Constar International (CNST) Announces Four-Year Agreement with Pepsi (PEP); Undertakes Restructuring Plan
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Constar International Inc. (NASDAQ: CNST) has executed a four year agreement for supply of PET packaging products to Pepsi (NYSE: PEP). The agreement covers supply of both bottles and preforms for cold fill applications beginning on January 1, 2009. 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.
Constar International Inc. (Constar) is a global producer of polyethylene terephthalate (PET) plastic containers for food, beverages, and other end use applications. [SM]
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