Sealed Air Corporation
) reported second-quarter 2013 adjusted net earnings from
continuing operations of 35 cents per share, which more than
doubled from the year-ago earnings of 16 cents per share and were
10 cents ahead of the Zacks Consensus Estimate.
Strong growth in Asia, Middle East, Africa and Turkey (AMAT)
and Latin America and modest growth in North America, margin
expansion in the Food & Beverage and Institutional &
Laundry divisions, benefits from pricing initiatives, and focus
on manufacturing and operational improvements led to the strong
Including special items viz. costs related to the acquisition and
integration of Diversey, and restructuring charges, earnings per
share were 26 cents in the reported quarter compared with a loss
per share of 11 cents in the year-ago quarter.
Total revenue edged up 1.94% year over year to $1.961 billion,
narrowly missing the Zacks Consensus Estimate of $1.965 billion.
Volumes improved 2.4% and a price/mix contributed 0.8% to the
increase. Region wise, sales were led by 9.4% growth in AMAT,
followed by 7.6% rise in Latin America and 2.1% growth in North
America. Sales decline of 3% in Japan/Australia/New Zealand and
1.5% in Europe were the dampeners.
Cost and Margins
Adjusted cost of sales remained flat at $1.29 billion. Adjusted
gross profit from continuing operations increased 6% to $669
million. Gross margin expanded 130 basis points (bps) to 34.1% in
the quarter. Marketing, administrative and development expenses
decreased 2% to $445 million in the quarter. Adjusted operating
profit from continuing operations increased 28% to $192 million.
Adjusted operating margin expanded 200 bps to 9.8%.
Food & Beverage (F&B): Net sales increased 2.6% year over
year to $946 million. Volumes edged up 2.5%, led by growth in
AMAT and Latin America and a slight increase in North America,
offset by decline in Europe and JANZ. Adjusted operating profit
increased 40% to $106.2 million in the quarter.
Institutional & Laundry (I&L): Net sales were $570
million, up 2% year over year on a reported basis. Volumes
increased across all regions except Europe. Pricing was up 1.5%.
The segment reported an adjusted operating profit of $38 million
compared with $28 million in the year-ago quarter.
Protective Packaging Segment: The segment reported net sales of
$394 million, up 1% on a reported basis. Volumes were up 3.8%,
offset by 2.0% lower price/mix. Adjusted operating profit
decreased 3% year over year to $46 million in the quarter.
Medical Applications and New Ventures (Other category): Net sales
remained flat at $50.9 million. Favorable price mix of 2.1% was
offset by a 1.1% decline in volume. Modest growth in Europe was
offset by declines in North America and AMAT. The segment
reported adjusted operating profit of $1.6 million in the quarter
compared with a loss of $1.1 million in the year-ago quarter.
As of Jun 30, 2013, cash and cash equivalents were $660 million
versus $680 million as of Dec 31, 2012. Cash from operating
activities was $63 million in the first half of 2013, a
substantial improvement compared with the outflow of $62 million
in the prior-year comparable period.
Long-term debt, excluding current portion, amounted to $4.3
billion as of Jun 30, 2013, compared with $4.5 billion as of Dec
31, 2012. The debt-to-capitalization ratio increased 90 basis
points to 76.9% as of Jun 30, 2013, compared with Dec 31, 2012.
Outlook for 2013
Sealed Air maintained its guidance for fiscal 2013 adjusted
earnings in the range of $1.10 to $1.20 per share. Net sales are
expected to be within $7.7 to $7.9 billion. Adjusted EBITDA is
expected in the range of $1.01 to $1.03 billion.
With the Diversey acquisition, Sealed Air expanded its presence
beyond specialty packaging solutions. This combination is
expected to further enhance Sealed Air's earnings per share and
free cash flow generation. Even though Diversey has added to the
company's growth profile, it also raised its risk due to the high
levels of leverage the company has incurred to fund the
acquisition. Furthermore, volumes at Diversey have been weaker
than expected due to its significant exposure in Europe.
The company's Integration & Optimization Program will
generate cost savings and benefits of approximately $195 million
to $200 million by the end of 2014. The company announced an
additional restructuring plan with projected annualized savings
of $80 million by 2015.
On the flipside, the additional restructuring plan will
increase Sealed Air's costs by $180 million to $200 million by
2015, including $65 million in 2013. However, the prevailing
weakness in the European economy has made the situation
challenging as the company has significant exposure to the
European market. The stock retains a short-term Zacks Rank #3
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Elmwood Park, NJ-based Sealed Air is a major specialty packaging
service provider to a diverse set of end markets. The company
operates in the United States and in 50 other countries with
packaging and performance-based materials and equipment systems
serving food, medical, and an array of industrial and consumer
Among Sealed Air's peers,
Packaging Corporation of America
) posted second-quarter earnings per share of 71 cents, up 45%
from 49 cents in the year-earlier quarter and beat the Zacks
Consensus Estimate of 63 cents.
Graphic Packaging Holding Co.
) reported earnings per share of 13 cents, an 18% year-over-year
increase, beating the Zacks Consensus Estimate by a penny.
Sonoco Products Co.
) reported second-quarter 2013 adjusted earnings of 59 cents per
share, beating the prior-year quarter's earnings and Zacks
Consensus Estimate by a penny.