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. 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 (described on the company's website as "sustainable cleaning, sanitation and hygiene solutions"), product care, and another category, which includes its medical applications and new venture businesses.
Diversey care provides solutions for floor, kitchen, infection prevention, restroom, speciality foodservice, insect control and others.
It boasts of a portfolio of well reputed brands which includes Cryovac- brand food packaging solutions, Bubble Wrap- brand cushioning and Diversey- cleaning and hygiene solutions.
First-quarter results
Sales
Net sales of $1.7 billion were up 3.5% on a constant dollar basis as compared to last year with positive sales across all divisions and regions.
Segmentwise
Food Care: During the quarter, net sales were $880 million (which was a decrease of 2.7% as reported and increased 5.8% on a constant dollar basis). Currency had a negative impact on Food Care net sales of 8.5%, or $77 million, in the first quarter 2015.
Diversey Care: During the quarter, net sales were $468 million (which was a decrease of 7.4% as reported and increased 1.5% on a constant dollar basis). Currency had a negative impact on Diversey Care net sales of 8.9%, or $45 million, in the quarter.
Product Care: During the quarter, net sales were $377 million (which marked a decrease of .2% as reported and increased approximately 1.1% on a constant dollar basis). Currency had a negative impact on Product Care net sales of 5.3%, or $21 million.
Net Earnings
During the quarter, net earnings were $97.2 million, or $0.46 per diluted share, which included $17.4 million, or $0.08 per diluted share (it was $70.9 million, or $0.33 per diluted share in the prior year period).
Adjusted EPS
During the quarter, Adjusted EPS was $0.54 (which was $0.33 in the prior year period).
Tax Rate
The core tax rate was 25.2% in the first quarter 2015 (which was 21.1% in the first quarter of 2014).
Share Repurchases
The company, during this quarter, repurchased approximately 1.4 million shares for approximately $64 million.
Adjusted EBITDA
Adjusted EBITDA for the first quarter 2015 was $284 million, or 16.3% of net sales (in comparison to $251 million, or 13.7% of net sales, in the prior year period). Adjusted EBITDA increased more than 13% compared to last year with Adjusted EBITDA margins expanding 260 basis points to 16.3% as a result of favorable price/mix.
Cash Dividend
It recently declared a quarterly cash dividend of $0.13 per common share.
Debt
Compared to December 31, 2014, the company’s net debt decreased $279 million to $3.8 billion as of March 31, 2015. This decrease was primarily a result of an increase in cash reflecting the tax refund related to the settlement agreement payment and cash generated from operating activities, partially offset by amounts paid for dividends and share repurchases.
Projections for 2015
The company expects the following for 2015:
- Net sales are expected to be $7.1 billion for the full year.
- Adjusted EBITDA is estimated to be in the range of $1.14 billion-$1.16 billion.
- Free Cash Flow is expected to be around $575 million.
- Capex to be around $210 million.
- It expects cash restructuring payments of approximately $120 million.
- Adjusted EPS is expected to be in the range of $2.08- $2.15.
(Source: Company’s Website)
On a concluding note
The company reported a strong first quarter despite currency headwinds. It is banking on low input costs. This has helped to combat currency headwinds.
SEE is shifting from product focus to market focus to cater value added selling to the customers. The company is aiming at a sales target and adjusted EBITDA of around $900 million and 20% by 2020. It is concentrating on innovation, waste reduction and increase in productivity levels. It is rolling out new models that leverage its operational expertise with knowledge management.
Overall Sealed Air is a solid company with an impressive first quarter results. Sealed Air’s vision is to create a better way of 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.
