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Sales down but profit doubles at MWV healthcare

By Nick Taylor , 29-Oct-2009

Profits doubled at MWV’s healthcare division in the third quarter, despite slightly lower sales, as the packaging company’s efforts to focus on high return opportunities and maximise production efficiency paid dividends.

MeadWestvaco (MWV) struggled earlier in the year, with higher input costs and weakening demand impacting on results, but its business performance actions, initial details of which were given this time last year, appear to have helped.

The packaging company’s healthcare division still had to contend with “slightly lower sales”, according to James Buzzard, MWV’s president, but the actions detailed above, plus exiting unprofitable product lines, have increased profits.

Furthermore, Buzzard expects sales of the recently launched Preservative Free Pump Nasal (PFP N), for prescription and over-the-counter drugs, to pick up in 2010 after “some initial interest” this quarter.

The market for pharmaceutical pumps has remained relatively stable”, according to Buzzard who added that customers are restocking but are yet to begin building up their inventories.

When the market picks up MWV believes PFP N will be well placed to take a share of the European market, where regulations encourage manufacturers to eliminate preservatives that have potential side effects in patients.

Growth in this market would help support MWV’s Shellpak business, which has grown from 8m to 20m units each quarter since its commercial launch. The growth of Shellpak has been helped by the product’s use in Wal-Mart’s generic drugs programme.

Overall performance

The third quarter results for MWV as a whole mirrored the situation in the healthcare division, with income from continuing operations increasing by 178 per cent to $128m (€86.8m) despite net sales falling by 10 per cent.

MWV’s cost savings programme has helped achieve these results. Savings of $44m were made in the third quarter, taking the total for the year-to-date to $90m, and MWV intends to exceed $125m by the end of 2009.

To achieve this saving MWV plans to layoff 2,000 employees, 10 per cent of its global workforce, and close or restructure at least 16 manufacturing facilities.

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