Certain Uncertainty

As the folding carton industry charts a course of steady growth, the broader economic environment weighs heavily on business psyche.

September 2011 By Tom Polischuk

multipage

What a roller coaster ride we’re on. No matter what the industry, the cloud that’s hanging over the general economy (national and worldwide) seems to dwarf other factors. Companies of all sizes and shapes are dealing with higher costs and soft demand—which isn’t a particularly good combination.

In the recently released second quarter earnings report for Graphic Packaging Holding Company, CEO David Scheible summed up some of his company’s challenges. “We continued to experience soft demand in some core end-markets like beer, soft drink, and cereal. Persistent high unemployment and higher fuel prices are forcing end consumers to continue to tightly manage discretionary spending.”

Despite all the challenges, companies in the folding carton segment have been able to post some positive results. For the most part, these have occurred due to management actions taken to reduce costs and focus on core businesses—actions that are necessary during recessionary periods.

Graphic Packaging posted second quarter results that were 4.3 percent above 2Q10. “We posted a solid quarter despite a difficult operating environment in our key end-use markets,” said Scheible. “Our top line increased over 4 percent as we continued to recapture prior input inflation through higher pricing. At the same time, our earnings more than doubled as higher prices, strong operating performance, and improvements in our cost structure more than offset input cost inflation.”

MeadWestvaco Corporation (MWV) reported record 2Q income, with 2Q11 sales from continuing operations increasing nine percent versus 2Q10. The company attributed its strong performance to gains in global consumer packaging markets, including food, fragrance, and beverage markets outside North America. Like Graphic Packaging, MWV noted beverage packaging declines in North America.

“MWV delivered another very strong performance during the second quarter,” reported John A. Luke, Jr., chairman and CEO. “We are consistently generating higher sales and profits by executing specific, market-based strategies in our businesses—including a transformed product and geographic mix that has strengthened our earnings power. Even as some of the challenges we expected began to emerge in the second quarter, including uneven economic recovery in developed markets and input cost inflation, we continue to prove that the step change in our performance is sustainable.”

It’s not just the industry behemoths that are enjoying good performance in these difficult times. Both Pawtucket, R.I.-based Packaging Graphics LLC and 3C Packaging (Clayton, N.C.) report strong results in their folding carton businesses.

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