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This Packaging Company Is a Decent Pick

- By Mrinalini Chaudhuri

Bemis Company Inc. (BMS), a global supplier of flexible packaging, reported strong fourth quarter results and increased its guidance. There was an increase in EPS, Adjusted EPS and net income. The global packaging segment performed well with increase in revenues. The acquisitions contributed to this. The U.S. Packaging segment's operating profit increased due to continued operational improvements gained from the rom the Company's asset recapitalization program.


Fourth quarter performance

EPS during the fourth quarter was 64 cents (which was an increase of 10.3% from 58 cents in the prior year quarter).

Adjusted EPS during the quarter was 67 cents (which marked an increase of 11.7% from 60 cents in the prior year quarter).

Net income during the quarter was $60.5 million (which was an increase of 6.5% from $56.8 million in the prior year quarter).

Adjusted EBITDA during the quarter was $149.2 million (which was an increase of 7.0% from $139.4 million in the prior year quarter).

U.S. Packaging return on sales during the quarter was 14.9% (an improvement of 60bps from 14.3% in the prior year quarter).

Global Packaging return on sales during the quarter was 9.4% (an improvement of 80 bps from 8.6% in the prior year quarter).

U.S. packaging

Net sales during the quarter were $632.0 million (which marked decrease of 3.6% from the prior year quarter).

Unit volumes increased by 1% from the prior year quarter.

Operating profit during the quarter increased to $94.0 million, or 14.9 percent of net sales, (which was $93.5 million, or 14.3 percent of net sales in the prior year quarter).

Global packaging

Net sales during the fourth quarter were $356.0 million (which was an increase of 8.8% from the prior year quarter).

Operating profit during the fourth quarter was $33.4 million (which was $28.1 million in the rpior year quarter).

Full year performance

EPS during the full year was $2.48 (which was an increase of 0.4% from $2.47 in the prior year period).

Adjusted EPS during the full year was $2.69 (which was $2.55 in the prior year period).

Net income during the full year was $236.2 million (which was $239.3 million in the prior year period).

Adjusted EBITDA during the full year was $600 million (which marked an increase of 3.5% from $579.8 million in the prior year period).

U.S. Packaging return on sales during the full year was 15.3% (an improvement of 100bps from 14.3% in the prior year period).

Global Packaging return on sales during the full year was 8.2% (a decrease of 60bps from 8.8% in the prior year period).

Cash flow from operations for the 12 months ended December 31, 2016 was $437.4 million (which was $552.4 million in the prior year in the prior year period).

Capex totalled $208.3 million for the twelve months ended December 31, 2016.

Total company net debt to adjusted EBITDA was 2.5 times as at December 31, 2016.

U.S. packaging

Net sales were $2,621.1 million for the full year 2016 (which marked a decrease of 4.6% from the prior year period).

Unit volumes increased by 1% from the prior year period.

Operating profit increased to $400.0 million for the full year 2016, or 15.3 percent of net sales, (which was $391.8 million, or 14.3 percent of net sales in the prior year period).

Global packaging

Net sales for the full year 2016 were $1,383.3 million (which marked an increase of 4.5% from the prior year period).

Operating profit for the full year 2016 was $114.0 million (which was $116.5 million in the prior year quarter).

Share repurchases

It repurchased 3.0 million shares during 2016. During the fourth quarter, 1.0 million shares were repurchased. The Board increased the authorization for share repurchases by 20 million additional shares of Bemis Company stock.

Dividend

The company declared a 3.4% increase in the quarterly cash dividend. It is payable on March 1, 2017, to shareholders of record at the close of business on Feb. 21, 2017.

Expectations for 2017

Range

Capex

To be around $200 million

Cash flow from operations

To be between $440-$480 million

Adjusted diluted EPS

To be between $2.85-$3.00

Effective income tax rate

To be around 32.5%



Focus

  • Increase its customer base
  • Bring in new products
  • Innovation
  • Operational improvements
  • Disciplined capital allocation
  • Leveraging product technology globally



Conclusion

This Wisconsin-based company supplies flexible packaging used by leading food, consumer products, health care, and other companies worldwide. It employs around 17,500 people across the world. Most of its products are used by the food industry (around two thirds), followed by medical, pharmaceutical, chemical and agribusiness sectors. It is expanding base in Latin America.

The company is delivering strong financials as of now and exceeding expectations. With the current trend, it is expected to create value for shareholders. The current dividend marks the 34th consecutive year the company has increased its dividends. It has been known to pay dividends since 1992 and also features in the Standard & Poor's list of Dividend Aristocrats since 2008. It is expected to maintain this trend in the future also. It is expected to create strong cash flow and future growth. I think adding this company will create shareholder returns.

Disclosure: I do not hold any position in the company

This article first appeared on GuruFocus.