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Sonoco (SON) Unit to Raise Prices for Tubes & Cores in EMEA
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Sonoco Products Company’s (SON - Free Report) wholly-owned subsidiary Sonoco Alcore S.a.r.l intends to implement a price hike by 10% for all tube and core grades sold in the company’s EMEA (Europe, Middle East & Africa) regions. The price rise will be effective for all shipments starting Dec 13.
The company is executing price-rise actions in response to the escalating cost pressure on the business. Raw material costs have been rising since the beginning of this year and will continue to increase further. The company is witnessing a cost surge in all sectors across its operations and supply chain. Sonoco’s productivity and cost-control initiatives are not enough to mitigate mounting costs from packaging, energy, transportation, adhesives and raw materials. Therefore, the company is forced to pass on these costs to customers.
Sonoco’s third-quarter 2021 earnings and sales beat the respective Zacks Consensus Estimates and increased year over year. The company anticipates demand in most consumer and industrial businesses to remain solid in the near term. It projects fourth-quarter 2021 adjusted earnings per share (EPS) between 84 cents and 90 cents. The mid-point of the guidance suggests growth of 6% from earnings of 82 cents reported in fourth-quarter 2020. For 2021, the company’s adjusted EPS guidance is expected in the range of $3.49-$3.55. The mid-point of the range indicates an improvement of 3% from the adjusted EPS of $3.41 in 2020.
Limited availability of certain raw materials and global transportation disruptions have impacted Sealed Air’s supply chain throughout the current year. The company encountered higher freight costs associated with the sourcing and movement of raw materials due to overall tight market conditions. Even though Sealed Air implemented price increases throughout the year, the associated timing lag on these increases and formula-based pricing have dented margins.
Packaging Corporation will bear the brunt of increasing energy costs due to higher gas prices and rising wood costs in the southern mills due to the wet weather, low inventory and high demand.
Greif will continue to encounter higher steel prices as steel supply markets are anticipated to remain tight in the Americas and EME regions. Costs for raw materials used in the paper-making process and old corrugated container costs are expected to increase. These factors will exert pressure on the company’s margins in the near term.
Sonoco’s consumer packaging businesses witnessed pandemic-driven demand for certain consumer products like food and household products. The segment will continue to gain traction from elevated at-home eating trends. It believes that the confectionery, food service and construction products’ markets, which had been mostly impacted by the pandemic, will continue to recover. The demand for Industrial Paper Packaging products returned to pre-pandemic levels in most of the global markets. The company sees opportunities for new product growth such as its fiber protective post business, which is expanding in Poland, Turkey and Mexico.
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. The company is focused on growing sustainable packaging solutions.
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Sonoco (SON) Unit to Raise Prices for Tubes & Cores in EMEA
Sonoco Products Company’s (SON - Free Report) wholly-owned subsidiary Sonoco Alcore S.a.r.l intends to implement a price hike by 10% for all tube and core grades sold in the company’s EMEA (Europe, Middle East & Africa) regions. The price rise will be effective for all shipments starting Dec 13.
The company is executing price-rise actions in response to the escalating cost pressure on the business. Raw material costs have been rising since the beginning of this year and will continue to increase further. The company is witnessing a cost surge in all sectors across its operations and supply chain. Sonoco’s productivity and cost-control initiatives are not enough to mitigate mounting costs from packaging, energy, transportation, adhesives and raw materials. Therefore, the company is forced to pass on these costs to customers.
Sonoco’s third-quarter 2021 earnings and sales beat the respective Zacks Consensus Estimates and increased year over year. The company anticipates demand in most consumer and industrial businesses to remain solid in the near term. It projects fourth-quarter 2021 adjusted earnings per share (EPS) between 84 cents and 90 cents. The mid-point of the guidance suggests growth of 6% from earnings of 82 cents reported in fourth-quarter 2020. For 2021, the company’s adjusted EPS guidance is expected in the range of $3.49-$3.55. The mid-point of the range indicates an improvement of 3% from the adjusted EPS of $3.41 in 2020.
Sonoco’s peers in the Containers – Paper and Packaging space like Sealed Air Corporation (SEE - Free Report) , Packaging Corporation of America (PKG - Free Report) and Greif, Inc. (GEF - Free Report) are all focused on price-surge actions to offset inflationary pressure.
Limited availability of certain raw materials and global transportation disruptions have impacted Sealed Air’s supply chain throughout the current year. The company encountered higher freight costs associated with the sourcing and movement of raw materials due to overall tight market conditions. Even though Sealed Air implemented price increases throughout the year, the associated timing lag on these increases and formula-based pricing have dented margins.
Packaging Corporation will bear the brunt of increasing energy costs due to higher gas prices and rising wood costs in the southern mills due to the wet weather, low inventory and high demand.
Greif will continue to encounter higher steel prices as steel supply markets are anticipated to remain tight in the Americas and EME regions. Costs for raw materials used in the paper-making process and old corrugated container costs are expected to increase. These factors will exert pressure on the company’s margins in the near term.
Sonoco’s consumer packaging businesses witnessed pandemic-driven demand for certain consumer products like food and household products. The segment will continue to gain traction from elevated at-home eating trends. It believes that the confectionery, food service and construction products’ markets, which had been mostly impacted by the pandemic, will continue to recover. The demand for Industrial Paper Packaging products returned to pre-pandemic levels in most of the global markets. The company sees opportunities for new product growth such as its fiber protective post business, which is expanding in Poland, Turkey and Mexico.
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. The company is focused on growing sustainable packaging solutions.
Sonoco currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance
Sonoco’s shares have moved up 0.1% in the past year compared with the industry’s rise of 11.5%.