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bemis\' ceo discusses q1 2011 results - earnings call transcript

by:SWIFT     2020-03-30
Bemis (BMS)
Q1 2011 profit call at 10: 00 a. m. on April 28, 2011
Vice President of Investor Relations and Treasury bonds
Chief Financial Officer and Vice President Theisen-
Chief Executive Officer, president and independent director analyst
Wells Fargo Securities (LLCGhansham Panjabi )-Robert W. Baird & Co.
Albert cabelli-
Macquarie Research
Goldman Sachs Group LimitedPhilip Ng -
Jefferies & Company, Inc.
Michael Hamilton
RBC Wealth Management Co. , Ltd.
George StaphosChristopher Manuel-
Capanke capital market CO. , Ltd. Timothy Thein -
Hello everyone, Citigroup.
Welcome to the first quarter of Bemis 2011 Earnings Conference.
The phone is being recorded.
For opening remarks and introductions, I will now transfer the call to the vice president and treasurer of BemisMelanie Miller. Ms.
Please continue, Miller.
Thank you, operator Melanie Miller.
Welcome to our first quarter 2011 conference call.
April 28, 2011 today.
After today\'s call, a replay will be provided on our website www. bemis.
The website of the investor relations section.
Today, I was on this conference call with Henry Tyson, President and CEO of Bemis;
Scott Durham, our Vice President and Chief Financial Officer
Today, Henry will start with a review of the performance of the business, followed by Scott\'s review of the detailed financial results.
After our review, we will answer any of your questions. [
Operation instructions]
Before we start, I would like to remind you that at this conference call, the statement on the future performance of the company is moving forward --
There are certain risks and uncertainties.
Due to various factors, including currency fluctuations, changes in raw material costs and availability, industry competition, the actual results may differ significantly from historical, expected or predicted results, unexpected consumer buying trends or customer order patterns, our ability to deliver increased costs in sales prices, changes in government regulatory requirements, fluctuations in interest rates, and changes in regional economic conditions.
A more complete list of risk factors is included in our regular submission of SEC documents, including the recently submitted Form 10-
The year ending December 31, 2010.
Now I\'m transferring the phone to Henry Tyson.
Good morning, Henry.
It was a challenging quarter for Bemis and we were disappointed to miss the low end $0 for EPS guidance for the first quarter. 03.
Our guidance for the first quarter included our expectations for an increase in raw material costs in the first half of 2011.
However, with the escalation of unrest in the Middle East and supply problems in the chemical industry, the cost of raw materials increased dramatically in the first quarter, especially the cost of special resin in Bemis depends on our high barrier flexible packaging products.
In our field of flexible packaging business, we use various raw material inputs including polyethylene, nylon, polyester, polypropylene and many other raw materials.
Our customer contract requires us to adjust the sales price according to the raw material cost change, but there is a time lag between the raw material cost change and the scheduled sales price adjustment.
At present, the lag time of contract price adjustment ranges from one month to six months.
However, the lag time of polyethylene
For complex multi-layer products containing more special resins, the packaging-based time is shorter and longer.
In the first quarter of 2011, we experienced more drastic raw material growth than expected.
In some cases, the cost of polyethylene, polyester polypropylene and nylon has increased by more than 15%, or even more than 30%.
Although most of this impact will be confirmed in the second quarter, there is still a measurable impact on the gross profit margin in the first quarter.
At this point, we recognize the additional cost growth we will experience in the second quarter.
Obviously, our sales price will be adjusted according to these higher input costs, and we will continue to reduce material costs through material substitution and efficiency improvement. We have well-
Continuous improvement programs focused on plant efficiency have been established throughout Bemis, and I believe these projects will continue to provide value as we move forward.
Looking ahead to the rest of the year, as our customers have begun to express some concerns about the impact of rising food prices on consumer buying patterns, the number of flexible packages is expected to be flat with last year.
At Bemis, as we are launching new products, we expect sales to grow throughout the year.
