Bemis Company has reported financial results for its first quarter ended 31 March, 2017.
Initiatives to Improve U.S. Packaging Operations and Profitability
As part of the Company’s efforts to improve the profitability of its U.S. Packaging business, Bemis is developing a comprehensive plan that enhances focus and improves performance in its U.S. business while maintaining the high quality products, best-in-class service, and culture of innovation consistent with Bemis’ standards. Actions include:
Strengthening the U.S. Packaging leadership team. Bemis appointed Fred Stephan as President of the Company’s U.S. Packaging business in February. Fred brings significant experience and skills to his new role. He most recently served as Senior Vice President & General Manager of the Insulation Systems business at Johns Manville, a Berkshire Hathaway company. Fred successfully served in a number of general management and functional roles over the past 12 years at Johns Manville and during the previous 20 years at General Electric.
Austen stated, “Fred is an outstanding addition to Bemis Company. He has a great track record of leadership and success, and I have already been impressed with his fresh insights, his drive for action and results, and his practical and simple approach to our U.S. business. I look forward to Fred’s impact on changing the way we do business in the U.S. and to the financial performance improvement that Fred will help drive in the long-term. I am personally committed to working with Fred to get our U.S. business back on track.”
Bemis is also evaluating additional ways to enhance its U.S. organizational structure to promote accountability and efficiency.
Optimizing manufacturing capacity. The Company is evaluating its manufacturing footprint and utilization in the U.S. to align with customer and end market demand and to ensure optimal operational efficiency. A plan will be announced during the second quarter and implemented during 2017, with benefits expected in 2018.
In late March and early April 2017, Bemis eliminated approximately 200 manufacturing positions in its U.S. Packaging business. The impact of this is included in the Company’s updated 2017 outlook.
Further reducing cost structure. Bemis is taking actions to reduce SG&A expenses in the U.S. The Company is evaluating all administrative activities and costs and is accelerating its Global Business Services (shared services) initiative in the U.S.
Business segment results
U.S. Packaging net sales of $648.9 million for the first quarter of 2017 represented a decrease of 1.8 percent compared to the same period of 2016. Compared to the prior first quarter, unit volumes were down approximately one percent. The remaining decrease in net sales was driven primarily by contractual selling price reductions previously negotiated with customers to retain and secure some high-technology packaging business for the long-term, partially offset by higher input costs that are passed through to customers.
U.S. Packaging operating profit decreased to $83.5 million in the first quarter of 2017, or 12.9 percent of net sales, compared to $101.7 million, or 15.4 percent of net sales, in 2016. Compared to the prior year, lower profits were driven by the impact of previously negotiated contractual selling price reductions on select high-technology products and unit volume declines and the associated operational cost structure. Compared to management’s expectations, lower profits were driven by lower than expected unit volumes and poor operational performance.
Global Packaging net sales for the first quarter of 2017 of $346.5 million represent an increase of 12.7 percent compared to the same period of 2016. Currency translation increased net sales by 4.2 percent. Acquisitions increased net sales by 6.1 percent. Organic sales growth of 2.4 percent reflects increased unit volumes of approximately 3 percent, partially offset by the mix of products sold.
Global Packaging operating profit for the first quarter was $27.2 million, compared to $16.3 million for the same period in 2016. The net impact of currency translation increased operating profit by $1.2 million during the first quarter, as compared to the prior year, primarily due to currencies inLatin America. Compared to the prior year, the profit increase was driven primarily by operational improvements in the Company’s Latin American and healthcare packaging businesses.