Founded in 1858, Bemis Company Inc. (BMS, Financial) is a global supplier of flexible packaging used by food, consumer products, healthcare and other companies. The company's business activities have been organized around three reportable business segments: U.S. packaging, global packaging and pressure sensitive materials (on Nov. 7, 2014, Bemis sold this segment). More than two-thirds of Bemis' packaging is used in the food industry, with the balance used in markets including medical, pharmaceutical, chemical and agribusiness.
Bemis has a strong technical base in polymer chemistry, film extrusion, coating and laminating, printing and converting. The majority of the company's products are sold to customers in the food industry. Headquartered in Neenah, Wis., Bemis has 60 facilities in 11 countries and employs approximately 17,000 worldwide.
The company delivered a record second quarter. It reported strong margin improvement and cash flow. The company is building toward its long-term financial targets and is poised to grow. A strong mix of products and operational excellence delivered margin improvement across the entire business. The company witnessed overall unit volume growth in the global packaging business, offset by light volume in its U.S. packaging business.
Strong second-quarter results
Second quarter diluted EPS from continuing operations increased by 11.7% and was 67 cents per share.
Gross profit as a percentage of net sales improved to 21.5% in the second quarter (20.0% in the prior year quarter).
The U.S. packaging segment's operating profit return on sales increased to 14.8% (13.9% in the prior year quarter).
U.S. packaging net sales during the quarter were $694.7 (a 4.3% decrease from the prior year quarter, reflecting an approximate 5% decrease in unit volumes, partially offset by an increase in sales price and mix). Unit volumes declined primarily from the impact of the company’s strategic pricing decisions.
Global packaging adjusted operating profit return on sales increased to 8.1% (7.2% in the prior year quarter).
Global packaging net sales for the second quarter of 2015 were $335.6 million (which marked a decrease of 9.7% from the prior year quarter). Currency translation decreased net sales by 15.9%, primarily driven by currencies in Latin America. Excluding the impact of currency translation, net sales increased by 6.2%, reflecting an increase in unit volumes of approximately 5%, along with positive sales price and mix.
Adjusted return on invested capital increased to 10.0% (9.5% during the prior year period).
Cash flow from operations for the first half of 2015 was $218.5 million, compared to $70.4 million for the first half of the prior year.
The second quarter contributed $133.3 million of operating cash flow ($57.9 million during the prior year quarter).
During the second quarter, Bemis repurchased 1.0 million shares, for a total of $45.9 million. At the end of the quarter, the remaining board authorization for the repurchase of Bemis common stock was 4.9 million shares.
Dividend
The company recently declared a regular quarterly cash dividend of 28 cents per share. Bemis has paid an annual dividend on its common stock since 1922 and has been included in Standard & Poor's list of Dividend Aristocrats since 2008.
Focus
- Commercializing new products
- Deliver productivity improvements
- Execute strong pricing discipline
- Accelerate growth
- Diversify customer base
- Broaden product line
Strong attributes
- Leading market positions
- Disciplined capital allocation
- Favorable market positions
- Relevant product pipeline
Why do customers choose Bemis?
- Reliable supply; quality product
- Technology leader with differentiated product
- Global breadth and scale
- Longevity and financial stability
Management's expectations
Management expects full-year adjusted diluted earnings per share to be in the range of $2.52 to $2.62.
Management is raising its capital expenditures outlook for 2015 to between $200 million to $215 million, an increase from its previous outlook of $185 million to $200 million. This increase reflects the improved timing of executing planned projects to support growth and operational efficiency.
Management expects an effective income tax rate for 2015 of slightly less than 34%.
Management expects revenue to grow from $4.3 billion in 2014 to $5.8 billion in 2019, assuming constant currency. Revenue growth through 2019 is anticipated to be equally balanced between organic and inorganic growth. Operating cash flow is forecast to be approximately $550 million in 2019.
Takeaway
People are becoming more health conscious, and they demand healthy and fresh food with fewer preservatives. Consumer trends favor flexible packages over metal cans or glass. Health consciousness has created the growth of a high-barrier packaging industry. In the global packaging segment, Bemis is expanding consumer markets in Latin America and Asia.
Bemis has leading market positions, strong innovation pipeline, global footprint and disciplined capital allocation that includes 31 consecutive years of increasing dividend payments and funding organic growth to enhance revenues and returns and balanced share repurchases. The company’s main strategic objectives are to accelerate growth and focus on innovation and continuous improvement. In March Bemis received two Flexible Packaging Association Achievement Awards for its McCormick Skillet Sauce pouch. It earned a gold award in the packaging excellence category and a silver award in the sustainability category.
The second quarter 2015 results are a reflection of the company’s continued progress in the implementation of long-term strategy. It recently was nominated for a 2015 DuPont Award for packaging innovation. Inaugurated in 1986, the DuPont Awards for Packaging Innovation program is the industry’s longest-running, global, independently judged competition that honors innovation and collaboration throughout the entire packaging value chain.
The company is bullish and a long-term stock.
(Source: Company’s Web site)
