Sonoco targets 3 factors to drive performance
Reporting their Q1 results, the firm said they remained “optimistic” about 2013 but productivity in Q1 was not to the historic average.
The biggest drag on productivity came from paper operations in North America, which was hit with 12 days more downtime, much of which was unplanned, due to an unusual amount of repair and maintenance cost being brought forward into Q1.
Sonoco said it dedicated a new molding foam plant in Central Mexico last month and will be opening another plant in the Central US later this year with both operational by the end of 2013.
In composite cans, a new line has been opened in Malaysia and a second line in China. A 2-line plant is opening in Poland and other opportunities are also being explored in Europe, said Sonoco.
During the quarter the company shuttered two US plants in Brecon, Ohio and Chattanooga, Tennessee and said while they don’t expect massive restructuring, further consolidation could be possible.
In plastics, the firm are bringing up a third production wheel to produce 50 million new bottles that will eliminate the bottleneck that impacted volume in Q1.
Paper and Industrial Converted products
Operating profits from Paper and Industrial Converted Products segment declined 4% in the first quarter. Negative factors contributing to the decline included higher than anticipated maintenance, labor and other expenses associated with paper mill repair outages and lower volume.
First quarter 2013 sales for the segment were $454m, compared with $464m in 2012 and operating profit was $31m in the first quarter, compared with $32.3m in 2012.
Protective Solutions
The Protective Solutions segment reported a 22% improvement in operating profits during the first quarter due primarily to synergies and productivity improvements.
Improved volume in the segment's molded foam and temperature-assurance businesses was more than offset by lower retail security business.
First quarter 2013 sales were $142m, compared with $138m in the first quarter of 2012 and operating profit for the first quarter was $8.5m, compared with $7m in the first quarter of 2012.
Consumer Packaging
Operating profits in the Consumer Packaging segment declined 15% during the quarter due to weakness in many packaged food categories, which was partially responsible for driving volumes lower in nearly all of the packaging businesses.
“Consumer Packaging was impacted by continued soft retail sales, particularly in packaged food. We were also negatively impacted by operational issues in some of our plastics businesses that reduced revenue,” said Jack Sanders, CEO, president and director.
Display and Packaging
Operating profits from the Display and Packaging segment were essentially flat for the quarter as slightly positive volume and a positive price/cost relationship were offset by higher costs.
First quarter 2013 sales were $463m, compared with $496m in 2012 and segment operating profit was $42.3m in the first quarter, compared with $50.1m in the same quarter of 2012.
Sanders said they expect a steadily improving operating environment in Q2 and the remainder of 2013.
“One-time operational issues have been addressed and we are focused on quickly commercializing recently won business.
“In addition, we expect to begin benefiting from announced price increases in our Industrial, Consumer Packaging and Protective Solutions businesses to offset higher operating and raw material costs.
“Finally, we will continue to aggressively implement contingency plans focused on reducing costs in all of our businesses to further improve margins and free cash flow."
