Dow Jones Newswires | Pactiv Corp.’s first-quarter profit dropped 38 percent as rising material costs hurt the packaging company’s margins, and sales growth missed Wall Street’s expectations.
Looking ahead, it expected per-share earnings of 52 cents to 56 cents for the second quarter. Analysts polled by Thomson Reuters predicted 64 cents. For the year, Pactiv now sees earnings of $2.10 to $2.30, down 10 cents from the company’s February projection.
Shares of Pactiv were down 2.2 percent at $25 in after-hours trading.
Pactiv attributed the lower view to higher raw material costs and the
fact that “price increases to offset those higher costs will not be
fully effective until the second half” of the year. Still, the company
expects volumes to remain strong during the year.
The maker of Hefty garbage bags and other packaging products has held up
well during the recession. Ahead of the results, Deutsche Bank said
that while recent resin price increases have come through faster than
expected, Pactiv should continue to benefit from improving volumes and
Pactiv posted a profit of $48 million, or 36 cents a share, down from
$77 million, or 58 cents a share, a year earlier. The latest results
included a 2-cent charge related to the anticipated impact of the
nation’s recent health-care overhaul. In February, Pactiv projected
earnings of 38 cents to 42 cents.
Sales climbed 1.4% to $777 million, below the $810 million expected most
recently by Wall Street. Sales were helped by an 8 percent growth in volume,
which offset a 7 percent decline in pricing.
Gross margin before depreciation and amortization narrowed to 27.9 percent from
Earnings declined 16% in the Hefty consumer-products segment and 42% in
the food-service and food-packaging business. Sales grew 2.8 percent and 0.6 percent,
Earlier this month, Pactiv completed its $200 million purchase of PWP
Industries, whose products include containers, trays and bottles. The
purchase is expected to “modestly” add to Pactiv’s 2010 earnings.