Sonoco Reports 4Q, Full-Year 2019 Results

Sonoco reported financial results for its fourth quarter and full year, both ending Dec. 31, 2019.

Sonoco’s 2019 net sales were $5.37 billion, a decline of $16.7 million, compared with $5.39 billion in 2018. Sales were down 0.3% for the year as acquisitions and higher selling prices were offset by negative volume/mix, the negative impact of foreign exchange and the absence of sales related to the contract packaging operation that Sonoco exited in September 2018.

GAAP net income attributable to Sonoco for 2019 was $291.8 million or $2.88 per diluted share, compared with $313.6 million or $3.10 per diluted share in 2018. GAAP earnings in 2019 included after-tax charges totaling $65.4 million, or $0.65 per diluted share, largely related to restructuring and asset impairment charges, acquisition costs and non-operating pension costs all of which were partially offset by a gain related to the release of an environmental reserve. Sonoco’s 2019 gross profit was a record $1,057.8 million, compared with $1,041 million in 2018. Gross profit as a percentage of sales in 2019 was 19.7%, compared with 19.3% in 2018.

Net sales for the fourth quarter were $1.3 billion, a decline of $46.8 million, or 3.4%, from last year’s quarter. Sales declined due to lower volumes in each segment along with lower selling prices in the Paper and Industrial Converted Products Segment and the negative impact of foreign exchange, which was only partially offset by sales added by the Corenso acquisition.

GAAP net income attributable to Sonoco in the fourth quarter was $44.9 million, or $0.44 per diluted share, a decrease of $32.8 million, compared with $77.7 million, or $0.77 per diluted share, in 2018. Gross profits were $246.9 million in the fourth quarter, a decline of $7.4 million or 2.9%, compared with $254.3 million in the same period in 2018.

“We were extremely pleased how the Sonoco team managed our diverse industrial- and consumer-related businesses through challenging market conditions to achieve solid results in 2019,” said Howard Coker, Sonoco president and CEO. “In addition, we continued to improve our portfolio with the acquisition of Corenso Holdings North America, which strengthened our domestic paperboard operations, and we expanded our offerings into the growing healthcare market with the year-end addition of TEQ. Finally, we launched our EnviroSense portfolio of sustainable packaging solutions that will help our customers further reduce the environmental impact of packaging.

“Our Consumer Packaging segment’s operating profit improved 6.6% as strong earnings in paperboard containers and improved results in flexible packaging were partially offset by weak results in rigid plastics,” added Coker. “The segment benefited from a positive price/cost relationship and productivity improvements, which were partially offset by lower volume/mix and higher operating costs. Our Paper and Industrial Converted Products segment experienced a 10.5% decline in operating profit over the prior year’s quarter as strong improvements in productivity and earnings from the Corenso acquisition were more than offset by a negative price/cost relationship, lower volume/mix and the impact of the prior year’s business interruption insurance proceeds.”

For 2019, cash generated from operations was $425.9 million compared with $589.9 million in 2018, a decrease of $164 million. The primary driver of the lower operating cash flow was an approximately $165 million after-tax voluntary contribution to the company’s US defined benefit pension plan. Free cash flow for 2019 was $74.3 million, compared with $260.2 million in the prior .

As of Dec. 31, 2019, total debt was approximately $1.68 billion, compared with $1.39 billion as of Dec. 31, 2018. The increase in total debt was due primarily to financing of the acquisitions of Corenso and TEQ, and funding a $200 million voluntary contribution to the company’s US defined benefit pension plan. At the end of 2019, the company had a total-debt-to-total-capital ratio of 48.1%, compared with 43.9% at Dec. 31, 2018.