Pactiv profit rises 17 percent on price gains

Pactiv Corp., the maker of Hefty garbage bags, said fourth-quarter profit rose 17 percent because of price gains and lower expenses.

Net income climbed to $69 million, or 52 cents a share, from $59 million, or 45 cents, a year earlier, Lake Forest-based Pactiv said today in a statement. Profit topped the 48-cent average estimate of nine analysts surveyed by Bloomberg. Sales gained almost 1 percent to $883 million.

Chief Executive Officer Richard Wambold held onto price gains amid falling costs for plastics, which are made from petroleum. U.S. prices for polyethylene, the world's most-used plastic, ended the fourth quarter 56 percent lower than a year earlier, and polystyrene was 41 percent cheaper, according to data compiled by Bloomberg.

"A near decade-long cost headwind for Pactiv has morphed into a potentially powerful tailwind," Ghansham Panjabi, a New York-based analyst at Wachovia Capital Markets, said in a Jan. 22 report. He recommends buying Pactiv shares.

Pactiv rose 45 cents, or 2.1 percent, to $21.44 at 4:15 p.m. in New York Stock Exchange composite trading. The shares slid 6.6 percent last year.

Prices rose 6 percent in the quarter, reducing the impact of a 4 percent demand drop, Pactiv said.

"We expect the difficult economic situation to continue at its current level throughout the year," Wambold said in the statement. "Offsetting this, to some degree, will be soft raw- material costs."

2009 Forecast

Profit this year will be $1.80 to $2 a share, and sales will fall 12 percent to 15 percent, Pactiv said. The company was projected to earn $1.97 a share, the average estimate of nine analysts surveyed.

First-quarter profit will be 44 cents to 48 cents a share, the company said. That exceeds the 38-cent average estimate of seven analysts in the survey.

Gross profit in the fourth quarter rose to 29.4 percent of sales from 27.3 percent in the year-earlier period as expenses declined, Pactiv said.

Operating income in the food-packaging and service unit climbed 19 percent to $69 million because of lower costs, the company said. Operating income in the Hefty consumer-products unit rose 4.8 percent to $65 million because of price gains, Pactiv said.

(Pactiv will hold a conference call tomorrow at 8:30 a.m. New York time. To listen, dial +1-201-689-8263, or visit the investor relations section of Pactiv's Web site at www.pactiv.com.)