Crown Holdings, Inc. CCK reported first-quarter 2015 adjusted earnings of 53 cents per share, declining 7% from 57 cents in the year-ago quarter. Earnings, however, surpassed the Zacks Consensus Estimate of 51 cents.
On a reported basis, earnings increased to 32 cents per share from 17 cents in the year-ago quarter.
Operational Update
Net sales increased marginally to $1,997 million from $1,993 million in the year-ago quarter, primarily driven by the contribution of Mivisa and Empaque acquisitions, partly offset by unfavorable currency translation impact. Revenues, however, lagged the Zacks Consensus Estimate of $2,082 million
Cost of products sold remained flat year over year at $1.66 billion. Gross profit decreased 3.7% to $286 million and gross margin contracted 60 basis points to 14.3% in the quarter, both on a year-over-year basis.
Selling, general and administrative expenses declined 5.8% year over year to $98 million. Adjusted operating profit dropped 4% to $192 million from the year-ago quarter and operating margin decreased 40 basis points to 9.6%.
Segment Performance
Net sales from the Americas Beverage segment were $617 million, up 12.4% from $549 million in the year-ago quarter. Segment operating profit also rose to $85 million from $75 million on a year-over-year basis.
The North America Food segment sales went down 10.6% year over year to $160 million. Operating earnings decreased 17% year over year to $24 million.
The European Beverage segment sales dropped 16.5% year over year to $324 million. Consequently, operating income plunged 35.6% year over year to $38 million.
Revenues in the European Food segment grew 15.5% year over year to $431 million. Segment operating profit surged 61.5% to $42 million from $26 million in the year-ago quarter.
Revenues in the Asia Pacific segment went up 4% year over year to $310 million. Operating profit also rose to $35 million from $34 million in the year-ago quarter.
Financial Update
Crown Holdings ended the quarter with cash and cash equivalents of $280 million, up from $267 million in the prior-year quarter. Cash flow used in operating activity in the first quarter of 2015 was $290 million, compared with $495 million in the year-ago period. Total debt of the company increased to $6 billion as of Mar 31, 2015 compared with $4.1 billion as of Mar 31, 2014.
On Feb 18, Crown Holdings completed the acquisition of Dutch brewer Heineken’s Mexican packaging business, EMPAQUE. The $1.225 billion acquisition will not only help Crown Holdings to expand its presence in the growing Mexican market but also to fortify its global beverage packaging business, while contributing between 15 to 20 cents per share to its 2015 earnings.
The company also announced the construction of a new beverage can plant in Monterrey, Mexico to meet the growing demand for both beer and non-alcoholic beverages in the market.
Our Take
Crown Holdings will benefit from a rise in global beverage can demand. Integration of Mivisa and acquisition of EMPAQUE will also aid growth. However, significantly elevated aluminum premiums in Europe and political conflict in parts of the Middle East remain headwinds for the company.
Philadelphia-based Crown is a leading supplier of packaging products to consumer marketing companies. The company manufactures aluminum beverage cans, food cans, aerosol cans and other packaging products.
Crown Holdings currently holds a Zacks Rank #4 (Sell). Stocks to consider in the sector include AO Smith Corp. AOS, Astec Industries, Inc. ASTE and Berry Plastics Group, Inc. BERY. All these stocks carry a Zacks Rank #2 (Buy).
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