Bemis' Earnings Beat, Sales Miss - Analyst Blog


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Bemis Company, Inc. ( BMS ) reported second-quarter 2013 adjusted earnings of 61 cents per share, up 13% from 54 cents earned in the year-ago quarter. The results beat the Zacks Consensus Estimate by a penny and were within management's guidance range of 57 cents - 63 cents per share.

Including facility consolidation and acquisition-related integration charges and gain on divestiture, earnings per share in the reported quarter stood at 51 cents, up 27% from 40 cents in the year-ago quarter. The year-ago quarter earnings included facility consolidation and other costs and acquisitions related integration costs.

Net sales slid 1.2% year over year to $1.297 billion, short of the Zacks Consensus Estimate of $1.310 billion. Excluding the impact of currency, net sales for the quarter declined 0.7% year over year.

Cost of products sold decreased 3% to $1.045 billion in the quarter. Gross profit increased 8% to $252 million. Gross margin expanded 160 basis points to 19.4% in the quarter, the highest level since 2009. Selling, general and administrative expenses increased 6.5% to $132 million. Adjusted operating income rose 9% to $108 million. Operating margin increased 80 basis points to 8.3% in the quarter.

Segment Performance

Net sales from the U.S. Packaging segment amounted to $781 million, down 1% year over year reflecting the impact of the sale of its Clysar thin gauge shrink film plant at the end of May as part of Bemis' facility consolidation program. Excluding the effect of the sale of the Clysar facility, net sales increased modestly during the quarter, reflecting a net increase in unit sales volume. However, adjusted segment operating profit increased 12% to $101 million from $90 million, reflecting cost savings associated with facility consolidation activities.

Net sales from the Global Packaging segment declined 2% to $374 million due to a weaker Brazilian currency and the impact of closure of two plants in the fourth quarter of 2012. However, the acquisition of Micris during the third quarter of 2012 increased net sales by about 1.6%. Adjusted segment operating profit declined 1.1% to $27.1 million due to the negative impact of currency translation.

Net sales from the Pressure Sensitive Materials segment totaled $142 million, flat year over year. Favorable currency translation, higher unit sales of low margin label products in the North American operations were offset by lower sales for value-added graphic products from the European operations. Segment operating profit was $6 million, down 45% from $10.9 million reported in the year-ago quarter due to weak results in Europe.

Financial Update

As of Jun 30, 2013, Bemis had cash and cash equivalents of $150 million, up from $114 million as of Dec 31, 2012. Total debt of the company increased to $1.45 billion as of Jun 30, 2013 from $1.42 billion as of Dec 31, 2012. The debt-to-capitalization ratio increased to 47.8% as of Jun 30, 2013 from 46.5% as of Dec 30, 2012.

Total cash flow from operating activities for the first half of fiscal 2013 was $102 million compared with $143 million in the prior-year quarter.

In July, Bemis expanded its Asia-Pacific foothold with the purchase of Foshan New Changsheng Plastics Films Co. (NCS).  Headquartered in China, Foshan New Changsheng Plastics Films is a specialty film manufacturer. The acquisition is expected to have no significant impact on Bemis' earnings results for 2013. Incremental net sales from NCS are expected to be approximately $60 million annually, and the acquisition of this film platform is expected to provide cost and logistics benefits to support Bemis' broader Asia-Pacific growth strategy.

2013 Outlook

Management expects volume levels in 2013 to be consistent with 2012, along with a generally stable raw material cost environment. Management expects adjusted EPS in the range of 57 cents to 63 cents for the third quarter of 2013. For 2013, EPS is projected to range between $2.30 and $2.40, a narrower range compared to the previous guidance of $2.30 to $2.45 per share.  The upper end has been reduced to reflect the expected impact of a weaker Brazilian currency and lower profits in the pressure sensitive business for the second half of 2013.

The incremental savings of the facility consolidation activities are expected to be around $37 million in 2013. Bemis expects cash flow from operating activities to total approximately $430 million in 2013. The company reduced its guidance for capital expenditures in 2013 to a range of $130 million to $140 million.

Our Take

Weak volume, cautious consumer spending environment, sluggish European economic outlook and rising food costs remain major concerns. However, savings from the Bemis cost reduction program due to the closure of unproductive facilities will help offset these pressures.

Neenah, Wis.-based Bemis Company is a global manufacturer of flexible packaging products and pressure sensitive materials sold primarily to the food industry. The company also sells its products to other customers in the chemical, agri-business, medical, pharmaceutical, personal care, electronics, automotive, construction, and graphic industries. Bemis currently carries a Zacks Rank #3 (Hold).

Peer Performance

Among the peers of Bemis Company, Packaging Corporation of America ( PKG ) posted second-quarter earnings per share of 71 cents, up 45% from 49 cents in the year-earlier quarter and beat the Zacks Consensus Estimate of 63 cents.

Graphic Packaging Holding Company ( GPK ) reported earnings per share of 13 cents, an 18% year-over-year increase, beating the Zacks Consensus Estimate by a penny.

Sonoco Products Co. ( SON ) reported second-quarter 2013 adjusted earnings of 59 cents per share, beating the prior-year quarter's earnings and Zacks Consensus Estimate by a penny.

BEMIS (BMS): Free Stock Analysis Report

GRAPHIC PKG HLD (GPK): Free Stock Analysis Report

PACKAGING CORP (PKG): Free Stock Analysis Report

SONOCO PRODUCTS (SON): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
More Headlines for: BMS , GPK , NCS , PKG , SON

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