sealed air\'s ceo discusses q2 2011 results - earnings call transcript
Q2 2011 earnings call at 11: 00 a. m. on July 27, 2011
David Kelsey, Director of Investor Relations-
William Hickey, chief financial officer and senior vice president
Chief Executive Officer and Managing Director
Barclays CapitalRobert W. Baird & Co.
Integrated Chip Dillon
Gabelli & Company, Inc. Philip Ng -
Jefferies & Company, Inc. Mark Wilde -
Good morning everyone, welcome to The Sealed Air conference call to discuss the company\'s 2011 performance in the second quarter.
The phone is being recorded.
Today we have William V.
Shiki, president and chief executive; and David H.
Senior Vice President and Chief Financial Officer Kelsey.
After the management is ready to comment, they will answer [the question]
Now, at this time, I want to transfer the call to Amanda Butler, director of investor relations.
Madam, please continue. Butler.
Thank you all. good morning, everyone.
Before we start our conference call today, I would like to remind you that the statement made at this conference call, setting out the management\'s vision or forecast for the future, is moving forward --
Look at the report.
These statements are made entirely on the basis of the information we have now.
We encourage you to review the information in the section entitled \"forwarding\"
Look for reports in our earnings release, which will apply to this call.
In addition, our future performance may vary due to multiple factors, many of which are listed in our most recent table 10 annual report
K, you can find it on our website. com.
We also discussed financial measures that are not in line with the United States. S. GAAP.
You may find important information about our use of these measures and reconciliation with the United States. S.
We listed the GAAP in the earnings report.
Now, I\'m transferring the call to our CEO, Bill Hickey. Bill?
Thank you, Amanda. good morning.
At today\'s conference call, I would like to discuss our 2011 operating performance for the second quarter, have Dave Kelsey detail some of the financial projects and then come back and contact our upcoming Diversey Holdings.
Once Dave and I have finished our prepared comments, we will be happy to accept any questions from the audience and those who come in via webcasts.
Earlier this morning, we posted earnings of $2011 per share in the second quarter.
In contrast, our revenue for the second quarter was $2010.
38, excluding the acquisition fees we announced earlier this quarter in connection with the proposed Diversey acquisition-
Later in the second quarter, our adjusted earnings per share were $0. 40 per share.
Our adjusted EPS performance grew 14% in a year. over-
The annual basis reflects the benefits of favorable foreign exchange, higher sales volume, favorable prices/combinations, all of which are partially offset by the continued adverse effects of scheduling for the recovery of higher raw materials and freight charges.
We used more than one.
The way to deal with raw material inflation, as you have seen this year.
This resulted in a relatively stable operating profit margin on the basis of the adjustment.
Positive/mixed prices are around $30 million, $10 million productivity gains and higher volumes and operational leverage gains from favorable foreign exchange, largely offset the high resin and freight costs projected at $45 million in the second quarter.
When we looked at the peak price of resin in the current quarter, we were satisfied with our profit performance, which reached its peak level almost in year 00 in the June S, but then declined modestly.
This is in line with the outlook we gave you on the first quarter call and we think the resin price will peak in the second quarter and they did that, then gradually faded in the summer months.
Overall, the fundamentals of our business remain very solid this quarter, although the pace of economic growth and recovery is uneven and uncertain, and with the end of this quarter it seems to have slowed down and made it more challengingover-
Annual comparison of our protective packaging department.
Our combined net sales rose 11% to $1. 2 billion. On a constant-
US dollar base sales excluding foreign currency conversion increased by 5%, which is in line with our guidance and our first quarter results.
Starting from the first quarter, we showed continued momentum, creating 3% unit turnover in the second quarter.
Unlike the first quarter, in which North America and Europe led the company\'s growth, in the second quarter we saw a mix between relatively strong European and strong performance in our developing regions, excluding Brazil
In Brazil, the continued appreciation of the Brazilian currency continues to limit the country\'s beef exports and animal productivity, which adversely affects our core food packaging business.
Business growth by geography, Europe and Asia has led to business growth, and all of our businesses have experienced positive growth in both regions.
In Europe, sales grew by 6% in the quarter, and sales in our food solutions division grew by 10%.
This increase is mainly due to the sales of equipment to new customers.
A well-prepared growth plan.
Darfresh and BDF throughout poultry.
In addition, the growth of the Mirabella case
Ready-made formats and pallets have also contributed to strong growth in Europe.
Our food packaging division has also achieved an increase in the number of equipment for a wide range of customers in Europe, reflecting customers\' continuous investment in automation and modern operations to achieve superior performance and reduce labor costs, reduce Total operating costs.
