Three-month period ended June 30, 2016: Net sales of converted product decreased 1% primarily due to: decreased shipments due primarily to increased promotional activity on branded products and inventory reductions by our largest customer. Net sales of parent rolls decreased 97% due primarily to: Management's decision to utilize parent rolls produced in Oklahoma in the Company's South Carolina facility until the South Carolina paper mill is operational. We believe this will eliminate costs of purchasing equivalent parent rolls on the open market in the last half of 2016 and provide additional margin when the tonnage is sold as converted product. Gross profit as a percent of net sales decreased 0.9% primarily due to: •higher production costs in our Oklahoma operation, primarily due to a $1.2 million increase in repair and maintenance costs, resulting in part from the planned annual cold mill outage. •a 33% increase in depreciation expense due to assets placed in service since the second quarter of 2015, including $36.6 million of assets at our South Carolina facility. •lost margins on parent roll sales. As noted above, the Company decided not to sell parent rolls in order to save costs at our South Carolina facility in the last half of 2016. click Read More below for additional detail
BillerudKorsnäs has introduced a cost-saving program to ensure long-term efficiency and profitability. The measures include staff reductions with up to 300 people primarily in administration functions. All businesses of the company will be impacted by the cost-saving program.
As part of a strategic update, BillerudKorsnäs introduces a savings program that is expected to generate positive earnings effects of approximately MSEK 600 with a lasting effect from 2021. The positive effect in 2020 is expected to be approximately MSEK 250. As part of the program, BillerudKorsnäs has decided to reduce the number of employees by up to 300.
There is considerable potential to increase our cost efficiency within BillerudKorsnäs. We are well-positioned and basically a stable company but must continue to continuously improve operational efficiency. With the program, we ensure long-term efficiency and profitability, comments CEO and CEO Petra Einarsson.
In addition to increasing the efficiency of the business, the updated strategy also means that BillerudKorsnäs is now accelerating its innovation work and repositioning towards packaging solutions.