Sealed Air Corporation (SEE)
Q2 2010 Earnings Call
July 28, 2010 11:00 am ET
Amanda Butler - Director of IR
William Hickey - President and CEO
David Kelsey - SVP and CFO
Sara Majers - Wells Fargo Securities
Richard Skidmore - Goldman Sachs
Peter Ruschmeier - Barclays Capital
Rosemarie Morbelli- Ingalls & Snyder
Mark Wilde - Deutsche Bank
Al Kabili - Macquarie
Ariel Avila - JPMorgan
Stewart Scharf - Standard & Poors
Previous Statements by SEE
» Sealed Air Corporation Q1 2010 Earnings Call Transcript
» Sealed Air Corp. Q4 2009 Earnings Call Transcript
» Sealed Air Corporation Q3 2009 Earnings Call Transcript
Good morning, everyone, and welcome to the Sealed Air conference call discussing the company's second quarter 2010 results. Leading the call today, we have William V. Hickey, President and Chief Executive Officer; and David H. Kelsey, Senior Vice President and Chief Financial Officer. After managements' prepared comments, they will be taking questions. (Operator Instructions)
And now, at this time, I'd like to turn the call over to Amanda Butler, Director of Investor Relations.
Thank you, Pam, and good morning everyone. Before we begin our call today, I'd like to remind you that statements made during this call stating management's outlook or predictions for the future are forward-looking statements. These statements are made solely on information that is now available to us. Our future performance may be different due to a number of factors. Many of these factors are listed in our most recent annual report on 10-K, which you can find on our website at sealedair.com.
And now, I will turn the call over to Bill Hickey, our CEO.
Thank you, Amanda, and good morning, everyone. During today's call, I will be highlighting our business performance for the second quarter, and Dave will discuss details of our financial results. After Dave's remarks, we will take your questions both from the phone lines and via text on our webcast. I understand that this morning is a busy morning for earnings releases, so we'll try to move along very smartly.
Yesterday evening, we reported a 15% increase on our second quarter earnings per share of $0.38. Excluding $0.03 related to foreign currency exchange gains from our Venezuelan subsidiary in 2010 and a $0.01 impact from GMS in 2009, we reported a 3% increase on our adjusted EPS to $0.35 per share in the quarter.
As a reminder, we have elected to exclude any foreign currency translation, gains or losses, from Venezuela in 2010 due to the significant currency fluctuations in that country. We did, however, have a $0.02 foreign exchange loss in the quarter, which is reported in other income. And excluding that item, which records we're responsible for, on an operating income basis, we're essentially in the line with the consensus of last year estimates for the second quarter.
Sales increased 6% to $1.1 billion, reflecting approximately 5% higher volume and 3% favorable foreign exchange, which were partially offset by 1% lower price mix.
Our Protective Packaging segment stood out in the quarter with strong 12% volume growth. While volume growth in our Food Packaging segment was modest in the quarter, it exceeded customer production volumes during the same period.
Total company price mix remained below last year's level, but we did see marked improvement in the second quarter as we started to see the benefits of our April pricing actions later in the quarter. Although been official, the price increases did not offset the surge in resin costs that we experienced in the quarter when resin prices peaked in the month of April in most regions.
In light of these factors, our business demonstrated solid growth in the second quarter in several areas. First, our industrial packaging business volume growth was stronger than expected and above normal seasonal trends. Looking at protective packaging, North American volumes increased 10% and Europe achieved a solid 11% volume growth. We expected this level of growth to moderate slightly in the second half of the year, primarily due to the year-over-year comparisons.
Additionally, we are seeing strong reception of new solutions and technologies like our CT-301 Shrink Film where our new proprietary technology is extending our range of offerings and bringing us new customers. We will be reinforcing this product line with two additional launches later this year. So we're very excited about the growth prospects in shrink films and where we can extend this exciting new technology across our broader product portfolio.
We have observed significant growth in equipment demand with a 36% sales increase in equipment, which includes a 3% favorable impact from foreign exchange. This order rate currently exceeds production rates, reflecting solid backlogs going into the third quarter. Additionally, orders appear to largely reflect new installations versus replacements, which suggest that these equipment sales will lead to future incremental material sales opportunities.
Developing regions grew in the quarter, both on a year-over-year and the sequential basis. Our China sales were a little weaker, which you may have seen in our financials under the Asia Pacific region, but this was expected due to pre-buying in our medical business in the first quarter, as customers built inventory ahead of our formulation license renewal.
Overall, we saw solid growth throughout the quarter in countries like Mexico, Brazil and Southeast Asia, as our businesses did not see any economic weakness or slowdown in these economies. We believe that this growth remains on track through the balance of the year.
Europe has been a topic of much interest in the last few months, and I have to say that we are encouraged by the solid 5% volume growth rate in the region, which was largely driven by our industrial packaging business, but also by a 3% volume growth rate in food packaging.