Although bad weather, a weak economy and rising energy costs depressed sales, Sweetheart Cup Inc. said yesterday that its third-quarter profit rose.
The Owings Mills-based company is one of the country's biggest makers of disposable paper and plastic cups, plates and cutlery, and food packaging products. It employs 1,550 people in Maryland.
Sweetheart had net sales of $263.8 million in the 13 weeks that ended June 24, down 0.3 percent from $264.6 million for the comparable period last year.
The privately held company, which files financial reports with the Securities and Exchange Commission because it holds public bonds, reported a $8.7 million profit for the quarter, a 15 percent rise from $7.6 million for the comparable period last year.
Company officials attributed the higher earnings partly to a decrease in interest expense, which was down 49 percent to $5.9 million. Sweetheart also eliminated 30 jobs, mostly in administrative positions across the country, for a total savings of $1.6 million annually, they said.
"We expected this year to be more challenging than last year," Mike Hastings, Sweetheart's president and chief operating officer, said during a conference call.
He said that rapidly increasing energy costs - the company incurred $2.9 million more in energy and transportation costs in the past quarter compared with the like period last year - and a soft economy kept demand for disposable products low across the industry. Poor weather also kept customers away from food service providers, such as restaurants, which use disposable products.
"We actually think our revenue growth and our volume has held up pretty well, given that background," said Hans H. Heinsen, chief financial officer. The company's strongest quarters typically are in the late spring and summer, when away-from-home consumption is higher.
Sweetheart has tried to pass along its higher costs in the form of price increases for its disposable products, with limited effect, Hastings said. The company sells its paper and plastic products, mostly plates and cups, primarily to institutional food-service providers such as restaurant chains, schools, theaters and airlines.
"Even though we're the lone manufacturer out there with price increases, we have not been able to recover our increased costs," Hastings said, adding that there is "no overall market lowering of prices."
Sweetheart's sales to institutional customers decreased 0.6 percent, while net sales to food-packaging customers increased 2.4 percent.
Also in the fiscal third quarter, Sweetheart completed the $12.2 million purchase of an 80 percent share of Global Cup of Mexico, a maker and distributor of paper cups and lids throughout Latin America. Quarterly revenue from that operation stood at $2.1 million, with earnings before income taxes, depreciation and amortization totaling $400,000, company officials said.
For the first 39 weeks of its fiscal year, Sweetheart, a subsidiary of SF Holdings Group Inc., had net sales of $717 million, up 3 percent from $696.2 million in the comparable period last year. Net income rose to $13 million, compared with $8.1 million for the year-ago period.
