HARTSVILLE, S.C., Feb. 14, 2024 (GLOBE NEWSWIRE) — Sonoco Products Company (“Sonoco” or the “Company”) (NYSE:SON), one of the largest sustainable global packaging companies, today reported financial results for its fourth quarter and fiscal year ended December 31, 2023.
Summary
Achieved second best full year results for Adjusted EPS in the Company’s 125-year history
Generated a record $883 million of operating cash flow and $600 million of Free Cash Flow in the full year of 2023
Invested a record level of capital in the business for future growth and productivity
Achieved record results in Operating Profit and Adjusted EBITDA in flexible packaging and record net sales in rigid paper containers in the Consumer Packaging (“Consumer”) segment
Produced record Operating Profit margins and Adjusted EBITDA margins in Industrial Paper Packaging (“Industrial”) segment despite a low volume environment
Expanded the Company’s flexible packaging capabilities with the acquisition of Inapel Embalagens Ltda. in Brazil
Made further progress on strategic priorities including portfolio simplification, organic growth investments, and Environmental, Social, and Governance commitments
Solid fourth quarter operating results driven by strong productivity offset by higher employee expenses, healthcare, and accounts receivable reserve
Effective January 1, 2024, we integrated the flexible packaging and thermoforming packaging businesses within the Consumer segment to streamline operations, enhance customer service, and better position the business to accelerate growth
Fourth Quarter and Year End 2023 Consolidated Results
(Dollars in millions except per share data)
Three Months Ended
Twelve Months Ended
GAAP Results
December 31, 2023
December 31, 2022
Change
December 31, 2023
December 31, 2022
Change
Net sales
$
1,636
$
1,676
(2
)%
$
6,781
$
7,251
(6
)%
Operating profit
$
135
$
127
7
%
$
716
$
675
6
%
Net income attributable to Sonoco
$
81
$
97
(16
)%
$
475
$
466
2
%
EPS (diluted)
$
0.82
$
0.98
(16
)%
$
4.80
$
4.72
2
%
Three Months Ended
Twelve Months Ended
Non-GAAP Results(1)
December 31, 2023
December 31, 2022
Change
December 31, 2023
December 31, 2022
Change
Adjusted operating profit
$
167
$
184
(9
)%
$
804
$
920
(13
)%
Adjusted EBITDA
$
236
$
246
(4
)%
$
1,067
$
1,162
(8
)%
Adjusted net income attributable to Sonoco (“Adjusted Earnings”)
$
101
$
125
(19
)%
$
520
$
639
(19
)%
Adjusted EPS (diluted)
$
1.02
$
1.27
(20
)%
$
5.26
$
6.48
(19
)%
(1) See the Company’s definitions of non-GAAP financial measures, explanations as to why they are used, and reconciliations to the most directly comparable GAAP financial measures later in this release.
Q4-23 (versus Q4-22):
Net sales decreased 2% to $1.6 billion driven by lower volumes and pricing
GAAP operating profit increased to $135 million due to lower acquisition and restructuring costs, favorable productivity, and revenue from acquisitions
Effective tax rates on GAAP and Adjusted Earnings were 21.7% and 25.7%, respectively, in Q4 2023 compared to 1.9% and 21.3%, respectively, in Q4 2022
GAAP net income decreased to $81 million for GAAP EPS (diluted) of $0.82
Adjusted Earnings decreased to $101 million for Adjusted EPS (diluted) of $1.02
Adjusted operating profit and Adjusted EBITDA decreased to $167 million and $236 million, respectively, due to lower volumes across the portfolio, unfavorable price/cost in Industrial, higher employee expenses, and higher accounts receivable reserve, which were partially offset by higher productivity and favorable price/cost in Consumer
2023 (versus 2022):
Net sales decreased 6% year-over-year to $6.8 billion driven by lower volumes across the portfolio, partially offset by revenue from acquisitions
GAAP operating profit increased to $716 million due to gains on divestitures and asset sales, lower acquisition and restructuring costs, favorable productivity, and revenue from acquisitions
Effective tax rates on GAAP and Adjusted Earnings for the full year 2023 were 24.3% and 24.6%, respectively, compared with 20.7% and 23.9%, respectively, in the prior year
Net income margin was 7.0% and Adjusted EBITDA margin was 15.7% in 2023, compared with 6.4% and 16.0% in 2022, respectively
GAAP net income increased to $475 million for GAAP EPS (diluted) of $4.80
Adjusted Earnings decreased to $520 million for Adjusted EPS (diluted) of $5.26
Adjusted operating profit decreased to $804 million as lower overall volumes and unfavorable metal price overlap were partially offset by favorable productivity and revenue from acquisitions
“In 2023, Sonoco made further progress on our strategic initiatives and delivered solid financial results in a challenging macroeconomic environment,” said Howard Coker, President and Chief Executive Officer. “We achieved the second best year of financial results in our 125-year history. Our multi-year focus on improving and leveraging the operating model combined with our capital allocation strategy resulted in record productivity. We advanced our strategy by strengthening our portfolio with the addition of accretive acquisitions in our core businesses, and successfully divesting non-core assets.”
