SONOCO PRODUCTS CO Q4 FY2024 earnings call

• Acquisitions and Divestitures: In December 2024, Sonoco acquired Eviosus, Europe's leading food cans and enclosure manufacturer, and divested Tophan Holdings for ~$1.8 billion, with sale on track to complete in Q2 2025. Continuing strategic review of cold chain temperature-controlled packaging business. - Operational Performance: Fourth quarter adjusted EBITDA increased 5% to $247 million, with margin expanding to nearly 15%. In 2024, achieved $183 million in productivity savings, equally split between consumer and industrial segments. Generated $834 million in operating cash flow and $456 million in free cash flow. - Investments: Investing in expanding greenfield paper can production in Thailand, Mexico, and the US; recapitalizing pulp tube production; adding capabilities in metal packaging for aerosol cans, wet pet food cans, and cap enclosures; industrial paper products capturing growth opportunities in US and Europe while rightsizing select markets.

Consumer Segment: On a continuing operations basis, consumer sales were up 18% due to the Eviosus acquisition and favorable volume mix, though partially offset by lower selling prices. Eviosus contributed 27 days of sales in December. Consumer adjusted EBITDA margins grew 9% year-over-year. Industrial Segment: Industrial sales decreased 4% to $571 million, reflecting reclassification of recycling and exit of China operations. Adjusting for these, industrial sales would have been up 2.7% year-over-year. Organic volumes increased by low single digits, and adjusted EBITDA margins improved 250 basis points year-over-year. All Other Businesses: Sales were $88 million, adjusted EBITDA was $8 million, negatively affected by divestiture of Protective Solutions, a customer's new product launch not repeating, and slowing sales from COVID vaccine distribution.

• 2025 guidance considers full year of Eviosus and one full quarter of TFP. Sales projected to grow 21.5% from $6.6 billion to ~$8 billion. Adjusted EPS expected to grow 19%-23% above 2024 EPS of $5.06. Operating cash flow expected to average $100 million, with range $800-900 million. Free cash flow expected $450-550 million. Target capital expenditures ~$300 million. Eviosus acquisition expected 25% accretive, TFP divestiture dilutive 7%-9%.

• Integration Risks: Delayed synergies from Eviosus acquisition due to regulatory delays (e.g., UK CMA approval impacting annual contracts). - Macro Risks: Impact of tariffs, macroeconomic uncertainties, softness in regions like Europe for paper business. - Industry-Specific Risks: Soft volumes in ThermoSafe business due to pharma and vaccine market dynamics, including slowdown in COVID vaccine distribution and softness in GLP-1 drug supply initially.

Q: George Staphos from Bank of America asks about exit rates, Eviosus performance, and TFP in Q1.

A: Howard Coker states Eviosus adjusted run rate for 2024 was ~$390 million, expecting 10% increase in 2025, and sees sequential improvement in other businesses. Jerry Cheatham mentions TFP's first quarter 2025 performance expected similar to Q4 2024.

Q: Brian Bergmeier from Citi asks about consumer volume growth and North American metal pack season.

A: Howard Coker says consumer volume growth driven by metals business in North America and global paper can business, with North American metal pack season slightly better but not major recovery.

Q: Matt Roberts from Raymond James asks about ThermoSafe volumes, leverage target, and EPS for Q1.

A: Roger Fuller notes ThermoSafe volumes soft in Q4 due to industry issues but optimistic for 2025, and leverage target to 3-3.3 times net debt to adjusted EBITDA by end of 2026. Howard Coker mentions quarter-by-quarter updates on EPS due to moving pieces.

Q: Mark Weintraub from Seaport Research Partners asks about cash flow bridge, Eviosus synergies, and European paper business.

A: Jerry Cheatham talks about cash flow bridge factors. Howard Coker explains Eviosus synergies delayed to 2026 due to regulatory delays. Roger Fuller discusses rationalizing European paper business by accelerating investment in best mills and exiting unprofitable capacity.

Q: Mike Ruckson from Truist Securities asks about European paper business rationalization, Eviosus integration.

A: Roger Fuller says European paper business rationalization ongoing with moves in Greece and Ireland, expecting improvements in 2025. Howard Coker and Roger Fuller state Eviosus integration going well with strong leadership team, shared best practices, and opportunities in customer relationships and supply chain.

Q: George Staphos from Bank of America asks about productivity ex-synergy, supply chain tariffs, and metal aerosol strength.

A: Howard Coker and Roger Fuller discuss productivity ex-synergy around $60-65 million, balanced between consumer and industrial. Mention tariffs impact manageable via supply chain diversity. Aerosol strength from paint and disinfectant demand, focusing on customer service to gain share.

Q: Richard Carlson from Wells Fargo asks about 2026 leverage target and CapEx trend.

A: Jerry Cheatham talks about targeting 3-3.3 times leverage by end of 2026 with proceeds from divestitures and free cash flow. Howard Coker mentions CapEx weighted towards value-added, ~60% of 2025 capital forecasted as value-added vs maintenance.