Sonoco Products Co. (SON, Financial) is a $5 billion global provider of consumer packaging, industrial products, protective solutions and display and packaging services. Headquartered in Hartsville, South Carolina, and with more than 330 operations in 34 countries, it produces packaging for a variety of industries and many of the world’s most recognized brands, serving customers in 85 nations.
Sonoco’s operations consist of global consumer packaging businesses – Rigid Paper and Closures, Flexibles and Plastics, display and packaging division, which provides high-impact retail displays and packaging supply chain management; industrial businesses, which manufacture tubes and cores, reels and spools, uncoated recycled paperboard and Sonoco Recycling, one of the world’s largest recyclers, and Protective Solutions division, which produces custom-designed protective, temperature-assurance and retail security packaging solutions and highly engineered components.
The company reported a strong fourth quarter. It continued solid momentum achieved by Consumer Packaging and Protective Solutions segments during the quarter. The company is gaining from productivity improvements and acquisitions. The fourth quarter solid results were led by record fourth-quarter performances in Consumer Packaging and Protective Solutions segments.
Fourth-quarter results
Fourth quarter 2015 GAAP earnings per diluted share were 55 cents (48 cents in the prior-year quarter).
Base net income attributable to Sonoco (base earnings) for fourth quarter 2015 was 64 cents per diluted share (61 cents in the prior-year quarter).
Fourth quarter 2015 net sales declined by 3.8% and were $1.27 billion.
Cash flow from operations for the fourth quarter was $146 million ($151 million in the prior-year quarter).
Free cash flow in the quarter was $49 million ($78 million in the prior-year quarter).
Operating profit in the Consumer Packaging segment improved just over 8% and reached a record for the fifth consecutive quarter.
Protective Solutions segment's operating profits increased by 12% due to continued strong volume growth.
GAAP net income attributable to Sonoco in the fourth quarter was $56.1 million, or 55 cents per diluted share ($49.0 million, or 48 cents per diluted share, in the prior-year quarter).
Net sales for the fourth quarter were $1.27 billion (a decrease of 4% from $1.32 billion in the prior-year quarter).
Gross profit was $239 million in the fourth quarter (a decrease of 3% from the $247 million in the prior-year quarter).
Selling, general and administrative (SG&A) expenses on a GAAP basis were $138 million, or 10.9% of sales ($146 million, or 11.1% of sales during the prior-year quarter).
Net interest expense for the fourth quarter of 2015 increased to $14.1 million.
Expectations for 2016
The company expects the following:
- Full-year 2016 base earnings are projected to be in the range of $2.64 to $2.74 per diluted share.
- Free cash flow is expected to be approximately $140 million in 2016.
(Source: Company’s website)
Positive attributes of the company
- Gains from acquisitions.
- Manufacturing productivity improvements.
- Positive price/cost relationship.
Focus
- Optimizing business and brands.
- It is committed to the grow-and-optimize strategy.
- It is focused on achieving higher-than-market average growth.
- Improving operating margins.
- Optimizing structure through simplification and improved efficiency.
- Maximizing free cash flow.
- Targeting capital deployment to grow businesses and return cash to shareholders.
- Optimizing the portfolio.
- Accelerating organic sales growth.
Achievements
- In 2015, Sonoco’s Monterrey Display & Packaging location was recognized by the government with an Inclusive Company Award and a Family Oriented Company Award.
- Sonoco's Brantford paper mill was recognized with a PAPTAC National Business Award for "Safety Leadership," which recognizes mill leadership excellence and a demonstrated commitment to safety.
- Sonoco Alloyd was recognized with a WorldStar 2015 Packaging Award from the Institute of Packaging Professionals (IOPP) for its Whirlpool Water EveryDrop water filter package.
- It was included in the Dow Jones Sustainability World Index for 2014-2015, Sonoco's sixth consecutive listing.
- Sonoco ranked in the Top Five of the Packaging and Container sector of Fortune magazine’s 2014 World’s Most Admired Companies.
(Source: Company’s website)
An update on projects
The company is planning to do the following:
- An investment of $13 million to $15 million to further grow composite cans production capacity in Poland.
- A $20 million investment in a new composite can facility in Kuala Lumpur, Malaysia, which opened in September 2015 and will ramp up production through the first half of 2016.
- Investment in a new composite can line at its new plant in Shanghai and possible development of a second new plant in South China in 2016 or 2017.
- Development of a new rigid paper product technology engineered by its European rigid packaging operations for commercial development at its West Chicago, Illinois, can plant.
- A $22 million investment to purchase a new rotogravure press and triplex laminator in its flexible packaging facilities in Waco, Texas, and Franklin, Ohio.
- New extrusion and increased thermoformed portion control capacity at its Franklin Park, Illinois, plant.
- New polypropylene tray production capacity for microwaveable food trays.
- New blow molding capacity at its New Albany, Ohio, plant in 2016.
On a concluding note
With a unique range of packaging materials, technical disciplines, material science and manufacturing capabilities and packaging and display services, Sonoco takes a holistic approach to providing customized solutions that meet customers’ needs.
The company’s systematic approach to driving market-focused growth and innovation techniques with customers is going to help the company in the long run.
Disclosure: I do not hold any position in the company.
