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News & Press: Industry News

Cenveo Sells Quality Park to LSC

Monday, November 13, 2017  
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US envelope manufacturer Cenveo has sold its Quality Park Products business to LSC Communications.

Cenveo CEO Robert Burton said the divestiture allows the company to focus on its core operations including labels, direct envelopes, print and content management, and move away from a continually tough big-box retail market.

The sale involves two of Cenveo’s US-based envelopes facilities and comes during a climate of increased consolidation within the OP industry.

Speaking on today's earnings call, Burton said the company expects to make around $39 million from the deal. The company had expected the segment to generate approximately $120 million in sales with adjusted EBITDA of $9 million for FY2017.

He added: “We remain committed to executing our plan of operating niche growth businesses while using our cash flow to invest in and grow our higher margin product groups and de-leveraging our balance sheet."

In a related statement, Jim Ellward, President of the TOPS Products division of LSC Communications, commented: “We're excited to bring Quality Park into our stable of well-respected and widely known brands. Taking advantage of the synergies between TOPS Products and Quality Park will enable us to enhance our office solutions offering to extend deeper into new and existing relationships.”

The announcement followed a difficult Q3 for both groups. Last week, LSC’s Office Products division (formerly part of RR Donnelley) reported a decline in sales of more than 9.3% due to continued weakness in the office superstore retail channel. Nonetheless, it made a small bolt-on acquisition during the quarter to its TOPS OP brand buying Massachusetts-based custom filing products manufacturer NECI.

Similarly, for the three months ended 30 September, Cenveo revealed that sales had fallen 13.9% to $329.5 million due to ongoing unfavorable market trends.

This decline was primarily driven by lower direct mail demand from both financial institution customers and wholesale and generic transactional envelope product lines.

Trading was also impacted by lower sales volumes in the commercial print arm and the publisher services business, thanks to continued pricing pressures.
Meanwhile, the group’s decision to exit its coating operation in Q2 last year, coupled with weaker demand and product mix changes, resulted in lower sales in the label segment.

Pre-tax loss came to $20.3 million, plummeting almost 325% from profit of around $9 million last year.

Following the sale of Quality Park, the group has lowered its guidance and now expects to report FY2017 sales of $1.32-$1.33 billion with adjusted EBITDA of $110-$115 million. Q4 is traditionally the strongest quarter for Cenveo, generating 90% of the year's operating cash flow.

In other Cenveo news, the company has been granted the 2020 US Census printing and mailing contract. Worth around $61 million and lasting several years, it is one of the largest contracts of its type awarded by the US Government Publishing Office. - (OPI)

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