SON - Earnings call transcript Q2 2021 | Sonoco Products Company

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Operator

Good day. And thank you for standing by. Welcome to the Second Quarter 2021 Sonoco Earnings Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Roger Schrum, Vice President of Investor Relations.

Roger Schrum

good conference and call. and second to Liz, investor quarter you, morning, welcome everyone, Sonoco's Thank

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

also was addition, second which In will quarter morning. this presentation reference on our on posted we a website our results,

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

Julie. me let over it Now, to turn

Julie Albrecht

midpoint price unparalleled our our and results challenged solid cost results were quarter growth our to that second guidance on on per other our $X.XX shy where $X.XX loss across and see of the morning, you productivity per a $X.XX earnings share of begin and reported material that operational $X.XX range volume of significant is X, share, Despite I'll Slide this outpace strong did second raw portfolio. Rodger. inflation our just operating GAAP increases in of quarter many base basis, per of Thanks, businesses share. we which a a earlier by

difference the the $X.XX far, was liabilities, The the June. a below wrapped been EPS, was that to In between billion item terms base of termination our as $X.X of substantially communicating pension the process settlement $X.X by of just on charge largest item This related GAAP estimates up repayment in the to largest of we've approximately charge for in pension also and bonds non-cash relates the U.S. portion debt of share. quarter. offer resulted resulted transaction extinguishment a of completed next May, of after-tax second a This also million. we due unique early a $XX transaction that loss a in the in for debt $X.XX X.XX% per in our XXXX, In tender an while.

hedge per UCR foreign $X.XX is on costs favorable composed exchange a adjustments net, $X.XX at gain normal, of well last restructuring as cent per mostly repayment $X.XX $X.XX item, share euro favorable our related The all for at gain favorable pension on other $X.XX interest. VAT and non-operating refund on denominated to impairments. foreign another as plus asset loan a and share, – Next,

income, and of a bridge the than $XXX performance key SG&A the resulted below with $XXX points an sales, in $XX was expenses profit million, review base increase details our on XX million XX% of This XX% million, more about $XX was billion, sales see was prior prior quarter statement of $XXX to the above other the percent as a Slide increase year-over-year. starting which year expected profit net growth property line, the for last increased discuss and the incentives, drivers This of sales management were higher quarter. I'll top second few the year. mix of I'll resulting costs basis million key up period. $X.XXX year moment. were on moving from expense $X strategic So, year IT somewhat income And just or of drivers you X, that a by Gross sales our premiums million in in in was million. expense effective year and insurance was tax second pre-tax minutes. profit balances a of key lower were normalized lower higher on reduced profits modestly XXXX All expenses $XX due $XXX quarter, to than and higher to for tax million Net interest medical operating and drivers group this fixed reduced rate more a activities. rate. and of operating $XX spend, Income million a bridge debt $X last million due debt. higher million floating favorable profits, last

base Our effective XX.X%. current quarter’s tax rate was

income, net to earnings second year. XXXX $XX million to $XX down quarter compared last were base Moving our million

lower the Packaging Consumer segment. volume at of our in X.X% up growth higher by volumes sales company you seeing all reduced volume Consumer see partially by as for in or our recovery on with was modest or as somewhat rigid by looking and other plastic Slide million our $XX X, expected nearly partially from containers solid an the businesses, was global whole mix X%, food Industrial pandemic, recovery and businesses This as bridge X.X% the declined $XX paper Now by segment widespread a demand sales. down our which was X%. our was million in offset almost flexible unfavorable offset which mix volumes, were

to up volume this in packaging, of paper business. most million was surge $XX a or over XX% recovery economic mix Moving across industrial post-COVID with

by franchise tubes grew rose global XX% X%. paper over Our and global cores and nearly

saw growth broad cones across and businesses excluding businesses. these from D&P, recovery saw XXXX. This our when display million Other $XX was very mixed protective fiber XX%, addition, or and packaging, in finally, significant And rebounds outstanding of demand. group All In our volume

see as that prices as to by to selling our was freight million Industrial This Now mostly year-over-year higher escalating increased price, OCC, work globally. costs. segment to you $XX inflation battle moving by were energy we prices recover we and driven

all cost into recovery third the group, and Consumer quarters. in fourth We and but segment timing resets some price our contractual other are inflation proactively of of increasing pushes prices

acquisitions completed display August and our offset recent and Moving with the $XX negative Packaging by driven see impact operations the Can sales and last in of European partially to divestitures, was and is by a exchange divestitures by And weaker acquisition you translation packaging, driver which of exchange of foreign impact topline, million, the positive year-over-year. primary with foreign the being $XX U.S. from other million dollar finally, year. associated a U.S.

were to of raw cost category our we almost with million price the pricing the the earnings consumer operating from Consumer key group, million. $XX volume of our increases. quarter. Within cost operating the our OCC resin $XX impact impact impact higher million material the X on positive and in volume chasing In the Moving price is profit our had combined mix second segment. Packaging sales to of of most the $XX businesses, mix, pricing than on we with our Industrial higher this this bridge resulted higher million approximately greater total cost the a in were that impact of you material starting price as In quarter, a due of well price sales higher with is profit costs. Slide selling during benefit slightly quarter, of cost, resin much prices, and $XX All Shifting to remind unfavorable includes will falling million higher inflation but inflation I business second In segment, as of this second $XX and inflation. expected had drove at in positive Other also of

market average shows recent appendix is that in the there the that $XXX slide per $XX started pricing there quarter. first or June see quarter you'll OCC This pressures quarter official quarter, quarter. year, per $XX in importantly, ton board $XXX resulting a a came in March usual, sequential increase OCC last to jump at this market in increase represents the until second of As relative over And trends. and a price of a ton, to an caused into Southeast by $X year's second the

of is and includes productivity, impact which actions, cost. procurement, from productivity all Next results fixed including manufacturing, the our

a was million with that $XX solid three a year-over-year total favorable see segments. across impact You our all productivity

productivity margins. to protect we Our remain very as a and work business inflation our focus actions area our across important overcome

is divestitures, but $X and and Moving And in divestitures net foreign Can to unfavorable and Packaging packaging moving profit the the SG&A was mostly acquisitions exchange operating impact pieces, the expenses. display million acquisition. $XX the million from various profit in other decrease change finally, and by the operating with within

up the higher were and of fell from analysis Consumer Moving sales demand. you reduced price Consumer positive by by the selling eat-at-home driven translation somewhat foreign segment by unfavorable cost significantly driven see the addition to volumes highs exchange have behaviors as pandemic-driven year. last over of Packaging profit the moderated Slide lower Can X% segment XX%, on by operating Packaging COVID and X, that prices, softer

Our declined of to very strong year when Consumer XX.X%. segment margins margin last quarter versus second XX% the was the a

Our operating also The Industrial’s manufacturing in significant Industrial earnings leveraging were the price as price and profit by procurement almost grew global recovering demand impact year-over-year translation. as the and to segment’s demand, surged XX% on driven increases, cost exchange by well sales strong lifted positive XX%, due segment’s from by impact productivity. foreign by associated the turnaround favorable productivity.

by finally, sales by profit last the businesses. X.X%. strong XXX points when a improved declined due quarter offset XXX year’s profit other packaging the the across of sale to the X.X% of great and this driven segment’s impact in significantly nearly Operating the prior display Despite segment’s and increase Industrial productivity. of the strong operating XX%, margins demand increased on by to to compared Our our businesses, point basis was and display And XX%, positive second X.X%, sale demand higher year. all by than associated the operating packaging, X.X%, but basis

resulting For were improved company-wide of margin up and profits X.X%, by operating sales operating X.X%. a in XX% the total profit company

$XXX to settlement primary flows Slide of X, of second our the our middle of Moving slide, operating was last in on these and quarter cash pension the cashflow to million, lower related $XXX year-to-date million with process. our The with that termination a decrease cashflow to see $XXX $XXX second you driver contribution quarter compared million. year, this in

level cash our In addition, and management networking our million more Overall, networking remains $XX activity. both was capital capital inflation in business strong. of consumed of we which very driven increased by balances,

net this related a the we loss the was pension non-cash slide, to in compared period. $XXX Most $XXX of settlement So this GAAP year-to-date and to charge process. back profit million of of year our the had after-tax prior $XXX to million, decrease million top of termination

down our to year-to-date spend. Moving CapEx

other so for horizon. We project Our year-to-date do is $XX year, compared at to mostly this million was $XX spending quarter XXXX. expect second million on far increase net This $XX to spend million due and spend projects. this year project important horizon will comments our we CapEx the a additional ramp be on of balance in progress about over horizon few up Howard will minutes. as project providing

mostly cash million So this capital with $X us for of spend. last and same by increased the Again, to takes pension the $XXX flow termination working CapEx year. period driven process, higher of free compared million

to of compared and period reflect liquidity X, our Finally, position that the year. year remained million we several strategic sheet quarter. see $XX balance this paid dividends second actions the million you for executed strong and $XX Slide cash year-to-date On same our during last very

of million cash, decrease tender Our which million. the balance and principal. generated was deployments the contributions. repurchase debt our U.S. million $XXX XXXX. by share These $XXX accelerated The of The gross operating from $XX – million, of of of significant This somewhat usage bonds included cash and businesses. second driven offer $XXX pension and were quarter euro-denominated XXXX a year by million $XXX retired our the for proceeds was by consolidated cash repayment finally display packaging cash $XXX XXXX million $XXX of approximately $XX maturing end million decrease offset which our million

quarter the offset the billion, second to at paper approximately just of was by year $X.X driven end consolidated market. mentioned return repayments debt by the decrease from a debt $XXX Our our partially decrease of million was end. This commercial I the that

the for XX, Slide included we've the history quarterly on your at Finally, two our top. years last reference, for earnings

$X.XX third and $X.XX share. contributed of is you businesses You quarter QX range now that in EPS to guidance, XXXX base can divested our $X.XX respectively. XXXX display But for $X.XX our EPS on that and focusing packaging in see this note the per and year

to positive on that impact $X.X our assumes As for Howard continued one tax the headwinds. benefit. uncertain our February, from products, now at assumption effective the release the rate Specific expected always guidance our million million we a and third tax $X.X of but quarter but comments, continued this and of describe reserve this his inflation approximately are year is approximately is solid impact of to rate quarter. a This has full highlight earnings uncertain earnings will estimated XX.X%. assume in original the a approximate tax in timing, previously in unchanged positions. have also continue XX%. third base Embedded demand since an rate, effective We our of time were I'll guidance in for XX% this for tax further base the visibility rate included unique

You settlement. also quarter second we changing to does earnings liability fund guidance base on cash the flow $XXX $XXX sorry, $X.XX. our full exclude $X.XX pension million the see U.S. free slide share our not year $X.XX also our I'm of made not changing year – are million, $XXX And that $X consumer to to the which range of contributions guidance we're per of to full in million

my of second full and and concludes outlook our quarter the results for third review this So quarter year. our

turn to I'll So over Howard. it

Howard Coker

Julie, everyone. you, morning, Thank good and

Let with the our you I'll what me performance. entering of close see year. give half Also horizon sustainability second my brief the provide update project new you with on thoughts our commitments. second and a quarter we on

America. the Our Asia, despite parts range, within some industrial second remain there well effects of inflation balanced guidance in of America, all unprecedented lingering in businesses as as where and lockdowns were Latin in and we here consumer portfolio hotspots and well did Europe, COVID-XX, of our North quarter

during growth quarter demand second with experienced Our levels. of near industrial businesses volume other groups digit returning to the segment pandemic double and all

pantry we the As last record of set stocking normalized remains second quarter although demand volumes anticipated, during pre-pandemic above from consumer the year, levels.

in seen year's metals, containers our the the XXXX second to up As non-material in is rise to cost from moved corrugated Julie have resin doubled X%. X.X% expenses, while and January rest label quarter, inflation. packaging estimate OCC will additional some film, business, mentioned, double to level, have in in largest frankly, We we over mid last last consumer expect our and challenge significant our and single prices nearly our up now quarter. biggest In battling made and our July. raw prior ton globally a a raw material are Old increase ton of digits. paper This material external freight approximately just from $XX our excluding $XXX means

