“We delivered first quarter earnings above our most recent expectations, driven by improving operations and the benefits of Agility, which is our plan to fix, strengthen, and grow our business,” said William F. Austen, Bemis Company’s president and CEO. “Compared to the prior first quarter, profits increased in our US segment due to the benefits of Agility and operational improvements. Profits increased in our Rest of World segment due to growth and strength in our healthcare packaging business. Profits were down in our Latin American segment due to the impact of the economic environment in Brazil compared to one year ago, as anticipated. We continue to take action in Latin America to drive margin expansion throughout the remainder of 2018.”
Austen continued, “We are maintaining our full year 2018 guidance. Through Agility, we are making progress to improve our business. We continue to execute our plan to create a more agile, streamlined, and efficient business.”
As part of the company’s previously-announced improvement plan called “Agility” to fix, strengthen, and grow its business, the fix aspect of this plan includes a restructuring and cost savings target of $65 million pre-tax by the end of 2019.
Business Segments Results:
• US Packaging net sales of $666.0 million for the first quarter of 2018 represented an increase of 2.6% compared to the same period of 2017. The increase in net sales was driven primarily by sales price and mix partially offset by lower unit volumes of approximately 1%.
US Packaging operating profit increased to $87.2 million in the first quarter of 2018, or 13.1% of net sales, compared to $83.5 million, or 12.9% of net sales, in 2017.
• Latin America Packaging net sales of $169.4 million for the first quarter of 2018 represented a decrease of 4.8% compared to the same period of 2017. Currency translation decreased net sales by 4.6%. Organic sales were approximately flat reflecting increased selling prices offset by decreased unit volumes of approximately 8%. As anticipated, lower unit volumes for the first quarter were driven by the economic environment in Brazil that incrementally degraded starting in the second quarter of the prior year.
Latin America Packaging operating profit for the first quarter was $8.0 million, compared to $13.6 million for the same period in 2017. Compared to the prior year, lower profits in Latin America Packaging were driven by the impacts of the challenging economic environment in Brazil, including lower unit volumes.
• Rest of World Packaging net sales of $192.0 million for the first quarter of 2018 represented an increase of 13.9% compared to the same period of 2017. Currency translation increased net sales by 8.8%. The acquisition of Evadix increased net sales by 1.1%. Organic sales growth of 4.0% reflects increased unit volumes across the segment averaging approximately 12% partially offset by sales price and mix of products sold.
Rest of World Packaging operating profit increased to $16.5 million in the first quarter of 2018, or 8.6% of net sales, compared to $13.6 million, or 8.1% of net sales, in 2017. Improvement in Rest of World Packaging operating profit was driven primarily by increased sales volume in the Company’s healthcare packaging business.
Cash flow from operations for the three months ended March 31, 2018 was $54.3 million, compared to $94.5 million in the prior year. First quarter 2018 results were in line with the company’s expectations and normal seasonality of cash flows. As compared to the prior year, cash flow was lower primarily due to the prior year including the benefit of certain extended payment terms that the company negotiated with suppliers and has maintained on an on-going basis.
Total company net debt to adjusted EBITDA was 2.7 times at March 31, 2018.
Management maintained its full year 2018 cash from operations guidance in the range of $420 to $450 million, which includes approximately $50 million of restructuring and related cash costs.