Sonoco Reports Fourth Quarter and Full Year 2022 Results
Sonoco Products Company (“Sonoco” or the “Company”), one of the largest sustainable global packaging companies, today reported financial results for its fourth quarter and full year, which ended December 31, 2022.
Fourth Quarter and 2022 Highlights
- Delivered progress on strategic priorities including portfolio simplification and structural transformation
- Achieved record fourth quarter and annual financial results. In the fourth quarter, revenue grew 16%. GAAP EPS grew by 48% and Base EPS grew by 28% year-over-year
- Successfully integrated the Metal Packaging acquisition to expand rigid packaging in North America
- Completed Skjern Paper acquisition in Denmark in the fourth quarter to expand sustainable paper packaging products in Europe
- Reaffirmed commitments to ESG initiatives as noted in our annual corporate responsibility report
Fourth Quarter 2022 Consolidated Financial Results
- Net sales increased 30% year over year to $7.3 billion driven by strategic pricing performance and strong results from the Sonoco Metal Packaging (“Metal Packaging”) acquisition. These increases were partially offset by lower volumes in industrial paper products and the impact of foreign currency exchange.
- GAAP operating profit and base operating profit increased year-over-year from strategic pricing performance and acquisitions.
- The effective tax rates on GAAP and base earnings in the fourth quarter of 2022 were 1.9% and 21.3%, respectively, compared with 27.8% and 23.8%, respectively, in the prior year’s fourth quarter. The decrease in the GAAP effective tax rate for the fourth quarter 2022 was primarily due to the release of valuation allowance on foreign tax credits due to an increase in projected foreign source income in future years. The lower base tax rate for the fourth quarter 2022 was driven primarily by a change in the mix of income and loss in various jurisdictions, as well as various discrete adjustments.
- The effective tax rates on GAAP and base earnings for the full year 2022 were 20.7% and 23.9%, respectively, compared with 41.9% and 23.7%, respectively, in the prior year. The decrease in the GAAP effective tax rate for 2022 was due primarily to the prior year regular tax benefit recognized on the Company’s reported pretax loss together with a prior year discrete tax benefit from the realization of additional foreign tax credits.
- GAAP net income and base net income increased year-over-year from strong operating performance, partially offset by higher interest expense related to the financing of the Metal Packaging acquisition and absence of the pension charge in 2022.
- Diluted GAAP EPS and Base EPS for the fourth quarter increased 48% and 28%, respectively, from the same period last year. GAAP EPS for the 2021 full year included the impact of after-tax pension settlement charges of approximately $410 million, mostly related to the Company’s settlement of its U.S. Inactive Pension Plan.
“2022 was a year of record performance and meaningful change at Sonoco. We are executing our focused portfolio strategy and are investing in our businesses to drive growth and profitability,” said Sonoco’s President and CEO, Howard Coker. ” Our talented teams executed well in dedication to our customers despite a challenging macro environment. We made further progress on our portfolio simplification strategy and invested in organic growth and accretive acquisitions in our larger, core businesses. This progress coupled with effective commercial excellence enabled a positive step change improvement in profitability for the company.”
“We carry sustained momentum from our strategy and operating model into 2023 which we believe positions us well to navigate near term volatility. Our continued focus on portfolio optimization, improving price/cost through strategic pricing, and productivity positions us to expand profits and increase free cash flow, to increase long-term returns for our shareholders.”
Fourth Quarter 2022 Segment Results
Sonoco reports its financial results in two reportable segments: Consumer Packaging (“Consumer”) and Industrial Paper Packaging (“Industrial”), with all remaining businesses reported as All Other.
- Q4-22: Consumer segment net sales increased 49% and segment operating profit increased 37% year-over-year primarily from the Metal Packaging acquisition and strategic pricing. As expected, sequential sales declined compared to the third quarter of 2022 driven by seasonality and softness in plastic food packaging, which was impacted by lower harvest volumes resulting from inclement weather such as flooding and freezes.
- 2022: Consumer segment net sales increased 59% and segment operating profit increased 91% year over year primarily from the January 26, 2022 acquisition of Metal Packaging, and strong strategic pricing performance. Volume/mix growth in the segment was positive for the full year driven by food packaging.
