Sonoco(SON) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue grew 34% year-over-year to $1.9 billion, with base EBITDA margins expanding by 200 basis points to 15% [10][15][17] - Base earnings per share increased 60% to$ 1.60, driven by strong operating performance [10][17] - Base operating profit rose 67% to $225 million, with base operating profit margin increasing by 240 basis points to 11.9% [16][17] Business Line Data and Key Metrics Changes - Consumer segment sales increased 72% to$ 1 billion, with operating profit growing 93% to $128 million [27] - Industrial segment sales grew 4% to$ 661 million, and operating profit increased 48% to $82 million [28] - All other sales rose 10% to$ 198 million, with operating profit increasing 19% to $15 million [29] Market Data and Key Metrics Changes - Consumer prices increased by 18%, contributing positively to revenue growth [19] - Industrial volumes were down 9.5%, particularly impacted in Europe and Asia [18] - Organic sales growth was still 10% in the quarter, excluding acquisitions [20] Company Strategy and Development Direction - The company is focused on sustainability and innovation, with significant investments in new product designs and operational excellence [46][49] - Project Horizon aims to modernize operations and enhance production efficiency, transitioning to 100% recycled fiber [49][51] - The acquisition of Skjern Paper in Denmark is intended to increase lightweight production capacity in Europe [52][53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the consumer business, noting robust activity and normal seasonal trends [68] - There are concerns about industrial demand in Europe and Asia, with expectations of lower volumes in the fourth quarter [39][40] - The company anticipates higher free cash flows in 2023 as supply chains normalize [34] Other Important Information - The company has increased its full-year EPS guidance to$ 6.40 to $6.50, reflecting strong performance [32] - Capital allocation remains focused on high-return investments and maintaining an investment-grade credit rating [30][31] Q&A Session Summary Question: Expectations on free cash flow guidance and inventory headwinds - Management expects to recover$ 100 million in working capital in 2023 as supply chains normalize, with a positive outlook on price/cost benefits [64][66] Question: Demand trends in the consumer business - Demand has been robust, with normal seasonal builds observed, and inventory destocking is primarily driven by industrial customers [68][72] Question: Value-based pricing initiatives - The company is focused on strategic pricing and self-help initiatives to drive productivity and value generation [75][85] Question: Long-term EBITDA guidance - Management is reviewing long-term objectives and expects to provide updates early next year [105] Question: Impact of lower OCC and resin prices - Lower OCC prices have positively impacted price/cost benefits, with expectations for continued benefits in the fourth quarter [112] Question: Changes in capital allocation process with new CFO - The capital allocation strategy remains focused on core competencies and value-driven acquisitions [114][116]