Pactiv Corp. (PTV)
Q1 2010 Earnings Call
April 22, 2010 8:30 a.m. ET
Christine Hanneman - Vice President, Investor Relations
Richard Wambold - Chairman and CEO
Ed Walters - CFO
Tim Thein – Citigroup
Ghansham Panjabi – Robert W. Baird
George Staphos – Banc of America/Merrill Lynch
Chris Manuel – KeyBanc Capital Markets
Claudia Hueston – J.P. Morgan Chase
Chip Dillon – Credit Suisse
Mark Wilde – Deutsche Bank
Richard Skidmore – Goldman Sachs
Alton Stump – Longbow Research
Peter Ruschmeier – Barclays Capital
Al Kabili – Macquarie
Mike Regan – Analyst
Jenny Jones – Schroder
Previous Statements by PTV
» Pactiv Corporation Q4 2009 Earnings Call Transcript
» Pactiv Corporation. Q3 2009 Earnings Conference Call
» Pactiv Corporation Q2 2009 Earnings Call Transcript
Good morning. And welcome to Pactiv First Quarter 2010 Earnings Release Call. This call is being recorded at the request of Pactiv. If you have any objections please disconnect at this time. Beginning this morning call is Ms. Christine Hanneman, Vice President, Investor Relations of Pactiv Corporation. Ma’am you may begin.
Good Morning. I’m Christine Hanneman, Joining me today are Richard Wambold, Chairman and CEO; and Ed Walters, our CFO. Welcome to our discussion of Pactiv first quarter 2010 earnings.
In the course of reviewing our financial results some of our comments today may include forward-looking statements. Please keep in mind that actual results could differ materially from those projected.
In our press release and this conference call we discuss our earnings results using some non-GAAP financial measure. Reconciliation of those non-GAAP numbers to GAAP numbers can be found at Pactiv website at www.pactiv.com under the Investor Relations section, under financial press releases. Richard?
Good morning, everyone. First and foremost, I’d like to welcome our new team members from PWP, who may have joined us for the first time on this call. I’d like to tell all of you that, we’re really very excited about working with you going forward instead about building a really great business in APET area.
In the first quarter, our earnings per share were $0.38, excluding a $0.02 one-time expense related to the new healthcare bill that passed. We saw 8% volume growth in total, which is terrific. In each of our segment posted strong volume increases themselves.
We have posted four quarters in a row now higher volume despite what have been really weak market conditions in both our consumer and foodservice. Importantly, the volume is largely coming from gains in market share or growth in adjacent markets as opposed to an economic rebound in our bakery business. This good news because as the employment situation improves, we expect to see expansion in our base business as well.
Let me spend a moment on each of those segments and I’d like to start with consumer business. In the first quarter our Hefty consumer segment saw 9% volume gain. Our new great value waste bag business at Wal-Mart contributed 7% of that growth.
We also had good results in our tableware business. Our dual brand private label strategy continues to benefit us as consumers are still more value oriented than they were a few years ago.
Once again, industry data pointed to soft markets in almost all of our product categories. Our new great value waste bag business for Wal-Mart is doing very well. We have managed to ramp up, so as to not have a huge pipeline feel that skews our results short-term. We are already at a normal quarterly run rate and all is going as planned.
Our results in the first quarter were down in our food bag business, but that were rebound in the second quarter as we go back on to the shelves in Wal-Mart. Shipping began on food bag to Wal-Mart in April.
We been on the shelf at Wal-Mart, had we been on the shelf actually at Wal-Mart in the first quarter, it would have added approximately 2 percentage points to our growth and these we would have seen about 11% in our consumer business. All in all volume at our consumer business and our consumer business in total is doing quite well.
Consumer segment operating profit in margin in the first quarter was below last year’s record levels were strong driven by higher volume and lower SG&A costs. Thus far we’ve taken approximately $20 million in price increases in our consumer product lines and expect to continue to do so selectively later this quarter to offset significantly higher resin costs that have occurred this year.
Now, let me turn to foodservice business. Trends are very similar to what we saw in the fourth quarter. In this segment we posted a 7% volume gain as we continued to experience good growth in cups and cutlery, polypropylene products, processor trays and paper-based items. Some of our traditional products declined in volume along with the market. And at the end, as I said, employment levels improve. We would expect to see these improve as well adding to our base volume growth.
Operating profit in this segment was down from last year’s record performance as a result of lower pricing and substantially higher raw material costs. On March 1st, we put a price increase through as planned and we had a second price increase that was affective on April the 1st.
Many of our contracts reset in the quarter as well, so by the end of the second quarter we would expect to be caught up with resin cost increases that we have seen thus far in the foodservice business.
Right, one we close on acquisition to PWP, which is a leading APET container manufacturer. As a result of this acquisition we will be at a much stronger position to serve the needs of our customers for APET products. We are changing the outlook for other acquisitions opportunities as well.
Now, I’d like to focus on what we are seeing as we entered the second quarter in terms of the economy as well as our outlook for raw material costs. Overall, our business is doing well but because of our extremely strong comps in the first half of 2009, as well as increase in raw material costs we are currently seeing, the first half of 2010 is going to be challenging.