U.S. Packaging net sales of $648.9 million for the first quarter of 2017 represented a decrease of 1.8% compared to the same period of 2016. Compared to the prior first quarter, unit volumes were down approximately 1%. U.S. Packaging operating profit decreased to $83.5 million in the first quarter of 2017, or 12.9% of net sales, compared to $101.7 million, or 15.4% of net sales, in 2016. Compared to management’s expectations, lower profits were driven by lower than expected unit volumes and poor operational performance.
Global Packaging net sales for the first quarter of 2017 of $346.5 million represent an increase of 12.7% compared to the same period of 2016. Currency translation increased net sales by 4.2%. Acquisitions increased net sales by 6.1%. Organic sales growth of 2.4% reflects increased unit volumes of approximately 3%, partially offset by the mix of products sold.
Global Packaging operating profit for the first quarter was $27.2 million, compared to $16.3 million for the same period in 2016.
“We are clearly disappointed with our results this quarter, which were impacted by lower-than-expected unit volumes and operational issues in the U.S. Packaging segment,” said William F. Austen, Bemis Company’s president and CEO. “We are commencing a series of decisive actions and will execute a comprehensive plan to improve financial and operational performance in this segment. We are evaluating all aspects of our U.S. business – including our manufacturing footprint, SG&A, and direct and indirect spending – to better position the company in the current environment and for the long-term.
“Our Global Packaging segment met our expectations this quarter, driven by continued operational improvements in our Latin American and healthcare packaging businesses,” he added. “We are pleased with the traction our new leadership is making in each of these businesses as they drive new ways of thinking, enact change, and deliver on our commitments.”
As part of the company’s efforts to improve the profitability of its U.S. Packaging business, Bemis is developing a comprehensive plan. Bemis appointed Fred Stephan as president of the company’s U.S. Packaging business in February. Stephan most recently served as SVP and GM of the Insulation Systems business at Johns Manville, a Berkshire Hathaway company. He successfully served in a number of general management and functional roles over the past 12 years at Johns Manville and during the previous 20 years at General Electric.
“Fred is an outstanding addition to Bemis Company,” said Austen. “He has a great track record of leadership and success, and I have already been impressed with his fresh insights, his drive for action and results, and his practical and simple approach to our U.S. business.”
Cash flow from operations for the three months ended March 31, 2017 was $94.5 million, compared to $52.6 million in the prior year.
Management expects adjusted diluted earnings per share to be in the range of $2.50 to $2.60 for the full year 2017. Management estimates GAAP diluted earnings per share to be in the range of $2.44 to $2.54 for the full year 2017, excluding the impact of items that cannot be reasonably predicted at this time, such as any charges associated with future actions taken to improve financial and operational performance in U.S. Packaging.
“Our updated guidance reflects the impact of lower volume expectations from our core US customer base and near-term operating inefficiencies in our US Packaging business,” Austen said. “We are confident that the initiatives to improve US Packaging operations and profitability will enhance our positioning and performance, while driving enhanced value to our shareholders over the long-term.”
Management expects full year 2017 cash from operations to be in the range of $415 to $455 million, primarily a result of revised earnings expectations.