In a pre-close trading statement for the full-year ending 31 December 2020, which was released on Friday (8 January), the company said that it has undertaken a detailed review of its global footprint, “which has resulted in the proposed closure of certain sites in 2021, across the Components and Packaging divisions”.
Essentra Packaging operates from 24 facilities across four geographic regions and serves the major global pharmaceutical companies and five of the top 20 beauty organisations. The division’s products include cartons, leaflets, self-adhesive labels and printed foils used in blister packs.
Essentra Components, meanwhile, operates in 29 countries worldwide and has 14 manufacturing facilities and 29 logistics centres. It offers products for a variety of applications in industries such as equipment manufacturing, automotive, fabrication, electronics and construction.
The exceptional cost related to these closures is estimated to be around £17m. The company said it expects to start generating savings in 2021, with annual savings of around £13m from 2022 onwards, helping to underpin the profitability potential of the company.
Information on which sites will be closed and implications on staff was not given, but the company said further detail will be provided in its year-end results statement.
Essentra’s Q4 revenue was down 1.1% year on-year, maintaining the trend of steady quarterly improvement since it recorded a year-on-year drop of 9.8% in Q2.
The business said it expects to deliver full-year operating profit for 2020 in line with the consensus of analysts' forecasts, which range from £59m-£63m.
While the company added its Packaging division “has seen softness in certain end markets owing to a reduction in the levels of prescriptions and elective surgeries through lockdown periods”, recent order book trends have been improving “as the pharmaceutical and beauty markets start to slowly recover and we build on strong customer relationships”.
It said its H2 results for the division closed 4.9% below the prior year on a like-for-like basis, but that it continues to play its part in supporting the healthcare industry in its fight against Covid-19, helping to produce secondary packaging for anti-viral and vaccine products.
Additionally, now that the UK has exited the EU with a trade deal, Essentra said its focus “has shifted to ensuring the effective management of the new arrangements” and that, overall, it continues not to foresee any material direct impact to the company from Brexit.
Essentra’s share price jumped by around 6% on Friday to 335.2p, following the release of the trading statement, but had dropped back to 319.2p at the time of writing.