This has also been supported by the continued growth of our services --
Based on solutions such as our performance and system integration products.
In Asia, we have created about 15% sales growth, mainly from our new inflatable materials and equipment systems, such as our new cyclone inflatable system, with a 13% increase in protective packaging.
While our North American sales have grown by 1%, I would like to highlight the advantages of key areas.
Sales in the United States rose 4% in food packaging. S.
Driven by extended customer relationships, these relationships are mainly in mid-
2010, animal production increased slightly on average because, in the face of higher feed costs, mainly corn prices, processors bought more protein from the market.
In terms of protective packaging, sales in the United States increased by 4% driven by the following factors: first, the strength of our Instapak foamin-
Installation location, year-to-
The installation date far exceeds the installation amount of last year;
Second, strong growth in inflatable materials and equipment systems among existing e-commerce customers
Business and fulfillment space with new customers;
Third, the power of our new I. B.
Fast inflatable bubble system, new and larger film sizes are expanding opportunities and customer relationships, with the product line growing by about 45% in the quarter.
I am also pleased to announce that one of our core protected packaging products, our Instapak product line, is a very good product for us, actually, unit sales rose 5% to 6% in the second quarter.
These increases help offset some of the weaknesses experienced by the North American region, mainly due to a number of factors, including some $5 million in quantitative losses in the case --
The food solution is ready and we have discussed it before, which is caused by a case
A major retailer in mid-2010.
Part of this new format is now available by our food packaging department and included in their results.
In addition, I would like to point out that the food solutions team is actively seeking a pilot for change with other large North American supermarkets ---chains to re-
Achieving growth in cases
Ready in North America, we hope to transform into a growth model within a yearover-
On the basis of the second half.
Secondly, our food packaging department has an adverse quantity in Canada, reflecting a small account term.
When it comes to developing regions, we report sales according to sales volume, and sales in developing regions are increasing by 12% or 5%.
The dollar basis does not include the impact of foreign currency translation.
Excluding Brazil, as the country faces high foreign exchange issues, sales in our developing regions have increased by 16% on a reported basis and 10% on a growing basisdollar basis.
I bring this up because the pace is constant
Dollar sales growth is more representative of double
We see digital growth in countries like Russia. -
Russia, Poland and China.
As far as the business area is concerned, our growth of about 55% comes from the industrial business, protective packaging and specialty materials, which is mainly driven by the quantity drivers I mentioned earlier on protective packaging, and the volume growth rate of 9% of professional materials.
In addition, an additional 20% of the combined growth comes from the food solution, which is the result of the business\'s ongoing growth plan.
As we noted in our press release last quarter and earlier today, the amount of food packaging has been negatively affected by the appreciation of foreign currencies, brazilian and Australian currencies continue to weaken demand for meat products in the rest of the world.
In terms of price/mix and productivity benefits, we achieved a 3% discount price/mix this quarter, about $30 million.
These benefits are due to the fact that our two food companies in North America are about 6% more expensive/combined.
This strong growth is due to the adjustment of contract prices and the previous-
Pricing action implemented in 2011
We have also achieved good results in the European pricing action as we try to recover the rising cost of resin in the region.
I should note that our business is expected to continue to receive incremental pricing benefits quarters in the second half of this year from our previous 2011 pricing actions and the new pricing actions that came into effect later on, we expect to benefit from the third and fourth quarters.
We continue to anticipate that we will achieve price-cost parity in the third quarter during this period.
Many of our supply chain plans are turning to productivity improvements and achieving about $10 million in productivity gains this quarter, and we expect the rest of this year to maintain the pace of improvement in this quarter.
Turning to our EPS guide and the outlook for the rest of the year, we will maintain a $1 EPS guide for the whole year of 2011. 75 to $1.
85 per share, excluding any impact after the acquisition of diversity.
We continue to expect a moderate increase in volume this year. over-
Basic and track growth rate in the first half of this year.
This increase is based on expectations for moderate yearsover-
In many businesses and regions, the annual growth rate of animal production, strong equipment manuals and expanded customer relationships.
We do expect these benefits to be offset by a more challenging year --over-
From the price/combination point of view, we would like to obtain an ongoing price/combination benefit from our pricing actions and favorable formulas
We expect adjusted-based prices/combinations to increase by an average of 3% per cent throughout the year.
While resin prices may peak in the second quarter and are now expected to decline modestly, we expect resin prices to remain stable for the rest of the year, despite a slight increase.
