Sonoco reports record financial results despite economic, volume challenges

Hartsville, South Carolina-based packaging company Sonoco Products Co. is the latest to report its fourth-quarter and full-year financial results for 2023, echoing sentiments from other major industry players like WestRock and International Paper about low volumes and a challenging economic environment last year.

However, despite those challenges, Sonoco still achieved the second-best financial results in the company’s 125-year history in several key metrics, including net sales, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted earnings per share (EPS).

“In 2023, we continued to make progress on strategic initiatives and delivered solid results in what was a pretty difficult year from a volume perspective,” Sonoco President and CEO Howard Coker said during the company’s earnings call Feb. 15.

“Our strong margins were the result of record performances in our consumer rigid paper cans and flexibles businesses. On the industrial side, despite volume levels similar to 2008, our team delivered record profit margins through diligent cost management throughout the paper ecosystem. … Certainly, the global economic and external factors did not make this an easy year at all, but we did not stand still and we delivered the second-best annual financial performance in the company's 125-year history.”

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Sonoco’s fourth-quarter 2023 net sales were $1.64 billion, down slightly from the $1.68 billion in the fourth quarter of 2022, while full-year net sales in 2023 were down 6 percent to $6.8 billion compared with $7.3 billion in 2022.

Adjusted EBITDA was $236 million in the fourth quarter and $1.07 billion for the full year, down 4 percent and 8 percent from 2022, respectively, and adjusted EPS was $1.02 for the fourth quarter and $5.26 for the full year.

"By many measures, this was our best year ever. We achieved record operating cash flow, record free cash flow, record productivity and we invested a record amount to drive future growth and profitability,” Sonoco Chief Financial Officer Rob Dillard said during the earnings call. “We've built a foundation for continued strong financial performance, building on our enduring operating model, strong market positions, investment-grade balance sheet and our differentiated dividend. We're excited about the future and feel good that 2023 was a year to solidify our improvement since 2021.

“Full-year 2023 net sales decreased to $6.78 billion due to the volumes that come from destocking. … While these factors impacted year-over-year results, we grew net sales at a 10 percent compounded annual growth rate since 2021 due to strategic pricing, new product wins and acquisitions.”

Net sales in Sonoco’s consumer packaging segment were down 3 percent in the fourth quarter of 2023 compared with 2022 and down 4 percent year over year, which the company attributes to low volumes caused by lower consumer purchases for food and household products.

Similar volume challenges affected Sonoco’s industrial paper packaging segment, too, where net sales were down slightly in the fourth quarter (1 percent) but down 12 percent year over year with $2.4 billion net sales in the segment in 2023 compared with $2.7 billion in 2022.

The company also provided an update on the recent closure of its uncoated recycled paperboard (URB) mill in Sumner, Washington. The mill, which closed at the beginning of February, produced 40,000 tons per year of URB, had been in operation since 1915 and was owned by Sonoco since 1980.

“This was the oldest mill in Sonoco's North American network and the cost to recapitalize was just simply not feasible,” Coker said of the closure.

“We're moving tons to lower-cost mills in the network. We've owned Sumner for over 40 years and are extremely grateful for the support of this team through these years. … As we continue our portfolio resolution, we remain laser-focused on simplification and the alignment and fit to what businesses remain in our core.”

Sonoco’s full financial presentation can be found here.