Westvaco Reports 2Q Earnings, Paper Segment Sales Down $40 Million
Friday, May 25, 2001
NEW YORK, NY, May 24, 2001 -- Westvaco Corporation (NYSE: W) today reported fiscal second quarter earnings of $18.5 million ($.18 cents per share) after an unusual charge of one cent per share. Earnings for the same period a year earlier were $61.4 million ($.61 cents per share) after unusual and extraordinary items. Second quarter 2001 sales were $921 million compared to $905 million in the second quarter 2000. In the second quarter, a decline in U.S. economic activity and the strong dollar led to weaker demand and lower prices for printing papers. Weaker economic conditions also affected sales and pricing for certain grades of bleached paperboard, most notably products used in food and food service applications. In addition, higher fuel costs and increased maintenance expenses and lower production due to the acceleration of scheduled downtime had an impact on results. "Challenging economic and market conditions underscore the importance of the broad range of strategic initiatives we have in process to reduce costs, create efficiencies, improve financial returns and enhance our platforms for growth," said John A. Luke, Jr. Chairman and CEO. "We are developing improved technology to operate our businesses and channeling research and market development resources into promising new products and markets. With these actions, we are nurturing our leading global positions in markets for packaging, coated papers and specialty chemicals." Westvaco continued to increase its participation in global premium consumer packaging markets during the second quarter. The company acquired TM Limited, a leading European supplier of packaging design and other services to major motion picture studios. The company also entered into an alliance with Checkpoint Systems, Inc., to collaborate on development and commercialization of next-generation radio frequency technology applications for packaging. Last week, Westvaco completed its previously announced acquisition of Alfred Wall AG, one of Europe's leading suppliers of packaging for a wide range of consumer products. With Wall's six plants in Austria, Germany, Poland and the U.K, Westvaco now has 45 consumer packaging operations in nine countries. "Alfred Wall is a great acquisition," said Mr. Luke. "The business is not only growing, it provides us with excellent opportunities to serve global pharmaceutical and cosmetics companies that we now serve in U.S. markets. We also see opportunities to serve Wall's European customers from our operations in the United States and Brazil." Second quarter 2001 operating profit for Westvaco's packaging segment totaled $48 million, down from $87 million in the second quarter of 2000. Segment sales totaled $590 million, compared to $536 million in the same period a year ago. Operating profit declined due to lower demand and prices for bleached and unbleached paperboard and linerboard as well as 30,000 tons of market- and maintenance-related downtime at the company's three U.S. paperboard mills. Sales in consumer packaging markets reflected seasonal slowdown in media and cosmetic markets and order delays from some customers who experienced regulatory and supply chain issues expected to be temporary in nature. Westvaco's Brazilian packaging subsidiary, Rigesa, Ltda., had a strong second quarter, but its operating profit declined compared to the 2000 period, excluding an asset write-off, because of a weaker local currency. Shipments of saturating kraft paper used in decorative laminates declined somewhat, although prices were higher than in the first quarter of 2001 and the second quarter of 2000. For the paper segment, second quarter operating profit was $13 million, compared to $35 million in the second quarter of 2000. Sales totaled $248 million compared to $288 million, reflecting the full impact of earlier price decreases as well as lower demand and increased competition from imports due to currency effects. Chemical segment second quarter operating profit totaled $13 million compared to $18 million in the second quarter of 2000. Sales totaled $79 million compared to $84 million. Results for the activated carbon business reflected higher energy costs and lower sales due to weakness in automotive markets. Sales of ink resins were higher in the quarter, while the segment's fabric dye dispersants business declined due to slower economic activity and increased competition in Far East markets. Second quarter 2001 net income of $.18 per share reflects a $.03 per share gain from the sale of surplus land. Before an unusual charge, net income was $.19 per share in the second quarter of 2001, compared to $.63 cents per share before unusual and extraordinary items in the second quarter of 2000. Second quarter results included a net charge of $.01 per share related to ceasing production in a non-strategic flexible packaging business. In the second quarter of 2000, the company recorded a gain of $.07 cents per share from the sale of a liquid packaging plant previously written down as part of the restructuring charge in 1999 and a charge of $.09 cents per share for the early redemption of higher coupon debt.