Essentra to take £35m hit on site closure

By Jo Francis, Thursday 27 July 2017

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Around 150 jobs are set to go with the proposed closure of an Essentra site that only opened last year.

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Essentra plans to close its Newport folding cartons site

The £1.1bn turnover packaging group has announced plans to close the Newport IP5 site as part of a major strategic review it embarked upon at the beginning of the year. The full results of the review, along with Essentra’s revised corporate strategy will be announced tomorrow (28 July) alongside its interim results.

IP5 is part of Essentra’s Newport centre of excellence and employs circa 150 staff. It made an operating loss of £3.4m on sales of £6.1m in the six months to 30 June. 

It makes folding cartons for the consumer goods market, primarily gift boxes.

The group described IP5 as “structurally challenged” and said that despite “significant improvement efforts” made by the site’s general manager and employees, and the investigation of various other strategic options, the group’s board had concluded that closure was the most appropriate route.

Essentra said the proposed closure will result in a charge of circa £35m, of which £13m is non-cash.

It said its adjacent label and foils, and Design Hub operations at Newport were unaffected by today’s announcement. The group has received substantial support from the Welsh Government for the expansion of the site. 

Unite national officer Matt Smith said the news had come as a shock. "Especially taking into account the public money that has been invested, this is definitely a shock. 

"Unite will be doing everything it can to support our members. The potential 150 job losses and the wider effect on the community is a massive blow."

A formal consultation process over the closure is underway. In a statement Essentra chief executive Paul Forman said he regretted the impact the decision would have on employees and said the group was committed to handling the process in an open and honest way.  

He said: “Specialist secondary packaging is strategically important for Essentra, given the size of the underlying market and our extensive product portfolio and expertise.  However, if we are to rebuild solid foundations from which we can restore growth in our global Health & Personal Care Packaging business, it is imperative that we focus our capabilities on those activities which provide the most attractive, profitable opportunities in which we can add value to our customers.”

Essentra acquired Clondalkin’s Specialist Packaging division in 2014 in a $455m (£346m) deal, its biggest acquisition to date at that time.

It went on to consolidate nine of the 24 sites purchased into its other operations, but the “challenging and complex” process did not go smoothly and has proved costly and disruptive for the group, which has admitted that it lost customers as a result of the disruption that ensued.

Essentra had consolidated the Clondalkin Great Harwood and Northampton operations into the IP5 site.

The group’s share price rose by 5.42p to 549.5p on the announcement (52 week high: 630.5p, low: 382.9p).

Essentra’s global operations are split into three core product areas: components, health and personal care packaging, and filters for the tobacco industry.

 

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