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Bemis sees upturn in flexible packaging demand

By Rory Harrington , 29-Jan-2010

Bemis said a gradual improvement in demand for flexible packaging, especially for shelf-life extension products, was a major factor in it posting better than expected Q4 and year end results.

The US company said its flexible division, which accounts for 85 per cent of its total sales, reported net sales of $770m in the fourth quarter – a year-on-year increase of almost $40m. Beneficial currency exchange rates had boosted sales by 7 per cent while the acquisition of South American rigid packaging operations of Huhtamaki Oyj in June of 2009 had increased sales by 3.6 per cent.

Operating profit for the quarter in the flexible packing segment was $90.7m, compared to $66.2m in the same period last year – driven by sales of higher value products, said the company.

For the full year 2009, flexible packaging net sales of $3.0 billion represented a 5.4 percent decrease compared to 2008. This was due to a fall in selling prices as a result of declining raw material costs.

Shelf life extension products

Chief financial officer Gene Wulf said: “Our customers, our markets that are predominantly polyethylene based have year-over-year double digit price decreases. This would include markets such as bakery, multi-pack, industrial and health and hygiene. This quarter we experienced increased unit sales volume in products for market segments applications representing about 85 per cent of the total flexible packaging sales.”

He added there had been double-digit volume growth in the dry foods sector while the other food markets had achieved almost the same improvement. Meat, cheese, dairy and liquids had also seen volume boosts.

“Several of these applications represent increased demand for products that extend shelf life or preserve freshness, which are value added products within our product portfolio,” said Wulf.

Operating profit increased to $390.4 million compared to $315.9 million in 2008, thanks to a combination of improved sales mix, production efficiency initiatives, and decreasing input costs during the first half of 2009, said Bemis.

Alcan update

Giving an update on the $1.2bn Alcan Packaging Food Americas purchase, the company said it was still in discussion with US competition authorities but expected the deal to be approved in the near future. Bemis said it hoped to complete the takeover, which would see it acquire 23 food and beverage flexible packaging facilities in the US, Canada, Mexico, Brazil, Argentina, and New Zealand, by the end of the first quarter 2010.

Henry Theisen, Bemis Company's President and Chief Executive Officer, said: “Our emphasis on aggressive cost management, production efficiency, and working capital management achieved sustainable improvements throughout the business in 2009. In 2010, we expect to benefit from the continued strength of our balance sheet, a wide array of recently introduced products, and a larger footprint with the anticipated completion of our Alcan Packaging Food Americas acquisition."

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