AptarGroup Inc. (ATR)
Q3 2009 Earnings Call
October 15, 2009; 8:00 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
Ghansham Panjabi - RW Baird
George Staphos - Bank of America
Claudia Hueston - J.P. Morgan
Meggan Friedman - William Blair
Chris Manuel - KeyBanc
Chip Dillon - Credit Suisse
Jason Rogers - Great Lakes Review
Mike Hamilton - RBC
Previous Statements by ATR
» AptarGroup Inc. Q2 2009 Earnings Call Transcript
» AptarGroup, Inc. F1Q09 Earnings Call Transcript
» AptarGroup, Inc. Q4 2008 Earnings Call Transcript
Thank you, Devin. 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 Mr. Pfeiffer.
Good morning, everyone. I would comment on our overall results and outlook and then briefly comment on acquisition to be completed in South America. I will then provide insights in our Beauty & Home segments. Steve will follow with me with his comments our Closures and Pharma segments, and then Bob will review our financials.
Focusing on the quarter overall, we are encouraged by the sequential improvement in consolidated third quarter earnings over the second quarter of this year. Relative to the prior year, business conditions continued to be challenging. Our overall results were adversely affected primarily by the strong dollar, and weakness in our Beauty & Home segments, largely due to the continued self demand from fragrance cosmetic market.
The availability of capacity in the markets allows our customers to place orders with relatively short lead times. As a result, our visibility continues to be very limited. Several customers have mentioned to us that they are of the opinion that inventory levels have bottoming out and this is validated in some cases by our receipt of emergency orders.
In light of the caution and conservatism that still exists in the market, we still believe that the recovery in demand will be more of a granular nature than a quick snip back. We mentioned in the press release that we completed the acquisitions of Covit do Brasil. Covit do Brasil is a fairly small, but growing company that develops and supplies anodized aluminum parts primarily to the fragrance/cosmetic market. Their stamping and anodizing capabilities will allow us to reinforce our product offerings and better serves our customers in the fast growing South American market.
Turning now to our Beauty & Home segment; we had sequential improvement from the second quarter in both sales and income for Beauty & Home segment. Compared to the prior year reported third quarter sales decreased 12%. Changes in exchange rates adversely affected sales by 5%. Excluding currency changes sales declined by 7% in the quarter, mainly due to the softness in the fragrance/cosmetic market.
Our customers continue to be very cautious and we experienced weak demands in each market served by the Beauty & Home segment. Excluding changes in exchange rates, sales to the fragrance/cosmetic markets decreased 15%, sales to the personal care market increased 9% and sales to the household market increased 4%.
Reorganization charges of $1.2 million pretax and the continued underutilized capacity due to the drop in demand from the fragrance/cosmetic market were the main cause of the decline in the Beauty & Home segment’s income from the prior year.
On a positive note, flu virus transmission concerns have led to an increase in demand for of our Beauty & Home segment lotion pumps, which are used to dispense antibacterial or liquid soap products.
Briefly turning to some products, Daikin Valve household system was launched in US on Aquafresh and SensiTile oil care products that transformed from a gel into a foam during use. Our twist lock actuators were introduced on several types food sprays under the Lotrimin brand name. We continue to see interest in our dispensing systems for private labeled products.
I would like now to turn the call over to Steve.
Thanks Peter and good morning everyone. I will 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 declined 12%. Changes in exchange rates negatively impacted sales by about 5%, and acquisition made in the fourth quarter of last year accounted for about 2% of sales.