Sonoco Products Co. (NYSE:SON) Q3 2019 Earnings Conference Call - Final Transcript
Oct 17, 2019 • 11:00 am ET
[Operator Instructions] Our first question is from Ghansham Panjabi from Baird. Your line is now open.
Hey, guys, good morning.
Rob C. Tiede
I guess, Rob, first off, just picking up on your -- on the last comments you made in the press release about a more pronounced year-end slowdown in customer orders in certain markets. Can you just expand on that? Which specific segments do you anticipate that? And, it seems like inventory levels across the supply chain across multiple companies that we've covered point towards than being pretty lean and so I'm just curious as to whether you're seeing further sort of destocking as we cycle into the year-end?
Rob C. Tiede
Yes, I would tell you, Ghansham, the way -- the way we've looked at it is sort of the behavior we've seen. What we have seen is every quarter starts off pretty strong and then we start to see a tail off towards the end of the quarter. And when I take a look at what we experienced last year in December, where we saw a significant change in behavior, and I take a look at what our seasonal reductions typically are across the board, especially in December. We -- as we looked at all of that, we have no reason to believe at this point that we will see something different.
Now to the point that you have made is, we also believe that some of our customers have been managing their inventory down, and if in fact it is as low as in some cases, our people do think it is, then it would not surprise us to see a bit of a surge in orders as we come to the end of the year. I just don't know that we'd necessarily be able to ship those, we may be able to produce and drive absorption through those. But at this point, that's what we see, and that's what we know and that's what we built into our guidance.
Got it. And then switching to the Consumer Packaging segment, I know you called out some nuances as it relates to volume underperformance for 3Q, but just sort of stepping back, I mean this segment has been quite weak from a volume standpoint for three years now. You have a very broad and diverse product portfolio, you've committed capital to it with certain acquisitions in new verticals that are -- really growing faster. I guess kind of stepping back, what do you think has gone wrong from your vantage point, Rob, that has driven this level of quarterly choppiness in the segment? And then what do you -- what are the initiatives to try and change that going forward? Thanks so much.
Rob C. Tiede
Sure. Thanks, Ghansham. As I look across the portfolio, I am pleased with what's happening in regards to our rigid paper business. We've seen -- if you recall, we saw significant volume declines, especially in Europe as it related to the tobacco industry. We have now