Our rigid barrier platform, coupled with our stripping technology, provides us with new market access and expands the form of packaging in the existing market.
Some of these examples are Creamer, frozen pizza, and condiments.
Bemis gains growth in these market categories as our products provide convenient features, reduce material content and extend shelf life.
Let me give you a few examples of our innovation.
Our new frozen pizza packaging does not require an outer box, so the package content is reduced by 30% compared to the previous frozen pizza format.
The opportunity to use less material is critical to our customers\' sustainability goals and helps control packaging costs in an environment where raw material costs are rising.
For the convenience of consumers, this new package uses our polyester platform and combines our EZ Peel features.
This is just an example of how Bemis can provide our customers with affordable, sustainable packaging solutions.
Another example of our contribution to the sustainable development needs of our customers is shown in the dairy Cup business where our rigid barrier technology reduces material content by 20%, and live.
Our Peel re-sealed polyester platform continues to grow well as it does not require a re-sealed zipper.
This package is mainly used for the application of processing meat and cheese, and we see that customers use this cost
Effective packaging upgrades to add consumer convenience to their current product line.
Bemis also introduced including easy-
Open features, premium graphics and designs that offer dip format and pour format.
This new package will be available in retail stores and restaurants.
We are also pleased to see the continued growth of our technology and value.
Increased platforms in the medical devices and pharmaceutical markets. Our world-
First-class manufacturing plans continue to expand new production facilities and improve efficiency throughout the production process.
As the cost of resin increases, the raw material waste reduction program becomes more important and we expect continuous improvement by 2011.
In 2011, we actively promoted the second phase of food integration in the Americas.
At this stage, we are optimizing our manufacturing process to ensure that the right products are produced on the best equipment for that particular process.
This work will increase profit margins by increasing economies of scale for certain equipment and leveraging best practices across the company.
In addition, we are evaluating the use of multiple product specifications for a specific product or feature.
The reduction of specifications also reduces the replacement of equipment, increases economies of scale and simplifies the manufacturing process.
As we continue to integrate our food business in the Americas, our product and manufacturing footprint has been simplified, resulting in some additional costs, totaling about $0.
02 in the first quarter.
We look forward to seeing the positive benefits of these initiatives this year.
Our earnings per share guide is $2. 15 to $2.
The full year of 2011 reflects the reality of this volatility and inflation environment.
So far this range accounts for an increase in the cost of all known raw materials.
We are working to implement our sales and profit growth strategy as soon as possible and to shorten the time to adjust the sales price as much as possible.
In the context of this increased cost of special raw materials and the prudent demand outlook resulting from food inflation, we believe that our guidance reflects a realistic assessment of the potential results of 2011.
Our financial situation is still very good.
Although working capital absorbed cash in the first quarter due to rising resin costs, we still expect strong cash flow for the rest of the year. We purchased 1.
With a total of 7 million ordinary shares in the first quarter, we will continue to balance investment in prudent capital projects, acquisition opportunities, and reduce debt and opportunistic stock repurchase, to maximize our return indicators and shareholder value.
All in all, the cost of expensive resin will put pressure on our profits in 2011.
We hope this is a short time.
Until we adjust the contract sales price.
We are progressing smoothly in facility optimization and new business is developing well.
As the cost of food increases, we expect products that extend the shelf life to become more important, which gives us a competitive advantage in the market.
Now, I will hand it over to Scott for a more detailed analysis of the financial results.
Thank you, Henry.
Although we operate in a challenging raw material price environment, Bemis is in an advantageous position in the flexible packaging industry due to our new product platform and pipeline.
Our sales growth this year comes from the expansion of new products and product lines, which is why we are so focused on material science, chemical engineering and value as an organization --
Increased customer relationships.
Unfortunately, so far in 2011, our success with new products has been overshadowed by the volatility we are experiencing and the cost of raw materials for inflation.
In the flexible packaging business segment, net sales in the first quarter increased by about 34% year-on-year, of which about 22% compared with the American food we had a full quarter in 2011, only one month in 2010;
Increase sales of money discount 2. 5%;
Nine left.
