Sealed Air, a provider of packaging solutions, has announced financial results for the second quarter 2018.
Image: Sealed Air has announced financial results for the second quarter. Photo: courtesy of Wagner Magni / Free Images.
“In the second quarter, Net Sales and Adjusted EBITDA increased 8% and 11%, respectively. Our differentiated and innovative solutions portfolio allows us to capitalize on the rapidly growing fresh food and e-commerce markets. This solid top line performance combined with our efforts to reduce costs and drive operational excellence resulted in improved operating leverage for the second consecutive quarter compared to the same period last year,” said Ted Doheny, President and Chief Executive Officer.
“We are excited to announce the acquisition of AFP, Inc., a leading, U.S.-based fabricator of specialty packaging solutions. AFP complements our recent Fagerdala acquisition and expands our design capabilities for the electronics, transportation and industrial markets. Building on our first half 2018 results and continued business momentum, we are on track to deliver our full year objectives despite anticipated currency headwinds.”
Unless otherwise stated, all results compare second quarter 2018 results to second quarter 2017 results from continuing operations. Year-over-year financial discussions present operating results from continuing operations as reported, and on a constant dollar basis. Constant dollar refers to unit volume and price/mix performance and excludes the impact of currency translation from all periods referenced.
Additionally, non-U.S. GAAP adjusted financial measures, such as Adjusted Earnings Before Interest Expense, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), Adjusted Net Earnings, Adjusted Diluted Earnings Per Share (“Adjusted EPS”) and Adjusted Tax Rate, exclude the impact of specified items (“Special Items”), such as restructuring charges, charges related to the sale of Diversey, gains and losses related to acquisition and divestiture of businesses, special tax items (“Tax Special Items”) and certain other infrequent or one-time items.
Please refer to the supplemental information included with this press release for a reconciliation of Non-U.S. GAAP to U.S. GAAP financial measures.
Food Care second quarter net sales of $713 million increased 5% as reported and on a constant dollar basis. The 5% increase was attributable to favorable price/mix of 3% and volume growth of 2%. Adjusted EBITDA increased 3% to $135 million or 19.0% of net sales.
Adjusted EBITDA performance was primarily due to favorable mix and price/cost spread, restructuring savings and positive volume trends partially offset by higher operating costs. Currency had a $1 million unfavorable impact on Adjusted EBITDA.
Product Care second quarter net sales of $442 million increased 13% as reported. Currency had a positive impact on Product Care net sales of 2%, or $8 million. On a constant dollar basis, net sales increased 11%, including 6%, or $24 million, from Fagerdala, 5% from favorable price/mix and a slight increase in volume. Adjusted EBITDA increased 13% to $79 million or 17.8% of net sales. Adjusted EBITDA performance was primarily attributable to favorable mix and price/cost spread, restructuring savings and contributions from the Fagerdala acquisition partially offset by higher operating costs. Currency had a $2 million favorable impact on Adjusted EBITDA.
From April 1, 2018 through July 31, 2018, Sealed Air repurchased approximately $125 million or 2.9 million shares bringing the total year to date share repurchases to approximately $530 million or 11.7 million shares. The Company has approximately $900 million remaining under the current share repurchase authorization.
On July 12, 2018, Sealed Air entered into a third amended and restated syndicated facility agreement whereby its existing revolver was increased from $700 million to $1.0 billion and existing term loans were rolled over. The maturity of the new facilities was extended to July 2023 with more favorable terms.
On August 1, 2018, Sealed Air acquired AFP, Inc., a leading, privately held fabricator of foam, corrugated, molded pulp and wood packaging solutions. This acquisition expands Sealed Air’s protective packaging solutions in the electronics, transportation and industrial markets with custom-engineered applications.
Acquiring the company will allow Sealed Air to better position its fabricated foam innovations such as EcoPure, a sustainable solution made from plant-based resin. AFP generated $125 million in net sales in 2017 and operates six facilities across the U.S. with further presence in Asia and Mexico.
On a constant dollar basis, net sales increased 7% reflecting favorable price/mix of 4%, contribution from the Fagerdala acquisition of 2%, and an increase in volume of 1%. The Company experienced increased demand for its differentiated solutions on a global basis.
This was partially offset by a decline in equipment sales, particularly in Food Care North America due to timing and strong prior year comparable results. Equipment sales are expected to grow in the second half of the year. By region, constant dollar sales increased 4% in North America and EMEA, 19% in Latin America, and 20% in Asia Pacific.
Adjusted EBITDA increased 11% to $218 million, or 18.8% of net sales. This compares to $196 million, or 18.3% of net sales for the second quarter of 2017. Currency had a favorable $2 million, or 1%, impact on Adjusted EBITDA in the quarter. The year-over-year margin increase was primarily attributable to favorable mix and price/cost spread, restructuring savings and contributions from the Fagerdala acquisition partially offset by higher operating costs.
Adjusted EPS was $0.64 for the second quarter 2018 compared to $0.34 in the second quarter 2017. The Adjusted Tax Rate was 22.6% in the second quarter 2018, compared to 38.9% in the second quarter 2017. The 2017 rate was unfavorably impacted by earnings mix.
Sealed Air is a knowledge-based company focused on packaging solutions that help our customers achieve their sustainability goals in the face of today’s biggest social and environmental challenges.
Our portfolio of widely recognized brands, including Cryovac® brand food packaging solutions and Bubble Wrap® brand cushioning, enable a safer and less wasteful food supply chain and protect valuable goods shipped around the world.
Source: Company Press Release