Sealed Air Corporation (SEE) has reported its fiscal 2011 second quarter results posting an EPS of 37 cents, a penny below from the year-earlier quarter.
The quarter noted costs related to the proposed acquisition of Diversey of 3 cents per share, which was a one-time item. Excluding this, the adjusted EPS amounted to 40 cents versus 35 cents in the year-ago quarter and above the Zacks Consensus Estimate of 38 cents.
Total revenue in the reported quarter increased 11% year over year to $1.21 billion in the quarter, slightly above the Zacks Consensus Estimate of $1.20 billion. The successful implementation of recent pricing actions primarily in North America and Europe contributed 3% to the sales.
Costs and Margins
Cost of sales increased 13% year over year to $888.3 million in the reported quarter. Gross profit was up 8% year over year to $324.0 million; however, gross margins decreased 90 basis points year over year to 26.7%.
Marketing, administrative and development expenses soared 10% year over year to $188.6 million in the quarter. Operating profit at $129.1 remained unchanged from the prior-year quarter. However, operating margins declined 130 basis points year over year to 10.6% in the reported quarter.
Segmental Performance
Food Packaging: The segment reported net sales of $501.9 million, up 9% on the year over year basis, or 4% on a constant dollar basis, with 3% contribution from higher price/mix. Volumes contributed 1%, driven by a 4% increase in Europe primarily to higher equipment demand and a 1% increase in North America representing solid U.S. volume growth which was partially offset by lower volumes in Canada.
Operating profit was up 8% year over year to $62 million during the quarter.
Food Solutions: The segment reported total revenue of $261.9 million, up 15% year over year in the reported quarter. The sales increased 7% on a constant dollar basis, with a 4% contribution from higher price/mix largely in North America and Europe. Volumes were up 3% mainly due to a 10% increase in Europe, which was partially offset by a 7% decline in North America.
Income from operations increased 9% year over year to $25 million in the reported quarter.
Protective Packaging: The segment’s sales amounted to $353.5 million, up 10% year over year. On a constant dollar basis sales increased 5%, with a 4% contribution from higher volumes, led by increased demand in North America and Asia-Pacific primarily due to expanded customer relationships and higher demand for new solutions. Price-mix was up 1%.
Operating income increased 2% year over year to $46 million, in the reported quarter.
Other: This segment reported net sales of $95.3 million versus $81.2 million in the year-earlier quarter. On a constant dollar basis sales increased 10%, along with a 9% contribution from volumes, driven by increased demand in Europe and Asia-Pacific for both Specialty Materials and Medical Applications solutions. Price/mix was higher by 1%.
Operating profit declined to $2 million compared with $3 million due to spending on a recently acquired technology-based venture.
Financial Position
As of June 30, 2011, cash and cash equivalents increased to $705 million from $662.2 million as of June 30, 2010.
Free cash flow at the end of the second quarter was $61.5 million, declining from $180.7 million at the end of the prior-year period.
As of June 30, 2011, the debt-to-capitalization ratio improved to 54% from 57% as of March 31, 2011 and 59% as of December 31, 2010.
Diversey Acquisition Announcement
Sealed Air recently announced that it will acquire Diversey Holdings, Inc., a leading solutions provider to the global cleaning and sanitization market, in a transaction valued at approximately $4.3 billion.
The deal is still subject to the satisfaction of customary closing conditions and certain foreign regulatory approvals.
Outlook
Management reaffirmed its full year EPS guidance in the range of $1.75 to $1.85, not including the effect of the above acquisition and Sales growth in the range of 5% to 7%. Capital expenditure is now projected in the range of $225 to $275 million. We currently have a Zacks #3 Rank (short-term Hold rating) on the stock.
Elmwood Park, New Jersey-based Sealed Air Corp. is a major specialty packaging services provider catering to a diverse set of end-markets. The company operates in the United States and in 50 other countries.The company reports its operations in four segments: Food Packaging, Protective Packaging, Food Solutions and the Other. Sealed Air competes with the likes of Bemis Company, Inc. (BMS), Sonoco Products Co. (SON) and privately held Printpack, Inc.
BEMIS (BMS): Free Stock Analysis Report
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