AptarGroup Inc. (ATR)
Q2 2009 Earnings Call
July 17, 2009 9:00 am ET
Peter Pfeiffer - President & Chief Executive Officer
Ralph Poltermann - Executive Vice President & Treasurer
Steve Hagge - Executive Vice President & Chief Operating Officer
Bob Kuhn - Executive Vice President & Chief Financial Officer
George Staphos - Bank of America
Ghansham Panjabi - Robert Baird
Chris Manuel - KeyBanc
Meggan Friedman - William Blair
Greg Halter - Great Lakes Review
Mike Hamilton - RBC
Claudia Hueston - J.P. Morgan
Brian Griffin - Morgan Dempsey
Tim Burns - Cranial Capital
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Thank you, Juan. 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 in 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’d now like to turn the conference call over to Peter.
Good morning, everyone. I would briefly comment on our overall results and outlook and then provide some comments on our Beauty & Home segment. Steve will then provide insight in our Closures and Pharma segments and Bob will review our financials.
Focusing on the quarter overall, we are encouraged by the fact that each of all business segments continued to be profitable and second quarter earnings overall increase from the first quarter of this year. Relative to the prior year, business conditions continued to be challenging and our sales were adversely affected by the stronger dollar and decreases in demand, particularly in our Beauty & Home segment. We are continuing our costs saving activities in an effort to offset as much as possible the negative impact of the weak demand on our quarterly results.
Looking at income on a segment basis compared to the prior year. Beauty & Home segment’s income decreased from both on an absolute dollar and percentage of sales standpoint. Despite lower sales and restructuring charges the Closures segment income increased from both on absolute dollar and percentage of sales standpoint and our Pharma segment income decreased from an absolute dollar standpoint, mainly due to stronger dollar, but it increased as a percentage of segment sales.
We previously announced the consolidation of two dispensing closures manufacturing operations in France, as well as several sales offices in North America and Europe. We recorded some expenses relating to these activities in the quarter and most of them were recorded by the Closures segments. Our visibility continuous to be very limited, on a positive note, we saw some increases in demand late in the second quarter. This leads us to believe that the situation appears to be stabilizing and looking forward, we are cautiously optimistic.
Turning now to our Beauty & Home segment; reported second quarter sales for the segment decreased 26%. Changes in exchange rates adversely affected sales by 9%. Excluding the currency changes sales declined by 17% in the quarter mainly due to the softness in the fragrance/cosmetic market.
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 rates, sales to the fragrance/cosmetic market decreased 24%. Sales to the personal care market decreased 5% and sales to the household market decreased 4%. Continued underutilized capacities due to the drop in demand caused a decline in the Beauty & Home segment’s income from the prior year.
Briefly turning to some examples of new applications in our products, the use of convenient dispensing system on private label products continues to expand. For example, our lotion pump was introduced on a new moisturizing daily lotion by CVS. Our Bag-On-Valve systems were launched on both Self-Tanning spray, as well as an aloe vera moisturizing spray by Ultra and our Bag-On-Valve system with specialized actuator were launched on both a sunscreen, as well as an ultra-sheer sunblocks under Target’s private label brand called Up & Up.
I would now like to turn the call over to Steve.
Thanks, Peter and good morning, everyone. I’ll provide my comments and then turn the call over to Bob to review our financial results. First, looking at the Closures segment, compared to the prior year, second quarter reported sales decreased 15%, changes in exchange rates negatively impacted sales by about 9%.
An acquisition made in the fourth quarter of last year accounted for 2% of sales. So excluding currency changes in acquisitions, sales declined by 8% in the quarter and all of this decline was due to the pass through of our lower resin cost.