Consumer and foodservices/food packaging maker Pactiv Corp. (PTV: 29.17 0.00 0.00%) announced that it has invested $14.5 million in its Moorhead, Minnesota plant to produce molded-fiber, hinged-lid carryout containers under the brand EarthChoice Fiber Blend Hingeware. This investment marks Pactiv’s effort to manufacture eco friendly products.
The company is adding three new manufacturing lines to produce lightweight, smooth, and strong, high-quality foodservice carryout containers that pose lesser hazards to the environment than polystyrene containers. For its new product line, Pactiv will employ a new technology which allows precision molding resulting in finely molded features such as curves, folds and precise in-molded closures.
The expansion started in 2009 and is expected to be fully operational by October 2010. Adding the three new lines will result in 25 jobs at the plant. Based on the positive response to the product, Pactiv plans to add capacity later in 2010.
Pactiv launched the EarthChoice brand for disposable food service needs on May 20, 2010. EarthChoice products include cold drink cups, portion cups, and lids; hinged lid and deli containers, straws as well as hot cups and soup cups. The containers are made from environmentally sustainable wood pulp fibers and are compostable.
Pactiv’s first-quarter earnings per share (EPS) of 38 cents fell short of the Zacks Consensus Estimate of 41 cents and the year-earlier quarter’s earnings of 58 cents.
Full-year 2010 revenues are expected to increase between 10% and 12%, reflecting 9% to 10% volume growth and upward selling price adjustments of 1% to 2%. Pactiv lowered its EPS guidance for full-year 2010 from $2.20–$2.40 to $2.10–$2.30 due to higher raw material costs and the fact that price increases to offset those higher costs will not be fully effective until the second half of fiscal 2010. The Zacks Consensus Estimate for 2010 currently stands at $2.25, which is near the lower end of the guidance.
Pactiv will deliver earnings growth in 2010, due to synergies associated with the acquisition of Prairie Packaging Inc., a leading manufacturer of disposable tableware products. Additional share buybacks, further strategic acquisitions and deleveraging of its balance sheet could also offer upside in 2010. Further, its recent acquisition of PWP Industries will be accretive to earnings in 2010. However, rising costs remain a point of concern. We thus maintain our Neutral rating on Pactiv.
Lake Forest, Illinois-based Pactiv is a supplier of specialty packaging and consumer products. Pactiv has two operating segments. Consumer Products include plastic, aluminum, and paper-based products, such as, waste bags, food storage bags, and disposable tableware and cookware. Foodservice/Food Packaging products include foam, clear plastic, aluminum, pressed paperboard, and molded-fiber packaging for customers in the food distribution channel, including wholesalers, supermarkets, and packer processors that prepare and process food for consumption.
| Analysts' Targets | |
| Credit Suisse | $34 |
| Hold | |
| Thursday, April 01, 2010 | |
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