Sonoco Reports 2Q 2016 Results

Sonoco reported financial results for its second quarter, ending July 3, 2016. Second quarter 2016 net sales were $1.21 billion, down from $1.25 billion in 2015.
 
Second quarter 2016 GAAP earnings per diluted share were $0.55, compared with $0.63 in 2015. Second quarter 2016 GAAP results included $0.18 per diluted share, after tax, in asset impairment and restructuring expenses largely related to the divestiture of a paper mill in France and a retail packaging business in Puerto Rico, along with other previously announced restructuring actions.
 
Cash flow from operations was $119.7 million in the second quarter of 2016, compared with $112.8 million in 2015. Free cash flow for the second quarter was $31.9 million, compared with $32.2 million in 2015.
 
Free cash flow in 2016 is projected to be approximately $140 million, reflecting expected operating cash flow of $490 million. Expected free cash flow for the year is unchanged from previously communicated guidance.
 
“Our diversified mix of global packaging businesses collectively performed very well in the second quarter, producing solid results despite market and operating headwinds,” Jack Sanders, Sonoco president and CEO, said. “Once again, our targeted growth segments – Consumer Packaging and Protective Solutions – each produced record second quarter operating profit, and our Display and Packaging segment continued to show improvement, helping offset slightly lower results in our Paper and Industrial Converted Products segment driven by operating losses in corrugating medium.
 
“Operating profit in our Consumer Packaging segment was up 3.4%, reaching record levels for the seventh consecutive quarter, while segment operating margins improved 80 basis points over the same quarter last year,” Sanders noted. “Overall, the segment benefited from a positive price/cost relationship and lower pension expense. Segment sales declined 3.8% due to lower selling prices, primarily related to lower raw material costs, lower volume and the negative impact of foreign currency translation. Display and Packaging segment operating profit improved significantly for the quarter due to a positive price/cost relationship and productivity improvements.
 
“As expected, our Paper and Industrial Converted Products segment faced headwinds in the second quarter with operating profit declining 3.8% from the same quarter last year due primarily to the impact of deteriorating market conditions for paper produced on our single corrugating medium machine,” added Sanders. “Absent corrugating medium, segment earnings would have been well above last year on solid improvements in volume, manufacturing productivity and fixed costs, partially offset by the negative impact of foreign currency translation. Quarterly segment sales declined 3.5% year over year as the negative impact of foreign currency translation, lower corrugating medium prices and the divestiture of a paperboard mill in France were only partially offset by an improvement in global tube and core and North America paperboard volume and a positive mix of business.
 
“For the fifth consecutive quarter, our Protective Solutions segment produced record quarterly results with operating profit up 4.5% over the second quarter last year as solid volume growth, particularly in temperature-assured packaging, and a positive price/cost relationship more than offset higher labor, maintenance and other operating costs and a negative mix of business.”