MeadWestvaco Swings to 2nd Quarter Profit
Aug. 1, 2007 - MeadWestvaco Corp. today reported net income for
the second quarter of $32 million, or $0.17 per share. Included in the
second quarter results were after-tax restructuring charges of $5
million, or $0.03 per share, primarily related to employee separation
costs and facility closures, and after-tax one-time costs of $5
million, or $0.03 per share, related to the company's cost initiative.
Sales in the second quarter of 2007 were $1.71 billion, an increase of
9% compared to sales of $1.57 billion in the second quarter of 2006.
Profit from MeadWestvaco's primary business segments increased 20%
to $149 million in the second quarter of 2007 from $124 million in the
second quarter of 2006. In 2007, higher selling prices, improved mix
and productivity, as well as the results of Calmar, the company's
plastic dispensing and sprayer technology business, more than offset
lower volume and higher costs for energy, raw materials and freight.
"MeadWestvaco's strong profit growth in the second quarter is
further proof that our packaging strategy is working," said John A.
Luke, Jr., chairman and chief executive officer of MeadWestvaco. "We
delivered solid results for our shareholders, especially in our
mill-based packaging business, where gains in pricing and product mix
reflect continued good demand for our packaging solutions. With our
strong momentum and ongoing productivity actions, we are well on track
to deliver better performance in 2007 and beyond."
2006 Quarterly Comparison
In the second quarter of 2006, MeadWestvaco reported a loss of $7
million, or $0.04 per share. Included in the loss were after-tax
restructuring charges of $37 million, or $0.20 per share, primarily
related to the permanent shutdown of two previously idled paperboard
machines as well as employee separation costs. In addition, the
company incurred after-tax one-time costs of $6 million, or $0.04 per
share, related to the company's cost initiative. Also included in the
results was an after-tax gain of $13 million, or $0.07 per share, from
the sale of a note received as part of the consideration for the sale
of the printing and writing papers business in 2005.
In the Packaging Resources segment, profit in the second quarter
of 2007 increased 38% to $90 million compared to $65 million in 2006.
Sales in the second quarter of 2007 grew 3% to $773 million compared
to $748 million in 2006. Volume growth in the company's higher value
paperboard grades remained strong with year-over-year shipments of
tobacco and liquid aseptic packaging increasing 23% and 5%,
respectively. Key paperboard packaging pricing improved by 5%,
reflecting the company's ongoing pricing actions across its lines of
business to help offset inflationary costs for raw materials. In the
quarter, improved price, mix and productivity more than offset lower
volumes and higher costs for wood, other raw materials and freight.
In the Consumer Solutions segment, profit in the second quarter of
2007 was $24 million compared to $23 million in 2006, a 4% increase.
Sales in the second quarter of 2007 were $595 million compared to $498
million in 2006. Improved results during the second quarter reflect
the inclusion of Calmar, which was acquired in July 2006, as well as
increased profitability in the beverage and healthcare businesses and
productivity actions across the segment. Excluding Calmar, volumes
were lower due primarily to the media packaging business, which
continues to be challenged by significant market-related declines in
global CD music volumes.
Consumer & Office Products
In the Consumer & Office Products segment, profit in the second
quarter of 2007 was $24 million compared to $17 million in 2006, a 41%
increase. Sales in the second quarter of 2007 were $267 million
compared to $260 million in 2006. An enhanced product mix from the
company's focus on proprietary brands and products and improved
manufacturing productivity more than offset lower volumes and higher
costs for raw materials. The company's Five Star® consumer products
line experienced a solid start to the back to school season. This
segment continues to be impacted by Asian-based imported products.
