BWAY sees gross margin drop due to plastic packaging segment

A North American supplier of general line rigid containers, BWAY Intermediate Company Inc, reported net sales for fiscal 2011 of US1.2 billion, compared with US$1.0 billion last year, while the gross margin decreased by US$1.8 million, primarily as a result of lower margins in the company's plastic packaging segment.

BWAY analyzed that the acquisitions of Plastican and Phoenix Container in October and December 2010 respectively accounted for US$109 million of the growth, with the remaining increase of US$21.6 million resulting from higher raw material driven selling prices.

It was reported that sales of the company's plastic packaging segment were US$467.9 million, compared with US$374.8 million last year. The increase resulted largely from the Plastican acquisition and resin cost driven selling price increases, partially offset by lower volume. Excluding the effect of the Plastican acquisition, overall volume decreased from fiscal 2010 by approximately 0.9% for the full year.

According to the company, plastic packaging segment earnings (excluding depreciation and amortization) were US$20.0 million for fiscal 2011 compared with US$34.9 million last year. The decrease in plastic packaging segment earnings resulted primarily from lower volume, competitive pricing actions, and the timing and magnitude of changes in the cost of resin and the lag associated with selling price pass through of cost changes to customers.