CCL Industries Announces Plans to Invest $35 Million in Its Mexican Operations
CCL Industries Inc. ("CCL") (TSX:CCL.A) (TSX:CCL.B), a world leader in specialty label and packaging solutions for global corporations, small businesses and consumers, announced today that it plans to make a significant capital investment at its Guanajuato, Mexico location over the next 3 years.
Construction of a new CCL Design plant to service major global automotive OEM and Tier 1 customers located in Mexico will commence this quarter as announced earlier this year. On 28 acres of land immediately adjacent to the existing property, Avery will also build a world-class, low cost binder manufacturing plant that will export its entire output to the United States and Canada. Investments on the expanded campus will include a capacity addition to CCL Container and new production equipment to manufacture plastic laminate tubes for global Home & Personal Care customers operating in Mexico. Additionally, the Company will build a new coating operation to supply specialty, proprietary materials across CCL Label and Avery locations in NAFTA countries. Output from these new operations will commence in late 2016 and become fully operational by 2018.
CCL plans to close Avery manufacturing and distribution operations in Meridian, Mississippi with label production consolidating into its existing facility in Tijuana, Mexico by mid-2016. The transition of binder manufacturing to the new Mexican plant will be phased, completing after the "back-to-school" season concludes in 2017. Simultaneously a new, state-of-the-art, main United States Avery distribution centre will be opened in Dallas providing significantly improved logistics to service key customers. CCL will report a restructuring charge of approximately $5 million relating to this announcement in its third quarter 2015 results. The Company expects to reduce annual costs for Avery by approximately $8 million from 2018 once the moves are complete. The sale of Avery manufacturing properties in the United States is expected to entirely fund this part of the capital expenditure program resulting in no increase to the Avery investment base.
Geoffrey T. Martin, President & CEO of CCL said, "Our existing operations in Mexico are among the best in the Company. This new program is designed to support global customers operating across the NAFTA region while rewarding the outstanding performance of our people in Mexico with this significant investment. Once the expansion completes, Mexico will become our second largest country in the world after the United States in terms of infrastructure and employees. The decision affecting Meridian is very regrettable but offshore competition has made the consumer price point for binders unaffordable with domestic manufacturing especially for retail channels in the United States and Canada. The Company will act responsibly to help employees and the local community adjust, including this lengthy transition period and assisted transfer opportunities to both Avery and CCL locations expanding in the United States."
CCL Industries employs approximately 11,100 people and operates 105 production facilities in 29 countries on 6 continents with corporate offices in Toronto, Canada and Framingham, Massachusetts. CCL Label is the world's largest converter of pressure sensitive and extruded film materials for a wide range of decorative, instructional and functional applications for large global customers in the consumer packaging, healthcare & chemicals, consumer durable & automotive markets. Extruded & laminated plastic tubes, folded instructional leaflets, precision decorated & die cut metal components with electronic displays and other complementary products and services are sold in parallel to specific end use markets. Avery is the world's largest supplier of labels, specialty converted media and software solutions to enable short-run digital printing in businesses and homes alongside complementary products sold through distributors and mass-market retailers. CCL Container is a leading producer of impact extruded aluminum aerosol cans and bottles for consumer packaged goods customers in the United States and Mexico.
This press release contains forward-looking information and forward-looking statements, as defined under applicable securities laws, (hereinafter collectively referred to as "forward-looking statements") that involve a number of risks and uncertainties. Forward-looking statements include all statements that are predictive in nature or depend on future events or conditions. Forward-looking statements are typically identified by the words "believes," "expects," "anticipates," "estimates," "intends," "plans" or similar expressions. Statements regarding the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of the Company, other than statements of historical fact, are forward-looking statements. Specifically, this press release contains forward-looking statements regarding the anticipated closure and sale of the Meridian, Mississippi facility; the anticipated restructuring costs and estimated annual cost savings; and the Company's expectations regarding general business and economic conditions. Forward-looking statements are not guarantees of future performance. They involve known and unknown risks and uncertainties relating to future events and conditions including, but not limited to, the evolving global financial crisis and its impact on the world economy and capital markets; the impact of competition; consumer confidence and spending preferences; general economic and geopolitical conditions; currency exchange rates; interest rates and credit availability; technological change; changes in government regulations; risks associated with operating and product hazards; and CCL's ability to attract and retain qualified employees. Do not unduly rely on forward-looking statements as the Company's actual results could differ materially from those anticipated in these forward-looking statements. Forward-looking statements are also based on a number of assumptions, which may prove to be incorrect, including, but not limited to, assumptions about the following: global economic recovery and higher consumer spending; improved customer demand for the Company's products; continued historical growth trends, market growth in specific segments and entering into new segments; the Company's ability to provide a wide range of products to multinational customers on a global basis; the benefits of the Company's focused strategies and operational approach; the achievement of the Company's plans for improved efficiency and lower costs, including stable aluminum costs; the availability of cash and credit; fluctuations of currency exchange rates; the Company's continued relations with its customers; and general business and economic conditions. Should one or more risks materialize or should any assumptions prove incorrect, then actual results could vary materially from those expressed or implied in the forward-looking statements. Further details on key risks can be found in the MD&A section of CCL's 2014 Annual Report, particularly under Section 4: "Risks and Uncertainties." CCL's annual and quarterly reports can be found online at www.cclind.com and www.sedar.com or are available upon request. Except as otherwise indicated, forward-looking statements do not take into account the effect that transactions or non-recurring or other special items announced or occurring after the statements are made may have on CCL's business. Such statements do not, unless otherwise specified by the Company, reflect the impact of dispositions, sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made. The financial impact of these transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them and therefore cannot be described in a meaningful way in advance of knowing specific facts. The forward-looking statements are provided as of the date of this press release and the Company does not assume any obligation to update or revise the forward-looking statements to reflect new events or circumstances, except as required by law.
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Senior Vice President and Chief Financial Officer
For more details on CCL, visit www.cclind.com.