Huhtamaki announces cutbacks but food and drink packaging to be unaffected

02 Oct 2018 --- After a poor financial performance in the first half of 2018, Huhtamaki has announced that it is considering closing and writing-off non-competitive production lines in a move that is hoped to generate US$17-20million (€15-18million) by 2020. The company estimates that the effect of write-offs and other actions amounts to approximately US$-35million (€-30million), which would be reported as items affecting comparability (IAC) in the fourth quarter of 2018. It has not been disclosed which lines will be targeted nor how many jobs may be at risk. Details on which lines will be affected are to be disclosed in Q4, Thomas Geust, Chief Financial Officer at Huhtamaki, tells PackagingInsights.

“With these actions, we plan to improve our productivity and efficiency, and ensure we are well positioned to continue implementing our profitable growth strategy,” says Huhtamaki CEO Jukka Moisio. “We continue to see good growth opportunities in food and drink packaging.”

Food and drink packaging are Huhtamaki’s core competency, with Geust adding that “food and drink packaging is our main strain of business” and it is not under threat.

The change comes now due to an increase in costs, which can be seen across all industries, according to Geust, from the rise in raw material cost to personnel cost.

“It’s a general inflammatory environment. In order to stay competitive in this environment you need to do this every now and again,” says Geust.

Following a time of investment – 2017 saw $230,000,00 (€200million) of investment according to Geust – it is now the time to focus on efficiency over capacity: “We are not cutting back. We are putting more efficiency into the things we are doing. We have been investing hugely, so we have the capacity. We are not cutting back on our growth initiative. It will not impact our innovation.”

What could happen next?
Geust was clear that the changes will not be focused on one industry nor in one region, but be global.

However, speaking with PackagingInsights, he indicated that the New Zealand branches of Huhtamaki are already underway in “improving efficiency.”

Globally Huhtamaki Group focuses on and has expertise in flexible packaging, release films, molded fiber packaging and food service packaging. In New Zealand, there's Huhtamaki Henderson, a food service manufacturing site, a molded fiber manufacturing site in Otahuhu, Auckland and a flexible packaging sales office located in Auckland.

Huhtamaki’s Auckland factory has more than 120 jobs on the line, as reported by the New Zealand Herald last month. The shift comes as Huhtamaki is reportedly looking to shift some manufacturing to Asia. The company plans to “look at off-shore options to remain competitive in the market,” the New Zealand Herald further reports.

Huhtamaki Henderson general manager, Bryan Mould, said Huhtamaki was “committed to manufacturing in New Zealand and was making clear strategic changes to secure long-term success in this market,” according to the New Zealand Herald.

Two manufacturing technologies at Henderson reportedly will continue to operate – injection molding and folded cartons. These areas will be further invested in.

PackagingInsights has reached out to Huhtamaki New Zealand for further comment.

CEO's review on Huhtamaki's half-yearly report
“Our second quarter comparable net sales growth was good at 6 percent. In the emerging markets growth was 10 percent. All segments contributed to positive development and Flexible Packaging and Foodservice Europe-Asia-Oceania segments reported highest growth,” says CEO Jukka Moisio.

“Our profitability remained solid despite a decline compared to 2017. Currency conversion weakened our EBIT by EUR 4 million. Foodservice Europe-Asia-Oceania and Flexible Packaging segments improved their profitability while North America segment had negative margin development due to higher distribution costs and start-up costs of the newly-invested Goodyear, Arizona, facility.”

Regarding upcoming EU legislation that proposes to ban single-use plastics cutlery, plates, stirrers and straws and introduce labeling requirements, Moisio states: “the products that are proposed to be banned make less than 2 percent of our Foodservice business in Europe and can, for the most part, be replaced with alternative paper-based products. As a converter with innovations capabilities in many packaging materials and with the growing interest in replacing plastic with alternative materials, we are well placed to continue to work with our customers and their consumers to respond to their demands. Already now, the majority of our products are fiber-based.”

By Laxmi Haigh

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