Chief executive Paul Fineman said the spend marked the second phase of a project that began when the company installed a flexo press at its facility in Holland a year ago.

"We are moving to water-based flexo, which involves significant environmental benefits because we won't be handling the amounts of solvents we do now," he said.

He added that improvements in flexo print quality had also been an important consideration in making the change of print process viable. The company produces almost 500m metres of giftwrap a year.

Four gravure presses will be replaced by two flexo presses as a result of the year-long project, which is already underway. The company expects the new flexo presses to be delivered by the end of the year.

Fineman declined to name the Italian flexo press manufacturer, citing competitive advantage. "The presses have been adapted specifically for us and a lot of time and effort has gone into that, it's been a very collaborative process," he added.

Flexotecnica (now owned by KBA), Omet and Gidue are the major Italian-based flexo press manufacturers.

International Greetings will consolidate its two existing sites in the Cardiff area to one as part of the project, which is being funded by new and extended banking facilities. It will also involve a grant from the Welsh Government "in excess of £1m".

The gift packaging and stationery group posted sales of £221m last year. It has around 400 employees in Wales, but not all of them are involved in manufacturing. Fineman said job losses would not be inevitable as a result of the site consolidation.

"It genuinely remains to be seen. There may be some modest changes," he explained. "In Holland we found there was scope to reduce some positions because of the change in production process, but the business there has also grown as a result of the investment."

In its pre-close trading statement International Greetings also announced that it had secured contracts for Christmas giftwrap and packaging with all four major UK supermarket chains.

The group has reduced the seasonality of its business by adding 'everyday' products to its range and by gaining early commitments from clients for Christmas contracts. "Seasonal bottlenecks have reduced considerably, now we are really busy for 11 months of the year," Fineman added.

However, International Greetings said the investment, combined with a slowdown in sales at its Australian business, would have an impact on growth in its new financial year. Exceptional costs due to the updating of its manufacturing facilities in the UK and overseas will be around £1m.

The group's share price fell by 5.5p to 42.5p (52 week low: 42p, high: 67p) in early trading today. It will release its year-end results in July.