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Aptar's Niche Focus Delivers Profits

Pharma dispensing systems and excellent management have brought success.

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We found  AptarGroup's (ATR) fourth-quarter results to be lackluster, particularly in the beauty and home as well as the food and beverage segments, both of which posted declining year-over-year core sales and lower margins. Beauty and home has struggled in recent years as tepid U.S. consumer spending has weighed on volume, but we also think Aptar lacks durable competitive advantages in this business. We're pleased to see the company has changed the segment's management team and plans to make operations more efficient. After a stellar third quarter, food and beverage segment sales to the beverage market decreased 16% year over year as a result of inventory destocking and soft demand in Asia and the United States. Over the next five years, we expect beverage sales to grow in the low double digits annually on average.

The more important pharma segment turned in another solid quarter, with 6% year-over-year core sales growth and a 120-basis-point operating margin improvement to 27.5%. We were particularly pleased with the recovery in the injectables market following inventory destocking by customers in recent quarters. Now that GlaxoSmithKline's Flonase allergy treatment is being sold over the counter in the U.S., Aptar should benefit from higher volume because it supplies the product's delivery device.

Todd Wenning does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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