Sonoco reported steady second quarter financial results, with both sales and profits increasing, making ground on weaker first quarter results.
Sales for the second quarter of 2002 were $712.4 million (€712m), versus$647.7 million for the same period in 2001. Excluding one-time items, netincome for the second quarter of 2002 was $38.8 million, versus $38.7 millionin the second quarter of 2001. Including one-time items, net income for thesecond quarter of 2002 was $37.7 million, versus $16.9 million in the secondquarter of 2001.
For the first six months of 2002, sales were $1.37 billion, versus$1.28 billion in the same period last year. Excluding one-time items, netincome for the first half of 2002 was $73.2 million, versus $76.1 million forthe first six months in 2001. Including one-time items, net income for thefirst six months of 2002 was $71.3 million, versus $21.6 million in the sameperiod of last year.
"Despite continuing weak general economic conditions, sales were up10 per cent during the second quarter, compared with the same period last year,driven principally by acquisitions and increased volumes in the industrial andconsumer segments. Company-wide volumes, including the impact of acquisitionscompleted in 2001, were up 12.7 per cent, compared with the same period lastyear.
"Meanwhile, the company's price/cost relationship declined further in thesecond quarter, principally reflecting the partial impact of approximately $30per ton in average price increases during the quarter for OCC (old corrugatedcontainers), Sonoco's principal raw material for its paperboard that is usedprimarily for conversion into engineered carriers in its industrial sector.These increases in OCC cost came on the heels of already weakening convertedproduct pricing.
In response to increases in general operating costs andincreased raw material costs, the company is aggressively instituting priceincreases in paperboard and converted products in the United States, Canadaand Europe. Although the company will not realise the full impact of itsprice increases until later this year, when fully implemented, the increasesshould at least offset the higher OCC costs," said DeLoach.
He also notedthat Sonoco's recovered paper operations, which are net sellers of OCC,experienced a significant increase in sales and earnings during the secondquarter.
Looking forward to the last half of 2002, DeLoach said that anticipatedearnings improvement from the strong sales growth in flexible packaging andcontinued growth in steel easy-open closures should lead to stronger earningsin the consumer segment. He also noted that increased new product developmentin all areas of the consumer segment is progressing rapidly.
"We expect to generate approximately $150 million - $160 million in cashflow for 2002 and sustain significant levels over the next five years. Alongwith our strong balance sheet, this will allow us to continue to pursueconsolidation opportunities that meet our criteria, pay down debt orrepurchase stock when appropriate.
"In conclusion, although uncertainties continue about the timing anddegree of general economic recovery, we remain quite bullish about thecompany's positioning for growth as economic improvement occurs," saidDeLoach.