Industrial Paper Packaging
- Q4-22: Industrial segment net sales decreased 9% year over year from lower demand in all regions, especially in Europe and Asia. Industrial segment operating profit improved 34% from strategic pricing performance.
- 2022: Industrial segment net sales increased 9% and segment operating profit increased 45% from strong strategic pricing performance, partially offset by the impact of foreign currency exchange and lower volume/mix globally in both paper and converted products. This lower volume includes a $54 million impact as compared to 2021 from the exit of the corrugated medium market and from the conversion of the #10 paper machine in our Hartsville, SC paper mill complex.
All Other Segments
- Q4-22: Net sales from All Other businesses increased 3% and operating profit improved by 25% from the prior year’s fourth quarter due primarily to positive strategic pricing performance.
- 2022: Net sales and operating profit from All Other businesses both increased 5% from the prior year primarily due to strong strategic pricing performance on flat volume/mix.
Segment and All Other operating results do not include restructuring and asset impairment charges, acquisition/divestiture-related charges, LIFO adjustments, or certain other items, if any, the exclusion of which the Company believes improves comparability and analysis. See the reconciliation of segment operating profit to GAAP operating profit later in this release. Prior period results have been revised to conform to the current year presentation.
Balance Sheet and Cash Flow Highlights
- Cash and cash equivalents was $227 million at December 31, 2022, compared to $171 million at December?31, 2021.
- Total debt (long-term, notes payable and current portion of long-term debt) increased $1,612 million from December 31, 2021, primarily as a result of financing transactions used to fund the Metal Packaging acquisition in January 2022.
- At December 31, 2022, the Company had available liquidity of $977 million, consisting of $227 million of cash and $750 million of undrawn capacity under the revolving credit facility.
- Cash flow from operating activities for the full year of 2022 was $509 million, compared to $299 million in 2021, an increase of $210 million.
- Net capital expenditures for the full year of 2022 were $319 million, compared to $243 million in 2021.
- Free cash flow for the full year of 2022 was $190 million. See the Company’s definition of free cash flow, explanation as to why it is used, and reconciliation to net cash provided by operating activities later in this release.
- The Company has continued to provide value to shareholders through cash dividends. Total dividends paid increased to $187 million in 2022 compared to $179 million in 2021.
First Quarter 2023
- Base EPS(1) for Q1 2023: $1.15 to $1.25
- Q1-23: First quarter guidance assumes improving sequential volumes in the Consumer segment and no sequential volume improvement in the Industrial segment.
Full Year 2023
- Base EPS(1): $5.70 to $5.90
- Cash flow from operating activities: $925 million to $975 million
- Free cash flow(2): $550 million to $650 million
- 2023: Annual guidance assumes full year improvements in Consumer segment volumes and limited recovery in volumes in the Industrial segment.
For the full fourth quarter results, click here.
(1) First quarter and full-year 2023 GAAP EPS guidance are not provided in this release due to the likely occurrence of one or more of the following, the timing and magnitude of which we are unable to reliably forecast without unreasonable efforts: restructuring costs and restructuring-related impairment charges, acquisition/divestiture-related costs, gains or losses on the sale of businesses or other assets, and the income tax effects of these items and/or other income tax-related events. These items could have a significant impact on the Company’s future GAAP financial results. Accordingly, quantitative reconciliations of base EPS guidance have been omitted in reliance on the exception provided by Item 10 of Regulation S-K.
(2) See reconciliation of cash flow from operating activities to projected free cash flow later in this release.
Founded in 1899, Sonoco (NYSE:SON) is a global provider of packaging products. With net sales of approximately $7.3 billion in 2022, the Company has approximately 22,000 employees working in more than 300 operations around the world, serving some of the world’s best-known brands. With our corporate purpose of Better Packaging. Better Life., Sonoco is committed to creating sustainable products, and a better world, for our customers, employees and communities. The Company ranked first in the Packaging sector on Fortune’s World’s Most Admired Companies for 2022 as well as being included in Barron’s 100 Most Sustainable Companies for the fourth consecutive year. For more information on the Company, visit our website at www.sonoco.com.
Lisa Weeks – Vice President of Investor Relations & Communications – firstname.lastname@example.org – (843) 383-7524
Source: Sonoco Products Company