Bemis Co. Inc., disappointed with quarterly earnings, believes the company needs to broad its customer base to find “pockets of growth.”
The leadership at the Neenah, Wis.-based plastics packaging company was clear in recent comments made with the release of second quarter financial results about the need for change.
“To say that we are disappointed in our financial results this year would be an understatement,” CEO William Austen said. “But the challenges we are facing and the determination to overcome them have become the catalyst to make tough, smart decisions that will ultimately benefit the business in the long term.”
The CEO said part of the company's approach involves looking for new opportunities.
“In the U.S, we will continue to serve and highly value our large CPG [consumer packaged goods] customers. Beyond that, we need to pursue the pockets of growth that are available to the U.S. market, whether that be small to midsize customers, nonfood categories or trends such as organic or fresh,” Austen said.
“We have recognized this need in the past. The difference today is that we are analyzing options that would further allow us to deliberately organize our resources to pursue these pockets of growth,” the CEO said.
Bemis, he said, has invested in equipment that serve smaller customers. “But we also need the business mindset that recognizes the value of hunting, winning and serving smaller-sized customers and orders,” Austen said.
Bemis also highlighted problems in Brazil, which is in a recession. “Unemployment has reached astounding levels, and we have started to see a significant reduction in pull from our customers,” Austen said about that market.
Based on the decreased unit volumes in Latin America, the company has lowered full-year adjusted earnings per share guidance to $2.35 to $2.50 this year, down from the previous $2.50 to $2.60.
Bemis, just about a month ago, announced plans to close two plants and cut another 300 administrative jobs during the next three years as part of a plan to save $55 million to $60 million annually. About 200 of those job cuts will be in the United States with the rest primarily occurring in Latin America, the company said.
Chief Financial Officer Michael Clauer indicated one plant closure will begin this year and the other will begin in 2018.
“Clearly, the goal of these closures is to take out fixed costs. We continue to analyze additional opportunities to rationalize our footprint,” he said.
About $30 million of the cost savings will come from the plant closures and administrative job cuts, and the company said other details regarding additional moves will come during the company's next conference call to discuss earnings in October.
Austen also said the company is working on its culture to create long-term success. “We've been working on transitioning ourselves to a results-oriented organization. My view is we have made progress. However, when it comes to the pace of change proliferating through our organization, I am admittedly impatient because we know we can move faster,” he said. “It doesn't mean we are not moving, we just need to step up the pace with increased consistency and accountability.”
Bemis earned $28 million, or 30 cents per diluted share, on sales of $1.012 billion for the second quarter. That compares with earnings of $50.9 million, or 53 cents per diluted share, on sales of $1.021 billion during the second quarter of 2016.