The 5% increase reflects the impact of rising raw material costs pushing up sales prices for all categories, as well as an increase in the number of units in categories with higher Bemis sales --priced value-added products.
Mexico continues to improve its performance, and in addition to strengthening reais, our business in Brazil has performed well, which has adversely affected our customers exporting from Brazil.
We are the largest flexible packaging company in Mexico and South America with annual sales of nearly $1 billion.
Our business in these regions continues to provide attractive long term
Organic growth.
With the maturity of these food markets and the need for more and more high-tech barrier packaging, we can also get higher profits and returns.
On the other hand, our food flexible packaging business in Europe currently accounts for about 5% of Bemis sales, which is small and does not meet our profit target.
While the stress-sensitive materials and medical packaging business we sell in Europe continues to achieve good results, our food flexible packaging business is involved in a fragmented, competitive area.
This will continue in the foreseeable future.
Our focus is on European food flexible packaging, and the manufacturing business continues to improve as the volume and profit of the niche, meat and cheese markets we serve grow.
The good news is that, compared to the first quarter of last year, the European sales that fell most of 2010 stabilized in 2011.
In the first quarter, the operating profit of flexible packaging was 9. Net sales of 9%.
If we adjust last year\'s operating profit to not include acquisitions
Related costs, including projected food performance in the Americas in January and February, were approximately 11% comparable rates in 2010.
Different yearsover-
The annual profit margin reflects the headwinds of raw materials.
With the sharp increase in prices in the first quarter, the production cycle from raw materials to finished products, the profit margin of flexible packaging in the second quarter will continue to be under pressure, however, if the cost of special resin is stable, we do expect to return to higher profit levels in the second half of the year, which is the assumption reflected by our EPS guidance.
One of our company\'s priorities is to increase the frequency of sales price adjustments in customer agreements.
Many of the customer agreements we inherited with the American food acquisition set out 6-
A month cycle before the sales price reset to reflect changes in the cost of raw materials.
By contrast, most of ourS.
Bemis flexible packaging customer agreement, which usually adjusts the sales price every 30 to 90 days to reflect changes in material costs.
Looking forward to the future, we will work with our customers to shorten the time between Sales price adjustments.
Turn to our stress sensitive materials division, which accounts for 11% of sales this quarter.
Net sales increased by $4 million and operating profit increased by $3 million.
Due to the careful cost management and good matching of sales prices with the increase in raw material costs, the operating profit of the pressure sensitive materials department is on the right trend this quarter.
On a comprehensive basis, our sales, general and administrative expenses increased in turn in the fourth quarter, which largely reflected the amortization of our pension investment losses when the market dropped sharply in 2008.
In the first quarter, EBITDA increased by nearly 20% compared with the adjusted EBITDA in the same period in 2010, excluding all one-time acquisitions
Related expenses last year
This will drive healthy growth in operating cash flow for the quarter, but the increase in raw material costs leads to an increase in working capital, offsetting any improvement in cash flow.
Consistent with the past few years, we expect the cash flow from operations to strengthen for the rest of this year.
For the full year of 2011, we continue to expect capital expenditures of approximately $0. 15 billion.
Bemis\'s capital investment in material science research and development is oriented to two areas: one is the product category that provides higher long-term value
Long-term growth in volume and profit margins, such as half
Rigid Packaging, packaging that protects food freshness and extends shelf life, and medical packaging products that require high resistance film performance.
New products and targeted product line expansion will continue to be key to the growth in the number of flexible packaging we have.
The second priority of capital expenditure is to drive growth outside the United States. S.
In Europe, we can implement existing attractive organic growth rates in our portfolio.
These disciplined capital investments are still the top priority for us to use cash flow after dividends.
Our next priority in using cash flow is to make selected acquisitions when we have the opportunity to purchase businesses that meet our strategic and financial objectives.
Finally, we will manage our capital structure to provide the required flexibility for growth investments while minimizing capital costs.