Coker continued, “We generated record annual operating cash flow of $883 million and free cash flow of over $600 million. We remained focused on disciplined capital allocation and a strong balance sheet, and were pleased to increase our annual dividend for the 40th straight year. I am extremely proud of the hard-working Sonoco team members who remain focused on delivering value for our customers and executing initiatives to support the Company’s continued success in the future.”
Fourth Quarter and Year End 2023 Segment Results
(Dollars in millions except per share data)
Sonoco reports its financial results in two reportable segments: Consumer and Industrial, with all remaining businesses reported as All Other.
Three Months Ended
Twelve Months Ended
Consumer Packaging
December 31, 2023
December 31, 2022
Change
December 31, 2023
December 31, 2022
Change
Net sales
$
856
$
879
(3
)%
$
3,627
$
3,768
(4)%
Segment operating profit
$
83
$
85
(3
)%
$
382
$
526
(27)%
Segment operating profit margin
10
%
10
%
11
%
14
%
Segment Adjusted EBITDA1
$
116
$
114
2
%
$
507
$
638
(21)%
Segment Adjusted EBITDA margin1
14
%
13
%
14
%
17
%
Q4-23 (versus Q4-22):
Consumer net sales were $856 million as volumes continued to be impacted by lower consumer purchases for food and household products from inflationary pricing impacts
Consumer operating profit decreased to $83 million due to lower volumes and higher accounts receivable reserve, which were partially offset by strong productivity and strategic pricing initiatives
2023 (versus 2022):
Consumer net sales were $3.6 billion, down 4% year over year, primarily due to the previously mentioned inflationary pricing impacts on volumes and volume declines from customer retail destocking throughout the year
Full year segment operating profit decreased to $382 million due to unfavorable volume/mix and metal price overlap of $35 million (which was a full year $105 million year-over-year difference), which was partially offset by improved productivity
Three Months Ended
Twelve Months Ended
Industrial Paper Packaging
December 31, 2023
December 31, 2022
Change
December 31, 2023
December 31, 2022
Change
Net sales
$
593
$
597
(1)%
$
2,374
$
2,685
(12
)%
Segment operating profit
$
62
$
79
(22)%
$
318
$
328
(3
)%
Segment operating profit margin
10
%
13
%
13
%
12
%
Segment Adjusted EBITDA1
$
91
$
106
(14)%
$
432
$
434
—
%
Segment Adjusted EBITDA margin1
15
%
18
%
18
%
16
%
Q4-23 (versus Q4-22):
Industrial net sales decreased 1% to $593 million due to unfavorable volume/mix, weakness in global demand for converted paper products and lower pricing, which was partially offset by higher demand in paper and revenue from acquisitions
Continued low volumes and price/cost pressures were partially offset by improved productivity which resulted in an operating profit margin of 10% and Adjusted EBITDA margin of 15%
2023 (versus 2022):
Industrial sales decreased 12% to $2.4 billion due to unfavorable volume and index-related pricing declines
Segment operating profit margin and Segment Adjusted EBITDA margin increased to 13% and 18%, respectively, primarily due to the first half 2023 benefits of higher pricing and lower costs
Three Months Ended
Twelve Months Ended
All Other
December 31, 2023
December 31, 2022
Change
December 31, 2023
December 31, 2022
Change
Net sales
$
187
$
200
(7
)%
$
780
$
798
(2
)%
Operating profit
$
22
$
20
14
%
$
104
$
66
57
%
Operating profit margin
12
%
10
%
13
%
8
%
Adjusted EBITDA1
$
28
$
26
10
%
$
128
$
91
41
%
Adjusted EBITDA margin1
15
%
13
%
16
%
11
%
Q4-23 (versus Q4-22):
Net sales declined 7% due to lower volumes, primarily in temperature assured packaging as COVID-related demand declined
Operating profit and Adjusted EBITDA improved by 14% and 10%, respectively, primarily due to positive strategic pricing and strong productivity, partially offset by lower volume
2023 (versus 2022):
Net sales declined 2% primarily due to lower volumes
Operating profit and Adjusted EBITDA improved by 57% and 41%, respectively, primarily due to ongoing structural improvement programs to improve profitability across this diversified collection of businesses, favorable strategic pricing initiatives, and strong productivity
1Segment and All Other Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. See the Company’s reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures later in this release.
