SON - Earnings call transcript Q4 2020 | Sonoco Products Company

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2020 Sonoco Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today's, Rodger Schrum, Vice President, Investor Relations. Please go ahead.

Rodger Schrum

Sara. you, Thank and year morning our quarter fourth And conference welcome call. full investor and good to

Joining are Julie Investor on Rodger release the Fuller, and me market Executive sonoco.com. Financial Relations reporting Executive Chief today Chief and was Vice website Howard our Coker, opened financial at President; issued A today the and Officer. Albrecht, results President and Vice news President before Officer; available is

outlook, financial we also will presentation results reference on and website was which XXXX our XXXX addition, posted In on our a morning. our this

subject information let includes Before condition we forward-looking measures Therefore, uncertainties. remind information is section website. go about the expectations, statements performance presentation Company's definitions on call today's management most may to and results on actual are measures, available guarantees investors financial measures, based contains those further, estimates as materially. the use of provides as Further certain GAAP me related closely number Relations risks not Furthermore, you projections. non-GAAP today's These future are that and a and operations. the of to also differ current presentation the of of statements including well financial of useful reconciliations Company's about of Investor results non-GAAP of financial believes to our use which measure, the and and

turn to Julie. will over it introduction, I Now, with that

Julie Albrecht

$X.XX above morning, end earlier base GAAP share, I share. our X, reported the was will basis that and per you this $X.XX fourth range we $X.XX of of $X.XX earnings share, Rodger. quarter Thanks begin top per to guidance Slide on of per on a which see of loss a where

the last $X.XX results delivered EPS the quarter were year. of base fourth than we stronger quarter This also $X.XX in

our and operating all performance Our fourth notably North to America rigid integrated better compared segments. our businesses that due Thermosafe. quarter primarily four improved were paper across containers, expectations flexible, industrial The were above to expectations global most results

cent our non-operating difference impairment by $X.XX and EPS to from from $X.XX $X.XX of $X.XX costs to expenses. other related operations, terms to and most pension packaging display of our GAAP divestiture, was $X.XX driven perimeter Europe $X.XX thermoforming between was activities, In related restructuring base was due charges, and store which primarily and asset of was M&A

Now strengthen $XX all also the on were the of expenses this a $XX expense we actions million from our million, statement million profit last moving XX which Net XXX discuss tax Income up as base key a resulting just to sales in profit. starting million of moment. key liquidity compensation This were Gross a our the $XXX point you XX the the bridge expense profit income slightly year-over-year, by took above was year we above to is last few operating our interest offset in have than higher billion expenses year. more of that to about our highlight with Slide last type on our year on million, to top million businesses, review prior of solid our XX such and did operating basis I'll million XX%, prior the minutes. in sales to of X, million the the see by due sales the was expense from year. I'll addition $XXX COVID-XX drivers driven they higher period. pretax was mostly bridge as I'll acquired travel, position. of that drivers of $X.XXX timing increased fourth last detail a sales expenses above year increases. profit quarter. million SG&A in versus lower lifted gross $XXX million improvement performance line, XX by due X but XXXX percent profit

Our from unchanged the quarter year prior tax rate quarter. XXXX mostly fourth was XX.X% of effective

base in million quarter well net a Moving volume additional your fourth quarter growth were by or full see looking had split volume was the days in earnings last containers higher to company the as year. appendix income as operating versus for paper million, about between bridges rigid a $XX profits. increase X%. our Consumer bridge both nice as $XX you was we've roughly statement by a the in year We X% $XX saw last This which X.X%. income, for And robust up on base full was information, as down mix for continued sales X, X% sales well included stronger whole. XXXX the year as year. increase global And at demand, and over a packaging increase million two or Slide volumes

Our patterns, flexible at-home pronounced and eat business a X% to solid most demand crackers market. our grew due COVID continued end use by in cookies

But by XX%. perimeter almost was million by and driven X.X% primarily market, the demand weakness $X foods use demand driven as in well the prepared end global volumes growth Finally, lower driven store. or packaging by Display flat and continued down volume specialty was plastics this industrial pandemic. in by as of offset lower specifically was at volume

X.X%, about tubes, solutions products, across this unit finally, in sales or And and converted as network, by our demand up segment. Moving million, recovered in global in up was cores volume XX% paper business was mill volumes driven operations. each cone $X within our or strong $XX to as and paper volume as well industrial million protective

the $X segment consumer the industrial was across moving price the by selling material raw by you price, costs. So in increases offset driven decreases by year-over-year by primarily each in This partially see the segment, higher driven to bridge prices million. were

to our from continue services benefits recognition of see customers. we Additionally, provided of value do and the to our the products

at was negative and sale packaging of the items divestitures, from other our see and you million addition consumer from a and partial Packaging exchange of million $X acquisitions no the Can top a TEQ of activity. unusual Europe by impact to and displays finally, the with foreign of Moving the and includes line And and November. tax $XX end offset in of segments, sales

operating profit our mix, mix $XX So of volume bridge, million. of million, a operating impact moving to starting combined $XX with of positive and profit volume higher had impact with sales the the on

of I'll to price that Moving cost, expectations. with cost, segment, non-material between benefits quarter, roughly of all had includes inflation. as remind this our the total In of the cost and of in million $XX category prices, price unfavorable within well inflation our line impact dynamics you was price negative selling which we was which split as industrial the higher the fourth earnings impact from

double in stable increase This an the OCC recent $XX than was in fourth you'll more board and December, average a fourth market fourth that $XX ton per slide caused pressures ton, year. until in usual, appendix all southeast in the resulting pricing was see quarter to per As last the XXXX shows quarter that quarter. an ton market per at $XX in official of $XX there's of average OCC trends the in of

