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Sonoco Unveils Five-Year Growth Strategy
December 15, 2007 Official Board MarketsSonoco Chairman, President and CEO Harris E. DeLoach Jr., and Charles J. Hupfer, senior vice president and chief financial officer, outlined a new five-year growth strategy and provided updated financial guidance for 2007 and 2008 at Sonoco’s recent annual conference with the New York investment community.
The Hartsville, S.C.-based company expects base earnings per diluted share for fourth quarter and full-year 2007 to be at the high end of the company’s previously announced estimates of $.52 to $.55 per diluted share and $2.28 to $2.31 per diluted share, according to Hupfer. Base earnings in 2006 were $2.13 per diluted share.
“Our base earnings guidance for 2008 is $2.44 to $2.47 per diluted share, which represents a year-over-year increase at the earnings before interest and taxes (EBIT) line of approximately 10 percent, and at the base earnings per share line of approximately 6.5 percent,” says Hupfer, adding that the guidance assumes an effective tax rate of approximately 32 percent. “This means we are not projecting a recession for 2008 — but we are not projecting boom times either.”
DeLoach outlined a new five-year strategic growth initiative called “Progress Forward,” which is aimed at continuing Sonoco’s profitable growth momentum established over the past five years as sales have grown from $2.7 billion in 2002 to a projected $4 billion in 2007, for a compound average growth rate of 8.1 percent.
According to DeLoach, Sonoco is targeting to grow sales to between $5.5 billion and $6 billion by the end of 2012. In addition, the company has the objective of improving EBIT margins from 9.3 percent to 11 percent. It is also focused on increasing return on net assets employed from about 11 percent to 12.5 percent.
DeLoach said Sonoco intends to achieve its aggressive profitable sales growth objectives by increasing organic sales; expanding geographically in response to customer and market requirements; providing total solutions to its consumer product company customers; developing new products and services; and making strategic acquisitions.
The company will also continue to shift the historical ratio of sales generated by businesses serving consumer and industrial markets.
“We are focused on changing the mix of our business from a current ratio of 51 percent consumer and 49 percent industrial to approximately 60 percent consumer and 40 percent industrial,” DeLoach states.
Sonoco’s Consumer Packaging and Services businesses are projecting to grow at a compound average growth rate of approximately 6.5 percent over the next five years, DeLoach said. This objective will be accomplished by developing new, innovative products and services to meet changing consumer needs; providing cradle-to-cradle sustainability solutions ranging from providing more environmentally friendly packaging to improving recycling for customers’ manufacturing and distribution facilities; promoting cross-selling of products and services from throughout Sonoco’s diverse mix of businesses to its large consumer product customers; and by pursuing strategic acquisitions.
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