Bemis Company Reports Q1 Results: Acquisitions Boost Sales
Press release from the issuing company
MINNEAPOLIS--April 23, 2003-- Bemis Company, Inc. today reported quarterly diluted earnings of $0.66 per share for the first quarter ended March 31, 2003, slightly ahead of the prior year's earnings of $0.65 per share. First quarter net sales increased 16 percent to a record $639 million from $553 million in the prior year. Excluding the impact of acquisitions, net sales increased by 6 percent.
"Bemis continues to deliver positive results despite a challenging cost environment," said Jeff Curler, Bemis Company President and Chief Executive Officer. "Steep increases in resin prices during the first quarter are being actively managed in our flexible packaging business segment and we are working closely with our customers to pass along increased resin prices in accordance with the terms of our existing sales agreements. I am also pleased to see organic sales volume growth in our flexible packaging business compared to the first quarter of last year and sequentially compared to the fourth quarter of 2002. New high barrier film structures and features are being introduced to the market, effectively raising the bar for performance in the industry, and our polyethylene product line is entering its seasonally strong second quarter with improved capacity.
"We are disappointed in the first quarter performance of our pressure sensitive materials business after such a strong fourth quarter in 2002. This business has been operating under severe conditions of uncertainty related to generally weak economic conditions and the proposed transaction to sell the business to UPM-Kymmene. We continue to operate this business through a very tough economic environment and expect improvement in the remainder of the year."
Flexible packaging, representing 81 percent of total company net sales, reported net sales of $514 million in the first quarter, an increase of 18 percent compared to the same quarter in 2002. Excluding the impact of acquisitions, net sales increased about 6 percent. Operating profit for the first quarter was $67 million, up 4.1 percent from the first quarter of 2002. As a percentage of net sales, operating profit decreased to 13.0 percent from 14.7 percent a year ago primarily reflecting the impact of the rapid increase in resin prices during the first quarter and higher pension expense for 2003.
"Raw material costs increased rapidly during the first quarter," Curler said. "These increases dampened margins during the first quarter as contractual adjustments to selling prices lagged the raw material price increases. We expect results to improve during the second quarter as selling prices are adjusted to absorb the remaining resin price increases in accordance with defined schedules in our customer agreements. Our polyethylene product line continues to focus on cost control and improving manufacturing efficiencies. New printing capacity has substantially improved our ability to manage the seasonal increase in polyethylene product orders for specialty packaging expected during the second quarter."
Pressure Sensitive Materials
First quarter net sales from the pressure sensitive materials business segment were $124 million, a 5.1 percent increase from the first quarter of 2002. This segment contributed operating profit of $2.5 million or 2.0 percent of net sales for the quarter. These results are lower than the operating profit of $5.0 million or 4.3 percent of net sales recorded in the first quarter of 2002.
On August 21, 2002, the Company announced an agreement to sell its pressure sensitive materials business segment to UPM-Kymmene for $420 million. The European regulatory agency approved the transaction on October 16, 2002. On April 15, 2003, the U.S. Department of Justice filed a civil complaint to block the proposed sale of this business to UPM-Kymmene, citing their concern that the sale would reduce competition in the production of bulk paper labelstock for use in variable information printing and prime labeling.
Commenting on the results of the pressure sensitive materials business segment, Curler said, "The uncertainties of the pending transaction magnify the need for concentration on cost control and performance objectives. The leadership of this business remains focused and we continue to expect approximately 4 to 6 percent annual operating profit as a percentage of net sales in this weak economic environment."
Total debt was $722 million, nearly equal to the year-end balance of $724 million. Debt to total capitalization was 39 percent at March 31, 2003, compared to 40 percent at December 31, 2002.
2003 Earnings Outlook
Bemis expects second quarter 2003 results to range from $0.83 to $0.86 per share. For the full year 2003, management expects to deliver diluted earnings per share in the $3.15 to $3.30 range. These estimates are based upon a full year of operating results for our pressure sensitive materials business segment.
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