Sealed Air Corporation (SEE - Free Report) has announced price increase for majority of its Food Care division’s North American products in the range of 5-8% to combat elevated costs for major petrochemical raw materials. The price hike will be effective from Oct 2.
According to Sealed Air, persistent spike in costs of key raw materials, including a 31% rise in the price of polyethylene since 2016, led to the price hike. Notably, the company has raised prices by 5% on all shrink bags, rollstock products, food films, and vertical pouch packaging. The company has also increased the prices for unpadded solid plastic trays by 6% and pre-padded solid plastic trays by 8%.
The most important raw materials utilized by Sealed Air are polyolefin and other petrochemical (PE)-based resins and films. These raw materials represented around one-third of consolidated cost of sales in 2016.
The prices for these raw materials are cyclical and depend on fluctuations in prices of petrochemical-based raw materials and energy. Further, the recent tropical storms, Harvey and Irma, have adversely affected the production and delivery capabilities of refineries and natural gas and petrochemical suppliers. These factors lead to increased costs of raw materials and in turn, may hurt revenues and profit margins of Sealed Air.
The above discussed action is in sync with Sealed Air’s effort to minimize the cost adjustments. The move will also assist the company to continue delivering equally valuable and innovative products to customers.
Sealed Air’s topline is likely to grow on the back of enhanced demand for its core product portfolio, recently-introduced innovations, and accelerated growth in the global protein market, along with the e-commerce sector. In addition, the company believes market differentiation of revolutionary innovation has been gaining significant traction in each of its divisions. In Food Care, customer interest continues to increase for the next generation target technology-Optidure.
However, the company has underperformed the industry it belongs to in the past year, partly impacted by escalating raw material costs and lower volumes in Latin America. The stock has dipped 8.8%, while the industry recorded growth of 9.6% during this time frame.
Sealed Air currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the industrial product space include EnPro Industries, Inc. (NPO - Free Report) , Lawson Products, Inc. (LAWS - Free Report) and Komatsu Ltd. (KMTUY - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EnPro Industries has an expected long-term earnings growth rate of 15.9%.
Lawson Products has an expected long-term earnings growth rate of 15%.
Komatsu has an expected long-term earnings growth rate of 12.7%.
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