very million productivity, total quarter Next you was of a $XX see the in productivity see the year-over-year. impact that our fourth strong and

due related across execution to but of to procurement, restructuring with amounts finally, execution, levers $XX million have the We cost timing well our in floor fixed benefits. compensation and as as was solid various controls deliberate moving primarily in the unfavorable change And pieces, cost other a and shop combination expense. of by productivity

by volumes to as XX% by moving packaging you XX% segment X, increased COVID segment driven well driven Can Slide up of mix our higher profits So you'll consumer where strong see by the as sales analysis excellent Packaging, addition find that by at-home productivity were Consumers volume results. and and eat behaviors. driven TEQ operating

increases Our jumped price as down to to well XX%. was consumer as sales strong sales improvement improved the of the X.X%. much profit stronger XXX and fourth well a segment's last to profit was demand. D&P as were year. prior Display as profit headwinds dynamics profit fourth margins in year year. and points did was European by mostly of by X.X% by of declined Paper price to down cost efficiencies. year-over-year XX% basis versus XXX productivity as solutions the recovering XX% lower X%. the last quarter solid were as And the improve basis due due XX.X% to sales the This due when the due margin segment grew when segments over compared lower demand product cost due Operating margin Europe, These somewhat to to finally, improvements by well basis converted business. to down basis industrial point year's to margin XX volume, the weaker points by COVID-XX. XX%, X.X% protective sales quarter and the divestiture XXX by of prior divesting grew offset due XX.X% X.X% by by increased points by actions Operating productivity. Operating packaging solid margins better operating to XX%, The very to compared industrial and

$XXX down total resulting contributions aspects Shifting the $XX the operating The largest that year. result the you the despite year's million, compared in year operating XXX you of reduced with all that cash increase sales. was in XX.X%, compared cash in capital operating X.X% see to working in after balances was the higher slide, companywide million. that of flow. for of up flow of million this pension source $XXX was challenging significant which business $XXX single by capital a flow, were slide XXXX million was decreased of improvements to company see XXXX, over So operating working cash Midway increased just environment. our million, tax our X% profit an sales a our last this middle by of and margin This management, full cash million very of last of $XX in increase driver voluntary to

an termination planned the $XX from other tax generation $XX cash activity, as deferral category approximately COVID FICA contribution million XXXX. Moving from related in down approximately as our million million cash to an operating benefit well benefit pension includes from $XX this

increase to net flow compared dividends the cash year. XXX compared our year a And to spending flow, to our in cash free liquidity cash operating the free last on last our you flow for X of the $XXX reviewed. that moving And extremely $XXX driven and improved million all in our full XXXX increase finally, On or $XXX balance million was CapEx paid XXXX million, just Now was slight year. by XXX year prior that see were of strong. flow higher sheet I virtually over million, operating remain Slide profit the was our position cash and million an X, of million

reduced somewhat increased the our from divestiture reflects proceeds the year during of of the year. in strong third of consolidated and cash flow the very XXXX by generation Europe the increase XXX quarter. million million balance display by cash and Our $XXX end packaging acquisition Packaging Can This

consolidated quarter. our billion year Our totaled debt the end to end of to increase the the slide decreased end during of And finally, end, of million bottom debt that $X.X million $XXX XXXX. of fourth at at prior the see following you'll at from the total XXXX, our capital net at debt short-term only XX.X% $XX of the repayment from an of XXXX XX% the

Howard, it So to over with that, I will hand

Howard Coker

Thanks Julie morning and good everyone.

by some first swings. virus. note, temperature European COVID the businesses me of I vaccines our XXXX, to and my needed packaging during our European have begin commentary consumers response guidance. strength as in to accelerating brief results margin before shipping We world our test making our to and quickly regarding continue was thank Julie demand and role. me all designer related growing packaging, life Despite the vitally further details do about they of the to year of we pandemic And related critical while On I by team to provide regarding performance it for of of food supporting strategic equipment the spread combat people. year our for manufacturer and our adjustments the both our to a this meet packaging. needs done turn therapeutic saving associates our provide in lower improve then personal the XX,XXX in to protective drugs you full demand a to a XXXX company packaging paper our portfolio of cannot of Let develop packaging customers back and around meet such operations direction and testament can enough the in by refocused industrial this sustainable our contract assured and acquiring production of divesting and and our packaging talk

paper was packaging mixed with up we year Flexible industrial strong reaching and food Rigid with but year its XX, of last XX% by the confectionery organic with from plastics especially strong year of had that As X%. and Page with sales a sales packaging, trays up during volume had although of declines volume on full offset best plastic profits record our retail segment activity offset X% in declined one slowing organic business. also year. review seen sales operating declines packaging have was in on year segment consumer more than containers a up sales. sensitive had by gains volume a up due digits, mix and economic, pandemic. double exceptional an this to Display in years Prepared

XX% with in last well price also to significant the decline and The cost had rising driven mix OCC business on profits due a by global a declining industrial managed year, nearly relationship our segment and team profits volume pandemic the X% very impact However, XX%. operating by operating a prices. increased paper negative

volumes we enter second previously, industrial of recovered the year. quarter the continued the this and of year, As in declined mentioned as but we improve rest significantly to through year the

in which our half drove X% improvement segment of protective Finally, operating strong solutions profits. second XXXX,

talk me enter we strategic as about let focus gears XXXX. switch Now and our

cost in continue businesses in completed the know As performance move to to throughout million well. address When investment growth board. year both in to that Medium opportunities urgency term prime with quickly I company our quarter will lead and convert Machine we $XX produce XXXX, long-term A second part of our our uncoated more Hartville Horizon, this is longer to and this which know $XXX annualized a of Project support strategy to of can of key drive improvement drive will A to sense is you million shared strategy approximately will by recycled this to last in we example time, improvements. and issues paper margin our ourselves invest project savings. drive Corrugated

we In developed enhance high Project ability or productivity. opportunities, Horizon, addition to internal to the of growth pipeline strong a have accelerate return

