British American Tobacco loss sparks Chesapeake cost cuts

The group attributed almost £3m ($6m) of employee-related costs for the second quarter of 2007 to planned workforce reductions in its tobacco packaging business.

Chesapeake announced in March that it was "aggressively pursuing cost-saving opportunities" in tobacco packaging and alternative business in other markets, such as pharmaceuticals and healthcare, to offset the loss of the British American Tobacco work. This accounted for approximately 8% of Chesapeake's paperboard packaging revenues in 2006.

Chesapeake has two tobacco packaging sites in the UK, in Bradford and Portsmouth.

Chesapeake also experienced a slowdown in UK confectionery packaging sales in the second quarter of 2007.

The group reported an overall net loss of £6.2m, compared with £2.4m in the same period in 2006. Sales rose 6% to £123m.

Chesapeake chief executive Andrew Kohut said reduced tobacco packaging sales and seasonal factors overshadowed a strong quarter for the group's plastic packaging department.

"We continue to expect 2007 operating income, excluding special items, to improve over last year and remain confident that our plan to reduce our cost basis in Western Europe and accelerate growth in developing markets will produce tangible benefits to our shareholders," he added.

In July, Chesapeake announced the redundancies of European chief Neil Rylance and European finance director Richard Scully, and restructured into three divisions: pharmaceutical and healthcare, branded products, and plastic packaging.

Chesapeake has 47 locations in Europe, North America, Africa and Asia, including 18 in the UK, and employs approximately 5,000 people worldwide.

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