Bemis food packaging sales fall on weaker US economy
sales for 2007, largely due to weaker consumer demand for packaged
food in its core market.
The company said it had had a "challenging year" and expected 2008 to be "equally as challenging". "We did not anticipate the negative impact that the current economic environment would have on consumer demand for food products in 2007 in the United States," said Jeffrey Curler, Bemis chief executive. Higher energy and food prices, and in some cases, increased housing-related costs associated with mortgage market issues are squeezing consumer's budgets, said Curler. On top of slower sales, Bemis is also expecting raw material cost increases during the first half of the coming year. It plans to pass on the higher raw material costs through higher selling prices "as rapidly as possible". In flexible packaging, which accounts for more than 80 per cent of the firm's sales, sales and profits were buoyed by currency benefits and restructuring. Excluding both factors, the firm actually saw lower sales volumes across a number of markets while operating profit fell by more than 5 per cent to $346.6 million. Curler said the food and consumer product end markets began to show signs of weaker demand levels as the year progressed leading to a tighter focus on costs from mid-year. Margins in the pressure sensitive materials division, which makes labels and films for the food and other industries, also fell significantly partly due to the slowing economy but also the addition of more capacity in label products, said Bemis. For the total year, net sales of pressure sensitive materials were $647.5 million, a 1.3 percent increase from the net sales of 2006. Currency effects accounted for net sales growth of 4.5 per cent however. Operating profit was $40.3 million or 6.2 percent of net sales in 2007, down from $50.1 million or 7.8 percent of net sales in 2006, which included restructuring and related charges of $1.0 million. The 2007 figure was also swollen by a currency translation benefit of $2.5 million. But Curler said the firm was prepared for 2008 with "a more competitive cost structure and our state-of-the-art production facilities." The company has invested in new facilities in growth markets such as the medical and pharmaceutical markets, as well as the Asia/Pacific region. It has also added proprietary film production capacity for European markets. The company has also "substantially reduced" its capital expenditure plan in 2008 to reflect the slower demand in the marketplace, said Curler. Total capital expenditures for 2007 were $178.9 million, dropping to approximately $125 million for 2008.