MWV on course for record year

MeadWestvaco Corporation (MWV), a global packaging company that provides packaging solutions to many of the world’s premiere brands in the healthcare, personal and beauty care, food, beverage, tobacco, and home and garden industries, said it expects to achieve record annual earnings this year after reporting strong results in the third quarter.
 
Overall, sales in the third quarter at MWV from continuing operations increased nine percent year-on-year to US$1.64 billion, with income from continuing operations climbing from US$109 million in the third quarter of 2010 to US$117 million this year.
 
By segment, Packaging Resources, which includes high-quality paperboard for food, beverage, tobacco and commercial print applications, saw sales increase by seven percent (to US$750 million) and profit by 12 percent (to US$102 million) in the third quarter.
 
Sales growth was said to be primarily due to improved paperboard pricing and a better product mix across all end markets, as well as favorable foreign currency exchange. Total paperboard shipments declined six percent although the segment continued to outperform in targeted global food and beverage markets, as volumes in those markets outpaced industry trends and helped offset weaker volumes in general packaging, MWV said. Profit growth primarily reflected strong improvement in pricing and product mix across key product lines, improved manufacturing productivity and favorable foreign currency exchange. These benefits were partially offset by input cost inflation for certain raw materials and freight, as well as higher maintenance expenses and unabsorbed fixed manufacturing costs mainly due to the planned Mahrt mill outage in September.
 
Consumer Solutions, covering paperboard and plastic packaging solutions for the beverage, tobacco, personal care, home, garden and healthcare markets, saw sales grow five percent, although profit in the segment tumbled 29 percent.
 
Sales growth was due to favorable foreign currency exchange, the addition of the trigger sprayer business acquired with Spray Plast, and pricing and product mix improvement in beverage, tobacco and personal care packaging. Volume gains in tobacco and healthcare packaging were more than offset by declines in standard personal care pump and dispensing solutions as major North American customers sought to reposition their product mix in a competitive environment, MWV said. Lower beverage consumption rates in North America also led to declines in the company’s beverage packaging business. Partially offsetting these declines were solid volume growth in airless dispensers and beverage volume growth in emerging markets.
 
MWV said profit decline primarily reflects input cost inflation, mainly increased costs for resins, stainless steel, energy and freight, as well as lower volume and unfavorable foreign currency exchange. These factors were partially offset by pricing and product mix improvement and productivity gains.
 
The Consumer & Office Products and Specialty Chemicals businesses returned positive results for MWV during the third quarter too, with sales up one and 19 percent and profit up four and 27 percent respectively.
 
This performance in the third quarter led MWV to state: ‘In the fourth quarter of 2011, the company expects to build on its strong year-to-date performance and achieve record annual earnings this year. Earnings in the fourth quarter compared to the prior year will, however, be modestly lower principally due to costs from the planned maintenance and upgrade outage at the Covington paperboard mill and to lower rural land sales. The company also is anticipating weaker consumer demand driven by ongoing macroeconomic events, including the sovereign debt crisis in Europe and slower growth in developing markets. In addition, commodity volatility and inflation is leading to higher raw materials costs.
 
‘In this difficult environment, the company remains focused on executing its market-focused strategies to generate profitable growth, improving operating productivity and investing in innovative solutions and emerging markets.’
 
John A. Luke, Jr (pictured, above), MWV chairman and chief executive officer, said: ‘We continue to make progress with commercial strategies designed to capture growth in targeted areas and expand our market share – even in those markets where demand is being impacted by global economic conditions. This progress – building on the success we have had all year – demonstrates the strong financial return on our strategy and gives us a confident long-term outlook.’