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AptarGroup, Inc. (ATR)
F1Q09 Earnings Call
April 16, 2009 8:00 am ET
Ralph Poltermann - Executive Vice President and Treasurer
Peter Pfeiffer - President and Chief Executive Officer
Steve Hagge - Executive Vice President and Chief Operating Officer
Bob Kuhn - Executive Vice President and Chief Financial Officer
Claudia Hueston - J.P. Morgan
George Staphos - Banc of America
Chris Manuel - KeyBanc Capital
Meggan Friedman - William Blair & Company
Mike Hamilton – RBC
Greg Halter - Great Lakes Review
Tim Burns – Cranial Capital
Previous Statements by ATR
» AptarGroup Inc. Q3 2009 Earnings Call Transcript
» AptarGroup Inc. Q2 2009 Earnings Call Transcript
» AptarGroup, Inc. Q4 2008 Earnings Call Transcript
Before we begin I would like to point out that the discussion to follow includes some forward looking comments and that actual results or outcomes could differ materially from those projected or contained in the forward looking statements. To review important factors that could cause actual results to differ materially from those projected or contained in the forward looking statements, please refer to AptarGroup's SEC filings.
The information in this conference call is relevant on the date of this live call. Although the company will post a replay of this conference call on its website as a service to those investors who are not able to listen today, the information contained in the replay will be dated and should be used for background information only. The company undertakes no obligation to update material changes and forward looking information contained therein.
Participating on this call today, are Peter Pfeiffer, President and Chief Executive Officer of AptarGroup, Steve Hagge, Executive Vice President and Chief Operating Officer, and Bob Kuhn, Executive Vice President and Chief Financial Officer. I would now like to turn the conference over to Mr. Pfeiffer.
I will briefly comment on our overall results and outlook and then provide some comments on the Beauty & Home segments. Steve will then provide insight in our Closure and Pharma segments and Bob will review our financials. Focusing on the quarter overall, presently we are in an unusual extended period of enriched consumers on a fairly broad basis tightening their purse strings and inventories throughout the channels are being drawn down sharply.
Our sales adversity affected by several items including the stronger dollar and decrease in overall demand in both the Beauty & Home and Closure segments. We are facing some increased price pressure in the Beauty & Home and Closure segments due to both weak economy situation and with raw material declines. However, offsetting this is market of demand for innovative systems to differentiate their products.
Although we have had success in our cost reduction efforts we could not complete the offset, the negative impact of weak demand on our quarterly results, primarily in the Beauty & Home segment. Looking at income on a segment basis, Beauty & Home segment decreased from both an absolute dollar and percentage of sales standpoint. We are encouraged by the increase Closures income both on an absolute dollar and percentage standpoint and Pharma segment income decreased from an absolute dollar standpoint entirely due to the strong dollar but this increase as a percentage of segment sales.
Because or focus our actions on reducing costs, we announced in the press release that we will be consolidating two dispensing closure manufacturing operations in France as well as several sales offices in North America and Europe. We have approached these cost reductions strategically and present that these actions are being undertaken to streamline our structure without sacrificing our ability to give innovative products or properly serve our customers and respond quickly to market demand.
Looking forward our visibility continues to be very limited. Presently we expect that the conditions we are experiencing in the first quarter will continue into the second quarter and the demand, particularly in the Beauty & Home and Closure segments will increase in the second half of this year.
Turning now to our Beauty & Home segment, reported first quarter sales for the segment decreased 35%. Changes in exchange rate adversely affected sales by 9%. Acquisitions accounted for an increase of about 1%. Excluding currency changes and acquisitions, sales declined by 17% in the quarter mainly due to the softness in the fragrance/cosmetic markets.
Our customers continue to be very cautious and we experienced weak demand in each market served by the Beauty & Home segment. Excluding changes in exchange rate sales to the fragrance/cosmetic market decreased 20%. Sales to the personal care market decreased 9% and sales to the household market decreased 19%. Underutilized capacity due to the drop in demand led to the decline in the Beauty & Home segments income.
Briefly turning to some examples of new applications of our products, our turning and locking actuator allows marketers to eliminate the use of overcasts on aerosol products. This patented system was recently introduced on Pledge cleaning product marketed by SC Johnson as well as dusting and cleaning spray from Sara Lee in their Endust line. Also our [inaudible] system is being used on a new ultra brand of sun care products.
I would like now to turn the call over to Steve.
I’ll provide my comments on both the Closures and the Pharma segments and then turn the call over to Bob to review our financial results. First of all, looking the Closure segment, compared to the prior year first quarter reported sales decreased 13%. Changes in exchange rates negatively impacted sales by approximately 10% and acquisition we made in the fourth quarter of last year accounted for 3% of sales. Excluding currency and acquisitions, sales declined by 6% in the quarter of which 3% of this 6% was due to pass through with the lower resin costs we saw worldwide.