Sonoco Reports Fourth Quarter and Full Year 2023 Results

Sonoco Products Company (“Sonoco” or the “Company”), one of the largest sustainable global packaging companies, reported financial results for its fourth quarter and fiscal year ended December 31, 2023.

Summary

• Achieved second best full year results for Adjusted EPS in the Company’s 125-year history
• Generated a record $883 million of operating cash flow and $600 million of Free Cash Flow in the full year of 2023
• Invested a record level of capital in the business for future growth and productivity
• Achieved record results in Operating Profit and Adjusted EBITDA in flexible packaging and record net sales in rigid paper containers in the Consumer Packaging (“Consumer”) segment
• Produced record Operating Profit margins and Adjusted EBITDA margins in Industrial Paper Packaging (“Industrial”) segment despite a low volume environment
• Expanded the Company’s flexible packaging capabilities with the acquisition of Inapel Embalagens Ltda. in Brazil
• Made further progress on strategic priorities including portfolio simplification, organic growth investments, and Environmental, Social, and Governance commitments
• Solid fourth quarter operating results driven by strong productivity offset by higher employee expenses, healthcare, and accounts receivable reserve
• Effective January 1, 2024, we integrated the flexible packaging and thermoforming packaging businesses within the Consumer segment to streamline operations, enhance customer service, and better position the business to accelerate growth

Q4-23 (versus Q4-22):

• Net sales decreased 2% to $1.6 billion driven by lower volumes and pricing
• GAAP operating profit increased to $135 million due to lower acquisition and restructuring costs, favorable productivity, and revenue from acquisitions
• Effective tax rates on GAAP and Adjusted Earnings were 21.7% and 25.7%, respectively, in Q4 2023 compared to 1.9% and 21.3%, respectively, in Q4 2022
• GAAP net income decreased to $81 million for GAAP EPS (diluted) of $0.82
• Adjusted Earnings decreased to $101 million for Adjusted EPS (diluted) of $1.02
• Adjusted operating profit and Adjusted EBITDA decreased to $167 million and $236 million, respectively, due to lower volumes across the portfolio, unfavorable price/cost in Industrial, higher employee expenses, and higher accounts receivable reserve, which were partially offset by higher productivity and favorable price/cost in Consumer

2023 (versus 2022):

• Net sales decreased 6% year-over-year to $6.8 billion driven by lower volumes across the portfolio, partially offset by revenue from acquisitions
• GAAP operating profit increased to $716 million due to gains on divestitures and asset sales, lower acquisition and restructuring costs, favorable productivity, and revenue from acquisitions
• Effective tax rates on GAAP and Adjusted Earnings for the full year 2023 were 24.3% and 24.6%, respectively, compared with 20.7% and 23.9%, respectively, in the prior year
• Net income margin was 7.0% and Adjusted EBITDA margin was 15.7% in 2023, compared with 6.4% and 16.0% in 2022, respectively
• GAAP net income increased to $475 million for GAAP EPS (diluted) of $4.80
• Adjusted Earnings decreased to $520 million for Adjusted EPS (diluted) of $5.26
• Adjusted operating profit decreased to $804 million as lower overall volumes and unfavorable metal price overlap were partially offset by favorable productivity and revenue from acquisitions

“In 2023, Sonoco made further progress on our strategic initiatives and delivered solid financial results in a challenging macroeconomic environment,” said Howard Coker, President and Chief Executive Officer. “We achieved the second best year of financial results in our 125-year history. Our multi-year focus on improving and leveraging the operating model combined with our capital allocation strategy resulted in record productivity. We advanced our strategy by strengthening our portfolio with the addition of accretive acquisitions in our core businesses, and successfully divesting non-core assets.”

Coker continued, “We generated record annual operating cash flow of $883 million and free cash flow of over $600 million. We remained focused on disciplined capital allocation and a strong balance sheet, and were pleased to increase our annual dividend for the 40th straight year. I am extremely proud of the hard-working Sonoco team members who remain focused on delivering value for our customers and executing initiatives to support the Company’s continued success in the future.”

Fourth Quarter and Year End 2023 Segment Results

Sonoco reports its financial results in two reportable segments: Consumer and Industrial, with all remaining businesses reported as All Other.

Consumer Packaging

Q4-23 (versus Q4-22):

• Consumer net sales were $856 million as volumes continued to be impacted by lower consumer purchases for food and household products from inflationary pricing impacts
• Consumer operating profit decreased to $83 million due to lower volumes and higher accounts receivable reserve, which were partially offset by strong productivity and strategic pricing initiatives

2023 (versus 2022):

• Consumer net sales were $3.6 billion, down 4% year over year, primarily due to the previously mentioned inflationary pricing impacts on volumes and volume declines from customer retail destocking throughout the year
• Full year segment operating profit decreased to $382 million due to unfavorable volume/mix and metal price overlap of $35 million (which was a full year $105 million year-over-year difference), which was partially offset by improved productivity

Industrial Paper Packaging

Q4-23 (versus Q4-22):

• Industrial net sales decreased 1% to $593 million due to unfavorable volume/mix, weakness in global demand for converted paper products and lower pricing, which was partially offset by higher demand in paper and revenue from acquisitions
• Continued low volumes and price/cost pressures were partially offset by improved productivity which resulted in an operating profit margin of 10% and Adjusted EBITDA margin of 15%

