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Sonoco’s consumer pack ops suffers from soft demand

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Sonoco’s consumer pack ops suffers from soft demand

February 08
14:23 2013

Sonoco, the global packaging group, has said that its Consumer Packaging segment has continued to suffer from soft demand

The firm recently published its full-year 2012 results. It reported that its Consumer Packaging segment continued to suffer from soft demand, reporting a 16% decline in operating profits.

Labour costs

Chief executive Harris E. DeLoach said: “In addition to lower volumes across most of our consumer packaging businesses, segment operating profits were also impacted by higher labour, pension and other costs.

“These negative factors were partially offset by productivity improvements and a positive price/cost relationship. Operating profits from our Display and Packaging segment improved 165% for the quarter due primarily to an improved mix of business and productivity.”

However, Sonoco reported that its fourth-quarter net income jumped 45%, helped by better profitability at its paper and industrial converted products business.

Sonoco earned $42.8 million, or 42 cents per share, up from $29.5 million, or 29 cents per share, in the same quarter a year ago.

‘Rising commodity costs’

DeLoach added: “Our performance in 2012 was not what we expected when we began the year.

“We did not fully anticipate the negative impact that rising commodity costs would have on consumers’ spending for packaged food, or the extent to which the European recession and slowing emerging market economies would reduce demand in our industrial-related businesses. We also incurred some self-inflicted operating issues which increased costs and reduced productivity.

“That said, we generated record sales and gross profits in 2012 and significantly improved free cash flow. In addition, we made significant strides in integrating Tegrant and further expanding our new Protective Solutions segment.

“As we enter 2013, the global economic outlook remains cloudy. However, we have addressed our recent operating missteps and are poised to take advantage of any improvement in market conditions. The repatriation of offshore cash, and the related pay down of outstanding debt, provides us with improved financial flexibility to invest in the business and/or return cash to our shareholders.”

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