We approximately $XX in expect XXXX. Project to spend Horizon million on

So our you recovered be with project project completed aspects the on store better this a modernizing by give the progress. handle into to our are let We're update four demolition paper. starting facility to me July. to There phase transport, and quick expect well the and of

finishing year cost use feed machine system, settlement construction mixed X there The construction of a on URB allow with October. storage XXX,XXX other thus a on as our activity new campus. well is stock building a modernize Next the of be should as campus. goods the new new We'll warehouse begins machines prep more system which completed new This finished of completed will should by per September. complex mid this lowering ton March new and a and be areas to will once and think pumping us to paper

March conversion the should the XXXX. be Finally, in completed of machine of

than this year, end the through medium about producing we of three planned. be will previously We months longer

that I we better want call to businesses XX us There's structure This industrial in our segments will packaging. will Julie, mention this the back are two reflect consumer of reporting leave change presentation. with change a to we and forward. XXXX to how our paper on simplified illustrate turn managing structure new our Before picture I reporting Page to going

from industrial will including and solutions moved our unit US include display and represent consumer The Changes businesses alloyed and to as into packaging care solutions protective packaging packaging and security other. relatively businesses will paper include and healthcare units. our Sunoco our group. in consumer be all will the will business all segment. protective that structure. packaging TEQ except and business Industrial protective added remaining other as to will the packaging fiber their retail eliminating plastics the segment moving Thermosafe, molded health All former businesses segments automotive be and display unchanged tech Our new other be packaging protective packaging foam and packaging this well

why XXXX? guidance about So you that, don't our talk financial Julie for with

Julie Albrecht

Howard. thanks Absolutely,

key So on XXXX assumptions see Slide you XX, our guidance. our for

volume COVID for divestiture using in and regional recent impact of half related from along what the served activity in recovery will I to by our sales a as about in company factoring a hearing minutes. level with targeting a assumptions starting drive closed and the the generally year. with last few we're XXXX. increase display segments of X% our of volume full point, these After this to economic reflected Europe developed recovery macroeconomic around packaging we're occurring as overall midyear And from our Packaging more a customers year markets, was in outlook our deals funnel, The whole. provide As are of about for information in Can with activity in the second XXXX acquisition outlooks a

related to outlook corrugated of containers was while per $XX costs The terms selling the time. In ton, that or prices per $XX to tied are XXXX average and market indices. OCC for average is old

will outlook resin this Inflation challenge last increase In assumes addition, is prices XX% a over approximately our that we year. start as year.

So freight in headwinds and our insurance. areas inflation includes including significant outlook

expense is our this to primarily year. and interest to lower is of million XXXX debt expected Our due projected in be maturing $XX repayments refinancing that by

terms XXXX. which XX.X% rate is to to estimated effective of be XXXX we've flat In our tax taxes,

bridge. So you the our outlook see on slide next XXXX sales

volume $XXX described. an our the whole, for that expect our color as company again, provide now structure I'll segment First, increase volume expectations X% new in improvement segment some has a each for using we sales by to million. drive around Howard

benefit prepared growth XXXX from at-home foods offset expects on consumer flat flat projected demand Conversely, is retract be as very after of business relatively around containers flexible But opportunities. X.X% plastics of paper rigid to is in this and For COVID in new around by around segment lower with our X% to by specialty global business volume be to of store. perimeter strong growth patterns. forecast global XXXX, and XXXX the our X.X% eat mostly

expect a to We volumes recover in we're and of with X.X% increase year-over-year. by security while about our single all expected grouping. by volumes driven in offset gross industrial is global and X% approximately about by volume growth digit segment cone rebound growth in increase lower other, partially And Thermosafe, Global tube, to this core business of rates projecting growth parts X.X%. TEQ paper in X.X% other high with retail

So moving of see year-over-year. impact a million across sales bridge, the positive prices $XXX of you

about makes resets Overall segments contracts, this pricing driven up well thirds increases two continued industrial increase. Our indices, price to excellence the are of activities. as as these by our market commercial on focus tied

exchange reflects the Next, mostly you Can Europe, primarily addition exchange foreign by And which impact is is sales see impact assuming the Packaging. display from for and slightly acquisitions to a of the finally, foreign and offset dollar XXXX. in divestiture packaging translation, $XX and the divestitures, weaker which due million, other of

XXXX total, see sales in $X.X our that you So are projected billion.

to So impact that share. the packaging due point per Europe. base earnings the EPS of divestitures $X.XX of expect XXXX we acquisitions net out bridge our of and divestiture now I'll to base to primarily by reduce the and display EPS $X.XX, and with moving in starting the first XXXX, made

add can on with our I removed X% how XXXX divestitures So $X.XX a base the volume our earnings. expected considered acquisitions basis. year-over-year described to overall now growth earlier, earnings The that from that on mix to to compare we've our focus results, operational drivers is actual and we

gains. project to and per which manufacturing split $X.XX productivity, procurement between a total share have we impact is positive from Next, of

from translation. foreign lower of You can exchange $X.XX, interest mostly positive see impact improved and expense, a

share. freight, technology, This cost enterprise XXXX, But global and key $X.XX $X.XX negative insurance improvements, strategic we're selling price our And areas, energy a year-over-year. offset favorable and Moving changes, negative deployment. increasing key than In finally, share. and net inflation are are spending of a cost investments cost in prices of include have material, ERP as there's of freight to we infrastructure compensation. expected impact does inclusive elements to related to more including per upgrade these items, per increases impact to IT network price of by such and net in other our

a we certain of In year. non-recurrence addition, do have items from last other headwind the unique income

