Acquisitions boost Graphic Packaging results

Net sales increased two percent to 1.1 billion USD during the fourth quarter of 2013. This improvement equated to 21.6 million USD, resulting from 23.4 million USD of favorable volume/mix primarily attributable to the addition of the Contego Packaging and A&R Carton businesses in Europe in 2012. 

The acquisitions drove a 7.2 percent increase in paperboard packaging segment sales versus the fourth quarter of 2012. The remaining net sales increase was due to 4.3 million USD of higher pricing. 

These positive factors were partially offset by 6.1 million USD of unfavorable exchange rates.

Full-year 2013 net sales were 4.5 billion USD, a gain of 141 million USD, or 3.2 percent, over 2012.

Net income for the fourth quarter was reported at 46 million USD, with the company adding that it incurred restructuring and other special charges of 12.6 million USD in the fourth quarter, primarily related to the integration of Contego Packaging and A&R Carton. Without these non-recurring charges, adjusted net income for the fourth quarter of 2013 was 58.6 million USD. This compares to fourth quarter 2012 net income of 22.9 million USD and adjusted net income of 33.2 million USD.

For the full year 2013, net income was 146.6 million USD, compared to 2012 net income of 122.6 million USD. Full year 2013 adjusted net income was 181.4 million USD, compared to full-year 2012 adjusted net income of 146.3 million USD.

Graphic Packaging chief executive officer David Scheible said: ‘We delivered a solid operating quarter driving year-over-year margins higher by delivering another 25 million USD through improved operating performance and an ongoing commitment to cost reduction initiatives.

‘The strong fourth quarter enabled us to achieve our targeted 100 million USD of performance improvements for the full year. Additionally, with improving revenue due to better pricing this quarter and market share gain, particularly in Europe, we have a nice backdrop for 2014.’

In an earnings call as transcribed by SeekingAlpha.com, Scheible said: ‘We're also focused on making strategic tuck-in acquisitions. We successfully integrated the Contego Packaging and A&R beverage packing businesses that we purchased last year and created a platform for continued growth and market share gains in Europe. Europe has become a very meaningful part of our business, and we like the underlying fundamentals of that market.

‘These are very large and mature end markets that are supported by strong consumer demographics. But the carton industry is very fragmented, which provides an opportunity for us to differentiate ourselves. We know how to drive volumes and productivity rates in mature markets and believe that there's a meaningful opportunity in Europe to do just that over time.’

He added: ‘Our global folding carton business increased 2.7 percent in the fourth quarter and was driven predominantly by our recent European acquisitions. This was partially offset by continued softness in our legacy US beverage and consumer products folding carton markets.’

Addressing flexible packaging, where Graphic Packaging brought together its multi-wall bag and specialty plastics packaging businesses with Delta Natural Kraft and Mid-America Packaging in late 2011, Scheible said: ‘Our flexible packaging business remains a work in progress. I really thought we would have made more progress in this business by now, but it remains a challenge. A lot of it has been market-related, particularly in multi-wall bag. But some of our issues are of our own making, and we need to address both elements in 2014.

‘The sale of our plastics business and label business, of course, reduced the overall significance to Graphic Packaging of this business, and allows us to focus resources on a smaller footprint to improve the results.’