Weak Chinese exports, challenging meat protein production trends and slack European demand led to ‘disappointing’ Q2 results for Sealed Air.
The volume decline was largely attributed to Food Packaging and Diversey businesses, Sealed Air CEO and president William V. Hickey said.
In an analyst call discussing the results Hickey added the Q2 results fell far short of expectations.
“Persistent weakness in our customers’ end markets and cautious order patterns became more challenging in the latter part of the quarter as European economic conditions further declined and our food businesses navigated through challenging protein production trends.”
However, he added Latin America and Asia was a positive: “Latin America organic sales rose 11% on a pro forma basis led by 19% higher organic sales in Food Packaging due to customer protein production strength both in the Northern cone of Latin America and in Brazil.
“Additionally, Food Packaging showed strength in Asia with 12% higher organic sales. Protective Packaging did see a slowing pace of growth in Asia primarily related to slowing export markets with organic sales up a modest 3% to 4% in the quarter.”
In the Food Packaging segment sales were flat for the period ending 30 June, with 3% higher price/mix from Latin and North American pricing actions.
Volumes increased 1% led by 7% volume growth in Latin America, which was muted by 2% lower volumes in both North America and EMEA on lower customer production rates.
Operating profit decreased 26% to $46m, or 9.3% of net sales, due to unfavourable product mix and manufacturing consolidation cost activities.
The Food Solutions segment sales decreased 6% with steady year-over-year price/mix performance and 2% lower volumes.
The decline was driven by lower equipment sales in EMEA due to a challenging 2011 comparison, timing of orders in 2012, and weakening European economic conditions.
These factors were partially offset by 4% constant dollar sales growth in North America from positive price/mix and higher volumes.
Sales for the Protective Packaging segment decreased 3% with slightly higher volumes and relatively steady price/mix performance compared with the prior year.
There was a 2% higher volume reported in North America due to the gradual economic recovery and strength in new solutions targeting e-commerce applications, which was offset by 3% lower EMEA volumes because of the weakening economic conditions in Europe.
Reported and adjusted operating profit decreased 7% to $43m, or 12.5% of net sales.