Leaders at Bemis Co. Inc. are not shy about talking about what needs to change to fix the company: Costs need to come down, and the product mix has to evolve.
The Neenah, Wis.-based flexible and rigid plastic packaging firm is in the midst of a reorganization that CEO William Austen dubbed "Agility" during a recent conference call to discuss quarterly earnings.
Bemis is working to remove $65 million in costs through a combination of job cuts, plant closures and office consolidation. That's up from an earlier plan to take out $55 million to $60 million.
"With regard to fixing our business, our cost-savings plan clearly creates a path forward in terms of appropriately aligning our cost structure. We are executing on this plan with clear direction and speed," Austen said.
Bemis provided some added insight regarding the cost savings during the call.
That plan involves the elimination of some 500 administrative jobs, mostly domestic. "From a geographic perspective, approximately three-quarters of these positions are in the U.S. and the remaining are primarily in Latin America," Austen said.
The company had targeted 300 job cuts in that area during the summer but pushed the number higher in September.
Those job cuts represent about $35 million, or more than half of the expected cost savings. Another $17 million will come from four plant closures, Chief Financial Officer Mike Clauer said.
"Work performed at these facilities will be transferred to other Bemis locations," he said.
During the summer, Bemis initially indicated two plants would be closed but increased that number to four in September.
Consolidation of certain administrative offices in the United States and Latin America will save another $5 million.
Fixed costs reductions, in areas such as travel expenses, use of external warehouses and product shipping costs, will slice another $8 million.
"We made progress during the third quarter. We continue to take actions through our restructuring and cost-savings plan to align our business to the environment we are operating in to create a lean, nimble business that is well-positioned for the long term," Clauer said.
Agility, Austen said, is a mindset and involves moving quickly and easily.
"We recognize that our business model requires enhancement and change. We have shaped a three-pronged approach through Agility: fix, strengthen and grow," he said.
Part of the growth will be targeting areas of the market that Bemis previously has not focused on while still holding on to existing business.
"With regard to growing our business, we are developing plans to more deliberately pursue pockets of growth in the market such as small to midsized customers and consumer and industrial applications. To be clear, we highly value our existing base of large CPG [consumer packaged goods] customers, which create the backbone for our business. These customers provide us large volumes and will always be part of our mix," Austen said.
"However, as customer preferences have shifted, the work we are doing to deliberately align portions of our production asset base and our people around small to midsized customers and non-food applications will allow us to more deeply penetrate some pockets of growth that historically our business model has not focused on," the CEO said.
"I do not anticipate growth from this overnight, but the plans we are developing position Bemis very well for the long term," he said.