Founded in 1858, Bemis Company Inc. (BMS, Financial) is a global supplier of flexible packaging used by food, consumer products, health care 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. 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, Wisconsin, Bemis has 60 facilities in 11 countries and employs approximately 17,000 people worldwide.
The company delivered its first-quarter results in May. It executed on a long-term strategy, but the short-term operational performance was mixed. The U.S. Packaging business delivered a strong performance driven by manufacturing efficiencies. Operational challenges affected the Global Packaging business. The company expects that the operating performance should be stabilized by the third quarter.
First-quarter results
First quarter adjusted diluted earnings per share from continuing operations were 60 cents in 2016.
Gross profit margins improved by 70 basis points and were 21.6% of net sales for the first quarter of 2016, which was 20.9% in the prior-year quarter.
Adjusted return on invested capital increased to 10.5% during the first quarter of 2016 (9.9% in the prior-year quarter).
Cash flow from operations was $52.6 million, which was $85.2 million in the prior-year period.
Total company net debt to adjusted EBITDA was 2.4 times for the period ended March 31.
Capex totaled at $30.6 million for the three months ended March 31.
Dividends
On May 5 the company declared a regular quarterly cash dividend of 29 cents per share. The dividend is payable June 1 to shareholders of record at the close of business on May 17.
Share repurchases
During the first quarter, the company repurchased 1.0 million shares, for a total of $44.3 million.
Segmentwise results
U.S. Packaging
U.S. Packaging net sales were $660.5 million during the first quarter of 2016.
U.S. Packaging operating profit increased was $101.7 million in the first quarter of 2016, or 15.4% of net sales ($95.4 million, or 13.5% of net sales during the prior-year quarter).
Global Packaging
Global Packaging net sales for the first quarter of 2016 decreased by 7.7% and were $307.4 during the first quarter.
Global Packaging operating profit for the first quarter was $15.7 million (which was $24.3 million during the prior year quarter).
Expectations for 2016
The company expects the following:
| Â | Range |
| EPS | $2.68 to $2.78 |
| Full year cash from operations | $450 million to $500 million |
| Capex | To be around $200 million |
Focus
- Commercialize new products.
- Deliver productivity improvements.
- Execute strong pricing discipline.
- Accelerate growth.
- Diversify customer base.
- Broaden product line.
Plans of acquisition
The company entered into a definitive agreement to acquire the medical device packaging operations and related value-added services of SteriPack Group, (a global manufacturer of sterile packaging solutions for medical device and pharmaceutical applications). This acquisition includes a facility in Ireland as well as packaging production assets in Malaysia and the U.S. These operations recorded annual net sales of approximately $65 million in fiscal 2015. SteriPack Group will continue to independently own and operate its contract manufacturing services business.
Bemis is going to benefit from SteriPack’s strong customer relationships and modern clean room operations. It is going to help the company to grow strategically.
Strategic objectives
- Improve continuously.
- Focus innovation.
- Accelerate growth.
Brief about 2015
The company delivered strong financial results in 2015. The company exceeded expectations and made great progress toward the long-term financial objectives. It delivered strong adjusted EPS, even in the face of strong currency translation headwinds. It increased operating profit and the business remained strong. It also boasts of record cash from operations during the year.
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 led to 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 paid an annual dividend on its common stock since 1922 and has been included in Standard & Poor's list of Dividend Aristocrats since 2008.
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. The company is building toward its long-term financial targets and is poised to grow.
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.
It was nominated for a 2015 DuPont Award for packaging innovation. It has been recognized by the Flexible Packaging Association during its 60th annual awards program with the Highest Achievement Award for the Campbell’s Ready Meals pouch. 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.
Disclosure: I do not hold any position in the company.
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