Sealed Air Corporation
) reported fourth-quarter 2012 adjusted net earnings from
continuing operations of 34 cents per share, ahead of the Zacks
Consensus Estimate of 29 cents and increased almost seven fold
from the year-ago earnings of 6 cents per share.
The company sold its Diversey Japan business in Nov 2012 and
its results have been classified as discontinued operations.
Including discontinued operations, earnings per share were $1.21
in the quarter compared with 11 cents in the year-ago
Including special items of 39 cents per share and 1 cent per
share impact of dilutive shares, Sealed Air reported a loss of 6
cents per share from continuing operations in the quarter.
Including special items of 35 cents and 2 cents per share impact
of dilutive shares, loss per share was 31 cents in the year-ago
Total revenue inched up 1% year over year to $1.978 billion,
beating the Zacks Consensus Estimate of $1.938 billion. Volumes
improved 2.6% offset by an unfavorable foreign currency
translation of 1.7%. Region wise, sales was led by in Asia,
Middle East, Africa and Turkey with 9.6% growth, followed by 7.5%
rise in Latin America, 2.3% in North America and 2.0% for
Japan/Australia/New Zealand. Sales decline of 5.6% in Europe was
Cost and Margins
Adjusted cost of sales remained flat at $1.3 billion. Adjusted
gross profit from continuing operations increased 2% to $658.7
million. Gross margin expanded 30 basis points (bps) to 33.3% in
Marketing, administrative and development expenses decreased
5% to $441.5 million in the quarter. Adjusted operating profit
from continuing operations increased 21% to $191 million.
Adjusted operating margin expanded 160 bps to 9.7%.
Effective from the fourth quarter, Sealed Air's segment
information is presented under three new reportable segments and
an Other category. These are - Food & Beverage (F&B),
Institutional & Laundry (I&L), Protective Packaging
segments. The Medical Applications and New Ventures businesses
comprise the Other category segment.
F&B includes the legacy Food Packaging and Food Solutions
businesses and the food and beverage hygiene solutions business
from Diversey. I&L represent the remainder of the Diversey
segment or solutions for the building services, food service,
health care, hospitality and retail markets. Protective Packaging
represents legacy Protective Packaging and the specialty
materials foam business, which was previously included in the
Food & Beverage (F&B): Net sales edged up 0.9% year
over year to $986.4 million, up 2.4% on a constant dollar basis.
Volumes edged up 3.1% led by 3.6% volume growth in hygiene
solutions and 2.9% volume growth in the food packaging and food
This was offset by 0.7% lower price/mix due to pricing
pressures in Europe and the impact of contract pricing in North
America, and unfavorable currency translation of 1.5%. Adjusted
operating profit increased 21% to $124.5 million in the
Institutional & Laundry (I&L): Net sales were $533.6
million, flat year over year on a reported basis but up 2.3% on
constant dollar basis. Volumes increased 0.7% led by strength in
new healthcare business offset by a decline in consumer brands
and lower equipment sales in Europe. Higher price/mix aided sales
by 1.6%, offset by 2.4% of unfavorable currency translation.
Adjusted operating profit increased a whopping 206% to $10.4
Protective Packaging Segment: The segment reported net sales
of $407.4 million, up 1% on a reported basis and 1.5% on a
constant dollar basis. Volumes were up 2.6% led by growth in
North America. Adjusted operating profit increased 9% to $59
million in the quarter.
Medical Applications and New Ventures (Other category): Net
sales were $50.4 million, up 9% on a reported basis and 13.4% on
a constant dollar basis. Volumes increased 12.7% higher
volumes and acquisition added 1.1%. The sales increase was
primarily driven by increased market penetration in Europe. The
segment reported adjusted operating loss of $2.6 million in the
quarter compared with $2.2 million in the year ago quarter.
Fiscal 2012 Performance
Sealed Air reported adjusted earnings per share of 95 cents in
2012, down 25% from $1.26 in 2011 and ahead of the Zacks
Consensus Estimate of 93 cents. Adjusted earnings per share were
at the mid point of management guidance range of 90 cents to
$1.00 per share.
Including special items, the company reported loss per share
of $6.63 compared with earnings per share of 75 cents in 2011.
Including discontinued operations, earnings per share were $1.90
in 2012 compared with $1.31 in 2011.
Total revenue improved 38% year over year to $7.65 billion,
missing the Zacks Consensus Estimate of $7.68 billion.
As of 2012 end, cash and cash equivalents were $679.6 million
versus $703.6 million as of 2011 end. Cash from operating
activities increased to $404 million in the year from $372
million in the prior year. Free cash flow from continuing
operations was $280 million during the year versus $249 million
Long-term debt, excluding current portion, amounted to $4.54
billion as of Dec 31, 2012, compared with $4.97 billion as of Dec
31, 2011. The debt-to-capitalization ratio increased to 72.1% as
of Dec 31, 2012, compared with 62.8% as of Dec 31, 2011.
In Nov 2012, Sealed Air sold its Diversey Japan business and
utilized the cash proceeds and available cash on hand to reduce
term loan balances by $370 million.
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.
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. Recently, Sealed Air has
announced certain leadership changes that might lead to a
turnaround in the company. 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 (Hold).
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 fourth quarter 2012 adjusted earnings of 52 cents per
share, up 7% from 45 cents earned in the year-ago quarter. The
result surpassed the Zacks Consensus Estimate of 49
Packaging Corporation of America
) reported fourth quarter adjusted income of 61 cents per share
compared to 40 cents per share in the year-ago quarter.
Sonoco Products Co.
) reported fourth-quarter 2012 adjusted earnings of 56 cents per
share compared with 46 cents in the year-ago quarter, ahead of
the Zacks Consensus Estimate of 54 cents per share.
BEMIS (BMS): Free Stock Analysis Report
PACKAGING CORP (PKG): Free Stock Analysis
SONOCO PRODUCTS (SON): Free Stock Analysis
To read this article on Zacks.com click here.