Pregis records Q2 net loss of US$4.9M from loss of US$3.6M in year-ago period with increases in raw materials; net sales up 11.2% to US$242.2M driven primarily by selling price increases, positive currency translation
August 11, 2011
– Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2011 second quarter financial results.
For the second quarter of 2011, the Company generated net sales of $242.2 million, an increase of 11.2% versus net sales of $217.8 million in the second quarter of 2010. The increase was driven primarily by the impact of selling price increases and favorable foreign currency translation. Excluding the impact of favorable foreign currency translation, net sales for the three months ended June 30, 2011 increased 4.3% compared to the same period in 2010.
Gross margin as a percent of net sales was flat year-over-year at 21.3%. Year-over-year cost increases of over $9 million in key raw materials were offset by the impact of selling price increases implemented during the past twelve months. The majority of the products we sell are plastic-resin based, and therefore our operations are highly sensitive to fluctuations in the costs of plastic resins. In the second quarter of 2011 as compared to the same period of 2010, average resin costs were higher by approximately 16% in both North America and Europe, as measured by the Chemical Market Associates, Inc. ("CMAI") index and ICIS index, their respective market indices.
Adjusted EBITDA, or "Consolidated Cash Flow" as defined by our indentures, is a significant operating measure used by the Company to measure its operating performance and liquidity. Adjusted EBITDA was $22.6 million in the second quarter of 2011 compared to $19.4 million for the same period in 2010, driven primarily by the impact of year-over-year cost reductions.
Commenting on the Company's second quarter results, Glenn Fischer, President and Chief Executive Officer, stated, "I am very pleased with our strong second quarter performance. Our adjusted EBITDA of $22.6 million was the highest quarterly EBITDA performance since the third quarter of 2009. Our second quarter sales volumes were essentially flat on a year-over-year basis, with continued strong increases in our key growth areas – inflatable systems and foam-in-place – being offset by softness in our core products.
We were able to drive year-over-year and sequential EBITDA improvement, however, by continuing to reduce our cost structure, as well as offsetting significant resin cost increases with the impact of our selling price initiatives over the past twelve months."
Mr. Fischer continued, "Resin costs at the end of the second quarter began to ease, down from the historically high levels experienced in April/May. While we may see some benefit from this in the third quarter, resin costs are likely to start increasing again in the fall, as industry-wide resin supply will tighten, due to maintenance shutdowns planned at several facilities. As a consequence, we are committed to doing what is necessary to maintain margins."
Comments on segment net sales and EBITDA performance for the second quarter of 2011 are as follows:
Net sales of the protective packaging segment increased by $13.3 million, or 9.6%. This increase was driven primarily by the impact from selling price increases and favorable foreign currency translation. Excluding favorable foreign currency translation, net sales for the second quarter 2011 increased 4.0%.
EBITDA of the protective packaging segment increased $3.9 million, or 36.8%, compared to the same quarter of 2010. This increase was primarily due to selling price increases as well as the impact of cost reductions, partially offset by increased key raw material costs.
Net sales of the specialty packaging segment increased $11.1 million, or 13.9% compared to the same quarter 2010. This increase was primarily driven by the impact of selling price increases and favorable foreign currency translation. Excluding the favorable foreign currency translation, net sales for the second quarter 2011 increased 4.4%.
EBITDA of the specialty packaging segment decreased $0.1 million, or 1.0%, due primarily to increased key raw material costs which were only partially offset by the impact of selling price increases.
A summary of Adjusted EBITDA, a significant measure required by the Company's indentures and used by the Company to measure its operating performance and liquidity, is presented in the supplemental information at the end of this release.
The Company will conduct an investor conference call to review its 2011 second quarter results on Friday, August 12, 2011 at 10:00 a.m. ET (9:00 a.m. CT). The call can be accessed through the following dial-in numbers: Domestic: 800-573-4754; International: 617-224-4325; Participant Passcode: 64817322 A replay of the conference call will be available through August 26, 2011. The replay may be accessed using the following dial-in information: Domestic: 888-286-8010; International: 617-801-6888; Passcode: 59938561.
Pregis Corporation is a leading global provider of innovative protective, flexible, and foodservice packaging and hospital supply products. The specialty-packaging leader currently operates 46 facilities in 18 countries around the world. Pregis Corporation is a wholly owned subsidiary of Pregis Holding II Corporation. For more information about Pregis, visit the Company's web site at www.pregis.com.
Industry Intelligence Editor's Note: In an omitted table, Pregis recorded Q2 net loss of US$4.9 million. For the same period a year ago, the company recorded net loss of US$3.6 million.