The Arizona facility processed polystyrene and polypropylene food packaging containers.
The group said the manufacturing equipment and operations will be consolidated into its other plastics operations in Coleman, Michigan and New Vienna, Ohio.
The closure of the site is expected by the end of the first quarter of 2009, and the company said it will take a one-time charge of approximately €5m in the fourth quarter of 2008 to cover the cost of the closure and the optimization.
Strategic review
Huhtamaki said the closure is a part of its ongoing rigid plastic strategic review.
“The action is taken to lower infrastructure costs and to optimize production efficiencies, which strengthens Huhtamaki’s ability to compete and improve profitability,” stated the group.
In September, Huhtamaki revealed that it might sell its hard plastics operations and focus instead on its paper-based packaging segment, which it claimed offered more robust volumes.
“Rigid plastic consumer goods operations, for the most part, do not meet our criteria for financial performance and its profitability has been below Huhtamaki average,” said the company.
Overcapacity
Hard plastic food packaging includes bottles, dairy, meat and deli containers, prepared food trays and a large group of containers mostly made for liquid foods.
A spokesperson for the packaging manufacturer told FoodProductionDaily.com previously that factors such as overcapacity in the sector as well as rising input costs were making its position in the rigid plastics segment almost untenable.
“We have good positions in smooth and rough moulded fibre products, release films, flexible packaging, foodservice paper cups and other products based on our paper forming technology,” added the company. “In these operations we have strong know how, technology platforms and business concepts that allow continued competitive advantage.”
Closures
The Finnish company has already ceased production of rigid plastic consumer goods packaging in Portadown in the UK with its site in Gosport, England, to follow suit at the end of this month.
The firm previously cited a slow down in demand for consumer packaging and increases in manufacturing and energy costs as the reasons for the closures.
The Portadown site had been primarily involved in the manufacture of thermoformed polypropylene thin wall food containers used for products like coleslaw and desserts. However, its Gosport site will continue to produce packaging for the foodservice industry.
The company also announced earlier in the year that it will also close its rigid packaging site in Karlholmsbruk, Sweden by year-end 2008.
According to the packaging supplier, advisers have been brought in to assist in the review of its other rigid plastics operations and the outcome of this process will be communicated early next year.
Restructuring
Plastics analyst with Applied Market Information (AMI), Carole Kluth, said that the Huhtamaki review is indicative of the pressures facing the European rigid plastics sector in general.
A report from AMI claims that rising costs and competitive pressures are driving restructuring and reorganisation throughout the European thermoplastic rigid film and sheet manufacturing sector.
She said that private equity groups are becoming increasingly involved in the sector, which is further driving restructuring to improve profitability.