ABD Acco Brands Corp.

MeadWestvacoCorporation (MWV) has reported adjusted earnings of 34 cents per share compared with 43 cents in the year-ago quarter. Adjusted earnings were ahead of the Zacks Consensus Estimate of 24 cents.

Adjusted earnings exclude restructuring charges of 4 cents and charges related to the pending spin-off of Consumer & Office Products in 2012. Including these items, earnings were 28 cents per share in the reported quarter compared with 41 cents in the year-ago quarter.

Total revenues in the reported quarter increased 4% year over year to $1.42 billion. Revenue also surpassed the Zacks Consensus Estimate of $1.38 billion.

Cost of sales increased 6.1% year over year in the quarter to $1,113 million. Selling, general and administrative expenses also increased 7.1% year over year to $197 million.

Segmental Performance

The Food & Beverage segment reported total revenues of $747 million in the first quarter, up 4.6% year over year. Revenue growth was driven by improved pricing and product mix and volume growth in both the beverage packaging and food packaging segments. Operating profit, however, dropped 30.2% to $63 million in the first quarter

Home, Health & Beauty segment’s total revenues increased 2% to $200 million. Improved volume in healthcare, home, and garden packaging and the favorable impact from the Polytop acquisition were partially offset by volume declines in the beauty and personal care packaging segments. Operating profit jumped 50% to $12 million in the quarter.

Total revenues in the Industrial segment declined 7.1% year over year to $113 million. Increased demand for entry level solutions had an unfavorable impact on product mix. Moreover, currency exchange also had an unfavorable effect on the revenues. Operating profit declined 5.3% to $19 million in the quarter.

Total revenues in Specialty Chemical increased 16.9% to $207 million. Sales growth was fueled by continuous success in penetrating higher value markets for pine chemicals, asphalt additives and carbon technologies. Volume improvement in oilfield and automotive carbon solutions as well as better pricing and product mix offset the negative impact of input cost. Operating profit in this segment increased 18.4% to $58 million in the quarter.

In the Consumer and Office Products segment, total revenues declined 7.4% to $108 million in the reported quarter. Revenues fell due to volume declines offsetting the favorable impact of product mix. Sales in the U.S. remained flat with the year-ago quarter while sales in Brazil were low due to general economic slowdown. Operating profit increased 33% to $8 million in the quarter.

Community Development and Land Management segment’s total revenues increased 7% to $46 million in the first quarter. Operating profit plunged 114.3% to $14 million in the quarter.

Financial Position                                                          

Cash and cash equivalents decreased to $483 million as of March 31, 2012, from $656 million as of March 31, 2011. Long-term debt amounted to $1,879 million as of March 31, 2012, versus $1,880 million as of March 31, 2011.

Cash flow from continuing operations was approximately $20 million in the reported quarter. Capital expenditure from continuing operations was approximately $150 million in the first quarter compared with $113 million a year ago.

Outlook

The company has not provided any estimates for 2012. It is hopeful about achieving annual sales growth of more than 5% and earnings growth in the range of 7%-10% over the next 3 to 5 years. The company expects capital expenditure in the range of $650-$700 million for 2012.

Our View

MeadWestvaco decided to spin-off its Consumer and Office Products business segment into a new entity and merge it with ACCO Brands Corporation (ABD). The company’s plan is to concentrate more on the profitable packaging solutions business instead.  

It has recently acquired Polytop Corporation to increase capabilities in the targeted packaging end markets. The company expects that commercial excellence and opportunities of packaging business will help it generate more than $1 million of additional revenues over the next three to five years.

MeadWestvaco faces competition from companies like Bemis Company, Inc. (BMS) and Sealed Air Corporation (SEE).

Currently, we have a Neutral recommendation for MeadWestvaco over the long term. The stock maintains a Zacks #3 Rank (Hold) over the short term.

 
ACCO BRANDS CP (ABD): Free Stock Analysis Report
 
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