Sonoco Products Co.
) gained 0.5% and closed at $42.05, a day after the company
reported fourth-quarter 2013 adjusted earnings of 58 cents per
share, which rose 3.5% from 56 cents earned in the year-ago
quarter. Earnings were in line with the Zacks Consensus Estimate
and company's guidance range of 55-59 cents.
The quarterly results excluded 5 cents per share of an after-tax
charge related to restructuring activities associated with the
expected plant closure in Ireland and Canada. Including this,
fourth-quarter 2013 earnings were 53 cents per share as against
42 cents in the year-ago quarter, which excluded an after-tax
charge of 14 cents per share related to restructuring activities
and taxes on the repatriation of offshore cash.
Net sales increased 3% year over year to $1.21 billion in the
quarter, in line with the Zacks Consensus Estimate. The
year-over-year sales improvement was driven by higher volume and
Cost of sales increased 2.2% year over year to $993.7 million.
Gross profit went up 8% year over year to $221 million. Gross
margin grew 90 basis points (bps) to 18.2%, driven by strong
productivity gains, volume growth and a positive price-cost
relationship. These were partially offset by a rise in
maintenance, labor and other costs.
Selling, general and administrative expenses increased 13.7% year
over year to $127 million due to wage inflation and higher
management incentives. Sonoco's adjusted operating income rose 2%
year over year to $93.8 million from $91.9 million in the
year-ago quarter. However, operating margin contracted 10 bps
year over year to 7.7%.
segment reported net sales of $482 million, up 4% from $463.8
million in the prior-year quarter. The rise was attributable to
volume improvement and a positive mix of business in packaging,
composite cans and rigid plastic containers, along with higher
sales prices and acquisition of a small graphics management
business in the U.K. These factors were partially offset by the
negative impact of foreign exchange.
Operating profit grew 20.6% year over year to $48.4 million. The
improvement came on the back of volume/mix gains, positive
price-cost relationship and productivity improvements, partially
offset by higher labor and operating costs.
Net sales at the
Paper and Industrial Converted Products
segment went up 3% year over year to $463.6 million, driven by
higher selling prices primarily associated with recovery in paper
costs and volume and mix gains in North America and Europe. These
were somewhat offset by the closure of European recycling
operations and the negative impact of foreign exchange.
Operating profit however, decreased 8% year over year to $33.3
million due to higher maintenance and labor costs and increase in
the profit deferred on intercompany paper sales.
Display and Packaging
segment's net sales increased 1% year over year to $131.6 million
from $130 million in the year-earlier quarter. Volume growth in
the U.S. display and packaging business was offset by lower
contract packaging volume.
Operating profit rose 2.8% year over year to $4.6 million on an
improved mix of business in U.S. display and packaging
activities, partially offset by higher labor and other operating
segment's net sales went up 3% year over year to $137.6 million.
The increase was mainly driven by volume expansion in the
industrial and consumer protective businesses, offset by the
divestiture of a small box plant.
Operating profit at the segment declined to $6.7 million from
$9.5 million in the year-ago quarter, primarily due to a negative
price/cost relationship, along with rise in labor and other
operating costs such as the institution of a plant in Mexico and
an unfavorable mix of business in retail packaging.
Sonoco ended 2013 with cash and cash equivalents of $217.6
million, down from $373 million as of 2012-end. Cash flow from
operations was $538 million infiscal 2013, compared with $404
million in the prior year.
The long-term debt of the company decreased to $946 million as of
Dec 31, 2013 from $1,099 million as of Dec 31, 2012.
Consequently, debt-to-capitalization ratio contracted to 36% as
of Dec 31, 2013 from 47.7% as of Dec 31, 2012.
The Board of Sonoco declared a quarterly dividend of 31 cents per
share, to be paid on Mar 10, 2014 to shareholders of record on
Feb 26, 2014.
Fiscal 2013 Performance
For full-year 2013, Sonoco reported earnings per share of $2.30,
up 4% from $2.21 in 2012. The results were in line with the Zacks
Consensus Estimate of $2.30. The year-over-year growth was driven
by productivity improvements, modest volume growth and a positive
price/cost relationship, partially offset by higher labor,
maintenance, pension and other expenses.
Revenues for the year 2013 rose 1% year over year to $4.85
billion. Revenues marginally beat the Zacks Consensus Estimate of
For the full year 2014, Sonoco expects earnings per share to
range from $2.43 to $2.53. The company also remains committed to
earnings per share target of $2.51, reflecting 9.1% improvement
over 2013 base earnings driven by expected growth in volume/mix,
lower pension expense, productivity improvements and a positive
price/cost relationship. Free cash flow is anticipated to be
around $130 million for 2014.
Sonoco expects first-quarter 2014 earnings per share in the range
of 50-54 cents. The company also announced to repurchase about 2
million shares in 2014, which would add approximately 2 cents to
earnings per diluted share for the year.
Organic sales growth, geographic expansion and strategic
acquisitions remain growth drivers for Sonoco. However, global
economic factors and possible changes in raw material prices
remain headwinds for the company.
South Carolina-based Sonoco is a global provider of a variety of
consumer packaging, industrial products, protective packaging and
packaging supply chain services. The company is also the largest
producer of paper-based tubes and cores in North America.
At present, Sonoco carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the same industry include
Resolute Forest Products Inc.
Packaging Corporation of America
). While Ball Corporation and Resolute Forest Products sport a
Zacks Rank #1 (Strong Buy). Packaging Corporation has a Zacks
Rank #2 (Buy).
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SONOCO PRODUCTS (SON): Free Stock Analysis
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