Published July 19, 2012
Sonoco, the Hartsville-based diversified global packaging company, today reported net income for the second quarter slipped 4% to $51.4 million, from $53.7 million in the year-earlier quarter.
For the first half, net income was down 15% to $94.4 million, from $110.8 million in the first half of 2011.
"Sonoco's second quarter results met our expectations despite the continuing tough global economic conditions. Base earnings showed sequential improvement for the second consecutive quarter and gross profits increased 13% year over year while base earnings before interest and taxes improved by 6%,” said Chairman and CEO Harris E. DeLoach Jr.
DeLoach said earnings from improved productivity, prior-year acquisitions and a positive price/cost relationship were largely offset by lower volumes, a negative mix of business, and higher pension, interest and income tax expenses.
“Absent the impact of a stronger dollar, year-over-year base earnings would have been essentially unchanged,” he said.
DeLoach said the consumer packaging segment's second-quarter operating profit improved 6% year over year, but was down 15% from the first quarter largely due to normal seasonality.
In the company’s paper and industrial converted products segment, second-quarter operating profits were down 2% compared to the same period last year, but were up 23% from the first quarter, DeLoach said.
Operating profits in the new protective packaging segment, created as a result of last year's acquisition of Tegrant Holding Corp., improved 66% from the first quarter. Tegrant's operations comprise the majority of this segment.
Year-over-year results in the legacy protective packaging operation improved slightly, DeLoach said, as a small decline in volume was offset by improved productivity.
The 7% increase in overall sales was due to sales from acquisitions of $124 million, almost all of which is related to Tegrant, and higher selling prices, partially offset by lower volume/mix and a $41 million negative impact from foreign currency translation.
"We expect third-quarter base earnings to continue to improve sequentially and possibly could be near our results for the third quarter of 2011, which benefited from some lower incentives, taxes and other favorable actions,” DeLoach said.
“Also, we expect to complete several important growth projects this year, including the third-quarter startup of our new rigid plastics container plant in Columbus, Ohio,” DeLoach said. “Finally, efforts to successfully integrate our protective packaging businesses continue and we expect to meet our objective of achieving annualized synergies of $12 million by year end."