Glatfelter has announced several cost reduction measures in its Specialty Papers Business Unit.
The changes include the shutdown of a single paper machine (PM24) at the Company’s Chillicothe facility.
The measure also includes the elimination of approximately 50 affected hourly positions at the Chillicothe facility, and a reduction of 70 salaried positions across the business unit in Ohio and Pennsylvania.
The PM24 shutdown will remove approximately 80,000 tons, or 10%, of capacity from the Specialty Papers Business Unit and reduce the Chillicothe facility’s exposure to purchased pulp.
The Company plans for production to be absorbed by the remaining seven paper machines in the business unit.
“The supply-demand imbalance in the printing and writing markets continues to put pressure on industry operating rates and selling prices. In light of the challenging market conditions, we must aggressively manage costs by eliminating capacity without impacting our ability to service our customers. While these are difficult decisions, we must take the actions necessary to strengthen our Specialty Papers business and position Glatfelter for long-term success,” said Dante C. Parrini, Chairman and Chief Executive Officer.
In a press release Thursday, the company said the production on PM24 is planned to end by September 30th, 2017, and will result in the elimination of approximately 50 manufacturing jobs. Glatfelter will assist the affected employees to attempt to identify new positions for them within the mill.
In addition, Specialty Papers’ salaried workforce will be reduced by approximately 70 employees across the business.
The machine shutdown and headcount reductions are expected to result in an annual net profitability improvement of approximately $9 million and the avoidance of costly market-driven downtime.
In connection with these cost reduction initiatives, the Company will recognize an aggregate pre-tax charge to earnings of approximately $8 million to $9 million including an estimated $5 million to $6 million in non-cash charges. The majority of the charge is expected to be recognized in the third quarter of 2017.
“Our continuous improvement initiatives in recent years have improved paper machine productivity and efficiencies across Specialty Papers’ asset base. These improvements, combined with the market weakness, have eliminated the need for the capacity from the PM24 machine,” said Tim Hess, Senior Vice President and President, Specialty Papers Business Unit. “We appreciate everything our employees have done to help us compete successfully in our markets, and we are committed to assisting affected employees and their families during this time of transition.”