Sonoco Products Co. (SON - Analyst Report) declared that it will hike the price for all paperboard tubes and cores by 6%–10% owing to the continuous rise in raw material costs. The price increase will be effective on shipments in the U.S. and Canada, beginning Oct 24, 2016.
The price rise is in response to the recent increase in costs for uncoated recycled paperboard, combined with price escalations in energy, labor and other input costs. This move will help Sonoco to continue providing high-quality, value-adding products to customers.
Uncoated recycled paperboards are the primary raw material for Sonoco’s Paper and Industrial Converted Products segment. This segment accounted for approximately 34% of the company’s consolidated net sales in 2015.
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An increase in costs can adversely affect Sonoco’s business and financial results, while the ability to pass them on to customers by raising prices will improve productivity. The company also uses derivatives to mitigate some of the effect of raw material and energy cost fluctuations.
Sonoco is constantly seeking the most cost-effective means and structure to serve its customers. Thus, the company normally increases prices to counter the rising raw material costs. It will continue to monitor market conditions to determine if additional pricing actions will be required.
South Carolina-based Sonoco is a global provider of a variety of consumer packaging, industrial products, protective packaging and packaging supply chain services. It is also the largest producer of paper-based tubes and cores in North America.
At present, Sonoco carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the same industry include Berry Plastics Group, Inc. (BERY - Snapshot Report) , Packaging Corporation of America (PKG - Analyst Report) and UFP Technologies, Inc. (UFPT - Snapshot Report) .
Berry Plastics has seen upward estimate revisions over the past 60 days. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Packaging Corporation of America, also a Zacks Rank #1 stock, has witnessed upward estimate revisions over the past 90 days.
UFP Technologies, which carries a Zacks Rank #1, has seen solid estimate revisions over the last 30 days.
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