We still believe that the annual average increase in resin costs we estimate will be within the lower percentage of adolescents, although we think it is appropriate to represent our resin cost dynamics.
As we mentioned in the press release, we continue to offset raw material inflation through a diversified project that includes not only pricing actions with customers, it also includes higher combinations of productivity improvements, product reformulation of raw material flows, and new differentiated solutions.
In this quarter, we have achieved measurable gains from all of these factors, helping to maintain operating profit margins within a relatively tight range.
The foreign exchange translation provided a favorable impact on our performance this quarter, which was achieved mainly in the Meiyue, for example, the euro climbed from $1.
From 2010 to June, the euro was $23.
June of 2011.
We continue to expect a favorable foreign exchange rate to generate a few percentage points of benefits for our net sales throughout the year, and as we continue to assume in currencies such as the Australian dollar that the euro continues to strengthen the Brazilian real, relative to the United States. S. dollar.
With the seasonal improvement of trading volume in the second half of the year, price/combination advantages and favorable foreign currency translation will help us achieve greater earnings performance in the third and fourth quarters, this will enable us to achieve EPS guidance throughout the year.
As we noted in the press release, we have adjusted the assumptions of capital expenditure and free cash flow this year.
Based on the uncertain progress of the recovery, we reduced the initial capital expenditure guidance by $25 million to reflect changes in project time and productivity gains, resulting in incremental capacity.
As a result, we now expect capital expenditures to be approximately $100 million to $0. 125 billion, compared to our previous guidance of $0. 125 billion to $0. 15 billion.
Looking at free cash flow, we have adjusted our guidance and now assume that free cash flow is about $0. 225 billion to $0. 275 billion, to reflect the adverse foreign exchange impact on working capital projects and the reduction in capital expenditure.
The decrease in cash flow is mainly due to the translation of working capital projects, especially inventory and accounts receivable at higher exchange rates, resulting in the United StatesS.
The dollar amount shown on our balance sheet.
When financial institutions get higher inventory and compare it with the previous year, it seems to be the use of cash.
But in terms of actual cash dollars, basically, we have indicated an increase in inventory at the end of this period.
Fundamental business fundamentals have not changed.
To reiterate our press release, payment W is not included in our revenue Guide. R.
With the time of this settlement still unknown, Grace reconciled.
However, the proceedings are continuing and are currently being heard by the Delaware District Court.
The latest update is that on June 28 and June 29, the District Court heard an oral debate, and the court considered a number of issues and did not make a decision at the hearing.
In addition, our earnings guide does not include any operational gains and losses arising from fluctuations in the Venezuelan currency or any transaction costs directly related to the proposed Diversey acquisition, after Dave\'s more detailed discussion of the second quarter project, I\'ll talk to it.
Now, I will transfer the call to Dave Kelsey to review the details of our financial performance and liquidity status. Dave?
Thank you, Bill.
As Bill said, foreign exchange is an important factor in our second-quarter results.
In addition to providing some more details on the impact of foreign currency, I will also detail our operating expenses, operating income, Key Balance Sheet Statistics, free cash flow and liquidity programs.
Then I\'ll transfer the phone to Bill.
Because we are Americans. S.
Real companies, we translate the financial results of foreign currency pricing into the United StatesS. dollars.
As foreign currencies change in value relative to the United StatesS.
The US dollar\'s conversion of our foreign exchange results into the US dollar may have a favorable or adverse effect.
Obviously, so far this year, with the weakness of the dollar, we have seen mainly favorable currency translations.
In the second quarter, compared with the same period last year, not only did the euro strengthen against the dollar, but other currencies such as the Australian dollar and the Brazilian Real also recorded a double
Increased value to the United StatesS. dollar.
About 55% of our sales are outside the US. S.
Sales in euros are about 20%.
The appreciation of the euro and these other currencies in the second quarter had a positive impact on our sales of $64 million and had a significant impact on our operating profit and free cash flow results.
In terms of costs, our marketing, administrative and development costs increased by $17 million in the second quarter to $0. 189 billion, but the percentage of sales remained relatively low.
The increase of $9 million is due to unfavorable foreign exchange, and the increase of $5 million is due to the incremental sales and marketing costs we generate to support sales growth.
Our operating profit for the second quarter increased by $6 million over last year, excluding the costs associated with our proposed acquisition of Diversey.
This result includes preferential foreign currency conversion of about $7 million, contributing about $0.
03 we earn per share.
In my profit and loss comments, our interest expense was $4 million less than in 2011, compared to $2010, due to the fact that we redeemed $0. 15 billion of 12% senior notes in December 2010.
