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Sonoco expects Q4 GAAP earnings to be up to $1.04

Staff Writer |
Sonoco said expects fourth quarter and full-year 2016 GAAP earnings to be $.95 to $1.04 and $2.73 to $2.82 per share, respectively.

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This is including a gain of approximately $0.47 per share from the previously announced sale of the company's rigid plastics blow molding operations.

Base earnings are expected to be within the company's previously stated guidance of $.60 to $.65 and $2.70 to $2.75 per diluted share, respectively.

Last year, the company reported fourth quarter and full-year 2015 GAAP earnings of $.55 and $2.44 per share and base earnings of $.64 and $2.51 per diluted share.

President and CEO Jack Sanders and members of the company's senior leadership team provided the investment community in New York with an overview of the company's financial guidance and strategic priorities.

The sale of the company's blow molding plastics operations in November 2016. The company expects to spend approximately $190 million on capital investments and $147 million on cash dividends to shareholders, thus leaving free cash flow of approximately $61 million.

Excluding the $81 million in cash tax payments and fees, Sonoco's free cash flow is expected to be in line with its previously communicated target of approximately $140 million.

Proceeds of divestitures net of acquisitions are expected to be $189 million. During 2016, Sonoco is using free cash flow and net proceeds from divestitures to repurchase $100 million in company stock and has completed acquisitions in flexible packaging and Protective Solutions and paid down debt.

Sonoco now expects its net-debt-to-EBITDA ratio to be 1.3 times at year-end 2016.

The company said it estimates 2017 base earnings per share to be in the range of $2.68 to $2.78, with a projected midpoint target of $2.73 per share.

Free cash flow and cash proceeds could potentially be used to make strategic acquisitions or purchase shares.

If acquisitions do not materialize, the company estimates that if such proceeds were used for share repurchases, the impact would be equal to approximately $0.10 per share, increasing the previously mentioned 2017 base earnings guidance to $2.78 to $2.88 per share.

For 2017, Sonoco is projecting cash from operations to be approximately $470 million and free cash flow to be about $126 million, after spending $190 million in capital investments and payment of dividends.

The company expects free cash flow to be lower in 2017 due to increased pension contributions, higher cash taxes and the historic practice of increasing cash dividends to shareholders.

Saunders said the company's 2017 capital deployment strategy is expected to be weighted toward investments to grow its existing businesses while looking to make targeted acquisitions.

He pointed out the company has a 92-year tradition of returning substantial amounts of cash to shareholders in the form of dividends and share repurchases, including nearly $1.75 billion in the past decade and approximately $245 million in 2016.

Sanders announced Sonoco will invest $20 million in the development of a new packaging center to support Duracell's new North America battery packaging operation.

Sonoco's Display and Packaging unit will be located in Duracell's new leased facility in the Atlanta area. Sonoco will install and operate state-of-the-art primary packaging equipment at the new center and provide all packaging materials.

In addition, the company will produce retail merchandising displays which will also be packed out at the same facility.

Full production is expected in the fourth quarter of 2018. Sales of packaging and services annualized over the five-year contract period are expected to be more than $50 million.

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