Sealed Air Corp. (SEE, Financial) is a prominent player in the food packaging industry that boasts a portfolio of widely known brands, including Cryovac brand food packaging solutions, Bubble Wrap brand cushioning and Diversey cleaning and hygiene solutions.
Sealed Air has about 23,000 employees in 169 countries.
This Elmwood Park, New Jersey-based company doesn’t confine its business to food packaging. Its other services include hygiene solutions, fabric care, infection prevention and packaging designs and many more. The company mainly operates in four segments: Food care, diversey care (described on the company’s website as "sustainable cleaning, sanitation and hygiene solutions"), product care and another category that includes its medical applications and new venture businesses. (Source)
The company recently reported a strong second quarter with EPS in line. The second quarter witnessed solid margin performance in the three core divisions, and the company updated its guidance.
Second quarter results
GAAP summary
Net sales during the quarter were $1.7 billion, which marked a decrease of 3.2% from the prior-year quarter. As reported, Latin America and Asia Pacific declined 11.3% and 3.5%. EMEA and North America also declined 1.6% and 2.5% on an as-reported basis.
Net income on a reported basis was $50 million or 25 cents per diluted share during the quarter ($28 million or 13 cents per diluted share in the prior-year quarter).
The effective tax rate in the second quarter was 59.7%, which was 34.5% in the prior-year quarter.
Non-GAAP summary
Net sales on an organic basis increased by 0.9%. The company's fastest-growing region on an organic basis was Latin America with 8.2% followed by sales growth in EMEA of 2.5% and Asia Pacific of 0.7%. North America declined 2.2% in constant dollars.
Adjusted EBITDA during the second quarter was $306 million, or 17.7% of net sales.
Adjusted EPS was 65 cents during the second quarter (60 cents in the prior-year quarter).
The adjusted tax rate was 29.1% during the second quarter (28.9% in the prior-year quarter).
Cash flow and net debt
Cash flow provided by operating activities in the six months ended June 30 was $181 million, which was $456 million in the six months ended June 30, 2015.
Capex increased to $114 million in the six months ended June 30 ($58 million in the six months ended June 30, 2015).
The company’s net debt increased $122 million to $4.3 billion as of June 30 compared to Dec. 31, 2015.
Share repurchases
During the second quarter, the company repurchased about 400,000 shares for approximately $20 million and paid cash dividends of $32 million. In the first half of this year, it repurchased 1.1 million shares for about $52 million and paid cash dividends of $58 million.
(Source: Company’s website)
Expectations for 2016
| Ă‚ | Range |
| Net sales | To be $6.85 billion |
| Adjusted EBITDA | To range between $1.17 billion and $1.18 billion |
| Adjusted EPS | To be between $2.52 and $2.60 |
| Adjusted Tax Rate | To be around 24% |
| 2016 Free Cash Flow | To be around $550 million, including capital expenditures of approximately $275 million and cash restructuring payments of approximately $110 million |
Factors that contributed to second quarter success
- Continued focus on new product adoption.
- Operational disciplines.
- Increased demand for the core product portfolio.
- Recently introduced innovations.
- Expedited growth in global protein market and ecommerce.
Focus
- Strategic alignment.
- Targeted research and development efforts.
- Productivity improvements.
- Working capital management.
- Innovation and sustainability.
- Reduce greenhouse gas emissions.
- Lessen the risks of potential climate change.
Conclusion
In 2015, the company generated revenue of approximately $7.0 billion. For the third year in a row, it remained firm in its commitments and delivered financial and operational improvements. The company has been recognized as the world’s most admired company by Fortune magazine’s annual survey in packaging three years in a row.
It recently acquired TTS-Ciptec (a company that optimizes Cleaning in Place systems through remote monitoring capabilities and predictive analytics services for industrial use in brewing, beverage and dairy companies). This acquisition is expected to save time, reduce product loss and water and energy consumption and improve quality, hygiene and yield. (Source)
It is continually implementing improvement processes. In addition to the strong performance within the divisions, the company is focused to deliver profitable growth. It is also trying to maximize free cash flow by focusing on execution and operational excellence. The company’s value-added selling approach and focus on earnings quality improvements will surely go a long way in creating shareholder returns. Adding this company will reap shareholder returns.
Disclosure: I do not hold any position in the company.
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