Sealed Air Corporation (NYSE: SEE) manufactures specialty packaging products and generated $4.7 billion in 2007 revenues. The company operates in the United States and 50 other countries and manufactures packaging materials for food, medical and other industrial and consumer applications. Its widely recognized brands include Bubble Wrap cushioning and Jiffy protective mailers.
In 2007, higher beef export rates in Brazil and Australia as well as increased pork and red meat production in North and South America resulted in a $104 million revenue increase for Sealed Air. The company also received a $177 million revenue boost due to favorable exchange rates in 2007. On the other hand, decreased consumer spending growth resulted in decreased sales of Sealed Air's Protective Packaging products. Likewise, a 21% increase in the price of plastic resin decreased the company's gross margin. Sealed Air competes with other packaging companies like 3M Company (MMM), Bemis Company (BMS), Pactiv (PTV) and Printpack.
Food Packaging earned 41% of the company's total revenues in 2007. The Food Packaging segment makes shrink bags as well as laminated and coextruded rollstock packaging materials. Shrink bags are used to vacuum pack perishable and other foods. Laminated and coextruded roll stock is used to wrap and seal food, sometimes with the use of a tray. The segment's products are primarily sold to food processors, distributors, supermarket retailers, and foodservice businesses. The company's Food Packaging products compete with similar products made by companies like 3M Company (MMM), Bemis Company (BMS), Pactiv (PTV) and Printpack.
Food Solutions earned 20% of the company's 2007 total revenues. The segment focuses on case ready packaging, ready meals, vertical pouch packaging, and bag-in-box packaging, which provide consumers with fresh, consistently prepared, high-quality meals either from foodservice outlets or from grocery stores. This division also manufactures and sells absorbent pads used for food packaging, such as its Dri-Loc absorbent pads. Food Solutions products are often used to package products products like precooked, microwaveable meals. Products are primarily sold to food processors, distributors, supermarket retailers, and foodservice businesses. Food Solutions products compete with similar products from companies like 3M Company (MMM), Bemis Company (BMS), Pactiv (PTV) and Printpack.
Protective Packaging accounted for 32% of the company's total revenues in 2007. The segment makes cushioning and surface protection products such as Bubble Wrap cushioning and other air cushioning materials as well as shrink and non-shrink films, which are used to pack goods for shipping. This segment also manufactures polyurethane foam packaging systems sold under the Instapak trademark, polyethylene foam packaging, protective mailers, paper-based protective packaging materials, suspension packaging and inflatable packaging. The products in this segment are mainly used for non-food packaging applications and are primarily sold to distributors and manufacturers of products. The company's Protective Packaging products compete with similar products made by companies like 3M Company (MMM) and Bemis Company (BMS).
Other contributed 7% of the company's total revenues in 2007. Its products include CelluPlank and Cellu-Cushion special density foams and Stratocell laminated polyethylene foams used by fabricators as well as foams, films and composite materials used largely in performance component applications. The company also produces films, tubing and connectors used in manufacturing bags and pouches for medical applications as well as thermoformed packaging materials for medical devices and technical products. Its products (other than those for medical applications) can be used for temperature-controlled supply chain insulation, floor underlays, building insulation, construction products and sporting goods.
Because Sealed Air reports their revenues in U.S. dollars but does 53% of their business outside of the U.S., they are exposed to fluctuations in exchange rates. If foreign currencies depreciate, the dollar value of Sealed Air's international revenues decreases. On the other hand, if foreign currencies appreciate, the dollar value of Sealed Air's international revenues increases. Between June 18, 2007 and June 18, 2008 the U.S. Dollar depreciated in relationship to the Euro and the Japanese Yen. The dollar's depreciation resulted in a $177 million boost to Sealed Air's revenues.
When consumers demand more packaged food, companies that supply packaged food purchase more of Sealed Air's packaging products in order to keep up with the increased demand. On the other hand, if consumers begin to demand more fresh food, companies that supply packaged food purchase less of Sealed Air's packaging products in order to compensate for decreased demand. In 2007, higher beef export rates in Brazil and Australia as well as increased pork and red meat production in North and South America resulted in resulted in increases in the number of Food Packaging and Food Solutions units Sealed Air sold. In fact, the increase in units of Food Packaging and Food Solutions products sold resulted in $104 million of revenue increases for Sealed Air during 2007.
When the price of plastic resin increases, Sealed Air's gross margins decrease. On the other hand, when the price of plastic resin decreases, Sealed Air's gross margins increase. Between December 31, 2006 and December 31, 2007 the price of polypropylene plastic resin on the London Metal Exchange rose from $1155 per ton to $1400 per ton. During the same period of time Sealed Air's cost of sales increased from 71% of revenues to 72% of revenues and their gross margins decreased from 29% to 28%.
When spending on all goods decreases, there is less demand for packaging used to deliver goods safely resulting in lower revenues for Sealed Air. On the other hand, when spending on all goods increases, so does demand for packaging and Sealed Air's revenues. In Q1 and Q2 2008 consumer spending growth is expected to drop to almost 0%.  As a result of the decrease in consumer spending, Sealed Air received fewer orders for its Protective Packaging products in 2007. This resulted in $1.8 million in revenue decreases for Sealed Air in 2007.
Sealed Air and Key Competitors 2007 ($ in millions)
|Company||Total Revenues||Net Income||Net Profit Margin|
|3M Company (MMM)||24,462||4,096||17%|
|Bemis Company (BMS)||3,649||182||5%|