Sonoco achieve record sales despite 'challenging year'

By Mark Astley

- Last updated on GMT

Tegrant acquistion boosted sales in Q4 2011.
Tegrant acquistion boosted sales in Q4 2011.

Related tags Injection molding Packaging

A food packaging segment sales boost of more than 100% has helped drive record sales for 2011, despite it proving to be a “challenging year”, packaging giant Sonoco has announced.

A food segment driven 23% sales increase in the blow-moulded plastics sector, a sale price hike and the acquisition of Tegrant in late 2011 contributed to the company’s record overall net sales of $4.5bn for 2011 - an increase on $4.1bn for 2010.

The company recorded an overall 9% sales increase on 2010, despite sales across many segments falling.

Net sales for Q4 2011 hit $1.13bn – mirroring the result for the same period in 2010.

Food segment boost

“For the company as a whole, trade volume was down modestly,” ​said Sonoco vice president Barry Saunders.

“Trade volume was flat for the overall consumer segment, as roughly a 2% decline in composite can volume in North America, a 1% decline in flexible volume, and a 1% decline in thermoforming and injection-moulded plastics was offset by another strong quarter in blow-moulded plastics, where sales were up 23% year-over-year.”

“This was in the blow-moulded plastics group; this is driven by more than 100% increase in the food segment.”

The purchase of US-based packaging provider Tegrant in late 2011, which made up $550m of the $566.9m spent on acquisitions in 2011, contributed significantly to the sales increase.

“Acquisitions accounted for $62 million of the increase in sales, with essentially all attributable to the Tegrant acquisition, partially offset by the impact of disposition of our small injection moulded plastics business in South America.”

Q4 sales drop

Sonoco’s consumer packaging segment, which includes the production of round and shaped rigid containers, blow-moulded plastic and printed flexible packaging, recorded a drop in sales for the fourth quarter of 2011.

Sales for the segment were down to $485m compared with the same quarter in 2010.

The company’s paper and converted products segment and packaging services segment recorded a similar reduction for Q4.

Sales for the company’s protective packaging segment were boosted significantly by the recently completed Tegrant acquisition.

Q4 2011 sales hit $84m compared with $26m for the same period in 2010.

“Operating profits increased 22% due to the Tegrant acquisition, which more than offset lower volume, fewer days and a negative price/cost relationship experienced by the company’s legacy protective packaging business,”​ said a company statement.

The company hopes that acquisition will provide it with a new growth platform to establish itself as a “leading custom-engineered, multi-material protective packaging provider in North America.”

“2011 proved to be a challenging year. In addition to the unexpected decline in industrial-related volumes at year end, we faced escalating raw material, energy, freight and other costs during the year and productivity was well below our historical standards,”​ said Sonoco CEO Harris DeLoach.

“We remain cautious entering 2012 as global economic trends remain uncertain,” ​he added.

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