Millennium Management's 4Q13 positions in Crown Holdings and more (Part 3 of 6)
Millennium Management and Crown Holdings
Some of the notable positions traded by Millennium Management during the fourth quarter include new positions in Endo International PLC (ENDP), Crown Holdings (CCK), and SunTrust Banks (STI). The fund also saw stake increases in Perrigo Company PLC (PRGO) and NextEra Energy Inc. (NEE).
Israel Englander’s Millennium Management started a new position in Crown Holdings (CCK) that accounts for 0.20% of the fund’s portfolio.
Crown Holdings is involved in the design, manufacture, and sale of packaging products for consumer goods. The company’s primary products include steel and aluminum cans for food, beverage, household, and other consumer products and metal vacuum closures and caps. As of December 31, 2013, the company operated 147 plants along with sales and service facilities throughout 40 countries. The company’s reportable segments within the Americas Division are Americas Beverage and North America Food, while within the European Division are European Beverage and European Food. The company’s Asia Pacific Division primarily consists of beverage can operations and also includes the company’s non-beverage can operations, primarily food cans and specialty packaging. Crown’s non-reportable segments include its European Specialty Packaging business, its aerosol can businesses in North America and Europe, and its tooling and equipment operations in the U.S. and the United Kingdom. Crown Holdings’ consolidated net sales in 2013 were $8.7 billion, with 74% derived from operations outside the U.S.
Crown saw a fall in share price after the company missed estimates in its 4Q results. Fourth quarter gross profit declined to $274 million from $281 million in 4Q 2012, as increased beverage can volumes and lower depreciation expenses were offset by lower volumes and substantially reduced production activity across food can operations in North America and Europe. The U.S. and Canadian beverage can markets are mature markets that have experienced slightly declining volumes in recent years. In Brazil, the company’s sales unit volumes have increased in recent years, primarily due to market growth.
In 3Q 2013, the company said its food, aerosol, and specialty businesses performed well relative to the industry, but demand for food cans in Europe was below expectations, principally due to end user cyclical demand weakness. As the European economies recover from recession, Crown expects food can demand to rebound. Crown said in its annual filing that its specialty packaging and aerosol can businesses have experienced slightly declining volumes.
The stock jumped in October when the company acquired Mivisa Envases SAU of Spain in a 1.2 billion euros ($1.6 billion) deal. The acquisition is expected to build upon Crown’s existing position in the European food can segment by substantially increasing its presence in Spain, one of Europe’s leading agricultural economies. With sales of 555 euros million and EBITDA of 133 euros million for the audited fiscal year ended June 30, 2013, Mivisa is the largest food can producer in both the Iberian Peninsula and Morocco.
The company said in its 4Q earnings release that for 2014, general business conditions in North America and Europe are expected to improve, positively affecting the company’s performance. Crown also anticipates further global beverage can growth and solid contributions from the 2013 capacity expansion in Cambodia, China, Malaysia, Thailand, and Vietnam, as well as the start-up of a new plant in Teresina, Brazil. This, combined with a continuing focus on cost reduction and productivity improvement throughout the company, will deliver increased value to shareholders.
Analysts at Wells Fargo earlier upgraded the stock and said, “Several of the challenges which have plagued CCK’s operational performance over the past two years have either been reconciled or bottomed such that returns from several of the company’s recent capital projects can begin to translate into profit growth.” However, estimates have been lowered due to “reduced earnings in the company’s North American Food can business, and no improvement in pricing for Chinese beverage cans.”
Browse this series on Market Realist: