Net sales for the third quarter were $1.35 billion, down slightly from last year’s third quarter sales of $1.36 billion. The sales decline was driven by lower volumes and a stronger US dollar. These negative impacts were mostly offset by increased sales from acquisitions. GAAP net income at-tributable to Sonoco in the third quarter was $92.1 million, or $0.91 per diluted share, an increase of $19.6 million, compared with $72.4 million, or $0.72 per diluted share, in 2018.
Cash flow from operations was $238.8 million in the first nine months of 2019, compared with $451.5 million in 2018. Free cash flow was a negative $32.5 million, compared with $218.9 mil-lion of free cash flow generated in the first nine months of 2018. Year-to-date 2019 cash flows in-clude a $200 million voluntary contribution to the company’s US defined benefit pension plans.
On Aug. 9, 2019, Sonoco completed the acquisition of Corenso Holdings America, Inc, from a company owned by investment funds advised by Madison Dearborn Partners, LLC, for approxi-mately $110 million in cash. Corenso Holdings America is a leading US manufacturer of uncoated recycled paperboard and high-performance cores used in the paper, packaging films, tape and spe-cialty industries.
“Our strong mix of consumer- and industrial-related packaging businesses did an excellent job navigating slumping global macroeconomic conditions. By focusing our businesses on the areas which we can control, we continued to drive margin expansion as each of our four business seg-ments reported gains in operating profit as compared to last year. With these strong operating re-sults, which included the Corenso acquisition, and a lower effective tax rate, we delivered our best third quarter earnings performance and exceeded the high end of our guidance,” Rob Tiede, presi-dent and CEO, said.
“Overall in the third quarter, net sales declined slightly while GAAP net income attributable to Sonoco improved approximately 27%, and base net income gained 12.5% to a record $98.1 million as productivity improvements, earnings from acquisitions and a favorable effective tax rate more than offset lower volume/mix and a negative price/cost relationship. GAAP gross profit margin was a solid 19.6%, up 58 basis points from last year’s quarter. GAAP operating profit improved 36% from last year due to improved margins, and lower restructuring and other costs. Base operat-ing profit increased 12.1% to $139.1 million, while base operating profit margin increased approx-imately 120 basis points from last year.
“Our Consumer Packaging segment reported a 3.1% decline in sales and a slight improvement in operating profit compared to last year’s quarter, however, operating margin improved approximate-ly 45 basis points to 9.8%. Sales in our Paper and Industrial Converted Products segment were up 6.9%, while operating profit grew 10% and operating margin rose 36 basis points to 12%. The turnaround in our Display and Packaging segment continued during the quarter with operating margin expanding 390 basis points over the prior-year period, and in our Protective Solutions segment operating profit improved 34% and operating margin expanded by 293 basis points.”
Gross profit was $265.5 million in the third quarter, which was up from $259.6 million reported in the same period in 2018. Gross profit as a percentage of sales was 19.6%, an improvement from 19.0% in the same period in 2018.
As of Sept. 29, 2019, total debt was approximately $1.55 billion, compared with $1.39 billion as of Dec. 31, 2018, and the company had a total-debt-to-total-capital ratio of 45.6% at the end of the third quarter 2019 compared to 43.9% at the end of 2018. The increase in total debt from year-end was driven by a new $200 million term loan drawn during the second quarter which was used to fund the company’s voluntary pension contribution to the Sonoco US defined benefit pension plans.