We want to maintain our investment rating while reducing our outstanding shares through opportunistic open market buybacks.
We re-purchased 1.
There were 7 million ordinary shares in the first quarter, with an average diluted outstanding shares of $109.
Earnings per share for the quarter were calculated at 1 million.
We report on the cash flow statement the $16 million payments made for the acquisition in the first quarter, involving the final liquidity adjustment payments made to Rio Tinto, mainly related to the cash we received when we acquired the American food company a year ago.
We continue to make an offer for preferred shares issued by our Brazilian subsidiary.
The purchase of these shares is not reflected in our guidance as we cannot predict the time or certainty of the completion of the transaction.
If we obtain regulatory approval to resume the bid offer, we will complete the transaction as soon as possible.
Our guidance for 2011 is $0. 48 to $0. 54.
This reflects a 15% to 30% increase in special resin costs, which will be confirmed in the second quarter and sales price adjustments for many related customers will be made later in the second quarter and earlier in the third quarter.
The expected decline in earnings per share in the first half of this year has been included in the guidance of the total earnings per share of $2. 15 to $2. 30.
As Henry mentioned, this change reflects a sharp increase in the cost of special resin, which tends to have a longer lag in sales price adjustments, and further increases in raw material costs in the second quarter, however, there was no further increase in the second half.
Henry, Melanie, I \'d be happy to answer your questions.
Operator, please open the phone to the participants. Question-and-
[Answer]
Operation instructions]
Let\'s go to gamsham Panjabi first. [Robert W. Baird]
Panjabi-Robert W. Baird & Co.
In the comments and press releases you have prepared, you mentioned that the client has expressed progressive caution.
Does this really translate into a smaller number than you expected, or is your comment a proactive expectation?
Henry, how would you describe the current environment, not what happens when you have very similar energy and resin peaks in 08?
First, we did not see a decline in sales related to food inflation in the first quarter.
These are just some of the reviews we get from some of our clients, they just look at what\'s going on and just a little bit cautious.
But, as of today, we have not seen any impact on reducing the number on that basis.
Panjabi-Robert W. Baird & Co.
The shortage of special resin you mentioned, which area is affected, which specific grade are you referring?
When we talk about special resin, the most popular thing is nylon, acid polymer.
Polyester is a big blow related to the price of cotton.
I think polyester is now at its highest level since entering the water season.
So, polyester, nylon, high EVAs, acid polymers, Poly, and everything that suits the field of the profession.
It is almost Global.
We will be traveling to Philip Wu with Jefferies & Company. Philip Ng -
Jefferies & Company, Inc.
Just a business question about you guys not having a passthrough.
Do you think it is equally successful by pricing?
Henry Tyson we saw a price increase at the same level as in the past.
Earlier, Ghansham asked a few things about this compared to 2007, which is very similar.
First of all, we are successfully facing our
Customer agreement.
Secondly, we are actively growing raw materials through the agreements we have reached. Philip Ng -
Jefferies & Company, Inc.
Then you mentioned how you tried to adjust these contracts in order to get through fasterthrough.
This is an ongoing job as you re-adjust every year.
So like a 3-or 4-
The process of the year, or how should I think about it?
Henry secini thinks you\'re saying it\'s a 3-to 4-year process.
We work hard when these contracts are to be renewed, review the terms and improve them, and frankly we can\'t have 6-in--
Monthly upgrade/cancellation
The upgrade terms we inherited from the transaction with Alcan.
You can\'t just wander between our customers and our raw material suppliers and absorb these.
Therefore, with the emergence of these contracts, especially those from Alcan, we will actively seek to reduce the terms.
We will work with Alex Ovshey of Goldman Sachs. Alex Ovshey -
Goldman Sachs Group Limited
A few questions.
First of all, in business where you have a contract Pass --
By, you talk about having a longer lag time through some special resin.
Is there a way to break which part of your business is more accessible to specialty resin than commodity resin because they deliver fasterthroughs?
