Sonoco Products Co at Wells Fargo Industrials Conference Transcript

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

Question: Gabe Hajde - Wells Fargo - Analyst : So sort of an thematic question that I've been talking to the company is. We're maybe six quarters into -- I'll call it post-COVID burn off, but just volumetrically malaise in the marketplace, have a couple of different potential explanations as to why. But just generally speaking, from your conversations with -- or Sonoco conversation with customers on the consumer side, what's driving the weakness? I mean we obviously went through sticker shock some inflation. But before we get there -- we'll start with that. And then I know you've got some prepared remarks.

Question: Gabe Hajde - Wells Fargo - Analyst : Appreciate it. I jumped on a little bit. I know you had some prepared remarks, but just like I said, thematically kind of thinking about maybe we can -- when we can see the inflection, we'll get there.

Question: Gabe Hajde - Wells Fargo - Analyst : Thank you. So maybe, I guess, within consumer, we've seen a couple of companies, I guess, go to verging directions. Some are focused on simplification, and I feel like some are trying to introduce complexity into their models for one reason or another. Specifically in rigid paper containers, you talked about Renaissance. What's driving that? And maybe can you talk about some of the product lines where you're seeing specific success there?

Question: Gabe Hajde - Wells Fargo - Analyst : And you are seeing it sounds like new product introductions and restagings.

Question: Gabe Hajde - Wells Fargo - Analyst : That wasn't maybe on the forefront of your customers' minds two years ago?

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. On the metal packaging side, relatively speaking, new business for Sonoco. You've been in and around it, I'm sure and around the food supply chain. But I guess, what were the strategic merits of that acquisition? And then I think in the previous slide, there was some M&A associated with that. Is it domestic? Could you envision adding something maybe in Europe. There's a couple of things out there that we're aware of, but just how to think about that?

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. Sticking with the metal cans, you kind of differentiate a little bit between the aerosol versus the food cans. It's hard to track specifically some of the codes and import, export data, but it looks like there's some imported filled food cans making their way in the US. And on one hand, I think it's probably intended to maybe divert away from some of the import tariffs around template potentially to make it more affordable on the shelf. And is that a concern for you all? And do you see it as another potential threat for the market, at least on the human food side?

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. And then on the flexible and thermal form side, outside looking in, you have some pretty big players in the marketplace that choose to use scale, specifically on the procurement side to test their low-cost capabilities. Your business isn't as big, but it seems like the margin profile is pretty consistent, quite honestly. So I' curious if your success in that business and the willingness to deploy capital to it is maybe a circular, one supports the other, but is there something you do commercially, operationally that's maybe a little bit better, a little bit depreciated ? And then does that justify the investment in terms of -- again, I think M&A is part of the strategy there.

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. I guess dial back a little bit maybe 2024, the expectation, I think, for consumer was that we'd see sequential volume improvement. You sort of intimated we're on that track. Again, seasonal pack or anything that we should be aware of thinking about the volume cadence for 2024 as it relates to consumer.

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. On the industrial side, there's a lot of products when I look at that. But tubes and cores specifically, I think, is kind of the heart and soul of that business. We're reading about an inflection in one of your competitors just reported earnings and talked about, again, sequentially improving demand trends. Can you talk about what your seeing there similar sequential and year over year.

Question: Gabe Hajde - Wells Fargo - Analyst : We talked a decent amount and there's a couple of paper companies here today, one for dinner last night. There's multiple price initiatives in the marketplace today both domestically and Europe. And I want to transition a little bit to Europe. You talked about why conditions are a little bit better here domestically. But what about Europe? What are you seeing there? And you don't just make tubes of course here you make them in Asia as well.

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. You talked about productivity. You talked about increasing CapEx to $300 million-plus. How do you think about those projects from a returns' perspective?

Question: Gabe Hajde - Wells Fargo - Analyst : Okay. OCC is a big input. We've heard a decent amount about increased tension from export on the North American fiber basket, if you will. What are you seeing? And then sort of can you remind us what's embedded in expectations for the full year?

Question: Gabe Hajde - Wells Fargo - Analyst : Understood. And then strategy. You talked about the realigned thermoformed flexible packaging segment. How -- what are you expecting from that initiative? You talked to, again, $50 million of productivity, which is pretty robust for the but for anyone, right? What's the runway look like for that?

Question: Gabe Hajde - Wells Fargo - Analyst : And have you identified for us on the outside world sort of maybe '24, '25 targets associated with that specifically?

Question: Gabe Hajde - Wells Fargo - Analyst : No? Okay. One other thing you mentioned that I think it's probably for the investment community to understand or something that, I guess, is on our mind is when you look at the $1 billion or so, $1.67 billion, I guess, to use the point estimate of $1.5 billion, what are the two maybe key risks or things that could derail the success of that? And then if we're having this conversation in 2027 and you're on track, what are the two things that have to go right to get you there?

Question: Gabe Hajde - Wells Fargo - Analyst : Kept a relatively conservative balance sheet. Can you talk about that, the importance of investment-grade rating, et cetera?

Question: Gabe Hajde - Wells Fargo - Analyst : Is there anything specifically about the story that you feel like is misunderstood by the investment community?

Question: Gabe Hajde - Wells Fargo - Analyst : Last one for you. I think you've talked about maybe $1 billion to monetize out of that all other segment. I don't think there's a specific time frame or should there be necessarily you can't dictate. But anything you see on the horizon that we should be mindful of thinking about markets specifically that are more in favor less in favor today.

Question: Gabe Hajde - Wells Fargo - Analyst : All right. Thank you.