Food and beverage can maker Crown Holdings Inc. (CCK), reported Monday a swing to profit in the fourth quarter from a loss last year, helped by improved gross margins, lower interest expenses, as well as higher sales. Earnings for the quarter came in above Street expectations, while revenues fell short of estimates. Looking ahead, the company said operating improvements and cost reductions are anticipated to continue throughout 2010.
The Philadelphia, Pennsylvania-based company reported net income for the fourth quarter of $81 million or $0.50 per share, compared to a loss of $14 million or $0.09 per share in the year-ago quarter.
The company recorded a $55 million charge in the fourth quarter 2009, or $36 million, net of tax, or $0.22 per share, to increase its asbestos litigation reserve.
The company estimates that its liability for pending and future asbestos claims will range between $230 million and $268 million. At December 31, 2008, the reported range was $201 million to $239 million. After the $55 million charge, the company's recorded liability at December 31, 2009 was $230 million, compared to $201 million at December 31, 2008.
Excluding the charge, the company's fourth quarter net income increased 25.7% to $44 million or $0.27 per share from $35 million or $0.22 per share in the fourth quarter of 2008.
On average, twelve analysts polled by Thomson Reuters expected the company to earn $0.23 per share for the quarter. Analysts estimates typically exclude special items.
Net sales for the quarter increased to $1.92 billion from $1.88 billion in the prior-year quarter, primarily reflecting favorable foreign currency translation of $116 million, largely offset by the pass-through of lower aluminum costs. Eight analysts had a revenue consensus of $1.96 billion for the fourth quarter.
In the immediately preceding quarter, the company's profit declined from last year, hurt by a restructuring charge related to plant closures. The company reported net income of $108 million or $0.67 per share for the third quarter, on revenues of $2.28 billion.
Among peers, Broomfield, Colorado-based Ball Corp. (BLL) reported a profit for the fourth quarter that climbed from last year, boosted by sales growth as well as lower business consolidation costs. The company reported net earnings of $81.4 million or $0.85 per share for the fourth quarter, on revenues of $1.86 billion.
Another player, glass container maker Owens-Illinois Inc. (OI) reported a narrower net loss for the fourth quarter, as strong operating performance offset higher non-operational costs. The company posted a net loss available to common shareholders of $159.3 million or $0.95 for the fourth quarter, on revenues of $1.9 billion.
Net sales from Crown Holdings' Americas Beverage dropped to $449 million, and sales from European Beverage improved to $348 million. North America Food sales improved to $246 million, while sales from European Food increased to $466 million over a year ago. European Specialty Packaging segment posted sales of $99 million, up from the prior year quarter.
Gross profit in the quarter rose 10.6% to $250 million from $26 million in the prior year quarter. As a percentage of net sales, gross profit improved to 13.0% from 12.0% in the previous year quarter. Segment income was $143 million, up from $139 million in the fourth quarter of 2008. Segment income, as a percentage of net sales, improved to 7.5% from 7.4% last year. On a currency and pension neutral basis, segment income grew 13.7% over a year earlier.
Crown Holdings said, "Gross profit and segment income margins expanded for the quarter and for the year. These improvements and the very strong free cash flow performance reflect, among other things, very tight cost controls, the benefits of restructuring measures taken over the course of the year, improving manufacturing efficiencies and materials utilization, and the ongoing growth of our emerging markets businesses relative to our more mature packaging businesses in North America and Western Europe."
Interest expense in the fourth quarter was $58 million compared to $70 million in the fourth quarter of 2008, reflecting the impact of lower average borrowing rates and lower average debt outstanding partially offset by foreign currency translation of $2 million.
For the fiscal year 2009, net income rose to $334 million or $2.06 per share from $226 million or $1.39 per share in the previous year period.
Net income before items advanced 15.2% to $326 million or $2.01 per share from $283 million or $1.74 per share in the prior year period.
Net sales for the period declined to $7.94 billion from $8.31 billion in the year-ago period.
Analysts were looking for earnings of $1.98 per share on revenues of $7.98 billion for the fiscal year 2009.
Looking ahead, the company expressed its hope that its mature packaging markets of North America and Western Europe would recover from 2009 levels and operating improvements and cost reductions are anticipated to continue throughout 2010.
The company also expects that its markets businesses in China, Southeast Asia, Brazil, Eastern Europe and the Middle East will continue to grow. Further,
Commenting on the outlook for 2010, John Conway, chairman and chief executive officer stated, "Additionally, the numerous capacity expansions we have undertaken are completed or well underway, and are expected to contribute to production and sales in 2010. We continue to believe that we are exceptionally well positioned for profitable growth in 2010 and beyond."
Crown Holdings shares closed Monday's regular trading session at $23.64, down $0.17 or 0.71%. However, the stock gained $1.36 or 5.75%, and traded at $25.00 in the after hours.
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