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January 15, 2014
07:32 EDTMWVMeadWestvaco announces new cost savings program
MeadWestvaco announced a new program to generate increased earnings and cash flow from its packaging businesses. The program is expected to deliver annual pre-tax cost savings of $100M-$125M by the end of 2015, with at least $75M expected to be realized in 2014. Key elements of the program include: Implementing a leaner organization design across the packaging businesses to simplify the structure and speed decision making; Aligning the corporate infrastructure to the revenue base; Reassessing participation to focus on business lines and markets within packaging that provide the greatest opportunity for profitable growth; Prioritizing capital on the highest return projects to improve free cash flow. The program savings are in addition to MWVs previously announced overhead reduction actions targeting $75M-$80M by the end of 2014. Total combined annual cost savings from the two programs is expected to reach more than $200M by the end of 2015, with at least an additional $75M expected in 2014 from the new program. Free cash flow (cash flow after capital expenditures) is expected to increase by at least $100M in 2014 from higher expected after-tax earnings and a $50M reduction in capital expenditures to approximately $350M. By the end of 2015, MWV expects to have significantly improved the EBITDA margins of the Food & Beverage and Home, Health & Beauty packaging segments. Industrial Packaging, after initial start-up costs associated with the expansion of the Tres Barras mill in Brazil, is performing well and is expected to achieve EBITDA margins of at least 25 percent by the end of 2014. MWV has already begun implementing key components of the program, which the company began formulating in connection with the sale of its forestland assets to Plum Creek Timber Company.
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