Sonoco Reports Second Quarter 2024 Results

Sonoco Products Company (“Sonoco” or the “Company”), one of the largest sustainable global packaging companies, today reported financial results for its second quarter ended June 30, 2024.

Summary

• Achieved GAAP net income attributable to Sonoco of $91 million, Adjusted EBITDA of $262 million, diluted earnings per share of $0.92 and diluted Adjusted earnings per share of $1.28
• Generated strong productivity of $51 million during the second quarter and $102 million during the first half of 2024
• Generated $275 million of operating cash flow and $96 million of Free Cash Flow during the first half of 2024
• Entered into an agreement on June 24, 2024, to acquire Eviosys for approximately $3.9 billion; expected to be completed in the fourth quarter of 2024
• Reaffirms full year 2024 guidance for Adjusted EBITDA, Adjusted earnings per share (“EPS”), and operating cash flow (excluding effects of the pending Eviosys acquisition and potential divestitures)
• Net sales decreased 5% to $1.6 billion primarily driven by the Protective Solutions (“Protexic”) divestiture, the closure of a thermoformed food packaging plant, the treatment of recycling operations as a procurement function beginning January 1, 2024 and lower selling prices; overall volumes were positive and up low single digits including the impact of acquisitions
• GAAP operating profit decreased to $140 million primarily due to higher acquisition-related costs, restructuring, and asset impairment charges; unfavorable price/cost was offset by higher productivity
• Effective tax rates on GAAP net income attributable to Sonoco and Adjusted Earnings were 23.5% and 25.5%, respectively, in Q2 2024, compared to 26.8% and 25.6%, respectively, in Q2 2023
• GAAP net income attributable to Sonoco decreased to $91 million resulting in GAAP EPS (diluted) of $0.92
• Adjusted Earnings decreased to $127 million resulting in Adjusted EPS (diluted) of $1.28
• Adjusted operating profit and Adjusted EBITDA decreased to $193 million and $262 million, respectively, primarily due to unfavorable price/cost in the Industrial Paper Packaging (“Industrial”) segment

“Sonoco delivered solid second quarter results with sequential growth in adjusted EBITDA and EPS,” said Sonoco’s President and CEO, Howard Coker. “While the pace of Consumer volume recovery remains muted, we were pleased to see low single digit organic volume improvements in Industrials. Importantly, productivity was $51 million in the second quarter bringing our first half 2024 total to $102 million, well ahead of our full year outlook. Our assertive actions to improve productivity from value creating capital and portfolio simplification has continued to yield results. In addition, we continued executing on our disciplined and dynamic capital deployment strategy by investing in capital and innovation projects while returning capital to shareholders.”

Second Quarter 2024 Segment Results

Sonoco reports its financial results in two reportable segments: Consumer Packaging (“Consumer”) segment and Industrial, with all remaining businesses reported as All Other.

Consumer Packaging

• Consumer net sales were down 4% to $928 million primarily due to the closure of a thermoformed food packaging plant and lower pricing; the metal packaging business experienced year over year volume growth in both food and aerosol
• Segment operating profit margin increased to 12% and Adjusted EBITDA margin to 16% from continued strong productivity

Industrial Paper Packaging

• Industrial net sales increased 3% to $601 million from low single digit organic volume improvements in global paper and converted products and from acquisitions, partially offset by lower index-related pricing and lower sales related to the treatment of recycling as a procurement function effective January 1, 2024
• Segment operating profit margin decreased to 11% and Adjusted EBITDA margin to 16% as continued price/cost pressure and higher employee-related expenses that are not expected to persist, were only partially offset by strong productivity and the benefit of higher volumes

All Other

• Net sales declined 36% primarily due to the sale of Protexic
• Operating profit and Adjusted EBITDA declined by 39% and 37%, respectively, from the sale of Protexic, lower volumes and negative price/cost, partially offset by higher productivity

Balance Sheet and Cash Flow Highlights

• Cash and cash equivalents were $140 million as of June 30, 2024, compared to $152 million as of December?31, 2023
• Total debt was $3.0 billion as of June 30, 2024, essentially flat compared to December 31, 2023
• On June 30, 2024, the Company had available liquidity of $1.4 billion, including the undrawn availability under its revolving credit facility
• Cash flow from operating activities for the first half of 2024 was $275 million, compared to $349 million in the same period of 2023
• Capital expenditures, net of proceeds from sales of fixed assets, for the first six months of 2024 were $179 million, compared to $90 million for the same period last year
• Free Cash Flow for the first six months of 2024 was $96 million compared to $259 million for the same period of 2023. 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 six months ended June 30, 2024 increased to $101 million compared to $98 million for the same period of the prior fiscal year

Announced Acquisition

On June 24, 2024, Sonoco announced it had entered into a definitive agreement to acquire Eviosys, a leading European manufacturer of food cans, ends and closures, from KPS Capital Partners, LP (“KPS”) (the “Transaction”) to expand Sonoco’s global leadership in metal food can and aerosol packaging. Both Sonoco’s metal business and Eviosys have demonstrated meaningful commercial momentum, and the Transaction is expected to facilitate Sonoco’s ability to partner with customers and lead with innovation and sustainability.

The Transaction advances Sonoco’s strategy of disciplined and high return capital allocation. Under the terms of the agreement, Sonoco agreed to acquire Eviosys from KPS for approximately $3.9 billion (€3.615 billion). The Transaction is expected to be immediately accretive to Adjusted EPS.

Sonoco is committed to maintaining its investment grade credit rating and intends to reduce its leverage following the Transaction with debt reduction from expanded divestitures and cash from operations.

The Transaction is expected to close by the end of 2024, subject to the completion of required works council consultations, the receipt of required regulatory approvals and other customary closing conditions.

Eviosys’ current CEO, Tomas Lopez, is expected to remain with Sonoco and lead Sonoco’s EMEA metal packaging business and Rodger Fuller, Chief Operating Officer, is expected to lead the integration effort.

Guidance⁽¹⁾       

Third Quarter 2024

• Adjusted EPS⁽²⁾: $1.40 to $1.60

Full Year 2024

• Adjusted EPS⁽²⁾: $5.00 to $5.30
• Cash flow from operating activities: $650 million to $750 million
• Adjusted EBITDA: $1,050 to $1,090

Commenting on the Company’s outlook, Coker said, “We expect sequential adjusted earnings per share improvement in the third quarter from seasonally higher volumes in Consumer, stable volumes in Industrials, and continued strong productivity. Our first half 2024 results reinforce our confidence in our ability to meet our current full year 2024 financial expectations.”

⁽¹⁾ Guidance provided excludes any impact of the pending Eviosys acquisition or potential divestitures. 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 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⁾ Third 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 from 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 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 integrated its flexible packaging and thermoformed 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 changed its operating and reporting structure to reflect the way it now manages its operations, evaluates performance, and allocates resources. Beginning the first quarter of 2024, the Company’s consumer thermoformed businesses moved from the All Other group of businesses to the Consumer segment. The Company’s Industrial segment was not affected by these changes.

For the full second quarter results, click here.

About Sonoco

With net sales of approximately $6.8 billion in 2023, Sonoco has approximately 21,000 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. Sonoco was named one of America’s Most Responsible Companies by Newsweek. For more information on the Company, visit our website at www.sonoco.com.

Contact:

Lisa Weeks – Vice President of Investor Relations & Communications – lisa.weeks@sonoco.com – (843) 383-7524

Source: Sonoco Products Company