Sonoco Products Co.
) has paid approximately $121 million in principal and interest
of its 6.5% bonds that matured on Nov 15. The major portion of
the debt repayment was funded from Sonoco's available cash.
Sonoco's debt levels had increased following the acquisition of
Tegrant in 2011 for $550 million, the largest ever in the
company's history. Though the acquisition positioned Sonoco as a
leader in multimaterial protective packaging in North America, it
was instrumental in driving the debt to capitalization ratio to
47% as of 2011 end from 29% as of Dec 31, 2010. However, since
2011, the company has remained focused on reducing its debt
burden and has paid back debt worth $300 million.
As of the third quarter end, Sonoco's cash and cash equivalents
were $287.6 million, and debt-to-total-capital ratio was 37.28%.
Even though Sonoco's debt-to-total-capital ratio was on the
higher side, nevertheless it outscored its peers such as
Sealed Air Corp.
Graphic Packaging Holding Co.
Bemis Company, Inc.
). Sealed Air, Graphic Packaging and Bemis had respective
debt-to-total-capital ratio of 75.38%, 66.34% and 45.74% as of
Sep 30, 2013.
Following the debt repayment, Sonoco projects net debt to be
around $820 million at 2013 end. This translates to a net debt to
total capitalization ratio of 33.6% and a net debt to EBITDA
ratio of approximately 1.4. Sonoco currently has an investment
grade credit rating of BBB+ and Baa2 from Standard & Poor's
and Moody's, respectively.
Sonoco expects fourth-quarter 2013 earnings per share in the
range of 55 to 59 cents per share and full-year earnings per
share in the range of $2.27 to $2.31. The Zacks Consensus
Estimate for the fourth quarter is at 58 cents, depicting a 3.72%
year-over-year increase and for fiscal 2013 at $2.30, reflecting
a 4% annual improvement. Both the estimates are skewed toward the
upper end of the management guidance.
Organic sales growth, geographic expansion and strategic
acquisitions remain the growth drivers for the company. Sonoco
expects fourth quarter to benefit from optimization of business
portfolio and productivity. The company also remains optimistic
about the increase in prices of uncoated recycled paperboard,
tubes and cores in the U.S. and Canada. This will aid Sonoco to
counter increasing raw material costs.
Furthermore, reduction of debt level will boost profitability and
enable the company to invest in growth opportunities. Conversely,
uncertainty among customers due to the slow recovery in the U.S.
and ongoing European weakness continue to act as headwinds for
South Carolina-based Sonoco is a global provider of a variety of
consumer packaging, industrial products, protective packaging and
packaging supply chain services. Sonoco is also the largest
producer of paper-based tubes and cores in North America.
BEMIS (BMS): Free Stock Analysis Report
GRAPHIC PKG HLD (GPK): Free Stock Analysis
SEALED AIR CORP (SEE): Free Stock Analysis
SONOCO PRODUCTS (SON): Free Stock Analysis
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