Reynolds Group sets out 2013 goals

By Joe Whitworth

- Last updated on GMT

Related tags: Cost

SIG, Graham Packaging, Evergreen, Pactiv results overview
SIG, Graham Packaging, Evergreen, Pactiv results overview
Reynolds Group recorded a much improved 2012, despite still posting an overall loss, and outlined existing expansion and cost reduction initiatives as aims for this year.

The firm said it expects to incur US$700m in capital expenditures during 2013 to support plant expansion in South America and the US and replacement, growth and cost reduction initiatives, compared to $650m for the year ending 31 December 2012.

Total loss for the year in the group, which includes SIG, Graham Packaging, Evergreen and Pactiv, was $18m - down from $443m in 2011.

As of 31 December 2012, total indebtedness was $18.1bn compared to $17.5bn on 31 December 2011, comprised of outstanding principal amounts of borrowings and bank overdrafts.

Mixed revenue and sales for SIG

Revenue increased by 2% to $2.1bn in 2012 driven by higher sales volume in the Middle East, South America, Asia and North America, partially offset by unfavorable foreign currency impact of $107m due to the strengthening of the dollar against the euro.

Cost of sales decreased by $46m, or 3%, to $1.55bn for the year compared to $1.6bn for the year ended 31 December.

The decrease in cost of sales included an $84m favorable foreign currency impact and lower manufacturing costs of $37m compared to the year ended 31 December 2011, due to better utilization of plants and higher start-up costs of the new plant in Brazil during 2011.

Graham Packaging integration continues

Once Graham Packaging is fully integrated, the firm expect to generate annual operational synergies and cost savings across segments of $75m by the end of 2013, of which $46m has been achieved from the acquisition date through 31 December 2012.

Further cash outlays of $27m are expected to be incurred by the end of 2013 to integrate Graham Packaging into Reynolds Group Holdings Limited (RGHL).

Reported revenue was just over $3bn for 2012, a decrease of 2% on a pro forma basis.

Lower volume due to customer one-off inventory adjustments in Q4 and manufacturing issues affecting ability to supply in some cases, price declines, unfavorable foreign currency impact but these factors were partially offset by increase in resin pricing passed through to customers.

Evergreen paper products boost

Revenue increased by 3% to $1.7bn in 2012 driven by higher volumes for paper products, cartons and liquid packaging board, price increases for cartons and partially offset by price decreases for paper products and liquid packaging board.

Cost of sales increased by 3%, to $1.42bn for the year ended 31 December 2012 compared to $1,38bn for the same period in 2011.

This change was due to a $75m increase in higher volumes across the business, with the largest contributor being paper products, which consisted of higher export shipments this year.

This increase was partially offset by a $38m decrease as a result of lower raw material and other input costs, such as energy, resins and fiber, and maintenance.

Pactiv refocus

The Pactiv business reported revenue decreased 3% to $4bn in 2012 because of a volume decrease driven by sale of the laminating operations in Louisville, Kentucky in January 2012 and exiting low margin non-strategic product offerings.

The firm recorded a $16m charge at Pactiv Foodservice's Kearny, New Jersey plant, where injection molded products were manufactured, which was damaged by Hurricane Sandy in October 2012, leading to the closure and relocation of production to other facilities.

One of the North American plants that manufacture products for Reynolds Consumer Products is also scheduled for closure in 2013.

As Pactiv Foodservice builds capacity at other facilities, it is incurring additional procurement costs which are expected to have a negative impact on profitability during the first half of 2013.

Related topics: Processing & Packaging

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