[ph] to has these and of recover shape, normal proud said medical In addition, as good costs, more cover higher The of capital, how expectation. cost fully commodities increases and and expenses increases. controlling business cash all costs Inflation incentive to property management, expenses, to due Julie additional implementing noted, team is including global insurance, we've our costs. seen and fundamentals increased exceeding pull productivity, to all price SG&A PT driving other Having in are volume, necessary labors worked extremely issue. that, are our working productivity, the all I'm

of $XXX of a Hartsville tons brief update uncoated you number give and of gears be second expect state-of-the-art the construction XXX,XXX of that new allow number OCC. our times cost will of to machine increased on switch recycled projects with to conversion efficient number to million and board XXX prep stock of We to there medium now a horizon XX more project cylinder of of project vapor approximately new completed of goods. lower are and approximately handling the end per underway and key annual XX machine a quarter The finished corrugated me element consumption along a for rebuilt system will machine The of for infrastructure machines. the let conversion by XXXX. entire with prep construction Now complex provide the recycled of allow horizon. modernize raw stock mixed And capacity. the The significant fiber other materials day the is system

operational this end expect be to We October. the system by of

allow by at announced, our we medium URB early capacity market approximately to tons. XXXX time previously conversion. to corrugated the As is And keep for our million X.X to the exit strategy neutral expect

our As one, exact permanently of number the will of tons. which announced the number we annual a depend number closures capacity XX,XXX XX will reduce on recently by market conditions as timing nine The that down and result, shut as startup approximately well to Hartsville expect we converted machines, these machine.

and shut drive reminder, a savings and system machine top board last recycled XX,XXX cost paper liner machine that produced sustainability. permanently Ontario investors As year, and our horizon quartile Hartsville approximately URB. More year, year mill mill, Trent asking and U.S. and from Project into our XX,XXX more long-term the are we which down the by a for complex ton particular a expected perspective. XXXX, in $XX in performance both Canada to tons Hartsville million per about Valley, mill viability, ensure place annual the cost us paper

I regarding made thought reduce to update our environmental new I So footprint. would provide some commitments we've

all think other safe, delivery a around food, agree I that we fundamental products role providing in medicines and hygienic for essential packaging and can systems the world. plays sustainable,

challenges recycler a to criteria. in paperboard, leader it's of in providing diverse and a the we top responsibility based our change recycled believe with As industrial scientific protective data-driven and packaging, the as global environmental healthcare on the such production climate address mix of along U.S. consumer,

to global have set greenhouse approximately have line global reduce gas our emissions warming to planning, degree X Agreement targets with limit levels. well-below to reduced XX% since temperatures C we're After gas Climate new and we our doing pre-industrial greenhouse Paris much normalized the ambitious in research committed While by to above emissions to more. XXXX, we

a from base Specifically, by one by – greenhouse scope XXXX and to absolute reduce two emissions XXXX baseline. we've XX% committed gas

emissions to We three scope reduce greenhouse have by committed gas absolute XX.X%. also

be that greenhouse metrics developments continue the and actively are packaging I their have plastics and to of expand compliance to sustainability achieve changes, portfolio is and To operational goals, across science-based flexibles of achieve into each customers our contents we'll net-zero validated represented technology am from initiative. emissions line plan business environmental help incorporates of recyclability. to our by by To pleased iconic gas our necessary begin management targets EnviroSense In reviewed and improved market recycle type studying of would that incentives. we our our our addition, XXXX. sustainability required been and our increased that rigid we our changes drive targets, sustainable to targets EnviroSense units containers. more incorporating

in type with we're today. products In containers their Europe to fact, customers working transition into EnviroCan of

We trend expect continue. to this

be our We and social people will next our both publish which purpose, activities, better title our and from week and commitments when our of our time corporate our to information take environmental, report. all We new download providing be more we detailed our report. annual corporate responsibility on you'll some perspective the to to happens hope and understand a governance commercial plan,

Let know just into what some me heading of we of is close going by Clearly six now. were the about said what half months the be we going expecting the different around seeing the the future seeing is second only that And to that we're inflation we're different. than thing over things it's year. ago

economic consumers demand consumer As for levels, we businesses as we moderate their from to pre-pandemic continue third our related expect confident benefit our above at-home will post despite food normalized that packaging, eating pandemic quarter, patterns. remain remain business enter more the to we recovery. volumes And the

and confectionary, as However, even construction continue should products benefit. expect markets, service COVID-impacted food to certain we also such

industrial strengthened tubes, illustrated further We And as demand expect recovery for also backlogs strengthening globally. cores paperboard to cones, the for historically levels. are and which – high global markets in pre-pandemic by our

our resins and prices will challenge escalating patterns should slow. prices prices to the several a area strong rise recovering fourth businesses. the believe likely the said, quarter follow inflation. quarter. in we price from materials demand other ease begin of on peak an decline the due could domestic cost managing still in continue believe and curve still most are to hand to fourth biggest We paper prices That improve and behind non-material historic this quarter demand. and in Our into We're be will as raw and Recovered may collections currently OCC

recovery Sonoco price well serve improving these should our in trends We increases price positioned our believe last year costs However, over including time. markets. us mechanisms announced our resiliency is and primary over fully allow the recover to given

strategy margin Our while and returning strong shareholders. to cash supports financial consistently creation invest to in drive growth ourselves position our improvement to value

with that we to be operator, Now, review questions. any would pleased

Operator

Bank question of [Operator Instructions] Our America. comes first from Staphos with George

George Staphos

Hi, everyone. morning. Good

Howard Coker

Good morning, George.

