Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Curt Woodworth with J.P. Morgan.
Curt Woodworth - J.P. Morgan
Just wanted to drilldown on the packaging segment margins and Rieke I thought had very high incremental margins of least, call it maybe 30% and with that business up 7% you should see pretty good incremental EBIT growth, yet you were down about $1.6 million and it just seems like Compact would have had to be down 40% to 50% to get those numbers, so if you can just kind of walk me through the moving pieces on the operating profit line of packaging this quarter, that would be very helpful?
Grant Beard
Curt, with respect to the Rieke businesses, there is a few things that moved within the quarter and that is the price actions have been announced and as such they will be more effective in the back half of the year. So, part of that negative regress as you may call it, is indeed related to some of the inflationary activities that we’re seeing the business.
Your point towards the compact business with respect to significant reductions really points to two things; one, how much of that business is really related to the commercial construction segment, which I’m not prepared to comment to at this point in time, but it is down sizably in that respect. The ability of that management team to takeout costs and commensurate it with the sales decline has been proven difficult but it is underway.
Curt Woodworth - J.P. Morgan
Okay and is it still about a 70/30 split between the two?
Mark Zeffiro
Yes, that’s close.
Curt Woodworth - J.P. Morgan
Okay and you mentioned incremental growth expense also has somewhat of a drag. What was that number incremental year-on-year?
Mark Zeffiro
Curt to that end, within the SG&A structure of Rieke, there were incremental hedge added for the growth initiatives of the business. The exact number I can get back to you if you’d like, but it’s relative to a couple of heads that are focused on market development activities.
Curt Woodworth - J.P. Morgan
So going forward do you think that the current sort of run rate of margin at packaging, is that a better forecast assumption to you or on the 16%, 59?
Mark Zeffiro
With respect to the forecast, I’m not ready to comment towards the changes in the back half, but the current margin run rates are a good indicator for future expectations.
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