Sonoco Products Company Q2 FY2025 earnings call

• Second quarter results showed strong top-line and bottom-line growth with margin expansion, but impacted by global macroeconomic pressures and delayed European packing season.
• Consumer Packaging segment saw 115% growth in adjusted EBITDA due to volume/mix in U.S. metal and Eviosys acquisition, plus productivity savings.
• Industrial segment grew adjusted EBITDA 16% due to favorable price-cost and productivity, with margins at 19% for seventh consecutive quarter of improvement.
• Integrated SMP EMEA, with run rate synergies expected to be $40M-$50M by end of 2025 and $100M by 2026.
• New growth projects in SMP EMEA, including multiyear contract with pet food customer and new satellite production facility, plus sustainable packaging awards won.

Consumer Packaging segment: Adjusted EBITDA grew 115% due to 10% volume/mix gains in U.S. metal business and Eviosys acquisition (rebranded as Sonoco Metal Packaging, SMP EMEA), plus productivity savings. Industrial segment: Adjusted EBITDA grew 16% due to favorable price-cost environment and productivity, with EBITDA margins at 19% (seventh consecutive quarter of margin improvement). Net sales grew 49% to $1.9 billion, adjusted EBITDA up 25% to $328 million, adjusted EBITDA margin 17.2%.

• Maintains net sales range $7.75 billion to $8 billion.
• Adjusted EBITDA guidance remains $1.3 billion to $1.4 billion.
• Adjusted EPS targets low end of $6 to $6.20.
• Operating cash flows within previous range but lower end due to higher net working capital usage from material inflation.
• Expect improved interest expense in second half, with pull forward of amortization fees not repeating.

• Global macroeconomic pressures affecting consumer and industrial demand.
• Delay of European packing season compared to last year.
• Tariff uncertainties impacting costs and consumer behavior.
• Higher-than-expected interest expenses due to pull forward of amortization fees and higher commercial paper balances.

Q: Talk about volume run rate across major businesses and SMP EMEA's 2Q volume and 3Q expectations A: Robert Howard Coker and Rodger D. Fuller discuss volume trends, with SMP EMEA noting late vegetable harvest start and sardine catch impact, expecting mid- to upper-single digit volume increase in 3Q Q: Stranded costs and interest expense impact A: Jerry Cheatham says interest expense expected to improve in second half, and stranded costs expected to improve over back half of year and into 2026 Q: Eviosys EBITDA expectations and project flow-through A: Rodger D. Fuller states expect EBITDA up year-over-year, with $400M incremental units and other new projects contributing to volume growth Q: Tariff impact on businesses A: Robert Howard Coker and Jerry Cheatham discuss tariff mitigation, impact on retail and consumer behavior, and mitigation on P&L and balance sheet Q: ThermoSafe volumes, growth opportunities, and sale process A: Robert Howard Coker mentions positive volumes in 2Q, ongoing growth in pharma products, and expectation to have sale process signed by end of year Q: Revised guidance drivers and EPS outlook A: Paul Joachimczyk explains revised guidance due to interest expense and net working capital usage, with confidence in revenue and EBITDA despite EPS lower end Q: Consumer segment sustainability and Eviosys synergies A: Robert Howard Coker and Rodger D. Fuller discuss consumer segment sustainability and Eviosys synergies, with progress on $100M synergies and upside potential Q: Dollar-euro exchange rate sensitivity and tax impact A: Jerry Cheatham discusses dollar-euro exchange rate sensitivity (every penny move impacts EPS ~$0.025 annualized) and tax rate expected at ~25% with no significant impact from tax legislation Q: CapEx and 2026 outlook A: Robert Howard Coker says CapEx expected to be in line with 2025 spending, too early to say on 2026 step-up but focused on cost and efficiency