Packaging

Sealed Air: Second Quarter 2009 Results 03 Aug 2009

Sealed Air Corporation reported second quarter 2009 earnings per share of $0.33, which includes a charge of $0.01 per share related to the global manufacturing strategy (GMS) and restructuring and other charges.

This compares with earnings per share of $0.34 in 2008, which included a charge of $0.03 per share related to the impairment of investments in auction rate securities and $0.01 per share related to GMS. Excluding these charges, second quarter 2009 earnings per share would have been $0.34, compared with 2008 earnings per share of $0.38.

Commenting on the Company's operating performance, William V. Hickey, President and Chief Executive Officer, stated:

"While we did not see volume recovery in the quarter, our results tracked generally in line with first quarter unit volume rates. We did achieve a 2% year over year increase in our consolidated operating profit excluding the impact of currency translation, which was largely based on the strength of our food businesses. While our food businesses' combined operating profit increased 23% excluding currency translation, this gain was offset by the ongoing impact of the global recession on our Protective Packaging and Specialty Materials businesses.

The quarter also exemplified two key characteristics of our brand - innovation and financial strength. Our innovative solutions continued to generate customer interest, new pilot tests and industry recognition. We were the only packaging company to receive coverage in a Business Week review of the grocery store of the future. Additionally, year to date we generated $228 million in free cash flow versus a use of $6 million last year. To strengthen our liquidity position, we issued $700 million in new senior notes, retired the remaining $137 million of our outstanding 6.95% Senior Notes and, in July, redeemed all $431 million of our 3% Convertible Senior Notes."

Second Quarter Financial Highlights

Net sales decreased 20% to $1.03 billion in the quarter, compared with $1.28 billion in 2008. The decrease primarily resulted from a $158 million reduction in unit volumes principally in Protective Packaging and a $117 million unfavorable effect of currency translation, which was partially offset by a $24 million favorable effect of product price/mix primarily in Food Packaging. Excluding the unfavorable effect of currency translation, net sales would have decreased 11%.

Cost of sales decreased $209 million, or $118 million excluding a favorable effect of currency translation. This decrease resulted primarily from the impact of lower unit volumes and approximately $60 million in lower average petrochemical-based raw material costs. Benefits from GMS and the 2008 cost reduction and productivity program continued to help offset the impact of lower unit volumes.

Marketing, administrative and development expenses decreased $34 million, or $18 million excluding a favorable effect of currency translation. This decrease reflects tight control of expenses. Operating profit was $118 million, or 11.5% of net sales. This compares with $126 million, or 9.9% of net sales, for the second quarter of 2008.

Free cash flow was a source of $228 million year to date compared to a use of $6 million last year. This increase was attributable to a $194 million net increase in cash from working capital items, including the use of our accounts receivable securitization program, and a $52 million decline in capital expenditures. (See the supplementary information provided regarding free cash flow, a non-U.S. GAAP measure.)

Business Segment Review

Food Packaging Segment

Food Packaging's second quarter net sales decreased 14% to $449 million compared with $519 million last year. Excluding an unfavorable effect of currency translation, segment net sales would have decreased 3%.

This decline in net sales primarily reflects the impact of pre-buying by customers in the second quarter of 2008 in advance of our enterprise software launch in the U.S. on July 1^st. Food Packaging experienced positive product price/mix in all regions in the second quarter of 2009.

Operating profit was $62 million in the quarter, or 13.9% of Food Packaging net sales. This is approximately 10% higher than prior year, or 18% higher excluding a $5 million impact of currency translation. This compares with $57 million, or 11.0% of net sales, in 2008. The increase in operating profit was primarily due to lower average petrochemical-based raw material costs.

For the full report: Click here

Source: Sealed Air

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