George Staphos

for details. my taking for Thanks question. the Thanks

you Just adjustment to an like net approximation third to will the millions there, for quarter domestic a should let or to you or as your a purposes, heard you you me us and the related were divestiture dollars be would could EPS be as price for in think look know of case just cost packaging displaying the we Julie, so what just said if the third for that and give that maybe correctly, quick quarter, question, fair standpoint rough start. start quarter Howard or from I either of I factor businesses well, comparison what that, $X.XX $X.XX should be an think something at

Howard Coker

D&P Yes, on the side Julie. you're pass will I I right think that’s based specificity, on to on

Julie Albrecht

D&P, timing M&A around from be as price expect think as so And so, a market call is hi, Howard year. a from divestiture with all call expecting right. open a we just going with of it slightly you're slightly as But increases. we the continue of Howard, Rodger kind still of of to and provide Thanks, say from perspective, are offset in inflation, can last that Yes, the price the bit I'd year-over-year. and our reset, I in negative to obviously obviously of cost around $X.XX QX well a of price color, more increases dynamics to it a contract The third we lot nonetheless negative quarter continue Packaging a about little pullout acquisition, there yes, of George. Can headwind,

George Staphos

in was XQ Okay. XQ. fairly to industrial on positive that assume cost that some see both basis it in negative in or slightly and XQ its on sequentially good industrial keep as implies we And are should cost can price that price cost a improvement consumer XQ? But price net you'll

Julie Albrecht

are we cost. to price expecting slightly positive Yes, industrial stay

mean, more obviously, could a little the of talk again, that there, it bit and upward Although, – about price neutral OCC increases. I kind headwinds, can there's uncertain be Rodger but Howard

And segments. so to it's, I quite going in more depend across is think on I frankly especially, if any the takes continued puts It resins but OCC don't know really and and the to inflation that. want on add Rodger color you

Rodger Fuller

significant have Well, as the George, business, through where we mechanisms side, fairly the consumer increases a quarterly and you July. in we would price of on in our resins months three change a the rear. expect major consumer recover price going Most CPGs

instance, implementing May June. calculate in April July. in – We March, increases, March, July, that So put April we're in enforce for we

we So saw and July. more June increases in

that we resin. So third start the price quarter, we expect some around catching will costs to and still consumer negative In up. see

catch will fourth up that We in the quarter.

George Staphos

turn out from volume a obviously there's normalizing, surge, last we you've top two My can, one, Can and three you right. your and of next a packaging learned margin cans consumer as business ones the it somewhat that standpoint. of remained flexibles, Okay. had kind years, pressure over. the lot Rodger. or now Thanks, businesses, look what I'll they're composite about on Paper a several has reflect

and and for years out and growth confectionary, looking the do much normalized angle right and the quarter. is Thank outlook seeing Although relative in has would consumer how think you have and the those businesses think do gained you readopted, much what growth the next case consumer, lot to increment convenience the you a do what couple been what you to think that the you're you've maybe luck business of pre-COVID? that growth is, very good of in

Howard Coker

adoption business, America. percentage, Thanks, if forecast our can We about not to continued the North talking going exact generally, we know of in I'm there's been think but do talk just XXXX are you that volumes probably paper ahead here levels. George.

And folks a just of in efforts. categories this sustainability perspective. on – – just where exciting we're some really it point that the anti what that's with number Asia, And expect we've of to we years time terms we side digit well. growth that continuing specifically is being happy saw to funnel going for plastic the international through another switch We're now, container We're call paper right throughout at with the in from is continue in can an good drop The let's trays, how is pickup. flat an seeing at it see managed really we're as business, double relatively quarter, to And really our of now. wanting exciting seen tray to opportunity. quarter-over-quarter-over-quarter over Flexible and business If substrate. we but business. to the productivity look on is build flexible just really

a on other I related products, holiday think as drag a we that it convenience confectionary head actually of and was into bit the future softness where we and saw business.

the probably on meals settle any stocking, actually, really there'll other. has long we frozen that And positive they're There'll home, That's tracked driven new think that's activity stock. a expect that I pantry one And during And our ahead it's about of I the volume interesting to than more carrying one's move plastic actually we as the been So I last food they but of work frozen that to forward. year quickly ever. grabbing more pantry a finding home consumer just people the sector. from freezer. product have be home, slant their And noted from good. down, be term there consumers is working working market because the these be from will out the be to that think than will

not of through the sector really totality consumer about very, fill So and this a future. the into year, very the bullish but end just

George Staphos

very you Thank much.

Operator

next comes Spector question Josh with UBS. Our from

Josh Spector

strong, to better, bridging. for operating income getting kind maybe flattish your and second XQ but for of you're up in talking sequential about to saying listen I things Hey being just and Maybe guidance pricing guess volumes the on similar updated about in what taking guys. implies the you're you're my getting half, XQ. Yes. consistently Thanks I some of question. follow if

what So half, perhaps second from, prior the the in expectations? you back incremental guidance hold lifting which negative versus factors are

Howard Coker

Josh that has And did we're of and that's recovery one really, mean, resin, right it's Rodger lag just the the in now. a escalated this most. continuation I hyperinflation job of in period explaining that the particularly good

solid just the three out in it's prior timing. the the of recovery And average, with that calculation as mechanisms. I month is pointed month It's on Rodger month. to arrears get have quarter the fourth think we We months

look to expecting QX at into QX end we and expecting to QX us, things out. that's inflation going into we're that carry and to go So in and as quarter see is we that play early inflation QX in moderating how we June still we that saw with are

Josh Spector

So catch-up. that just to similar still any sequentially. it in and better It's doesn't XQ because I XQ what of get remains that was GAAP so understand

Howard Coker

the Yes. That's exactly point.

Josh Spector

second Okay. I is for appreciate and your and that. reading impact half? are your conditions other impact or side, certain plastics demand just an baked anything is and could guidance North fruit, Coast for challenging some rigid on from have perspective West an specifically, the question, seeing on that plastics America the you something we're more into And growing rigid that the have about that just one crops vegetables, in specialty

Rodger Fuller

Josh, it’s Rodger.

the northwest the the year first Same the forecast We up for some impact there, that is primarily second crops sales story on headwind XX%-ish. in the PT, United States. built year. seeing our are of of the the half since into We of

northwest well, some crops into and prices any headwinds for business we're as weather that, yes, in all from have in we our have but So answer the that fires is built forecast. specific we seen some impact. the But moving that

Josh Spector

Okay. you. Thank

Operator

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

Mark Wilde

morning, Good Howard. morning, Great. Rodger. Good Julie,

Howard Coker

Mark. Hey,

Julie Albrecht

Good morning.