XXXX result last All increase an EPS base of our and in for for divestiture reported of or outlook acquisition XXXX base adjusting an our movements of $X.XX improvement X.X% over these activity EPS per base X% year. share of EPS after

guidance, cash So our I free operating review XXXX be our we note flow less flow I'll this year, cash that to changing cash spending. flow are net free before CapEx beginning of definition

flows or longer results. in cash definition flow free will our for included Our be the no dividend cash

balances no So our XXXX. million in is $XXX for underlying million. increasing outlook higher generate The our This related year $XX and XXXX million XXXX, Howard includes end assumptions invest-in-ourselves free to about noted, Project of and as does spending capital CapEx $XXX working reflect flow XXXX million Horizon. are our CapEx outlook compared to to strategy, cash key spending to to XXX change

and an headwind million XXXX of required each in made XXXX million year-over-year We and deferred $XX be cash approximately the XXXX. also of from flow to FICA related payments have to $XX

So I'll previously. active recognize before non-days process. currently comments, year US XXXX pension non with expect approximately mid we've finished cash to the We the related discussed completed expect with pension settlement are my termination of billion million in liabilities. pension an we be to process annuitization that our We do add termination that process $XXX to $X mid approximately this an of charge I

when we In the termination complete addition, contribution we around expect to pension million of and $XXX a voluntary process. annuitization make

contribution. excluded due For now, amount this the cash final of uncertainty the about and our flow inherent we've guidance XXXX contribution the from timing to

back And turn that, I'll it so to over Howard. with

Howard Coker

progressing are to experienced be Thanks we the outlook. Julie. the our of Entering into momentum we good The and of continuing quarter. how industrial positive seems at the XXXX, consumer feel economic end despite first uncertain mix balanced businesses about XXXX

this in still show our to markets primarily consumer sequential costs. price including year-over-year, benefit packaging Demand negative to face we I in ton should food US paper experience all effective and system a for We significantly backlogs continue increase Canada operating we focused can as longer and remain price working habits. packaging this inventories price a the is announcing we although in solid we in paper segment, continue industrial pharmaceutical chain still did inflation, industrial other broader of which from the expect our COVID demand to vaccines the and therapeutics FDA in consumers recovered and continues cold on improvement We're solutions recover we In eating and Our other believe packaging are recently shipping qualified mill escalating tight. URB providing for to increase public. second mentioned freight approved achieve days a markets. relationship X. early to aggressively March $XX cost at-home our

We become to distribution demand more organized. as last mile expect systems expand

to to turning XX, I about capital our comments few just deployment want strategy. Finally Slide balanced make a

help we the acquire X%. and optimize to divest portfolio. been to an and this has strategy cash provided As that XXXX increase And our year element Julie we were top M&A $XXX and payout of remains consecutive and hold over is were priority. we by cash year have driven a to consumer shareholders mention in XXth that our our in will pleased to Project million X% delayed XXth to capital we Returning dividend mentioned, by a the increase capital our dividends, also board our the expenditures shows primarily core consecutive selectively roughly important industrial projects pandemic to I'll the Horizon the shareholders. payout historically continue increased authorized and our XXXX. representing that

solid to and Our opportunities. evaluate and flow provides pursue and robust external a most platform us sheet cash strong internal balance

However, rating. committed we maintaining investment to remain our grade

times. positioned are comfortable opportunity. repurchases of unable the is continue core how to when an returning but businesses if internal the the find invest our remaining to uncomfortable only Sonoco value shareholders. have while to long-term We're We'll committed we're operating to proud potential our share to Finally, the external people right always remain that for investment grown option, well of our of weakens. in We grip pandemic or confident reinforce

the operator, procedure? please Now you that would Q&A review

Operator

line Hajde Securities. comes of question Gabe [Operator first the with Thank Instructions] Fargo Our Wells you. from

Your line is now open.

Gabe Hajde

indicating the format comment for hope families through well. difficult morning, can of assets was such the your experience footprint Europe? both and with and hoping appreciate to investment supply chain reports bidder in maybe I kind and could grade finalize the I And help such think your you this. us guess important. out region, Good to rating in a including I merit you as a I your transaction, the strategic few getting potential as of is a kind it's then Europe, certain US in you in as your But Howard with as in food a retailers of lastly, are Sonoco your well comments obviously

So to a the using of extent you would there. form payment consider equity as

Howard Coker

the opening, yeah, some really not going relates as heard actually aren't frankly, type give the I'm Gabe. Frankly, But the to business we context correlations to Thanks that reports. I've market any frankly same rumors, read they're necessarily and And considering to surprised your there. same of out there it speculation. our cannon closures

really So about can go far I with as that's that.

