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Top line results up on volume growth in Americas & Asia at PGI

18 May '12

6 min read

Polymer Group Inc (PGI) reported results of operations for the first quarter ended March 31, 2012.

Net sales for the first quarter of 2012 were $295.2 million compared with $291.9 million in the fourth quarter of 2011 and $283.6 million for the first quarter of 2011. The increase reflected higher volumes in the U.S. principally due to higher demand in the hygiene market, higher volumes in Latin America due to the company's Colombia facility returning to full operations, and higher volumes in Asia due to higher demand in both the healthcare and hygiene markets, offset by the negative effect of foreign currency translation and lower selling prices from the pass-through of lower raw material costs.

The company achieved solid volumes during the quarter supported by increased sales of consumer disposable applications in the Americas and wipes and industrial volumes in Europe. The company's carded operations in both the U.S. and Europe yielded improved operational efficiencies, offset somewhat by the additional lease expense associated with the new spunmelt line in the U.S. SG&A costs improved as a result of cost control efforts and certain period expenses, offset somewhat by competitive pricing pressures and increases in raw material costs later in the quarter.

New investments in Suzhou, China and Waynesboro, Virginia contributed to year-over-year and sequential growth in sales and profitability.

New organizational structure is expected to leverage the benefits of PGI's global footprint, align resources and capabilities with future growth opportunities, and provide for a more efficient structure to serve existing markets.

PGI's chief executive officer, Veronica (Ronee) M. Hagen, stated, "While the underlying fundamentals of our business remain strong throughout the world, we face an increasingly competitive environment due to excess industry capacity and continued volatility in raw material costs. The growth investments we ramped up in the past year and the manufacturing efficiencies we have implemented are yielding sequential improvement in sales and profitability. To carry this momentum even further and realize the full potential of our unique, diverse business model and global scale we possess, we are boldly moving the company to new levels of competency, readiness and capabilities with a new internal operating framework."

Net sales for the first quarter of 2012 were $295.2 million compared with $283.6 million for the first quarter ended April 2, 2011 and $291.9 million in the fourth quarter of 2011. The year-over-year increase was due primarily to additional volume in the company's Nonwovens segments, with increases in Latin America, the U.S. and Asia offset somewhat from lower volumes in Europe, and lower volumes in the Oriented Polymers segment. A higher price/mix in the Oriented Polymers segment was more than offset by a lower price/mix in all Nonwovens segments, with the exception of Asia, primarily due to the pass-through of lower raw material costs. Foreign currency translation rates negatively impacted sales by approximately $4.8 million compared with the first quarter of 2011.

Gross profit was $53.2 million for the first quarter of 2012 compared with $40.8 million for the first quarter of 2011 and $48.1 million for the fourth quarter of 2011. The year-over-year increase was predominately due to the absence of $10.5 million of purchase accounting adjustments in 2011 primarily associated with the stepped up inventory values, higher volume related to the disruption in operations during 2011 at our Cali Colombia facility, partially offset by an increase in lease expense associated with the new line installed in the U.S.

Raw material costs were $4.7 million lower in the first quarter of 2012 compared with the prior-year period, offset by unfavorable sales price/mix of $4.1 million related to the pass-through of lower raw material costs. Raw material prices began to increase during the first quarter and into the second quarter of 2012. In the Americas, the company has experienced a moderation in polypropylene prices that has not been experienced to the same degree in other regions. The combination of the above is expected to result in profit headwinds for the second quarter of 2012.