Now I want to turn your attention to some key balance sheets, free cash flow and liquidity items.
As at June 30, cash and cash equivalents amounted to $0. 705 billion, an increase of $9 million over March 31.
We paid a dividend of $21 million this quarter.
Our accounts receivable increased by $35 million to $0. 732 billion this quarter.
Excluding the increase in foreign currency conversion, our accounts receivable will increase by $30 million or $ 5%.
As Bill commented, when we undo the effect of foreign currency translation, our basic performance in accounts receivable and inventory is relatively unchanged, so our day sales are outstanding, the key indicators to measure the health of accounts receivable are largely unchanged, as the growth of accounts receivable is consistent with the revenue growth for the quarter.
Inventory investment increased by $43 million this quarter.
Excluding the increase in foreign currency conversion, our inventory will increase by $36 million, or 6%, this quarter.
In June 30, mainly in our food business, stocks in North America and Europe were higher, reflecting the peak Cost of resin for 5 and 1 years
As the sales of the two food companies are expected to increase their inventory from a normal seasonal increase.
We expect our inventory balance to decline in the second half of this year, in line with the pattern of the past few years.
Inventory days, also a key indicator of our inventory health, did not change in June 30 compared to March 31.
Free cash flow for the second quarter was $8 million, mainly because we have covered Net cash use for working capital projects.
Judging from our liquidity situation, our debt (excluding cash and cash equivalents) as of June 30 was $0. 709 billion, down $8 million from March 31.
Also, at any point in the year, we do not have any outstanding amounts under the promised credit line.
As of June 30, our commitment to borrowing capacity was approximately $0. 78 billion.
Anyway, we\'re still fine.
Positioning for Gold Day-to-
Daily work and W to be processed. R.
Although, as indicated in the bill, we still do not have a date for when to contribute.
Now I transfer the phone to Bill.
Now, if I can take a few minutes on our future and growth strategy, I would like to talk about the dependent sey acquisition that we announced in June 1.
We are all very excited about this acquisition, which brings together two industries.
Leading organizations with a shared vision leverage the strong tradition of innovating new market spaces and developing unique solutions to create measurable value for our customers.
We believe that the acquisition will serve as a catalyst for our work in the field of food solutions to expand our presence in the food processing industry beyond the solid foundation we have achieved in terms of fresh protein.
This acquisition took advantage of our current R & D investment in food safety and hygiene and expanded our growth plan to provideto-
Terminal solutions in the food processing and food service industries.
Ultimately, the goal of eliminating pollution maximizes the shelf life and freshness of food and minimizes unnecessary waste, which is key in today\'s world of limited resources and high costs and
Finally, diversey\'s extensive influence and relationships in the developing regions of the world will strengthen our own growth plans and expand opportunities in countries such as India, in India, the size of Diversey in that particular country.
After we announced it, we released an incremental 8-
K. in June 8, we outlined our estimated 2013 estimates and expected value creation for the new consolidated company.
Dave and I then started an extensive roadshow to discuss our strategy and help our investors and analysts get to know diver with Ed Lonnegan, CEO and president of Diversey
With chief financial officer, Norman Crabbe.
I believe many of the people we met at the roadshow are on call today and I would like to thank everyone who gave us the time and opportunity to continue the discussion.
Since then, we have started our integration planning process, led by the integration steering committee and assigned leaders in their respective functions.
I am pleased to inform you that as we meet, we continue to understand how the organization can generate incremental synergies in these opportunities, positive feedback from our food and industrial customers reinforces the vision of the new organization.
In the short term, we will continue to focus on Diversey as our own reporting department to minimize the risk of integration and maximize the 2013 growth plan that each organization is implementing itself.
From the approval process, we have been approved to terminate the United States in advanceS. Hart-Scott-
Rodino antitrust review, we are already getting foreign regulatory approvals from the EU, China and some other foreign jurisdictions.
At this time, we continue to expect to complete the transaction in the fourth quarter and continue to make progress in transaction financing.
Now, operator, I would like to turn on the phone for any issues with the participants and we will follow up on any text issues with our webcasts participants as well. Question-and-
The first question will come from George stafus, Bank of America.
George StaphosI wanted to answer my first two questions and use them to explore Diversey again.
Clearly, the diverter and Sealed Air products within the food packaging unit are driven by R & D.
Obviously, you are selling to the same customer base.
Bill, over time, what is your vision of how to finally be able to integrate sales methods for both businesses?
Will you eventually see, depending on the market situation ---
In fact, a salesperson who sells both products?
How did you see it?
Then I have a follow-up.
