02.13.15
Sonoco, one of the largest diversified global packaging companies, reported record base financial results for its fourth quarter and full-year 2014.
Net sales for 2014 were $5.01 billion, up 3.4%, compared with $4.85 billion in 2013. The increase was mostly due to increased volumes and acquisitions, partially offset by the negative impact of foreign exchange.
Net sales for the fourth quarter were $1.32 billion, up 8.5%, compared with $1.22 billion in last year’s quarter. The increase was driven by a 6% increase in company-wide volume and $64.4 million in sales from businesses acquired during the past twelve months, including $52.2 million from the Weidenhammer acquisition.
Gross profit was a record $250 million in the fourth quarter, up 12.8%, compared with $221 million in the same period in 2013. Gross profit as a percentage of sales increased to 18.9%, compared with 18.2% in the prior year period. These increases were due primarily to volume growth, productivity improvements and lower pension expense, which were partially offset by operating cost inflation.
Commenting on the company’s fourth quarter results, president and CEO Jack Sanders said, “Sonoco’s balanced portfolio of businesses showed strong improvement during the fourth quarter in a number of areas. Consolidated sales grew 8% to a new record due to the combination of volume gains and a major acquisition. Gross profits and base earnings also reached records for the quarter, driven by solid volume growth, strong manufacturing productivity, a positive price/cost relationship and lower pension expense. Quarterly results were also aided by the reimbursement of excess costs incurred in prior quarters related to a materials issue in our flexible packaging business. Each of the Company’s segments reported improved operating profits despite higher year-over-year labor, maintenance, management incentive and other costs.
“Our Consumer Packaging segment reported record results in the quarter with operating profits up 21% over last year’s quarter due primarily to productivity improvements, volume growth throughout the segment and lower pension expense,” Sanders added. “Current quarter results reflect the flexible packaging excess cost reimbursement which benefitted productivity. In addition, the Weidenhammer Packaging Group acquisition completed on Oct. 31, 2014, provided modest accretion to operating profits, which excludes acquisition-related inventory step-up charges. Operating profits in our Display and Packaging segment rose 49% in the quarter due primarily to strong volume growth in U.S. display and international packaging fulfillment activity and manufacturing productivity improvements.
“Operating profits in our Paper and Industrial Converted Products segment exceeded the prior year quarter by nearly 11% due primarily to volume growth, a positive price/cost relationship and modest manufacturing productivity improvements, and lower pension expense, partially offset by higher operating costs and incentives. Excluding South America and Asia, the company experienced volume gains throughout the segment. In our Protective Solutions segment, operating profits increased more than 10% due to volume growth in temperature-assured products, consumer protective packaging and automotive components, along with modest productivity improvements.”
GAAP net income attributable to Sonoco in the fourth quarter was $54.5 million, or $.53 per diluted share, compared with $54.7 million, or $.53 per diluted share, in 2013. Base earnings in the fourth quarter were $67.9 million, or $.66 per diluted share, compared with $59.9 million, or $.58 per diluted share, in 2013.
Cash generated from operations in the fourth quarter was $151 million, exceeding the prior year quarter by $34 million despite slightly lower GAAP net income. Free cash flow for the fourth quarter of 2014 was $78 million, compared with $58 million for the same period last year.
Net income attributable to Sonoco for 2014 was $239.2 million, or $2.32 per diluted share, up 9.2% from $219.1 million, or $2.12 per diluted share, for 2013.
Base earnings for 2014 were $261.9 million, or $2.54 per diluted share, compared with $237.5 million, or $2.30 per diluted share in 2013. The 10.3% increase in base earnings stemmed from manufacturing productivity improvements, a positive price/cost relationship, volume growth, proceeds from a legal settlement, acquisitions and lower pension expense.
Current year gross profit was a record $921 million, up 5.5%, compared with $874 million in 2013. Gross profit as a percentage of sales was 18.4%, compared with 18.0% in 2013.
As of Dec. 31, 2014, total debt was approximately $1.3 billion, compared with $981 million at December 31, 2013.
