Pactiv, the global food packaging provider, has reported a solid third-quarter performance for the period ending 30 September, improving on a challenging financial year to date.
Pactiv's net income was $59 million (€60.3m) compared with $45 million last year, reflecting a strong increase in volume and ongoing benefits from previously implemented productivity initiatives. Sales rose 5 per cent to $727 million, driven by volume growth of 8 per cent. Acquisitions contributed to 3 per cent growth.
Operating margin increased to a record 16.8 per cent from 14.8 per cent last year, as strong volume and productivity increases more than offset unfavourable spread (the difference between selling prices and raw material costs). Free cash flow (cash from operations less capital expenditures) increased to $97 million. Year-to-date free cash flow reached $219 million, an increase of 18 per cent compared with last year.
"Our performance continues to be very strong, resulting in another quarter of substantial double-digit earnings per share growth. Each business segment continued its year-over-year improvement. Significant growth and the impact of our productivity initiatives continued to drive performance.
As a result, we achieved a record operating margin. Once again, our free cash flow generation was substantial, leading us to increase our full-year target to approximately $260 million." said Richard L. Wambold, Pactiv's chairman and chief executive officer.
For the nine-month period ended September 30, net income from continuing operations was $159 million versus $119 million last year. Year-to-date net income was $89 million, compared with $147 million last year. This year's results included a $72 million after-tax charge related to restructuring costs. Sales were even with last year at $2.1 billion.
Volume in the Consumer and Foodservice/Food Packaging segment jumped 9 per cent. Reported sales of $518 million rose 5 per cent, reflecting strong volume gains and the benefit of the Winkler acquisition.
Operating income of $93 million increased 26 per cent compared with $74 million last year. Operating margin rose substantially to a record 18.0 per cent from 15.0 per cent, as strong volume increases and productivity improvement more than offset unfavourable spread.
Growth in Foodservice/Food Packaging reflected significant volume increases in the base business as well as in innovative new products, including items for major fast food restaurants. Higher margin products, such as rigid display packaging, agricultural products, and microwaveable home meal replacement items, drove much of this growth.
Third-quarter sales for the Protective and Flexible Packaging segment of $209 million rose 3 per cent compared with last year.
The company is targeting a free cash flow for 2003 to be in a range of $240 million to $260 million. This outlook, according to the company, reflects the expected continuing impact of volume growth, ongoing productivity improvement, an accretive acquisition programme, and a decrease in the effective tax rate from 40 per cent to 38 per cent.
US-based Pactiv Corporation operates 72 facilities in 13 countries around the world.