Multi Packaging Solutions Announces 1Q 2017 Results

Multi Packaging Solutions International Limited (MPS) announced results for its first quarter ended Sept. 30, 2016.
 
GAAP net sales for 1Q FY 2017 were $407.8 million vs. net sales for 1Q FY 2016 of $459.1 million, which includes negative foreign exchange effects in 1Q FY 2017 of $17.4 million when compared to the prior period. On a segment basis, North American sales were down $26.2 million from the prior year principally due to the decline in the multi-media market and some weakness in health care. European sales were down $25.7 million principally due to foreign exchange, and weakness in the European drinks market. Asia sales were relatively flat year over year.
 
Gross margin in 1Q FY 2017 was 20.7% compared to 21.6% in the prior year. The decline is principally due to the operational issues at specific facilities identified in the fourth quarter of FY 2016 that continued into the first quarter of FY 2017. These issues relate to the transfer of work from Scotland to China for the drinks business, lower absorption from manufacturing operations in the transaction card business due to weakness in EMV card sales, and costs associated with the German operations as they implement new ERP systems.
 
GAAP operating income for 1Q FY 2017 was $27.7 million vs. $40.7 million for 1Q FY 2016. Included in the current quarter is approximately $2.9 million of restructuring charges which primarily relate to the previously announced relocation of the Company’s operations in Stuttgart, Germany as well as the announced closure of its Bradford, UK site which serves certain tobacco customers. The company will also close one of its media facilities located in Louisville, KY.
 
“As we expected, the first quarter was challenging due to the headwinds that were previously discussed: continued negative impact of foreign exchange rates, the discontinuation of a specific toy program, the exit from the tobacco business and the continued decline in multimedia sales,” CEO Marc Shore said. “Furthermore, we continued to struggle at four facilities, and some of our core customers had weaker sales than budgeted. As previously noted, we will cycle through all of these challenges by the end of our fiscal second quarter, except for foreign exchange and media declines.
 
“Notwithstanding these headwinds, there were significant accomplishments in the quarter,” Shore added. “We have a robust pipeline of new business, which we will start benefiting from in early 2017. This is driven in part by our ability to give customers consistently high quality products on a global basis. MPS has also completed two strategic acquisitions in October and November that will enhance our offering for both labels in Europe and transaction cards in North America. These acquisitions currently have combined annual revenue of $25 million.”