Mark Wilde

to parts job the of kind up some packaging, costs done you've wanted walking of the of kind with there of out, of the us some can in through anything of I us plastic a you just other to start portfolio? good just legs help in price cadence catch do

Howard Coker

is which And on portfolio, would related a Rodger. I based And I course, any say turn the you effectively the the say consumer hit of just and really resin. to where the is business. thoughts? the Rodger, all what influence that hard all side of it you resin over resin category, you said to see But further parts but when as if we've other us across look here headline

Rodger Fuller

think I right. No, that's

look than know, all on basis you you of the We're it, regular escalating mechanisms. increases with packaging, in expected. name Mark, as you faster outside out freight price normal change at other, a they're our areas If inflation, those

I'm increase, on well. URB, we've thought July went fourth minute. come announced we'll aware, to our and you're tube that which sure the to effect for went happening, industrial well. side our has But $XX which X% The a that's OCC XXth with X% and as increase core in into So gone

second we So OCC that to industrial. the in in front we're in upward we when trying headwinds did. part of And reason stay throughout to of announced quarter prices an expecting the with that's OCC out We're this more bias quarter.

Mark Wilde

European increases OCC also business any on kind helpful. the between That's of difference, and of North difference America, other and North any of versus the the And your cost the and Rodger, is in sort there markets? of Okay. Europe timing magnitude America order both –

Rodger Fuller

a you in convert U.S. $XXX team done European of average. the has to ton up there metric front the a about run faster, if Euro of to staying job Well, out But ton, on short really ton nice Europe that. they're

not up has the where But far. say going, us in I'd U.S. front a tells So again, done the comparison. exactly so good run sure job I'm happened U.S. the that's that recovering there their but is our this team of of

Mark Wilde

just correctly, is, URB question up have the medium you're is And that I'm like but the profitable to has production the I And quarter, the heard stop Okay. year. next quarter this other sounds guess, not curious until ramp to fourth at for of at second Hartsville you Julie. just the machine on the of the that of going medium And end end I I quite I'd it if year, at market be kind this year. the looking assume corrugating probably

of on us give we can move what So the medium what earnings out may that as about of next year URB, next I'm if of help and a corrugating ramp the basis? be into think the year-over-year the year, any curious you impact up phase just and

Howard Coker

question, Good Yes. Mark.

to point our overall weeks of first year. seven make that go later six going of next probably have it's even for be that the in as how to down part at down down we'll of fact, And In we quarter conversion. assumptions. where not and a at would point sat we this XXXX the in looked impact time We're reflected at and be

of the it'll the quarter into second year. XX, and won't be quarter next It'll be part year. first a be this So it be a coming, but of won't latter

Mark Wilde

not very you're of to not but earning Howard lead that just you're have startup XXXX, this, where you a this profitable, have and far the without, period you're too to to it reasonable but to up kind assume curve after production in might going year, be is take a running, bit you little an rebuilt? a only of going going on a machine because set would the to medium give trying

Howard Coker

that to and from. corporate looks a fair you've That's plant, new a material We'll yes, process, up anytime, the got, new I starting But what be. assumption, a Sure. where see equipment. roll coming entire but going have like you're up is guess, I'm new to the

You've got that. through to walk

Mark Wilde

Last how's the the flexible me, one Halloween in for business. real looking quickly packaging Okay. season

Howard Coker

treatment are to stuff trick Actually, business ready CPGs as because your get acting need normal. or you as the

Mark Wilde

right. All Okay.

Sounds good. Thanks, Howard.

Operator

question comes Baird. with from next Our Panjabi Ghansham

Matt Krieger

for This morning. today? actually good Hi, are sitting Matt you Krieger, is doing in Ghansham. How

Howard Coker

Hi, Matt.

Julie Albrecht

Good morning.

Matt Krieger

Great, great.

the on was volumes we half back I the of hoping year. that touch for So could

would any underlying that product or you of region by are could of helpful? embedded provide your these kind half the by are environment major really market basis product line what of what XXXX? for a detail on assumptions? segment So basis assumptions And projecting be kind the volume second type of If you within

Howard Coker

with thought of It we for to help it from each talk X% category biggest to I macro going to a see about upward to which kind – we a year, perspective. the where to To might about is this be share going were now is up our X% the X% that. Well, bulk And X%. X%. we've up up with side X.X% consumer our is slightly seen QX forecast volume up other for X.X%. the over quarter do talk in just of to And QX QX The within so. particular don't know we expect showing to the And that industrial to in side continuing business all the ramp about or to this really the about an individual if forward. be very X% we're prepared positive sectors XX%. year. try

Matt Krieger

to helpful. in across maybe incremental which about of the service perspective? inventory freight I a in incurred to you access markets in markets various any specific manner instances? out levels you I are have had any That's Great. costs just play, customers supply from talk you guess And wanted and to And could challenges in or gaining you if raw see materials trending end how touch pattern then on if or any

Howard Coker

are, tight income tight. us customers. changeovers type adhesive. weekends working that We're Yes, committed material we've trucks productivity, of But Matt. freight, the an Yes, all we daily, our make that's so raw seven mill to if and very the not been literally in certainly to above almost situation. day more particularly we've managing in situation week and resin perspective. that across driving a the a particularly inventories manage got the we're pleased that for on Outbound system very can to similarly Yes, resin, almost that We're where has on again where are that it come how impact does not we've make sure company, having then that's which productivity. base shipments it's with but it's managed dynamic

is a well you through right I it team pleased situation But interesting again, very tell now. is how managing dynamic I how our this. am with So can't

Matt Krieger

understood. That's very helpful. Understood,

could is Just kind reasonable feel normalization a any there just or day-to-day drop timeline for one of follow-up it there I'll as Is assessment? and then off. that you

Howard Coker

issue, this labor costumers the issue, it throughout going this continue we managing with of it's we're to by day to not Sonoco type a It's for just time forecast and facing are day we're I some going to that material basis. recovery we're can. costs the America. facing we're out managing best in that couldn't We're and macro what of getting really North cost all the the These a to saying. be headwinds of from that come, is our pull rest biggest our issues able

Matt Krieger

That's Great. me. for it Thanks.

