Packaging manufacturer Sonoco expects to improve its return for investors in the coming year after the acquisition of Peninsula Packaging, despite reporting a downturn in first-quarter sales.
The company turned over $1.17 billion in the first three months of the year – down from $1.23 billion in 2016 – with the negative impact of Sonoco’s divestiture of its blowmolding and other smaller operations more than offsetting the addition of Peninsula.
California-based Peninsula Packaging manufactures thermoformed packaging for fresh fruit and vegetables. The buyout, reported by FoodBev in February, makes way for Sonoco to improve its performance in the fresh produce fixture of US supermarkets.
Sonoco expects its net cash and free cash flow to bounce back somewhat by the end of the year, as the benefits of the Peninsula deal are realised.
It said that the discontinuation of its contract packaging business in Mexico and the negative impact of foreign exchange, partially offset by higher selling prices, had also contributed to weakened turnover this quarter.
Sonoco president and chief executive officer Jack Sanders said: “While we are starting the second quarter somewhat behind the price/cost curve, we have announced necessary price increases, along with contractual resets in nearly all of our businesses that should allow us to recover as the year progresses from the significant raw material inflation we experienced in the first quarter.
“As we manage these headwinds, we continue to be pleased with the performance of our consumer-related businesses, which accounted for nearly two-thirds of our operating profit in the quarter. We continue to see consumer demand lag for processed foods sold in the centre of the store, while demand for fresh foods sold on the perimeter continues to show solid growth. Our recognition of this changing consumer behaviour is exactly what led us to our recent acquisition of Peninsula Packaging.
“Our expansion to capture share at the perimeter of the store is just one example of how we are executing our strategy to grow our fresh and prepared food packaging offerings in thermoformed containers and flexible packaging. This broadening of our consumer portfolio offers new growth opportunities that will complement our existing innovative offerings for processed food packaging. Combined, we will significantly expand our presence at retail, as well as expanding the solutions we have to offer our customers.
“Overall, we remain optimistic for the rest of 2017. We are focused on launching new consumer-based customer initiatives. We also are actively exploring further growth opportunities through rational, strategic acquisitions in consumer packaging and protective solutions.
“We will continue to look at ways to further optimise our portfolio, while aggressively pursuing new and different alternatives to improve performance in our industrial businesses and continuing to manage our cost structure throughout the company.”
© FoodBev Media Ltd 2017