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Sonoco Operations Dented by Hurricane Florence, Costs to Rise

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Sonoco Products Company (SON - Free Report) announced that it will shut down its paper-mill operations in Hartsville, SC, temporarily due to unprecedented flooding resulting from Hurricane Florence. The hurricane, which weakened to a tropical storm, caused heavy rainfall in South Carolina on Sep 16 and significantly impacted the company’s manufacturing operations.

The consumer and industrial packaging products maker Sonoco has its headquarter in Hartsville, and production facilities across North and South Carolina. It operates six uncoated recycled paperboard (URB) machines and one corrugated medium paper machine at the Hartsville mill complex, which represents more than 20% of the company’s global paper production.

Flooding and storm damage resulting from Hurricane Florence have also interrupted operations at three of Sonoco’s Recycling locations in North Carolina, and tube and core operation in Hartsville. However, the company has reopened several facilities in Virginia, North Carolina and South Carolina as the hurricane lost its intensity on Sep 18.

Sonoco’s results will bear the brunt of repair expenses at the Hartsville manufacturing complex and other affected locations due to damage caused by the flood. In addition, the company expects to incur increased input, operational and supply-chain costs to recover from the disaster. It will provide an estimate of the impact on the business and financial results later this month.

Notably, Sonoco is trying to offset the negative impacts of the hurricane by leveraging inventory and production from the rest of its global mill network and supplier relationships. The company carries property and business interruption insurance, subject to a $1-million self-insured retention, but the extent of the resulting claim and ultimate recovery is currently unknown.

Price Performance

Sonoco has outperformed the industry over the past year. Shares of the company have gained around 20% compared with 6% growth recorded by the industry during the same time frame.

Zacks Rank & Key Picks

Sonoco carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same sector include Atkore International Group Inc. (ATKR - Free Report) , iRobot Corporation (IRBT - Free Report) and Caterpillar Inc. (CAT - Free Report) . While Atkore and iRobot sport a Zacks Rank #1 (Strong Buy), Caterpillar carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atkore has a long-term earnings growth rate of 10%. The stock has rallied 41% in a year’s time.

iRobot has a long-term earnings growth rate of 21%. Its shares have gained 43% in the past year.

Caterpillar has a long-term earnings growth rate of 15.6%. The company’s shares have been up 19% over the past year.

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