MeadWestvaco Reports Weak Results - Analyst Blog

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MeadWestvaco ( MWV ) has reported a net loss from continuing operations of $9 million or 5 cents per share in the fourth quarter of 2011, compared with 40 cents per share in the year ago quarter.

Excluding charges related to a spinoff of the Consumer and Office Products business, net earnings declined to $44 million or 26 cents per share from net earnings of $71 million or 41 cents per share. Adjusted earnings fell short of the Zacks Consensus Estimate of 29 cents per share.

The decline was due to lower volume across U.S and European packaging markets. Consumers' demand trends were uncertain, driven by ongoing macroeconomic developments.

Total revenue in the reported quarter remained unchanged year over year at $1.49 billion.  Revenue also fell short of the Zacks Consensus Estimate of $1.50 billion.

Cost of sales increased year over year in the reported quarter to $1,201 million from $1,157 million. Selling, general and administrative expenses also increased to $229 million from $203 million in the prior-year quarter.

Fiscal 2011 Performance

For fiscal 2011, net income from continuing operations was $268 million or $1.54 per share compared with $262 million or $1.52 per share for fiscal 2010.

Excluding some special items, adjusted earnings from continuous operations were $ 335 million or $1.92 per share compared with adjusted earnings from continuous operations of $267 million or $1.54 per share. Adjusted earnings for the full year also fell short of the Zacks Consensus Estimate of $1.95 per share.

Total revenue for fiscal 2011 increased 6% to $6.06 billion, compared with the prior year. Total revenue for the full year 2011 just surpassed the Zacks Consensus Estimate of $6.04 billion.

Segmental Performance

Packaging Resources has reported total revenue of $698 million in the fourth quarter of 2011, up 5% from $667 million in the fourth quarter of 2010. Total revenues grew, driven by improved paperboard pricing and better product mix across key packaging markets.

Total paperboard shipments fell in the fourth quarter of 2011, owing to weaker exports for fruits and meats besides the year-end destocking by domestic household products customers.

Operating profit, however, dropped sharply to $37 million in the fourth quarter of 2011 from $64 million in the fourth quarter of 2010.

Consumer Sales total revenue in the reported quarter was flat at $437 million. Improved pricing and product mix across key packaging markets and the favorable impact from the Spray Plant acquisition in 2010 were offset by overall volume declines and unfavorable foreign currency exchange.

Operating profit declined to $17 million in the reported quarter from $24 million in the year ago quarter.

Total revenue in Specialty Chemical increased to $193 million in the fourth quarter of 2011 from $173 million in the fourth quarter of 2010. Sales growth was due to continuous success in penetrating higher value markets for pine chemicals, asphalt additives and carbon technologies. Pricing and product mix improved across key pine chemicals and carbon technologies markets.

The segment continued to get benefits from its focus on the highest value formulations. In carbon technologies, revenues were up, driven by volume gains in automotive markets as well as improved pricing and product mix.                                                                                                             

Operating profit in this segment increased to $42 million in the fourth quarter of 2011 from $36 million in the fourth quarter of 2010.

Total revenue in the Consumer and Office Products was $218 million in the reported quarter versus $235 million in the year ago quarter. Revenues declined in the fourth quarter due to general economic slowdown in Brazil, which resulted in reduced orders from the retailers for the Brazilian back-to-school season. However, sales for dated and time management products in North America were better than expected and offset some of the weaknesses in Brazil.

Operating profit declined to $53 million in the fourth quarter of 2011 compared with $57 million in the fourth quarter of 2010.

Community Development and Land Management has reported total revenues of $35 million in the fourth quarter of 2011 compared with $61 million in the fourth quarter of 2010.

Operating profit declined to $8 million in the fourth quarter of 2011 from $30 million in the fourth quarter of 2010.

Financial Position                                                          

Cash and cash equivalents decreased to $656 million as of December 31, 2011 from $790 million as of December 31, 2010. Inventories were $649 million as of December 31, 2011, up from $642 million as of December 31, 2010. Long-term debt amounted to $1,880 million as of December 31, 2011 versus 2,042 million as of December 31, 2010.

Cash flow from continuing operations was approximately $560 million in full-year 2011 compared with $551 million in full-year 2010. Capital expenditure from continuing operations was approximately $670 million in full-year 2011 compared with $242 million in full-year 2010.

Outlook

The company has not provided any estimates for 2012. However, it believes that weaker demand trends would continue, particularly in Europe. It also expects inflation in raw materials. As a result, the performance in the first quarter of 2012 will be affected.

However, the company remains confident and is also focused on executing its profitable growth strategies to achieve its 3 to 5 year targets of 5%-plus annual sales growth and 7% to 10% annual earnings growth.

MeadWestvaco Corporation provides solutions to companies operating in the healthcare, beauty and personal care, food, beverage, home and garden, tobacco, and commercial print industries. The company competes with the likes of International Paper Co. ( IP ) and Weyerhaeuser Co. ( WY ). The shares of MeadWestvaco are currently maintaining a Zacks #4 Rank (Sell rating) over the short term.


 
INTL PAPER ( IP ): Free Stock Analysis Report
 
MEADWESTVACO CP ( MWV ): Free Stock Analysis Report
 
WEYERHAEUSER CO ( WY ): 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 The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: IP , MWV , WY

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