Operator

question Adam next comes KeyBanc. from with Josephson Our

Adam Josephson

Rodger, you're morning. Hope Howard, well. good

Howard Coker

morning. Good

Rodger Fuller

Yes. Adam. Good morning,

Adam Josephson

or OCC, little mind. Good on morning, more Howard. just Rodger, a can clarification resin and just if you Howard don't you

by then little think you further said, for up be pressure. upward interested the up last what I now? bone? end I or think I I Can a meat costs would and your quarter, you went expectation XXX nailed Rodger you me or more and of remind as by July, XX% the another just would on on in June you XX to what just last were for knowing And were On Julie expect expectations OCC, expecting in freight, thinking So is resin you were can year think that inflation year, go lastly, it. And call put you OCC that now. the

Rodger Fuller

shot XX% look increase and a I'll end and we're potentially calendar slight Hi of Rodger. at is Howard XXXX, this. now Adam. you the to and year, for a of expecting on moderation resin, But it expecting expecting year. give this we're the the It’s if then what can or Julie year for add reductions some

resins if XXX%. go I cases, know, in from you mean, up many doubled, As I year-over-year, think polypropylenes as have said, you Julie

So about basket P we resins. bunch buy bought million of quarter over polypropylene all a a that's about XXX others. We of a half pounds and is then XX% based,

premiums the you of marketplace. the has already earlier XXX increase So mills of I what again we're container year looking is We're back seeing said assuming are there's July. heavily. at very The get we And upward of OCC, as a XXXX. now, but still know, to the in that's month bias. in the an moved pulling in XX% moderation

if going changing looking what nine we it's for It's months. we're but at been made the in me upward trucks added more, that's a comments this and you color at freight, that cost can Howard X% not the So, but for availability the we I to move, this first more tell the exactly do significant drivers bias, that's that end I is is it you bigger now coming even quarter, and and point, at that an are year. need believe has of it. and we're the more today. of way the wouldn't the for us, And in On schedules said to the X% of there which trailers XX to headwind important. answer But

Adam Josephson

over I mentioned No. I forget but Roger. cost U.S. up, equivalent just are in year-to-date one on think the of up prices I timeframe in is, Thanks, XXX U.S., Europe. issue, the XX, believe. bucks. you a talking what OCC were follow-up is about, And which Southeast you the

go how of that would a – that that relationship are to U more or you think lead you there's to you year-to-date the S Europe in U.S. terms inflation? in the are the lot about So thinking between and

Howard Coker

today I'll price of just the tons in paying equivalent Europe Yes, would at be say time. what we're $XXX the short

Adam Josephson

I’m sorry.

Rodger Fuller

are And that So mills we're heavily. just you again, demand that going shows saying not to was the point. again, I'm And globally. but go $XXX, to pulling containerboard the

do bias we quarter. see So, upward in the

Howard Coker

assumption you that the we basically they seen Yes, Adam, historically. make whatever Europe I situation think don't are, independent that be correlation to U.S., am and the may to, not I market, we've can levels totally sure between It's create heading a dynamics. market so an

Adam Josephson

what all year. depending about read Yes. China gotten U.S., talk just you been demand Thanks, by better, exceptionally what Howard you and is getting strong markedly you Rodger. And on worse Brazil Europe have seeing, on obviously, region, has are can worse.

just as can So problems, are embedded region guidance? having about talk in and is by you seeing China, what having think lines seeing other Southeast on your you by what is region, along COVID expectations those problems. Asia China you just what is in obviously going your you're

Howard Coker

actually. pretty you I think well, covered don't I Yes, it know.

as seeing Industrial noted also South mill footnote, Consumer actually same, mills is in you a we're on to business our supplement side, out in the the our we're mean, mill you at capacity, backlogs, dynamics, America part cetera, in this America, here just Latin South strong as board strong. America our order same we're very America of in shipping in actually here I If And North challenges look of to do of very system, our terms and South but having is U.S. America. et

Adam Josephson

Yes.

Howard Coker

fact, and performed into – it's American on sides, both Consumer. really in So the line bottom exceptional well, as businesses rolled South the and Industrial,

are here. side You Very, to strong, where very somewhat Demand talked tube similar it would mills on Europe we the core hope would is is our full. and about be. Europe,

paper side, cam mostly new George's On earlier and current to I very, business, made our pending which the is that comments demand Consumer very solid, orders. question

for XXXX last small Asia year. as of ago year XX% about extremely that is is turnaround. us pleased XX% example, was relatively with we're the day and Take our we look full about the from the From a cone scheme. to COVID as this time dropping business,

in flat of period. our can now got to a weeks quarter Asia macroeconomic more is has that in This paper overall major guess in where probably down just conditions is we're So, remember, Southeast real I double paper issue our we've relates had quarter can that as the business, and in Consumer that where that continues. the showing I after still when reason the that expect have because a biggest the first be it we to just digits, just lockdowns somewhat for And seeing enjoying new facility I Indonesia us. to recovery, things see noted complex, down we and lastly, actually no Asia for but settle our hit it down, that complex It's largest to China. the is that for earlier going been we're we we when but there been doubt Asian COVID has about fairly quarter was I large due mandates point pressure government

Adam Josephson

so Thanks Terrific. Howard. much,

Operator

Our comes Bank. Deutsche from White next question with Kyle

Kyle White

markets or and to details provide good bit? how food into reopen to you go quarter what here trended trend Hey, kind as question. Thanks volumes basis Wanted a taking of July on just containers to on for at-home throughout you to morning. the kind impact rigid and the any cadence trying consumption understand weakens and a of seeing the are month-to-month here, paper able Are packaging.

Howard Coker

quarter, the that we about that total within were think, noted really in above X%, in in but I XXXX. down I of have Yes, we Julie, we data were where don't me. were front not we

Julie Albrecht

perspective, and think, I'd quarter unusual during quarter. the I Yes, volume a a much relatively steady anything were, as not on say, monthly think basis – don't but during I from the trends basically month-to-month

really strong had a was As again a But after I of think, again, global Howard plastics growth like being tough second food solid XXXX. very comp, cans year-over-year the just again about very talking a business, quarter X%. mentioned, a you're about down it maybe

volume the I there's I'd continues be don't But quarter. to during And unusual think so very that growth anything say, second solid. terribly monthly

Kyle White

season And this demand you will seeing hearing of your that be it. what what to sustainable year are then Other, terms going for business? how in expecting from going are terms All of you vaccine Got And the customers flu forward? some of in or the

Rodger Fuller

over we with We is are into fall. Yes, hi, that seeing get the about of some $XX customers the it's to as Rodger. main constraints half pulling $XX concerns Flu season, are we're earlier supply expecting it good a million flu we One season. volume, pulling typically million. captured thing early,

see the in So, third we in that some come volume second balance of the quarter. saw we'll quarter, the in,

into of we out to So, the almost it's of solid standpoint, a flu to normally this turning From vaccine season. we more season. last the a talked similar we're type a expecting quarter playing pretty like flu COVID vaccine point see

some turn standard into of or booster from As going these is $XX for $XX we younger shots to ThermoSafe shots, expect our in get children, impact COVID more for package. on to we're vaccine. we million an eleven, get customers of we what to now basis temperature-controlled package hearing about as five to a into And annual million

change So, to the the guidance last from really quarter. no

Kyle White

And you. the year. the good of Thank balance it. luck Got for

Julie Albrecht

Thanks.

Operator

comes Seaport question Salvator with next Tiano Our from Research Partners.

Salvator Tiano

Thanks for taking my questions. hi. Yes,

specifically, essentially that the both loading? in are with plastics the trends, kind paper pantry rigid benefited globally, from a you So containers of about but rigid deviation end bit the even firstly, market as I us we tough tell know at you though why demand, little comps mentioned look you seeing the can

Howard Coker

plastics… I question, you are asking why to your Sal make sure understand

Salvator Tiano

the outperformed quarter? why have plastics paper Essentially, this rigid containers

Howard Coker

Yes, I understand.

consumer I frozen, opening But just equally nature the with continue. that think acceptance to the up that's it's of the first the of of to that that benefit. my consumed with is go some we're of so re-introduced a frozen for continuing COVID back earlier been point through products consumers the are food the fast truly they, QSR starving were back certainly meals and time

the seeing the frozen slightly actually we're So, year. peak side up over of last

the And If just we Can you up, of already and we a snacks I've as Europe saw scenario items, America. look slightly North talked then lot bit that Again, that pullback in the in in related it was at just to actually good there. a relates shutdown shape other here the Asia business to is of and a refrigerated. had to

Salvator Tiano

cost million $XX wonder differential because I the pretty also business negative given X% Okay, the just Consumer year-over-year, if two, you you for Packaging when we great. about income mentioned, price can on I the that steep a little think operating the a margin decline the leaves elaborate between volume. that bit think

the So, being so cans would incremental have Was reason a for guess, the, I paper margin. rigid imagine much margins the the high? that higher I

Howard Coker

yes. Julie,

Julie Albrecht

as in versus of of labor oriented It's other different well inflation, two our parts those it's interesting, business. as cans the you've dynamics business, very and the dynamics among – flexibles challenges there the more whether the between and inflation types in plastic Consumer are productivity being business kinds food and different several of – got resin prevalent really

around, So, et The a all cetera, challenges, productivity. COVID across raw labor Consumer footprint I the dynamics frankly. impact, our depending and impacts materials have obviously businesses, we mean, think, there's labor no different broad simple again these answer I on there, businesses quite across availability, again,

moving pieces that what's of any dynamics And so the margins in different the the of to we of able about just get impacting our key really, into that more now parts lots Consumer won't granularity sector. be with

Howard Coker

and seeing cost the resin-based getting raise as – were that hard, really volumes just up on Sal, in we're so capturing whole really, We're the this side. say in I'd back the to plastic even businesses, inflation is we’ve the tray said, that hit in inflation. summary, we're our price in Yes,

Salvator Tiano

the such the $XX other substantial bit segment. And perfect. the on in Consumer I it's just of provide because are headwind businesses, little what for quickly Okay, more cost you cost differential seeing inflation between guess, Packaging million at business the can segment, small the for a color a obviously other you other price and super

use So, terms in resins can you and you the on segment in Consumer elaborate pustules versus of the differential Packaging? that other

Howard Coker

resin-based businesses exactly there. it's embedded the back that, is It to XXX% resins. in Other is All almost

So, it's simple as really just large what's that driving that's as that number.

Salvator Tiano

Okay, much. you Thank very great.

Operator

Our next with question comes from Gabe Wells Fargo. Hajde

Gabe Hajde

right impact, Thanks domestically. I'm we exogenous China Howard, and recycled view in they're recycled obviously guess. genesis OCC? terms in normal instructive potentially, China's that and terms what a months or projects can reached the of I it seems over the what OCC rates in maybe anything And like afternoon, there's if as of, of and has to pulp. think, importing you behind of like XX what Julie, know of I the collect XX the pulp say for really going terms globe, new obviously been But there question lot a influencing the factors but of what's not no the Rodger, operating they list to limit the the the COVID across is, actions kind now And like would OCC, upper of in taking the has be good was might kind put call. in we're that. stuff of, sort look then for terms looking at of I late I'm question, obviously XX past let's curious curious seeing

a So don’t just OCC ton foreseeable that $XXX something there's to if above or future? potential curious know, in I remain, like for the a

Howard Coker

it's it's potential right. does, of reach we've about if get it If be increase trending. more I through price seen today hopefully situation. back Right month XXX, its after, has that, but and nine a if it, been through, What so issue a you has is will chase. it, so month, mean, and type now consecutive XXX it's month caught the months a in normalized that, just is to in cost And it's really it's The after, it OCC normal plateau passed back the month up, is be stability, been what there. plateaus certainly we've are differentially after, that really passed

to to really say. the global is market how of terms hard settle, really, In going

