AptarGroup: Demand For Products Should Remain Strong

| About: AptarGroup Inc. (ATR)

AptarGroup (NYSE:ATR) makes dispensing systems used in the fragrance and cosmetic, personal care, pharmaceutical, household, and food and beverage industries.

Specific products include pumps, which dispense contents from non-pressurized containers; closures, which allow dispensing without removing the cap; and aerosol valves, which dispense a continuous spray or measured dose from pressurized containers.

About 61% of 2006 revenues were generated in Europe and 10% from other foreign markets. Only 29% came from the U.S.

The Beauty & Home segment, which produced 52% of 2006 net sales, sells pumps and aerosol valves to consumer goods packagers. It makes pumps for perfumes, colognes, and premium beauty products such as specialty skin creams. It makes spray pumps and continuous spray aerosol valves for hair styling products, deodorants, shaving creams, and sun care products. Lotion pumps are used for liquid soaps, shampoos, and moisturizers. Aerosol valves and spray pumps are used for cleaning products, spray paints, insecticides, and car products. ATR also makes aerosol valves for cooking sprays and spray pumps for butter substitutes.

The Closures segment produced 28% of 2006 net sales. It provides advanced caps that prevent drips, facilitate inverted storage, and allow for directional pouring. It makes snap tops, disc tops, and twist tops, which are used in personal care products such as shampoos, liquid soaps, sun screens, and toothpastes. They are also used to dispense condiments, salad dressings, syrups, sports drinks, dishwasher soaps, and laundry detergents.

Finally, the Pharma segment, which produced the remaining 20% of net sales, develops pumps and metered dose inhaler [MDI] aerosol valves for nasal, oral, and topical drug-delivery systems. These products are used primarily for dispensing allergy, cold, and flu relief medications.

Demand for dispensing systems has been strong as consumers show a preference for packaging that offers convenience and cleanliness as well as precise dosing. Innovations and improvements have fueled demand. For example, bag-on-valve systems prevent the expulsion of aerosol chemicals into the atmosphere, miniature flat spray sampling pumps replace scented paper strips in magazines and catalogs, and spray pumps for salad dressings are being marketed as a way to control calories.

ATR 2 Recent results have benefited from acquisitions, favorable foreign currency translation, and strong organic growth. Q1 net sales jumped 19.8% year-over-year to $449.8 million. Beauty & Home segment revenues jumped 24%, Closures climbed 14%, and Pharma increased 18%. The gross and operating profit margins expanded 84 and 173 basis points, respectively, to 33.25% and 10.36%. Net income jumped 49.3% to $29.6 million or 82 cents per share. Investment risks include rising raw material costs and a high degree of operating leverage.

However, demand for the company’s products should remain strong. Cost containment programs should help boost earnings. Long-term growth should be driven by further product conversions, especially in emerging geographic markets in Eastern Europe, Asia, and South America. The highmargin Pharma segment should benefit from MDI valve adoption for a broader range of medical applications including vaccines, hormone replacement, and treatments for sexual disorders.


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