Sonoco Products Company (SON) plans to close its rigid paper packaging plant in Orrville, Ohio by March 2010. The plant, which was acquired in 2007, manufactures fiber cartridges for adhesives and sealants, and currently employs 84 employees.

The first phase of the plant’s shutdown is expected to begin in late November and its workforce will be reduced by half. The company said the plant will remain in partial operation until its closure in March 2010. Production from the Orrville plant will shift to other rigid paper packaging operations in the Ohio area.

The company is experiencing weak volumes in all its businesses. In order to minimize the impact of weak volumes on its earnings Sonoco has implemented various restructuring initiatives.

The company closed several plants in Western Europe and relocated to places such as Turkey and other Eastern European countries to cut costs. Further, to make operations more cost competitive, the company had announced a restructuring program primarily for its overseas operations, mainly Europe. The company has closed a number of facilities as part of this move as well as others outside its formal restructuring plan.

Apart from restructuring activities, Sonoco’s bottom line is benefiting from productivity gains, which were $96.5 million in 2007 and $33.0 million in 2008. Further, in early December 2008, SON announced additional cost reduction measures in an attempt to align its manufacturing capacity and fixed cost structure to match the current market conditions.

This realignment includes closure of approximately 15 plants globally and the reduction of approximately 700 positions.

These cost reduction measures are expected to generate approximately $28 million in annualized pre-tax savings when fully phased in through 2009.

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