Crown braves bad weather and tough macroeconomic conditions
CFO Timothy Donahue told investors and analysts yesterday that global unit volume growth in beverage cans, the pass-through of higher raw material costs to customers and positive currency translations, had offset ‘soft’ global food can volume sales for Crown.
Q3 net sales grew to $2.423bn ($2.205bn: Q3 2010), primarily due to Crown passing on higher raw material costs, as well as $92m in positive currency translations, despite the strength of the US dollar. Overall gross profits were up 5 per cent to $396m against 2010.
Adverse weather
The company said that global beverage can sales rose 3 per cent (in unit volume terms) in Q3, driven by strong demand from the emerging markets of Brazil and Asia.
However, in both the US and Europe, macro-economic challenges that hit consumer demand, and adverse weather affecting vegetable crops had dented volumes in some business sectors, Crown said, with the firm experiencing demand below expectations.
For instance, food cans, where Crown has only limited emerging market exposure, were down 4 per cent overall in the quarter.
Within its US food business Q3 revenues were essentially flat, Crown said, with the pass-through of higher steel costs offsetting a 4.5 per cent decline in unit sales.
Sales within the EU food business were up $65m or 12%, but again these figures reflected higher steel costs that offset a 4.5 per cent volume decline as a result of tough economic conditions and cool and damp weather across Nothern Europe that depressed yields.
Developing world investment
Crown chairman and CEO John Conway said the firm began operating a second beverage can line in Phnom Penh, Cambodia earlier this month and expected to begin production at several new plants in countries including China and Brazil in the first half of 2012.
Donahue pointed out that Thailand had experienced its worst flooding in over 50 years; while this had not disrupted plant activities, it had influenced food and beverage canned demand in the country, he said.
Nonetheless, Donahue said: “We are fortunate to be in the business we’re in. While we’re not immune to global economic conditions, and the volatility that surrounds us, our business is defensive, with a growing position in developing markets.”
Around 74 per cent of Crown’s net sales were generated outside of the US in Q3, which was 2 per cent up on the respective figure for Q3 of 2010.
Conway said: “We are pleased with our overall financial performance and solid execution in the third quarter.”
