Q4 2011 Earnings Call
January 25, 2012 10:00 am ET
Melanie E. R. Miller - Vice President of Investor Relations and Treasurer
Scott B. Ullem - Chief Financial Officer and Vice President
Henry J. Theisen - Chief Executive Officer, President, Director and Member of Executive & Finance Committee
Usha Chundru Guntupalli - Goldman Sachs Group Inc., Research Division
Christopher D. Manuel - Wells Fargo Securities, LLC, Research Division
Albert T. Kabili - Crédit Suisse AG, Research Division
Chip A. Dillon - Crédit Suisse AG, Research Division
Thomas Mullarkey - Morningstar Inc., Research Division
Michael A. Hamilton - RBC Wealth Management, Inc., Research Division
Matthew R. Wooten - Robert W. Baird & Co. Incorporated, Research Division
Philip Ng - Jefferies & Company, Inc., Research Division
Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division
Previous Statements by BMS
» Bemis' CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Bemis' CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Bemis' CEO Discusses Q1 2011 Results - Earnings Call Transcript
Good day, everyone. Welcome to the Bemis Fourth Quarter and Year End 2011 Earnings Release Conference Call. This call is being recorded. For opening remarks and introductions, I would now like to turn the call over to the Vice President and Treasurer for Bemis Company, Ms. Melanie Miller. Ms. Miller, please go ahead.
Melanie E. R. Miller
Thank you. Welcome to our Fourth Quarter and Full Year 2011 Conference Call. Today is January 25, 2012. After today's call, a replay will be available on our website, www.bemis.com, under the Investor Relations section. Joining me for this call today are Bemis Company's President and Chief Executive Officer, Henry Theisen; and our Vice President and Chief Financial Officer, Scott Ullem. Today, Henry will begin with comments on the performance of the business, followed by Scott with comments on the detailed financial results.
After our comments, we will answer any questions you have. However, in order to allow everyone an opportunity to participate, we ask that you limit yourself to one question at a time with a related follow-up and then fall back into the queue for any additional questions.
Before we begin, I'd like to remind everyone that statements regarding future performance of the company made in this teleconference are forward-looking and are subject to certain risks and uncertainties. Actual results may differ materially from historical, expected or projected results due to a variety of factors, including currency fluctuations, changes in raw material costs and availability, industry competition, unexpected consumer buying trends, changes in customer order patterns, our ability to pass along increased costs in our selling prices, unexpected costs related to plant closings, changes in government regulatory requirements, interest rate fluctuations and regional economic conditions. A more complete list of risk factors is included in our regular SEC filing, including the most recently filed Form 10-K last year for the year ended December 31, 2010.
Now I'll turn the call over to Henry Theisen.
Henry J. Theisen
Good morning, and thank you for joining us today. I want to begin by recapping our 2011 performance and take some time to talk through our facility consolidation program.
In 2011, we continued to successfully integrate our expanded manufacturing footprint and eliminate duplicative specifications. In addition, we successfully acquired Mayor Packaging in China, which gives us a high barrier footprint focused on the growing food packaging market in that region.
In December, we bought a small operation in North America that gives us access to the high barrier bulk liquid market from which we intend to expand. These acquisitions both position us to grow in new markets.
I am pleased that we are able to accomplish these important strategic actions, and we entered 2012 with a clear path to grow our operating profit in the future on a global basis.
During 2011, we faced a number of market challenges that led to unsatisfactory financial performance. I'd like to explain the impact of 3 specific challenges we faced in 2011 and why we feel more confident as we look ahead to 2012 and beyond, namely: dramatic resin price increases, challenging customer pricing terms and volume decline.
First, resin prices increased dramatically during the first half of the year. These increases were related to a number of market pressures, some of which were unique to particularly specialty resins. While commodity resin costs weakened during the second half, offering some relief, our specialty resin costs remained flat. Due to the time lag built into our customer pricing agreements that delays our ability to pass along changes in raw material costs, we realized the decline in our profitability throughout the year.
The second major challenge in 2011 was unfavorable price adjustment formulas in certain of our customers' agreements, which delayed our ability to pass along higher raw material costs. We expect to have improved most of our customer pricing agreements to more favorable terms by the end of 2012.
Lastly, during the second half of 2011, unit sales volumes softened in high barrier packaging for meat and cheese, dairy and liquids, specialty food products. This volume decrease was modest, and we believe it was related to the consumer response to higher retail prices in the grocery stores.
We expect these high barrier packaging volumes to grow modestly in 2012 with the commercialization of new business.
In sales of packaging for applications such as confectionery, snack, bakery, pet food and hygiene products, the decline in unit sales volume during the second half of the year was reflective of a combination of weaker consumer demand and specific pricing actions that we have taken to improve our sales mix to generate higher profits.
In the fourth quarter, we began a facility consolidation that includes 3 main categories of activities: plant closings, improved sales mix, rightsizing of administrative work force.