William Hickey Ko
George, we are now in the process of integration, and one of the key projects that the integration team is focused on is how to get to the market.
So I would say that if you stick to this issue for a quarter or so, we might tell you more later.
George stapsokaiBut at that --
You should at least have some perspective on how to integrate it.
What were your initial expectations, Bill? what do you think?
I think I \'d rather wait until next quarter, George.
I mean, we\'re working on how to best-
In different markets in different parts of the world, the situation is also different.
I mean, if you use my example in India, where Diversey is much bigger and more mature than us, there may be ways to rely on their organization.
In North America, we have a much better position in the food industry, especially in the food processing industry, and they will support us.
So the way we work isby-Area, product-by-
How to go to the market better.
I appreciate your patience, Bill.
I think my other question is more about Dave.
Dave, your point. -
Or your point of view, in terms of how you finance Diversey, both in terms of capital structure and in terms of the audience you finance, it\'s clear that, given the circumstances in which we are now, what is a somewhat challenging and changing debt market? David Kelsey.
As you know, we disclosed at the time of the transaction announcement that we had previously had a bank commitment of $4. 5 billion.
This will be provided by Citibank, an institution called Bank of America Merrill Lynch, and I think you are familiar with RBS and BNP.
Through these commitments, we are able to get 100% of the funds needed to complete the purchase.
We will update the capital structure at the close, but at this point we really can\'t discuss it in more detail.
George, the only thing I think I can say is our debt ceiling.
We\'re just waiting for Washington to get them.
The next question will come from the work of Philip Wu Jeffries. Philip Ng -
Jefferies & Company, Inc.
One of your biggest competitors has just reported on flexible packaging today, and it sounds like their expectations for sales will slow down as your customers raise their prices.
It looks like you don\'t see the same impact.
I just wanted to find out what is disconnect?
I mean, I\'m not going to say there\'s a big disconnect, I mean, we--
Now we have a better geographical footprint.
So I mean, you see that our business is much bigger in Europe and we still see some bigger growth in Asia.
I mean, our data in China grew by 14% this quarter.
So I want to say that part of it is geographically.
Also, what we see, I think, is that we are more exposed to the protein components on the market.
Due to the high price of corn and the high price of feed, we actually see that animals listed in the second half of the year will increase instead of feeding them $7 and $8 for corn
So this is a factor now.
It will take a little time from 2012.
There is no doubt about this.
However, it does mean that there will be more time in addition to seasonal pick-up.
On the other hand, our equipment business is very healthy.
Keep in mind that we have equipment businesses with $0. 2 billion and $0. 3 billion.
By selling the whole solution, we think we have an advantage in the market.
As for your protective packaging business, this is a bit economically sensitive.
I think if I hear it wrong, sales will slow this quarter.
I just want to know how it tracks in the later stages of 2Q and in the early days of 3Q?
Yes, it\'s all the same. I mean, it\'s --
I would say that the industrial side of our business is more uncertain about the economy than the food side.
I think many of our clients are saying that they are waiting for what Washington is doing before making a commitment.
Their inventory is very low.
They bought it for a week-to-week basis.
What we usually see is that due to the customer\'s caution, we usually see orders flowing in the middle of the month.
If they run low-
Generally speaking, in the last 3 to 4 days of the month, we will see a considerable rise.
So I want to say that the industry is more concerned about the overall macroeconomic situation.
But geographically, we have a big footprint.
I mean, we can still see it in China.
Our Instapak business, you know, steel is one of our leading products and one of our main products.
We actually saw it.
In addition, unit sales growth in the second quarter was 5% to 6%.
Inflation rose 31%.
Therefore, despite the slow economic development, our employees have done a great job in finding customers in need.
I think in the next few days, it depends a lot on the situation in Washington.
The next question will come from Ghansham Panjabi, Robert W. Baird. Matthew WoottonRobert W. Baird & Co.
Today, Matt Wooten of intecatedit sat down in Ghansham.
I hope you can talk about the increase in equipment sales contributions this quarter and how you look at the growth in the second half, given the conservative comments of many of your customers, the possibility of your client reducing capital expenditure in the second half of this year?
Very interesting. It\'s --
Equipment is usually a good indicator of economic health.
Surprisingly, when the economy is uncertain-
Customers\' Investment in equipment is slow.
But we see a constant of 12%. The dollar rose. And on --
Overall 20--16% constant-
In terms of protection, the dollar rose, and in terms of food, the dollar rose 45%.
I think a big part of this is that we show cost savings, productivity savings, and reduced labor.
