Spartech Corp. (SEH) swung to a fiscal fourth-quarter earnings
loss on write-downs, although the packaging company's adjusted
results were still below expectations.
Gross margin slumped to 8.8% from 13.2%. The company said Monday
the drop reflected inefficiencies caused by plant consolidation
efforts and equipment line moves, which included higher labor,
product returns, freight and workers compensation expenses.
Chief Executive Victoria Holt said she still "strongly" believes
manufacturing changes will provide a more cost efficient
infrastructure and position the company for earnings growth in the
long term. But she acknowledged the company has made mistakes in
implementation that have slowed its recovery.
Spartech also cited higher priced materials and increased
competition for the weak margin.
The company, which makes plastic sheeting, compounds and other
packaging products, has been struggling with a slower recovery than
it expected. It has said the U.S. construction and
recreation/leisure markets in particularly remain very weak.
Spartech saw demand drop in the recession, prompting it to lay off
workers and shut plans. The effect of cost cuts and better
productivity had been buoying results, but in the previous two
quarters the bottom line has been disappointing.
In September, Spartech replaced its chief executive with board
member Holt, a former executive of paint-and-chemical supplier PPG
Industries Inc. (PPG). She's the company's third chief executive in
five years.
For the quarter ended Oct. 30, the company posted a loss of
$55.7 million, or $1.80 a share, compared with a year-earlier
profit of $8.2 million, or 26 cents a share. The latest results
included large write-downs, among other items. Excluding them,
earnings from continuing operations fell to a penny from 15
cents.
Revenue increased 7% to $259.6 million on a slight increase in
volume and the effects of higher prices as the company passed along
higher raw material costs.
Analysts surveyed by Thomson Reuters had expected earnings of
six cents on revenue of $273 million.
The custom sheet and rollstock segment, Spartech's biggest by
sales, saw its operating profit plunge 60% even without the items,
as revenue fell slightly. The division for packaging technologies
posted a 22% decline in profit.
Spartech shares closed Monday down 1.6% at $9.74 and weren't
active following the earnings report. The stock has fallen 5.1% so
far in 2010, underperforming the broader market.
-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291;
joan.solsman@dowjones.com