Food is one of the basic needs for human beings. As years have passed, packaging of foods has improved. These packaging companies play a great role as everything depends on them. Sealed Air Corp (SEE, Financial) is one the prominent players in this food packaging industry.
This Elmwood Park, New Jersey based company doesn’t confine its business in 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, product care, and another category, which includes its medical applications and new venture businesses.
Food care business provides complete solutions to many sectors such as poultry, dairy, beverage, fish and seafood, bakery and snack, ready meals, agriculture and many more. This particular sector generates half of the company’s total revenue.
Diversey care provides solutions for floor, kitchen, infection prevention, restroom, speciality foodservice, insect control and others.
Product care business provides solutions to mainly logistics and supply chain industries. Its products include inflatable, protective cushion wraps, paper products, mailers and shipping bags, loose fills, mushroom packaging, shrink packaging, foam packaging, corrugated packaging and others. A chart has been provided below to show the company’s customers in different segments.
Performance check: Impressive figures posted
On Feb. 10, Sealed Air reported the financial results for the fourth quarter and full year 2014. Net sales for the reported quarter were $2.0 billion, a decrease of 1.9% on a reported basis, and an increase of 3.3% in constant currency. For the full year 2014, net sales totaled $7.8 billion, a reported increase of 0.8% and 3.2% in constant currency.
For the company’s region-wise performance, Latin America provided 8.4% growth in sales followed by a 6.8 % rise in Asia, Middle East, Africa and Turkey (AMAT). North America delivered constant currency net sales growth of 2.3%, Europe increased 2.2% and Japan, Australia and New Zealand (JANZ) was up 0.8%. For the full year 2014, constant currency net sales increased 8.4% for Latin America, 6.9% for AMAT and 2.8% for North America. Net sales in JANZ increased 1.9% and Europe was up slightly by 0.7%. Sealed Air experienced improving business trends in Europe throughout the year. Additionally, 2014 net sales from Developing Regions, which accounted for 25.7% of net sales, increased 8.1% in constant currency and were essentially unchanged on an as reported basis compared to last year.
Adjusted EBITDA for the fourth quarter 2014 was $282 million, or 14.3% of net sales, compared to $270 million, or 13.4% of net sales, in 2013. Full year 2014 Adjusted EBITDA was $1.12 billion, or 14.4% of net sales. This represents a 7.5% increase compared to Adjusted EBITDA of $1.04 billion in 2013, or 13.5% of net sales.
As of Dec 31, 2014, cash and cash equivalents were $322.6 million, a significant decline from $992.4 million as of Dec 31, 2013. Cash used in continuing operations in 2014 was $201.9 million compared with cash inflow of $624.8 million in the prior year. Compared to December 31, 2013, the company’s net debt decreased $241 million to $4.1 billion as of December 31, 2014. This decrease was primarily a result of cash generated from working capital and operating activities, partially offset by amounts paid for dividends and share repurchases.
Sealed Air repurchased approximately 5.4 million shares of its common stock in 2014 for $184 million at an average price of $34 per share, and during the fourth quarter 2014, it repurchased approximately 1.4 million shares for approximately $50 million, at an average price of $36. Since January 1, 2015, the company has repurchased approximately 498,000 shares for $21 million or at an average price of $41 per share. A chart has been provided below for the company’s segment's performance.
Positive outlook
For 2015, Sealed Air expects net sales to be approximately $7.4 billion, and this estimate assumes an unfavorable impact of approximately 7% from foreign currency translation. Excluding the impact of foreign currency translation, on a constant currency basis, net sales are expected to increase approximately 2.5%. Compared with 2014 adjusted EPS of $1.86, current year’s is expected to be in the range of $2.08 to $2.18, which represents an estimated increase of 12% to 17%.
Adjusted EBITDA is estimated to be in the range of $1.15 billion to $1.18 billion, including approximately $80 million of unfavorable currency translation. This compares with 2014 adjusted EBITDA of $1.12 billion. For 2015, Sealed Air anticipates capital expenditures of approximately $180 million and cash restructuring payments of approximately $120 million. Free cash flow is expected to be approximately $600 million (Capex $180 million, restructuring costs $120 million, interest payments $255 million).
Why Sealed Air?
In December 2014, the Board of Directors approved a new restructuring program called The Fusion Program (“the Plan”). This program consists of projects across the company’s three divisions and functional support. It is estimated that this new program will incur aggregate costs of approximately $275 million to $285 million, of which the net cash cost is expected to be in the range of $210 million to $220 million. The program is expected to be completed by the end of 2017. Sealed Air estimates annualized savings of approximately $80 million to $85 million by the end of 2018.
On Feb. 19, Sealed Air’s Diversey Care division has signed a five-year global contract with Carlson Rezidor Hotel Group, which represents a significant expansion from the previous 4-year Europe, Middle East and Africa (EMEA) contract and includes Diversey Care’s full suite of innovate products and services designed to meet Carlson Rezidor’s commitment to sustainability and high level of customer satisfaction.
On a concluding note
Overall Sealed Air is a solid company with an impressive record of earnings per share growth, compelling growth in net income, revenue growth, good cash flow from operations and expanding profit margins. These strengths will help the company to counterbalance the unfavorable currency translation impact. Further, 2014 delivered constant currency sales growth with favorable Price/Mix in every division and every region.
Sealed Air’s vision is to create a better way for life and the company is constantly working on its vision. In this globalized world packaging demand is constantly increasing and people have also changed their spending patterns for better hygiene and solutions for day to day activities. This will pave the way for Sealed Air to strengthen its position in the near future. I feel bullish that Sealed Air will continue its trend and won’t let its valued investors as well as customers down in the long run.
Source: Company website
