Sonoco Details 2016 Financial Targets, Strategic Priorities

Jack Sanders, Sonoco president and CEO, and members of the Company’s senior leadership team provided the investment community in New York with an overview of the company’s financial outlook and strategic priorities.
 
Sonoco expects fourth quarter and full-year 2015 base earnings to be within its previously stated guidance of $0.59 to $0.64 and $2.46 to $2.51 per diluted share, respectively. Last year, the company reported fourth quarter and full-year 2014 base earnings of $0.61 and $2.41 per diluted share.
 
“Our targeted growth segments – Consumer Packaging and Protective Solutions – are demonstrating they can innovate and grow, despite difficult economic conditions,” Sanders said. “Through the first nine months of 2015, sales in our Consumer Packaging segment are up about 11%, aided by last year’s acquisition of Weidenhammer Packaging Group, while operating profits are up 18.5%. Likewise, Protective Solutions sales for the first nine months of 2015 are up about 5% and operating profits are up 44%.
 
“It is my belief we are seeing a divergence in the US economy where improvements in sales of big-ticket items, such as housing, automobiles, appliances and even smartphones, are being offset by a continued decline in manufacturing activity, much of it related to lower commodity prices and the strong dollar,” he added. “This divergence is clearly impacting some of our served industrial markets, as sales through the first nine months of 2015 in our Paper/Industrial Converted Products segment are down nearly 9% and operating profit is down just under 21%.”
 
Sonoco estimates 2016 base earnings per diluted share to be in the range of $2.61 to $2.71, with a projected record midpoint target of $2.66 per diluted share. According to Barry Saunders, SVP and CFO, the company’s midpoint guidance assumes a $.15 per share improvement in earnings from the company’s base operations stemming primarily from volume growth, net of higher depreciation associated with growth initiatives, while productivity is projected to offset wage inflation and other cost changes.
 
Sonoco is projecting to generate approximately $450 million in cash from operations in 2015 and spend approximately $170 million on capital investments and $138 million on cash dividends to shareholders. Free cash flow of approximately $140 million is primarily being deployed to reduce debt, with the company projecting to end the year with a net debt to EBITDA ratio of 1.6 times.
 
For 2016, Sonoco is projecting cash from operations of nearly $485 million and free cash flow of approximately $140 million. The company expects free cash flow to be essentially flat year over year due to higher capital expenditures, higher pension contributions and expected increased cash dividends.
 
Sanders noted that the company has a 90-year history of returning substantial amounts of free cash flow to shareholders, including nearly $1.5 billion in the past decade. “Barring acquisition, we favor returning a substantial amount of free cash flow in 2016 to shareholders through increased dividends and share repurchases,” said Sanders. “If a share repurchase is activated utilizing essentially all free cash flow in 2016, it could add up to $.04 per share in increased earnings to our previously mentioned 2016 guidance $2.61 to $2.71 per share.”