MWV 3Q 2014 results: income from continuing operations up 72% from year ago to $105 million

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MWV 3Q 2014 results: income from continuing operations up 72% from year ago to $105 million

October 28, 2014 - 00:16

RICHMOND, VA, Oct. 28, 2014 (Business Wire) -Third Quarter 2014 Highlights:
  • Earnings from continuing operations of $0.60 per share, $0.63 ex-items vs. $0.37 on the same basis in the prior year

  • Sales of nearly $1.5 billion were up 7% from gains across targeted packaging and specialty chemicals markets

  • EBITDA ex-items of $285 million increased 20% driven by strong improvement across all packaging segments

  • Margin expansion driven by broad volume, price/mix and productivity improvement, as well as cost savings benefits; company expects to exceed its 2014 savings goal of $75 million

MeadWestvaco Corporation, a global leader in packaging and packaging solutions, reported strong sales and EBITDA margin growth in the third quarter of 2014 (see table below). Sales increased from gains across targeted, higher-value packaging and specialty chemicals end markets. Margin grew from strong operational performance, gains in productivity from major efficiency investments, and cost reductions associated with the company's margin improvement program. As a result, total company EBITDA ex-items increased 20% to $285 million, or 19.4% of sales. Refer to the "Use of Non-GAAP Measures" section of this release for further information.

"We executed well and made excellent progress improving our margins during the third quarter," said John A. Luke, Jr., chairman and chief executive officer, MWV. "Despite a low- to no-growth global economic environment, we increased volumes of our valuable, differentiated products in many of our targeted end markets. We also greatly improved profitability from outstanding operational performance and reductions in our cost structure. We are executing our strategy with discipline and generating results each day that move us closer to our goal of sustained industry-leading margins."

Quarterly Comparison

Sales from continuing operations in the third quarter of 2014 were $1.47 billion compared to $1.38 billion in the third quarter of 2013. Income from continuing operations attributable to the company in the third quarter of 2014 was $105 million or $0.60 per share, compared to $61 million or $0.34 per share in the third quarter of 2013. Income from continuing operations attributable to the company excluding special items was $109 million or $0.63 per share in the third quarter of 2014, compared to $68 million or $0.37 per share in the third quarter of 2013.

Third Quarter Segment Results

Following is a summary of third quarter 2014 results by business segment. All comparisons of the results for the third quarter of 2014 are with the third quarter of 2013 on a continuing operations basis.

Food & Beverage

In the Food & Beverage segment, sales grew 7% to $854 million in the third quarter of 2014 compared to $796 million in the third quarter of 2013. EBITDA increased 16% to $161 million in the third quarter of 2014 compared to $139 million in the third quarter of 2013.

  • Excellent operating leverage - positive volume and price/mix combined with strong operational execution and continued productivity from major mill efficiency investments

  • 4% revenue increase in food driven by gains in food service

  • 3% revenue growth in beverage driven by share gains in North America and continued strong growth in Asia

  • 19% revenue increase in tobacco driven by continued strong volumes with North American brand owners and new customers in Asia

  • Backlogs in bleached paperboard at 5 weeks and CNK® at 2-3 weeks

Home, Health & Beauty

In the Home, Health & Beauty segment, sales were down 1% to $183 million in the third quarter of 2014 compared to $185 million in the third quarter of 2013. EBITDA increased 12% to $28 million in the third quarter of 2014 compared to $25 million in the third quarter of 2013.

  • Total revenue up 4% excluding the European and Brazilian folding carton businesses that the company exited

  • Strong revenue growth from continued gains in fragrance pumps and home and garden trigger and aerosol categories

  • Substantial profit improvement in healthcare adherence business

Industrial

In the Industrial segment, sales grew 14% to $150 million in the third quarter of 2014 compared to $132 million in the third quarter of 2013. EBITDA increased 48% to $37 million in the third quarter of 2014 compared to $25 million in the third quarter of 2013.

