Increasing sales in target markets and holding the line on costs helped Bemis Co. Inc. post the highest gross margins the company has had in years during the first quarter.
The Neenah, Wis.-based flexible packaging maker also completed a series of capacity expansion projects aimed at improving productivity and product growth.
“In line with our strategy, we increased sales to our target end markets in every region of the world, including packaging for meat and cheese, dairy and liquid, and medical device and pharmaceutical applications,” CEO William Austen said on a conference call to discuss quarterly earnings. “And we commercialized this new business with operational efficiency.”
“We delivered our highest gross margins in years, driven by strong operational performance across the entire business by our strategy to sell the right value-added products,” Austen said.
Bemis, in what the company described as a strong quarter, saw consistent earnings from continuing operations.
The company earned 58 cents per diluted share during the first quarter ended March 31. That's the same as profit from continuing operations during last year's first quarter.
Overall, the company earned $54.4 million, or 55 cents per diluted share, on sales of $1.04 billion. That compares with earnings of $49.2 million, or 48 cents per diluted share, on sales of $1.1 billion during last year's first quarter.
These numbers factor in a loss of 3 cents per diluted share from discontinued operations for the past quarter and 10 cents per share for discontinued operations during the first quarter of 2014, the company said.
Bemis indicated several new pieces of equipment became operational during the first quarter, including a curing unit for shrink films used for meats in Europe and a printing press, nine-layer blown film line and laminator, all in the United States. The company also pointed to a seven-layer blown film line in Mexico that began operating.
“Our continuous capital allocation process is helping accelerate the pace of our future growth,” Austen said.
Bemis, meanwhile, faced hurdles during the quarter due to currency and what Austen called “opportunities to further enhance operational improvement.”
Earnings were negatively impacted by almost 3 cents per share due to the U.S. dollar's strength against the Brazilian real and the euro.
While sales increased in target end markets, the CEO also said overall volumes were impacted by “light consumption” in both the United States and Latin America.
Regarding operational inefficiencies, the CEO said, the company experienced issues during the second half of 2014 related to “select new product commercializations that burdened profitability.” Bemis has made progress and expects the issues to matters to be fully resolved during the third quarter.
“Our business teams have diligently applied lessons learned from last year's operational challenges to this year's new product launches and have successfully minimized waste and maximized throughput while achieving commercial scale on our new product launches,” Austen said.