Rock solid

It has been quite an eventful year for Rock-Tenn. Two acquisitions were made, and in September, the firm sold its plastic packaging assets to global packaging giant Pactiv. In addition, recently published results suggest that a degree of financial solidity has been achieved.

Net sales from continuing operations for the fiscal fourth quarter of 2003 were $385, million, up 6.6 per cent from the prior year quarter, and net sales from continuing operations topped $1.4 billion for the fiscal year ended 30 September 2003.

"The higher earnings for the quarter reflect strong gains in packaging sales, up 19.9 per cent over the prior year quarter, and improved profitability in our display segment,"​ said Rock-Tenn chairman James A. Rubright. "Our increase in sales for the full fiscal year reflects our continuing improvement in our competitive position in all of our businesses. "​

Capital expenditures for fiscal year 2003 were $57 million, somewhat lower than expectations of $60 to $65 million at the beginning of the year. The company expects that over half of its capital will support continued growth and cost reduction strategies in folding carton operations.

The company's packaging products segment saw sales increase by 19.9 per cent in the fiscal fourth quarter of 2003 to $221.3 million from $184.6 million in the fourth quarter of 2002. Packaging products segment operating income increased to $12.7 million in the fiscal fourth quarter of 2003 compared to $10.6 million in the prior year quarter.

Folding carton division sales increased 23 per cent compared to the fourth quarter of 2002. The sales increase was due to strong internal growth and to the company's two acquisitions, Cartem-Wilco and Pacific Coast Packaging, which contributed $18.9 million of the $36.2 million increase.

The folding carton division's operating income increased $1.3 million from the prior year quarter. Interior packaging sales increased $0.5 million compared to the year ago quarter, and operating income for the RTS division increased relative to the fourth quarter of 2002 as a result of lower workers compensation and other labour-related costs.

It has not been all good news however. In the fourth quarter of 2003, merchandising displays and corrugated packaging segment sales were $76.8 million compared to $79.5 million in the fourth quarter of 2002. Operating income for the segment increased 1 per cent over the year ago quarter to $9.1 million. Return on sales for the fiscal fourth quarter of 2003 was 11.8 per cent compared to 11.3 per cent in the prior year quarter.

Corrugated packaging sales decreased 7.7 per cent from the prior year quarter primarily due to the closing of a corrugated packaging plant in September 2002. Operating income in the segment increased from the prior year quarter primarily as a result of a facility rationalisation in the corrugated division.

Merchandising displays and corrugated packaging segment sales were $285.1 million in fiscal 2003 compared to $289.6 million in fiscal 2002. The company claims that the decrease in segment sales was due to a 9.3 per cent decrease in sales at the corrugated packaging division. The merchandising displays division's sales increased over the prior year despite a weakening in the market for promotional displays.

Nonetheless, the sale of its plastic packaging assets​ will undoubtedly have an impact on financial results for 2004. The assets, which are related to the manufacture of amorphous polyethylene terephthalate (APET) and polypropylene products for food packaging, were sold for $60 million.

Rock-Tenn​ says that the purchase price is approximately equal to the replacement cost of the assets, and Pactiv says that the acquisition will be accretive to its 2004 earnings. For the 12 month period up to 30 June, 2003 the business segment had net sales of $73 million (€63.6m).