Constar International Inc. announced that it has executed a four year agreement for supply of PET packaging products to Pepsi. The agreement covers supply of both bottles and preforms for cold fill applications beginning on January 1, 2009.
Constar’s CEO, Michael Hoffman, commented, “Pepsi is a key long term customer of Constar’s. We are proud that they have again put their confidence in us as a critical supply chain partner. We believe that our negotiations have brought us to a mutually beneficial agreement.”
As expected, compared to the existing agreement, the new agreement provides for a reduction in total volumes with a mix shift towards fewer bottles and more preform volume.
In conjunction with the signing of the new supply contract with Pepsi, Constar is undertaking a plan of restructuring to reduce the Company’s overhead cost structure. The estimated annual cash overhead savings from the restructuring, including the savings from the previously disclosed closure of the Company’s Houston Texas facility, is expected to be approximately $28-32 million.
Based upon the Company’s current estimates, the Company believes that the new Pepsi agreement will result in lower sales but, after taking into account the expected net reduction in costs from the restructuring program, will result in higher cash flows from operating activities, net of investing activities as compared to those realized from the Pepsi cold fill business in 2008.
Philadelphia-based Constar is a leading global producer of PET (polyethylene terephthalate) plastic containers for food, soft drinks and water. The Company provides full-service packaging solutions, from product design and engineering, to ongoing customer support. Its customers include many of the world's leading branded consumer products companies.