If you look at what areas are really operating specialty resin, it\'s in our high barrier.
The product will need to extend the shelf life. Alex Ovshey -
Goldman Sachs Group Limited
Is there a way to give us some contracts that will represent your percentage of revenue or how to consider the order of magnitude of those revenues ---
Relative to the business of other departments of the company?
Melanie Miller if you extend our flexible packaging business to a variety of market categories we sell, meat and cheese account for about 30% of our flexible packaging. But then --
This will be a big obstacle.
The content of dairy products and liquids exceeded 10%.
Some dry food categories will fall into this category.
Close to 6%.
Then you will go into other professional types of areas, so this is another 10%.
So it will be at least 50% or more.
Then it depends on what other special resin is in it-
A simpler classification.
Because even if you look at sweets and snacks, there are many other types of special resin in some snacks depending on the type of package.
So there\'s medical.
Medical products--
It depends on whether you include a pharmaceutical company or not.
I think it will be close to 10%, including the pharmaceutical company.
We will be traveling to Al Kabili with Macquarie. Albert Kabili -
Macquarie studies Henry, a question about the Alcan contract.
You have been in business for a year.
Would like to know the contracts that you have renewed and renegotiated, could you please tell us the success rate of these contracts relative to the shortened passage timethroughs?
So far, we have very few--
I almost say no, but I don\'t want to say no without knowing it for sure.
But there are very, very few people who have already appeared.
Later this year, the first part of next year, they will really start.
So we really don\'t have any experience to pass along these lines. Albert Kabili -
Macquarie Research, and then I think the second question is the new business you mentioned.
How do you feel about your goals for new business sales this year, and how do margins compare to the flexible segment average?
Henry, this is the new business we are talking about, and I think the profit margin for all new businesses will be higher than our average.
When we launch products, we have the opportunity to price them and price products with higher profit margins.
Of course, as you know, as the standard curve goes down over time.
But I expect all of our new products to be more profitable than our average in flexible business.
In terms of sales volume, I think we can consider growing our new business by $50 million to $100 million.
It depends to a large extent on how fast we can expand these products.
We are going to Timothy den with Citi. Timothy Thein -
Citigroup is reviewing the legacy contract issues you just mentioned, Henry, as we look forward to the renewal of these contracts.
Do you think there are other competitors who can get through this in the context of this volatile resin and raw materials? We have certainly seen this in the past few years.
Do you think someone else can handle similar delays and pass? -
Pass in this nature-through?
Now what I get is, with these contracts coming up, do you think there is anyone else in terms of the contract that can absorb the delay of 6 to 9 months?
Henry TheisenI thinks everyone, all of our competitors, everyone in our industry, and even anyone who is really relevant to the chemical industry, has to look at this and say these 6-
The month clause that exists only is not sustainable.
I don\'t think anyone can absorb the kind of growth we see, and no one can pass through those in a shorter period of time.
I think everyone will suffer the same pain. Timothy Thein -
Citi IncOkay.
At this point, as a follow-up
I know it\'s getting harder to follow this.
But internally, when you guys see the Alcan synergies, I want to take into account the raw material environment and they are getting a bit of a shock here.
But, how are these traces relative to the original expectations?
According to Henry secini, the tracking is very good.
In fact, I think we are slightly ahead of what we think is synergy with Alcan acquisition.
Unfortunately, the addition of raw materials has only changed the good things that have happened in these areas.
We will be traveling with Bank of America Ibuprofen Suspension Drops to George stafus.
George stapphosi wants to sign more Alcan contracts.
Will there be a situation, perhaps in the future, in order to speed up your ability to pass on a faster basis, and perhaps, you are also willing to adjust other terms in the contract to your customers, whether it\'s profit or other value?
Henry secini believes it\'s a negotiation when you go in and talk to the customer.
Everything will happen.
The profit will be online, what business will you do online, what terms will there be.
I think all these things should be negotiated and discussed at that time.
Then you have to negotiate with them.
Some of the things you give are not.
