Business News

Pregis Announces First Quarter 2008 Financial Results

Monday 12. May 2008 - Pregis Corporation, a leading international manufacturer, marketer, and supplier of protective packaging products and specialty packaging solutions, today announced its 2008 first quarter financial results.

For the first quarter of 2008, the Company generated net sales of $259.3 million, an increase of 8.5% over net sales of $239.0 million in the first quarter of 2007. Excluding the impact of favorable foreign currency translation and sales from two acquisitions made in the second half of 2007, the quarter’s net sales were down 3% compared to the prior year quarter.

Gross profit margin, as a percent of net sales, was 21.9% in the first quarter of 2008, compared to 25.5% in the first quarter of 2007. The decline in gross margin resulted primarily from significantly increased costs of resin and other raw materials in the 2008 period, which approximated $7 million of year-over-year unfavorability. In order to mitigate these increases in raw material costs, the Company implemented selling price increases throughout its businesses in the first quarter of 2008. However, the Company has experienced a lag in realizing the benefits from these recent price increases relative to the impact of the increased raw material costs, which resulted in the reduction in its gross margin percentage in the first quarter of 2008.

Commenting on the Company’s results, Mike McDonnell, President and Chief Executive Officer, stated, “Our first quarter results were negatively impacted by raw material cost inflation, as well as the weakened economic environment in the U.S. as well as in Europe. Although resin costs stabilized somewhat during the first three months of 2008, we expect continued volatility and remain committed to our disciplined focus on achieving pricing for value and full cost recovery as rapidly as possibly. In addition, we continue to drive efficiency initiatives throughout the organization, both to mitigate the weakened economic environment and to solidify our foundation for future growth.”

For the first quarter of 2008, operating income was $8.3 million compared to $16.5 million in the first quarter of 2007, with the reduction driven primarily by increased raw material costs, as noted above.

Segment Performance

Comments on segment net sales performance for the first quarter of 2008 are as follows:

— Net sales of the protective packaging segment increased by $12.8
million, or 8.2%. The 2008 first quarter sales growth was driven by
favorable foreign currency translation, as well as the incremental
sales generated by the Petroflax and Besin entities acquired in the
second half of 2007. The segment experienced declining volumes in
both its U.S. and European businesses due primarily to the weakened
U.S. and European economies. Excluding the impact of favorable
foreign currency effects and acquisitions, net sales for the segment
decreased 3.8%.
— Net sales of the flexible packaging segment increased $5.6 million,
or 13.1%. Improvements in pricing and product mix were offset by
volume shortfalls in the segment’s Egyptian operations. Excluding
the impact of favorable foreign currency, 2008 net sales for the
segment were comparable to the 2007 period.
— Net sales of the hospital supplies segment increased $2.3 million,
or 11.9%. Excluding the impact of favorable foreign currency
effects, net sales for the segment decreased 2.1% in the quarter,
primarily due to price erosion resulting from the competitive market
environment.
— Net sales of the rigid packaging segment were relatively flat
compared to net sales in the first quarter of 2007. However,
excluding the impact of favorable foreign currency effects, net
sales for the segment decreased 1.4% in the quarter, due mainly to
product mix during the quarter.