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Food packaging business ‘back on track’, says Sealed Air

By Joe Whitworth , 05-Nov-2012

Sealed Air claimed its food packaging business is ‘back on track’ compared to Q2 despite dropping $20m in net sales and nearly $7m in operating profit year-on-year.

In the three months results for the period ending 30 September Q3 food packaging net sales were $509.8m compared to $529.8m in 2011 and operating profit was $68.5m, down from $75.4m.

In Q2 net sales for food packaging were $499.7m and operating profit was $46.4m.

Sales in the segment for this quarter were 2% higher on a constant dollar basis or decreased 4% on a reported basis.

It achieved 2% higher volumes, led by 8% volume growth in Latin America and positive volume growth in all other regions but prior and current pricing actions were offset by unfavorable product mix, primarily in North America.

Adjusted operating profit decreased 7% to $70m, or 13.6% of net sales, compared with $75m, or 14.2% of net sales, in 2011.

On a sequential basis, third quarter operating profit and margin results were significantly higher due to improved operational execution, tight control of expenses and lower petrochemical based raw material costs.

Jerome A. Peribere, president, chief operating officer and director, said: “The key takeaway for Food Packaging is that the business is back on track. This is most evidenced by how we re-established our third quarter adjusted operating profit margin back to 13.6%. This compares to the 9.7% margin we reported in the second quarter.”

Fluid packaging growth

In the Food Solutions segment sales increased 1% on a constant dollar basis with 2% higher volumes led by strength in fluids packaging in North America but Q3 sales decreased 4% on a reported basis.

Adjusted operating profit increased 10% to $32m, or 12.7% of net sales, on lower petrochemical based raw material costs and solid operational performance. Reported operating profit increased 9% to $32m, or 12.5% of net sales, compared with $29m in 2011.

Peribere said: “Our volume performance was largely driven, in fact, by a 21% volume increase in our vertical pouch packaging solutions for fluid and semi-fluid product in North America, due to a record tomato crop this year and the right solutions to capitalize on these favorable trends.”

Weak regions

He added that Europe, Middle East and Africa remain the weakest region for Protective Packaging.

In the segment sales decreased 1% on a constant dollar basis, or 5% on a reported basis, with relatively steady volume performance and 1% lower price/mix.

Sealed Air continued to achieve 2% higher volumes in North America due to expanded market presence and strength in new solutions targeting e-commerce applications. This growth was partially offset by 2% lower EMEA volumes due to weak economic conditions in southern Europe.

On an adjusted basis, third quarter 2012 operating profit was $49m, or 14.3% of net sales, due to expense control and benefits from our innovative, more sustainable film structures.

William V. Hickey, chairman and chief executive officer, said: “While we remain confident in the underlying fundamentals of our business and achieved good momentum in the third quarter, uncertainty in end market demand and relative customer confidence to drive near-term capital investment keeps us cautious for the fourth quarter.”