VANCOUVER (CP) — Tree Island Wire Income Fund is shutting two of its six manufacturing plants and closing an office as part of a consolidation plan after purchasing wire manufacturing plants in China and California earlier this year.
Tree Island said Tuesday it will close a manufacturing plant in Corona, Calif., and another in Ferndale, Wash., and will consolidate its U.S. sales, purchasing and administrative functions by closing its office in Covina, Calif.
''Cost reduction and operational efficiency continue to be key components of Tree Island's business strategy,'' said Daniel McAtee, Tree Island president and chief executive officer, in a release after markets closed Tuesday.
''The Baoan acquisition has created additional opportunities to reduce our costs and optimize plant utilization with no impact on our product capacity or customer service.''
In April, Tree Island agreed to pay US$18.5 million Baoan International Investment Co. and Universal Metal New Material Co., both majority owned by China Baoan Group.
The acquisition came a month after Tree Island cut its monthly distributions by one-third to an annualized payout of $1 per unit amid ''a declining trend in volumes and revenue over the past three years largely as a result of growing import competition.''
On Tuesday, the company declared a dividend of 8.3 cents per unit paid on Oct. 15.
Tree Island said the Corona plant will be closed by year-end and the mesh wire production will move to the TI Wire Plant in Etiwanda, Calif., while stucco wire production will move to its K-Lath plant in Fontana, Calif.
Collated nail production from the Ferndale plant will moving to Tree Island's manufacturing facility in Richmond, B.C.
TreeIsland said all consolidated costs will be incurred in 2007, with full cost recovery and benefits realized in 2008.
''The consolidation is expected to provide significant ongoing savings thereafter. No production capacity will be lost as a result of the consolidations,'' the company said.