I think our customers see from these returns that investing in new equipment and reducing costs is a compelling argument when they are uncertain about the future and their profitability, because they got 1-to-2-
Annual returns on some devices. Matthew WoottonRobert W. Baird & Co.
As a quick follow-up-up question.
I hope you can give us some colors about Inter Milan.
Quarterly Volume track.
Is the volume of the whole three months consistent?
Any signs of the trend in July will help.
William hicwell, I tell you, it\'s pretty stable.
I mean, I look. -
Maybe before I called, I looked at the sales situation yesterday. they were almost the same as what we have been running.
Single digits in the United StatesS.
A little higher outside the United States. S.
The operator and the next question will come from Peter Ruschmeier of Barclays Capital.
Barclays Capital bill, I\'m curious about Diversey, if you can remind us of the product distribution methods of Diversey and Sealed Air, how can we consider ways to save logistics costs?
Or ask different questions, do you expect to achieve
Unit freight cost savings are only at a high level?
William HickeyYes, I think we talked a little bit about it in the road show ---
Diversey mainly serves the food industry directly, and the way Sealed Air serves the food industry is very similar.
Taihua Shi, No.
Its food section, construction service contractors, laundry rooms and a few other items, through distribution channels, it consists of many major distribution companies around the world, such as Bunzls, Unisources and Xpedxs.
These are the same channels used in non-Sealed Air
Food industry sector.
Therefore, we have obtained direct channels through the food industry and indirect distribution channels through many of the same distributors in the non-food industry.
Food aspect of our business.
We talked about the opportunity of logistics at the roadshow.
Diversey sales, generally filled with 3 feet of the heavyweight chemicals in front of the truck, and sealed air sales will pack in light rolls of air bubbles that will pile up on the truck very neatly.
So I guess as we said at the roadshow, while I would like our protective Packers to be taken away, the foam packaging is free.
Barclays Capital. That\'s helpful.
Hurry up, I turn it over.
Can you comment when you consider the price/mixed spread? When you\'re based on--
In terms of the time and cost of your price increase, do you expect a greater sequential contribution to the price/combination of 3Q or 4Q?
William hickwell, I think 3 may be the top.
I mean, there\'s always a problem, if you look at the history of the industry, they usually-
Supplier side, our supplier, if you look at it, you usually--
They usually try to raise prices in the fourth quarter.
So, despite the fact that many forecasts are basically stable between July and December, my personal view is that the fourth quarter may try to raise prices as it has been in the past few years.
The next question will come from Rosemarie Morbelli, Gabelli Inc.
Gabelli & Company, Inc.
Bill, back in your device sales, can you tell us how much money is there in North America and how much money is there in Asia?
Problems in the Pacific and Europe?
I\'m not sure I have that relative.
I do business, Rosemary.
I do business.
I got it from food and food. -
Yes, we operate our business globally.
But I can tell you, I know, right behind, I saw very quickly that the growth of the European food solution was about $3 million, the line of that Darfresh, the line of the PDF is still the kind of bird.
Now, we are installing an automatic line for poultry in Saudi Arabia.
We have seen the US economy grow by about $3 million. S.
In terms of protection, it is mainly on the new cyclone equipment.
We also saw some in Japan.
So it spread very well.
Although I would like to say that food solutions in Europe are probably the biggest of them.
Then, it crossed the industrial industry and finally emerged the basic core food packaging business of food.
Gabelli & Company, Inc.
From your past experience, I mean, these are razors.
How much revenue can we expect from installing all these new devices?
We usually sell three to four times the sales price or the value of the equipment in terms of industry.
That\'s the number we need.
In terms of food, it may be less than that, and more between 1x and 2x each year.
Gabelli & Company, Inc. Okay.
If I can ask one more question about profit, after you say you are going to close-
Gap, are you talking about Q3, can Gross margin be higher than last year, or are you mainly speaking in order?
William Hickey Ko
What we\'re saying is, we\'re closing the gap, Rosemary. -
In fact, resin growth has exceeded $100 million since January 1, and we will take back all of this.
Gabelli & Company, Inc. Okay.
So you are closing the gap in dollars, but the profit margin will still fall compared to the previous year?
William hicwell, this is because of math, because the numerator and denominator are both higher.
Gabelli & Company, Inc. Yes, sure.
No, no, no, I understand.
However, it should be higher in order?
Should be higher in order. Yes.
The operator and the next question will come from Chip Dillon, a vertical research partner. Chip Dillon -
When you see the food packaging section, it looks like the volume in the second half is much more difficult than in the first half.
