Weaker consumer demand for packaged food affects 2007 sales of Bemis

01-Feb-08

Weakening consumer demand due to a sagging US economy has affected demand for packaged food in the country. Higher energy and food prices, and in some cases, increased housing-related costs associated with mortgage market issues are squeezing consumer's budgets. US flexible packaging maker Bemis has reported an unanticipated 3% drop in sales for 2007, largely due weaker demand for packed food in its core market. Flexible packaging accounts for more than 80% of its sale. 2008 is also estimated to be a challenging year due to raw material increases during the first half. Food and consumer product end markets began to show signs of weaker demand levels as the year progressed leading to a tighter focus on costs from mid-year. Margins in the pressure sensitive materials division, which makes labels and films for the food and other industries, also fell significantly partly due to the slowing economy, and also due to addition of more capacity in label products. Operating profit was US$40.3 mln- 6.2% of net sales in 2007, down from US$50.1 mln - 7.8% of net sales in 2006, which included restructuring and related charges of US$1 mln. The 2007 figure was also enlarged by a currency translation benefit of US$2.5 mln. The company has invested in new facilities in growth markets such as the medical and pharmaceutical markets, as well as the Asia/Pacific region. It has also added proprietary film production capacity for European markets.