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Sonoco (SON) to Raise Tubes & Cores Prices in the US & Canada

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Sonoco Products Company (SON - Free Report) intends to implement a price hike of a minimum of 6% for all paperboard tubes and cores sold in the United States and Canada. The price hike will be effective for all shipments beginning on or after Mar 1, 2022.

Sonoco is executing price-increase actions in response to elevated raw material costs for primary paper making products like uncoated recycled paperboard (“URB”) and adhesives, inadequate supply of paperboard and ongoing market tightness. Recently, the company declared that it is implementing price increase by $50 per ton for all the grades of URB sold in the United States and Canada. The price hike will be effective for all shipments beginning Feb 18.

Raw-material costs have been flaring up since the beginning of 2021. Management expects the trend to persist in the current year as well. 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 and Packaging industry like Sealed Air Corporation (SEE - Free Report) , Greif, Inc. (GEF - Free Report) and Packaging Corporation of America (PKG - Free Report) are also witnessing an unprecedented surge in material costs. These companies are implementing price hikes to offset these impacts.

Limited availability of certain raw materials and global transportation disruptions have impacted Sealed Air’s supply chain throughout 2021. 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.

Sonoco’s consumer packaging businesses are gaining from elevated at-home eating trends. It believes that the confectionery, food service and construction products’ markets, which had been impacted by the pandemic, will continue to recover. The company’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.

Last month, Sonoco provided financial guidance for the current year. It anticipates adjusted earnings per share (EPS) in the band of $3.85-$3.95, with a mid-point target of $3.90 per share. Positive price/cost, productivity initiatives, improvement in volume/mix, benefit from lower interest expenses and fewer outstanding shares are likely to favorably impact earnings in 2022. The upsides are likely to be offset by unfavorable impacts from foreign currency translation and divestures, non-recurring COVID-related incentives and increased SG&A expenses. The company expects to deliver solid earnings and sales growth in 2022 despite headwinds from material cost inflation. It is committed to creating sustainable packaging solutions for customers. To that end, the company intends to achieve sustainability goals with significant reduction of carbon emission and provide customers with sustainable products.