Sonoco Reports Third Quarter 2017 Results

Sonoco (NYSE:SON), one of the largest diversified global packaging companies, today reported financial results for its third quarter, ending October 1, 2017.

Third Quarter Highlights
•Third-quarter 2017 GAAP earnings per diluted share were $0.72, compared with $0.64 in 2016.
•Third-quarter 2017 GAAP results included $0.04 per diluted share, after tax, in acquisition and acquisition-related charges and non-base tax related charges. In the third quarter of 2016, GAAP results included $0.08 per diluted share, after tax, in restructuring charges and a goodwill impairment of its industrial converting operations in Brazil.
•Base net income attributable to Sonoco (base earnings) for third quarter 2017 was a record $0.76 per diluted share, compared with $0.72 in 2016. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided third-quarter 2017 base earnings guidance of $0.71 to $0.77 per diluted share.
•Third-quarter 2017 net sales were a record $1.32 billion, up 9.6 percent, from $1.21 billion in 2016.
•Cash flow from operations was $282.1 million through nine months of 2017, compared with $348.7 million in 2016. Free cash flow for nine months of 2017 was $26.7 million, compared with $94.9 million in 2016. (See free cash flow definition and reconciliation to cash flow from operations later in this release.)

Fourth Quarter and Full-Year Guidance Update
•Base earnings for the fourth quarter of 2017 are estimated to be in the range of $0.68 to $0.74 per diluted share. This guidance takes into consideration the impact of acquisitions, net of divestitures, and expected changes in raw material costs. Base earnings in the fourth quarter of 2016 were $0.62 per diluted share.
•Full-year 2017 base earnings guidance has been raised to $2.75 to $2.81 per diluted share.
•Full-year 2017 operating cash flow and free cash flow have been updated to approximately $415 million and $70 million, respectively.  Free cash flow guidance has been updated to now include the after-tax impact of an expected voluntary $50 million pre-tax contribution into the Company’s domestic defined benefit pension plan in the fourth quarter of 2017.

Note: Fourth-quarter and full-year 2017 GAAP guidance are 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: possible gains or losses on the sale of businesses or other assets, restructuring costs and restructuring-related impairment charges, acquisition-related costs, 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 financial results.

CEO Comments
Commenting on the Company’s third-quarter GAAP and base results, Sonoco President and Chief Executive Officer Jack Sanders said, “Sonoco’s ‘Grow and Optimize’ strategy continues to gain momentum as we grew top line results by nearly 10 percent to an all-time quarterly record, while bottom line results (base earnings per diluted share) were near the high end of our guidance. Our businesses were well managed during the quarter, as the Company benefited from strong improvements to total productivity and a positive price-cost relationship.

“In looking at the performance of our business segments, we were extremely pleased with the record sales and operating profit generated by our Consumer Packaging segment, particularly in a challenging consumer packaged food market. In addition, our Paper and Industrial Converted Products business registered a 27 percent improvement in operating profit, while producing its best third-quarter results in three years. Results in our Protective Solutions and Display and Packaging segments lagged last year’s quarter, but each registered sequential quarterly improvement as we continue to adjust these businesses to changing market conditions.”

Third Quarter Review
Net sales for the third quarter were a record $1.32 billion, an increase of $115.9 million, or 9.6 percent, from last year’s quarter. The improvement in sales was a result of higher selling prices, largely driven by rising raw material prices; sales added from acquisitions, net of divestitures; and the positive impact of foreign exchange.

GAAP net income attributable to Sonoco in the third quarter was $72.8 million, or $0.72 per diluted share, an increase of $7.4 million, compared with $65.4 million, or $0.64 per diluted share, in 2016. Base earnings in the third quarter were $76.6 million, or $0.76 per diluted share, an increase of $3.1 million compared with $73.5 million, or $0.72 per diluted share, in 2016. 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 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.)

Third-quarter GAAP earnings include charges totaling $3.8 million, or $0.04 per diluted share. These charges consist mostly of acquisition and acquisition-related charges as well as non-base tax charges related to tax rate changes and reserve adjustments. In the third quarter of 2016, GAAP results included $8.1 million, or $0.08 per diluted share, after tax, consisting of restructuring charges and a goodwill impairment charge for the Company’s industrial converting operations in Brazil.

Gross profits were a record $250.9 million in the third quarter, an increase of $15.5 million or 6.6 percent, compared with $235.4 million in the same period in 2016. Gross profit as a percentage of sales declined to 18.9 percent, compared with 19.5 percent in the same period in 2016. The gross profit percentage reduction was primarily due to higher raw material and other operating costs offset by manufacturing and procurement productivity. Third-quarter selling, general and administrative expenses increased $8.7 million from the prior year to $130.3 million. This increase was driven by wage inflation and acquisition-related expenses.
more detail at:  http://phx.corporate-ir.net/phoenix.zhtml?c=82014&p=irol-newsArticle&ID=2309731

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