In reviewing Sonoco’s performance in 2014, Sanders said, “We started a process of changing Sonoco for the better in 2013; targeting changes that provide us better opportunities to grow through new products, new markets, new customers, new services and new ways of thinking. These changes are creating an environment that allows us to better harness the power of our portfolio and our people to optimize business performance. Included in these changes are new processes aimed at organizing our efforts to better execute our mission.
“Our efforts to change for the better resulted in record sales in 2014, topping $5 billion for the first time in our 115-year history,” Sanders added. “In addition, we achieved record gross profits, as gross profits as a percentage of sales gained 40 basis points to 18.4%; and record base earnings, which grew more than 10% in 2014. This is the second year in a row we have achieved or exceeded our base earnings target, which is a pattern we are committed to seeing continue.”
Sonoco expects first quarter 2015 base earnings to be in the range of $.56 to $.61 per diluted share. The Company’s first quarter 2014 base earnings were $.52 per diluted share. Sonoco expects its 2015 base earnings per diluted share to be in the range of $2.60 and $2.70 with a target of $2.65 per diluted share, a decrease of $0.03 from what was communicated on Dec. 5, 2014.
Sonoco is projecting cash from operations in 2015 to be approximately $505 million and free cash flow to be $150 million. The projected year-over-year improvement in cash from operations is largely driven by expected higher earnings, including higher non-cash depreciation and amortization expenses, and lower pension contributions. After considering an assumed $134 million in cash dividends to shareholders, the resulting $150 million of projected free cash flow is expected to be used primarily to reduce debt.
“We are optimistic entering 2015 that the U.S. economy will continue to steadily improve and international markets will rebound,” Sanders said. “In addition, we remain committed to our grow-and-optimize strategy. This includes achieving organic growth targets, improving operating margins, successfully integrating the Weidenhammer acquisition, maximizing cash flow, balancing capital deployment between growth and return of cash to shareholders and, finally, optimizing our global portfolio through simplification and improved efficiency.
“In 2015, we will begin implementing a series of actions focused on improving our cost competitiveness by optimizing our supply chain, enhancing productivity and streamlining our corporate and business unit structures.,” Sanders added. “Utilizing a leading consultant, we have completed a detailed assessment of our processes, systems and organization and will be implementing a series of changes throughout the year directed at being better prepared and aligned to achieve our mission.”
Net sales for 2014 were $5.01 billion, up 3.4%, compared with $4.85 billion in 2013. The increase was mostly due to increased volumes and acquisitions, partially offset by the negative impact of foreign exchange.
Net sales for the fourth quarter were $1.32 billion, up 8.5%, compared with $1.22 billion in last year’s quarter. The increase was driven by a 6% increase in company-wide volume and $64.4 million in sales from businesses acquired during the past twelve months, including $52.2 million from the Weidenhammer acquisition.
Gross profit was a record $250 million in the fourth quarter, up 12.8%, compared with $221 million in the same period in 2013. Gross profit as a percentage of sales increased to 18.9%, compared with 18.2% in the prior year period. These increases were due primarily to volume growth, productivity improvements and lower pension expense, which were partially offset by operating cost inflation.
Commenting on the company’s fourth quarter results, president and CEO Jack Sanders said, “Sonoco’s balanced portfolio of businesses showed strong improvement during the fourth quarter in a number of areas. Consolidated sales grew 8% to a new record due to the combination of volume gains and a major acquisition. Gross profits and base earnings also reached records for the quarter, driven by solid volume growth, strong manufacturing productivity, a positive price/cost relationship and lower pension expense. Quarterly results were also aided by the reimbursement of excess costs incurred in prior quarters related to a materials issue in our flexible packaging business. Each of the Company’s segments reported improved operating profits despite higher year-over-year labor, maintenance, management incentive and other costs.
“Our Consumer Packaging segment reported record results in the quarter with operating profits up 21% over last year’s quarter due primarily to productivity improvements, volume growth throughout the segment and lower pension expense,” Sanders added. “Current quarter results reflect the flexible packaging excess cost reimbursement which benefitted productivity. In addition, the Weidenhammer Packaging Group acquisition completed on Oct. 31, 2014, provided modest accretion to operating profits, which excludes acquisition-related inventory step-up charges. Operating profits in our Display and Packaging segment rose 49% in the quarter due primarily to strong volume growth in U.S. display and international packaging fulfillment activity and manufacturing productivity improvements.
