CCL to close aerosol plant in Ontario

Packaging company CCL Industries is to permanently close its Canadian aerosol manufacturing operation, commencing in the first half of 2014 and completing no later than mid-2015.

Geoffrey T. Martin, president and CEO of the company, says, “It is with great regret that we are announcing this news. Our operation in Ontario now exports its entire output into the US; distance from key customers and the step change rise of the Canadian dollar over the last decade combined to significantly impede competitiveness. The plant has been unprofitable since 2009 and posted sizable losses during the economic crisis years. Although results improved in 2012 and 2013, the operation continues to make losses; consequently, we feel it is now time to make this difficult decision.”

He adds, “In addition to appropriate severance and other benefits, we will do our very best to help the 170 employees at the site develop their personal transition plans. Many of them have a long tenure with CCL, so early notice of the closure gives reasonable time to consider options. These will include outplacement assistance embracing, where possible, international transfers within CCL Container and domestic opportunities at our CCL Label and Avery business units as we simultaneously expand their manufacturing operations in both Toronto and Montreal.

“CCL Container will consolidate the sales volume from the Canadian plant into its existing operations in the US and Mexico, investing approximately $25m (£15.5m) in required capacity and infrastructure additions at its Hermitage, Pennsylvania and Guanajuato sites over 2014 and 2015,” Martin continues.

“This includes the previously announced new aerosol production line planned for installation in mid-2014. The company will record a pre-tax one-time restructuring charge of $11m (£6.8m) during the fourth quarter of 2013 to provide for the closure costs with approximately 40% in non-cash asset write downs and the balance largely in employee severance. In addition, we expect to expense approximately $4m (£2.5m) from mid-2014 through the first half of 2015 in other one-time transition costs. CCL Container is targeting an increase of $10m (£6.2m) to its current annualised EBITDA run rate of approximately $30m (£18.5m) when the consolidation is completed in mid-2015.”

Martin concludes, “We firmly believe this decision was essential to optimise the CCL Container supply chain footprint and cost position to best service our important Home and Personal Care customers, all of which are now located in the US and Mexico.”