Sonoco Affirms Q4, 2013 Profit Outlook; Sees 2014 Earnings In Line

(RTTNews) - Packaging business Sonoco Products Co. (SON) on Friday affirmed its earnings outlook for the fourth quarter and fiscal 2013. The company also forecast higher earnings for fiscal 2014 in line with analysts' expectations.

In addition, Sonoco said it plans to make targeted, bolt-on acquisitions and also return additional cash to shareholders through the buy back of shares. During 2014, the company expects to repurchase at least 2 million shares.

At the company's annual investor conference in New York, Hartsville, South Carolina-based Sonoco affirmed its outlook for fourth-quarter base earnings in a range of $0.55 to $0.59 per share and fiscal 2013 base earnings of $2.27 to $2.31 per share, respectively. Last year, the company reported fourth quarter and full-year 2012 base earnings of $0.56 and $2.21 per share, respectively.

Base earnings exclude restructuring charges, asset impairment charges, acquisition expenses and other items, if any.

On average, analysts polled by Thomson Reuters expect the company to report earnings of $0.58 per share for the fourth quarter, and $2.30 per share for fiscal 2013. Analysts' estimates typically exclude special items.

Barry Saunders, CFO of Sonoco said, "Despite the uncertainty involving the government shutdown in October, we have not seen any significant changes in business conditions in the fourth quarter that would cause us to change our previously communicated guidance. That said, business activity in the last few weeks of the year is always uncertain and we are hearing of normal plans by some of our customers to take holiday downtime. We are preparing accordingly."

CEO Jack Sanders said that the company was pleased with its overall performance thus far in 2013 and expects to meet its full-year financial targets.

"Although we got off to a bit of a slow start in the first quarter, by September year-to-date base earnings were up about 5 percent, despite higher pension expenses. Operating profits in our Consumer Packaging, Display and Packaging, and Protective Solutions segments were up year over year, while results from our Industrial businesses were essentially flat despite tough economic conditions in Europe and South America," Sanders said.

Looking ahead to fiscal 2014, Sonoco forecast base earnings in a range of $2.45 to $2.53 per share, with a projected midpoint of $2.49 per share. Street expects the company to earn $2.53 per share for the year.

According to CFO Saunders, the company's midpoint guidance assumes an improvement of $0.31 per share over 2013 expected results, stemming primarily from a combination of modest volume growth, lower pension and post-retirement expenses, and productivity gains.

Offsetting these improvements are negative items of $0.11 per share, driven by an estimated impact of $0.07 per share from higher depreciation expenses, a modest increase in the effective tax rate, and higher information technology and other expenses.

For fiscal 2013, Sonoco projects free cash flow of about $190 million, after paying about $125 million in dividends to shareholders. Looking forward, the company is projecting that annual cash flow from operations should average about $450 million over the next two years.

However, for fiscal 2014, the company estimates free cash flow to be about $130 million, down from 2013 levels due primarily to anticipated higher pension contributions and cash tax payments.

CEO Sanders said that the company plans to make targeted, bolt-on acquisitions and also return additional cash to shareholders through the buy back of shares from time to time to reduce dilution.

During 2014, the company expects to repurchase at least 2 million shares through open market purchases beginning in January. Sanders noted that Sonoco's board of directors has previously authorized the repurchase of up to 5 million shares.

Further, Sanders said that Sonoco is focusing capital investments and other resources in those businesses that serve faster growing markets, including the company's Consumer Packaging and Protective Solutions businesses as well as selected emerging market opportunities for composite cans and tubes and cores.

Despite the slow growth in consumer demand over the past several years, Sanders said that Sonoco is targeting aggressive, market-focused organic growth strategies and opportunities that should allow the company to generate sales at up to twice the current growth rates for packaged consumer foods.

Sanders said, "To guide us forward, we will focus on maximizing cash flow from all operations, disproportionally investing in those businesses that have significant growth opportunities and optimizing our portfolio."

In Friday's regular session, SON is trading at $40.38, up $0.38 or 0.95 percent on a volume of 22.636 shares.