Pactiv Corp. (PTV) reported earnings from continuing operations of 38 cents per share for the first quarter of 2010, falling short of the Zacks Consensus Estimate of 41 cents.
 
Revenue rose 1% to $777 million from $766 million, reflecting the effects of 8% volume growth and 7% lower pricing, which had trended downward with lower raw material costs in 2009.
 
Quarterly gross margin was 27.9% compared with 35.4% in 2009 as unfavorable spread between selling prices and raw material costs offset higher volume. Compared to last year’s figures, polyethylene costs rose 34% while polystyrene costs were up 55% in the quarter.
 
Segment Results
 
Hefty Consumer Products
 
Quarterly sales of $291 million increased 3% from $283 million, reflecting a 9% volume increase and 6% unfavorable pricing. The volume growth primarily reflected new business in store brand waste bags and tableware.
 
Foodservice/Food Packaging
 
Quarterly revenue rose 1% to $486 million from $483 million in 2009. A 7% volume increase and 1% favorable foreign exchange offset 7% lower pricing. The volume increase was driven by continued growth in cups and cutlery, as well as growth in several other product lines, including polypropylene containers, processor trays, and paper-based items.
 
Segment operating income for the above segments was $102 million, compared to $147 million in 1Q09.
 
Free cash flow in the first quarter was $9 million compared with $105 million last year. The decrease primarily was a result of the negative impacts of higher raw material costs on working capital, lower earnings and higher incentive compensation payments for the year 2009.
 
Guidance            
 
Pactiv Corporation lowered its EPS guidance for the full year 2010 from $2.20-$2.40 to $2.10-$2.30. Full year 2010 revenues are expected to increase between 10% and 12%. This increase includes the effects of 9% to 10% volume growth and upward selling price adjustments of 1% to 2%.
 
Pactiv Corporation engages in the manufacture and sale of consumer and foodservice/food packaging products in the United States and internationally. The company operates in two segments, Consumer Products and Foodservice/Food Packaging.
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