“Operating profits in our Paper and Industrial Converted Products segment exceeded the prior year quarter by nearly 11% due primarily to volume growth, a positive price/cost relationship and modest manufacturing productivity improvements, and lower pension expense, partially offset by higher operating costs and incentives. Excluding South America and Asia, the company experienced volume gains throughout the segment. In our Protective Solutions segment, operating profits increased more than 10% due to volume growth in temperature-assured products, consumer protective packaging and automotive components, along with modest productivity improvements.”
GAAP net income attributable to Sonoco in the fourth quarter was $54.5 million, or $.53 per diluted share, compared with $54.7 million, or $.53 per diluted share, in 2013. Base earnings in the fourth quarter were $67.9 million, or $.66 per diluted share, compared with $59.9 million, or $.58 per diluted share, in 2013.
Cash generated from operations in the fourth quarter was $151 million, exceeding the prior year quarter by $34 million despite slightly lower GAAP net income. Free cash flow for the fourth quarter of 2014 was $78 million, compared with $58 million for the same period last year.
Net income attributable to Sonoco for 2014 was $239.2 million, or $2.32 per diluted share, up 9.2% from $219.1 million, or $2.12 per diluted share, for 2013.
Base earnings for 2014 were $261.9 million, or $2.54 per diluted share, compared with $237.5 million, or $2.30 per diluted share in 2013. The 10.3% increase in base earnings stemmed from manufacturing productivity improvements, a positive price/cost relationship, volume growth, proceeds from a legal settlement, acquisitions and lower pension expense.
Current year gross profit was a record $921 million, up 5.5%, compared with $874 million in 2013. Gross profit as a percentage of sales was 18.4%, compared with 18.0% in 2013.
As of Dec. 31, 2014, total debt was approximately $1.3 billion, compared with $981 million at December 31, 2013.
In reviewing Sonoco’s performance in 2014, Sanders said, “We started a process of changing Sonoco for the better in 2013; targeting changes that provide us better opportunities to grow through new products, new markets, new customers, new services and new ways of thinking. These changes are creating an environment that allows us to better harness the power of our portfolio and our people to optimize business performance. Included in these changes are new processes aimed at organizing our efforts to better execute our mission.
“Our efforts to change for the better resulted in record sales in 2014, topping $5 billion for the first time in our 115-year history,” Sanders added. “In addition, we achieved record gross profits, as gross profits as a percentage of sales gained 40 basis points to 18.4%; and record base earnings, which grew more than 10% in 2014. This is the second year in a row we have achieved or exceeded our base earnings target, which is a pattern we are committed to seeing continue.”
Sonoco expects first quarter 2015 base earnings to be in the range of $.56 to $.61 per diluted share. The Company’s first quarter 2014 base earnings were $.52 per diluted share. Sonoco expects its 2015 base earnings per diluted share to be in the range of $2.60 and $2.70 with a target of $2.65 per diluted share, a decrease of $0.03 from what was communicated on Dec. 5, 2014.
Sonoco is projecting cash from operations in 2015 to be approximately $505 million and free cash flow to be $150 million. The projected year-over-year improvement in cash from operations is largely driven by expected higher earnings, including higher non-cash depreciation and amortization expenses, and lower pension contributions. After considering an assumed $134 million in cash dividends to shareholders, the resulting $150 million of projected free cash flow is expected to be used primarily to reduce debt.
“We are optimistic entering 2015 that the U.S. economy will continue to steadily improve and international markets will rebound,” Sanders said. “In addition, we remain committed to our grow-and-optimize strategy. This includes achieving organic growth targets, improving operating margins, successfully integrating the Weidenhammer acquisition, maximizing cash flow, balancing capital deployment between growth and return of cash to shareholders and, finally, optimizing our global portfolio through simplification and improved efficiency.
“In 2015, we will begin implementing a series of actions focused on improving our cost competitiveness by optimizing our supply chain, enhancing productivity and streamlining our corporate and business unit structures.,” Sanders added. “Utilizing a leading consultant, we have completed a detailed assessment of our processes, systems and organization and will be implementing a series of changes throughout the year directed at being better prepared and aligned to achieve our mission.”