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Net income falls for paper packaging giants

By Joe Whitworth , 07-May-2012
Last updated the 07-May-2012 at 12:02 GMT

Graphic Packaging and RockTenn both saw net incomes fall year-on-year but predicted better times ahead despite tough market conditions.

Graphic Packaging’s Q1 net income fell 35% to US$17.3m (€13.3m) as the company said it was negatively impacted by $10.1m in higher income tax expenses.

RockTenn’s Q2 net profit fell to $31.9m (€24.5m), as $27m was spent on the closure of a containerboard mill in Canada and $8.7m of pre-tax integration and acquisition costs relating to Smurfit Stone.

Graphic Packaging Q1

For Graphic Packaging, net sales increased 6.7% year-on-year due to favourable volume/mix and higher pricing passed onto customers.

Paperboard packaging sales comprised 82.8% of total first quarter net sales, reflecting higher volumes in food and consumer packaging and inflationary price recovery.

Net sales in the flexible packaging segment increased 17.8% compared to Q1 of 2011 because of the addition of Delta Natural Kraft and Mid-America Packaging in December last year.

Graphic Packaging David W. Scheible, president and CEO, said: “Although end-consumer demand remains sluggish, share gains in consumer products along with new product introductions drove increased sales.

Mill production was significantly higher than a year ago and continuous improvement initiatives focused around energy, fixed costs and operating efficiencies continued to drive lower costs.”

RockTenn results

RockTenn reported net income had fallen 14% to $31.9m but net sales for the three months ending 31 March rose by nearly $1.4m because of the Smurfit-Stone takeover last year.

Total segment income was up 75% to $164m, driven by the new business segment.

The recycled fibre business generated low single-digit EBITDA margins, but the company described export and domestic pricing as being at: “historic lows, which compresses the margin opportunities we have in our export business.”

The Smurfit-Stone acquisition resulted in 1.6m tons more containerboard and paperboard being produced but maintenance saw production drop 124,000 tons from last quarter.

Income from corrugated packaging was adjusted to eliminate $6.7m of pre-tax losses at the closed containerboard mill in Quebec, to $75.4m with an EBITDA margin of 11.8% for the second quarter.

The consumer packaging segment income was $84.4m due to increased display sales, higher selling prices, lower fibre and energy costs that were partially offset by higher chemical and freight costs.

Speaking to analysts, James A. Rubright, RockTenn chairman and CEO, said: “The weak market conditions we faced in the maintenance downtime we took in the quarter had the greatest impact on our corrugated segment, where sequential quarter adjusted earnings were down $0.31 per share, and that more than offset the $0.10 per share in other earnings improvements.