Sonoco Q2 net sales down

Despite the pace of consumer volume recovery remaining “muted,” Sonoco CEO Howard Coker says his company’s second quarter 2024 financial results are “solid” and expects price/cost headwinds across its portfolio to improve in the second half of the year.

The Hartsville, South Carolina-based packaging company saw a 5 percent decrease in net sales for the quarter, which ended June 30, coming in at $1.62 billion compared with $1.71 billion in the second quarter of last year. Operating profit, net income and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also posted losses.

“For the quarter, net sales decreased … due to negative contractual resets and price and negative $101 million of strategic actions to exceed or divest nonstrategic positions,” Sonoco Chief Financial Officer Rob Dillard said during the company’s second quarter earnings call Aug. 1. “Excluding these strategic actions, net sales would have grown 1.1 percent.

“We believe that divesting the Protective Solutions business, exiting nonprofitable thermoforming markets and reclassifying the recycling business increase our ability to focus and execute our strategy. It’s notable that volume/mix was positive low single digits in the quarter as low single-digit volume increases in [the] consumer [segment] and double-digit volume increases in [the] industrial [segment] overcame declines in all other.”

RELATED: Sonoco to acquire Eviosys in $3.9B transaction

Sonoco’s second quarter operating profit was down 25 percent from the same period last year, coming in at $140 million compared with $188 million in the second quarter of 2023, while net income is down 21 percent and adjusted EBITDA is down 5 percent.

“During the quarter, we had continued price/cost headwinds across the portfolio, primarily in Industrial [Paper Packaging], that we believe will improve in the second half,” Coker said during the earnings call last week. “Productivity in the second quarter came in at $51 million, continuing on our strong operating trends and bringing our first half productivity total to just over $100 million.”

In its Consumer Packaging segment, net sales were down 4 percent, which Sonoco attributes to the closure of a thermoformed food packaging plant and lower pricing. However, net sales in Sonoco’s Industrial Paper Packaging segment were up 3 percent thanks to low single-digit organic volume improvements in global paper and converted products as well as acquisitions.

“There’s certainly not a robust recovery, but volume levels have increased over the depressed levels that we saw last year,” Sonoco Chief Operating Officer Rodger Fuller said. “Price/cost is impacting industrial profitability to a lesser degree than the first half of 2024. There remains a drag year-over-year as higher input costs for raw materials and labor have not yet fully been recovered in our announced price increases, but we do expect that the contracted price resets will reflect improved pricing in the second half of the year.

“We expect industrial productivity to be positive across all industrial businesses in the third quarter, and we expect total industrial volumes up low single digits year over year. In all other, sales will be lower on a year-over-year basis after the sale of our protective solutions business.”

Sonoco’s full second quarter 2024 earnings presentation can be found here.