Graham Packaging blames net losses on one-off costs
Graham Packaging has reported a net loss of $11.5 million (€ 9.1
million) for the first quarter of this year, even though net sales
increased by 138 per cent and operating income rose by 28 per cent.
The net loss was mainly due to non-recurring charges of $7.4 million, project charges of $900,000 and impairment charges of $1.6 million, said the company's chief financial officer, John Hamilton. The company recorded a profit of $10.5 million in the first quarter of 2004.
Net sales amounted to $620.5 million in the first quarter of 2005, an increase of $360.2 million compared to the same period last year. Operating income was $42.5 million for the first quarter 2005, up $9.3 million. The figures include the non-recurring charges.
The sales and operating income increases were attributed mainly to the results from Owens-Illinois' plastic blow-moulded container unit, which Graham Packaging bought last November. Owens-Illinois has since changed its name to O-I. The acquired business accounted for $303.6 million of the net sales increase in first quarter net sales. Rising prices for resin accounted for the rest of the gains, the company said.
First-quarter sales in North America were up $324.1 million, including net sales of $283.7 million attributable to the O-I business. Net sales were up 80 per cent in Europe and 76 per cent in South America.
"This is now our second quarter as a combined company, and we are starting to see the results of our integration," said Hamilton.
Graham Packaging's chairman and chief executive officer, Philip Yates, said the integration of the O-I business with Graham Packaging should be completed within the next 18 months. The company estimates it will add about $70 million to its operating income and save about $100 million in costs when the integration is complete.
One-time costs to achieve the saving could eventually add up to about $160 million, according to company forecasts.
"The company believes that the cost savings will be partially offset by the expected sales run-offs in the acquired business, performance issues in the combined household category and continued softness in the overall automotive lubricants market," the company stated in a press release.
Graham Packaging is the operating subsidiary of Graham Holdings. Graham Packaging doubled in size as a result of the $1.2 billion acquisition of the O-I business last year. The company makes blow moulded plastic containers for the food and beverage, household, specialty containers and automotive lubricants markets.