Gabe Hajde

that. appreciate problem. No I

supply comment bit you kind might temperature of together. have opportunity you you look kind talked there. for of And you to specificity the about the assurance and like? Can where us give where done will the more side, really, that's extent can what And chain work around any On timing? – that to for I a sense little guess, get you'll participate waiting

Howard Coker

mean. frankly we start now, It's activity, we but seeing really seeing for time. participant. really in deliveries this quantify forecast at from but feelings certainly overly this quarter. earlier relates could type we as – the possibly see there's now and you seeing market a you the be noted what this Rodger be to out. I that protected more, fourth plays our to we're to are into Gabe really, point where us color really mile add to But we really a – right as thing got aggressive we chaos right – certainly year Thermosafe engaged we that? call our as started to as in now. not look difficult with there into the up it things we ramp to how terribly it sit right last There's want bit in any fourth material of our We being expect call the got We've quarter. well for as We're stabilize, it will wouldn't

Rodger Fuller

record Rodger. a only Gabe had performance. line fantastic this I XXXX, and is would The line year Thermosafe bottom thing is say Yeah, in top

win to business, be As vaccines. on to new an some COVID across we estimate the put but will pharma delivering in we space booked continue business too it's We early simply the involved total. just

Thermosafe with in to XXXX in vaccines into with growth vaccine. COVID be single that outcomes digits expect double the high We and digit

second we'll give quarter incremental you we're out. I to be for you some But being now, difficult it. us. of able It opportunity firmer the estimate, are as process excited very just for approved other it's about numbers come So meeting, in too vaccines a be will an of think but give to specific

Gabe Hajde

thank Great, you, guys.

Operator

Thank you.

Our from comes next George of question a with America. Staphos Bank of line

is line now Your open.

George Staphos

anyway during guess everyone. that referenced on and prepared for perimeter details. be just of you in the seemingly I question perhaps less the portfolio. a kind of still I had remarks, the today, the than you Hi, all is A much. like. couple store would very is first morning. call times to the the Thanks Thanks going well parts Good couple performing

pursuing on a tend blast or business markets. to as own sales one, terms you in of strategy quick versus guardrails quarter on of what mentioned say would both more to in give in appealing follow three mix Sonoco the portfolio could accretive color we're core a bit your how, I us industrial that. you And and might you less two give you a down in on or of to the in some capabilities? ago, setting acquisitions appealing in what on relative fits relatively, type acquisition road? what's slides a consumer the think of And then had and you're for If you be a Can your it your do one going and well

Howard Coker

acquisition Sure, the about me side. to talk George, let break

foundational businesses that our is the happy for that One we really portfolio. that things in said or have we're of we've year last the so the with consistently

terms base, So interested within if building be core basically our we now. that be feel in you on competencies would of want like and to that an – staying in in growing and lane we would of staying think it where our acquisition in

type two perimeter our in to platform Sonoco let And TEQ makes for with color I'm Of pleased across where of just overall surprise we're the I've a it. but this number that food industrial in just a and should say, those in maybe course, on said we why that some flexible lot healthcare say fits. this a yes, don't be be seeing have to thermoforming those We're we less And about as the our a quick that in the Rodger I color a business more relates get can we've done see then thermoforming That's just and off like acquisition. little the you'll on And we businesses serve you but just probably course business got going of of going position. and the should to of not us give number year acquisition the about market exactly totality, talk Rodger consumer more year. about anyone on on. future And you're in thermoforming recent thermoforming. to portfolio, cases with do, market, we've of the approach in it it segment, total. the is particular mid real units in But the I referencing one make I place last mind, they've that sense solid as talked all start to quite question, What side. what more changes then you of if And described, of year, that to our taken to acquisitions our – that feel quickly really so business. from so store got But Rodger's before, any where past. simply doing we're

Rodger Fuller

Sure.

we've consolidation update, and of three West in an quickly real Coast the completed George, the as one operations the plant mega the California. So in

complete. that's So

West needed. products And standpoint. on at volume of some the mentioned pros we're raising some prices Coast, from certain putting for headwinds And risk. on frankly, a the Now out Julie volume as we're

fourth out on consolidation from price as But the range West we that basis consolidation some a volume that that playing will save we annual Coast, there. about $XX moves would we on standpoint, million pressure quarter, the combined we in with came So from with the said see see safety the we announcement an and out.

new As growing. growing. our with thermoform. are marketplace We've from Howard store rest Eggs it's plastic of products top greens got a said, business in our our business. and a on refill thermoforming Coast, perimeter peel the you the of clothes look leafy Bottom flexible including at with the East business

excited deal we're general still of on issue West we about of a with. So had was growth specific prospects. to the in the Coast business store perimeter It the and that more

So be going as across store strong, food our perimeter forward as leveraging you'll which us those hear of platform, strengths very And is our Howard thermoforming we'll talk said, well. very business about successful.

answer did question? that your So

George Staphos

in got could figure Or with quarter. and if what to On figure good the that cost other Yeah, turn latest volume Thank could color. overall, getting that's we which the on the Slide I'll you that shrink bracket bridge I guidance of embedded price year. pricing? Is And price successful all in there's earnings give you cost, very stuff big your a you productivity? helpful between that take understand. you've for in given the have assumption And and round you're do Rodger. on fact, very going latest diminishing know number of you in else XX, luck it's do it's on quickly for because late. good you What a that for And pricing? Thanks number? lower the negative helpful your us over and this it

Rodger Fuller

assumptions George of the the increase. implemented are successful core in Rodger, first we invitation achieving its increase there the the and XX first price that

price our finally in as a the know, in resins, to the contracts. on inflation we expecting the well. hitting took resin based going on Freight the second, this the on of XX%, XX% first in see very be So moving headwind hardest costs recovering the part Freight quarter on part of the to hard fourth some of we the resin also force down. for can the as working first aggressive the And of continue year actions hopefully, products We're a that we freight, quarter. in freight come implement range. We're – also first some and XX% resin And and quarter. prices that you quarter as so fourth range working is quarter, We're out aggressively

I inflation 'XX. you think as of that the kind three So price cost big gives as and our for far recovery

George Staphos

much. you Thank very in the luck Good quarter, guys.

Operator

Thank you.

Josephson line comes of Adam next Our question KeyBanc. from with a

open. now Your line is

Adam Josephson

you Thanks. for Good more and obviously, morning, one I hope your you well. on the business. portfolio European packaging contract Howard, families you, are the everyone. sold

in more makes portfolio you many You simplify about how lives Do the took think say will it's follow. think impairment the business. and difficult. need investors the thermoforming is that it their to somewhat you And So you to just structured further there sometimes it? do How now? there's businesses are complicated

you to some would the much be benefits all – them. have understand, have explain How them for of the the simple against about simpler of a play just a investors? a issue businesses easier pure company to some having more like said of you how go portfolio, potential And down do think would more of easier of you to

Howard Coker

Thanks Adam.

near total, some movement that and line as go businesses we've be we at midterm. we look in to line some with Just there'll directly, expect item relative if about by got portfolio, re-segmented further can have some the item, really But leadership. you solid solid in particularly the

while we've are from be that as our business well structure at you'll portfolio. the portfolio, your would not the go to be It'll new both in and I structures see as I'll term, move forward. be challenging got. these it standpoint. frankly, our new from always Properties will I standpoint. some logic expect to movement, we're And very acquisitive in acquisitive looking relative And happy so we of answer we going we question particularly say with always more and place, forward as an under near segments and forward-looking. the There's think divestiture set

Adam Josephson

there? guidance, that. years. for And often year thanks How to that volume reasons. to no, last case the for worse? just starts much target? it you confidence any inflation one various expecting, sometimes the the couple on mix have the and how you short last bout that Is know of XXXX? the just I guiding been the you that's falls Is Terrific, it X% And in do inflation mix, target X% the big bad, about volume company in would less that on X% of you're thoughts saw just compare

Howard Coker

about guidance. good feel We the

hey, also COVID start go relatively when to course the were side you way. year. of it strong holding the business But through the up the consumer you related yours that you business have in If year, a picked to look we were seeing portfolio, new we flat of to at and uncertainly the as that say, we're

space. And off Probably, as talked the continued part pointed the around protective of of about business, but back but continues a the as world. tapering down rate. Skipping we're seeing So perform so, consumer side, that here, fairly quarter on year? independent we're sequential into enter, for on getting type related frankly, extremely towards industrial, the about side. pretty we've the seen. much well type very And strong improvements to first degradation out normal be on COVID strength to COVID again, Could somewhat Thermosafe type of to situation. we the goods, only perform the around room any demand, And not the Rodger we've globally, it strong run go there's some and the talked we've white mid demand, the

So actually there. should upside be some

that you when good about where positioned we're at So this pretty look feel X% to point.

Adam Josephson

think big going to temporary the economy, realistically I and data longer the is on last be? think piece, strong facing, any do it's but inflation to likely views lasting you inflation? you're Thanks comparison the global inflation any this of lasting, you how depends long on situation or the it just to? How know

Howard Coker

And extremely critical it Rodger but specifically is industrial referencing to make out, same. side, that I consumer side of and on aggressive. Rodger on again, Hard pointed equally as was that call, part the the the the side, recovery about think

on subside? in That's see recover a very and that would direction. is just So to can't anyone's plan when will almost comment rapid full our and when expect But to basis, executing time the our it that in start guess. on really to other it recover we

Adam Josephson

so Howard. Thanks much,

Operator

Thank you.

of question next line the Salvator from Our Seaport comes Tiano Global. with

Your now line open. is

Salvator Tiano

hi, my Yeah, questions. for thanks taking

little on bit uncoated, a Firstly, board. recycled

$XX You're increase. out, said, as a with you

I you're versus and And be both before to price first you you're RISI what is if reflected in mentioned you annualized all the if and with right through now correctly, could XX. difference in with $XX earnings, that an potential reflecting? basis? go think increase, that assuming the it question clarify seeing I March, of does has is what remember XXXX the on Can secondly, response what second what your in and on customers RISI impact

Rodger Fuller

comment can't one. index Rodger. that in first movements. our this recognized start X% the XX Yes, has base, I'll RISIs is – as said, as customer achieved X% core, But was question. we you we with well the explain to have XX. as announced RISI our RISI first the We the Yeah, really XX full or

same really so region world. then $XX doing good effective RESI X. the do And doing but of increase on RESI in the will far we're very really every in does, Europe. same those March We're pushing confident next the what And We're performance in the through.

at that follow through we'll as see of the and second confident go we're it index majority increase we'll So changes. to the point, the base this customer our then

Salvator Tiano

I regard March through? if earnings price guess potential with the And to impact increase goes the

Rodger Fuller

would accretive. I say

Salvator Tiano

Yeah.

me ask do let guess, up investments mentioned you pipeline, but main CapEx step you you XXXX question can do organic what basis? you opportunities the with about, projects clearly more versus sustainable robust as your and from But Project is how project essentially Okay, And done? a beyond more lot examples? perfect. a see here Horizon. see I see CapEx I to some you think a increase on And give Do one of

Rodger Fuller

lot a examples. there's Yeah, of

early forward. so very at I our I is know capital this were we've point there's spread it organic me And – a to to 'XX impressed we you we let beyond. We're forward guys going back question. your mean, you the not project. going well of a come existing going had major do? we've It year, And play looks but you say business to as an if through portfolio, we're growth the out away deploy across to first that across much board your units with more, has business real strategic give this say, increased been, productivity Horizon process will and go no what to in light have Yeah, what big type out units – as come a what time. it let went – lot units. to in year. dollars through Project what but number Horizon But talked to with can going service, with by So demand across we've We'll I into of there example? really about more all walked they a pent question, this planning how up is our is business mine, did to going the the I and like

Salvator Tiano

very thank Okay, much. you

Operator

you. Thank

Our with comes next Panjabi Ghansham the line question of from Baird.

