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Packaging: Cenveo looks M&A hungry especially in the packaging, label segments

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Packaging: Cenveo looks M&A hungry especially in the packaging, label segments

March 08, 2013 - 09:22

SAN FRANCISCO, March 8, 2013 (PPI Pulp & Paper Week) -Cenveo, which generated three-fourths of its revenue last year from envelopes, direct mail, and print marketing products, is looking this year to grow in label and packaging businesses -- from acquiring smaller label and packaging firms, company chmn and pres/CEO Robert Burton told analysts on Feb. 27.

"I've done personally about 70 of these (M&A) deals and we've been looking for several other Label and Packaging opportunities, and we think they are there," Burton said.

Burton's son, another Cenveo executive, told an analyst that the company could be 100% into packaging and labels in three to five years.

The combination of labels and packaging is occurring with other firms that have been active on the M&A scene in the USA over the past year, with deals involving firms focused on labels acquiring packaging-dominant companies, and flexible packaging firms acquiring label-focused companies.

Cenveo's Burton Sr said that Cenveo was "tired of being hammered by traditional print" and eyes the move more so into packaging and labels.

Acquisitions are "what's given us and driven us all the way from our time with World Color to here, and I want us to get back on that track of acquiring these companies, small or large, and integrate them with our ability to generate cash flow," Burton Sr added.

Label/packaging sales off 1%.For label and packaging, Cenveo's label and packaging segment operates 15 manufacturing facilities in the USA and Latin America, and the unit's net sales in 2012 totaled $435.6 million, down about 1%, and operating income was $49.8 million, down slightly, the company said in its annual report that was released on Mar. 4. The unit makes folding cartons, and tags and labels, and can provide fulfillment and distribution services.

Cenveo's Gilbreth specializes in making shrink sleeves, tamper-evident neck bands, and medical and electronic tubing. For labels, Cenveo calls its Rex unit "one of the largest specialty manufacturers of premium and high-quality packaging solutions," and it makes custom labels including pressure-sensitive prescription labels for the retail.

"We remain focused on executing our game plan," said Burton Sr, "about increasing our higher margins and organic growth opportunities in the business that we talked about, of Labels, Packaging, the Direct Mail, our content, and the new smaller acquisitions that we do. ... We continue to become more of a label, packaging kind of company."

$80 million 2012 net loss.Cenveo's 2012 revenue of almost $1.8 billion declined almost 6% (vs 2011) and the company reported a nearly $80 million net loss for last year. The firm also completed a refinancing that is due in 2017.

Cenveo's print and envelope segment operates 48 manufacturing facilities in North America and India, and generated $1.36 billion in revenue in 2012, down about 10%, and generated $94.2 million in operating income.

With anew portfolio of Forest Stewardship Council (FSC)-certified paper label materials,Avery Dennison, the world's largest label producer, said this week that it "formalized" a companywide policy that it developed with theRainforest Allianceto "promote responsible paper sourcing and procurement." "Our policy will guide us in sourcing materials responsibly, using them more efficiently in our operations, and developing greener products from them," said Avery Dennison pres/CEO Dean Scarborough, in a release. Avery said it would "work to avoid controversial fiber sources, ensure that its suppliers follow sustainable forest management practices, seek to maximize its use of recycled content and fiber sourced from FSC-certified forestry operations, and identify and disclose the sources of the pulp, natural fiber, and paper in its labeling and packaging materials and solutions." "Our goal is to help minimize the environmental and social impacts of our sourcing decisions across the entire paper lifecycle," Scarborough said.