Nowadays, people are becoming more and more health conscious and they demand healthy and fresh food containing less preservatives. Consumer trends favour flexible packages over metal cans or glass. The health consciousness of people has created the growth of high-barrier packaging industry. Bemis Company, Inc. (BMS, Financial) is the leader in this industry.
Founded in 1858, Bemis is a major supplier of flexible packaging used by leading food, consumer products, healthcare, and other companies worldwide. The company's business activities are organized around three reportable business segments: U.S. Packaging , Global Packaging (comprises of Latin America, Europe, Asia Pacific, and Healthcare), and Pressure Sensitive Materials (on Nov. 7, 2014, Bemis sold this segment). Over 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 individuals worldwide.
Performance check: Impressive figures posted
On Jan. 29, 2015, this leader in packaging industry reported fourth quarter 2014 results. Net sales for the quarter was $1052.7 million compared to $1085.3million of Q42013. Net sales from continuing operations totaled $4.3 billion in 2014. Excluding the impact of currency translation, acquisitions, and divestitures, net sales increased 4.2% in the fourth quarter and 2.1% for the full year. For 2014, Bemis posted adjusted diluted EPS of $2.30 per share, which increased 10.0% from $2.09 per share in 2013. Including special items, diluted earnings per share from continuing operations were $2.36 per share for the year, compared with $1.85 in 2013.
Bemis generated cash flow from operations of $248 million in 2014 compared with $373 million in 2013. At the end of 2014, the company had cash and cash equivalents of $47.1 million compared to $141.7 million at the end of 2013. Capital expenditures totaled $185.2 million for the full year 2014, reflecting increased investment in new capacity to support growth initiatives and productivity improvements. Bemis’s long-term debt (less current portion) for 2014 was $1,315.9 million compared to $1421.4 million for 2013. In 2014, Bemis repurchased 3.8 million shares, for a total of $152.1 million, and as of Dec 31, 2014, 6.7 million shares were available for repurchase. A chart has been provided below to the company’s segment-wise performance.
Positive outlook
For the full year 2015, Bemis expects adjusted diluted earnings per share to be in the range of $2.52 to $2.67, which includes the benefit of lower interest expense, partially offset by increased pension expense. For 2015, management believes capital expenditure in the range of $185 to $200 million, which will invested to support increased customer demand for value-added products and further strengthen its competitive position.
Why Bemis?
In the U.S. segment Bemis is focusing on mainly three things: shelf-life extension, proprietary and patented film structures, and extensive manufacturing scale. Shelf-life extension is for perishable foods such as meat, cheese, dairy, and produce. Proprietary and patented film structures will deliver convenience and sustainability features. Extensive manufacturing scale will support both national and regional brands. In the global packaging segment, Bemis is expanding consumer markets in Latin America and Asia. A chart has been provided below to show the company’s financial targets for 2019.
2019's target will be achieved if there is constant currency, effective pass-through of resin prices, constant share count, and tax rate of 34%. Bemis’s focus is differentiation that drives disciplined, profitable growth. Its technology creates the competitive advantage and platform for growth. Bemis is accelerating growth in emerging economies, i.e. Asia-Pacific. The company is rapidly growing in China at 14% CAGR. Therefore, emerging Asian economies coupled with Bemis technology are a formula for success.
Further, Bemis has leading market positions, strong innovation pipeline, global footprint, and finally disciplined capital allocation which includes 31 consecutive years of increasing dividend payments, fund organic growth to enhance revenues and returns, and balanced share repurchases. The company’s main strategic objectives are to accelerate growth, focus on innovation, and continuous improvement.
On Feb. 5, 2015, Bemis announced a 4% increase in the quarterly cash dividend, increasing it to 28 cents per share compared to the previous quarterly dividend of 27 cents per share. The cash dividend is payable on March 2, 2015, to shareholders of record at the close of business on February 18, 2015. This marks the 32nd consecutive year that the company has increased its dividend payment. Bemis has been paying an annual dividend on its stock since 1922 and has been included in Standard & Poor's list of Dividend Aristocrats since 2008.
Wrap up
Overall, Bemis is a rock solid company with impressive record of earnings, strong financial position with reasonable debt levels, solid dividend yield, continuous improvement in ROIC, and technology advantage. I am therefore bullish that Bemis won’t let its valued investors as well as customers down in the near future.
(Source: Company’s Website)
