Sonoco Products Co Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Staphos - Bank of America Securities - Analyst : Thanks so much. Hi, everyone. Good morning. Hope you can hear me okay. Thanks for the details. So I just wanted to bring up kind of a strategic question to start, and I'm sure you've gotten this since the last conference calls that you've done. Eviosys, you've outlined why this is a good acquisition in your view for Sonoco. You're getting a leading food and aerosol can business, et cetera. At the same time, you're doing the strategic review for TFP, which, while maybe smaller, is also a leading player in its markets. So help us understand what this potential trade, if you will, does to your return on capital and your capital intensity and your growth outlook for the company? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, SON.N - Q3 2024 Sonoco Products Co Earnings Call

Question: George Staphos - Bank of America Securities - Analyst : Okay. If I could, I just want to see if you have it. Do you have any kind of quantification, Howard or Rob in terms of what you think this would add to your return on capital, 1 point, 2 points? What it may or may not do in terms of your growth rate organically going forward and the capital intensity? If there's any way you can dimensionalize it for us with figures. And then my follow-on, and I'll turn it on -- turn it over to the other folks. Assuming no change with TFP, right, you're doing a strategic review, what do you think your interest expense is on a going forward basis for Sonoco? And then let's assume you do move on from TFP, what would be the cost of debt for the debt you'd pay down with those proceeds?

Question: George Staphos - Bank of America Securities - Analyst : Rob, you said $20 million of EBITDA you said incremental. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, SON.N - Q3 2024 Sonoco Products Co Earnings Call

Question: George Staphos - Bank of America Securities - Analyst : And on the financing side of those questions.=?

Question: George Staphos - Bank of America Securities - Analyst : All right. I'll turn it over. Thank you.

Question: Ghansham Panjabi - Baird - Analyst : Hey guys, good morning. You know, just focusing on the current operating outlook for the businesses that you do have, at least for now, what does it feel like in terms of the operating backdrop for industrials and consumer? Do you see any sort of green shoots on a volumetric basis. I understand the productivity and price costs and so on and so forth, but in terms of your volumes as we look out to 2025, what is the base case at this point?

Question: Ghansham Panjabi - Baird - Analyst : Got it. And then on the portfolio side, obviously, you're swapping large portions, right, with Eviosys and simultaneous strategic reviews. How are you managing the organization, including your employees and also your customers during this period of uncertainty to sort of ensure execution consistency? And then just related to that, pro forma for Eviosys and assuming you exit TFP in ThermoSafe, what would be the split between metal and paper? And would you have any plastics left at that point?

Question: Ghansham Panjabi - Baird - Analyst : Okay, perfect. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, SON.N - Q3 2024 Sonoco Products Co Earnings Call

Question: Matt Roberts - Raymond James - Analyst : Thank you and good morning, everybody. First off, I hope you all and all the team members that were impacted by the storms are recovering and doing well. My first question on productivity, Rodger, I mean, that continues to come in strong, well above the initial $100 million that you laid out earlier in the year. So were you able to realize these continued savings? And where is there still room for those other gains in 4Q irrespective of volume? And to the gains this year seeing now have any impact either on the timing or magnitude in regard to the longer-term $300 million to $500 million that you laid out through 2028 last February.

Question: Matt Roberts - Raymond James - Analyst : Okay, great. Thank you very much for all that color there. And then my next question Maybe, Rob, on the divestitures. The ThermoSafe timing in 3Q '25, it seems more definitive at least, but still in line with the 12 to 18 months that you laid out previously. Given it's still a year away, is there anything that gives you more confidence in providing a more specific range for that business? And I know you said no further updates on TFP, but it doesn't stop me if you're trying to see if you could provide any additional color in terms of transaction options or magnitude of the range that you're considering here in the fourth quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, SON.N - Q3 2024 Sonoco Products Co Earnings Call

Question: Matt Roberts - Raymond James - Analyst : That'll make sense. Appreciate the additional color there.