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents were $152 million as of December 31, 2023, compared to $227 million as of December 31, 2022.
Total debt was $3.1 billion as of December 31, 2023, a decrease of $139 million from December 31, 2022.
On December 31, 2023, the Company had available liquidity of $1.1 billion, including the undrawn availability under its revolving credit facility.
Cash flow from operating activities for the year ended 2023 was $883 million, compared to $509 million in the same period of 2022.
Capital expenditures, net of proceeds from sales of fixed assets, for 2023 were $283 million, compared to $319 million for the same period last year. Capital expenditures were $363 million and net proceeds from the sale of our timberland properties were $80 million in 2023.
Free Cash Flow in 2023 was $600 million compared to $190 million in 2022. 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 fiscal year ended December 31, 2023 increased to $197 million compared to $187 million for the prior fiscal year.
Guidance(1)
First Quarter 2024
Adjusted EPS(2): $1.05 to $1.15
Full Year 2024
Adjusted EPS(2): $5.10 to $5.40
Cash flow from operating activities: $650 million to $750 million
Adjusted EBITDA: $1.05 billion to $1.10 billion
Sonoco’s President and CEO, Howard Coker stated, “In the first quarter of 2024, we expect volumes to be down over the prior year period. We also expect negative price/cost from metal price overlap and from the year-over-year Industrial comparable. For the full year, we are expecting overall sales to be up modestly and price/cost impacts to be negative, in each case compared to the prior year period. We intend to continue to aggressively manage costs and generate positive productivity while we navigate global volume uncertainties. We remain focused on executing strategic initiatives to simplify our portfolio and capture synergies from our recent acquisitions to advance Sonoco through 2024 and beyond. We look forward to providing further updates in our Investor Day, which is planned for February 22, 2024.”
(1) 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 continued 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) First 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 on the sale of businesses or other, 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 will integrate its flexible packaging and thermoforming 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 will change its operating and reporting structure to reflect the way it plans to manage its operations, evaluate performance, and allocate resources going forward. Therefore, in future reporting periods, the Company’s consumer thermoforming businesses will move from the All Other group of businesses to the Consumer segment. The Company’s Industrial segment will not be affected by these changes. As of, and for the year ended December 31, 2023, there were no changes to the manner in which the Company reviewed financial information at the segment level; therefore, these changes had no impact on our reporting structure.
Conference Call Webcast
Management will host a conference call and webcast to further discuss these results beginning at 8:30 am EDT, Thursday, February 15, 2024. The live conference call and a corresponding presentation can be accessed via the Company’s Investor Relations website at https://investor.sonoco.com. To listen via telephone, please register in advance at https://edge.media-server.com/mmc/p/owncumwd/. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the conference call and webcast will be archived on the Company’s Investor Relations website for at least 30 days.
Contact Information:
Lisa Weeks
Vice President of Investor Relations & Communications
lisa.weeks@sonoco.com
843-383-7524
About Sonoco
Founded in 1899, Sonoco (NYSE:SON) is a global provider of packaging products. With net sales of approximately $6.8 billion in 2023, the Company has approximately 22,000 employees working in more than 310 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. The Company ranked first in the Packaging sector on Fortune’s World’s Most Admired Companies for 2022 and was also included in Barron’s 100 Most Sustainable Companies for the fourth consecutive year. For more information on the Company, visit our website at www.sonoco.com.
Forward-looking Statements
Statements included herein that are not historical in nature, are intended to be, and are hereby identified as “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended. In addition, the Company and its representatives may from time to time make other oral or written statements that are also “forward-looking statements.” Words such as “anticipate,” “assume,” “believe,” “committed,” “continue,” “could,” “estimate,” “expect,” “focused,” “forecast,” “future,” “goal,” “guidance,” “likely,” “may,” “might,” “objective,” “ongoing,” “outlook,” “plan,” “potential,” “project,” “seek,” “strategy,” “will,” or the negative thereof, and similar expressions identify forward-looking statements.
