) projected its Food and Beverage (F&B) business segment
profit to fall 50% in second quarter 2013. MeadWestvaco cited
unanticipated costs, outage and start-up issues at its Covington,
Va., paperboard mill to be the reasons for lower profit
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MeadWestvaco is expected to announce its second quarter results
on July 30. For the quarter, MeadWestvaco estimates the Food
& Beverage segment profit to lie between $45 and $50 million,
a 50% fall from the year-ago segment profit of $100 million. The
projected fall is based on unexpected costs and lower
productivity due to a planned major maintenance outage and
subsequent start-up issues at the Covington, Va., paperboard
mill. Furthermore, operational impacts related to the
implementation of a new information system at the mill aggravated
This, however, does not come as a surprise. During the first
quarter earnings call, MeadWestvaco had hinted that second
quarter revenues would be lower year over year owing to planned
major cold outage at the Covington, Va, paperboard mill and lower
land sales. However, MeadWestvaco's profitable growth strategies
which will improve volume across the Packaging and Specialty
Chemicals businesses, product pricing improvement and recent
acquisitions in the Industrial and Specialty Chemicals businesses
will help mitigate the loss.
MeadWestvaco also clarified that the start-up issues associated
with the outage have been addressed. The mill is back in
operation at full capacity and volumes in June are strong. The
operational challenges connected to the new system are also being
solved and are expected to have minimal impact moving forward.
MeadWestvaco expects earnings growth to resume in the third
quarter of 2013 and to log growth for the full year.
MeadWestvaco's first-quarter 2013 adjusted earnings declined 51%
to 16 cents per share compared with 33 cents in the year-ago
quarter. Results were affected by lower sales of beverage
packaging, home and garden packaging, and asphalt paving
chemicals due to colder weather in some key regions as well as
lower consumer spending in Europe, which affected sales of beauty
and personal care folding carton packaging.
MeadWestvaco is planning to sell its beauty and personal care
folding carton in Europe and Brazil to improve margins in its
Home, Health & Beauty segment. MeadWestvaco has embarked on
an enterprise-wide overhead cost reduction plan, which is
expected to lead to annual cost savings between $65 and $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. A major portion
of the plan will be completed this year and the company expects
benefits of $25 to $30 million in 2013.
MeadWestvaco will benefit from its new products, profitable
growth strategies, expansion in Brazil and from acquired
businesses despite challenging economic conditions in Europe.
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).
Other companies in the paper and related products industry with
favorable Zacks Ranks are
KapStone Paper and Packaging Corporation
Resolute Forest Products Inc.
) with Zacks Rank #1 (Strong Buy), and
PH Glatfelter Co.
) with a Zacks Rank #2 (Buy).