Question: Anthony Pettinari - Citi - Analyst : Is it possible to talk a little bit more about -- is it possible -- can you talk a little bit more about the decision-making process for potentially exiting single-use plastic? And I guess what I'm asking is was this purely kind of an ROIC decision that you would just make for any business? Or were you kind of contemplating sustainability trends or regulatory or getting feedback from customers or other stakeholders that kind of made you want to accelerate the move out of consumer plastic more into metal and paper? Just curious if you kind of walk us through the decision-making process.

Question: Anthony Pettinari - Citi - Analyst : Got it. No, it's very helpful. And then I'm just wondering on metal pack. I mean you saw positive price cost and organic volume growth despite what seemed like a pretty weak tax season, at least for many crops. I'm just wondering if you can talk a little bit more about sort of the drivers of the strong performance. And how you kind of characterize inventories across aerosol and food when you kind of look at the customer base?

Question: Anthony Pettinari - Citi - Analyst : Okay. That's super helpful. I'll turn it over.

Question: Mark Weintraub - Seaport Research Partners - Analyst : Thank you. I just want to follow up a little bit on the M&A since it really just strikes me that you don't seem to be getting any credit for this transformation if you can deliver the types of things you're talking about in terms of accretion. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, SON.N - Q3 2024 Sonoco Products Co Earnings Call And first, thank you for the explanation on timing with ThermoSafe. That was very clear and helpful. One of the other questions that I think is coming up is to getting to that $200 million of EBITDA accretion, it sort of embeds like $430 million from Eviosys. And I see that you are reiterating that in your slide deck, which is great. But if you look to the first six months, the EBITDA was not at that type of run rate. And so I just wanted to check in and get a sense as to what level of confidence do you have at this juncture? Are you getting the updates so that you have good visibility. That really is a good base number to be using as we try to analyze the net effect of these transactions.

Question: Mark Weintraub - Seaport Research Partners - Analyst : Appreciate the color.

Question: George Staphos - Bank of America Securities - Analyst : Hi, thanks for taking the follow on guys. I was hoping you can maybe give us a bit more detail in terms of what you're seeing in the industrial markets. You've got some positive momentum on URB pricing, which is good. You said industrial markets are still sort of trying to crawl out from the recovery or into a recovery. Can you give us a sense for what the cadence of volume has been? And there's been a lot of discussion. On the earnings calls, we were just -- at one of the industry conferences about the supply of boxboard globally, recognizing that you are being what you do is very much a niche. Nonetheless, are you seeing any pressure from the supply that's out there in the boxboard markets or really not that big of a deal at all for many reasons, including your integration? So pricing trends, how is that moving? Demand, what kind of cadence in the third quarter into the fourth quarter and the outlook for next year is flat, why if you're improving? And then supply on boxboard globally and what it means for you or not?

Question: George Staphos - Bank of America Securities - Analyst : Understood. I've gotten a question coming in. I'll relay it on behalf of somebody. Do you expect any regulatory hiccups with Eviosys? If you could comment there? And then also the question why do you think what's going on in RPC is not secular as opposed to just timing? Thanks, guys. And now good luck for the quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 01, 2024 / 12:30PM, SON.N - Q3 2024 Sonoco Products Co Earnings Call

Question: George Staphos - Bank of America Securities - Analyst : Okay, thanks so much for all the time guys. Have a great one.

Question: Gabe Hajde - Wells Fargo - Analyst : Good morning, everyone. Two questions. Rodger, I think you made a reference to TAM lending chip prices continuing to move up. And I was curious if there's an active price increase in the marketplace that we're not aware of or haven't seen, meaning, was that a reference to indices moving higher? Or is this just a function of what's been posted working through your contracts?

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. Must have misheard that. And then there's some consolidation in a couple of your big customers. Just curious, looking back in history, how that's impacted the business, if at all?

Question: Gabe Hajde - Wells Fargo - Analyst : Great. Thank you, guys. Good luck.