Not Just a Pretty Face

05/10/2010 11:22 am EST


Vahan Janjigian

Editor, Bottom Line's Money Masters Stock Report

Vahan Janjigian, editor of Forbes Growth Investor, recommends a supplier of dispensing systems to numerous market places.

AptarGroup (NYSE: ATR) designs and manufactures dispensing systems. These include pumps, closures, and aerosol valves for personal care products, cosmetics, pharmaceuticals, household products, and foods and beverages. In 2009, 58% of sales were produced in Europe, 28% in the US, and 14% in other markets.

ATR makes pumps designed for perfumes, colognes, specialty skin creams and other high-end beauty products. The company makes mist spray pumps and continuous spray aerosol valves for hair care products, sunscreens, deodorants and shaving creams. It also makes lotion pumps for moisturizers and liquid soaps.

The household market includes spray aerosol valves and spray pumps for cleaning products, spray paints, insecticides and air fresheners. The rest of segment sales came from aerosol valves for cooking sprays and spray pumps for butter substitutes and salad dressings.

The closures segment produced 27% of net sales and 22% of net income. The personal care market was responsible for 55% of [that segment’s] sales. It includes closures for shampoos, liquid soaps, and lotions. The food/beverage market, which was responsible for 34% of segment sales, includes closures for condiments, salad dressings, syrups, honey, dairy creamers, and bottled beverages.

The household products market accounted for 7% of segment sales. It makes closures for dishwashing soaps, laundry products, and household cleaning products. Other products include specialty closures designed to deliver precise amounts of a particular product.

Finally, the Pharma segment generated 23% of net sales and 53% of net income. Pharma pumps are used to deliver medicines nasally, orally, and topically. This segment also makes precise metered dose inhaler valves for inhaled medications.

In 2009, consumers scaled back spending and customers reduced inventory levels. Full-year net sales fell 11.1% year over year to $1.84 billion. Net income fell 18.8% to $124.6 million, or $1.79 per share. However, in [the first quarter of] 2010, net sales jumped 17.1% year-over-year to $505.5 million.

The gross profit margin improved 158 basis points to 34.5%. The operating profit margin expanded 280 basis points to 12.2%. Net income jumped 47% to $39.1 million, or 56 cents per share.

Management expects strong near-term demand for more cyclical categories such as fragrances and cosmetics, and is calling for about a 50% year-over-year gain in [second-quarter] per share earnings. Long-term opportunities are also attractive as more products convert from non-dispensing tops to dispensing closures and pump systems.

The Pharma segment also shows promise for growth. In particular, there is increasing interest to convert medications from pill and syringe delivery systems to pumps. Areas of interest include vaccines, hormone replacement therapies, and pain medications.

(AptarGroup closed above $41 Friday—Editor.)

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