Packaging business Sonoco Products Co. (SON) on Wednesday reported a 45 percent surge in profit for the fourth quarter from last year, reflecting higher revenues and lower one-time charges. Adjusted earnings beat analysts' estimates, while revenues matched their expectations.
Looking ahead, the company forecast earnings for the first quarter below Street expectations and projects earnings for fiscal 2013 in line with their estimates.
Consumer Packaging segment sales for the quarter declined 4 percent from last year to $463.87 million, primarily due to lower overall volumes and negative changes in product mix. Paper and Industrial Converted Products segment sales declined less than 1 percent to $448.15 million, as lower recovered paper prices in the company's recycling operations were offset by improved volumes in trade paper sales and recycling.
Meanwhile, Display and Packaging segment sales increased 19 percent to $130.37 million, due to low-margin volume growth, primarily in international packaging fulfillment activities. Protective Solutions segment sales grew 58 percent to $133.48 million, primarily attributable to Tegrant and largely driven by the timing of the acquisition.
Harris DeLoach, Chairman and Chief Executive Officer of Sonoco said, " A lower effective tax rate drove a significant part of the base earnings improvement. The improvement in base EBIT stemmed from much stronger productivity, the addition of Tegrant and modest volume gains. These favorable factors were partially offset by a slightly negative price/cost relationship and higher maintenance, labor, pension, interest and other expenses."
The Hartsville, South Carolina-based company's net income for the fourth quarter was $42.78 million or $0.42 per share, up from $29.52 million or $0.29 per share in the prior year.
The latest quarter's results include $0.14 per share in net after-tax charges on restructuring activities and taxes on the repatriation of cash, partly offset by excess insurance settlement gains. The year-ago period's results include a net after-tax charge of $0.17 per share related to restructuring activities, acquisition items and income tax reserve adjustments, partly offset by excess insurance settlement gains.
Excluding items, base earnings were $57.15 million or $0.56 per share, compared with $47.12 million or $0.46 per share in the same period last year. On average, 13 analysts polled by Thomson Reuters expected earnings of $0.54 per share. Analysts' estimates typically exclude one-time items.
Net sales for the quarter increased 4 percent to $1.18 billion from $1.13 billion in the year-ago period and matched analysts' consensus estimate.
The increase in sales reflects $46 million of added sales from last year's acquisition of Tegrant.
Improved volumes, particularly in the Display and Packaging as well as Paper and Industrial Converted Products segments, was offset by lower selling prices, principally in the Paper and Industrial Converted Products segment.
For fiscal 2012, Sonoco's net earnings were $196.01 million or $1.91 per share, down from $217.52 million or $2.13 per share in the previous year. Base earnings were $226.88 million or $2.21 per share, compared to base earnings of $233.58 million or $2.29 in the prior year. However, net sales for the year grew 6 percent to $4.79 billion from $4.50 billion last year.
Analysts expected the company to report earnings of $2.19 per share for the year on revenues of $4.80 billion.
Looking ahead to the first quarter, Sonoco forecasts base earnings in a range of $0.50 to $0.54 per share and fiscal 2013 base earnings in a range of $2.26 to $2.34 per share, with a projected midpoint of $2.30 per share. Street expects the company to earn $0.55 per share for the first quarter and $2.31 for the full year.
Jack Sanders, Sonoco's president, chief operating officer and CEO-elect said, "The first quarter is historically our weakest quarter due to slow seasonal demand, particularly in the industrial-focused and Protective Solution businesses. We are projecting similar year-over-year results in the first quarter on expectations that global economic conditions will not significantly improve and consumer spending will remain sluggish."
SON closed Tuesday's trading at $31.78, down $0.02 on a volume of 278,900 shares.
by RTT Staff Writer
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