News

Chesapeake will "probably look to sell" its plastics business, a packaging analyst has predicted, after the firm said it would explore "alternatives for non-core or redundant assets".

Tim Rothwell, packaging specialist at Lansdowne Partners, made the comments after Chesapeake also said it had renegotiated its banking covenants in anticipation of a reduction in operating profits for 2007.

Chesapeake president and chief executive Andrew Kohut said yesterday (16 January) that the business was "encouraged" by several new orders and would focus on "exploring alternatives for non-core or redundant assets" to improve operating results and reduce debt.

The company has renegotiated its total leverage ratio from 5.00 to 5.30 and decreased its interest ratio cover from 2.25 to 2.15 for the fourth quarter of 2007.

Chesapeake, which rebranded its European Field operations under its own name this month, had expected to receive cash proceeds from the sale of its tobacco packaging facility in Bremen, Germany, before the end of 2007. However, it did not receive the funds until the first week of January.

At the end of 2007, the company predicted that a dip in sales volumes in its South African beverage business would hit its operating profits for the year.

It also blamed a drop in performance in "certain areas" of its pharmaceutical and healthcare business for the poorer than anticipated performance.

Chesapeake gained its plastics operations with the acquisition of Boxmore International in 2000.

Chesapeake has 47 operations across Europe, North America, Africa and Asia, and employs around 5,500 people.

The company's share price rose from $4.30 to $4.51 at closing yesterday, but it has been falling steadily since its 52-week peak of $18 in February 2007.