Sonoco Repays $121M in Bonds on Maturity - Analyst Blog
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. ( SEE ), Graphic Packaging Holding Co. ( GPK ), and Bemis Company, Inc. ( BMS ). 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 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. 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 Report
SEALED AIR CORP (SEE): Free Stock Analysis Report
SONOCO PRODUCTS (SON): Free Stock Analysis Report
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