Newell Rubbermaid Inc.
) - the producer of Sharpie pens and Rubbermaid containers -
reported third-quarter 2012 adjusted earnings per share of 47
cents, beating the Zacks Consensus Estimate of 44 cents and
year-ago quarter's earnings of 45 cents.
The earnings growth was a result of positive impact from
pricing and productivity and lower structural selling as well as
general and administrative expenses as a percentage of sales. On
a reported basis, including special items, the company reported
earnings of 37 cents per share compared to a loss of 61 cents in
the year-ago quarter.
Top-Line and Margin Details
During the quarter, Newell's net sales inched down 0.9% to
$1.535 billion, missing the Zacks Consensus Estimate of $1.540
million. However, core sales of the company inched up 1.5%,
excluding negative impact from foreign currency translation.
The growth in core sales was primarily driven by core sales
increases of 2.5% and 7.8% in the company's Newell Professional
and Baby & Parenting Essential categories, respectively.
Newell's quarterly gross profit marginally grew 0.5% year over
year to $0.582 billion, while gross margin expanded 50 basis
points to 37.9% primarily due to higher pricing and productivity,
partially offset by higher input cost inflation.
Operating income decreased marginally by 0.5% year over year
to $0.210 billion, while operating margin remains flat year over
year at 13.7%, as the benefit from gross margin expansion were
fully offset by higher overall selling, general and
administrative expenses (SG&A).
Net sales of the company's
segment dipped 2.1% year over year to $0.815 billion while
segment's core sales slipped 0.4% primarily due to weak
performance in Decor and soft sales in Culinary business
partially offset by robust performance in Writing and Creative
Expression global business.
Segmental operating margin came in at $0.141 billion compared
with $0.129 billion in the year-ago quarter. Operating margin
expanded by 180 bps to 17.3%, primarily driven by improved gross
margin and lower SG&A expenses.
During the quarter, sales at
segment inched down 1.1% to $0.535 billion. However, the
segment's core sales grew 2.5% primarily driven by solid
performance at the company's Commercial Products global business
in North America and Latin America, which were partially offset
by weak performances in Europe, Australia and New Zealand.
The segment's operating profit declined to $70.6 million
during the quarter compared with $84.5 million registered in the
prior-year quarter. As a percentage of sales, it contracted 240
bps to 13.2% due to higher input costs along with increased
investments in selling and marketing.
Driven by strong performance of Graco brand in North America
and Aprica brand in Japan, the company's sales at
Baby & Parenting
segment improved 5.2% year over year to $0.185 billion, while
core sales climbed 7.8% during the reported quarter.
Operating profit increased to $18.3 million from $17.7 million
in the previous-year quarter. Operating margin during the quarter
contracted 10 bps to 9.9%.
Other Financial Details
Newell ended the quarter with cash and cash equivalents of
$0.250 billion and long-term debt of $1.366 billion.
Shareholders' equity was $1,971.2 million, excluding
non-controlling interests of $2.063 billion.
During the quarter, the company's capital expenditure came in
at $45.2 million, generating a cash flow of $301.5 million from
Fiscal 2012 Guidance
Management continues to anticipate core sales growth of 2%-3%
and adjusted earnings in the range of $1.63-$1.69 per share for
fiscal 2012. Moreover, Newell expects an improvement of 20 basis
points in operating margin during fiscal 2012.
Moreover, the company expects an incremental annual net income
in the range of $55-$65 million from fiscal 2012 through its
European Transformation Plan. Moreover, Newell will be saving
costs in between $90 million and $100 million through its Project
Renewal program in the first half of 2013.
The initiative will be funded by savings through reduced
structural selling, general and administrative expenses. The
Project Renewal initiative will facilitate the company in
reducing the complexity of the organization while increasing
investments in most important growth areas within the
Further, Newell still expects to generate operating cash flow
in the range of $550-$600 million in fiscal 2012 with planned
capital expenditures in between $200 million and $225
Expansion of Project Renewal Program
Concurrent with its third-quarter results, Newell has
announced to expand its Project Renewal Restructuring Program.
The company has outlined five new work stream in connection with
A) In order to simplify its
organizational structure, the company has decided to report its
financial results under six new segments beginning fourth-quarter
2012. The company has eliminated its Consumer and Professional
segments while retained Baby & Parenting. The six new
reporting segments are - Tools, Commercial Products, Writing,
Home Solutions, Baby & Parenting, and Specialty.
B) To reduce costs Newell will
enlarge its scope of SAP.
C) To simplify decision making,
transaction process and information management, the company,
along with aligning other resources, will apply SAP.
D) The company will enhance its
efficiencies in customer services and sourcing functions.
E) Newell will optimize
manufacturing and distribution facilities.
The company expects the implementation of the expansion
program would cost in between $340 million and $370 million. On
the other hand, with the completion of the program, Newell will
be saving additional $180-$225 million annually from the end of
the second quarter of fiscal 2015. Moreover, the company will be
able to reduce its global work force by 10% and above in the next
two and a half years.
Newell Rubbermaid is one of the leading manufacturers of home
and office products in the U.S. The company also possesses a
strong portfolio of widely popular brands, such as Sharpie, Paper
Mate, Dymo, Expo, Waterman, Parker, Irwin, Lenox, Rubbermaid,
Levolor, Graco, Calphalon and Goody. Leveraging its strong brand
equity, Newell Rubbermaid expects modest earnings going ahead,
provided the market scenario improves.
The company faces intense competition from numerous
manufacturers and distributors of consumer and commercial
products, such as
Cooper Industries plc
Avery Dennison Corporation
Newell Rubbermaid currently has a Zacks #2 Rank, implying a
short-term Buy rating. However, we maintain a long-term Neutral
recommendation on the stock.
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