Flexible plastics packaging powerhouse Bemis Company Inc. (BMS) acquired Mayor Packaging, a privately-owned converter of consumer and specialty flexible packaging. Financial terms of the transaction were not disclosed.
Mayor is based in Hong Kong but in 2008 it shifted its film conversion processing to a new purpose-built facility in Dongguan, China.
For Bemis, headquartered in Neehah, Wisconsin and one of the few publicly traded plastics processors in the flexible packaging industry, the move to buy Mayor is part of its ongoing entry strategy for Asia. The high barrier, flexible packaging operation in Dongguan serves food and consumer product companies around the world.
The addition of Mayor Packaging, will add to Benis’ existing portfolio a talented management team and an excellent workforce, providing it a strong platform to expand in the future.
Last week, Bemis reported second quarter 2011 earnings of 51 cents per share compared with 58 cents per share in the year-ago quarter. Reported earnings were in line with management’s guided range of 48 cents to 54 cents per share but exceeded the Zacks Consensus Estimate by a penny.
The increase in raw material prices, particularly specialty resin, adversely affected the company’s financial performance during the quarter.
Net sales improved 7.9% year over year to $1.37 billion, including a favorable impact of 3.4% from currency translation. Net sales in the quarter marginally missed the Zacks Consensus Estimate of $1.38 million.
Gross profit increased 1.6% year over year to $234 million, despite higher cost of products sold (9.6% to $1.14 billion). Operating income, however, declined 6.4% to $105.3 million.
As of June 30, 2011, Bemis had cash and cash equivalents of $72.7 million compared with $60.4 million as of December 31, 2010. Total debt of the company was $1.46 billion at the end of the second quarter of 2011 versus $1.29 billion of debt at the end of the fourth quarter in 2010.
Cash flow from operating activities was $82.9 million in the first half of 2011 compared with $128.7 million in the year-ago period.
Bemis purchased 3.8 million shares of its common stock for $123.1 million in the first six months of the year. Thus, as of June 30, 2011, the company had 5.7 million shares remaining under its current authorization.
Management expects adjusted EPS in the range of 56 cents to 61 cents for the third quarter of 2011. In addition, adjusted earnings per share for full year 2011 are projected between $2.08 and $2.18. Capital expenditures are expected to be approximately $125 million for fiscal 2011.
Bemis has adopted a disciplined business model to ensure efficiency and effectiveness in the face of weak demand experienced in the last two years. This initiative was taken to reduce operational costs and encourage savings and investments in prospective opportunities, and to repay debt if the situation so permits.
Moreover, the company spends heavily on research and development to live up to the expectation of its existing customers as well as to attract new potential customers. R&D expense was $17.6 million during the first half of 2011 compared with $14.3 million during the same period in 2010.
However, rising raw materials prices, especially polymer resins, have significantly impacted the company through increased costs, thereby putting downward pressure on its margins.
Further, Bemis has faced deterioration in its liquidity position, with reduced cash flow and rising debt balance.
Thus, keeping these in mind, the shares of Bemis Co. Inc. are maintaining a Zacks #5 Rank, which translates into a short-term Strong Sell rating. Alongside, the shares also have a Neutral recommendation for the long term.
The company competes with Avery Dennison Corporation (AVY).
AVERY DENNISON (AVY): Free Stock Analysis Report
BEMIS (BMS): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment