Sonoco Alcore S.a.r.l., a wholly owned subsidiary of Sonoco Products Co. SON, has announced a price hike on all recycled paperboard grades sold in the company’s Italian region to combat rising material and manufacturing costs.
Sonoco Alcore operates 29 tubes and cores plants and five paperboard mills in Europe, including Sonoco’s largest European uncoated recycled paperboard mill in Italy. Sonoco manufactures paperboard primarily from recycled materials for both internal use and open-market sale.
Paperboard tubes and cores are the elements of Sonoco’s Paper and Industrial Converted Products segment. The segment accounted for approximately 38% of Sonoco’s consolidated net sales in 2014. This segment serves its markets through 183 plants on five continents. Sonoco’s paper operations provide the primary raw material for the Company’s fiber-based packaging.
In order to cope with price adjustments occurring in the Italian market, the consumer packaging company has raised prices of recycled paperboard by $55 (€50) per metric ton. The price hike will be effective with shipments on or after Jun 15, 2015.
For 2015, Sonoco maintained its earnings per share guidance in the range of $2.60 to $2.70. Over the next three to four years, the company aspires to improve sales to $5.5—$6.0 billion, increase base earnings per share annually by approximately 8% to 10% and increase return on net assets employed to 11% or more.
Sonoco expects volumes to improve close to 2% in 2015, reflecting its assumption that economic recovery will continue at a modest pace. Sonoco will also continue to benefit from low resin prices. Moreover, subdued old corrugated container (OCC) prices will be a tailwind for the company in the second quarter.
However, achieving these goals will be challenging in the current low-growth environment. Moreover, unfavorable foreign exchange, higher pension expense and newly issued mortality tables and a slightly higher effective tax rate remain headwinds for Sonoco.
South Carolina-based Sonoco is a global provider of a variety of consumer packaging, industrial products, protective packaging and packaging supply chain services. The company is also the largest producer of paper-based tubes and cores in North America.
At present, Sonoco carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Astec Industries, Inc. ASTE, AO Smith Corp. AOS and Allegion plc Ordinary Shares ALLE. All these stocks carry a Zacks Rank #2 (Buy).
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