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Sonoco (SON) Hikes Prices for Uncoated Recycled Paperboard

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Sonoco Products Company (SON - Free Report) is implementing price increase by $60 per ton for all the grades of uncoated recycled paperboard (URB) sold in the United States and Canada. The price hike will be effective for all shipments beginning Nov 1.

Sonoco is executing price-rise actions in response to the rising manufacturing cost pressure on the business. It is battling elevated costs for energy, freight, chemicals, and packaging materials. Raw-material cost has been flaring up since the beginning of 2021, and management expects the trend to prevail for the remaining period of this year and the next year as well. The company is also witnessing supply-chain related challenges due to the solid URB demand. Meanwhile, Sonoco’s focus on optimizing businesses through productivity improvement, standardization and cost control will aid its performance in the upcoming period.

Apart from Sonoco, some other prominent players in the Containers – Paper Packaging industry like Greif, Inc. (GEF - Free Report) , Packaging Corporation of America (PKG - Free Report) and Berry Global Group, Inc. (BERY - Free Report) are also witnessing unprecedented surge in material costs.

Sonoco projects adjusted earnings per share to lie between $3.50 and $3.60 for the current year. In 2020, it reported adjusted earnings per share of $3.41. For third-quarter 2021, Sonoco estimates adjusted earnings per share between 87 cents and 93 cents compared with the earnings of 86 cents reported in third-quarter 2020. The upbeat guidance is driven by an anticipated strong demand for most of its consumer and industrial businesses.

Sonoco’s consumer-related business volumes are forecast to be above the pre-pandemic levels despite more normalized demand for food packaging as consumers moderate at-home eating patterns. It believes the confectionery, food service and construction products’ markets, which had been mostly impacted by the pandemic, will continue to recover. Sonoco’s industrial-end markets will gain from the historically-high backlogs for uncoated recycled paperboard in the United States and Canada, coupled with robust demand for global tubes, cores and cones returning to the pre-pandemic levels. Moreover, the company is focused on growing sustainable packaging solutions.

Sonoco’s Consumer Packaging and Industrial Paper Packaging segments are likely to witness a negative price/cost in the third quarter due to the rising recycled fiber and resin prices, as well as higher freight costs.