Chesapeake loss ‘worse than expected’

Net sales fell 7% to $252.9m, excluding fluctuating foreign currency rates.

Chesapeake chief executive Andrew Kohut said the firm had made "good progress" in refinancing its credit facility. GE Commercial Finance and General Electric Capital Corporation have signed a commitment to provide $250m to refinance outstanding borrowings, which is expected to be in place by the end of June.

However, Kohut warned that the firm would sell or close non-core or under-performing assets.

Chesapeake has also renegotiated a new recovery plan with the trustees of its UK pension plan, which will reduce the firm's annual cash contribution to the pension plan to £6m in July each year to achieve 100% funding by 2014.

"There are clear milestones in place for a better second half with a strong business pipeline and process improvements," said Kohut.

Chesapeake chief financial officer Joel Mostrom said net sales for the firm's paperboard packaging division fell 11% to $200m owing to a 21% decline in tobacco packaging and weaker demand for food and drink packaging in the UK, which fell by 16%.

This decline was slightly offset by higher sales of German confectionery packaging.

Pharmaceutical and healthcare packaging sales dipped by 11% due to falling prices, competition and "customer service issues".

The plastic packaging division fared better as sales increased by 13% to $53m, primarily due to the partial pass through of higher raw material costs.

Chesapeake's total debt at 30 March was $543.2m.

Chesapeake, headquartered in Richmond, Virginia, is one of Europe's largest suppliers of folding cartons, leaflets and labels, as well as plastic packaging for niche markets.

The firm has 45 locations worldwide and employs around 5,400 people.

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