop its European business, said Cameron McLatchie, BPI chairman and CEO.