The restructure was announced today (19 April) alongside a trading update. The Cumbrian group said that sales in the year to 1 April would be around £130m, with adjusted pre-tax profits ahead of market expectations at £2.2m.
The number of paper machines at its paper making operation in Burneside will be reduced from four to three, but only two of the machines are likely to be in production at any one time.
James Cropper said this would create “a more resilient and higher margin business that is less exposed to the multiple headwinds it has faced for many years”.
A 90-day consultation has begun on job losses, with around 60 jobs – 10% of the overall workforce – likely to go in Paper and at group functions, with the estimated cost of the restructure put at £2.1m.
A James Cropper spokesperson told Printweek that the move to three paper machines was part of James Cropper's overall strategy to focus on value over volume “as the company looks to increase contribution and ultimately profit for the paper business”.
“Each machine has varying capabilities and those which will remain in use will allow James Cropper to deliver on capability and support the new value-focused vision.”
The Paper division is currently James Cropper’s largest business unit, and posted sales up 37% in the 2021-2022 financial year at £70.4m. However, the division also accounts for 88% of the group’s energy expenditure, and the energy price crisis saw costs jump 70% compared with pre-Covid prices.
The Paper wing made an operating loss of £2.4m as a result.
By the time of the current half-year chairman Mark Cropper said that energy costs had increased by 148% compared with the prior year, while raw materials were up 20%, resulting in “sudden multi-million pound cost increases across the company”, which negatively impacted profits.
Five months ago the group also announced that it was right-sizing its paper portfolio around “a smaller more profitable core” focused on luxury packaging.
The wider group revamp also announced today includes a brand reorganisation with greater emphasis on the James Cropper name.
James Cropper Paper becomes James Cropper Creative Papers; Colourform as was becomes James Cropper Luxury Packaging, comprising the Colourform moulded pulp products and its luxe packaging papers; Technical Fibre Products becomes James Cropper Technical Fibres; while new wing James Cropper Future Energy incorporates the former TFP Hydrogen business and includes other specialist materials and products for fuel cells, carbon capture, batteries and wind.
Patrick Willink has also been appointed to the new role of chief innovation officer, heading up an expanded innovations team tasked with anticipating the demands of future markets and customers including emerging markets such as green hydrogen, carbon capture, and fuel cells.
CEO Steve Adams, who took over last August, said the business had faced unprecedented challenges over the past year.
“I am extremely grateful to the whole team for helping to exceed against our revised expectations. However, moving forward, we must continue to be mindful of future headwinds and drive margin improvement."
"We're a purpose-driven business built on strong values and announcing potential job losses is not a decision taken lightly. We will work collaboratively with our employees, unions, and representatives throughout this process. Change is difficult yet it is essential to ensure the sustainability and growth of James Cropper."
Adams said the strategic realignment would drive margin improvements “by bringing greater focus on our customers and allow us to take better advantage of our size and remain agile and dynamic in our markets”.
“Combined with our wealth of manufacturing knowledge, sustainability alternatives and pioneering abilities we will strengthen our position across multiple sectors as the preferred global partner of choice.”
Shares in James Cropper jumped by 8.7% on the news to 625.00p (52-week high: £12.47, low: 560.00p). However, over the past year shares in the group have lost half of their value.
