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Sonoco: Higher Prices for Uncoated Recycled Paperboard Products

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Nov. 20 2020, Updated 3:39 p.m. ET

Price movement

Sonoco Products (SON) has a market cap of $5.4 billion. It rose 2.1% and closed at $52.21 per share on September 15, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -0.32%, 3.2%, and 30.8%, respectively, on the same day. Sonoco is trading 0.85% above its 20-day moving average, 2.0% above its 50-day moving average, and 14.2% above its 200-day moving average.

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Related ETF and peers

The PowerShares S&P Mid-Cap Low Volatility Portfolio (XMLV) invests 1.3% of its holdings in Sonoco. XMLV tracks a volatility-weighted index of the 80 least volatile S&P Mid-Cap 400 companies. XMLV’s YTD price movement was 13.3% on September 15.

The market caps of Sonoco Products’ competitors are as follows:

  • WestRock Company (WRK) – $12.1 billion
  • AptarGroup (ATR) – $5.0 billion
  • Bemis Company (BMS) – $5.0 billion

Latest news on Sonoco

In a press release on September 15, 2016, Sonoco Products reported, “Sonoco (SON) today announced that it will raise the price of all grades of uncoated recycled paperboard (URB) products by $40 to $60 per ton depending on grade, effective with shipments in the United States and Canada, beginning October 3, 2016.”

According to Palace Stepps, Sonoco’s North America paper business’s director of sales and marketing, “The increase is necessary to capture generally higher operating costs so we can continue providing high-quality, value-adding products to our customers.”

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Performance in fiscal 2Q16

Sonoco Products reported fiscal 2Q16 net sales of ~$1.2 billion—a fall of 3.4% from net sales of ~$1.3 billion in fiscal 2Q15. Sales from its Consumer Packaging, Display & Packaging, and Paper & Industrial Converted Products segments fell 3.8%, 7.6%, and 3.5%, respectively.

Sales from its Protective Solutions segment rose 2.8% between fiscal 2Q15 and fiscal 2Q16. The company’s gross profit margin rose 4.3% and its income before interest and taxes fell 7.0%. Its net income and EPS (earnings per share) fell to $56.3 million and $0.55, respectively, in fiscal 2Q16—compared to $64.4 million and $0.63 in fiscal 2Q15.

Sonoco’s cash and cash equivalents fell 41.0% and its inventories rose 3.1% between fiscal 4Q15 and fiscal 2Q16. Its current ratio rose to 1.5x and its long-term debt-to-equity ratio fell to 0.65x in fiscal 2Q16—compared to 1.4x and ~0.7x, respectively, in fiscal 4Q15. It reported free cash flow of $31.9 million in fiscal 2Q16—a fall of 0.93% from fiscal 2Q15.

Projections

Sonoco Products projected EPS of $0.65–$0.70 for fiscal 3Q16. The company made the following projections for fiscal 2016:

  • EPS of $2.68–$2.74
  • effective tax rate of 31.5%
  • free cash flow of ~$140 million—this reflects an operating cash flow of $490 million

In the next part, we’ll discuss Ingredion (INGR).

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