Sonoco (NYSE: SON) reported Q3 EPS of $0.82, in-line with the analyst estimate of $0.82. Revenue for the quarter came in at $1.31 billion versus the consensus estimate of $1.32 billion.

Third Quarter Highlights

• Third-quarter 2020 GAAP earnings per diluted share were $0.82, compared with $0.91 in 2019.
• Third-quarter 2020 GAAP earnings included net after-tax charges of $3.6 million related primarily to restructuring activity and non-operating pension costs mostly offset by a tax benefit related to anticipated divestiture activity. In the third quarter of 2019, GAAP earnings included net after-tax charges of $6.1 million related mostly to restructuring actions and non-operating pension costs that were partially offset by an environmental reserve release.
• Base net income attributable to Sonoco (base earnings) for third-quarter 2020 was $0.86 per diluted share, compared with $0.97 in 2019. (See base earnings definition, explanation and reconciliation to GAAP earnings later in this release.) Sonoco previously provided third-quarter 2020 base earnings guidance of $0.73 to $0.83 per diluted share.
• Third-quarter 2020 net sales were $1.31 billion, compared with $1.35 billion in 2019.
• Cash flow from operations was $489.5 million in the first nine months of 2020, compared to $238.8 million in 2019. Free cash flow was $251.6 million, compared with a use of $32.5 million in the first nine months of 2019. (See free cash flow definition and reconciliation to cash flow from operations later in this release.)
• On August 3, 2020, Sonoco acquired Can Packaging, a privately-owned designer and manufacturer of sustainable paper packaging and related manufacturing equipment, based in Habsheim, France, for approximately $49 million in cash.
• On October 9, 2020, the Company signed an agreement to sell its Europe contract packaging business, part of the Display and Packaging Segment, to Prairie Industries Holdings backed by The Halifax Group, a Washington, D.C.-based global investment firm, for $120 million in cash. As a result of the pending transaction, the assets and liabilities for this business are reported as "held for sale" on the condensed consolidated balance sheet as of September 27, 2020.

CEO Comments
Commenting on the Company’s third-quarter performance, Howard Coker, President and Chief Executive Officer, said, "We are very pleased with our third quarter performance as our Sonoco team drove bottom-line results that exceeded the high-end of our expectations. The results of our diverse portfolio of global Consumer- and Industrial-related businesses reflect improved global macroeconomic conditions coming off the pandemic-induced recession in the second quarter. Our Consumer Packaging segment produced solid year-over-year improvement as at-home food demand stabilized from the preceding quarter's pantry stocking, while our Paper and Industrial Converted Products segment experienced improvement sequentially from the prior quarter's lows, reflecting a partial recovery of our global industrial served markets. In addition, our Protective Solutions segment achieved record quarterly results as customer demand rebounded, and our Display and Packaging segment achieved one of its best quarters in more than a decade driven by cost reduction activities. Overall, the Company's bottom line results benefited from continued strong productivity, general cost savings and earnings from recent acquisitions. However, these positive factors were more than offset by a negative price/cost relationship stemming from higher year-over year recovered paper costs, which primarily impacted our Paper and Industrial Converted Products segment, lower volume/mix, increased interest expense and a higher effective tax rate.

“Cash flow generation was also very strong during the first nine months of 2020, reflecting our focus on generating high quality earnings and on disciplined working capital management. Sonoco's liquidity position remains strong which provides us the flexibility to further reduce debt as we continue to support our investment-grade credit rating."

GUIDANCE:

Sonoco sees Q4 2020 EPS of $0.70-$0.80, versus the consensus of $0.73.

Sonoco sees FY2020 EPS of $3.29-$3.39, versus the consensus of $3.27.

• Sonoco expects fourth-quarter and full-year base earnings to be in a range of $0.70 to $0.80 and $3.29 to $3.39 per diluted share, respectively. Fourth-quarter and full-year base earnings per diluted share in 2019 were $0.75 and $3.53, respectively.
• Full-year 2020 cash from operations and free cash flow is expected to be in a range of $643 million to $663 million and $290 million to $310 million, respectively. Full-year 2019 cash from operations and free cash flow was $425.9 million and $74.3 million, respectively.

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