Flexible packaging focus

Analyst bearish on Bemis, but company forecast is sunny

By Heidi Parsons

- Last updated on GMT

A slide from Bemis's investor report shows growth opportunities in high-barrier packaging.
A slide from Bemis's investor report shows growth opportunities in high-barrier packaging.

Related tags Bemis Investment

Bemis Company’s latest report to investors indicates an upbeat outlook and a plan for growth, but market analysts are projecting tough times for the packaging supplier and giving its stock a “sell” rating.

An article by Zacks Equity Research pointed out that Bemis management has lowered its earnings per share (EPS) guidance “to a new range of $2.26 to $2.31 per share from $2.45 to $2.55 per share”​ for 2014.

“Moreover, with respect to volume, the US packaged food industry has been relatively flat, with a lagging overall GDP (gross domestic product),”​ the article stated. ”Weak non-durable consumer spending and inflation of food and beverage items could cause volumes in some of the company’s key end markets to remain sluggish in the foreseeable future.”

“This tough volume environment will continue to weigh on Bemis’ results. Demand fundamentals in Brazil remain challenging with the slowing economy.”

Strengthening its core

Aside from those comments, however, Zacks analysts described positive trends at Bemis, echoing the company’s own report.

The company listed its divestment of non-core businesses including thin gauge shrink film and paper packaging as one of its key accomplishments during the past 4 years.

In November, Bemis sold its global pressure sensitive materials business (known as “MACtac”) to a private equity firm for $170m. Zacks analysts said Bemis will use those funds to grow its flexible packaging business, “where margins are higher and growth prospects are substantially greater.”

Bemis also divested its paper packaging business this year, selling it to Hood Packaging Corporation In April. Zacks analysts said, “These divestments will allow the company to focus on strategic opportunities in high-barrier flexible packaging, medical and pharmaceutical packaging, and in emerging markets.”

In another cost-cutting move, Bemis completed its facility consolidation plan. The company closed nine plants, thereby “optimizing our manufacturing footprint,”​ the report to investors said.

Growing strategically

Another of its major accomplishments from 2010-2014, the company acquired Alcan Food Americas for $1.2bn.That was the largest acquisition in Bemis’s history. The company also purchased a film-based aseptic and bulk packaging manufacturer.

In addition, Bemis “expanded its footprint in Asia-Pacific”​ by acquiring two firms in China: a converting operation in Dongguan and an extrusion platform in Foshan.

The company expects its capital expenditures to total about $175m this year. “Our capital investments will support growth in 2015 and beyond,”​ the investor report stated.

Bemis’s management is committed to “a disciplined approach to measurement and evaluation of returns on all capital projects”​ and “increased investment in projects that deliver higher return on investment capital.”

Separately, the company announced it has hired Michael B. Clauer as vice president and chief financial officer. He came to Bemis from BWAY Corporation, a supplier of metal and rigid plastic containers, where he had been executive vice president and chief financial officer since 2009.

Related topics Processing & Packaging

Related news

Follow us


View more