Q2 2012 Earnings Call
July 26, 2012 10:00 am ET
Melanie E. R. Miller - Vice President and Treasurer
Henry J. Theisen - Chief Executive Officer, President, Director and Member of Executive & Finance Committee
Scott B. Ullem - Chief Financial Officer and Vice President
Scott Gaffner - Barclays Capital, Research Division
Ghansham Panjabi - Robert W. Baird & Co. Incorporated, Research Division
Adam J. Josephson - KeyBanc Capital Markets Inc., Research Division
James Armstrong - Vertical Research Partners Inc.
Alton K. Stump - Longbow Research LLC
Mark Wilde - Deutsche Bank AG, Research Division
Albert T. Kabili - Crédit Suisse AG, Research Division
George L. Staphos - BofA Merrill Lynch, Research Division
Michael A. Hamilton - RBC Wealth Management, Inc., Research Division
Gabe S. Hajde - Wells Fargo Securities, LLC, Research Division
Philip Ng - Jefferies & Company, Inc., Research Division
Good day, everyone, and welcome to the Bemis Second Quarter 2012 Earnings Release Conference Call. This call is being recorded. For opening remarks and introductions, I would like to turn the call over to the Vice President and Treasurer for Bemis Company, Ms. Melanie Miller. Ms. Miller, please go ahead.
Melanie E. R. Miller
Thank you, operator. Welcome to our second quarter 2012 conference call. Today is July 26, 2012. After today's call, a replay will be available on our website at www.bemis.com under the Investor Relations section. Joining me for this call today are Bemis Company's President and Chief Executive Officer, Henry Thiesen; and our Vice President and Chief Financial Officer, Scott Ullem.
Today, Henry will begin with comments on the performance of the business, followed by Scott with comments on the detailed financial results. After our comments, we will answer any questions you have. [Operator Instructions]
Before we begin, I'd like to remind everyone that statements regarding future performance of the company made in this teleconference are forward-looking and are subject to certain risks and uncertainties. Actual results may differ materially from historical, expected or projected results due to a variety of factors, including currency fluctuations, changes in raw material costs and availability, industry competition, unexpected consumer buying trends, changes in customer order patterns, our ability to pass along increased costs in our selling prices, unexpected costs related to our facility consolidation program, the timing of plant closings, changes in government regulatory requirements, interest rate fluctuations and regional economic conditions. A more complete list of risk factors is included in our regular SEC filings, including the most recently filed Form 10-K for the year ended December 31, 2011. Now I'll turn the call over to Henry Theisen.
Henry J. Theisen
Good morning. This morning, we announced earnings of $0.54 per share in the middle of our guidance. We are pleased to have delivered performance improvements in the face of a difficult operating environment. At the same time, we are revising our outlook for volume for the total year. Based upon a commentary of our large customers, back in April we had expected our volume levels to increase during the second half of this year. We are now revising this expectation and believe volume for the second half of the year will be approximately the same as the first half. Overall volume in 2012 is expected to decline by about 2% to 3% compared to the total year 2011. As a result, we expect to report earnings for the total year around the low end of our original guidance. With volume levels expected to remain low for the remainder of 2012, our business teams are accelerating the commercialization and qualification of new business that is ramping up. Let me give you some examples.
Commercialization, a patented order scavenging films for the poultry market is solving a long-term issue for our meat customers. Previously, when a barrier package containing poultry was open, the customer would be presented with an offensive odor. This new patented film scavenges this odor so that the customer never experiences it. Another example is our packaging for frozen sandwiches that are microwavable in the package. The technology in our films allow the sandwich to be warmed in the microwave, while maintaining the crispness of the bread.
In addition, we recently developed a breakthrough medical device package for artificial joints. For example, new replacements need to be packaged extensively to protect them before they are placed in a thermoformed container. We have developed a polyester package with a polyurethane coating that protects the new replacement, eliminates the need for additional packaging and substantially reduces damage during distribution.
While economic conditions are negatively impacting volumes across all regions as consumers curve spending, wherever they can. Our food packaging markets will be more stable than the most, and we will to continue to focus on new business opportunities and prudent cost management to position Bemis for earnings growth in the feature.
There are a number of additional factors impacting our performance and our revised guidance this quarter, and I'd like to take some time to go through each of these factors with you. These factors include the impact of raw material costs, sales mix and currency. First, let's talk about raw material cost.
The resin costs headwinds that impacted results in 2011 have been relatively calm during the first half of 2012, and we expect modest raw material cost tailwinds during the second half of this year. The costs of commodity raw materials such as polyethylene had increased during the first quarter of this year but began to soften again during the second quarter. Overall, we expect commodity resin costs to remain flat during the third quarter, providing short-term benefits before selling prices are adjusted. We expect modest commodity resin cost increases later in the year.
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