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Spartech resilient despite sales decline

By Joe Whitworth , 17-Sep-2012
Last updated the 17-Sep-2012 at 13:52 GMT

Spartech Corporation has recorded a 10% decrease in sales in its Packaging Technologies segment in its third financial quarter (Q3), but said it would continue to shift its product mix towards more specialized and higher margin products.

Net sales were $58.4m for the three months ended 4 August, representing a 3% decrease from price/mix and a 7% decrease in underlying volumes when compared to the same period in 2011.  

Sales volume to the food and consumer packaging market was up slightly, but below expectations due to the delayed launch or commercialization of new programs.  

Pass through costs

The price/mix decrease was related to lower prices from raw material decreases passed through as lower selling prices and a product mix that included a greater percentage of lower priced products.  

Operating earnings excluding special items were $4m in Q3 2012 compared to $6.9m for the three months ended 30 July, 2011.  

The firm said the decrease in earnings could be attributed to the decrease in sales and additional development costs from new food and consumer packaging programs.  

Vicki Holt, Spartech's president and chief executive officer, said: "Although we continue to make progress on new customer programs in the Packaging Technologies segment, the results for the quarter fell short of our expectations due to lower sales in graphic arts and higher development costs for new programs.  

“The growth and financial performance of our Packaging Technologies segment have not scaled up as quickly as anticipated, but we are successfully executing our strategy to expand our customer base and new commercial applications that will benefit the future sales potential of this segment."

EPS comparable with 2011

Spartech said it expected annual earnings per share from continuing operations excluding special items to be comparable with 2011, despite shortfall in Q3 earnings performance related to lower sales and higher new product development costs in Packaging Technologies.

“Although demand in the company's diverse end market segments continues to be volatile and raw materials pricing is dynamic, the company continues to shift its product mix toward more specialized and higher margin products,” said a statement.

The firm said it intended to build on the foundation from the operational improvements executed in repositioning the Packaging Technologies segment for an expanded customer base.

Holt added: “We are on track to complete by calendar year end the two strategic actions we announced last quarter: the consolidation of our Custom Sheet and Rollstock facilities in Canada and the expansion of our Muncie, Indiana packaging facility."