Forward-looking statements in this communication include statements regarding, but not limited to: the Company’s future operating and financial performance, including first quarter and full year 2024 outlook and the anticipated drivers thereof; the Company’s ability to support its customers and manage costs; opportunities for productivity and other operational improvements; pricing, customer demand and volume outlook; expected benefits from and integration efforts related to acquisitions and divestitures; the effectiveness of the Company’s strategy and strategic initiatives, including with respect to portfolio simplification and capital allocation priorities; the effects of the macroeconomic environment and inflation on the Company and its customers; and the Company’s ability to generate continued value for customers and shareholders.
Such forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management. Such information includes, without limitation, discussions as to guidance and other estimates, perceived opportunities, expectations, beliefs, plans, strategies, goals and objectives concerning our future financial and operating performance. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements.
Such risks, uncertainties and assumptions include, without limitation, those related to: the Company’s ability to execute on its strategy, including with respect to acquisitions (and integrations thereof), divestitures, cost management, productivity improvements, restructuring and capital expenditures, and achieve the benefits it expects therefrom; the operation of new manufacturing capabilities; the Company’s ability to achieve anticipated cost and energy savings; the availability, transportation and pricing of raw materials, energy and transportation, including the impact of potential changes in tariffs or sanctions and escalating trade wars, and the impact of war, general regional instability and other geopolitical tensions (such as the ongoing conflict between Russia and Ukraine as well as the economic sanctions related thereto, and the ongoing conflict in Israel and Gaza), and the Company’s ability to pass raw material, energy and transportation price increases and surcharges through to customers or otherwise manage these commodity pricing risks; the costs of labor; the effects of inflation, fluctuations in consumer demand, volume softness, and other macroeconomic factors on the Company and the industries in which it operates and that it serves; the Company’s ability to meet its environmental and sustainability goals, including with respect to greenhouse gas emissions; and to meet other social and governance goals, including challenges in implementation; and the other risks, uncertainties and assumptions discussed in the Company’s filings with the Securities and Exchange Commission, including its most recent reports on Forms 10-K and 10-Q, particularly under the heading “Risk Factors.” The Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed herein might not occur.
References to our Website Address
References to our website address and domain names throughout this release are for informational purposes only, or to fulfill specific disclosure requirements of the Securities and Exchange Commission’s rules or the New York Stock Exchange Listing Standards. These references are not intended to, and do not, incorporate the contents of our website by reference into this release.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars and shares in thousands except per share data)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net sales
$
1,635,800
$
1,676,022
$
6,781,292
$
7,250,552
Cost of sales
1,296,148
1,362,085
5,345,638
5,810,903
Gross profit
339,652
313,937
1,435,654
1,439,649
Selling, general, and administrative expenses
200,439
173,466
741,860
707,343
Restructuring/Asset impairment charges
3,952
13,553
56,933
56,910
Gain on divestiture of business and other assets
85
—
78,929
—
Operating profit
135,346
126,918
715,790
675,396
Other income, net
2,714
—
39,657
—
Non-operating pension costs
3,888
2,822
14,312
7,073
Net interest expense
31,619
29,250
126,303
97,041
Income before income taxes
102,553
94,846
614,832
571,282
Provision for income taxes
22,275
1,797
149,278
118,509
Income before equity in earnings of affiliates
80,278
93,049
465,554
452,773
Equity in earnings of affiliates, net of tax
1,552
4,056
10,347
14,207
Net income
81,830
97,105
475,901
466,980
Net loss (income) attributable to noncontrolling interests
(588
)
99
(942
)
(543
)
Net income attributable to Sonoco
$
81,242
$
97,204
$
474,959
$
466,437
Weighted average common shares outstanding – diluted
99,164
98,922
98,890
98,732
Diluted earnings per common share
$
0.82
$
0.98
$
4.80
$
4.72
Dividends per common share
$
0.51
$
0.49
$
2.02
$
1.92
FINANCIAL SEGMENT INFORMATION (Unaudited)
(Dollars in thousands)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Net sales:
Consumer Packaging
$
855,687
$
879,326
$
3,626,977
$
3,767,956
Industrial Paper Packaging
593,080
596,582
2,374,113
2,684,563
All Other
187,033
200,114
780,202
798,033
Net sales
$
1,635,800
$
1,676,022
$
6,781,292
$
7,250,552
Operating profit:
Consumer Packaging
$
82,979
$
85,139
$
382,063
$
526,028
Industrial Paper Packaging
61,504
79,139
317,917
327,859
All Other
22,336