Westvaco Net Earnings Decline 47 Percent, DVD Segment Shows Strength
Press release from the issuing company
NEW YORK- Aug. 22, 2001--Westvaco Corporation today reported fiscal third quarter earnings of $28.0 million ($.28 per share).
Earnings for the quarter included a nonrecurring tax benefit of $.05 per share. Earnings for the same period last year were $53.6 million ($.53 per share) after a restructuring charge of $.16 per share. Third quarter 2001 sales were $947.8 million compared to $928.0 million in the third quarter of 2000.
In the third quarter, continued weakness in U.S. economic activity resulted in lower demand and prices for printing papers and some grades of paperboard. The strong U.S. dollar also affected printing paper markets, resulting in higher imports and additional pressure on prices. During the quarter, the company lowered production in response to weaker demand. Higher energy prices also contributed to lower earnings in comparison to last year's third quarter.
"Markets for printing papers and paperboard continued to be weak,'' said John A. Luke, Jr., Chairman and CEO. "At the same time, we are seeing strength in some of our newer markets, especially markets for entertainment packaging and asphalt emulsifiers. We continue to see great value in the important new business platforms which we are building, and we are also focused on new technology, new products and cost reduction programs designed to position us well for long-term growth and strong financial performance in all of our businesses.''
Last week, Westvaco announced the acquisition of Poly-Matrix, North America's largest producer of specialty plastic components for DVD, CD and other entertainment packaging. Poly-Matrix provides a U.S. base to leverage the capabilities of Westvaco's injection-molded plastic packaging operations in Europe, which manufactures and licenses the world's best selling standard DVD package.
"In addition to increasing Westvaco's participation in rapidly growing DVD markets, Poly-Matrix positions us to create new high-value plastic packaging for pharmaceutical and cosmetics markets,'' said Mr. Luke. "Broadening our product offering is key to our strategic vision for our global consumer packaging platform.''
Third quarter 2001 operating profit for Westvaco's packaging segment totaled $54.1 million, down from $87.8 million in the third quarter of 2000. Segment sales totaled $610.2 million, compared to $547.9 million in the same period a year ago. Operating profit declined due to lower demand and prices for bleached and unbleached paperboard as well as 53,000 tons of market-related downtime at the company's three U.S. paperboard mills. The company's consumer packaging business benefited from increased sales of cosmetics and entertainment packaging. Consumer packaging results also reflect reduced sales in U.S. tobacco markets and weaker than expected results in pharmaceutical packaging. Westvaco's Brazilian subsidiary, Rigesa, Ltda., continues to see good demand for most of its value-added products, but earnings for the quarter reflect currency devaluation and a weaker economy. Markets for saturating kraft paper used in decorative laminates are weaker in the U.S. and overseas primarily due to weaker economies.
For the paper segment, third quarter operating profit was $8.5 million, compared to $34.6 million in the third quarter of 2000. Sales totaled $245 million compared to $285 million in the third quarter of 2000. Segment results reflect sharply lower demand and prices as a result of the slowdown in U.S. economic growth, increased competition from imports due to currency effects and market-related downtime of about 12,500 tons.
Chemical segment third quarter operating profit totaled $17.5 million compared to $16.5 million in the third quarter of 2000. Sales totaled $86.4 million compared to $88.3 million in the third quarter of 2000. Segment performance improved due to increased sales of ink resins, coupled with improved cost efficiency, as well as increased sales of asphalt emulsifiers. Results for the activated carbon business were weaker, reflecting higher energy costs and lower sales to automotive markets. Fabric dye dispersant sales were lower due to slower economic activity and increased competition in the Far East.
Third quarter 2001 net income of $.28 per share reflects a $5.3 million, or $.05 per share, benefit resulting from increased utilization of domestic research tax credits and foreign tax credits. Results for the third quarter of 2001 also include a gain of $.04 cents per share from the sale of surplus land. In the third quarter of 2000, net income of $.53 per share reflected a $.16 per share restructuring charge.
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