2023 (versus 2022):  

• Industrial sales decreased 12% to $2.4 billion due to unfavorable volume and index-related pricing declines
• Segment operating profit margin and Segment Adjusted EBITDA margin increased to 13% and 18%, respectively, primarily due to the first half 2023 benefits of higher pricing and lower costs

Other

Q4-23 (versus Q4-22):

• Net sales declined 7% due to lower volumes, primarily in temperature assured packaging as COVID-related demand declined
• Operating profit and Adjusted EBITDA improved by 14% and 10%, respectively, primarily due to positive strategic pricing and strong productivity, partially offset by lower volume

2023 (versus 2022):  

• Net sales declined 2% primarily due to lower volumes
• Operating profit and Adjusted EBITDA improved by 57% and 41%, respectively, primarily due to ongoing structural improvement programs to improve profitability across this diversified collection of businesses, favorable strategic pricing initiatives, and strong productivity

Balance Sheet and Cash Flow Highlights

• Cash and cash equivalents were $152 million as of December 31, 2023, compared to $227 million as of December?31, 2022.
• Total debt was $3.1 billion as of December 31, 2023, a decrease of $139 million from December 31, 2022.
• On December 31, 2023, the Company had available liquidity of $1.1 billion, including the undrawn availability under its revolving credit facility.
• Cash flow from operating activities for the year ended 2023 was $883 million, compared to $509 million in the same period of 2022.
• Capital expenditures, net of proceeds from sales of fixed assets, for 2023 were $283 million, compared to $319 million for the same period last year. Capital expenditures were $363 million and net proceeds from the sale of our timberland properties were $80 million in 2023.
• Free Cash Flow in 2023 was $600 million compared to $190 million in 2022. See the Company’s definition of Free Cash Flow, the explanation as to why it is used, and the reconciliation to net cash provided by operating activities later in this release.
• Dividends paid during the fiscal year ended December 31, 2023 increased to $197 million compared to $187 million for the prior fiscal year.

Guidance⁽¹⁾ 

First Quarter 2024

• Adjusted EPS⁽²⁾: $1.05 to $1.15

Full Year 2024

• Adjusted EPS⁽²⁾: $5.10 to $5.40
• Cash flow from operating activities: $650 million to $750 million
• Adjusted EBITDA: $1.05 billion to $1.10 billion

Sonoco’s President and CEO, Howard Coker stated, “In the first quarter of 2024, we expect volumes to be down over the prior year period. We also expect negative price/cost from metal price overlap and from the year-over-year Industrial comparable. For the full year, we are expecting overall sales to be up modestly and price/cost impacts to be negative, in each case compared to the prior year period. We intend to continue to aggressively manage costs and generate positive productivity while we navigate global volume uncertainties. We remain focused on executing strategic initiatives to simplify our portfolio and capture synergies from our recent acquisitions to advance Sonoco through 2024 and beyond. We look forward to providing further updates in our Investor Day, which is planned for February 22, 2024.”

⁽¹⁾ Although the Company believes the assumptions reflected in the range of guidance are reasonable, given the uncertainty regarding the future performance of the overall economy, the effects of inflation, the continued challenges in global supply chains, potential changes in raw material prices, other costs, and the Company’s effective tax rate, as well as other risks and uncertainties, including those described below, actual results could vary substantially. Further information can be found in the section entitled “Forward-looking Statements” in this release.

⁽²⁾ First quarter and full year 2024 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 without unreasonable efforts: restructuring costs and restructuring-related impairment charges, acquisition/divestiture-related costs, gains or losses on the sale of businesses or other, 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. Accordingly, a quantitative reconciliation of Adjusted EPS guidance has been omitted in reliance on the exception provided by Item 10 of Regulation S-K.        

Effective January 1, 2024, the Company will integrate its flexible packaging and thermoforming packaging businesses within the Consumer segment in order to streamline operations, enhance customer service, and better position the business for accelerated growth. As a result, the Company will change its operating and reporting structure to reflect the way it plans to manage its operations, evaluate performance, and allocate resources going forward. Therefore, in future reporting periods, the Company’s consumer thermoforming businesses will move from the All Other group of businesses to the Consumer segment. The Company’s Industrial segment will not be affected by these changes. As of, and for the year ended December 31, 2023, there were no changes to the manner in which the Company reviewed financial information at the segment level; therefore, these changes had no impact on our reporting structure.

For full fourth quarter results click here.

About Sonoco

Founded in 1899,?Sonoco?(NYSE:SON) is a global provider of packaging products. With net sales of approximately?$7.3 billion?in 2022, the Company has approximately 22,000 employees working in more than 300 operations around the world, serving some of the world’s best-known brands. With our corporate purpose of?Better Packaging. Better Life.,?Sonoco?is committed to creating sustainable products, and a better world, for our customers, employees and communities. The Company ranked first in the Packaging sector on Fortune’s World’s Most Admired Companies for 2022 as well as being included in Barron’s 100 Most Sustainable Companies for the fourth consecutive year. For more information on the Company, visit our website at www.sonoco.com.

Contact:

Lisa Weeks – Media Relations – lisa.weeks@sonoco.com – (843) 383-7524

Source: Sonoco Products Company