MeadWestvaco posts first quarter net loss on charges
May 2, 2007 (Press Release) - MeadWestvaco Corp. today reported a net loss in
the first quarter of $16 million, or $0.09 per share. Included in the
first quarter results were after-tax restructuring charges of $10
million, or $0.05 per share, primarily related to employee separation
costs and facility closures. In connection with the company's cost
initiative, the company also incurred after-tax one-time costs of $3
million, or $0.02 per share. Sales in the first quarter were $1.55
billion, an increase of 8% compared to sales of $1.43 billion in the
first quarter of 2006.
First quarter 2007 total operating profit from the company's
primary business segments increased 20% to $77 million, compared to
$64 million in the prior year. In 2007, higher selling prices and
improved productivity as well as the results from Calmar, the
company's plastic dispensing and sprayer technology business, more
than offset lower volume and higher costs for energy, freight and raw
"Our strategies to generate profitable growth in our core
packaging businesses are working," said John A. Luke, Jr., chairman
and chief executive officer. "Pricing actions, an enhanced product mix
and better overall productivity in the packaging businesses improved
our operating performance compared to last year.
"We are responding to good demand in many of our key markets with
an aggressive focus on execution and implementation of our strategies
for profitable growth - including innovative product development and
emerging markets expansion. With these efforts and continued price
increases to offset cost inflation, we expect to generate meaningful
improvements in all key performance metrics in 2007."
Land Management Strategy
MeadWestvaco is establishing a new business unit to segment and
manage higher-value opportunities for its United States land holdings.
The new Land Management Group will generate long-term value and
sustainable cash flow from enhancement strategies across
MeadWestvaco's land holdings in the United States - including
converting land for uses such as conservation, recreation and
"With a focused business unit and experienced leadership, we will
ensure that shareholders receive the full potential benefit of our
valuable land holdings in growing areas across the southeastern United
States," continued Luke. "We will work to increase the value of these
lands in a sustainable manner that fully considers the long-term needs
of our communities."
In the first quarter of 2006, MeadWestvaco had net income of $3
million, or $0.02 per share. These results included after-tax
restructuring charges of $2 million, or $0.01 per share; after-tax
one-time costs of $1 million, or $0.01 per share; and after-tax gains
on forestland sales of $2 million, or $0.01 per share.
In the Packaging Resources segment, operating profit in the first
quarter of 2007 increased 4% to $55 million versus $53 million in
2006. Sales in the first quarter of 2007 were $714 million, a decline
of 2% versus $727 million in 2006. Improved product pricing and
productivity more than offset lower shipments, higher costs for energy
and raw materials as well as expenses incurred for long-term
maintenance activities at the Evadale, Texas, bleached board mill.
Shipments were lower compared to the prior year due to a key
customer's supply chain optimization. During the first quarter of
2007, demand remained solid for bleached paperboard packaging with
shipment growth continuing in the higher value markets for liquid
aseptic packaging and tobacco packaging. Overall paperboard packaging
pricing improved 5% year-over-year, reflecting the company's pricing
In the Consumer Solutions segment, operating profit in the first
quarter of 2007 was $20 million compared to $7 million in 2006. Sales
in the first quarter of 2007 were $566 million compared to $462
million in 2006. Included in 2007 are results from Calmar, the plastic
dispensing and sprayer technology business that was acquired in July
2006. Higher domestic selling prices and stronger demand from
international markets in global beverage as well as cost and
manufacturing productivity improvements across the segment were offset
by lower profits in global media packaging mainly due to lower CD
New leadership within the Consumer Solutions segment was announced
in April 2007 to accelerate the company's profit improvement
initiative focused on growth and enhancing asset productivity. In
April, Mark Cross, senior vice president, assumed direct oversight of
the Consumer Solutions Group (CSG). Steve Scherger, previously vice
president of corporate strategy, assumed the role of president, CSG
Americas, with additional responsibility for the global strategy of
Consumer & Office Products
In the Consumer & Office Products segment, first quarter 2007
operating loss was $2 million, compared to an operating loss of $5
million in 2006. Sales of $201 million increased 3% from $195 million
in the prior year quarter. An enhanced product mix from the company's
focus on value-added products and manufacturing productivity
improvements were offset by higher costs for raw materials,
principally uncoated paper. A solid back to school season in the
segment's Brazilian business also contributed to improved results.
