HARTSVILLE, S.C., Feb. 14, 2019 -- Sonoco (NYSE: SON), one of the largest diversified global packaging companies, today reported financial results for its fourth quarter and full year, both ending December 31, 2018.
Fourth-Quarter and Full-Year Highlights
- Fourth-quarter 2018 GAAP earnings per diluted share were $0.77, compared with $0.06 in 2017. 2018 results include net after-tax charges of $0.07 per diluted share, related to restructuring activities, acquisitions, and certain other charges which were partially offset by non-base income tax benefits related to foreign tax credit valuation allowance releases and other non-base tax adjustments. Prior-year results included a net after-tax charge of $0.67 per diluted share mostly due to the impact of the 2017 U.S. Tax Cuts and Jobs Act, as well as restructuring expenses, acquisition costs and other one-time items. Full-year 2018 GAAP earnings per diluted share were $3.10, compared to $1.74 in 2017. Sonoco previously provided GAAP earnings guidance of $0.75 to $0.85 and $3.09 to $3.19 per diluted share for the fourth quarter and full year, respectively.
- Base net income attributable to Sonoco (base earnings) for the quarter was $0.84 per diluted share, compared with $0.72 in 2017. Full-year 2018 base earnings per diluted share were $3.37, compared to $2.79 in 2017. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.)
- Fourth-quarter 2018 net sales grew to $1.36 billion, up 4.4 percent, from $1.30 billion in 2017. Full-year 2018 net sales grew 7.0 percent to a record $5.39 billion, compared to $5.04 billion in 2017.
- Full-year cash flow from operations was $589.9 million for 2018, compared with $348.3 million in 2017. Free cash flow was $260.2 million, compared with $11.5 million in 2017. (See free cash flow definition and reconciliation to cash flow from operations later in this release.)
- During the fourth quarter, Sonoco purchased the remaining 70 percent interest in the Conitex Sonoco joint venture as well as a previously unowned composite can operation in Spain from Texpack, Inc., for total consideration of approximately $145 million. Also, Sonoco acquired an additional 19 percent interest in its Sonoco Asia, LLC, joint venture from PFE Hong Kong Limited for $35 million. This increased Sonoco's ownership of Sonoco Asia, LLC to approximately 99 percent.
First-Quarter and Full-Year 2019 Guidance
- Base earnings for the first quarter of 2019 are estimated to be in the range of $0.77 to $0.83 per diluted share, compared to $0.74 per diluted share in the first quarter of 2018.
- As previously reported, full-year 2019 base earnings are expected to be $3.47 to $3.57 per diluted share, with a projected midpoint of $3.52 per diluted share. This estimate does not reflect the adoption of the new lease accounting standard that took effect January 1, 2019. Additionally, beginning January 1, 2019, the Company excludes non-operating components of net pension expense from base earnings. In 2019, these charges are expected to total approximately $19 million, before the effect of income taxes. In 2018, base earnings included non-operating components of net pension expense totaling $0.2 million, before the effect of income taxes.
- Full-year 2019 operating cash flow and free cash flow are expected to be in a range of $600 million to $620 million and $225 million and $245 million, respectively.
Note: First-quarter and full-year 2019 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, asset impairment charges, acquisition-related costs, certain income tax related events and other items. These items could have a significant impact on the Company's future GAAP financial results.
Commenting on the Company’s full-year and fourth-quarter GAAP and base results, Sonoco President and Chief Executive Officer Rob Tiede said, "Despite hurricanes, accelerating inflation, tariffs and disappointing performance in our Consumer Packaging segment, Sonoco produced record top-line, bottom-line, and cash flow results in 2018. This performance demonstrates how our strong, diversified business mix has allowed us to produce consistent earnings improvement over the past several years."
"In the fourth quarter, net sales grew approximately 4.4 percent and bottom-line results (base net income attributable to Sonoco) improved by more than 15.4 percent compared to last year. However, results for the fourth quarter were choppy as a strong performance in our Paper and Industrial Converted Products, and Display and Packaging segments were offset by a disappointing performance in the Consumer Packaging segment. Overall, earnings in the fourth quarter benefited from a positive price/cost relationship, acquisitions and a lower effective tax rate compared to the prior year, which were partially offset by negative productivity, higher operating costs and lower volume/mix."
"Our Paper and Industrial Converted Products segment produced another solid quarter as net sales grew 8.8 percent and operating profit expanded 22.6 percent over the prior year's quarter, reflecting a positive price/cost relationship, earnings from the recently completed Conitex acquisition, and proceeds from business interruption insurance. These benefits were partially offset by lower productivity and modestly lower volume/mix. Net sales in our Consumer Packaging segment improved 3.6 percent over the prior year's quarter, while operating profit declined 34.7 percent primarily due to weak results in our rigid plastics and flexible packaging businesses driven by negative productivity, lower volume/mix and higher operating costs."
"Our Display and Packaging segment produced its strongest quarterly operating profit in a decade, benefiting from strong domestic display volume, productivity improvements, a positive price/cost relationship and the exit from an under-performing arrangement to operate a large pack center near Atlanta at the end of the third quarter. Finally, results in our Protective Solutions segment declined slightly from the previous year as higher operating costs offset a modest improvement in volume/mix."