Like in most contracts, both of them left and felt like they had got something and lost something.
George stapslet
Well, it sounds like you\'re at that stage.
I guess my second question, maybe for you or Scott, is it possible to determine what the lag effect actually cost you this quarter?
You gave us some guidance on the resin and the resulting overall compression.
But if every single business of yours is on a traditional classic Bemis type contract, what kind of return will you get on the revenue for this quarter, not because of the Alcan contract
Scott, this is Scott.
The impact of lag on different customers and different contract terms cannot be accurately tracked.
We just don\'t break through.
Next, we will go to Chris Manuel of KeyBanc Capital Market.
Christopher Manuel
Capanke capital market CO. , Ltd.
I have a few questions for you.
When these businesses are integrated together, I remember that when you set collaborative goals for us, this is one of the components you don\'t necessarily mention, but you expect to have some, revenue synergies.
So, when you\'re sitting in business today, it\'s been about a year or so now, have you had the chance to find out there, or have you seen some?
Is that the main driver of the new product that you see around $0. 15 billion, or is it all traditional products or combinations?
Maybe a little bit of color will help. Scott UllemYes.
Chris, that\'s a good question.
The answer is, of course, having a wider product sales package helps us to relate to customers with a broad portfolio of products.
So I think we see the benefits of having an existing pre-American food product line and a new product pipeline that we can offer our customers, which helps us get the price.
As Henry said before, all of these customer relationships are driven by a combination of product differences, pricing and profits, terms.
Therefore, I think we are very satisfied with the ability of our products to have a differentiated position in the market, whether it is the American food product line or the Bemis product line, because they are all combined now.
Christopher Manuel
Capanke capital market CO. , Ltd.
OK, this is very helpful.
Perhaps a point of clarification.
Will you end up with the same clock when you put the new product in the right place?
That is, can you give it the right price on the day the new business is launched? Or, when you launch some new business, are you probably already behind some of them?
When you start a new business, you will price it on the day you start the business.
So you start it with all the raw material costs currently and everything.
You can set the initial price.
We will work with Sara Magers of Wells Fargo Securities. Sara Magers -
Wells Fargo Securities, LLCHenry, I\'m sure you mentioned about $0 in your prepared comments.
02 high quarterly costs related to acquisitions.
Is it right that I understand this is not what is expected?
I think if I want to do this right, can you give us more colors?
We talked about optimizing our footprint and optimizing our specifications, and in some cases, see where we have two separate specifications for packaging the same product, and how we put things into the factory, we encountered some redundant waste in doing so.
We experienced a little extra downtime.
We have to do more to make some devices run efficiently. Sara Magers -
Wells Fargo Securities, LLCOkay, okay?
So I guess that\'s not what you expected before the quarter or when you did your due diligence on Alcan? [
Technical difficulty
I was just wondering if this was expected and the cost associated with additional waste and downtime etc would be higher?
Henry TheisenNo, we anticipate some of the costs associated with optimizing our footprint and optimizing our specifications.
But we still have some difficulties that we did not expect.
But we have now gone through this and we hope to see the benefits of making these adjustments for the rest of the year.
We will go to Mike Hamilton with RBC.
Michael Hamilton
RBC Wealth Management Co. , Ltd.
I would like to talk about your comments on European food packaging.
My feeling is that if I am wrong, maybe you can educate me. Some of the sales decline last year was . . . . . . [
Technical difficultyOperator[
Operation instructions]
Michael Hamilton
RBC Wealth Management Co. , Ltd. All right.
Again, going back to European food packaging, my feeling is that last year\'s decline in sales was, in part, a commodity you were willing to lose in the environment.
Can you give a dynamic as stability goes on?
Do you work more aggressively in more commodity areas to keep your share?
Will It growth emerge in other areas and what do you think about the future of the business?
Henry Tyson we are not actively looking for more commodity areas that we gave up last year.
Scott\'s comment is about stabilizing what we have, which is in the niche where we compete very well with our technology.
