MeadWestvaco CEO Discusses Q4 2010 Earnings Call Transcript

MeadWestvaco (MWV)

Q4 2010 Earnings Call

January 26, 2011 10:00 am ET

Executives

E. Rajkowski - Chief Financial Officer and Senior Vice President

James Buzzard - President

John Luke - Chairman, Chief Executive Officer and Chairman of Executive Committee

Jason Thompson - Director of Investor Relations

Analysts

Mark Connelly - Credit Agricole Securities (USA) Inc.

Mark Wilde - Deutsche Bank AG

Mark Weintraub - Buckingham Research Group

Richard Skidmore - Goldman Sachs Group Inc.

George Staphos

Chip Dillon - Crédit Suisse AG

Gail Glazerman - UBS Investment Bank

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the MWV Fourth Quarter Conference Call. [Operator Instructions] At this point, I'd like to turn the meeting over to Director of Investor Relations, Mr. Jason Thompson. Please go ahead.

Jason Thompson

Thanks, David, and good morning, everyone. This morning, we announced our results before the market opened, and a notification of this morning's call was broadly disclosed. Further, this morning's call is being webcast at mwv.com, and a slide that accompany this call are available there as well.

I'll briefly remind you that certain statements we make are forward-looking, and are not guarantees of future performance and are subject to known and unknown risks and uncertainties described in our public filings. Furthermore, contents contain time-sensitive information that although correct today may change with the passage of time.

All the results we share this morning are presented on a continuing-operations basis. For the fourth quarter, we reported net income from continuing operations of $68 million or $0.40 per share, x items adjusted net income was $71 million or $0.41 per share.

Now here to tell you more about our results for the fourth quarter and the full year are John Luke, Chairman and CEO; Jim Buzzard, our President; and Mark Rajkowski, CFO.

I'll now turn the call over to John.

John Luke

Thanks, Jason, and good morning. I'm pleased to report that MWV completed a record year in 2010, with very strong performance in the fourth quarter. Our operating earnings for the year were due directly to the success we have had in implementing our market focus strategies for our Packaging businesses and an exceptionally strong performance in our Specialty Chemicals business.

Looking back at the year in which we made substantial and lasting progress with our business model improvement and market-based strategies, it is clear that we have transformed MWV's business. Our vision has been and remains to be a global leader in packaging, competing successfully in the most profitable end markets, partnering with the best brands and customers, developing the most innovative solutions, and delivering the most value possible to our shareholders. Our steady record of progress in recent years confirms that MWV is capitalizing on these strengths to deliver significantly higher earnings on a consistent basis.

This transformation is especially evident in our performance in 2010. First, we shaped to more valuable revenue mix, exiting unattractive products and markets, and replacing this volume with higher margin products and solutions. Second, we partnered with global brand owners to understand their strategies and packaging requirements, and to develop solutions that enhance their market performance and expand their share. Third, we invented and commercialized innovative new solutions based on consumer insights, customer needs and MWV's design and technology capabilities. And fourth, we used our financial strength to invest in profitable growth opportunities in our most attractive markets.

The result is a substantial and sustainable improvement in profitability across our businesses that drove record operating income of $531 million, exclusive of special items. This success, as new starting point for further improve, was built on our focused work to execute specific strategies to grow profitably in the large global packaging market that we have targeted.

As a logical extension of this, we are in the process of organizing our internal management structures to run our Packaging businesses with a focus on end markets. When we complete this process and operate in this structure, most likely later in 2011, we will report segment results under this new view. This will give our investors and other stakeholders a better perspective on the transformative changes we are implementing and the heightened potential for very strong growth and value creation in attractive end markets.

Until it's appropriate to report our results in this way, I will highlight key activity in our top-priority markets. After I do so today, Jim will share additional details on our performance in the segment as we report them today. Mark will follow with a review of our financial performance for the year, and provide an outlook for our business for the first quarter of 2011.

Turning to our targeted packaging markets and beginning with food. In the large global market for food packaging, we continue to win new business with retail food customers. Our volume was up about 12% in the quarter, especially with new product launches by frozen and dry food customers, including Kellogg's, Unilever and General Mills. We're also building our platform for future growth, with in-store trials for Captivate, our shopper-ready packaging solution for grocery store shelves, with major brand owners starting in the first quarter of 2011.

Our Beverage Packaging business was steady for the year, tracking at or slightly ahead of trends in the industry. There was widespread softness for beer and soft drink multipacks in developed markets in North America and Europe, but we achieved strong volume increases in Asia and Latin America. We've recently seen an increase in machinery placements, a sign that customers are beginning to make infrastructure investments that we expect will lead to higher revenue in the future.

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