Sonoco Reports Third Quarter 2021 Results

Sonoco reported financial results for its third quarter ended Oct. 3, 2021. Third quarter 2021 net sales were a record $1.42 billion, compared with $1.31 billion in 2020.

Cash flow from operations was $220.1 million in the first nine months of 2021, compared to $489.5 million in the same period of 2020. Free cash flow was $74 million in the first nine months of 2021, compared with $381.1 million in the same period of 2020. Free cash flow for the first nine months of 2021 included pension contributions totaling $133 million made as part of the final settlement of the company’s Inactive Plan’s liabilities.

Full-year 2021 cash provided from operations is updated to be in a range of $520 million to $550 million while free cash flow guidance remains unchanged at $270 million to $300 million.

“We were pleased with the improved top-line and bottom-line results delivered in the third quarter as our Sonoco team skillfully navigated through supply chain disruptions, raw material shortages and unrelenting inflation to meet the critical needs of our customers,” Howard Coker, Sonoco president and CEO, said

“Net sales reached a record level, growing almost 8% over the prior-year quarter, as volume/mix improved almost 4% as solid customer demand in each of our business segments overcame supply chain challenges,” added Coker. “Operating profit in our Consumer Packaging segment declined 5.4% in the quarter as strong productivity improvements were more than offset by a negative price/cost relationship stemming from rising resin, film, metals, packaging, freight, and labor costs. Our Industrial Paper Packaging segment experienced a 30% improvement in operating profit due to strong demand and the associated positive leveraging impact on operations.”

Third Quarter Review

Net sales for the third quarter of 2021 were $1.42 billion, up 7.8% from last year’s third quarter sales of $1.31 billion. This growth was driven by an improvement in volume/mix and higher selling prices mostly implemented to offset inflation. These positive factors were partially offset by the disposition of the company’s European and US display and packaging businesses in November 2020 and April 2021, respectively, net of sales added from the acquisition of Can Packaging in August 2020.

Gross profit was $257.7 million in the third quarter of 2021 compared to $257.0 million in the same period in 2020. Quarterly gross profit as a percentage of sales was 18.2% compared to 19.6% in the third quarter of 2020.

Year-to-Date Results

For the first nine months of 2021, net sales were $4.15 billion, up $290.2 million, compared with $3.86 billion in the first nine months of 2020. Sales improved 7.5% in the first nine months of the year as an approximately 5% improvement in volume/mix reflected demand recovery following prior-year’s pandemic-driven reductions, along with higher selling prices mostly implemented to offset inflation, and a positive impact from foreign exchange translation all of which more than offset sales reduced by divestitures, net of acquisitions.

GAAP net loss attributable to Sonoco for the first nine months of 2021 was $(150.6) million or $(1.51) per diluted share, compared to income of $219.1 million, or $2.17 per diluted share in 2020. The net loss in the first nine months of 2021 included $417.5 million in net after-tax non-base charges, driven by $418.5 million in after-tax non-operating pension costs largely attributable to pension settlement charges and by a $15.0 million after-tax loss related to the early extinguishment of debt.

Current year-to-date gross profit was $798.3 million, compared with $771.6 million in 2020. Year-to-date gross profit as a percentage of sales in 2021 was 19.2%, compared with 20.0% in 2020.

Cash Flow and Free Cash Flow

Cash generated from operations for the first nine months of 2021 was $220.1 million, compared with $489.5 million in 2020, a decrease of $269.4 million. While net income declined by $368.9 million, this was primarily due to the increase in after-tax, non-cash pension settlement costs of $406.5 million driven by the company’s Inactive Plan liability settlement in the second quarter of 2021. Free cash flow for the first nine months of 2021 was a provision of $74 million, compared with $381.1 million of cash generated in the same period last year.