Sonoco Products Co. (NYSE:SON) Q3 2019 Earnings Conference Call - Final Transcript

Oct 17, 2019 • 11:00 am ET


Sonoco Products Co. (NYSE:SON) Q3 2019 Earnings Conference Call - Final Transcript


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Julie Albrecht

which more than offset the addition of SG&A from acquisitions. All thus resulting in operating profit of $139 million, which was $15 million above last year. Our third quarter operating profit as a percent of sales was 10.3%, a 120 basis point improvement over the prior year period. And I'll review the key drivers to operating profit on the bridge in a few minutes.

Net interest expense of $14.8 million was nearly flat with last year, primarily due to higher debt balances and reduced interest income on lower offshore cash balances, which were both offset by a one-time interest income from a favorable tax ruling in Brazil.

Income taxes of almost $28 million were approximately $2 million higher than last year, driven by a combination of higher pre-tax profits, but a lower effective tax rate. Our third quarter 2019 effective tax rate of 22.3% was lower than the prior year quarter, primarily due to favorable interpretations of the GILTI tax calculation that we've recognized this quarter. And moving down to net income, our third quarter 2019 base earnings were $98 million or $0.97 per share.

And looking at the sales bridge on Slide 5, you see volume was lower by almost $36 million or 2.6% for the company as a whole. Consumer Packaging volume was down $17 million or 2.9%, where some growth in international rigid paper containers was more than offset by lower volume in rigid paper containers North America, as well as in flexibles and in plastics. Rob will be providing more color about these volume declines in his comments.

Display and Packaging had solid volume growth of almost $3 million or 1.7%, driven by increased business activity, primarily in our domestic displays business and in Poland. This does exclude the impact of exiting the Atlanta pack center, which is included in the exchange and other category.

Volume in Paper and Industrial Converted Products was down almost $18 million or 3.8% due to weak global tube and core volumes as well as lower worldwide paperboard demand.

And finally, sales volume in Protective Solutions was down by $4 million or 2.8% with the continued trend of weak volume in automotive and consumer packaging, but very strong demand for temperature-assured packaging.

Moving over to price, you see that selling prices were modestly lower year-over-year by $2 million, driven by lower raw material costs, partially offset by our work to better realize the value of the products and services we provide to our customers.

Moving on to acquisitions, you see an impact on the top line of $74 million, which was primarily driven by the Conitex acquisition in the fourth quarter of last year, as well as the addition of Corenso's operations in early August.

And finally, exchange and other was negative by $47 million, driven by a $28 million negative impact from foreign exchange translation and $26 million of lower sales from the Atlanta pack center exit at the end of last year's third quarter.

Moving to the operating profit