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    SON
    Earnings call· Mar 2026(Q1 FY26)

    SONOCO PRODUCTS Q1 FY26 earnings call SON

    Apr 22, 2026 Source

    Executive summary

    Sonoco Q1 FY26 — Solid Start Despite Headwinds, Profitability Plan Delivering

    Sonoco delivered a solid first quarter, meeting adjusted EPS expectations despite significant macroeconomic and geopolitical headwinds, including severe weather and rising input costs. The company's strategic shift to consumer-focused businesses and the early success of its profitability performance plan were key to navigating these challenges. Management remains committed to its long-term strategy of sustainable growth, margin improvement, and efficient capital allocation, with a focus on debt reduction and shareholder returns, while acknowledging continued market uncertainty.

    Highlights

    5

    • Adjusted earnings for the first quarter were $1.20 per share, meeting consensus estimates, driven by strong productivity savings and a favorable price/cost environment.

    • The Consumer Packaging segment exceeded expectations, and the Industrial Paper Packaging segment managed well through operational and demand challenges.

    • The Profitability Performance Plan delivered $8 million in savings in Q1, contributing to $32 million in annualized recurring savings.

    • The Board authorized the 43rd consecutive annual increase of dividends to shareholders, raising the payout to $2.16 per share, which provides an annual yield of about 3.8%.

    • A new paper can plant in Nong Yai, Thailand, contributed to a 6% lift in paper can volume in the Asia region in the first quarter.

    Concerns

    5

    • Net sales from continuing operations were down 2% year-over-year to $1.7 billion, reflecting lower volumes, weather impacts, and macroeconomic/geopolitical pressures.

    • Adjusted EBITDA was down 4% year-over-year to $277 million, primarily driven by lower volumes and the absence of operating profit from the divested ThermoSafe business.

    • Severe winter weather disrupted several U.S. operations and large consumer customers in late January, leading to temporary closures and production losses.

    • A fire at the Greenville recycling facility on March 24 resulted in a one-time cost of $2 million within the quarter.

    • Rapid input cost inflation in energy, freight, and petrochemicals began in March, with an estimated $8 million to $10 million in additional costs expected in the second quarter.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year Sales
    $7.25 billion to $7.75 billion
    high materiality
    High
    Full-year Adjusted EBITDA
    $1.25 billion to $1.35 billion
    high materiality
    High
    Full-year Adjusted EPS
    $5.80 to $6.20
    high materiality
    High
    Full-year Operating Cash Flow
    $700 million to $800 million
    medium materiality
    High
    Profitability Performance Plan Savings
    $150 million to $200 million
    medium materiality
    High
    Annualized Savings from Profitability Performance Plan
    $32 million
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Consumer Packaging
    Sales increased driven by pricing and favorable foreign currency exchange rates, partially offset by volume and mix softness related to macroeconomic conditions. Adjusted EBITDA decline reflects lower volumes, partially offset by productivity initiatives, pricing actions, and early transformation savings. Adjusting for $18 million of unallocated corporate costs in Q1 2025, Consumer adjusted EBITDA would have been up with flat margins. The team remains focused on price realization and mix discipline across key geographies while driving manufacturing and supply chain productivity.
    Paper can volume in Asia: 6% lift in Q1
    		$1.1 billion3%—Adjusted EBITDA declined 7%
    Industrial Paper Packaging
    Sales were down year-over-year due to softer volumes, partially offset by favorable pricing and index-based resets with foreign currency benefits. EBITDA margin was lower year-over-year due to unfavorable volume and mix, along with losses attributed to a fire at the recycling facility in Greenville, South Carolina. The segment is focused on capturing index-based pricing resets, executing cost and productivity initiatives, and preserving margin discipline while managing demand variability.
    Reels business sales: up 13% in Q1
    		$579 million-1%—Adjusted EBITDA declined $7 million to $100 million (7% decrease)

    Operational metrics

    23
    Adjusted EPS
    $1.20flat YoY
    Q1 FY26

    Met consensus estimates.

    Net Sales from Continuing Operations
    $1.7 billiondown 2% YoY
    Q1 FY26

    Reflects lower volumes, weather impacts, macroeconomic and geopolitical pressures, partially offset by pricing actions and foreign currency benefit. Excluding ThermoSafe, sales increased by approximately 1%.

    Adjusted EBITDA from Continuing Operations
    $277 milliondown 4% YoY
    Q1 FY26

    Decline driven by lower volumes and absence of operating profit from divested ThermoSafe business, partially offset by productivity, pricing, early profitability savings, and favorable FX. Excluding ThermoSafe, adjusted EBITDA would have been flat.

