Bemis Company, Inc. (BMS) reported third quarter earnings of 48 cents per share, above the Zacks Consensus Estimate of 39 cents and year-ago EPS of 43 cents. Earnings growth in the quarter was primarily driven by strong operating performance in the Flexible Packaging business, helped by improved sales mix and successful cost controls by the company.
Quarterly sales dropped 8.7% year over year to $898.9 million. The second quarter acquisition of the South American rigid packaging operations of Huhtamaki Oyj contributed 1.9% to the third quarter sales. This was more than offset by a negative currency translation effect of 3.6%. The remaining 7.0% decline in sales came from lower volumes and selling prices, partially offset by improved sales mix.
Sales in the Flexible Packaging segment were down 7.5% compared to last year, as positive contribution from acquisition and improved sales mix were more than offset by lower unit volumes, decline in selling prices and unfavorable foreign currency translation impact. However, the segment posted a 24% improvement in operating profit, reflecting successful cost management and increased sales volumes in value-added product lines.
Pressure Sensitive Materials segment sales fell 14.6% due to lower volumes in all the product lines and a negative foreign currency translation effect. The segment’s operating profit was down 66.7% as a result of lower volumes and unfavorable currency effects.
During the quarter, Bemis signed a definitive agreement to acquire the Food Americas operations of Alcan Packaging from Rio Tinto plc (RTP), for $1.2 billion. Bemis will acquire 23 Food Americas flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina and New Zealand. The acquisition, which is expected to close by the end of 2009 or early 2010, will be accretive to the company’s earnings in 2010.
In order to raise capital for the acquisition, Bemis issued of $800.0 million of public bonds. The company raised another $203 million through a public stock offering of 8.2 million common shares. As a result, the company’s debt-to-capitalization ratio stood at 40.4% at the end of the reported quarter, compared to 26.3% at the end of the previous quarter.
Based on its year-to-date operating performance, Bemis raised its earnings guidance for the full year. The company now expects 2009 EPS in the range of $1.81-$1.86, compared to the previous guidance of $1.68-$1.75. For the fourth quarter, the company anticipates EPS between 40-45 cents, compared to 33 cents reported in the fourth quarter of previous year.
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