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Reynolds results positive but reflect weak Europe

By Joe Whitworth , 14-Nov-2012

Reynolds Group has reported a total group revenue and gross profit rise, but said weak European demand affected all of its business segments.

The New Zealand based packaging group said revenue increased 13% to $3.5bn for the three months ending 30 September 2012, mainly due to the acquisition of Graham Packaging in September 2011.

This was offset by price decreases related to passing on resin price changes to customers in the closures segment and Pactiv recording lower volumes and exiting certain low margin product offerings.

Gross profit rose 26% to $650m which reflected a rise in all segments, except Evergreen, a manufacturer of fresh carton packaging for beverage products.

SIG stung by Europe

In the SIG business, a manufacturer of aseptic carton packaging systems for beverage and liquid food products, revenues increased 1% to $519m overall. However, they decreased $42m in Europe, where the firm has its largest presence, due to lower sales volume and unfavourable foreign currency translation.  

Revenue in the rest of the world increased 21% to $278m due to stronger demand for products including aseptic filling machines, cartons, spouts, caps and closures.

Evergreen holds its own

In the Evergreen segment, revenue remained unchanged at $418m for the period, reflecting a $10m increase in sales of cartons offset by a decrease of $7m in sales of liquid packaging board and $3m in paper products.

The increase in sales of cartons was due to $8m in higher sales volumes, driven primarily by international demand and $2m in price increases. The decrease in sales of liquid packaging board was due to $4m in lower sales volumes and an impact of $3m as pricing declined in the period.

The decrease in sales of paper products was due to $7m as pricing declined in the current period, partially offset by $4m in higher sales volumes as a result of higher export and market demand for certain paper products.

Evergreen is a manufacturer of fresh carton packaging for beverage products, primarily serving the juice and milk end-markets in North America.

Closures decrease

Revenue decreased 9% to $323m for the closures segment, attributable to a $25m decrease as a result of changes in product mix and pricing related to price concessions and passing on resin price changes to customers.

Decreases were partially offset by the impact of higher sales volumes of $8m, primarily due to the stabilization of the political environment in the Middle East and market share growth.

Revenue from North America decreased 17% to $127m and revenue from the rest of the world decreased 3% to $196m, despite an increase of $14m due to higher sales volumes, especially in the Middle East.

Reynolds said changes in product mix and raw material costs affect the segment as contractual price adjustments with customers do not occur simultaneously with resin purchase price fluctuations but on another basis.

Pro-forma estimation

Graham Packaging revenue was $746m, which decreased 8% on a pro-forma basis, due to decreases in unit volume sales to customers and a decline in resin pricing passed through to customers.

The manufacturer of custom blow moulded plastic containers, which has its largest presence in North America, said the information should not be taken as being indicative of future results.  

The firm also reported that foil rolling operations at its Louisville facility ceased on September 6 (other operations continued), because emissions of Volatile Organic Compounds (VOCs) may have been close to the annual limit imposed. These operations recommenced on 19 September.

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