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Sonoco Initiates Review of TFP Business to Simplify Portfolio
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Sonoco Products Company (SON - Free Report) announced that it commenced a strategic review of its Thermoformed & Flexible Packaging (“TFP”) business. This move is in sync with SON’s ongoing strategy to streamline its portfolio and focus on fewer bigger and core businesses to generate improved returns and lower debt levels.
Overview of Sonoco’s TFP Business
The TFP business is part of Sonoco’s Consumer Packaging segment. The segment’s products consist of rigid packaging (paper, metal and plastic) and flexible packaging. It caters to the consumer staples market focused on food, beverage, household and personal products and accounted for approximately 53% of sales in 2023.
TFP provides complex packaging solutions to various categories including snacks, condiments, healthcare, prepared meals, fresh products and coffee and pets. The business generated revenues of $1.3 billion in 2023, contributing 36% to the Consumer Packaging segment’s revenues and 19% to Sonoco’s total revenues.
SON’s Ongoing Portfolio Strategy to Improve Profitability
To improve its long-term profitability and return capital to shareholders, Sonoco has been simplifying its business portfolio and focusing on larger and core business units. It continues to work on commercial, operational and supply-chain excellence programs intended to shift the mix of its business towards higher-valued products and increase productivity. Its strategic pricing initiatives will also aid results.
In June 2024, Sonoco inked a deal to acquire Eviosys, a leading European manufacturer of food cans, ends and closures, for $3.9 billion. This will strengthen its global leadership in metal food can and aerosol packaging and boost its ability to partner with customers and advance innovation and sustainability in metal packaging offerings.
In September 2023, SON acquired the remaining equity interest in RTS Packaging from joint venture partner WestRock to strengthen and expand its 100% recycled fiber-based packaging solutions. The company also added Inapel to its portfolio in December 2023, augmenting its presence in the flexibles packaging services market in Latin America.
Sonoco undertook significant divestitures as part of its portfolio transformation strategy. In April 2024, it completed the sale of its Protective Solutions business (Protexic). The business provided foam components and integrated material solutions for various industrial end markets. In 2023, the company completed the divestitures of its U.S. and Mexico Bulksak businesses, which consisted of the manufacture and distribution of flexible intermediate bulk containers, plastic and fiber pallets and custom fit liners, and its S3 business, which provided customized waste and recycling management programs.
The strategic review process of TFP is expected to be completed by the fourth quarter of 2024. Sonoco expects these divestitures will reduce the complexity in business, thereby improving operational focus while also generating proceeds to fund deleveraging and capital investments in core businesses.
Sonoco Modifies Payment Plan for Eviosys
Sonoco has modified its financing plans for the pending acquisition of Eviosys. The acquisition will now be funded through a combination of prepayable debt, longer-term bond financing and cash. Equity will not be issued to fund the Eviosys acquisition.
SON’s Price Performance
Image Source: Zacks Investment Research
SON shares have lost 1.6% in the past year against the industry’s 19.9% growth.
The Zacks Consensus Estimate for Mueller Water Products’ 2024 earnings is pegged at 93 cents per share, which indicates year-over-year growth of 47.6%. The consensus estimate for earnings has gone up 17.7% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 64.1%. MWA shares have gained 46.1% in the past year.
Northwest Pipe has an average trailing four-quarter earnings surprise of 20.15%. The Zacks Consensus Estimate for NWPX’s 2024 earnings is pinned at $2.96 per share, which indicates year-over-year growth of 41.6%. Estimates have moved 20.3% north in the past 60 days. The company’s shares have gained 28.7% in a year.
The Zacks Consensus Estimate for PKG’s 2024 earnings indicates year-over-year growth of 0.1%. Packaging Corp has an average trailing four-quarter earnings surprise of 8.60%. Estimates have moved 4.6% north in the past 60 days. The company’s shares have gained 41% in the past year.
