Sonoco (NYSE:SON), one of the largest diversified global packaging companies, today reported financial results for its first quarter, ending April 1, 2018.
First Quarter Highlights
•First-quarter 2018 GAAP earnings per diluted share were $0.73, compared with $0.53 in 2017.
•First-quarter 2018 GAAP earnings included after-tax charges of $0.01 per diluted share related to restructuring and acquisition-related expenses, which were mostly offset by the effect of the change in the U.S. corporate tax rate on adjustments to deferred taxes. In the first quarter of 2017, GAAP results included $0.06 per diluted share, after tax, in restructuring and acquisition-related charges.
•Base net income attributable to Sonoco (base earnings) for first quarter 2018 was $0.74 per diluted share, compared with $0.59 in 2017. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided first-quarter 2018 base earnings guidance of $0.69 to $0.75 per diluted share.
•First-quarter 2018 net sales were $1.30 billion, up 11.2 percent, from $1.17 billion in 2017.
•Cash flow from operations was $119.8 million in the first quarter of 2018, compared with $67.4 million in 2017. Free cash flow for the first quarter was $44.9 million, compared with $(18.4) million in 2017. (See free cash flow definition and reconciliation to cash flow from operations later in this release.)
•On April 12, 2018, Sonoco completed the acquisition of Highland Packaging Solutions, a Plant City, Fla.-based, leading manufacturer of thermoformed packaging for fresh fruits, vegetables and eggs for approximately $150 million in cash.
Commenting on the Company’s first-quarter GAAP and base results, Sonoco President and Chief Executive Officer Rob Tiede said, “Sonoco’s growing diversified mix of Consumer- and Industrial-related packaging businesses achieved record consolidated top-line and bottom-line results in the first quarter, with each improving by double-digits over prior-year consolidated results. Net sales grew by 11.2 percent, while operating profit improved 17.6 percent and net income attributable to Sonoco gained 37.8 percent compared to last year. Base operating profit and base net income attributable to Sonoco improved 12.8 percent and 24.6 percent, respectively. First-quarter GAAP and base operating profit benefitted from a positive price/cost relationship and improvements to productivity, which were partially offset by a negative mix of business and operating cost inflation. Overall volume was up slightly compared to the prior-year quarter, despite the impact of one fewer business day. GAAP operating profit was further aided by less restructuring asset impairment charges in 2018 compared to 2017.”
“Net sales in our Consumer Packaging segment grew 18.2 percent over the prior year, while operating profit improved by approximately 2.7 percent. Improved productivity, a positive price/cost relationship and the benefit of acquisitions drove the first quarter operating profit increase and more than offset higher operating inflation and lower volume/mix.
“Our Paper and Industrial Converted Products segment reported its strongest first-quarter operating profit in 10 years, improving 48.2 percent from last year, while net sales grew 4.1 percent. The improvement in segment operating profit was primarily driven by a positive price/cost relationship, which more than offset higher operating costs and lower volume/mix which was driven by the current period having one less day than the prior period.
“Operating profit from our Protective Solutions segment was down slightly from last year as productivity improvements helped offset lower volume/mix, primarily in the segment’s automotive components business. Display and Packaging segment operating profit was lower than last year due to higher operating costs and a negative mix of business associated with the segment’s domestic pack center and display businesses. However, both of these segments registered sequential quarterly improvement as efforts to address the current challenges in these businesses are beginning to show positive results.”
First Quarter Review
Net sales for the first quarter were $1.30 billion, an increase of $131.9 million, or 11.2 percent, from last year’s quarter. The improvement reflects an increase in sales added by acquisitions, the positive impact of foreign exchange, higher selling prices implemented to recover rising freight, wages and operating inflation, and modest volume growth.
GAAP net income attributable to Sonoco in the first quarter was $74.1 million, or $0.73 per diluted share, an increase of $20.3 million, compared with $53.7 million, or $0.53 per diluted share, in 2017. Base earnings in the first quarter were $74.6 million, or $0.74 per diluted share, an increase of $14.8 million compared with $59.9 million, or $0.59 per diluted share, in 2017. Base earnings and base earnings per diluted share are non-GAAP financial measures adjusted to remove restructuring-related items, asset impairment charges, acquisition expenses 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.)
First-quarter GAAP earnings included after-tax charges of $2.4 million, or $0.02 per diluted share, related to restructuring and acquisition-related expenses. These charges were mostly offset by the effect of the change in the US corporate tax rate on deferred tax adjustments and a gain from a casualty loss insurance settlement totaling $1.8 million, or $0.02 per diluted share. In the first quarter of 2017, GAAP earnings included $6.1 million or $0.06 per diluted share, after tax, in restructuring charges and acquisition-related expenses.
Gross profits were a record $250.6 million in the first quarter, an increase of $27.6 million or 12.4 percent, compared with $223.0 million in the same period in 2017. Gross profit as a percentage of sales increased to 19.2 percent, compared with 19.0 percent in the same period in 2017. The gross profit percentage increase was primarily due to manufacturing and procurement productivity mostly offsetting higher raw material and other operating costs.
First-quarter selling, general and administrative expenses increased $12.2 million from the prior year to $137.4 million. This increase was driven by expenses related to acquired businesses, wage inflation and higher management incentive accruals.
more detail at: http://investor.sonoco.com/news-releases/news-release-details/sonoco-reports-strong-first-quarter-2018-results?field_nir_news_date_value%5Bmin%5D=2017