Our desire is to develop in these niche areas.
We are such a distant little player compared to Amcor\'s first place, and we just need to find where we can make a profit.
Michael Hamilton
RBC Wealth Management Co. , Ltd.
And one more.
Obviously, R & D costs have declined in turn.
How is the situation this year?
Henry Tyson R & D
R & D went very well.
We will not do R & D in pilot factories or elsewhere.
We actually do it in our manufacturing plants, because we believe it can be expanded better.
It also brings our engineers and operators into the factory together so that we can run more efficiently.
Our R & D expenses are actually just tracking the number of people we have and some small expenses.
So our R & D channels are full.
We moved into a new facility.
We call it the Bemis innovation center.
We put all the technicians together to share ideas under one roof.
We have produced a lot of good ideas in the R & D process, and the R & D attitude and R & D morale are very good.
We will be rolling out some great new products for multiple markets.
We will be traveling with Bank of America Ibuprofen Suspension Drops to George stafus.
George StaphosTwo\'s question about the volume.
First, have you specifically pointed out what is the number of flexible packages for this quarter?
I think you said something to the effect that the balance you didn\'t say was a mix of price combinations and quantities.
Do we hear you say that you still expect the number of flexible packages to be positive this year, or that you are not quite sure, and that it may be flat in the acquisition --
Considering that customers are starting to worry about food inflation in any case, what is the basis of the adjustment?
Scott UllemGeorge, the number of flexible packages has increased slightly, especially in areas where we sell high barrier performance films.
The real growth in 2011 will come from the expansion of new products and new product lines. There\'s not --
We didn\'t see sales growth throughout the market, but just because of the new product pipeline we are launching, we are happy with our sales prospects.
George StaphosAnd then for one of the products you mentioned, the replacement on the frozen pizza market, your flexible packaging replaces the carton.
Now inside the product, is there a tray with a susceptor, or is this--
Is the flexible packaging completely replacing the carton and tray?
Henry TheisenThis will be a frozen pizza, so if you want to call it, it will have a corrugated platter at the bottom and I will call it to enable it to support the rigid forming film on the side.
Then there is a cover, a high barrier cover for printing.
So what you\'re really doing is taking the carton and the packaging is replacing the protection, stiffness and support provided by the carton.
Next, we will work with Chris Manuel from KeyBanc Capital Markets.
Christopher Manuel
Capanke capital market CO. , Ltd.
I really have a few questions for you.
First of all, does this happen when you see this new product development? -
As material costs soar, do you see things accelerate?
Have you seen some projects that might be put on hold for a short period of time until things stabilize and start running or things slow down?
Can you give us a feeling that our customers accept, or a desire to put new products on the market now?
Henry TheisenI believes that in this case, the customer\'s desire to put new products on the market will increase because they all recognize that packaging is a difference from others in the market.
They want to be the first person to have a new package.
So you really can\'t see the huge changes that have taken place in our R & D field.
With the same push, the same push for our customers to launch these new products and new packaging continues.
Scott ullem also has a second factor, which is that there is a lot of focus on material content reduction and sustainability, and Bemis does have a leading edge in this regard.
As Henry mentioned, for example, we are saving a lot of materials, saving us costs, saving our customers costs and meeting the following requirements-
I think we all have some broader sustainable development goals.
Christopher Manuel
Capanke capital market CO. , Ltd. Yes. That\'s helpful.
Because it\'s hard for me to believe that when you take these new things out, they tend to replace some of the old ones, and you can\'t speed up some of the terms when you renegotiate or redo the contracts.
Henry: That\'s right. That\'s right.
Christopher Manuel
Capanke capital market CO. , Ltd.
My second question is that when you look at your portfolio, you see both the brand business and the private label business.
With all these prices rising, the challenges facing the brand product business are increasing.
This seems to be a private label, gaining more share again.
What do you have to do with those two?
Have you ever seen something like this on your website that I don\'t want to call a backlog, but your new business activity? Scott UllemYes.
