Sonoco Reports Second Quarter 2019 Results

Financial News

HARTSVILLE, S.C., July 18, 2019 -- Sonoco (NYSE: SON), one of the largest diversified global packaging companies, today reported financial results for its second quarter ending June 30, 2019.

Second Quarter Highlights

  • Second-quarter 2019 GAAP earnings per diluted share were $0.80, compared with $0.88 in 2018.
  • Second-quarter 2019 GAAP earnings included after-tax charges of $15.3 million related to restructuring actions, non-operating pension costs and acquisition costs. In the second quarter of 2018, GAAP results included net after-tax charges of $4.2 million, as after-tax restructuring charges were mostly offset by a tax benefit from the U. S. Tax Cuts and Jobs Acts of 2017.
  • Base net income attributable to Sonoco (base earnings) for second quarter 2019 was $0.95 per diluted share, compared with $0.93 in 2018. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided second-quarter 2019 base earnings guidance of $0.93 to $0.99 per diluted share.
  • Second-quarter 2019 net sales were $1.36 billion, essentially flat when compared with $1.37 billion from 2018.
  • Cash flow from operations shows $40.1 million in the first six months of 2019, compared with $251.2 million in 2018. Free cash flow was a use of cash of $144.9 million, compared with $88.8 million of free cash flow generated in the first six months of 2018. Year-to-date cash flows reflect a $190 million voluntary contribution to the Company's U.S. defined benefit pension plans. (See free cash flow definition and reconciliation to cash flow from operations later in this release.)
  • On May 20, 2019, Sonoco signed a definitive agreement to acquire Corenso Holdings America, Inc, from a company owned by investment funds advised by Madison Dearborn Partners, LLC, for approximately $110 million in cash. Corenso Holdings America is a leading U.S. manufacturer of uncoated recycled paperboard and high-performance cores used in the paper, packaging films, tape and specialty industries. The acquisition is expected to close by the end of the third quarter of 2019. 

Third Quarter and Full-Year Guidance Update

  • Base earnings for the third quarter of 2019 are estimated to be in the range of $0.88 to $0.94 per diluted share, compared to $0.86 per diluted share in the third quarter of 2018.
  • Full-year 2019 base earnings guidance remains at $3.52 to $3.62 per diluted share.
  • As a result of the after-tax cash flow impact from the voluntary contribution to the Company's U.S. defined benefit pension plans, full-year 2019 operating cash flow guidance has been lowered to a range of $435 million to $455 million, down from the previous range of $600 million to $620 million. Also, the Company now expects free cash flow to be $60 million to $80 million, compared with previous guidance of $225 million to $245 million.

Note: Third-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 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 on Second Quarter Results
Commenting on the Company’s second-quarter GAAP and base earnings performance, Rob Tiede, President and Chief Executive Officer, said, "Sonoco's diverse mix of businesses produced solid operating results during the quarter, despite challenging global macroeconomic conditions, where we saw further slowing in demand in many of our served markets. In addition, we experienced unforeseen fires, floods and other events which damaged four of our operations resulting in insurance deductible and other business losses of approximately 2 cents per share. Overall in the second quarter, net sales were essentially flat and GAAP net income attributable to Sonoco declined primarily due to our targeted restructuring efforts, which are focused on reducing costs and improving operating margin. Base net income gained 3.0 percent to a record $96.5 million as improvements in productivity and earnings from acquisitions more than offset lower volume/mix. GAAP gross profit margin was a strong 20.2 percent, unchanged from last year's quarter and approximately 25 basis points higher than first quarter, while GAAP operating profit declined from last year due to higher restructuring and other costs. Base operating profit increased 4.4 percent to a record $144.3 million, while base operating margin increased approximately 50 basis points from last year.

“Our Consumer Packaging segment reported lower sales and operating profit compared to last year's quarter, however, operating margin improved slightly to 10.4 percent. Sales in our Paper and Industrial Converted Products segment were up 3.6 percent, while operating profit was essentially flat with last year's record results and operating margin declined 52 basis points. Also, our Display and Packaging segment continued its turnaround with operating margin expanding 477 basis points over the prior-year period, and in our Protective Solutions segment operating profit improved 4.8 percent and operating margin expanded by 66 basis points.”


Source: Sonoco