Sonoco third quarter earnings outlook hit by maintenance problems

By Joe Whitworth

- Last updated on GMT

Related tags: Vice president of the united states, Outlook

Sonoco Revises 2012 Q3 Base Earnings Estimates
Sonoco has lowered its earnings guidance for the third quarter of 2012 due to unscheduled downtime and lower than anticipated volumes. 

Unrelated operating problems at three North American uncoated recycled paperboard mills resulted in more down days than expected and excess costs.

The firm also attributed the outlook reduction to lower than expected volumes in many of its consumer and industrial packaging units.

The company expects Q3 2012 base earnings per diluted share to be $.51 to $.53, compared with previously announced guidance of $.62 to $.66 per diluted share.

It reported base earnings of $.66 per diluted share in Q3 2011.

Separate issues

The revision of third quarter estimates is primarily due the three mills in Bamford, Ontorio, Hutchinson, Kansas and Hartsville suffering separate mechanically related issues, Roger Schrum vice president of investor relations at Sonoco told FoodProductionDaily.com.

“The problems are all fixed now but they were out for a couple of weeks. They were mechanical-related issues that were significant for us.

“We made sure there was no impact on our customers by meeting their needs from other paper mills or from our inventory.”

Sonoco has removed its base earnings estimates for full-year 2012 and plans to provide updated guidance for Q4 2012 when it releases Q3 results before the market opens on 18 October.

Schrum added they had planned for 100 down days for maintenance but the unexpected interruption led to 171 days.

Need for transparency

When asked why the firm had revealed this before their Q3 results next month, he said: “It was important as the operational issues occurred in August and September to get the information out there to investors so there was surprise in the announcement.

“Our customers are working with us and we felt it was important to show transparency and we hope it is all behind us now.”

In addition, the Company is experiencing lower than anticipated volumes in many of its consumer and industrial packaging businesses.

“We have more exposure in certain regions, like tube and core is at slightly lower volumes but not significantly down. The announcement is more operational than to do with volumes.”

Sonoco's Q3 is not yet completed and the financial estimates are subject to change based on actual results through the end of Q3, the closing of the books and determination of actual financial results.

Sonoco will host its quarterly conference call on 18 October to review its Q3 2012 financial results.

Related topics: Processing & Packaging

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