Sonoco Q1 net income drops despite higher net sales

19 April 2012 (Last Updated April 19th, 2012 18:30)

Global packaging company Sonoco has reported a drop in the first quarter profit, despite reporting an increase of 8.5% in net sales to $1.21bn from $1.12bn in the same period in 2011.

Global packaging company Sonoco has reported a drop in the first quarter profit, despite reporting an increase of 8.5% in net sales to $1.21bn from $1.12bn in the same period in 2011.

Net income fell to $42.9m, or 42 cents per share for the three months ended 1 April 2012. That is in contrast to the $57.6m, or 56 cents per share, recorded in the same period in 2011.

Sonoco's consumer packaging segment reported a decrease in sales to $496m compared to $498m in the first quarter of 2011, while its operating profit stood at $50.1m, down from $51.2m in the same period last year.

Sales in the paper and industrial converted products segment plummeted to $464m from $471m in 2011, and the segment's operating profit rose to $32.3m compared to $30.3m in the previous year.

The packaging services segment saw a decrease in sales to $115m against $123m in the first quarter of 2011, and the segment's operating profit fell to $4.8m from $6.5m in 2011.

The Protective Packaging segment, which includes paperboard-based and expanded foam protective packaging; temperature-assurance packaging; and retail security packaging, has posted sales of $138m compared to $24m in the first quarter of 2011.

Sonoco said the increase in the overall net sales was primarily due to $114m in sales from the Tegrant acquisition and higher selling prices.

The company's gross profits for the quarter were $217m against previous year's $194m and operating profit for the segment for the quarter was $7m against $3.2m in 2011.

Sonoco chairman and chief executive officer Harris DeLoach, Jr said the company is pleased with the return of productivity improvements to more historical levels and with the sequential improvement in industrial-related volumes.

"However, our long-term visibility into customer volumes remains uncertain and we remain focused on minimizing downtime in our paper mills and further reducing our cost structure through proactive operating excellence initiatives and necessary restructuring actions," DeLoach said.