Graham Packaging has reported that net profits for the second quarter were down, despite a healthy rise in both sales and operating profits.
The company's net income totalled $13.0 million (€11.5m) for the second quarter of this year, compared to $14.0 million for the second quarter of last year. For the first six months, net income was $8.5 million compared to $17.2 million for the same period in 2002.
Chief financial officer John Hamilton said that net interest expense increased by $11.0 million in the first half of 2003, primarily due to the write-off of debt issuance fees related to the refinancing of the company's senior credit agreement during the first quarter.
The company reported that EBITDA was $56.6 million for the second quarter of 2003, compared to $55.6 million for the second quarter of 2002. It also reported a 3 percent gain in operating income for the second quarter of 2003, compared to the second quarter of last year.
Hamilton said operating income was $35.9 million for the quarter ended June 29, 2003, up from $34.8 million for the quarter ended June 30, 2002.
Net sales for the second quarter were $261.1 million, an increase of $24.7 million, or 10.4 per cent, on an 8.1 per cent gain in units sold, compared to the second quarter of last year.
For the first six months of 2003, net sales totalled $493.8 million, an increase of $25.9 million, or 5.5 per cent, on a 4.7 per cent increase in units sold, over the same period in 2002. Operating income for the first half was $64.2 million, or 6.3 per cent greater than the first half of 2002. EBITDA was $105.6 million for the first half, an increase of 3 per cent over the same period last year.
"We have continued to build our business in the face of difficult economic conditions and softer-than-expected customer demand. Although there are general signs of an improving economy, we have yet to see it reflected in our customers' order patterns," CEO Philip R. Yates said. "The fact that we have been able to increase sales and improve operating income against this backdrop attests to the soundness of our core strategy and market positioning.
"To reinforce the core strategy and our initiatives, we have just completed a significant organizational restructuring, primarily focused on North American Food & Beverage and administrative support, which will enhance our market effectiveness and improve our ongoing cost base," added Yates.
The company estimates the effect of these actions will reduce 2003 operating income by a net amount of approximately $2.6 million, including one-time reorganization expenses of approximately $3.3 million, offset by cost savings of approximately $0.7 million. For 2004, the company estimates a net increase in operating income of $2.5 million as a result of this reorganisation.
Graham has also wrapped up an extended period of consolidation involving its European operations - including the sale of two locations in Germany and the closure of a plant in France in the second quarter of 2003. "Excluding business impacted by this restructuring," Hamilton noted, "our sales and unit volume for the second quarter would have increased by approximately 14 per cent and 11 per cent, respectively, compared to last year."
Graham Packaging, based in York, Pennsylvania, US, is a worldwide leader in the design, manufacture and sale of customized blow-molded plastic containers for the branded food and beverage, household and personal care, and automotive lubricants markets. The company employs approximately 3,900 people at 55 plants throughout North America, Europe and South America. It produced more than nine billion units and had total worldwide net sales of $906.7 million in 2002