Sonoco Reports 1Q 2016 Results

Sonoco reported financial results for its first quarter ending April 3, 2016.

Net sales for the first quarter were $1.23 billion, up $20 million or 1.7% from last year’s quarter. This sales growth was due primarily to additional business days and other volume/mix improvements along with acquisition-related sales. These gains were partially offset by a negative translation impact from exchange rate changes of approximately $45 million along with lower selling prices due to lower commodity costs.

Gross profits were a record $245.3 million in the first quarter, up 11%, compared with $220.4 million in the same period in 2015. Gross profit as a percentage of sales improved to 20.0%, compared with 18.3% in the same period in 2015, and reached the highest percentage margin level since 2002. The 170 basis point improvement in the quarter was due to a positive price/cost relationship, productivity gains and lower pension expense, which were partially offset by wage inflation and increased operating costs.

First quarter 2016 GAAP earnings per diluted share were $.59, compared with $.84 in 2015. First quarter 2016 GAAP results included $.06 per diluted share, after tax, in asset impairment and restructuring expenses. In the first quarter of 2015, the favorable disposition of Fox River-related environmental litigation together with a gain on the sale of two metal ends plants, partially offset by costs related to acquisition and restructuring activities, added $.30 to earnings per diluted share.

“We are extremely pleased to deliver record first quarter base earnings results with each business segment reporting solid year-over-year improvement, including record first quarter performances in our targeted growth segments – Consumer Packaging and Protective Solutions,” Jack Sanders, Sonoco president and CEO, said, “Overall, the company benefited from a positive price/cost relationship, productivity improvements, lower pension and post-retirement benefit costs, and gains from volume/mix, which showed improvement even after excluding the positive impact of additional business days. Offsetting these positive factors were higher labor, maintenance and other operating costs, the negative impact of foreign currency translation and a higher effective tax rate.

“For the sixth consecutive quarter, operating profit in our Consumer Packaging segment reached record levels, improving 16% year over year due to solid improvement from global composite cans and flexible packaging,” Sanders added. “Results in the Display and Packaging segment improved significantly in the first quarter due to a positive price/cost relationship, productivity improvements and volume growth in international packaging fulfilment.

“We’re clearly pleased with the turnaround in our Paper and Industrial Converted Products segment, as operating profit grew 20% due to solid productivity gains, a positive price/cost relationship, lower pension expense and gains from volume/mix beyond the benefit of additional business days in the quarter. Finally, our Protective Solutions segment produced record first quarter operating profit, up 24% year over year.”

Cash flow from operations was $66.4 million in the first quarter of 2016, compared with $60.3 million in 2015. Free cash flow for the first quarter was negative $22.1 million, compared with a positive $17.8 million in 2015.

At April 3, 2016, total debt was approximately $1.13 billion, unchanged from Dec. 31, 2015, and the debt-to-total capital ratio was 42%, compared to 43% at Dec. 31, 2015.