Sonoco Products Company (SON) Wells Fargo 2024 Industrials Conference summary

Market environment and volume trends

• Inventory stocking from the COVID period has ended, with volumes in key segments like aerosols returning to normal levels.

• Customers are experiencing deleveraging after a period of high profitability in a low-volume environment.

• Sequential and year-over-year improvements are expected, especially in consumer volumes as the year progresses.

• The busiest season is expected from late summer through fall, with anticipated volume improvements.

• Industrial segment operating rates in North America are above 90%, indicating strong demand.

Strategic focus and capital allocation

• Shifted strategy to invest in core franchises, increasing annual capital allocation from ~$180M to $350M.

• Company realigned from 20 P&Ls to four focused segments, emphasizing areas with a competitive advantage.

• Recent divestitures and focus on foundational businesses have driven EBITDA growth from $700M+ in 2021 to over $1B.

• Most EBITDA improvement came from core businesses, with margin profile up 300 basis points.

• Capital projects are evaluated to exceed WACC, with disciplined returns expectations.

Segment performance and growth drivers

• Rigid paper containers are experiencing a renaissance, driven by sustainability trends and partnerships like Pringles and Frito-Lay.

• All-paper can solutions are gaining traction, especially in Europe, with new product launches and conversions from glass.

• Metal packaging business has exceeded financial expectations, with further organic and acquisition growth targeted.

• Flexible and thermoforming segments focus on niche markets, leveraging unique solutions and targeted M&A like the Inapel acquisition in Brazil.

• Industrial business has improved margins through strategic investments and operational changes, moving away from cyclical products.