Bemis boss disappointed by bottom line as volumes fall and plants close
The US-based company said that while Q3 net sales had risen due to the pass on of price increases and favourable currency exchange, sales volumes had fallen almost across the board of its product portfolio.
Total net sales were $1.36bn - a 4.9% increase from $1.29bn for the same period of 2010.
Volume headwinds and cutbacks
Bemis, which manufactures flexible packaging, said it had closed several smaller plants and cut jobs as part of what it called “capacity optimization”. More cutbacks were expected in 2012, said the company.
Rising food prices has caused a ripple effect along the supply chain with retailer and food manufacturers all feeling the effect of a dip in demand, said company head Henry Theisen.
“During the third quarter, unit volumes decreased in nearly every market category, reflecting the concern about softness in demand that our customers had expressed earlier in the year,” said the company president and CEO.
He added: “Food price inflation has driven grocery store prices higher in 2011, challenging consumers to stretch their grocery store dollars. Most of our customers experienced lower unit sales volumes in many of the product categories for which we provide packaging, and we expect this trend to continue through the fourth quarter.”
This was expected to be a short-term rather than permanent drop, said Theisen.
Bemis said that flexible packaging profits in the period fell US$15m to $117m year-on-year, despite an increase in net sales.
Latin America challenge
Theisen said that while the effect of price increases had come through in the third quarter, these had been “more than offset by the negative impact of generally lower unit sales volumes this quarter”.
This had resulted in lower volumes in North America, while the company managed to mitigate decline in Europe through increasing prices. However, Latin America had proved a challenging market.
“In Latin America, we experienced substantial volume declines as our customers responded to the slowing economy. In addition, with the Brazilian currency weakening by nearly 10% during the quarter, raw material imports to that region became more expensive,” he said.
The company cautioned that the negative impact of lower unit sales volumes was expected to continue through the end of the year.
Chinese acquisition
Theisen revealed the company had acquired Mayor Packaging - a flexible packaging company in China during the period.
This addition provides our Asia-Pacific footprint with more complex food packaging capabilities including stand-up pouches and retort technology,” said the CEO. “This is a great complement to our existing medical device and shrink bag capabilities in that region. The operations are well-capitalized and offer room for expansion in the future as we grow our presence in the Asian food packaging markets.”
He concluded by saying the 2102 financial year “continues to be challenging” and he was disappointed to “have accomplished so much in the business with so little to show for it in the bottom line.”
