Sonoco Reports 3Q 2024 Results

Sonoco Products Company reported financial results for its third quarter ended Sept. 29, 2024.

Summary:
• Achieved GAAP net income attributable to Sonoco of $51 million, adjusted EBITDA of $281 million, diluted earnings per share of $0.51 and adjusted diluted earnings per share of $1.49
• Generated productivity improvements of $39 million during the third quarter of 2024 and $141 million during the first nine months of 2024
• Generated $438 million of operating cash flow and $171 million of free cash flow during the first nine months of 2024
• Entered into an agreement on June 24, 2024, to acquire Eviosys for approximately €3.6 billion (approximately $3.9 billion); on track to complete the acquisition in the fourth quarter of 2024
• Secured financing for the Eviosys acquisition by entering into new term loan agreements and completing a public offering of senior unsecured notes
• Announced strategic review of the Thermoformed and Flexible Packaging (“TFP”) business to accelerate portfolio simplification; review expected to be completed in the fourth quarter of 2024
• Reaffirms full year 2024 guidance for adjusted EBITDA and operating cash flow (excluding effects of the pending Eviosys acquisition and potential divestitures)

Net sales of $1.7 billion reflect the Protective Solutions (Protexic) divestiture, the closure of a thermoformed food packaging plant, the treatment of recycling operations as a procurement function beginning Jan. 1, 2024 and lower selling prices; overall volumes were positive and up low single digits including the impact of acquisitions.

GAAP operating profit was $128 million from higher acquisition-related costs and net loss on divestitures; unfavorable price/cost was offset by higher productivity from procurement savings, production efficiencies and fixed cost reduction initiatives. Adjusted operating profit and Adjusted EBITDA were $211 million and $281 million, respectively.

“Our third-quarter results were within expectations from seasonally higher Consumer Packaging demand and continued strong productivity,” said Howard Coker, Sonoco’s president and CEO. “Consumer and Industrial volumes were higher year-over-year and price/cost headwinds were persistent across both segments. Overall, we achieved strong profit margin and operating cash flow in the quarter from the solid execution of our global team.”

Total debt was $4.8 billion as of Sept. 29, 2024, an increase of $1.7 billion compared to Dec. 31, 2023, primarily related to the financing for the pending Eviosys acquisition.

Cash flow from operating activities for the first nine months of 2024 was $438 million, compared to $617 million in the same period of 2023. Free cash flow for the first nine months of 2024 was $171 million compared to $435 million for the same period of 2023.

Announced Acquisition

On June 24, 2024, Sonoco announced it had entered into a definitive agreement to acquire Titan Holdings I B.V. (Eviosys), a leading European manufacturer of food cans, ends and closures from an affiliate of KPS Capital Partners, to expand Sonoco’s global leadership in metal food can and aerosol packaging.

Sonoco believes that both Sonoco’s metal packaging business and Eviosys have demonstrated meaningful commercial momentum, and the transaction is expected to facilitate Sonoco’s ability to partner with customers and lead with innovation and sustainability.

The transaction advances Sonoco’s strategy of disciplined and high return capital allocation. Under the terms of the agreement, Sonoco agreed to acquire all of the issued and outstanding equity interests in Eviosys for approximately €3.6 billion (approximately $3.9 billion) on a cash-free and debt-free basis and subject to customary adjustments.

The transaction is expected to close by the end of 2024, subject to the satisfaction or waiver of customary closing conditions, including expiration, termination, or receipt of the applicable waiting period or clearances, as applicable under certain specified antitrust laws.

Eviosys’ current CEO, Tomas Lopez, is expected to remain with Sonoco and lead Sonoco’s EMEA metal packaging business and Rodger Fuller, COO, is expected to lead the integration effort.

Strategic Reviews of TFP and ThermoSafe Businesses as Part of Further Portfolio Simplification Efforts

On Sept. 4, 2024, Sonoco announced a review of strategic alternatives for the TFP business, included in the Consumer segment. Sonoco’s TFP business is a market leader in thermoformed and flexible packaging serving a wide range of customers in food, retail and medical markets.

The TFP business provides a variety of complex packaging to value-added categories including snacks, condiments, healthcare, prepared meals, fresh products and coffee and pet. On a standalone basis, the TFP business generated revenue of $1.3 billion in 2023. The strategic review process of the TFP business is underway and Sonoco expects to complete the review processes in the fourth quarter of 2024.

As previously announced, Sonoco also intends to divest the ThermoSafe business, included in the All Other group of businesses. The ThermoSafe business is Sonoco’s leading temperature-assured packaging business and generated revenue of $283 million in 2023. The strategic review process of the ThermoSafe business is underway and Sonoco expects to complete the review processes in the third quarter of 2025.

“Our earnings and cash results year-to-date keep us on track to deliver within our annual guidance range for 2024,” Coker concluded. “We are excited about the anticipated completion of the pending Eviosys acquisition, which we expect will bring incremental growth to our metal packaging business and continue the transformation and simplification of our portfolio.”