USA: pension expenses warning for packaging firms

Pension fund expenses in 2009 will weigh on the earnings of several major US packaging companies because of a drop in the stock market in 2008 that reached nearly 40%.
Since a company“s pension fund…

Pension fund expenses in 2009 will weigh on the earnings of several major US packaging companies because of a drop in the stock market in 2008 that reached nearly 40%. Since a company“s pension fund assets often have more than 50% stocks, a decline in the stock market can force an employer to pay more into the pension to maintain adequate funding for its retirees. KeyBanc analyst Christopher Manuel, noting that the Standard & Poor“s 500 stock index ended 2008 down 38%, said the resulting effect constitutes “a significant drag to earnings” for Philadelphia-based Crown Holdings Inc., Perrysburg, Ohio-based Owens-Illinois Inc., Lake Forest, Illinois-based Pactiv Corp. and Hartsville, South Carolina-based Sonoco Products Co. Mr. Manuel also said in his client note that resulting incremental cash contributions in 2010 could be most significant for Broomfield, Colorado-based Ball Corp., Owens-Illinois and Pactiv, though recent legislation and prefunding credits may make the impact less severe.