    Adjusted EBITDA Margin
    down 35 bpsYoY
    Q1 FY26

    Overall margin decline.

    Profitability Performance Plan Savings
    $8 million
    Q1 FY26

    Early progress towards the 3-year plan target.

    Annualized Recurring Savings (Profitability Performance Plan)
    $32 million
    FY26

    Savings expected to annualize in 2026.

    One-time Cost from Greenville Fire
    $2 million
    Q1 FY26

    Cost incurred due to a fire at the recycling facility.

    Estimated Additional Input Cost Inflation
    $8 million to $10 million
    Q2 FY26

    Expected additional costs in Q2 from energy, freight, and petrochemicals. This is net of hedging and recovery efforts.

    Uncoated Recycled Paperboard (URB) Price Increase
    $70
    Q2 FY26

    Implemented price increase to recover rising costs.

    Uncoated Recycled Paperboard (URB) Price Increase
    EUR 80
    Q2 FY26

    Implemented price increase to recover rising costs.

    Initial URB Price Increase (Fastmarkets reported)
    $60
    Q2 FY26

    Reported by Fastmarkets by Friday.

    Petroleum-based Resins Usage
    75 milliondown from 240 million pounds in 2023
    Annual

    Primarily in plastics industrial plastics business and plastic cartridges for adhesives and sealants, with recovery mechanisms in place.

    Gross Capital Investment
    $62 millionbelow expectations
    Q1 FY26

    Actively monitoring capital spending to stay disciplined.

    Higher Tax Payments
    $140 millionYoY
    Q1 FY26

    The $103 million related to capital gains from prior period divestitures will not repeat.

    ThermoSafe Sales Contribution
    $55 million
    Q1 2025

    Sales from divested ThermoSafe business in the prior year period.

    Discontinued Operations Adjustment (EPS)
    -$0.18
    Q1 FY26

    Net impact on EPS.

    ThermoSafe Divestiture Impact (EPS)
    -$0.07
    Q1 FY26

    Decrease in EPS due to the divestiture.

    Operational Changes Impact (EPS)
    -$0.08
    Q1 FY26

    Due to top-line pressures from macroeconomic/geopolitical factors, partially offset by operational productivity.

    Nonoperational Changes Impact (EPS)
    +$0.09
    Q1 FY26

    Led by FX (especially Euro), debt reduction, and tax benefits, offsetting headwinds.

    Profitability Performance Impact (EPS)
    +$0.06
    Q1 FY26

    Improvement from the profitability performance plan.

    D&A
    $125 million
    Q1 FY26

    Analyst estimate confirmed by management as a good run rate, expected to tick up slightly as products come online.

    Polyethylene Price Increase
    $0.30
    March-April

    Analyst estimate of price increase between April and March.

    Industrial Segment Reels Business Share
    10%doubled in last couple of years
    Current

    Reels business continues to grow and is supported with capital.

    Industry KPIs

    5
    MetricValueDetails
    Dividends$2.16per share
    CAPEX capital program$62 millionUSD
    Volume production growth6%%
    End market demand driversresilient
    Adjusted underlying EBITDA$277 millionUSD

    Product announcements

    1
    ProductTypeDetails
    New paper can plant in Nong Yai, Thailandexpansion

    Deals & partnerships

    2
    TFPDivestiture of business unit.

    TFP was divested on April 1, 2025.

    ThermoSafeDivestiture of business unit.

    ThermoSafe was divested on November 3, 2025.

    Capital programs

    1
    New automated nailed wood reel production line at Hartselle, Alabama facilityunderway$20 million

    Benefit: Increase capacity by 15%, enable meeting needs of the fast-growing wire and cable industry.

    Investment to support the booming power infrastructure demand for AI centers. Sales in the reels business were up 13% in Q1.

    Risks & headwinds

    4
    Severe winter weather in U.S.Late January (Q1 FY26)

    Temporarily closed some operations and large consumer customers for over a week, impacting Q1 volumes.

    Mitigation: Management noted February saw volume recovery and expects the magnitude of Q1 impact not to repeat, with customers looking to make up lost production through the year.

    Fire at Greenville recycling facilityMarch 24 (Q1 FY26)

    One-time cost of $2 million.

    Mitigation: Implied as a one-off event, no specific mitigation strategy detailed beyond cost recognition.

    Rapid input cost inflation (energy, freight, petrochemicals)Began in March (Q1 FY26), expected Q2 FY26 impact.

    Estimated $8 million to $10 million in additional costs in Q2 FY26.