This segment continues to be impacted by Asian-based imported
In the Specialty Chemicals segment, first quarter 2007 operating
profit was $4 million compared to $9 million in 2006. Sales for the
segment grew 3% to $117 million from $114 million in the first quarter
of 2006. Improved pricing across all major product lines was more than
offset by lower volumes and unfavorable product mix in the carbon
business and by higher raw materials and manufacturing costs. The
volume and profit decline in the carbon business is due to lower
production levels at North American auto manufacturers. Increased raw
material costs are due to increased costs for crude tall oil, the
principal raw material used to make value-added pine chemicals. Crude
tall oil prices have increased substantially compared to the
comparable year-ago quarter.
Corporate and Other
Corporate and Other segment operating loss was $94 million in the
first quarter of 2007 versus $62 million operating loss in 2006.
Contributing to the increased loss in 2007 were restructuring charges
and one-time costs that were $16 million higher in 2007 compared to
2006, and gains from the sales of corporate real estate of $11 million
and transition services revenue of $5 million recorded in the prior
In the first quarter of 2007, prices for energy, raw materials and
freight were approximately $32 million higher than the prior year
Cash flow from operations was nearly $100 million during the first
quarter of 2007, down slightly from cash provided by operations of
$104 million for the same period last year. Capital spending remained
well below depreciation expense for both periods, but was $17 million
higher than the first quarter of 2006 due to the addition of Calmar
and investments for growth in emerging markets.
The annual effective tax rate for 2007 is estimated to be
approximately 30%. The effective tax rate in the first quarter was
lower than the estimated annual rate due primarily to the company's
adoption of FIN 48 and other discrete items.
MeadWestvaco paid a regular quarterly dividend of $0.23 during the
first quarter, and on April 30, 2007, declared a quarterly dividend
payable on June 1, 2007, to stockholders of record at the close of
business on May 10, 2007.
For the second quarter, MeadWestvaco expects solid year-over-year
improvement in its Packaging Resources segment. Market demand is
expected to remain steady during the second quarter of 2007 with
shipments benefiting from the seasonally stronger selling period and
from improved mill operating performance. The company also plans to
continue to implement price increases to offset input costs, which
remain at historically high levels.
MeadWestvaco's Consumer Solutions segment is expected to show
significant year-over-year operating profit improvement due to
previously-announced cost and productivity actions and from the
addition of Calmar. Partially offsetting these improvements are
expected lower volumes in media packaging due to continued declines in
sales of CD music.
While results should improve from the seasonally weak first
quarter for MeadWestvaco's Consumer & Office Products segment,
operating profits are expected to continue to shift into the second
half of the year as major customers place an emphasis on optimizing
the overall supply chain. In the company's Specialty Chemicals
segment, increased demand for pine chemicals and improved pricing are
expected to be more than offset by continued high raw materials costs,
principally crude tall oil, and by continued weakness in the
automotive carbon business.
MeadWestvaco provides packaging solutions and products to many of the world's best-known companies and most-admired brands. With a presence in more than 30 countries, our research, design, manufacturing and distribution capabilities serve leaders in the food and beverage, media and entertainment, personal care, home and garden, cosmetics and healthcare industries. We also have market-leading positions in our Consumer & Office Products and Specialty Chemicals businesses. In our values and in our operations, we act on the principle of sustainability - creating value for shareholders while fulfilling our environmental, social and economic responsibilities. MeadWestvaco manages all of its forestlands in accordance with internationally recognized forest certification standards, and we have been selected for the Dow Jones Sustainability Indexes for the third consecutive year.
SOURCE: MeadWestvaco Corp.