By the numbers: Q3 2024
Net sales: $1.68B
Down 2% year over year, due to the Q2 sale of Protexic and other factors
Consumer packaging net sales: $984M
Down 0.1% year over year
Industrial packaging net sales: $585M
Up 0.9% year over year
Net income: $51M
Compared to $131M in Q3 2023
- Q3 overview: CEO Howard Coker reported “another solid quarter” for the company during a Friday earnings call, with an estimated $141 million in “productivity improvements” realized through Q3 due to various actions. The company also reaffirmed Q4 guidance in multiple categories, which excludes the potential effect of upcoming acquisitions or related changes.
- Hurricane effects: Coker reported that more than 60 facilities were in the initial path of Helene, leading to shutdowns that limited production in the remaining days of Q3 and affected supply chains into October. Milton inflicted “major damage” on a thermoform facility in Plant City, Florida, that resulted in weeks of downtime.
- Consumer trends: Volumes in this segment were up 1.8% year over year, largely driven by growth in metal packaging. Executives noted the aerosol container category was improving as consumers finally work through higher volumes of cleaning and disinfectant products purchased during the pandemic.
- Industrial trends: Volumes were up 6% in this segment, but demand patterns are mixed heading into 2025. Facility closures are underway and Chief Operating Officer Rodger Fuller said the company anticipates “future closures and consolidations” as it reviews various regions.
- Cost cutting: A securities filing noted $26.7 million in severance and termination benefits through Q3, which the company said included costs for an estimated 220 employees and various facilities under its Industrial segment. This included facility relocations in Greece and Germany, as well as multiple closures. The closure list includes paper mills in Washington state and Greece, two industrial converted products facilities in China and another in Canada.
- Asian market: Fuller described conditions in the Asian market as “very weak,” and Coker said Sonoco is in the process of closing one paper mill and three converting operations in China “by the end of this year.” The company’s filing also disclosed the pending sale of two production facilities in China for $419 million, which is expected to be complete in Q4.
- Eviosys: Coker said the the regulatory approval process for Sonoco’s pending $3.9 billion purchase of metal food packaging company Eviosys is “well underway” and the deal remains on track to close in Q4. Eviosys CEO Tomás López will lead Sonoco’s Europe, Middle East and Africa packaging business. The company no longer plans to issue equity for the deal due to expected proceeds from potential divestitures.
- TFP review: Sonoco announced a strategic review of its Thermoformed & Flexible Packaging business in September, which generated $1.3 billion in revenue last year. An auction process is underway and an agreement could be signed in about six weeks. Coker said the company identified “too many mouths to feed” while assessing its five-year plan and that other areas such as metal or paper cans offered greater opportunities for return on invested capital.
- ThermoSafe review: Sonoco also still intends to divest its temperature-assured packaging business, which generated $283 million in revenue last year, but is waiting to advance that process due to bandwidth constraints from the pending Eviosys and TFP processes. It expects to complete this strategic review in Q3 2025.
- Future substrate mix: Following the expected completion of all these transactions, Coker said that “effectively we’re out of single-use plastics” and will be primarily focused on paper, aluminum and steel products. The company will retain its industrial plastics business. He described this as purely a business decision, rather than one driven by regulations, and said that “sustainability was not part of the conversation,” but noted that “it certainly doesn’t hurt the story at the end of the day, particularly in other parts of the world.”
- Outlook: “This is probably the largest period of change this company has been through in our 125-year history,” said Coker, noting that he sees room for the company’s stock price to be valued more highly as the plans come to fruition. “We know we will prove out our forecast and our expectations, and the market will respond accordingly.”