Your now is line open.

Ghansham Panjabi

really group. it above XQ, your like Hey, and the trend X% for back stuff more the to But for quarters, doing let's guys, the from packaged the just good environment three the was And peer days morning. I what guess relative say previous consumer broadly. food quarter X% going well volume and to growth line from extra that. was

first there impacted an market acceleration Or some of was there the sort XQ? XQ volumes? of that in delay at level? the flowed into guess that what terms Was I of end So it just changed

Howard Coker

Yeah, point acceleration. fits I to think your Ghansham it last

somewhat didn't trailing while a taper into of normally, And frankly, be that they month and see expect well. So fourth see that Can we we our happen. quarter our in is – we the November. play to it our to if the into year flexibles business across pretty business, the as October busy And busiest December down board – are thermoforming

that very all just pantry remains only as first can that behind enter still the could consumption well be but normally happen. of mid – would down robust. all home. the year touches of frankly, on didn't kind terms in and December quarter we just brakes say at seasonality we that stocking it whys this So we that as slow The Likely well, on know of

Ghansham Panjabi

which like of on negative this what Got XXXX just could makes time. looking freight change maybe what different if inflation – going of the Sonoco an significance, guiding makes insurance it, insurance from for mean, What and is rate question, rare to higher bridges. back basically particular costs of years this you're EPS over consecutive the you have just and based – price it's is then quantify I impact well. to and for two back the cycle for maybe as to earlier cost

Howard Coker

you into where commodities, in commodity a we're Yeah. earlier. Yes, of this the year-over-year, category, have series or more broadly we almost every year have spend across had it's And mentioned painted, across from but Ghansham, than same paying previous may board. seems we're a insurance category. that every types seeing going as seeing And had be the unfortunate of – mentioned year it we to Rodger

meaningful So insurance, to it's that directly and is though, on your point, –

Julie Albrecht

is driven, million that what we've insurance, really property outlook. it's our market is lot increase in a is roughly $X which Yeah, $X what we're million expecting. of up of in year-over-year is And really, our very but got

Ghansham Panjabi

so thanks Perfect, much. Okay.

Operator

you. Thank

Mark Our the next line question with Montreal. comes Wilde Bank from of of

open. now is line Your

Mark Wilde

grade, to sort about acquisitions. net to you heard that potential you Julie, that leverage, leverage you asked terms We just for mean does to actually an investment earlier in wanting of from you to how measure of come remain want back limit it? of think clearly EBITDA however just that to on what question the particularly and about is I or very Gabe debt wanted but upper

Julie Albrecht

absolutely. Yeah,

extremely So already to Board, grade mentioned. management as the investment Howard rating the yeah, absolutely, committed is

of and the regularly we times. We our business, really around wrap GAAP Our year up and look debt very look to EBITDA two into sheet as closely a is in model do normal planning course an metrics, the we our might obviously, normal on as perspective. well as yeah, address them course, right, balance and from eye opportunities keep agency to how XXXX rating

always pick we in kind at, So touch we're model rating could monitor agencies. leverage we we that would of with a one – modeling is let's let's and we say, around just acquire, very cash again, yeah, adjusted our future do grade, again, type business, that closely of that like obviously scenarios something although when pretty out with size, over the times, comfortable and three our say internal touch closely, investment keep flows, ratio, we that profits, thing. with Moody's long look keep we but in to we remain the actual type say very results. I'd the And of as term, target, we But closely

So does I that don't question? Mark, your answer know

Mark Wilde

Yeah.

like to upper about just we simplistically, would it, bound the would of mean, what EBITDA, debt net to if thought like, So in terms that going do, be? what

Julie Albrecht

On basis? a GAAP

Mark Wilde

Yeah.

Julie Albrecht

but of a From we something. times what Maybe or – on leverage a like really, agencies our rating tandem right. to and sets yeah, side by basis, two tend side half monitor obviously of course, is and a adjusted But really That's, with to pretty monitor each we other, both but in closely tend metrics. ratios the they move adjusted important. the – really GAAP move

Mark Wilde

room would now? much have you right How

Julie Albrecht

ample well strong a I business. have liquidity the for mean sheet, to very and we, have Yeah, right clearly balance

choose to grow it. we However,

Howard Coker

in continue pointing acquisitions of we Yeah, talked a out, of in of in where going investing give very that's to us But that we're going strong terms fit exactly, capital? that's balance some to are opportunities Salvator's to question committed more grade complimentary. do already is Mark, terms mean I going investment that have we rating yes, core at back to we've sheet, in Julie ourselves, spending as looking And we're in are within category. staying our firmly that terms certainly,

balance point got we nice talked our a other we balance we've have be better uses time, external, and but have focused sheet, internal cash, in use good of strength opening if opportunities, this cash. pretty if at some in we the for don't our think on there both share But we sheet. of about comments, buybacks, So

Mark Wilde

be don't then flog curious Howard for pretty display and – for big want Okay, – that a horse dead target just you've I kind pretty of to acquisition you and and big just capital. actually was here. exiting incremental to you I fulfillment, fulfillment But seem like I'm business a the a

terms thermoforming write what cases, happened lessons West some look take of downs taken in you future those You've that Coast going that you in forward M&A? the what at in business. When are

Howard Coker

That's a big question.

