Sonoco Reports 3Q 2017 Results

Sonoco reported financial results for its third quarter, ending Oct. 1, 2017.
 
Net sales for the third quarter were a record $1.32 billion, an increase of $115.9 million, or 9.6%, from last year’s quarter. The improvement in sales was a result of higher selling prices, largely driven by rising raw material prices; sales added from acquisitions, net of divestitures; and the positive impact of foreign exchange.
 
GAAP net income attributable to Sonoco in the third quarter was $72.8 million, or $0.72 per diluted share, an increase of $7.4 million, compared with $65.4 million, or $0.64 per diluted share, in 2016. Base earnings in the third quarter were $76.6 million, or $0.76 per diluted share, an increase of $3.1 million compared with $73.5 million, or $0.72 per diluted share, in 2016.
 
Gross profits were a record $250.9 million in the third quarter, an increase of $15.5 million or 6.6%, compared with $235.4 million in the same period in 2016. Gross profit as a percentage of sales declined to 18.9%, compared with 19.5% in the same period in 2016.
 
“Sonoco’s ‘Grow and Optimize’ strategy continues to gain momentum as we grew top line results by nearly 10% to an all-time quarterly record, while bottom line results (base earnings per diluted share) were near the high end of our guidance,” Jack Sanders, Sonoco president and CEO, said.
 
“In looking at the performance of our business segments, we were extremely pleased with the record sales and operating profit generated by our Consumer Packaging segment, particularly in a challenging consumer packaged food market,” Sanders added. “In addition, our Paper and Industrial Converted Products business registered a 27% improvement in operating profit, while producing its best third-quarter results in three years. Results in our Protective Solutions and Display and Packaging segments lagged last year’s quarter, but each registered sequential quarterly improvement as we continue to adjust these businesses to changing market conditions.”
 
For the first nine months of 2017, net sales were $3.74 billion, up $97.0 million compared with $3.64 billion in 2016. Sales grew modestly during the period due to higher selling prices implemented to recover rising material costs and acquisitions, net of divestitures.
 
GAAP net income attributable to Sonoco for the first nine months of 2017 was $169.7 million or $1.68 per diluted share, compared with $181.6 million or $1.78 per diluted share in 2016.
 
Current year-to-date gross profit was $707.0 million, compared with $722.6 million in the first nine months of 2016. Gross profit as a percentage of sales in the first nine months of 2017 was 18.9%, compared with 19.8% in 2016.
 
For the first nine months of 2017, cash generated from operations was $282.1 million compared with $348.7 million in 2016, a decline of $66.6 million. Free cash flow for the first nine months of 2017 was $26.7 million, compared with $94.9 million in the same period last year.
 
At Oct. 1, 2017, total debt was approximately $1.43 billion, compared with $1.05 billion as of Dec. 31, 2016. At the end of the third quarter, the company had a total-debt-to-total-capital ratio of 44.8%, compared with 40.4% at Dec. 31, 2016. The increase in the debt and debt ratio are primarily due to the $230 million acquisition of Peninsula Packaging, Inc., a thermoforming business, in March 2017 and the $170 million acquisition of Clear Lam Packaging, Inc., a flexible packaging business, in July 2017.
 
Operating cash flow in 2017 is expected to be approximately $415 million, and free cash flow is expected to be approximately $70 million, following a $50 million pre-tax contribution to the company’s defined benefit pension plan in the fourth quarter of 2017.
 
“We expect higher resin prices during the quarter, which should provide a headwind to our polymer-based packaging businesses,” Sanders reported. “As a result, we are implementing price increases and expect our contractual cost recovery mechanisms to ultimately offset current cost increases. On the other hand, recovered paper prices have fallen entering the fourth quarter, which should help our paper-based businesses recover previous raw material inflation. We were fortunate to weather the hurricanes and other natural disasters with minimal impact to our operations.”
 




Photo courtesy Sonoco