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Macfarlane issues new warning
RobertPowell Business Editor
RobertPowell Business Editor
Friday 6 November 1998
MACFARLANE (Clansman), the Glasgow-based packaging group,
announced 200 job losses yesterdayas it issued its second profits
warning this year. The shares plunged 19p to 50.5p as City analysts
once more downgraded their profit forecasts.
Scotland will bear the brunt of the job cuts, which will reduce
Macfarlane's 2100 workforce by nearly 10%. The company said full-year
profits would fall ''belowdirectors' expectations'' because Russianvodka
manufacturers had cancelled big orders for bottle enclosures and the
electronics industry in Scotland was ordering less packaging than
expected.Macfarlane is making a #500,000provisionfor loss of
business with Russia and will take a further charge of #750,000to cover
the redundancy costs.Up to 90 jobs will be lost at Daniel Montgomery in
Kirkintilloch, which makes sophisticated bottle enclosures for the drinks
trade. And 65 will go at A&W Fullarton in Govan, which makes
packaging for the electronics industry. South of the Border,Macfarlane

2. will close its cardboard packaging plant at Stalybridge in
Northamptonshire with the loss of 45 jobs. Chairman John Ward, who
took over from company founderLord Macfarlane in May, said Daniel
Montgomery had been hit by Russia's re-nationalisation of the spirits
trade last month. This led to the cancellation of orders from several
vodka bottlers in the private sector.A&W Fullarton is suffering from the
global downturn in the electronics industry. The Govan factory normally
experiences a 35% to 45% surge in demand during the last quarter as
computerand mobile phone companies rush to meet Christmas orders.
But Ward said the seasonal uplift was only running at half this level.
There is however a third and more fundamental reason for the job
losses.Ward is determined to move Macfarlane out of commodity
manufacturing to concentrate on higher added value products designed
in house. ''I would like the whole of the Macfarlane group to focus more
on the proprietary and the special,'' he said. Daniel Montgomery will
therefore phase out the manufacture of simple plastic mouldings, such
as scoopsforsoap powderover the next 18 months. It will concentrate
instead on special enclosures forspirits bottles. Ward admitted that
Macfarlane had been wrong to transfer the production of simple plastic
mouldings from the closed ACW factoryin Aberdeento Kirkintilloch at
considerable expense earlier this year. In hindsight it would have been
better to have sold the business or closed it down, he said. The closure
of Stalybridge is also linked to the new focus on higher added value. The
Midlands plant made low-margin goods such as cardboard boxes for
television sets. Ward said the Clansman Cases subsidiary of which it
formed part would in future concentrate on sophisticated custom-made
products such as cardboard boxes for naval torpedoes.AndrewPaisley,
a packaging analyst with Edinburgh stockbrokerSutherlands, said the
profits warning was ''disappointing,but not entirely unexpected,'' given
that Macfarlane had flagged up Russia and electronics as problem areas
at its interims in September.He is downgrading his full-year profit
forecastby #2m to #15m - a far cry from the #25m that Lord Macfarlane

3. had been aiming for before his retirement. Most of the skeletons should
now be out of the cupboard, but Ward said there might yet be further
rationalisation to come at Macfarlane's small plastic mouldings business
in Wicklow, Ireland. CommentPage 25
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