Bemis Company, Inc. (NYSE:BMS) today reported financial results for its third quarter ended September 30, 2017. Refer to the reconciliation of Non-GAAP measures detailed in the attached schedule, including adjusted earnings per share, adjusted EBITDA, and net debt, referenced in this release.
“We made progress during the third quarter, driven in part by operational and manufacturing efficiencies in our U.S. business,” said William F. Austen, Bemis Company’s President and Chief Executive Officer. “Profit in our Global business also improved over the second quarter. As anticipated, in Latin America, unit volumes continued to be weak due to the challenging economic environment in Brazil; profit improved sequentially as we reduced variable costs to align with customer demand in Brazil.”
Austen continued, “During the third quarter, we concluded the analysis of our restructuring and cost savings plan to properly align our manufacturing and administrative cost structures and better position the Company in the current business environment and for the long-term. We established an Enterprise Project Management Office to enhance ownership and accountability and to ensure that our planned $65 million in savings are delivered on time. The actions we are taking will create a more agile, streamlined, and efficient business, and we will implement these initiatives while maintaining the high quality products, focus on service, and culture of respect and innovation consistent with Bemis’ standard.”
Austen further commented, “While we have made good progress on our business initiatives during the third quarter, we anticipate volume challenges during the fourth quarter in our U.S. and Latin American businesses. We will continue to stay focused on our cost savings plan and initiatives to strengthen our business.”
2017 RESTRUCTURING AND COST SAVINGS PLAN
On September 12, 2017, the Company announced the remaining details of its restructuring and cost savings plan to reduce its fixed manufacturing and administrative cost structures. The Company increased the pre-tax annual savings run rate target to $65 million. Estimated total pre-tax costs to implement the plan are $100 to $125 million. Of that total, pre-tax cash expense is estimated between $70 and $80 million.
The plan includes the following actions:
Optimizing manufacturing capacity. The Company will close a total of four manufacturing facilities. Work performed at these facilities will be transferred to other Bemis locations. The Company initiated the closing of two of these facilities in 2017 and will initiate the others in 2018. Benefits from these four plant closures will be approximately $17 million when fully implemented.
Consolidating office space. The Company will consolidate a portion of its administrative facilities. Certain administrative offices in the United States and Latin America will be exited and relocated to other existing company-owned buildings. Benefits from these consolidations will be approximately $5 million when fully implemented.
Reducing SG&A Cost Structure. The Company is reducing its administrative support cost structure to align with the current business environment. Over the next three years, the Company will reduce a total of 500 administrative positions, or 8 percent of the global administrative workforce. Impacted employees will receive job placement assistance and severance benefits to assist in their transition. The total cost savings from these changes will be approximately $35 million when fully implemented.
Reducing Other Costs. The Company has identified numerous opportunities for cost efficiency across a variety of operational and administrative activities and functions. Examples include consolidating external warehouses used for inventory storage, reducing transportation costs associated with shipping product, and optimizing costs associated with travel. Benefits from these opportunities are expected to be approximately $8 million when fully implemented.
During the third quarter, the Company recorded restructuring and other costs totaling $12.9 million or $0.09 per share, primarily related to the initial steps in its 2017 plan. These charges consisted primarily of employee termination costs and fixed asset write-downs of equipment. Management anticipates approximately $10 million of cash expenditure during 2017 related to this plan.
U.S. Packaging
U.S. Packaging net sales of $672.3 million for the third quarter of 2017 represented an increase of 2.2 percent compared to the same period of 2016. Compared to the prior third quarter, unit volumes were up approximately two percent.
U.S. Packaging operating profit decreased to $99.6 million in the third quarter of 2017, or 14.8 percent of net sales, compared to $100.8 million, or 15.3 percent of net sales, in 2016. Compared to the prior year, profits were impacted by previously-negotiated contractual selling price reductions on select products, partially offset by manufacturing efficiencies and the benefits of increased unit volumes. Compared to the second quarter of 2017, increased profits were due to strong operational performance and manufacturing efficiencies, stabilization at a facility in Wisconsin that struggled with an ERP go-live during the second quarter, and lower business incentives related to select customers who were unable to meet their commitments for new business volume.
Global Packaging
Global Packaging net sales of $362.8 million for the third quarter of 2017 represented a decrease of 1.8 percent compared to the same period of 2016. Currency translation increased net sales by 0.5 percent. Organic sales decline of 2.3 percent reflects unfavorable mix of products sold, partially offset by sales price increases. Compared to the prior third quarter, Global Packaging unit volumes were relatively flat, comprised of weak volumes in the Company’s Latin American business, as anticipated, and offset by net volume growth in the remaining regions of the Global Packaging Segment.
Global Packaging operating profit for the third quarter was $24.6 million, compared to $36.2 million for the same period in 2016. Compared to the prior year, lower profits in Global Packaging were driven primarily by the impact of the challenging economic environment in Brazil. Current third quarter profits in the Company’s Latin American business were in-line with the Company’s expectations shared during the most recent earnings cycle, which outlined sequential profit improvement as compared to the second quarter of 2017.
more detail at: http://investors.bemis.com/press-release/bemis-company-reports-third-quarter-earnings