The M.J.Maillis Group, a global leader in secondary packaging listed on the Athens Exchange (ATHEX: MAIK) updates the investment community on the progress of its restructuring plan. The extensive restructuring program that commenced in 2007 following the more than 30 acquisitions that the Group had concluded between 1995 and 2006, aimed to transform the Group from a collection of semi-autonomous operating units into one globally integrated operational entity, and it has so far generated significant results for the Group’s long-term viability and growth.
Action Plan and Achievements
The first phase of the restructuring plan is near completion with a second phase extending to the end of 2010. The overall objectives have been to:
• consolidate and rationalize manufacturing facilities;
• reengineer the commercial and warehousing activities;
• implement an aggressive cost cutting program across the board;
• revamp and strengthen the management team;
• maintain and enhance the Group’s “Good Corporate Citizen” status
In terms of manufacturing facilities, the Group has merged and consolidated its 15 European production sites into 8 larger ones, with two more plant closings scheduled for 2010, ultimately reducing to 6 the total number of manufacturing sites in Europe. Specifically, the Group has closed down 2 plants in Romania, 2 in the United Kingdom, 1 in Germany, 1 in Spain and 1 in Italy; It has also rationalized the activities of its 2 plants in Greece, and those in Canada, and expanded the capacity of the plant in Poland. In Italy, by the end of 2010, the Group will decrease its plants to 2 from 5 originally.
In terms of commercial activities, the Group has closed down 5 smaller commercial affiliates in Holland, Austria, Albania, Serbia and Sweden, covering sales activities in these countries out of Germany and UK, aiming to develop a uniform pan-European commercial organization. In addition, the Group is rationalizing logistics by reducing the number of regional warehouses by four and keeping one central warehouse instead of two in order to improve inventory management for raw materials and finished goods and reduce distribution costs. Finally, billing policies have been revamped aimed to speed up collection of receivables and enhance profitability.
The restructuring process has resulted so far to a substantial headcount reduction as Group’s personnel is down by 20% or 425 employees compared to the end of 2007, which improved productivity without impairing its competitiveness.
The organizational structure of the Group has been re-engineered along four geographic clusters, including Western Europe, Eastern Europe, Italy and North America. Furthermore, the first step to enter the fast growing Asian market was undertaken, with the set-up of a joint-venture in India. The management team of the Group has also been strengthened considerably
by the recruiting of seasoned senior executives both at the Greek headquarters and the subsidiaries
Being a responsible Corporate Citizen and within the framework of the company’s commitment to reduce the effect of its operations on the environment, the Group has also proceeded to investment projects with a budget of E 3.6 million at the Inofyta plant in Greece. These investments, which will help minimize waste and emissions to levels significantly lower than those specified by the relevant regulations, while at the same time improve production efficiency, are expected to be completed by the end of 2009.
Financial Results of the Restructuring Plan
The restructuring plan is well under way and it has produced so far tangible results. During the period between January 2007 and June 2009, the Group has achieved net savings of E 18.1 million in total, comprised of E13.9 million in reduction of operating expenses and E4.2 million in productivity efficiencies. Between July 2009 and the end of 2010 the Group aims to generate an additional E 5.5 million in cost reduction through further restructuring of the Group’s commercial units and corporate headquarters. Annual operating expenses were at the level of E60.9 million in 2007, decreased to E52.5 million in 2008, and are expected to decrease further to E47.0 million in 2009, thereby significantly lowering the Group’s fixed cost base.
Mr. Dimitris Kouvatsos, Chief Restructuring Officer of Maillis Group, stated: “The positive results of the restructuring plan are significant for the Group’s long term viability and growth but have been temporarily obscured by the impact of the economic crisis and the additional costs that the Group has incurred as the result of breaching certain financial covenants at the end of 2007.
The successful realization of this extensive restructuring plan has improved the operational efficiency and cost structure of the Group on a sustainable basis, enabling us to focus on higher margin products, to improve gross margin capitalizing on manufacturing efficiencies and economies of scale and to decrease operating expenses thus reducing our fixed cost base.
The economic crisis had a significant effect on the packaging sector globally and on the Group both in terms of volumes and pricing. However, the Group managed to maintain its global market share and as announced, the second quarter of 2009 showed a marginal increase in sales over the first quarter coupled with an improvement in the gross margin to 13.5% from 9.0%, which is a substantial improvement considering we were still selling expensive pre-crisis stock and with continued reduction in operating expenses. As of June 2009, there are clear signs that the world economy seems to be entering into a phase of slow but gradual recovery and in this context the Group expects an up-tick in volumes and pricing, fuelled by increased demand and the turnaround of stocks, with a positive effect on its revenues and profitability.
The breaching of financial covenants at the end of 2007 has burdened the Group with significant additional expenses – about E20 million in 2008 and E5.9 million in the first half of 2009 related to higher interest costs, advisor fees and currency fluctuations due to the lack of hedging facilities. However, due to the successful implementation of the restructuring plan and tight working capital management the Group has been able to meet its liquidity needs and fund its
operations so far without incurring additional indebtedness.
We have engaged Ernst & Young to validate Maillis Group Five-Year Business Plan and we have been in constructive discussion with our lenders, aiming to find a permanent solution that will ensure the Group’s long-term viability, capitalizing on our competitive advantages and the privileged position it holds in the international market of secondary packaging.”
About the M.J. Maillis Group
The M.J. Maillis Group is a leader in secondary packaging providing its clients globally with complete, high technology and cost effective packaging solutions (one-stop-shopping) that combine packaging equipment, packaging materials, service and support. The Group employs 1,650 people and maintains physical presence in 18 countries in Europe, North America and Asia, while its products are sold in more than 80 countries worldwide. The Group’s customer base extends to the food and beverage, aluminium, steel, construction, timber and bailing industries and it is the exclusive or preferred global supplier to an increasing number of major industrial and consumer products multinationals such as US Steel, Nestle, Coca Cola, P&G, Henkel, Pepsi, Mars, Lafarge, Alcoa, ArcelorMittal, Corus, Wall-mart etc. The shares of the M.J. Maillis Group are listed on the Athens Exchange under the ticker symbol “MAIK”.
For more information please contact:
Group’s Investor Relations Department
Tel. +302106285000 or e-mail firstname.lastname@example.org
Investor Relations Advisors
Athens – Theodora Ampatzi – Tel. +30-210-6109-800
London – Annie Evangeli – Tel. +44-203-206-1320
New York – Matthew Abenante – Tel. +1-212-661-7566