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Bemis' Earnings Beat by a Penny

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Bemis Company, Inc. (BMS - Free Report) reported first-quarter 2013 adjusted earnings of 53 cents per share, up 8% from 49 cents earned in the year-ago quarter. The result beat the Zacks Consensus Estimate by a penny and was at the midpoint of management’s guidance of 50 cents to 56 cents per share. Including facility consolidation and acquisition-related integration charges, earnings per share in the reported quarter stood at 47 cents, up 12% from 42 cents in the year-ago quarter.

Net sales slid 4% year over year to $1.255 billion, ahead of the Zacks Consensus Estimate of $1.303 billion. Excluding the impact of currency, net sales for the quarter declined 1.8% year over year.

Cost of products sold decreased 6% to $1.013 billion in the quarter. Gross profit increased 5% to $242 million. Gross margin expanded 160 basis points to 19.3% in the quarter. Selling, general and administrative expenses inched up 1% to $131 million. Adjusted operating income jumped 10% to $100 million. Operating margin increased 100 basis points to 8% in the quarter.

Segment Performance

Net sales from the U.S. Packaging segment amounted to $746 million, down 2.5% year over year.  Lower sales volumes of packaging for certain non-barrier packaging, somewhat offset by increased unit sales volumes of packaging for products such as refrigerated foods, led to the annual decline. However, adjusted segment operating profit increased 6.5% to $95 million from $90 million reflecting cost savings associated with facility consolidation activities completed in 2012.

Net sales from the Global Packaging segment declined 7% to $368 million as negative impact of currency translation, lower volumes substantially offset the benefits from higher selling prices and acquisitions. Adjusted segment operating profit declined 11% to $25 million due to negative impact of et currency translation.

Net sales from the Pressure Sensitive Materials segment totaled $140 million, a decline of 3% from the year-ago quarter. Segment operating profit was $7.7 million, down 21% from $9.7 million reported in the year-ago quarter. Higher volumes of label products offset lower unit volumes for both graphic and technical products, leading to a less favorable sales mix and lower operating profits during the quarter.

Financial Update

As of Mar 31, 2013, Bemis had cash and cash equivalents of $153 million, up from $114 million as of Dec 31, 2012. Total debt of the company increased to $1.55 billion as of Mar 31, 2013 from $1.43 billion as of Dec 31, 2012. The debt-to-capitalization ratio increased to 48.7% as of Mar 31, 2013 from 46.5% as of Dec 30, 2012.

Total cash flow from operating activities for the quarter was $8.4 million compared with $49 million in the prior-year quarter. During the quarter, Bemis repurchased one million shares for $36 million. Bemis also increased its quarterly cash dividend by 4%, marking its 30th consecutive annual increase.

2013 Outlook

Management expects volume levels in 2013 to be consistent with 2012, along with a generally stable raw material cost environment. Management expects adjusted EPS in the range of 57 cents to 63 cents for the second quarter of 2013. For 2013, EPS is projected to range between $2.30 and $2.45.

The incremental savings of the facility consolidation activities are expected to be around $37 million in 2013. The annualized savings rate of $50 million is expected to be achieved during the second quarter of 2013.  Capital expenditures are estimated at around $175 million in 2013 while cash flow from operations is expected to exceed $430 million.

Our Take

Weak volume, cautious consumer spending environment, sluggish European economic outlook and rising food costs remain major concerns. However, savings from the Bemis cost reduction program due to the closure of unproductive facilities will help offset these pressures.

Neenah, Wis.-based Bemis Company is a global manufacturer of flexible packaging products and pressure sensitive materials sold primarily to the food industry. The company also sells its products to other customers in the chemical, agri-business, medical, pharmaceutical, personal care, electronics, automotive, construction, and graphic industries. Bemis currently retains a Zacks Rank #3 (Hold).

Peer Performance

Among the peers of Bemis Company, Packaging Corporation of America (PKG - Free Report) posted first-quarter earnings per share of 62 cents, up 48% from 42 cents in the year-earlier quarter and beat the Zacks Consensus Estimate by 6 cents. Graphic Packaging Holding Company (GPK - Free Report) reported earnings per share of 10 cents, a 67% year-over-year increase and ahead of the Zacks Consensus Estimate of 8 cents. On the other hand, Sonoco Products Co.’s (SON - Free Report) first-quarter 2013 adjusted earnings of 50 cents per share declined 4% from the prior-year quarter’s earnings of 52 cents per share, missing the Zacks Consensus Estimate of 53 cents.

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