Sonoco(US:SON)2024-02-15 15:57Financial Data and Key Metrics Changes - Full year 2023 net sales decreased to $6.78 billion, impacted by destocking and an elongated cycle in industrial, although net sales grew at a 10% compounded annual growth rate since 2021 due to strategic pricing, new product wins, and acquisitions [4][10][107] - Q4 2023 net sales declined to $1.64 billion, with a 3.4% decrease in volumes and a negative price impact of 2.3% due to index-based pricing [5][97] - Adjusted EBITDA grew from $770 million in 2021 to $1.067 billion in 2023, with an adjusted EBITDA margin of 15.7%, a 190 basis point increase from 2021 [32][105] Business Line Data and Key Metrics Changes - Rigid Paper Containers sales declined low single digits due to mid single-digit volume declines, while Flexible sales were flat as new customer gains offset low legacy customer volumes [6] - Industrial operating profit decreased to $62 million, with a margin of 10.4%, while Consumer operating profit decreased to $83 million, maintaining a margin of 9.7% [14][34] - All other sales decreased 7% to $187 million, but operating profit increased to $22 million due to strong productivity and positive price cost [14] Market Data and Key Metrics Changes - Industrial volumes decreased low single digits due to lower demand in key markets, with prices decreasing mid-single digits due to index-based pricing actions [99][112] - Consumer volumes are expected to grow low single digits, while industrial volumes are projected to experience limited recovery [100][114] Company Strategy and Development Direction - The company is focused on portfolio simplification and alignment with core businesses, including the expected sale of the Protective Solutions business [17] - Increased capital expenditures are directed towards long-term growth and profitability projects, with expectations for record productivity in 2024 and beyond [15][111] - The integration of flexible and thermoforming businesses is aimed at creating a larger scaled platform, enhancing market position and operational efficiency [40][58] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future performance despite challenges, noting that 2023 was the second-best financial performance in the company's history [10][107] - The company anticipates modestly negative volume in consumer due to cautious customer behavior, but expects recovery in industrial volumes as conditions normalize [15][114] - Price cost is expected to be negative in the first quarter due to rising input costs and timing of pricing updates, but improvements are anticipated throughout the year [37][120] Other Important Information - The company returned capital to shareholders and increased its annual dividend for the 40th consecutive year [31] - Record operating cash flow of $883 million and free cash flow of $600 million were generated in 2023 [106] Q&A Session Summary Question: What is the impact of price cost on profitability for 2024? - Management anticipates a drag of $0.50 to $0.55 in Q1 due to price cost dynamics, with industrial expected to have a $35 million impact [22] Question: How has the competitive landscape changed in the consumer segment? - Management noted no material share loss, with some share gains, but overall demand remains weak across the consumer segment [73] Question: What is the expected impact of the divestiture of Protective Solutions on guidance? - The divestiture is expected to be $0.10 dilutive to EPS on a full-year basis, with closure anticipated by the end of Q1 [121]