RICHMOND, Va. (AP) — MeadWestvaco Corp. said Wednesday that sales gains in its specialty chemicals business drove the packaging company to a fourth-quarter profit, but the results fell short of Wall Street expectations.
MeadWestvaco's earnings were hurt by a "sudden drop in economic activity" at the end of the year associated with the fiscal cliff, as well as ongoing global macroeconomic challenges, CEO John A. Luke Jr. said in a news release. Separately, the Commerce Department reported that the U.S. economy shrank 1 percent during the October-to-December quarter.
The Richmond, Va., company reported earnings of $17 million, or 10 cents per share, for the three-month period ended Dec. 31, compared with a loss of $25 million, or 14 cents per share, in the final quarter of 2011. Adjusted for charges related to the spin-off of its consumer and office products business and other items, it earned 7 cents per share, far below the 18 cents per share analysts expected.
MeadWestvaco shares fell $1.67, or 5.1 percent, to $31.26 in midday trading.
Revenue increased 4 percent to $1.33 billion, matching analyst estimates. Sales in its specialty chemical business for asphalt, adhesives, inks and oilfield drilling increased about 20 percent to $232 million, and its land sales grew 60 percent to $56 million. Sales in its home health and beauty packaging segment and industrial segment were relatively flat, while sales in its food and beverage packaging segment fell about 1 percent.
MeadWestvaco said its results included business from its acquisitions of an India-based corrugated packaging company and a Brazilian specialty chemicals company, both completed in the fourth quarter. In May, the company completed the spin-off and merger of its business that made Mead, Five Star and At-A-Glance branded office and school supplies with ACCO Brands Corp. ACCO, based in Lincolnshire, Ill., makes Swingline staplers and Day-Timer planners.
For the full year, the company said it earned $205 million, or $1.16 per share. Adjusted earnings from continuing operations for the year were $1.25 per share. Revenue rose about 3 percent to $5.46 billion. MeadWestvaco also said its board authorized it to buy back five million shares of common stock.
The company said it expects that demand in the first quarter will be stronger than the fourth quarter, but still anticipates posting "modestly lower earnings," compared with the year-ago period, when it reported adjusted profit of 34 cents per share. Despite a challenging environment, MeadWestvaco said it expects sales, earnings and cash flow to increase in 2013.
In a conference call with investors, Luke said the company is still confident it is "still headed in the right direction."
Wall Street was predicting earnings of 32 cents per share for the January-to-March quarter.
MeadWestvaco operates in 30 countries and has customers in more than 100 nations. In the last several years, it has gone from a mill-centric paper supplier to a global partner for brands like Procter & Gamble, Coca-Cola and Wal-Mart.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .