British Polythene Industries plc, Europe's largest polyethylene film company, again is performing major surgery on its operations. This time it has taken the scalpel to its retail bag business, announcing 80 job cuts at its Alida Packaging Ltd. unit.
In a telephone interview, Cameron McLatchie, BPI's chairman and chief executive officer, said the company has to reduce PE bag capacity because it has not been able to compete with cheaper imported bags.
"Despite previous restructuring in our [retail bag] manufacturing facilities, we find that — using Western European raw-material prices and operating to European regulations — we are unable to compete profitably against product from the Far East," McLatchie said in a news release.
Meanwhile, McLatchie plans additional production cuts this year, a process that will continue "for some years" as BPI counters the effects of adverse currency exchange rates and foreign competition.
This is sure to lead to further layoffs and plant closures at BPI's film empire, which currently includes more than 50 sites and a work force of nearly 3,900.
"We have very strong businesses. But we need to go through some evolutionary pain to come out stronger and fitter," McLatchie said.
Alida of Heanor, England, is BPI's main facility for extruding and converting PE supermarket and retail bags. It was the focus of an earlier restructuring, when BPI focused plastic bag production there in 1997.
Greenock, Scotland-based BPI said it is having trouble passing on the soaring cost of PE resin, which it claims rose 70 percent between April and December.
Meanwhile, BPI is continuing to take on the Asian bag makers at their own game. It is increasing extrusion and bag-making capacity at its Xinhui Alida Polythene plant in Xinhui, China.
The Alida labor cutback comes hard on the heels of 226 layoffs BPI made last year when it closed three British plants, and 500 cuts in 1998 when it sold or closed five plants.
Last year's cuts included the closure of Agritay Ltd. of Dundee, Scotland, and Parkside Stourton Ltd. in Leeds, England.
The company reported its 1999 pretax profit was down 11 percent to 19.2 million ($30 million). Sales were down 4 percent, to 452 million ($710 million).
McLatchie said BPI will simplify its structure, reorganizing various operations into a "large, focused businesses." The simplification process was prompted by pressure from customers to cut packaging costs, and by BPI's decision to move into electronic commerce in a big way.
McLatchie said the business units will be responsible for incorporating the Internet into the way the company deals with customers.
A London-based packaging industry analyst praised BPI's restructuring effort.
"BPI needs to exit its loss-makers. It has been very good at getting individual operations to focus on individual product areas. Now it needs to collect the focused businesses into larger groups," said Daniel Cane, packaging analyst at ABN Amro.
He said management currently is making "sensible moves."