RockTenn’s Profit Slides in 4Q (BLL) (BMS) (IP) (RKT)

Zacks

RockTenn’s (RKT) fourth-quarter fiscal 2012 earnings were $1.39 per share, beating the Zacks Consensus Estimate of $1.37. Results declined from the year-ago quarter’s earnings of $1.70 per share.

The quarter excluded expenses related to restructuring and other as well as operating losses and transition costs stemming from plant closures of 19 cents per share, and loss on extinguishment of debt of 6 cents per share.

The year-ago quarter noted expenses related to restructuring and other as well as operating losses and transition costs stemming from plant closures of 35 cents per share, non-cash loss on Canadian intercompany note of 15 cents per share and expenses due to acquisition inventory step-up of 3 cents per share.

Including these, earnings in the reported quarter were $1.14 per share compared with the prior year quarter’s earnings of $1.17.

Operating Performance

Total revenue declined 4.5% year over year to $2.354 billion, missing the Zacks Consensus Estimate of $2.395 billion. The top-line decreased due to lower sales in all the segments.

Cost of goods sold declined 4.7% to $1.93 billion. Gross profit also dropped 3.3% to $419.9 million. Selling, general and administrative expenses increased 8% to $242.4 million. Adjusted operating income decreased 13.4% to $208.8 million.

Segmental Performance

Corrugated Packaging Segment: Net sales in the segment declined 1.8% to $1.6 billion in the quarter. Adjusted operating income dropped 26.6 % to $112.8 million, thereby contracting adjusted operating margin by 230 basis-points (bps) to 7.1%.

Consumer Packaging Segment: The segment’s net sales edged down 1.1% to $660.6 million. Operating income rose 20.3% to $98.8 million. Consequently, operating margin expanded 270 bps to 15%.

Recycling: Net sales in the segment fell 25.7% to $264.4 million. Operating loss in the quarter was $2.8 million compared with an income of $5.3 million.

Financial Position

Cash and cash equivalents declined to $37.2 million as of September 30, 2012, from $41.7 million as of September 30, 2011. Cash provided by operating activities were $115.3 million for fourth-quarter fiscal 2012, compared to $122 million in the year-ago comparable period.

Fiscal 2012 Performance

RockTenn’s full year adjusted earnings were $4.48 per share, beating the Zacks Consensus Estimate of $4.47. Including special items, earnings were $3.45 per share compared to $2.77 in fiscal 2011. Total revenue improved 70.5% year over year to $9.208 billion, missing the Zacks Consensus Estimate of $9.268.

Our View

RockTenn retains a short-term Zacks #1 Rank (Strong Buy). The company faces tough competition from leading companies like International Paper Company (IP), Bemis Company, Inc. (BMS) and Ball Corporation (BLL).

RockTenn is one of the leading integrated manufacturers of corrugated and consumer packaging and recycling solutions in North America. It operates in the U.S., Canada, Mexico, Chile, Argentina and China.

BALL CORP (BLL): Free Stock Analysis Report

BEMIS (BMS): Free Stock Analysis Report

INTL PAPER (IP): Free Stock Analysis Report

ROCK-TENN CO (RKT): Free Stock Analysis Report

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