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Spartech’s food packaging sales suffer Q2 decline

By Joe Whitworth , 15-Jun-2012
Last updated the 15-Jun-2012 at 12:48 GMT

Spartech Corporation’s food packaging sales volume fell for the three months up to 5 May compared to last year contributing to an operating loss of US$1.3m (€1m) in the segment.

The firm’s packaging technologies segment Q2 volume decreased 5% year-on-year leading to operating earnings of $5.2m in 2012 from $6.5m for the three months ending 30 April 2011.

Net sales in the segment, which includes the graphic arts market, increased 3% to $61.3m for the three month period relating to a greater percentage of higher priced products.

Segment focus

In their earnings call discussing the results, Spartech said their focus included expansion of facilities and capabilities in Muncie, Indiana later this year to support multi-layer barrier packaging market and expanding relationships at new brand names to support future growth”.

Total cash flows from operations in Q2 were $15.5m to reduce debt and fund $4.5m focused on building capacity for new specialty product lines including the Muncie, Indiana plant expansion.

Vicki Holt, Spartech's president and chief executive officer, said the firm achieved solid results that exceeded the comparable period in the prior year.

Driven by the continued execution of our strategic plan, our results reflect sales growth, improved margins and our ongoing efforts to manage costs.

“We achieved a margin increase in our Custom Sheet and Rollstock segment, improved volume in the Color and Specialty Compounds segment, and operational efficiencies across the company."

Overall results

Overall net sales increased 6% year-on-year to $298.3m for the second quarter of 2012, reflecting segment increases of 4% in custom sheeting and rollstock, a 2% decrease in packaging technologies and a 15% increase in color and specialty compounding.

A 1% increase in underlying volume was attributed to the construction and transportation to end markets, coupled with increased sales for custom thermoformed applications.

Net earnings were $3.7m compared to $2.8m in the prior year. Excluding special items (restructuring and exit costs), net earnings were $3.7m compared to a net earnings of $3.2m in 2011.

Holt added: "Our focus in the second half of the year remains on executing our strategic initiatives.

“This includes implementing operational improvements to enhance margins, accelerating growth in our specialty products and continuing to reduce our cost structure.

“Two actions that we are undertaking in support of these priorities are the consolidation of two Custom Sheet and Rollstock operating facilities in Canada into one by the end of the year and the expansion of our operations in Muncie, Indiana to support our growth initiatives in higher margin packaging product lines and new customer programs.”

Spartech added that despite the impact of uncertain demand, direct and indirect exposure to European markets, and dynamic raw materials pricing, it will continue to shift toward more specialized and higher margin products.