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Sonoco Products (SON) Reaffirms 4Q, 2012 Profit View

 December 07, 2012 09:37 AM

(By Balaseshan) Sonoco Products Co. (NYSE: SON) has reaffirmed its fourth quarter and full year 2012 profit view and said there is no significant changes in business conditions yet customer order patterns remain somewhat erratic and overall economic activity is uncertain.

The company expects fourth quarter and full-year 2012 base earnings to be unchanged from the company's previously announced guidance of $0.52 to $0.56 and $2.17 to $2.21 per share, respectively. The company reported fourth quarter and full-year 2011 base earnings of $0.46 and $2.29 per share, respectively. Street predicts fourth quarter and full-year earnings of $0.54 and $2.19 per share, respectively.

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Sonoco expects to recognize about $12 million in additional tax expense in the fourth quarter of 2012 associated with the repatriation of cash held outside the United States. This one-time charge is excluded from the company's base earnings projections.

"Obviously, our performance in 2012 is not what we expected when we began the year. That said, we have weathered a difficult economic and operating environment and made changes we believe will improve our performance in the future," said Harris DeLoach Jr., Chief Executive of Sonoco.

Sonoco estimates 2013 base earnings per share to be in the range of $2.24 to $2.32, with a projected midpoint of $2.28 per share, while Street analysts predict profit of $2.43 per share.

Sonoco's Chief Financial Officer Barry Saunders said the company's midpoint guidance assumes a $0.20 per share improvement stemming from modest volume growth, productivity improvements and a slightly positive price/cost relationship. Offsetting these improvements is about $0.11 in negative items, including an estimated $0.09 per share impact from higher year-over-year pension expenses.

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For 2012, the company expects to generate free cash flow of about $90 million, after paying about $120 million in dividends to shareholders.

Looking forward, Sonoco is projecting that annual cash flow from operations could average about $460 million over the next several years. For 2013, free cash flow, after dividends, is estimated to increase to about $130 million, due primarily to anticipated lower pension contributions, Saunders said.

For 2013 through 2015, the company's remaining available cash is expected to total about $260 million and be available for targeted acquisitions and/or share repurchases, Chief Operating Officer Jack Sanders said.

"2013 is projected to be a better year, but again we don't expect any real help from the global economy. In addition, we expect to face pension headwinds. However, free cash flow, after dividends, is expected to increase by up to 40% next year to $130 million. Our extended outlook through 2015 could see our top line reach $5.5 billion and earnings growing at compound rate of about 8%," said Sanders.

SON is trading up 0.24% at $29.77 on Friday. The stock has been trading between $28.61 and $34.83 for the past 52 weeks.



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