Revenue expanded to $670.1 million in 2012, an increase of $18.0 million or 2.8 percent from the prior year. Volumes grew by 4.0 percent in relation to 2011. The product lines of rigid containers, modified atmosphere packaging, specialty films and lidding all experienced mid-single-digit volume expansions. This was in spite of a general muted performance of the overall economy which had a greater impact on packaging machinery and biaxially oriented nylon, which experienced setbacks from the prior year. The combination of lower selling prices and product mix negatively impacted revenue by 1.0 percent while a somewhat weaker Canadian dollar had only a minor effect on revenue, resulting in a contraction of 0.2 percent compared to the prior year.
Gross profit margins
Gross profit margins swelled to 31.8 percent of revenue in the fourth quarter of 2012 from the 29.3 percent of revenue recorded in the same quarter of 2011. Solid manufacturing performance, primarily as a result of greater efficiencies, more than offset the negative impact of a compression in the gap between raw material costs and selling prices, contributing 2.5 cents in earnings per share for the quarter.
In 2012, gross profit margins of 29.7 percent of revenue surpassed the prior year result of 28.8 percent by nearly one full percentage point. This resulted in additional earnings per share of 4.0 cents as enhanced production efficiencies and lower waste levels were more than sufficient to counter some margin erosion caused by a narrowing of the spread between selling prices and raw material costs.
For reference, the following presents the weighted indexed purchased cost of Winpak's eight primary raw materials in the reported quarter and each of the preceding eight quarters, where base year 2001 = 100. The index was rebalanced as of December 26, 2011 to reflect the mix of the eight primary raw materials purchased in 2011.
----------------------------------------------------------------------------Quarter and Year 4/12 3/12 2/12 1/12 4/11 3/11 2/11 1/11 4/10----------------------------------------------------------------------------Purchase Price Index 170.6 167.3 174.5 174.7 172.3 182.9 184.5 168.0 154.7----------------------------------------------------------------------------
The purchase price index climbed 2.0 percent in the fourth quarter of 2012 in relation to the third quarter and ended the year within one percentage point of the prior year-end. Overall, the purchase price index has remained within a narrow band throughout 2012, never swaying by more than 3 percent from the mean. This has provided some level of price stability for both the Company as well as its customers.
Expenses and Other
Operating expenses, adjusted for foreign exchange, were essentially flat in comparison to the fourth quarter of 2011 while sales volumes advanced by 4.6 percent. This operating expense leverage, combined with less income attributable to non-controlling interests, provided an additional 1.5 cents in earnings per share in the quarter. A lower effective income tax rate contributed a further 1.5 cents in earnings per share due to a reduction in the 2012 Canadian federal corporate income tax rate as well as a larger proportion of net income being earned in lower tax jurisdictions. Foreign exchange negatively impacted earnings per share by 1.0 cent in the fourth quarter of 2012, in relation to the corresponding 2011 period, due primarily to foreign exchange losses on Canadian net monetary assets as the Canadian dollar weakened against its US counterpart in the current three-month period.
