Sealed Air recovery held back by weak Europe
The US-based company said its European markets were taking longest to regain confidence after the recession - as it posted a five percent increase in first quarter earnings to $300m and a profit of $61.2m.
The packaging and equipment giant indicated that while performance across the Americas and Asia Pacific regions were generally positive, its European business continued to struggle amid poor consumer confidence in the aftermath of the global economic downturn.
“Europe is a soft spot, we’re really down high single digits and the European weakness goes across both food businesses,” said Sealed Air CEO and president William V. Hickey.
The company said overall sales in its food packaging segment sales revenue rose 5 per cent in constant currency terms while earnings were down 3.6 per cent. Operating profit dropped four per cent to $57m. Within this division, food packing volumes rose four per cent in North America and 10 per cent in Latin America. However, in Europe packaging volumes fell by “mid-to-high single digits”.
“Western European volumes remained weak due to prolonged economic weakness and very low consumer confidence levels,” Hickey said “But on a bright note, we did see ongoing growth in Eastern Europe, particularly in Russia, where we achieved double-digit volume increases.”
European impact on business
The pattern was repeated across its food solutions division, where Western European performance again was worst. North America posted a six per cent increase due largely to strong poultry case ready sales and product launches including a new star fresh film for fresh fish, while Asia Pacific showed an 18 per cent jump – thanks to a growth in case ready and ready meals.
“Like our food packaging business, the food solutions team deserved the onset of recovery in all the regions, except Western Europe, where conditions remained weak,” said the Sealed Air CEO.
Hickey pinpointed weakening demand in southern Europe and “particularly Spain” as an issue. Russia bucked this trend where demand for the company’s case ready products rose by more than 50 per cent.
He added that Europe comprised 26 per cent of the company’s business and low consumer confidence in the region had “held us back for the quarter” and “had a significant impact on bringing down the base”.
Emerging markets
Volume growth was led by the firm protective packaging division and developing markets – with BRIC sales increasing 39 per cent, which included 17 per cent due to foreign exchange gains, said a Sealed Air statement.
Hickey added there were “encouraging signs” from increased volumes in new products and applications and a growing backlog of equipment orders. He said equipment sales were up approximately 14 per cent year-on-year.
The results represented a “modest recovery”, he said.
