Lower demand and high costs drag results down for packaging players

By Katie Bird

- Last updated on GMT

Related tags: Raw material costs

Lower demand for packaged consumer goods and rising raw material costs have led to large net losses for packaging giant MeadWestvaco (MWV) and chemicals behemoth DuPont.

Virginia-based MWV recorded net losses of $90m for the year ending December 31 2008, with a particularly poor fourth quarter.

Net sales for the fourth quarter fell 7 percent from $1.721bn to $1.599bn, which the company blamed on lower demand due to declining global economic conditions.

Fourth quarter loss from continuing operations amounted to $16m, pulled down by $33m restructuring charges relating to facility closures and redundancy payments.

Commenting on the results CEO John A. Luke said: “Before and during this difficult period, we’ve taken bold, proactive steps to secure our financial position and ensure that we remain a strong competitor in our targeted markets.”

It appears these bold restructuring measures will also continue into 2009 as the company has announced it will be accelerating elements of its cost reduction program.

The company plans to shave $100m off its corporate and business overhead expenses and it hopes to save a further $25m from facility closures and restructuring.

Just this week, MWV announced the closure of its Washington Court House facility which manufactures dispensers for the personal care and beauty industries, involving the loss of 278 jobs.

DuPont reports $629m net loss

DuPont also struggled in the fourth quarter, reporting a net loss of $629m compared to a profit of $545m for the same quarter last year.

Its performance materials business segment, which includes its packaging technologies, suffered a 30 percent reduction in sales to $1.2bn.

This reduced demand, coupled with higher raw material costs, led to a pre tax operating loss of $129m compared to a $186m operating income in the same quarter last year.

Like MWV, the company has been following an aggressive cost reduction program delivering $425m of savings over the year. The company’s strategy for 2009 is similarly vigorous, with a planned savings of $730m from fixed cost reductions and $1bn from reduced working costs.

Commenting on the company’s position CEO Ellen J. Kullman said: “We do not underestimate the difficulties presented by the current environment. We will rigorously guard our financial strength and flexibility…”

Looking to the future, DuPont does not expect the situation to improve in the coming months and expects to see very weak demand in most of the company’s markets, excluding agriculture. Earnings for the first quarter are expected to fall between $0.50 and $0.70 per share.

Related topics: Packaging & Design

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