    Mitigation: Leveraging global sourcing and supply assurance team, implementing price increases ($70/ton URB US, EUR 80/ton URB Europe), confident in recovery mechanisms to offset costs in future quarters.

    Macroeconomic and geopolitical uncertaintyQ1 FY26 and ongoing.

    Lower volume mix, impact on supply chain and customers, creating a dynamic operating environment. EPS forecast has a cautionary tone.

    Mitigation: Maintaining pricing discipline, accelerating productivity, advancing profitability performance plan, tightly managing costs and capital, and building a more agile and resilient organization.

    What to watch in Q2 FY26

    4

    Input Cost Inflation Impact

    Q3 FY26
    Current$8M-$10M additional cost expected in Q2 FY26
    TargetRecovery of costs by Q3/Q4 FY26

    Why it matters

    Inflationary pressures are a key headwind, and the company's ability to recover these costs through pricing actions is critical for margin protection.

    Based on current estimates, we believe this inflation could add between $8 million to $10 million in additional costs in the second quarter. ... we must recover this inflation and have implemented a number of necessary price increases... we feel confident about the sustainability of our actions.

    Q&A highlights

    6

    Inquired about the percentage impact of winter storms on Q1 volumes, current Q2 volume trends in consumer/industrial, whether the $8M-$10M Q2 inflation estimate is sequential/YoY and if it persists into Q3, and the status of aluminum/steel supply chain.

    Paul noted disproportionate impact on US consumer business due to weather. Early Q2 volume recovery, especially in industrial. The $8M-$10M inflation is Q2 exposure, net of hedging, and is expected to be recovered by Q3/Q4 due to recovery mechanisms. Howard confirmed no issues with metal supply chain and fixed pricing through the year.

    “the $8 million to $10 million is what we have line of sight to for Q2. And with our recovery mechanisms that we have in place, there is a little bit of a lag. So I'd say right now, our exposure for Q2 is 8% to 10%.”

    asked by George Staphos · answered by Paul Joachimczyk

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Priorities & Q1 Performance

    Sonoco's Q1 performance reflects progress on its 3-year strategy: sustainable growth, margin improvement via the profitability performance plan, and efficient capital allocation. Adjusted EPS of $1.20 met estimates, driven by productivity, favorable price/cost, and early profitability plan savings, despite lower volumes and external disruption🌐s. The company emphasized its focus on 'controlling the controllables' amidst a dynamic operating environment.

    02

    Inflationary Pressures & Mitigation

    The company faced rapid input cost inflation in March, particularly in energy, freight, and petrochemicals, estimating an $8 million to $10 million additional cost impact in Q2. Sonoco is leveraging global sourcing and has implemented price increases, including a $70 per ton uncoated recycled paperboard increase in the U.S. and EUR 80 per ton in Europe, which are gaining traction. Management expressed confidence in its recovery mechanisms to offset these costs in future quarters.

    03

    Portfolio Resilience & Growth Investments

    Sonoco has purposefully shifted its mix to more resilient consumer-focused businesses, with 2/3 of sales from paper and metal cans in affordable food categories. The company significantly reduced exposure to resin-based packaging, from 240 million pounds in 2023 to 75 million pounds currently. Growth investments include a new paper can plant in Thailand, expected to produce 200 million units annually for the Asian snack market, and a $20 million investment in an automated nailed wood reel production line in Alabama, increasing capacity by 15% for the wire and cable industry.

    04

    Profitability Performance Plan Progress

    The 3-year profitability performance plan, outlined at Investor Day, is on track, delivering $8 million in Q1 savings. These savings were primarily from structural transformation initiatives ($6 million) and commercial excellence/operational improvements ($2 million). These savings represent $32 million in annualized recurring savings, reinforcing confidence in the program's execution and durability, and are expected to build throughout the year.

    05

    Capital Allocation & Shareholder Returns

    Sonoco maintains a disciplined capital allocation strategy, prioritizing high-return projects, optimizing working capital (especially inventory and payables), and preserving balance sheet flexibility by paying down debt. The Board authorized the 43rd consecutive annual dividend increase to $2.16 per share, reflecting a commitment to returning value to shareholders. The company noted that its dividend payout ratio has continued to decrease over recent years.

    06

    Q1 Operational Challenges

    The first quarter was impacted by several one-off📎 issues, including severe winter weather in the Americas, which caused production losses for major consumer customers and company mills. Additionally, a fire at the Greenville recycling facility on March 24 resulted in a $2 million one-time📎 cost. Despite these challenges, the team's focus on controls and long-term productivity allowed the company to deliver within expectations.

    AI-generated summary of the company’s earnings call. Not investment advice.