Sealed Air Corporation
) reported first-quarter 2013 adjusted net earnings from
continuing operations of 17 cents per share, up 6% from the
year-ago earnings of 16 cents per share but a penny short of the
Zacks Consensus Estimate.
Excluding $15 million (net of taxes) of expense ensuing from
cash-settled Stock Appreciation Rights (SAR) granted as part of
the Diversey acquisition, adjusted EPS was 24 cents in the
quarter compared with 20 cents in the prior-year quarter.
Including special items viz. a loss on debt redemption, loss
related to the devaluation of the Venezuelan bolivar in Feb 2013
and costs associated with Sealed Air's 2011 - 2014 Integration
and Optimization Program, earnings from continuing operations
stood at 1 cent in the quarter. Including restructuring charges
associated with the 2011 - 2014 Integration and Optimization
Program, loss per share was 4 cents in the year-ago quarter.
Total revenue inched up 0.4% year over year to $1.85 billion,
narrowly missing the Zacks Consensus Estimate of $1.86 billion.
Volumes improved 1% and a positive 0.2% price/mix were offset by
an unfavorable foreign currency translation of 0.8%. Region wise,
sales were led by in Asia, Middle East, Africa and Turkey with
7.1% growth, followed by 5.4% rise in Latin America, 0.2% in
North America. Sales decline of 2.3% in Japan/Australia/New
Zealand and 2.1% in Europe were dampeners.
Cost and Margins
Adjusted cost of sales inched up 1% to $1.23 billion. Adjusted
gross profit from continuing operations decreased 2% to $619
million. Gross margin contracted 70 basis points (bps) to 33.4%
in the quarter. Marketing, administrative and development
expenses decreased 2% to $437 million in the quarter. Adjusted
operating profit from continuing operations decreased 6% to $136
million. Adjusted operating margin declined 60 bps to 7.3%.
Food & Beverage (F&B): Net sales edged up 0.8% year
over year and 1.9% on constant currency to $902 million. Volumes
edged up 1.8 % led by 2.5% volume growth in hygiene solutions and
1.7% volume growth in the food packaging and food solutions
businesses. Price/mix was higher by 0.1%, driven by strength in
Latin America, which helped offset pricing pressures in Europe
and the impact of contract pricing in North America. Currency
translation had a negative 1.1% impact on sales. Adjusted
operating profit increased 8% to $96.8 million in the
Institutional & Laundry (I&L): Net sales were $513
million, up 0.5% year over year on a reported basis and 1.2% on
constant dollar basis. Volumes increased 0.1% and higher
price/mix aided sales by 1.1%, offset by 0.7% unfavorable
currency translation. The segment reported an adjusted operating
loss of $7.6 million compared with an adjusted operating profit
of $4.8 million.
Protective Packaging Segment: The segment reported net sales
of $387 million, down 0.8% on a reported basis and 1.2% on a
constant dollar basis. Volumes were up 0.1% led by growth in
North America offset by decline in Europe and Japan/Australia/New
Zealand. Adjusted operating profit decreased 7% to $47 million in
Medical Applications and New Ventures (Other category): Net
sales were $50.8 million, up 4% on a reported and constant dollar
basis. Volumes increased 2.5% and favorable price/mix added 1.6%.
The sales increase was primarily driven by increased market
penetration in Europe, offset by weakness in China. The segment
reported adjusted operating loss of $0.5 million in the quarter
compared with a loss of $0.6 million in the year-ago quarter.
As of Mar 31, 2013, cash and cash equivalents were $626
million versus $679.6 million as of Dec 31, 2012. Cash from
operating activities was an outflow of $39 million in the quarter
compared with $93 million in the prior-year quarter.
Long-term debt, excluding current portion, amounted to $4.4
billion as of Mar 31, 2013, compared with $4.4 billion as of Dec
31, 2012. The debt-to-capitalization ratio remained flat at 76%
as of Mar 31, 2013, compared with Dec 31, 2012.
Outlook for 2013
The company expects 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. Furthermore, free cash flows are expected in the
range of $300-$350 million.
Sealed Air also announced an earnings quality improvement plan
intended at delayering management in a bid to make the company
more cost efficient, especially in Europe. The plan is expected
to result in annualized savings of approximately $80 million by
the end of 2015 for an estimated total cost in the range of $180
to $200 million. Savings for 2013 are expected to be minimal and
one-time cash costs for 2013 are estimated to be approximately
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. 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
Elmwood Park, N.J-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
Bemis Company, Inc.
) reported first-quarter 2013 adjusted earnings of 53 cents per
share, up 8% from 49 cents earned in the year-ago quarter. The
result beat the Zacks Consensus Estimate by a penny and was at
the midpoint of management's guidance of 50 cents to 56 cents per
Packaging Corporation of America
) posted first-quarter earnings per share of 62 cents, up 48%
from 42 cents in the year-earlier quarter and beat the Zacks
Consensus Estimate by 6 cents.
Graphic Packaging Holding Company
) reported earnings per share of 10 cents, a 67% year-over-year
increase and ahead of the Zacks Consensus Estimate of 8
BEMIS (BMS): Free Stock Analysis Report
GRAPHIC PKG HLD (GPK): Free Stock Analysis
PACKAGING CORP (PKG): Free Stock Analysis
SEALED AIR CORP (SEE): Free Stock Analysis
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