AptarGroup's Earnings and Sales Lag

Zacks Equity Research

AptarGroup, Inc. (ATR) reported first-quarter 2013 adjusted earnings of 64 cents per share, flat compared with the year-ago quarter. The results narrowly missed the Zacks Consensus Estimate of 66 cents. Earnings came at the lower end of management’s guidance range of 64 cents to 69 cents.

Earnings in the reported quarter exclude a negative impact of 5 cents per share related to the European Operations Optimization plan. Including this, earnings declined 7.8% to 59 cents per share from the prior-year quarter’s earnings of 64 cents per share.

Operational Update

Total revenue increased 4% year over year to $618 million but missed the Zacks Consensus Estimate of $634 million. Core sales increased 4% excluding currency effects and acquisition. Changes in currency exchange rates had 1% negative impact on sales in the quarter. Aptar Stelmi contributed approximately $35 million to sales in the quarter. Sales growth in Latin America and Asian markets remained strong.

Cost of sales went up 4.3% to $418 million in the reported quarter. Selling, Research & Development and Administrative expenses increased 6.5% to $94 million. Operating income declined 8% to $64 million with operating margin contracting 140 basis points (bps) to 10.5%.

Segment Performance

Total revenue in the Beauty + Homes segment declined 3.6% to $363 million in the quarter. Operating income declined 26% to $24 million. Segment operating margin decreased 200 basis points to 6.7%. Segment’s sales and income were negatively impacted by softer than anticipated volumes in the U.S. Segment operating margin decreased 200 basis points to 6.7%.

Total revenue in the Pharma segment increased 21% to $169 million. Operating income went up 17% to $46 million. However, operating margin contracted 90 bps to 27.2%.

Total revenue in the Food + Beverage segment jumped 13% to $85 million. Operating income increased 26% to $8.5 million. Operating margin also expanded 100 basis points to 10% in the quarter.

Financial Performance

As of Mar 31, 2013, cash and cash equivalents amounted to $225.1 million versus $229.7 million as of Dec 31, 2012. Total debt amounted to $441.6 million as of Mar 31, 2013, compared with $427.5 million as of Dec 31, 2012. The debt-to-capitalization ratio expanded to 24.1% as of Mar 31, 2013 from 23.6% as of Dec 31, 2012.

Optimization Plan of European Operations

AptarGroup in the first quarter recognized around $4.5 million of expense regarding the plan, of which $0.5 million were non-cash expenses. Using current exchange rates, the company expects about $9 million additional costs, most of which will be incurred in 2013. Annual savings of roughly $12 million are expected to begin later this year.


AptarGroup expects earnings to remain in the range of 73 cents to 78 cents per share for the second quarter of 2013. The guidance does not include any impact from the European Operations Optimization plan.

The company anticipates income from the Beauty + Home segment to improve in the second quarter. The company is optimistic about its Pharma business expecting a normalized order level in the U.S. generic allergy and European consumer health care markets in the second quarter. Also, Aptar Stelmi is expected to continue to perform well.

Crsytal Lake, Illinois-based AptarGroup is a leading global supplier of a broad range of innovative dispensing systems for the fragrance/cosmetic, personal care, pharmaceutical, household and food/beverage markets. AptarGroup currently retains a short-term Zacks Rank #3 (Hold).

Other companies in the packaging and containers industry with favorable Zacks Ranks are Graphic Packaging Holding Company (GPK), UFP Technologies, Inc. (UFPT) and Packaging Corporation of America (PKG). While Graphic Packaging and UFP Technologies hold a Zacks Rank #1 (Strong Buy), Packaging Corporation carries a Zacks Rank #2 (Buy).


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