Sonoco Reports Fourth Quarter and Full Year 2023 Results

"In 2023 ... We achieved the second best year of financial results in our 125-year history. – Howard Coker, President and CEO of Sonoco.

Feb. 14, 2024 - Sonoco Products Company today reported financial results for its fourth quarter and fiscal year ended December 31, 2023.

Summary

• Achieved second best full year results for Adjusted EPS in the Company's 125-year history
• Generated a record $883 million of operating cash flow and $600 million of Free Cash Flow in the full year of 2023
• Invested a record level of capital in the business for future growth and productivity
• Achieved record results in Operating Profit and Adjusted EBITDA in flexible packaging and record net sales in rigid paper containers in the Consumer Packaging ("Consumer") segment
• Produced record Operating Profit margins and Adjusted EBITDA margins in Industrial Paper Packaging ("Industrial") segment despite a low volume environment
• Expanded the Company's flexible packaging capabilities with the acquisition of Inapel Embalagens Ltda. in Brazil
• Made further progress on strategic priorities including portfolio simplification, organic growth investments, and Environmental, Social, and Governance commitments
• Solid fourth quarter operating results driven by strong productivity offset by higher employee expenses, healthcare, and accounts receivable reserve
• Effective January 1, 2024, we integrated the flexible packaging and thermoforming packaging businesses within the Consumer segment to streamline operations, enhance customer service, and better position the business to accelerate growth

CEO Comments

Sonoco's President and CEO, Howard Coker stated "In 2023, Sonoco made further progress on our strategic initiatives and delivered solid financial results in a challenging macroeconomic environment," said Howard Coker, President and Chief Executive Officer. "We achieved the second best year of financial results in our 125-year history. Our multi-year focus on improving and leveraging the operating model combined with our capital allocation strategy resulted in record productivity. We advanced our strategy by strengthening our portfolio with the addition of accretive acquisitions in our core businesses, and successfully divesting non-core assets."

Coker continued, "We generated record annual operating cash flow of $883 million and free cash flow of over $600 million. We remained focused on disciplined capital allocation and a strong balance sheet, and were pleased to increase our annual dividend for the 40th straight year. I am extremely proud of the hard-working Sonoco team members who remain focused on delivering value for our customers and executing initiatives to support the Company's continued success in the future."

Consumer Packaging

Q4-23 (versus Q4-22):

• Consumer net sales were $856 million as volumes continued to be impacted by lower consumer purchases for food and household products from inflationary pricing impacts
• Consumer operating profit decreased to $83 million due to lower volumes and higher accounts receivable reserve, which were partially offset by strong productivity and strategic pricing initiatives

2023 (versus 2022):

• Consumer net sales were $3.6 billion, down 4% year over year, primarily due to the previously mentioned inflationary pricing impacts on volumes and volume declines from customer retail destocking throughout the year
• Full year segment operating profit decreased to $382 million due to unfavorable volume/mix and metal price overlap of $35 million (which was a full year $105 million year-over-year difference), which was partially offset by improved productivity

Industrial Paper Packaging

Q4-23 (versus Q4-22):

• Industrial net sales decreased 1% to $593 million due to unfavorable volume/mix, weakness in global demand for converted paper products and lower pricing, which was partially offset by higher demand in paper and revenue from acquisitions
• Continued low volumes and price/cost pressures were partially offset by improved productivity which resulted in an operating profit margin of 10% and Adjusted EBITDA margin of 15%

2023 (versus 2022):

• Industrial sales decreased 12% to $2.4 billion due to unfavorable volume and index-related pricing declines
• Segment operating profit margin and Segment Adjusted EBITDA margin increased to 13% and 18%, respectively, primarily due to the first half 2023 benefits of higher pricing and lower costs

Outlook

Mr. Coker said, "In the first quarter of 2024, we expect volumes to be down over the prior year period. We also expect negative price/cost from metal price overlap and from the year-over-year Industrial comparable.

"For the full year, we are expecting overall sales to be up modestly and price/cost impacts to be negative, in each case compared to the prior year period. We intend to continue to aggressively manage costs and generate positive productivity while we navigate global volume uncertainties. We remain focused on executing strategic initiatives to simplify our portfolio and capture synergies from our recent acquisitions to advance Sonoco through 2024 and beyond. We look forward to providing further updates in our Investor Day, which is planned for February 22, 2024."

Sonoco's complete Fourth Quarter and Full Year 2023 report can be found on the company's website: www.sonoco.com.

Founded in 1899, Sonoco (NYSE:SON) is a global provider of packaging products. With net sales of approximately $6.8 billion in 2023, the company has approximately 22,000 employees working in more than 310 operations around the world.

SOURCE: Sonoco Products Company