Historically, we sell the same product to brand customers and private label customers.
Typically, contract Packers make brands and store brands on the same line.
What we see is-
In fact, some of the growth we \'ve seen comes from store brand contract Packers and customers.
Therefore, we are happy to do a good job in this transformation.
Interestingly, customers of store brands, Private Label Manufacturers want the same type of convenience features and high-quality graphic attributes, of course, all the food protection requirements that brand food manufacturers want.
Therefore, we like our own brand customers and traditional brand customers. Operator[
Operation instructions]
Next is George staforth, Ibuprofen Suspension Drops of Bank of America.
The last question for me.
Obviously, over time, you have done very, very well in Latin America in terms of high returns, and you should be commended for that. I wanted --
If you haven\'t mentioned it in the past, in this call, can you give us an update on some of the issues and opportunities that Mexico has seen relative to you?
Then there is the related issue, and I think the flexible packaging business in Europe has been performing poorly for most of the past decade.
Of course, it has done well over the years and not well done in other years.
You may agree or disagree with this premise when you answer this question.
Henry, have you reached the point where, strategically, it doesn\'t make much sense to do so in the portfolio?
Or if it meets your needs, you think it\'s a long term
The players in the entire term of bermeis?
Thanks guys, good luck with the quarter.
Scott Ulm George\'s first question about Mexico
We are very satisfied with the performance of the Mexican business.
Two years ago, our business in Mexico was very difficult.
When we actually closed the deal, Mexico\'s food America business did not meet expectations.
Our management team there did a fantastic job of turning this business around and improving the current consolidated business.
We do this by focusing on profitable customers and on the manufacturing footprint where we operate very effectively.
The second question about flexible packaging in Europe, you are right.
This is a long struggle with our business there.
We are small and the market environment is tough.
So what we really focus on is what we can control.
We have no control over how many competitors there are in the market.
We cannot control the behavior of our customers.
What we have control over is how we operate our factory efficiently and the market we focus on, which is indeed a niche market for meat and cheese, there we have a micro-product that can compete in the market.
We will continue to do so.
Many of our customers, both from North America, have operations in Europe and globally.
We will work to strengthen our business in Europe.
We are committed to Europe and we will fix it.
We may take longer because we are such a small player.
But we have customers in Europe and we will serve them for a long time.
We will work with Alex Ovshey of Goldman Sachs. Alex Ovshey -
Goldman Sachs Group Limited
Two quick follow-upup questions.
First, Henry, can you please update us on the situation of your FreshCase product in the case?
Is the market ready?
Henry Tyson we just had a packaging show for the American Meat Association and we introduced fresh cases to many of the people who came in.
This is the first time many customers have a chance to see it.
It has generated great interest and people are excited about it.
We have conducted a lot of experiments with various customers.
I expect to see FreshCase in the market later this year. Alex Ovshey -
Goldman Sachs Group Limited
Okay, then go back to the resin.
In April, there was a meaningful increase in our commodity class, and I think there may be more growth.
Did your guidance reflect-
Did your updated guidance reflect the full price increase and potential growth of resin implemented in April?
Yes, they do. We are --
Our guidance reflects all the proposed price increases and the effective price increases we know today.
We will go to Tom mulaki with The Morning Star.
Thomas in Mare pull Kea
About George\'s question about the packaging of the new pizza.
I saw it at AMI Expo a few weeks ago and I think it makes sense compared to other pizza packaging options.
But can you remind us of your exposure to the pizza market before this new package?
Given that your existing customers seem to be at the high end of the pizza market, how much penetration do you think you can get on grocery shelves?
Henry Tyson in self
Rising pizza, where we have a major position in the self
Pizza business is booming
I don\'t know if this will give us more market share, but I certainly hope our customers can sell more pizzas, which is our growth in this area.
There are no further problems.
Thank you very much, operator.
We will be attending several meetings in the next two months and we look forward to seeing many of you there.
Thank you for joining us today.
This is the end of today\'s conference call.
Thank you for your participation.
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