Low & Bonar boxes clever

But Jim Heilig, Low & Bonar's chief executive, put the job losses down to the Waddington Cartons deal rather than any hit on the group from the strong pound and competitive trading conditions. The group's profits are expected to increase again in its current financial year to November 30. The acquisition will allow the Scottish packaging and plastics group to retain its number two position in the UK folding cartons sector, and its critical mass in food containers, in spite of its recent loss of the contract to supply

Kellogg in the UK.

It will give Low & Bonar its first carton production plants on the Continent, in the Netherlands and Belgium, and the company declared its intention to ''be at the forefront of the consolidation of the European folding cartons industry''.

The deal also provides a customer base in the Netherlands, Belgium, France and Germany, at a time when there is increasing demand for pan-European supply of cartons.

And it sees Low & Bonar take out a major competitor.

Waddington Cartons designs and manufactures board-based cartons for cereals, cake mix and confectionery. It also makes packaging for chilled and frozen foods found on the shelves of Marks & Spencer, Asda and other outlets.

It is being sold by the publicly-quoted Waddington, which previously made board games such as Monopoly. Waddington sold off its games business a few years ago and, after its latest deal, will remain in pharmaceutical packaging, specialist printing and food services.

Low & Bonar said the combination of Waddington Cartons with existing UK manufacturing would yield annual cost savings of #6m. Half of these would be realised during the year to November 1999 - from which time the deal would enhance earnings per share - and the remainder would come through in the

following 12 months.

It will take a #9m exceptional charge in its current financial year to cover reorganisation costs. Heilig said Low & Bonar would close its plants at Speke in

Liverpool and at Swindon in Wiltshire, and would transfer the equipment to Waddington Cartons' Leeds factory.

He added there would be a net reduction in staff of about 200.

These latest redundancies follow hard on the heels of 500 job losses at Greenock-based British Polythene Industries - 80 of them in Scotland - and the axing of

the Wace Clyde packaging plant

at Maybole in Ayrshire. The

Wace Clyde factory employed

86 people.

Andrew Paisley, packaging analyst at Edinburgh-based stock-

broker Sutherlands, welcomed Low & Bonar's purchase of Waddington Cartons.

He said: ''I should imagine they are feeling quite pleased with themselves.''

Low & Bonar did not want to renew the Kellogg contract because it considered the associated profit margins too low. Its production for Kellogg, undertaken at its now up-for-sale Irlam plant in Manchester, will begin winding down next May and end the following year.

Paisley was sure Austrian company Mayr-Melnhof, which was willing to take on the Kellogg work, would have been after Waddington Cartons as well.

Pointing out Mayr-Melnhof did not have enough UK capacity at the moment to produce what

Kellogg required, he voiced his belief that it would now have to look at its Scottish competitor's Manchester plant.

Low & Bonar said yesterday that, if efforts to sell the Manchester factory failed, it would take a one-off hit of about #5m.

The deal announced yesterday is Low & Bonar's fourth purchase in the folding cartons industry since 1993 and the latest move

in its drive over the last two years to refocus.

Low & Bonar is also involved in worldwide plastics manufacturing - targeting products which can replace wood or metal - and in ''specialist materials''. The latter division's activities include manufacture of high-performance floor coverings for institutional use.

Low & Bonar shares, which have come down hard from 420p on June 5, added 4p to 205p

yesterday. Shareholders will be asked to approve the Waddington

Cartons deal at an extraordinary meeting on October 13.

Comment Page 27