Less than 2 in the first half, in the second half--
Or I should say that last year, you compared with just over 2 people, and now in the second half of the year, you will compare with people with an average of nearly 5 people.
Having said that, what do you think about the volume potential of food packaging in the second half of 2011, just half of the year?
William Hickey, I think what you saw just now is one that we have actually seen--
If you look at our numbers, our Australian and Brazilian numbers are low in the first half of this year and low in the first half of this year, because both currencies are--
First, the drought in Australia;
And Brazil, the price is the first;
The second is currency.
We then actually see a slight improvement in Brazil at the end of the quarter ended July.
We are hopeful about Australia\'s progress, but we have not yet seen it.
Both of these will give US sales that we did not have in the first half of the year.
As I mentioned earlier, we are also looking at the listing of cattle in North America as there are records --
Corn prices remain high, although some of them may fall from 2012.
In many parts of the country, the price of feed is high due to lack of rain, and the grazing pasture is dry.
This has allowed some ranchers and cattle keepers to bring more animals to market earlier.
But it\'s still in the single. digit range. Chip Dillon -
Citigroup found you. Okay.
Then follow up quickly. can you remind us? -
Let\'s assume that Diversey ends in the fourth quarter as planned, when do you think your balance sheet will make you feel comfortable, either with a large stock repurchase or another large repurchase --
Big acquisitions like Diversey?
William HickeyI thinks we have to clean up our balance sheet first.
I mean, let\'s go--yes.
First, pay off the debt.
I mean, reducing debt is an important thing.
If you look at our projections, our goal is to reduce our debt to under 3 years by 2013.
We do not see any major acquisitions coming soon.
There could be a couple of little Tucker-
This will complement diversified businesses, but it is clear that they will be small in scale.
At some point, as we become more satisfied with our balance sheet and the economic outlook becomes clearer and clearer, we may reinvent in some stock buybacks.
The next question will come from Gilbert Alexander, the dalphil society.
Gilbert alekshedeki, as far as your resin costs are concerned, are you saying that you wish you would not have the resin as they did at their peak, and you would not have the volatility of the past year?
Hope is eternal.
I think so--John --
Was it Milton or Alexander, one of them.
But the stars seem to be arranged.
I mean, oil is stable.
Regarding the uncertainty of the economy, it does maintain the stability of the price of the resin.
I think only--
The real hope is that we have a pretty mild hurricane season or at least it didn\'t hit the coast of Luis Anna/Texas.
Basically, will your operating margin be much higher than last year?
William Hickey, I\'m sorry, Jill, you\'re a little faded out there.
Can you repeat it?
I\'m Gilbert Alexander.
When you look at operating profit margins, is it difficult for you to improve significantly from last year\'s results?
We will strive to improve our operating profit margin. That\'s --
I mean, it\'s clear. It should --
I mean, if you look at it, we hit the peak of the resin price in the second quarter, and if you look at our expectations, it shows a slight increase in operating profit margins.
Gilbert AlexandreFor this year?
William Hickey in the third and fourth quarters of this year
What is the possibility that Gilbert Alexei and grace will finalize by the end of the year? end?
If I knew, I would go to Las Vegas or Atlantic City.
The next question will come from Mark Wilde of Deutsche Bank. Mark Wilde -
I want to know AGBill from Deutsche Bank. -
Just a few questions, Bill must forgive me if they were asked earlier.
I\'m not answering the phone here.
But in Food Solutions, you talked about a 10% increase in sales in Europe, and I was wondering if we could get a little color out of it?
I think we did talk very briefly about a device being a component.
Equipment is a component, and as I said in response to my last question, sales of equipment for European food solutions increased by 45%.
Including a few new lines, we have-
Has been sold and is being installed.
For example, we have a route for the whole bird.
We have some new cases.
Ready, we also saw positive growth in Russia, which is very good.
I mean, the business in Russia is recovering very well and the whole support is fine, and I would say these are the key components.
There are, of course, pallets that will enter the poultry market as the basis for packaging.
So you take a share of sales growth for the entire bird packaging, BDF, Darfresh and equipment business.
People with food solutions have a very positive growth plan and they are really doing well. Mark Wilde -
And then in the protective package you mentioned a new lighterweight film.
It sounds like it\'s going to hit the ground, which means lower sales ~-
The square footage is the same.
Can you talk about this?
William HickeyThat\'s --
You hit that one.
In the same area, we can use 30% less plastic.
We \'ve been talking about this for a year, and this is CT-
301, this is a real 30
The meter shrinks the film and takes out a considerable amount of plastic from the material.
It\'s in 80-
Also, there is no result difference in the percentage of applications for customers.
