Sonoco (NYSE: SON), one of the largest diversified global packaging companies, today reported financial results for its first quarter ended April 4, 2021.
First Quarter Highlights
*First quarter 2021 GAAP earnings per diluted share were $0.71, compared with $0.80 in 2020.
*First quarter 2021 GAAP earnings included net after-tax charges of $19.4 million related to restructuring activity, asset impairments, acquisition and divestiture transaction costs, loss on a business divestiture and non-operating pension costs which were partially offset by insurance proceeds. In the first quarter of 2020, GAAP earnings included net after-tax charges of $14.8 million related mostly to restructuring actions and non-operating pension costs.
*Base net income attributable to Sonoco (base earnings) for first quarter 2021 was $0.90 per diluted share, compared with $0.94 in 2020. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided first quarter 2021 base earnings guidance of $0.80 to $0.90 per diluted share.
*First quarter 2021 net sales were $1.35 billion, compared with $1.30 billion in 2020.
*Cash flow from operations was $138.7 million in the first three months of 2021, compared to $87.7 million in 2020. Free cash flow was $99.4 million in the first three months of 2021, compared with $57.1 million in the first three months of 2020. (See free cash flow definition and reconciliation to cash flow from operations later in this release.)
*On April 4, 2021, Sonoco completed the sale of its U.S. Display and Packaging business to Hood Container Corporation for approximately $80 million in cash, the proceeds of which were received subsequent to the period’s end.
*As previously reported, beginning in 2021 Sonoco changed its operating and reporting structure and is reporting results in two new segments, Consumer Packaging and Industrial Paper Packaging. The Company’s remaining businesses, which primarily consist of healthcare and protective packaging businesses, are now reported as “All Other”.
2021 Second Quarter and Full-Year Guidance
*Sonoco expects second quarter base earnings per diluted share to be in a range of $0.82 to $0.88 and expects full-year base earnings per diluted share to be in a range of $3.50 to $3.60. Full-year guidance has been narrowed to the upper-half of the previously disclosed full-year guidance range. Second quarter and full-year base earnings per diluted share in 2020 were $0.79 and $3.41, respectively.
*Full-year 2021 cash provided from operations and free cash flow guidance remains unchanged at a range of $570 million to $600 million and $270 million to $300 million, respectively.
Note: Second-quarter and full-year 2021 GAAP guidance is not provided in this release due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast: restructuring costs and restructuring-related impairment charges, acquisition/divestiture-related costs, gains or losses on the sale of businesses or other assets, and the income tax effects of these items and/or other income tax-related events. These items could have a significant impact on the Company’s future GAAP results.
CEO Comments
Commenting on the Company’s first quarter performance, Howard Coker, President and Chief Executive Officer, said, “I’m extremely proud of how our Sonoco team came together in the first quarter to work through the challenges stemming from severe winter weather and global supply chain disruptions to meet the critical needs of our customers while delivering a better than expected start to 2021. Overall, Sonoco’s bottom line results benefited from productivity gains and improved volume/mix, which was helped by two extra shipping days in the quarter. These positive factors were more than offset by a negative price/cost relationship stemming from higher raw material costs, and freight and other non-material inflation less the impact of businesses sold and acquired in the last twelve months.
“During the first quarter, consumers continued to embrace at-home eating which propelled our Consumer Packaging segment to a 19 percent improvement in operating profit. Global industrial markets further reopened from the 2020 pandemic-induced recession which helped our Industrial Paper Packaging segment report sequential improvement in results for the third consecutive quarter, although operating profit remains down year-over-year. And, our All Other group of businesses, which primarily consists of healthcare, protective and retail/industrial packaging units, had mixed results in the quarter, including the impact of the November 2020 divestiture of our European contract packaging business. Finally, we took further steps to simplify our portfolio by divesting our lower margin U.S. Display and Packaging business at the end of the quarter.
“Our solid financial performance in the first quarter along with our disciplined working capital management also drove cash flow from operations up 58 percent compared to the prior year’s quarter.”
First Quarter Review
Net sales for the first quarter of 2021 were $1.35 billion, up 3.8 percent from last year’s first quarter sales of $1.30 billion. This sales growth was driven by a 3.5 percent improvement in volume/mix supported by two additional shipping days in the quarter but also includes a negative impact from disruptions to approximately 40 of the Company’s U. S. operations from Winter Storm Uri in February 2021. Additionally, sales benefited from higher selling prices mostly implemented to offset raw material inflation; but were reduced by the November 2020 disposition of the Company’s European contract packaging business, net of sales added from the acquisition of Can Packaging in August 2020.
GAAP net income attributable to Sonoco in the first quarter was $72.3 million, or $0.71 per diluted share, a decrease of $8.1 million, compared with $80.4 million, or $0.80 per diluted share, in 2020. First quarter GAAP earnings included after-tax non-base net charges totaling $19.4 million, $5.2 million of which related to restructuring and asset impairment charges and $5.4 million of which related to non-operating pension costs. The remaining $8.8 million relates to transaction costs and the loss on the disposition of the Company’s U.S. Display and Packaging business, which were partially offset by insurance proceeds. In the first quarter of 2020, GAAP earnings included $14.8 million of after-tax non-base net charges, $9.5 million of which related to restructuring activities and $5.6 million of which related to non-operating pension costs. Adjusted to exclude these items, base earnings in the first quarter of 2021 were $91.7 million, or $0.90 per diluted share, compared with $95.3 million, or $0.94 per diluted share, in 2020, a decrease of $3.6 million. Base earnings and base earnings per diluted share are non-GAAP financial measures adjusted to remove restructuring-related items, asset impairment charges, acquisition/divestiture-related expenses, non-operating pension costs, and certain income tax-related events and other items, if any, the exclusion of which the Company believes improves comparability and analysis of the ongoing operating performance of the business. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.)
Gross profit was $277.9 million in the first quarter compared to $266.6 million in the same period in 2020. Quarterly gross profit as a percentage of sales was essentially flat year over year at 20.5 percent. First-quarter GAAP selling, general and administrative expenses increased $21.3 million from the prior year to $145.2 million. This increase was largely driven by higher acquisition and divestiture transaction costs and a return to more normalized management incentive expenses.
details at: https://investor.sonoco.com/news-releases/news-release-details/sonoco-reports-first-quarter-2021-results