reported financial results for its first quarter ending March 31, 2019.
Net sales for the first quarter were $1.35 billion, an increase of $47.5 million, or 3.6%, from last year’s first quarter. The improvement reflects sales added by acquisitions and higher selling prices. Foreign exchange rate declines negatively impacted first quarter sales by approximately $38 million.
Gross profit was $270.1 million in the first quarter, an increase of $19.5 million or 7.8%, compared with $250.6 million in the same period in 2018. Gross profit as a percentage of sales was 20%, compared with 19.2% in the same period in 2018.
Cash flow from operations was $92.3 million in the first three months of 2019, compared with $119.8 million in 2018. Free cash flow was $9.5 million, compared with $44.9 million in the first quarter of 2018.
First-quarter 2019 GAAP earnings per diluted share were $0.73, compared with $0.73 in 2018. Base net income attributable to Sonoco (base earnings) for first quarter 2019 was $0.85 per diluted share, compared with $0.74 in 2018.
Base earnings for the second quarter of 2019 are estimated to be in the range of $.93 to $.99 per diluted share, compared to $.93 per diluted share in the second quarter of 2018. Full-year 2019 base earnings guidance is raised to $3.52 to $3.62 per diluted share, reflecting the better-than-expected first-quarter results. The company previously issued full-year guidance of $3.47 to $3.57.
Full-year 2019 operating cash flow and free cash flow guidance are unchanged at a range of $600 million to $620 million and $225 million to $245 million, respectively.
“Sonoco produced solid first-quarter results, which exceeded the high end of our earnings guidance, as our diverse mix of businesses successfully navigated through what can best be described as sluggish global economic conditions,” said Rob Tiede, president and CEO. “Net sales grew by 3.6%, while GAAP net income attributable to Sonoco was essentially flat, both compared to last year’s first quarter. Base net income gained 15.8% over the prior-year period as a result of earnings from acquisitions, a positive price/cost relationship, improvements in productivity, and a lower effective tax rate, which were only partially offset by modestly lower volume/mix, and the negative impact from foreign exchange translation. GAAP gross profit margin improved by 70 basis points and GAAP operating profit increased 6.2% over the prior year’s quarter, while base operating profit increased 13%.
“We were extremely pleased that each of our business segments recorded year-over-year improvement in operating earnings during the first quarter,” Tiede added. “Our Consumer Packaging segment reported slightly improved operating results in the first quarter while operating margin declined 19 basis points compared to last year’s period. However, these results were significantly better than the disappointing 2018 fourth-quarter results, as sequentially margins improved by 291 basis points. Our Paper and Industrial Converted Products segment continued to drive strong results, with operating margin improving 112 basis points compared to last year’s first quarter. In addition, the turnaround in our Display and Packaging segment continued, with operating margin expanding 348 basis points over the prior year period, and our Protective Solutions business operating results improved slightly and operating margin expanded by 45 basis points.”
As of March 31, 2019, total debt was approximately $1.41 billion, compared with $1.39 billion as of Dec. 31, 2018, and the company had a total-debt-to-total-capital ratio of 43.9% at end of the first quarter, unchanged from year-end 2018.
“We’re off to a solid start to 2019, and we remain optimistic that we have the initiatives in place to achieve our targets for profitable growth, improved operating margins and strong free cash flow,” Tiede said. “That said, we must also be realistic about the balance of the year as global economic conditions showed some weakness to start the year, and the uncertainty of tariffs, trade disputes and regional policy concerns are still hanging over business and consumer confidence.”