Because it has less plastic and is thinner, the price is slightly lower.
But, on the one hand, because it reduces the number of packages, it is harmless to the environment;
Second, it greatly reduces our cost.
Third, it works well on the device.
So everything went well.
Now we do the same thing on padding.
Air product line.
We have just launched a new movie, air, called 5, which once again brings us back to the film.
If you open the package from some email
You will see these inflatable pillows inside.
Start soon and you will see-
You may not notice it, but you may start to feel that the pillow is slightly thinner plastic.
This is also part of our sustainability of reducing costs, providing value proposition to our customers. Mark Wilde -
So the price is lower.
But what does that mean from your profit margin?
William Hickey, in fact, the way mathematics works is that the percentage margin is higher, not necessarily a significant increase in the dollar margin. Mark Wilde -
Very good, Deutsche Bank.
Finally, any idea-
There are concerns that China and some other Asian economies may slow down.
Can you see this in any business on your side?
William hickwell, I have the same concerns.
But I looked at our quarterly data in China, up 14%.
I know from our Chinese that they care about the real estate bubble.
China has been raising interest rates.
But from the basic situation two years ago, when I walked into one of our Chinese customers, I found that 2/3 of their factories were closed because of exports to the United States. S.
Europe is a little depleted.
When we went through the financial crisis, these people are back now, an increase of 14%.
Therefore, I have given a great evaluation of the economic management of the Chinese people.
No matter whether there is a bubble or not, only time will tell us. Is that --
Any questions on the Internet, or how many operators do we have?
We have a follow-up operator.
Question from George Staphos, Bank of America.
George Staples bill, two quick.
In the past, shrinking the film market was sometimes a very competitive market.
Over the years, one of your main competitors was acquired a few years ago.
One of the other competitors seems to have disappeared.
Maybe this is an incorrect statement, but what is the speed of competition in this market?
Then more broadly, in protective packaging, your price/combination is a little lower or so than what you see in your food.
How much is this difference--
Or in other words, what is the effect of CT
Do you have 301 movie introductions on your price/portfolio?
In other words, what will your price/combination be before the new product is released?
William Hickey Ko
Let me go back and say that the protection industry is still one of the more competitive industries we are engaged in.
In fact, even if there is protection, there are more products in certain categories.
What we do in terms of shrinkage is that we have introduced some new products. We now have CT-
301, 501 and 701.
They did greatly reduce the amount of plastic in the product.
It does have a lower price point before this issue.
I know this has a negative effect on the price/mix, so 5-on R5-
Air has a negative effect on price/mix.
I just don\'t have that particular number, George, what would it look like at this time without this number, but I can tell you, the thinning of our products does have a negative impact on the price/mix, although it has a positive impact on profits and our costs.
Is the situation worse with George staphoth and competition and shrinking?
Has it stabilized in the last 5 years?
How would you design for us?
I think William hicwell is very interesting.
If you look at the competitive environment, you are right.
They didn\'t really disappear, they probably just went through their own challenges.
I don\'t think it will get worse.
But then again, the situation has not improved.
It\'s like a competitive industry where players with the best products win.
This is our goal.
We have a follow-up.
From the question of Rosemary morbailey.
Gabelli & Company, Inc.
Come on, Bill.
If you expect-
You have seen the price of resin drop.
Your price increase is over.
You have not changed your guidance.
In fact, because now you think you may be closer to the high end than the low end, otherwise people will expect you to have a better result than previously thought?
William HickeyRosemarie, I think we gave our guidance in a range because there are a lot of moving parts, a lot of moving parts.
I don\'t think I want to go. -
We may end up in this range.
So I will leave it there.
I want to finish this call.
Thank you for your participation.
What I want to make clear is that, as I think, we are implementing this plan.
This is basically the message that the organization is communicating. here is our plan. we know where we want to go.
We know what we have to do to get there and we are doing this --by-step.
In the meantime, Diversey\'s integration team is focusing on determining the incremental value delivered from the transaction and speeding up the timeline as much as possible.
We look forward to continuing to speak with you, sharing our vision and demonstrating the value we create through this new market mix.
We want to maintain the position of innovator, thought leader and pioneer in our field.
We have a history of creating new markets, new solutions that bring premium and drive value to our stakeholders.
We intend to do this by acquiring Diversey.
We believe this is right.
Long-term investment in future value creation, which is why I am still proud to be a sealed airline shareholder.
Thank you for taking the time to listen.
This is the end of today\'s speech, actors and actresses.
We would like to thank you for your introduction.
You can now disconnect and have a great day.