MeadWestvaco Corporation (NYSE:
) today 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 $100 to $125 million by the end of 2015, with at least $75 million 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
“We have made good progress and continue to see significant potential in driving profitable growth in our targeted markets through our four growth pillars - commercial excellence, innovation, emerging markets and expanded participation,” said John A. Luke, Jr., chairman and chief executive officer of MWV. “We are eager to accelerate our progress and substantially improve our margins and cash flow through a more streamlined and efficient organization and cost structure. We are seeing measurable success with our previously announced cost reduction initiatives, and this new program will further improve our performance in packaging.
“These initiatives, coupled with the increasingly strong performance in our Specialty Chemicals business, will generate significant progress this year in the form of increased earnings and free cash flow, as well as solidify the establishment of a leading business platform that we expect will deliver consistently growing returns to shareholders,” added Luke.
The program savings are in addition to MWV’s previously announced overhead reduction actions targeting $75 million to $80 million by the end of 2014. Total combined annual cost savings from the two programs is expected to reach more than $200 million (before program-related charges) by the end of 2015, with at least an additional $75 million expected in 2014 from the new program. Free cash flow (cash flow after capital expenditures) is expected to increase by at least $100 million in 2014 from higher expected after-tax earnings and a $50 million reduction in capital expenditures to approximately $350 million.