US Pactiv sees flat or lower resin costs for 2H 2009

23 April 2009 18:08  [Source: ICIS news]

HOUSTON (ICIS news)--Pactiv, a major US producer of trash bags, plastic tableware and packaging, issued a stronger earnings outlook for 2009 based on expectations that resin prices would be flat or lower during the second half (2H) of the year.

Resin costs have increased by 11% since bottoming out earlier this year, with most of that increase occurring late in the first quarter, company officials said during a conference call with investors.

Soft demand, global capacity additions and a dissipating export market for North American producers were all factors that would help cap resin costs through the end of 2009, Pactiv said.

Pactiv reported record earnings of 69 cents/share (€0.53/share) during the first quarter as the spread between raw material costs and selling prices widened. The full-year earnings/share outlook was raised to $2.15-2.25 from $1.80-2.00.

The converter also benefited from lower inventory levels during the first quarter (Q1).

“We had a normal seasonal build in Q1, but we did not build inventories in Q1 anywhere near the degree that we did last year,” said chief financial officer Edward Walters.

“We are finding out we can operate at lower inventory levels,” he said. “That was one of the benefits of driving inventories down to a very low level at the end of last year.”

Pactiv chief executive Richard Wambold said demand was slightly improved in March after a “dismal” January and February, and April demand was even better than March.

He attributed some of the improvement to restocking.

“We’re still looking at a year that’s very difficult to project,” Wambold said.

Pactiv uses resins such as polypropylene (PP), polyethylene (PE) and polystyrene (PS) in its products.

($1 = €0.77)

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By: David Barry
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