In the Specialty Chemicals segment, profit in the second quarter
of 2007 was $11 million compared to $19 million in 2006. Sales in the
second quarter of 2007 were $127 million compared to $131 million in
2006. Improved pricing across all major product lines was more than
offset by higher raw material costs, lower volumes and unfavorable mix
in the pine chemicals business. In the pine chemicals business, volume
declines were driven by severe weather in the Southwest where
prolonged wet conditions resulted in decreased demand for
asphalt-related products. In addition, the weak U.S. housing market
negatively affected demand for certain higher value products used to
produce building materials. In the carbon business, lower North
American automotive sales, particularly truck and sport utility
vehicles, continued to negatively impact volume.
Corporate and Other
Corporate and Other loss was $101 million in the second quarter of
2007 compared to $132 million in 2006. Contributing to the decreased
loss in 2007 were restructuring charges and one-time costs that were
$54 million lower in 2007 compared to 2006. In 2006, there was a $21
million gain from the sale of a note that was received as part of the
consideration for the sale of the printing and writing papers business
During the second quarter of 2007, MeadWestvaco established the
Community Development and Land Management Group, which is focused on
executing the company's land enhancement strategy. The company
appointed 30-year real estate veteran Kenneth T. Seeger to lead this
During the second quarter of 2007, prices for energy, raw
materials and freight increased about $30 million over the prior year.
Capital spending was $148 million in the first half of 2007 compared
to $114 million in the first half of 2006, reflecting the addition of
Calmar and its China expansion. Capital spending remained well below
the level of depreciation for the comparable period.
Cash flow from operations was approximately $190 million for the
first half of 2007 compared to $186 million in the same period last
The annual effective tax rate for 2007 is estimated to be
On June 26, 2007, MeadWestvaco's Board of Directors declared a
regular quarterly dividend of $0.23 per common share to be paid
September 4, 2007, to shareholders of record at the close of business
on August 3, 2007.
During the second quarter, MeadWestvaco repurchased 2,649,600
shares of common stock under its existing authorized share repurchase
program to offset employee option exercises. The company's average per
share price was $32.48 for a total cash expenditure of $86 million.
Outlook: Third Quarter 2007
For the third quarter of 2007, MeadWestvaco expects total profit
from the primary business segments to improve compared to the prior
MeadWestvaco expects solid year-over-year segment profit
improvement in its Packaging Resources segment. Backlogs are firm for
the company's key paperboard products and the company anticipates
running at full capacity for the quarter. Continued realizations of
price and mix improvements are expected to be partially offset by
continued input cost inflation. Modest volume growth in conjunction
with improved productivity is expected to generate higher segment
In the Consumer Solutions segment, MeadWestvaco expects modest
year-over-year segment profit improvement. Several factors are
expected to contribute to profit improvement, including strength in
the beverage, healthcare and specialty media packaging businesses;
continued solid performance in the spray and dispenser business as
well as productivity actions already in place. The company expects
continued market-related volume declines in standard media packaging,
principally CD music.
In the Consumer & Office Products segment, MeadWestvaco expects
segment profit to be similar to year-ago levels. Continued benefits
from an improved product mix and better productivity will be partially
offset by lower volumes and by higher costs for raw materials. Third
quarter 2007 volumes will be slightly lower year-over-year due to the
company's continued focus on proprietary products and to some volume
that shifted into the third quarter of 2006 from the second quarter of
2006 due to the Northeast floods in June last year.
In the Specialty Chemicals segment, MeadWestvaco anticipates
segment profit to be similar to year-ago levels. Volume growth in ink-
and asphalt-related pine chemicals and continued price improvement
across all product lines will be offset by volume declines in carbon
and building materials products, and by continued input cost
MeadWestvaco is auctioning 290,000 acres of forestland located in
Alabama, Georgia and West Virginia. MeadWestvaco intends to return the
net proceeds from these sales to shareholders. After these sales, the
company will continue to own over 800,000 acres of forestland
principally located in South Carolina, Virginia and West Virginia. As
part of its ongoing land strategy, MeadWestvaco is master planning
approximately 72,000 acres in South Carolina and is continuing to
segment the rest of its land holdings for best uses.
SOURCE: MeadWestvaco Corp.