  • Significantly improved operating leverage - positive volume and price/mix combined with stronger operational performance in the expanded Brazilian platform

  • 30% EBITDA margin in Brazil

  • 6% volume improvement in Brazil, outperforming underlying corrugated market trends

  • Price and product mix improvement of 4% led by increases in Brazil to offset inflation

  • Productivity benefits from more consistent operating rates and the elimination of third-party paper purchases in the Brazilian operation

  • 28% revenue growth in Indian industrial packaging business

Specialty Chemicals

In the Specialty Chemicals segment, sales grew 9% to $283 million in the third quarter of 2014 compared to $260 million in the third quarter of 2013. EBITDA increased 4% to $77 million in the third quarter of 2014 compared to $74 million in the third quarter of 2013.

  • Revenue growth and price/mix improvement from gains in high value strategic markets - oilfield, asphalt and carbon technologies

  • Positive productivity from continued improvement in plant utilization rates

  • Excluding one-time benefits totaling $7 million in the third quarter of 2013, EBITDA margin in the third quarter of 2014 improved 140 basis points

Community Development and Land Management

Sales for the Community Development and Land Management segment were $8 million in the third quarter of 2014 compared to $6 million in the third quarter of 2013. A loss of $1 million was reported in the third quarter of 2014 compared to a loss of $3 million in the third quarter of 2013.

Other Items

During the third quarter of 2014, the company purchased and retired 1.1 million of its common shares for $44 million, and in October 2014 the company completed its 2014 repurchase program by purchasing and retiring an additional 1.0 million shares of its common shares for $43 million. With the completion of this repurchase program, the company has repurchased a total of 13.8 million common shares for $525 million throughout the duration of the program. Including the special dividend paid during the first quarter of 2014 as well as the above share repurchases, the company has returned to shareholders approximately $700 million using proceeds received from the sale of forestlands and related assets to Plum Creek in the fourth quarter of 2013.

In the third quarter of 2014, total pre-tax input costs of energy, raw materials and freight increased by $22 million compared to the third quarter of 2013 on a continuing operations basis.

In the third quarter of 2014, the pre-tax impact on earnings from foreign currency exchange was $3 million unfavorable compared to the third quarter of 2013 on a continuing operations basis.

Cash flow provided by operating activities from continuing operations was $139 million in the third quarter of 2014 compared to $107 million in the third quarter of 2013, reflecting higher earnings compared to 2013.

Capital spending declined to $74 million in the third quarter of 2014 compared to $108 million in the third quarter of 2013, reflecting lower overall investment primarily related to the Covington biomass boiler, which was completed in the fourth quarter of 2013.

The effective tax rate attributable to continuing operations was approximately 28% in the third quarter of 2014. The mix and level of earnings between domestic and foreign operations contributed to the difference between the effective tax rate and statutory rates.

During the third quarter of 2014, MWV paid a regular quarterly dividend of $0.25 per share.

Fourth Quarter 2014 Outlook

For the fourth quarter of 2014, earnings excluding special items are expected to be above year-ago levels on a continuing operations basis. The company expects ongoing benefits from solid execution of its commercial and operational excellence strategies, as well as continued contributions from its growth and productivity investments and cost savings initiatives.

The principal benefits that are expected to drive the company's improvement in the fourth quarter are:

  • Increases in consumer and industrial packaging volumes

  • Ongoing value-based pricing initiatives across all packaging businesses

  • Productivity improvements and continued positive operating leverage from increased mill and plant utilization rates

  • Continuing cost reduction efforts, including the company's ongoing margin improvement program

These principal benefits may be partially offset by:

  • Continued weak global economic conditions, especially in Brazil and the Eurozone

  • Continued demand challenges in liquid packaging and North American frozen and processed food markets

  • Continued higher costs for wood fiber

  • Negative impact from foreign currency exchange, principally the Euro and the Real

[For the full report and financial tables, click here.]