US packaging giant warns over plants' future

A US packaging giant with four Irish production plants, including one in the North, has warned that the future of any business that does not deliver on growth or returns could be in doubt.

Chesapeake Corporation, which has plants in Dublin, Limerick, Westport and Belfast, yesterday warned in its annual report that it was currently looking at ways to improve the profitability of its businesses and lower debt. Chesapeake, which produces specialty paperboard and plastic packaging, reported a net loss of $15.5 million for the full year ending December 2007 on a net turnover of $1,059.6 million.

This compares to net loss of $39.6 million on a net turnover of $995.4 million for the previous year.

Its latest annual report details how the corporation made €1.5 million last year from the sale of its plastic packaging operation, Boxmore Plastics Limited in the North.

The business, which is based in Lurgan, was sold to an existing management team.

Chesapeake operates across more than 50 locations in Europe, North America, Africa and Asia and employs in the region of 6,400 people worldwide. The group has suggested it will consider possible closures, downsizing and consolidation or the sale of certain plants as a means of cutting costs.

In a letter to its shareholders in the annual report, Chesapeake's president and chief executive said earnings for the first half of 2008 would be lower than first-half earnings in 2007. Andrew J Kohut said this was due to lower volumes and start-up expenses in relation to new facilities and product lines.

He said the group has made "significant process" on refinancing its operations and secured significant new business for 2008.

But he has warned that any parts of Chesapeake that he believes are underperforming are under review. "We target 8 per cent earnings growth or EBITDA [earnings before interest, taxes, depreciation and amortisation] margins of 15 per cent as being reflective of good specialty packaging businesses, and if we have businesses that are not at those levels or do not have a path to getting there, we will consider alternatives for such businesses," he said.