© Carsten Reisinger | stock.adobe.com
As more first-quarter results come in, Hartsville, South Carolina-based Sonoco Products Co. is the latest paper and packaging company to report continued low volumes as we approach the midpoint of the year, but the company says the results are in line with its expectations.”
“While the overall demand environment remains muted and price/cost headwinds persist, focused execution and operating discipline delivered $51 million of productivity from value-creating capital investments and business simplification initiatives over the past several years,” Sonoco CEO Howard Coker says.
The company reports $1.64 billion in net sales for the first quarter of 2024, down 5 percent from $1.73 billion in the first quarter of 2023, while operating profit is down 51 percent, coming in at $112 million in this year’s first quarter compared with $230 million in the same period last year.
Sonoco’s adjusted earnings before interest, taxes, appreciation and amortization (EBITDA) also is down, coming in at $245 million in the first quarter of 2024 compared with $276 million in the first quarter of 2023.
In its consumer packaging segment, the company says inflationary pricing continued to negatively impact volume. First-quarter net sales in the segment were down 5 percent this year, coming in at $911 million compared with $958 million in the first quarter of 2023, while the segment operating profit was $93 million in the first quarter of 2024 compared with $96 million in the first quarter of 2023.
“The first quarter results represent the resilience of our teams and our ability to deliver strong earnings despite a low volume environment,” Sonoco Chief Financial Officer Rob Dillard said during the company’s earnings call May 2.
“However, with list prices at elevated levels, volumes have been slow to return to historical patterns. Despite the year-over-year declines, consumer volumes remain on trend and increased 5 percent sequentially. As a comparable, Q1 2023 was unusually strong due to the end of destocking in most consumer markets.”
Net sales in Sonoco’s industrial paper packaging segment are down 4 percent year over year, with the company reporting $593 million in the first quarter of 2024 compared with $616 million in the same period last year, while the segment’s operating profit is down 30 percent from $94 million last year to $66 million this year.
“Industrial volumes are improving, but the recovery is uneven across our markets in a way that is unique relative to historical recoveries,” Dillard said. “We expect industrial volumes to improve as we are experiencing improved order rates and higher utilization, especially in the North America paper markets. Industrial price decreased mid-single digits due to index-based price actions.”
Coker also is encouraged, adding, “Volume equals leverage, and we’re looking forward to volume returning to really start driving the … plant level improvements we’ve made. I’m really encouraged with what we’re seeing from … our North American paper business. I think it’s the first time we’ve seen the amounts of backlogs that we have in place since we’ve made some really material capital investments, rationalizations, and so we see this as upside as we go forward.”
Sonoco’s full financial results can be found here.