Bemis Marre by Lower Volumes - Analyst Blog


Bemis Company Inc. ( BMS ) reported fourth quarter 2011 adjusted earnings of 45 cents per share, an 8% drop from the 49 cents in the year-ago quarter. Results, however, outperformed the Zacks Consensus Estimate of 39 cents and the management's guidance of EPS in the range of 36 cents to 42 cents.

Unit volumes decreased in nearly every market category, adversely affecting the company's financial performance during the quarter.

Including charges related to acquisitions of 2 cents in the quarter a 24 cent charge related to facility consolidation activities in the reported quarter, EPS stood at 19 cents. Including acquisition related costs of 1 cent, EPS was 49 cents in the prior year quarter.

Net sales improved 2% year over year to $1.27 billion, including an impact of 1.8% from acquisitions at par with the Zacks Consensus Estimate of $1.27 billion.

Gross profit decreased 7% year over year to $216 million and operating income declined 13% to $87 million.

Segment Performance

Net sales from the Flexible Packaging segment amounted to $1.13 billion, up 2% year over year, driven by acquisitions. Adjusted segment operating profit however dropped to $109.7 million from $119.5 million due to higher raw material costs and lower unit volumes.

Net sales from the Pressure Sensitive Materials segment totaled $136.4 million, a 0.4% drop from the year-ago quarter due to unfavorable currency effect. Adjusted segment operating profit was $6.5 million compared with $7.2 million recorded a year ago reflecting the negative impact of weak economic conditions in Europe.

Financial Update

As of December 31, 2011, Bemis had cash and cash equivalents of $109.8 million, up substantially from $60.4 million as of December 31, 2010. Total debt of the company was $1.57 billion at the end of fiscal 2011 versus $1.29 billion of debt at the end of the fiscal 2010.

Total cash flow from operating activities for the year was $417 million versus $368 million in the prior year. The company utilized its cash flow to pay dividends of around $101.8 million, repurchase shares of $161.1 million and $135.2 million toward capital expenditures.

Fiscal 2011 Performance

Bemis reported fiscal EPS of $1.99 in 2011, a 6% drop from $2.12 in 2011, ahead of the Zacks Consensus Estimate of $1.92 and the company's guidance of $1.90 and $1.96. Net sales improved 10% year over year to $5.32 billion, including a 4.8% contribution from acquisitions. Organic sales growth reflects selling price increases partially offset by lower unit sales volume.

2012 Outlook

In 2011, food cost inflation increased retail grocery costs, negatively impacting consumer demand. This trend is expected to continue in the first half of 2012 and consequently Bemis expects unit sales volumes in 2012 to be similar to 2011.

Management expects adjusted EPS n the range of 43 cents to 49 cents for the first quarter of 2012. For 2012, EPS is expected to be within $2.05 and $2.20.

Cash provided by operating activities for 2012 is expected to exceed $350 million and capital expenditures to be approximately $175 million which includes expansion of Bemis' capacity in China, the addition of high barrier capacity in Brazil, and added capacity to support  increased customer demand for products from Bemis' barrier platform in North America. 

Our Take

Bemis has adopted a disciplined business model to ensure efficiency and effectiveness in the face of weak demand experienced in the last two years. This initiative was taken to reduce operational costs and encourage savings and investments in prospective opportunities, and to pay back debt if the situation permits.

Moreover, the company spends heavily in research and developmental activities to live up to the expectation of its existing customers as well as to attract new potential customers.

However, rising raw materials prices, have significantly impacted the company putting downward pressure on its margins. Further, lower volume levels remain point of concern. The shares of Bemis currently retain a Zacks #3 Rank (short-term Hold rating).

Neenah, Wisconsin-based Bemis Company is a major supplier of flexible packaging and pressure sensitive materials used by leading food, consumer products, healthcare and other companies worldwide. Bemis competes with the likes of Sealed Air Corporation ( SEE ) and Avery Dennison Corporation ( AVY ).

AVERY DENNISON ( AVY ): Free Stock Analysis Report
BEMIS ( BMS ): Free Stock Analysis Report

SEALED AIR CORP ( SEE ): Free Stock Analysis Report
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Zacks Investment Research

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

This article appears in: Investing , Business , Stocks

Referenced Stocks: AVY , BMS , SEE

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