Sonoco decreased EBIT margin to 7.7% in 1Q2017

Sonoco decreased net sales by 4.4% in 1Q2017 to the level of USD 1,172.3 million, amid EBIT 89.9 million, margin accounted for 7.7%.

Jack Sanders, Sonoco President and Chief Executive Officer, commented:

“Despite an unprecedented and unexpected sharp increase in recovered paper prices, which is the primary raw material used in our Paper and Industrial Converted Products segment, Sonoco was still able to achieve the midpoint of our first- quarter guidance. Overall, compared to the prior-year quarter, the Company’s earnings were negatively impacted by lower volume/mix; divestitures, net of acquisitions; a negative price/cost relationship; and higher labor, maintenance, pension and other operating expenses. Partially offsetting the quarter’s headwinds were procurement savings, fixed-cost productivity, lower management incentive expense, and a lower effective tax rate.

Operating profit in our Consumer Packaging segment declined 8 percent from the prior-year quarter; however, operating margin remained at a solid 12 percent. The decline in segment operating profit was due primarily to the November 2016 sale of the Company’s blowmolding operations and lower composite can volume in Europe and North America. Segment sales declined by 9 percent, due to the divestiture of the Company’s blowmolding operations, net of acquisitions, lower volume and the negative impact of foreign exchange, partially offset by higher selling prices implemented to recover rising raw material costs and other inflation.

Our Display and Packaging segment’s operating profit was essentially flat with last year’s quarter. Segment sales declined 21 percent primarily due to discontinuance of the Company’s contract packaging center in Mexico, which had little effect on operating profits. Results also reflect lower volume in domestic displays and retail packaging, and the negative impact of foreign exchange.

Operating profit in our Paper and Industrial Converted Products segment declined approximately 26 percent as the average price for recovered paper in the Company’s U.S. and Canada operations increased nearly 90 percent from the prior year’s quarter, resulting in a significant negative price-cost relationship as the Company was unable to immediately pass on the higher costs to our paper, tube and core customers. Higher labor, maintenance, pension and other expenses also negatively impacted operating profit. Current-quarter segment sales grew by 5 percent due primarily to higher recovered paper prices, partially offset by the divestiture of a paperboard mill in France, lower volume and the negative impact of foreign exchange.

Operating profit in our Protective Solutions segment declined 10 percent from the prior-year quarter, as negative volume/mix, a negative price/cost relationship, and higher labor, maintenance and other operating costs were only partially offset by fixed-cost productivity improvements. Sales improved slightly in the quarter due primarily to acquisitions.”

In 4Q2016 Sonoco decreased sales by 9.9%.

Check other wood business-related companies 1Q2017 schedules for financial and operating results.

Earlier Sonoco launched a new portfolio of flexible packaging.

About Sonoco:

The company is a global provider of a variety of consumer packaging, industrial products, protective packaging and packaging supply chain services. With annualized net sales of approximately USD 5.0 billion, it has 20,800 employees working in more than 300 facilities in 35 countries. Sonoco is one of the largest producers of uncoated recycled paperboard in the United States and Canada, producing more than 1 million tons annually from 11 mills.

Source: Woodbizforum