MeadWestvaco profits slump in Q1

By Joe Whitworth

- Last updated on GMT

Related tags Developed country

MeadWestvaco has reported Q1 profits plummeted by 23% in their food and beverage segment and warned they expect Q2 earnings to be ‘lower than the second quarter last year’.

The firm said the drop from $82m (€61.9m) to $63m (€47.5m) was related to a $9m (€6.8m) planned maintenance at their Mahrt Mill facility in Alabama which produces paperboard for retail food packaging and beverage multipacks.

When asked about other factors that made up the loss, a MWV spokesman added: “Input costs and raw material inflation contributed a small to medium cost, with an unfavourable foreign currency exchange.

“We expect demand to stay flat with not many ups or downs in volume and we know it is going to be a tough time ahead.”

However, sales grew 5% for the division to $747m (€563.7m) for the first three months of 2012 led by ‘improved pricing and product mix as well as volume growth in beverage and solid volume gains in food packaging’​.

Geographic breakdown

The acquisition of the Polytop closures business and better than expected market performance across North America and Asia drove the beverage segment, the spokesman said.

He added: “In Asia our multipack cartons in beer, soda and dairy are becoming ever more popular with consumers buying more than one at a time and taking up our multi-packs.

“In North America we have a lot of brand engagements, such as Dr Pepper, but in Europe we mainly occupy the premium space in beverage and that had a tough time.​”

The spokesman added they were seeing an impact in its conversion business as firms switched their packaging from glass to corrugated paperboard to go lightweight.

Sales and profit down

The industrial sector, which includes corrugated packaging for frozen meat and produce, saw year-on-year sales decline 7% to $19m (€14.3m), attributed to increased demand for entry-level solutions unfavourably impacting the segment’s overall product mix.

Profit fell 5% to $113m (€85.3m) due to the unfavourable pricing and product mix and higher labour costs and the firm said the second quarter earnings are expected to decline because of higher investment costs being allocated for a new box plant in Aracatuba, Brazil.

In the second quarter, MWV added they expect overall earnings to be modestly lower compared to the same period last year.

Plans for growth focused on innovation and emerging markets will help offset continued weak demand in developed markets, particularly in Europe, they added.

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