By the numbers
2022 net income: $466.98M
Q4 net sales: $1.68B
Up 16% from the same period in 2021
Annual acquisition spending: $1.48M
Includes the $1.35B acquisition of Ball Metalpack, which Sonoco said has been a key sales driver
2023 guidance: $1.1B - 1.15B EBITDA
Annual free cash flow is also expected to be between $550M and 650M
- Record growth: During South Carolina-based Sonoco’s Q4 earnings call on Thursday, President and CEO Howard Coker said 2022 was a “pivotal year” involving work to “simplify both our portfolio and the way we run the company to drive improved growth and profitability.” Sales growth was driven primarily by the metal packaging acquisition, which was the largest in the company’s 124-year history.
- M&A: Other business segment sales and acquisitions played into the company’s financial results, including Sonoco’s acquisition of Skjern Paper in Denmark for $88 million. Sonoco also announced last year that it is purchasing the remaining equity interest in RTS Packaging from WestRock, a deal that is expected to close later this year. The M&A trend continues into 2023 with this month’s announcement that Northstar Recycling is acquiring Sonoco Sustainability Solutions for an undisclosed amount.
- Consumer vs. industrial packaging: Trends for consumer packaging and industrial paper packaging, which are the majority of Sonoco’s sales, diverged in Q4. Net sales for consumer packaging increased 49%, to $879 million, compared with the same quarter of 2021. Industrial quarterly sales dropped 9%, to $597 million, compared with Q4 2021; the company points to lower demand in all regions, especially Europe and Asia.
- Recession forecast: Coker said “it feels like we are in a recession, from our perspective, on industrial,” but he noted the paper business’s solid performance historically during recessionary periods. He said Sonoco is in a “better position today than we have ever been,” and the global team has worked to create appropriate levels of margin. While overall financial results exceeded Wall Street expectations, the $1.68 billion in revenue fell short of some analysts’ forecasts.
- 2023 outlook: Sonoco predicts that industrial volumes in Q1 2023 will remain flat, but consumer volumes will be positive for the entire year, driven by food packaging. The company expects that Q1 will be the “low-water mark” for the year, and improvements will occur throughout the remainder of 2023.
- Capital expenditures: Planned capital investments on the consumer side will expand capacity, especially for sustainable packaging as demand increases for more sustainable rigid and film packaging. The company expects raw material supplies and prices to stabilize. Capital investments on the industrial side are expected to boost productivity, and the company will carefully monitor volumes in Europe and Asia.
- Material transition: When asked whether Sonoco is seeing a consumer packaging demand shift from plastic to paper, Coker noted that pressure to transition largely is occurring in Europe due to enhanced plastics regulations. In the United States, “we are not seeing a lot of pressure right now,” he said, but “our expectation is that [it] will continue to build on a more enhanced basis here in the United States.”
