Optimization at Huhtamaki: closed one large and four smaller manufacturing sites in India; expecting to materially support its profitability leading to savings of approx. EUR 100 million

Optimization at Huhtamaki: closed one large and four smaller manufacturing sites in India; expecting to materially support its profitability leading to savings of approx. EUR 100 million

-Huhtamaki continued to further grow its core business by bringing new capacity to commercial production, including single-use tableware in North America and rough molded fiber egg packaging in both North America and South Africa

The Pulp and Paper Times | Annual Report 2023 highlights :

Huhtamaki is a leading global provider of sustainable packaging solutions for consumers around the world. Its innovative products protect on-the-go and on-the-shelf food and beverages, and home and personal care products, ensuring hygiene and safety, driving accessibility and affordability, and helping prevent food waste.

Huhtamaki updated its 2030 Strategy in March 2023, and it builds on four priorities: scaling up its profitable core businesses, developing its blueloop™ sustainable innovation in partnership with customers, driving world-class competitiveness across its global footprint and investing in strategic capabilities to drive its transformation journey. Huhtamaki targets sustainable profitable growth based on its strong competitive position. Scaling up profitable core business is one of the key elements in Huhtamaki’s 2030 strategy, leveraging the company’s knowhow in the three key technologies, the existing global footprint and existing products. Huhtamaki’s capital expenditure is focused accordingly, while also investing in innovation. Huhtamaki targets longterm growth by both capturing the organic growth opportunities and via acquisitions. 

Huhtamaki aims to achieve world-class operational performance across its footprint, where the key drivers are structural performance and continuous operational improvements. These actions are expected to contribute 1-2 percentage points to the overall profitability improvement, as stated in the long-term financial ambitions. To achieve structural performance improvements, Huhtamaki is optimizing its manufacturing footprint, and has taken decisions on site closures during 2023, including the Flexible Packaging site in Prague, Czech Republic and several smaller sites in India.

“Our performance for the full year 2023 was solid. In the full year 2023, our comparable net sales decreased by 2% and adjusted EBIT by 1%. Our EBIT margin was strong at 9.4% despite lower sales volumes, the divestment of our operations in Russia in 2022 and currency translation. Free cash flow reached EUR 321 million, representing a significant improvement compared to last year” Charles Héaulmé, President and Chief Executive Officer at Huhtamaki said in the Annual report of the company for FY 2023.

He further added, “In 2023, we brought new capacity to commercial production. These include for example egg packaging in North America and South Africa as well as fiber lids in Europe. Innovation continues to be high on our agenda, as we seek to both improve our sustainability performance and deliver new solutions to our customers. We also took several steps during 2023 towards optimizing our manufacturing footprint and strongly improving productivity globally. In November, we announced a program that accelerates strategy implementation, expecting to materially support our profitability”

On November 30, 2023, Huhtamaki announced that the company is accelerating the strategy implementation by starting a program which is expected to materially support the profitability with efficiency improvements leading to savings of approximately EUR 100 million over the next three years. All cost levers will be addressed including potential restructuring to a more optimal manufacturing footprint, reducing input costs at an accelerated pace, and improving productivity globally.

The Fiber Foodservice E-A-O business offers high-quality paperboard and molded fiber packaging for fresh food and drinks to foodservice operators, fast food restaurants, coffee shops and FMCG companies. “Despite the challenging market conditions in 2023, we continued to make progress in our strategic initiatives. We experienced softer demand compared to the previous year, but pricing remained supportive during the year. Comparable net sales for Foodservice E-A-O increased by 2% and by 7% for Fiber Packaging. The lower volumes, divestment of operations in Russia in 2022, and foreign exchange impacts had a negative impact on net sales. Our adjusted EBIT decreased by 7% for Foodservice E-A-O and by 1% for Fiber Packaging due to lower sales volumes as well as the divestment of the business in Russia” Fredrik Davidsson, President, Fiber Foodservice E-A-O said in the annual report.

The North America business serves local markets with retail disposable tableware branded (Chinet®) and private label products, foodservice packaging products, as well as consumer goods packaging products (such as ice-cream containers).

“We are delivering the strategy through investing in the profitable core business. We started production in our egg packaging plant investment, expanding our offering to a new product group in the market. This investment has supported the market’s increased demand as foam packaging is being banned in a large number of U.S. states. We are also in the process of increasing the production capacity of our retail products and have announced an investment to increase foodservice capacity. On the innovation side, we are developing more sustainable solutions in the Retail space, in collaboration with our customers and consumers. This demonstrates our commitment to producing sustainable packaging solutions that fulfill the changing requirements of our customers” Ann O’Hara, President, North America said.

The Flexible Packaging business offers light and innovative flexible packaging materials, pouches and labels for food and beverages, coffee packaging, pet food packaging, barrier packaging, retort pouches and packaging for healthcare products. The business serves global markets from 22 manufacturing locations in Europe, Middle East and Africa, Asia and South America.

The market situation (Flexible Packaging ) was challenging in 2023, primarily due to inflationary pressure on consumption and destocking in the value chain. The impact of inflation was particularly noticeable in emerging markets. As a result, comparable net sales decreased by 9% due to lower volumes, pricing and fluctuations in foreign exchange rates. Net sales decreased particularly in India and Europe but increased in South-East Asia and Oceania.

“We have taken decisive actions to improve the financial performance, including optimizing the operating model, labor productivity and consolidating the manufacturing footprint. We have closed one large and several smaller sites in India and the site in Prague, and have consolidated production volumes to larger sites. These efforts aim to streamline operations and improve efficiency” Marco Hilty President, Flexible packaging said.

The business in India has delivered a transformation during the last years, resulting in efficiency and profitability improvements. The business closed one large and four smaller manufacturing sites during 2023 and transferred the volumes to larger units. In addition, they sold the valuable Thane real estate. The structural improvements also include pricing actions, waste management improvements and overall cost cutting actions.

The report stated that, in 2023, Huhtamaki continued to further grow its core business by bringing new capacity to commercial production, including single-use tableware in North America and rough molded fiber egg packaging in both North America and South Africa. We announced a significant investment in the expansion of our North America Foodservice capacity in Paris, Texas, to capture the growing demand for folding carton packaging. The Paris facility is uniquely positioned to meet the increased demand in the United States for more innovative and sustainable folding cartons which provide convenient, safe and hygienic food for busy consumers. These projects illustrate our strategy to scale up our profitable core business, and we will continue to further grow through both organic investments and acquisitions.
 

Web Title: Optimization at Huhtamaki: closed one large and four smaller manufacturing sites in India; expecting to materially support its profitability leading to savings of approx. EUR 100 million