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Sonoco Initiates Review of TFP Business to Simplify Portfolio
Sonoco Products Company (SON - Free Report) announced that it commenced a strategic review of its Thermoformed & Flexible Packaging (“TFP”) business. This move is in sync with SON’s ongoing strategy to streamline its portfolio and focus on fewer bigger and core businesses to generate improved returns and lower debt levels.
Overview of Sonoco’s TFP Business
The TFP business is part of Sonoco’s Consumer Packaging segment. The segment’s products consist of rigid packaging (paper, metal and plastic) and flexible packaging. It caters to the consumer staples market focused on food, beverage, household and personal products and accounted for approximately 53% of sales in 2023.
TFP provides complex packaging solutions to various categories including snacks, condiments, healthcare, prepared meals, fresh products and coffee and pets. The business generated revenues of $1.3 billion in 2023, contributing 36% to the Consumer Packaging segment’s revenues and 19% to Sonoco’s total revenues.
SON’s Ongoing Portfolio Strategy to Improve Profitability
To improve its long-term profitability and return capital to shareholders, Sonoco has been simplifying its business portfolio and focusing on larger and core business units. It continues to work on commercial, operational and supply-chain excellence programs intended to shift the mix of its business towards higher-valued products and increase productivity. Its strategic pricing initiatives will also aid results.
In June 2024, Sonoco inked a deal to acquire Eviosys, a leading European manufacturer of food cans, ends and closures, for $3.9 billion. This will strengthen its global leadership in metal food can and aerosol packaging and boost its ability to partner with customers and advance innovation and sustainability in metal packaging offerings.
In September 2023, SON acquired the remaining equity interest in RTS Packaging from joint venture partner WestRock to strengthen and expand its 100% recycled fiber-based packaging solutions. The company also added Inapel to its portfolio in December 2023, augmenting its presence in the flexibles packaging services market in Latin America.
Sonoco undertook significant divestitures as part of its portfolio transformation strategy. In April 2024, it completed the sale of its Protective Solutions business (Protexic). The business provided foam components and integrated material solutions for various industrial end markets. In 2023, the company completed the divestitures of its U.S. and Mexico Bulksak businesses, which consisted of the manufacture and distribution of flexible intermediate bulk containers, plastic and fiber pallets and custom fit liners, and its S3 business, which provided customized waste and recycling management programs.
The strategic review process of TFP is expected to be completed by the fourth quarter of 2024. Sonoco expects these divestitures will reduce the complexity in business, thereby improving operational focus while also generating proceeds to fund deleveraging and capital investments in core businesses.
Sonoco Modifies Payment Plan for Eviosys
Sonoco has modified its financing plans for the pending acquisition of Eviosys. The acquisition will now be funded through a combination of prepayable debt, longer-term bond financing and cash. Equity will not be issued to fund the Eviosys acquisition.
SON’s Price Performance
Image Source: Zacks Investment Research
SON shares have lost 1.6% in the past year against the industry’s 19.9% growth.
Sonoco’s Zacks Rank & Stocks to Consider
Sonoco currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the Industrial Products sector are Mueller Water Products (MWA - Free Report) , Northwest Pipe Company (NWPX - Free Report) and Packaging Corporation of America (PKG - Free Report) . Each of these three companies currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Mueller Water Products’ 2024 earnings is pegged at 93 cents per share, which indicates year-over-year growth of 47.6%. The consensus estimate for earnings has gone up 17.7% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 64.1%. MWA shares have gained 46.1% in the past year.
Northwest Pipe has an average trailing four-quarter earnings surprise of 20.15%. The Zacks Consensus Estimate for NWPX’s 2024 earnings is pinned at $2.96 per share, which indicates year-over-year growth of 41.6%. Estimates have moved 20.3% north in the past 60 days. The company’s shares have gained 28.7% in a year.
The Zacks Consensus Estimate for PKG’s 2024 earnings indicates year-over-year growth of 0.1%. Packaging Corp has an average trailing four-quarter earnings surprise of 8.60%. Estimates have moved 4.6% north in the past 60 days. The company’s shares have gained 41% in the past year.