Gabe Hajde

Okay.

of year. that about spend were $XX from terms hand-to-mouth we year. know felt most living real spend $XXX talked year, not if Project Horizon knowing we've visibility, but in there Any you your next they this at? where of the But what think, where on then it of million call in it it's know of CapEx, before would fall incurring directionally, are inventories bit. And million appears some million quick a I I curious, are you difficult today. done, I work in in I customers’ $XXX that the a are such like kind to CapEx that were Just it of next normalize guidance know visibility giving for customer guess terms inventories little as starting of

Julie Albrecht

can too with early finishing modeled That's as I next that our could to you you guidance, on incremental push COVID, that et for assuming that will year. into tell I flow can go an with level. the bridge we've XXX to that to we cash Julie us what now free think, call. that that out make out up we've It's delays that cetera, have the provided spent we're right seen associated

into this the next going the pure CapEx in much fall of visibility this by how year. we're to in to is time have or together into be October, think able even we will terms bleed maybe really year, of I

customer other stabilized. right the the are have side, are price right, – on you think, side, are as the their inventories saying On food customers yes said you on on you our I

we're seeing not So, anything there.

they Any automotive, Just cases some to customer those up the story obviously, seeing, to the could more like normal they our have say second could year-over-year, know up could and customers in struggling sold that's materials, back over been sold were more the all were quarter. and higher. are Last sales more XX% with both shortage, – our we significantly up on raw year, but but they appliances have like are with have you sales I Appliance levels. dealing customers appliances. we're us would chip Automotive average, sales, there.

which So, I do I still think sales anything a upside plenty anything standpoint, the to from upside chip, to have do with think, with our to shortage, of housing customers or us. chip means

Gabe Hajde

And Thank luck. good Okay. you.

Operator

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

George Staphos

in come guys, real quick. late I'll Hey sorry make here. to it

the get resin? of hurricane building in are perhaps system, the you that in to luck How very off a hit happens? the that you'd has neutral we're And to project secular over demand even pricing construction much flexibility Thanks, inflation moved higher now, of grows the the So to to could all just the if always of that million. that more though may to materials? maybe on Horizon, the coming of you, quarter. closures cost of level Other of capacity is bit the in again, strong that which are current How you Project net growth optionality be Howard, just that then of time, you're basis the is on flexibility guys. up, much volatility with doing that with us brings question remind it And at second if $XXX I preparation little anything what seeing that a if had good season, that advance have some trying All than URB

Julie Albrecht

first as Yes, the of that of original identified on capital Thanks, the opportunity capital built increase had really incremental after team the that submission. we George. of backs did we had but the completion was Horizon,

presented material but up of incremental good brought was raw range the that warehousing. return a machine, outside million to paper the that redo and complex it $XXX $XX a itself million terms So, justifiable the very opportunity flow not to basically just in

the a campus come warehouse. next, you you'll when to new So, see XXX,XXX-foot

OCC of of flow the the how the see You'll does machines. to the backend now to misappropriate

it was that achieve the where we from. incremental spending that's that. So again by would savings came justified on And amount

second profile. was the demand around The question

announced of of all a market in couple the on my close noted depending but I As conditions. we've comments, that's machines,

the So, that Hopefully, we'll may like. today the with machines. look operations to things well, prep earlier annual is supply operational shared you our too, see I us more about are can should saying all situation whatever timing appropriate Supply closure going today of them were an We time inventories hopefully will to Rodger going for we've being managed as period versus hurricane lead got giving new we full keep and not bring seeing Hurricane that lot that chains make continue, an going so what it other But the that us we're that a a we've that is and about. ones are a the to choices. demand talked Yes, and can spoke But be we're but continue team, we're communication – internal – that. low. employees the that make issue. notice just prep, on to, issue, that And goes. for basis. our machine concerned appropriate day-to-day be, could to our down we're chain

in seeing pre-build anticipation Coast the Gulf supply chain not an event. of are materials of within normal you the So, such

So, be should us mother that brings there. that about we'll to something all we nature concerned what it's let

George Staphos

Thank right. much. All very you

Operator

KeyBanc. Our with Josephson next from comes Adam question

Adam Josephson

Howard, thanks so follow-up. much my for taking

– with your hurricanes, but in the quickly, just are in I recent quarter. as clear, terms improve slows, down fourth updated e-commerce quarter on collections demand but OCC and to has you hurricane to to that any supply exceptionally then know Just really, of obviously you cost strong fourth are impossible forecast? And forecast what, box you prices your I in in assumptions, been go demand expecting resin OCC think, full-year be chain are expecting issue, it's if disruptions

So, quarter? just the down much. Thanks therefore in demand very to seasonally to you why would OCC and prices wondering I'm go slow expect fourth

Howard Coker

is nothing [indiscernible] this it’s new. Adam

we do, My happen could the what of our I period forecast continue have could of We'll not in to as or But we typically to point ensure week of year. something operate. they an I happening this we others including that type stock materials season, – if we ahead down of here any hurricane. a in go event may out whatever we cannot assume, managed way built to time down really a always go just and our forever only it's raw suppliers forecast. figure never who have that's always never to but We have a suppliers maintain for have push material that

the know, India seasonal carry may forecast through one talk as there's will be. the thing say out We'll to that's more to he and we impact what but further following back the I want about, America. seen this and I with to trends. the So, starting whether exports have Rodger, starting seeing that spoke don't have within risen ultimate as would Jhonny of drop quarter, prices OCC, traditional but to and supply creating it fourth others With are of that just we're the pull you North way we're market, no think, morning,

a is very start time that moderate to dynamic it’s that things know to point complicated, you As But our down. at expectations this come should in market. see we

Adam Josephson

a lot, Howard. Right. Thanks

Operator

queue Showing time. questions this in no at further

Howard Coker

us thank company. in you, certainly your interest And joining we the for again, everyone Well, appreciate and today. you thank Liz,

have As Thanks talk hesitate us. call be contact We'll for today. please the to don't always, you glad if further. questions, further to

Sonoco Products (SON) 22 Jul 212021 Q2 Earnings call transcript