Tupperware manufacturer on rebound after recession

September 15, 1994|By Timothy J. Mullaney | Timothy J. Mullaney,Sun Staff Writer

It comes in so many forms in so many countries that you can even get one to brew beer in. Its home-party sales method, so often mocked, turns out to be a convenient answer to crowded commutes to shops in Japan and a way around some cultures' mores about women working outside the home. And after a tough recession, the company that makes it is back.

It's Tupperware, a $1.2 billion component of Premark International Inc., an Illinois conglomerate with $3.1 billion in 1993 annual sales. And Premark's chairman and chief executive, Warren L. Batts, in town this week to address a Legg Mason Inc. conference on value investing, said the company is looking strong after a tough 1992 restructuring.

"Overall, we expect a good year, but the second half will not be as good as the first half," he said before addressing the conference at the Harbor Court Hotel Tuesday. "We were up 46 percent in the first half, 90 percent last year. You can't keep up those kinds of numbers."

That's because those impressive gains are measured against some recessionary tough times for Premark. The company repositioned itself by streamlining its food service equipment business, boosting research and development spending, spreading Tupperware into more international markets, and in part by betting on Baltimore.

One key decision for the company's restaurant equipment division, which makes products for the Hobart and Vulcan brand names and accounts for about one-third of Premark's business, was where to consolidate plants. Mr. Batts said the company chose in 1992 to keep an older, union-represented plant on North Point Boulevard here while closing a non-union plant in Darlington, S.C.

"We did that because the work force is far more productive," Mr. Batts said. "We even had the opportunity to move to Mexico. We put aside local taxes and things like that and said, 'Where can we be closest to the largest number of customers?' . . . We would like in the future to consolidate more products and more processes in this plant."

The company also increased R&D spending when the economy was down -- something it could afford to do because Tupperware, which provides more than 60 percent of Premark's operating earnings, generates enormous cash flow and incurs little debt. Premark built two new research centers for Tupperware alone, as well as a food service equipment research center in Ohio that supports the Baltimore plant.

The moves helped to support Tupperware's move into more and more foreign markets, which account for 75 percent to 80 percent of sales of the ubiquitous plastic. Mr. Batts said Tupperware is expanding into China next year, is returning to Lebanon because of the slowdown of the civil war there, and has just entered Indonesia. One nation not on their list is Russia, due to its political instability and the weakness of the ruble.

"Direct selling is not nearly as cyclical as other companies," said Mr. Batts. But Premark's food equipment group and the $858 million consumer and decorative products group, which makes everything from Wilsonart kitchen counter laminates to West Bend small appliances, did suffer.

And products are geared to the market. For example, the company has Tupperware containers that can be used to ferment things. They are sold in Korea for making kim chi, highly spiced fermented cabbage, and similar containers are sold in Australia for making homemade beer.

Mr. Batts said direct selling has the unintended side effect of being culturally acceptable in nations where married women are discouraged from working. Women who want to work a little bit are often very good Tupperware distributors.

The result is that Premark earned $94.7 million, or $1.42 a share, in the first half of 1994 on sales of $1.6 billion. Both were company records, after full-year 1993 earnings of $172 million. The company earned only $4.6 million in 1992, hurt by the recession here and in Europe, and an accounting charge from a restructuring of the Tupperware division turned even that modest operating profit into a net loss.

Legg Mason analyst Laurence C. Baker said in June that the company "has endured recent poor performance and has now, in our opinion, turned a corner toward vastly increased profitability." This week, he said the company's shares, which closed yesterday at $44.25, are a good buy.

"They have a low price relative to their earnings growth," he said. "They also have a lot of spare cash they can use."

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