Your a been that's we strategy that for period about it running around were and packaging around long a during of that point built time. display time, was

we I think, being of totally – course most for its played of that you in terms Sonoco. realize it strategic a that asset

that packaging and West changes, with As had But been, well. point of that Coast have was -- can may about to more said some maybe open we've just that initial terms a things portfolio as on and to our back got of been the to what years on through think us. we that cetera that of -- us no say strategy. what put we I noted, the the guys for business. year leave with well, not to ago, it some business it that, of learned may clear the Thermoforming important in our of really that to We've division that your dealt that couple we've team portion or need a like as and talk kind performed and up. secret. them have that very issues felt the that got in dealt as trying we've takes some so our company, place Rodger we've with as to I'd we Display a think pros. gone and lessons about you we've was leadership select I point plenty in went I strategically really has to for acted guess, where – we've the that of last We've that has on acquisitions we not have et to improve We you're

we're going said move our that we're to hoping forward. I'm -- your actually got portfolio to address So from this away take do. to you'll going going we've company in we We're is and that doing what issues we're this

Mark Wilde

year. this luck Good over. it turn I'll Okay,

Julie Albrecht

Thanks Mark.

Operator

you. Thank

next of with Our from a Josh question UBS. comes Spector line

open. Your line is now

Josh Spector

Yeah. here. Hey, me thanks. squeezing Thanks for in

that. and you wondering was over still kind tubes last parts of of Just on it what's product up, of world drives and Thanks. your question about the Is over with just the I quarters? two the context outlook dynamics, what for can some and mix, performance if couple the business rest a next provide North of those of core regional couple business and different the quarters, down America

Rodger Fuller

over Rodger. of of XX%, product It's U.S. mix years, though still XX%, our Tube primarily Tube Yeah, business writing papers, U.S. business that as that this XX% and the defined our even less Core it's graphic newsprint, much is the and printing papers, probably than of it's and Core represents in the outside

second fourth, off XX% back we of very XX% film. down seen the compare, year we from bottom recovery in in we've strong same to the quarter year, previous the markets, as in XXX% new the back in fact, of as the start to textiles the to In

really as and that's and Turkey, Russia Europe you're we've around the really well seeing some some of good emerging wins got as So in dynamic the markets textiles.

rest that's trend we of follow and the of you in and world. Tube the regions kind business positive our expect are dynamic of first Core the So turn see to and and of the the projecting the quarter

Josh Spector

just Thanks. your That's quickly helpful. OCC outlook. And on

you that a place in in modest through What holding and much that do increase gives kind year. have today's view? the of that conviction from how taking forecasting You're or maybe price conviction you

Howard Coker

right. other, each at pointing We're

range, in -- that any range. see really we it frankly plus debt that Our can minus pretty decrease. is $XX if ton, We that real we at comfortable move or feel base a situation don't know increase or a could it forecast on rapid where up I -- a see

pretty at some in So in, this feel be volatility time, point understanding we with comfortable there the will that. range in we're that

Josh Spector

you. thank Okay,

Operator

you. Thank

with a from comes of question next cow Deutsche Bank. line wide Our

open. line is Your now

Kyle White

I up pricing. follow regarding question , URB on to in morning good thanks wanted Hey, question. Salvator's for the just

you your you to to of that us of REC contracts much if relative tied and cost there base give have? the curious business how are could Just some index the mechanisms the there actual maybe

Rodger Fuller

the we market, our about OCC, and at about and open XX% more if Core you Yeah, OCC. XX% REC look index, Tube Paper call is tied business, about what to is to through really XX% tied XX%.

We are to paper balance gradually the market. it's are about but and increasing open sales REC, our external XX%

today. a where paper, URB that's So are mix but we and bit of little between

Kyle White

nuts. result. of Got control provisions contract a if it, and then consumer with larger hands the or could curious, kind at terms there I there's that anything on business I'm be change regarding that potentially there was in of change as of risk of anything was just customer space existing just the regarding or wondering a

Howard Coker

business planners' You're talking about assume. the I

Kyle White

planners. Yeah,

Howard Coker

While can, some we we planners' that many volume. many, paperboard decline, supplied years facility nuts for for dedicated see

so So long-lasting issue opportunity. with no view building we that with we a Hormel, relationship see to to an going bigger that as Hormel. Look forward

Kyle White

good, over. it turn Sounds I'll

Operator

you. do Global. of a question the Seaport line follow up Thank you. Tiano with have We from Salvator Thank

Your line now open. is

Salvator Tiano

of your either little the down some has volumes? taking you some a actually. capacity over and Very there late and volumes so X%. you're the from I from quickly guess follow reducing XX% in year so past guys, been meaningful paper, thanks up of years, three a to kind the Hey, the I seeing X% in yearly think industrial any closures or growing only What's past of cap in preventing bit and with recovery your more for

Howard Coker

Yeah.

capacity the that's we've taken URB been invest out and If over two you system in has high-cost and we've we our at our America take same low-cost out commitment what the will done machines year. past that the we machines capacity, add recall, North a time in our URB, of as

going we've cost as in it XXX,XXX invest think we commitment removed So forward. our to was or tons think so I machines continue that's our and lowest

Operator

Thank like closing would Rodger call I back There you. you. for now to Thank are turn further questions. remarks. the to Schrum no

Rodger Schrum

give Thank giving for for We please us call. questions, again any us if hesitate to a And have further your thank participation. patience time everyone's your you today. again, you don't

Operator

this gentlemen, conference today's participation. Ladies you Thank for call. and concludes your

disconnect. now may You

Sonoco Products (SON) 12 Feb 212020 Q4 Earnings call transcript