) third-quarter 2013 adjusted earnings from continuing operations
increased 26% to 49 cents per share from 39 cents in the year-ago
quarter. Despite sluggish consumer demand, growth across targeted
packaging and specialty chemicals end markets, and increased land
sales and savings in overhead costs led to the year-over-year
rise. However, earnings fell short of the Zacks Consensus
Estimate of 52 cents.
Including the net effect of pension settlement charge of 2 cents,
restructuring charge of 2 cents and discrete income tax items of
1 cent, earnings on a GAAP basis stood at 44 cents per share.
Including restructuring charges of 1 cent per share, earnings in
the year-ago quarter were at 38 cents, which reflected a 16%
Total revenue edged up 3% year over year to $1.43 billion in the
reported quarter, falling short of the Zacks Consensus Estimate
of $1.44 billion. Results were aided by solid revenue growth,
volume gains in medical, fragrance and personal care pumps and
dispensers, as well as in food and beverage packaging.
The Industrial segment benefited from higher pricing in
Brazil, and the Specialty Chemicals business had strong volume
growth in innovative products for global asphalt, adhesives and
oilfield markets, as well as contribution from the recently
acquired specialty chemicals business in Brazil.
Cost of sales increased 2% year over year to $1.11 billion in the
third quarter. Gross profit improved 7% to $322 million with
gross margin expanding 100 basis points to 22.5%.
Selling, general and administrative expenses in the reported
quarter remained flat at $160 million compared with the year-ago
quarter. Adjusted operating profit improved 16% year over
year to $162 million. Consequently, operating margin expanded 130
basis points to 11.3%.
Food & Beverage
: Revenues in the segment declined 1% year over year to $796
million. Increase in food and beverage markets was offset by
weaker tobacco packaging sales.
Segment profit dipped 8% to $86 million in the reported quarter
from $93 million in the year-ago quarter. Improved operating
productivity and favorable foreign currency exchange were not
substantial to offset wage and input cost inflation, and
unfavorable product pricing and mix.
Home, Health & Beauty
: Revenues in the segment slid 1% to $185 million from $187
million in the prior-year quarter. Gains in higher value beauty
and skin care, fragrance and medical dispensing solutions were
mitigated by declines in home and garden dispensing and beauty
and personal care folding carton solutions.
Profit for the segment was $6 million in the reported quarter, a
50% drop from $12 million in the year-ago quarter. The decline
was a result of wage and higher input costs as well as
transformation costs due to the planned exits of the beauty and
personal care folding carton businesses in Europe and Brazil.
However, volume growth in higher value products and favorable
foreign currency exchange somewhat compensated these negative
: Net sales in the reported quarter went up 16% year over year to
$132 million, driven by improved product pricing in Brazil along
with contribution from the high-quality industrial packaging
materials business in India, Ruby Macons.
Segment profit rose an impressive 129% to $16 million from $7
million in the prior-year quarter. Increased product pricing and
lower expansion costs at the Brazilian operation were partially
offset by higher planned maintenance costs, wage and input cost
inflation, as well as unfavorable foreign currency exchange.
: The segment reported revenues of $260 million, up 2% from the
year-ago quarter, driven by growth in targeted pine chemicals
markets and contribution from the addition of the Brazilian pine
chemicals business, Resitec.
The segment's profit increased 6% to $66 million from the
year-ago quarter. Volume growth and contribution from the Resitec
were partially offset by lower pricing in more standardized
product lines, unfavorable foreign currency exchange and higher
raw material costs.
MEADWESTVACO CP (MWV): Free Stock Analysis
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Community Development and Land Management
: Revenues in the segment increased 80% year over year to $63
million. Profit for the segment increased threefold to $33
million in the reported quarter from $11 million in the
As of Sep 30, 2013, cash and cash equivalents amounted to $462
million versus $663 million as of Dec 31, 2012. Long-term debt
amounted to $2.03 billion as of Sep 30, 2013, compared with $2.1
billion as of Dec 31, 2012. Cash flow from operating activities
was $148 million during the first nine months of 2013, an
improvement from $117 million in the prior-year comparable
MeadWestvaco has embarked on an enterprise-wide overhead cost
reduction plan, which is expected to lead to annual cost savings
of around $75 million by the end of 2014. The company is
refocusing and streamlining its operations, as well as
consolidating general and administrative support across the
organization. With savings of $28 million generated in the first
nine-month period of 2013, MeadWestvaco expects its savings to
exceed the high end of its range of $25 to $30 million by the end
Sale Of U.S Forestlands
In a separate announcement, MeadWestvaco disclosed that it has
entered into a definitive agreement with
Plum Creek Timber Company, Inc.
) to sell its U.S. forestlands and certain related assets,
comprising approximately 501,000 acres in Alabama, Georgia, South
Carolina, Virginia and West Virginia. Plum Creek will also invest
in a newly-formed partnership comprising MeadWestvaco's
approximately 109,000 acres of diversified development lands in
the Charleston, S.C., region.
The aggregate value of the transaction, including both parties'
investments in the partnership, is $1.5 billion. Of the proceeds,
MeadWestvaco plans to return approximately $665 million to its
Upon closing of this transaction, MeadWestvaco will no longer own
forestland assets in the United States, but own and manage
approximately 135,000 acres of forestland in the state of Santa
Catarina, Brazil. The company plans to retain these forestlands
to serve its recently expanded virgin kraftliner operation in
MeadWestvaco did not provide any specific guidance for the fourth
quarter, but expects higher earnings compared with the year-ago
quarter, driven by continued volume improvement across its
targeted packaging and specialty chemicals markets, pricing
improvement in industrial packaging solutions and productivity
gains from increased operating leverage. Furthermore, the ramp up
of the new paperboard machine in Brazil and savings from its
overhead reduction initiative will also boost earnings.
However, MeadWestvaco added that challenging macroeconomic
conditions, higher raw materials costs (particularly resin and
fiber) and depreciation of Real against the U.S. Dollar will act
as a deterrent.
MeadWestvaco will benefit from its new products, profitable
growth strategies, expansion in Brazil, benefits from acquired
businesses and sale of non performing businesses. However, the
situation in Europe remains a headwind.
Richmond, Va-based MeadWestvaco is a global packaging company
providing innovative solutions to the world's most admired brands
in the healthcare, beauty and personal care, food, beverage, home
and garden, tobacco, and agricultural industries. The company
also produces specialty chemicals for the automotive, energy, and
MeadWestvaco currently retains a short-term Zacks Rank #3 (Hold).
One of MeadWestvaco's peers
Packaging Corporation of America
) reported third quarter 2013 adjusted earnings of 91 cents per
share, up 65% year over year and beat the Zacks Consensus
Estimate by 2 cents.
Sonoco Products Co.
) reported adjusted earnings of 63 cents per share, managing to
beat the Zacks Consensus Estimate of 61 cents and increasing 14%
from 55 cents earned in the year-ago quarter.