Sonoco Products Q1 2025 Earnings Report

Sonoco Products EPS Results

• Actual EPS: $1.38
• Consensus EPS: $1.41
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: $1.12

Sonoco Products Revenue Results

• Actual Revenue: $1.71 billion
• Expected Revenue: $2.02 billion
• Beat/Miss: Missed by -$308.54 million
• YoY Revenue Growth: +30.60%

Sonoco Products Announcement Details

• Quarter: Q1 2025
• Date: 4/29/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 30, 2025
• Conference Call Time: 8:30AM ET

Sonoco Products (NYSE:SON) Company, together with its subsidiaries, designs, develops, manufactures, and sells various engineered and sustainable packaging products in North and South America, Europe, Australia, and Asia. The company operates Consumer Packaging and Industrial Paper Packaging segments. The Consumer Packaging segment offers round and shaped rigid paper, steel, and plastic containers; metal and peelable membrane ends, closures, and components; thermoformed plastic trays and enclosures; and high-barrier flexible packaging products. The Industrial Paper Packaging segment provides paperboard tubes, cones, and cores; paper-based protective packaging products; and uncoated recycled paperboard products. It also offers various packaging materials, including plastic, paper, foam, and other specialty materials. Sonoco Products Company sells its products in various markets, which include paper, textile, film, food, packaging, construction, and wire and cable. The company was founded in 1899 and is headquartered in Hartsville, South Carolina.

Sonoco Products Q1 2025 Earnings Call Transcript

Key Takeaways

• Sunoco reported first-quarter net sales up 31%, adjusted EBITDA up 38% and adjusted earnings up 23% year-over-year despite higher interest, taxes and currency headwinds.
• The Consumer Packaging segment drove a 127% increase in adjusted EBITDA thanks to a full quarter contribution from the EVOSYS acquisition, strong volume mix and favorable price-cost dynamics.
• Sunoco completed the sale of its thermoform and flexibles business for ~$1.8 billion ( ~$1.56 billion after tax), using proceeds to cut debt and lower net leverage to under 4x EBITDA.
• The integration of the EMEA metal packaging business is on track, with $40 million of cost synergies expected in 2025 and a two-year synergy target of $100 million.
• Full-year 2025 guidance was reaffirmed: adjusted EPS of $6.00–$6.20, net sales growth of ~20% to ~$8 billion, adjusted EBITDA up ~30%, and operating cash flow of $800–$900 million.

Presentation

[Operator]

Thank you. I'd now like to turn the call over to Roger Schrum, Interim Head of Investor Relations and Communications. You may begin.

[Roger Schrum, Interim Head of Investor Relations at Sonoco Products Company]

Thank you, Rob, and good morning, everyone. Yesterday evening, we issued a news release and posted an investor presentation that reviews Sunoco's twenty twenty five first quarter financial results. Both are posted on our Investor Relations section of our website at sunoco.com. A replay of today's conference call will be available on our website, and we'll post a transcript later this week. If you would turn to Slide two, I would remind you that during today's call, we will discuss a number of forward looking statements based on current expectations, estimates and projections.

[Roger Schrum, Interim Head of Investor Relations at Sonoco Products Company]

These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Additionally, today's presentation includes the use of non GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations. Further information about the company's use of non GAAP financial measures, including definitions as well as reconciliations to GAAP measures, is also available on the Investor Relations section of our website. Finally, references to certain financial metrics along with corresponding year over year comparable results made on this call are on a full company basis, except when specifically referred to for continuing operations or for discontinued operations.

[Roger Schrum, Interim Head of Investor Relations at Sonoco Products Company]

Joining me on this call today is Howard Coker, President and CEO Roger Fuller, Chief Operating Officer and Gerry Cheatham, Interim Chief Financial Officer. For today's call, we will have prepared remarks followed by a Q and A. If you'll now turn to Slide four in our presentation, I'll now turn the call over to Howard.

[Howard Coker, President and CEO at Sonoco Products Company]

Thank you, Roger, and good morning, everyone. Let me start. Our first quarter results demonstrated the strength of the new Sonoco as our global team achieved record top line and adjusted EBITDA performance. Slide five shows net sales were 31% or grew 31% and adjusted EBITDA was up 38%, while adjusted earnings were up 23% despite higher than expected interest expenses, taxes and the negative impact from currency translation. I'll let Gerry go through the key drivers for the quarter, but overall we are pleased with the improvement in both our Consumer Packaging and Industrial Packaging segments.

[Howard Coker, President and CEO at Sonoco Products Company]

The 127% growth in adjusted EBITDA on the Consumer segment reflects a full quarter of the EVOSYS acquisition along with strong volume mix from our legacy metal and rigid paper can businesses and a positive price cost environment. Industrial segment generated a 6% improvement in adjusted EBITDA stemming from a year over year improvement in price cost and productivity. Volume was down low single digits in the quarter as flat results in South America was offset by results in the rest of our served markets. As shown on Slide six, we completed the sale of the thermoform and flexibles business to Topan Holdings on time and as expected. We received approximately $1,800,000,000 in cash for the business, which generated approximately $1,560,000,000 in after tax proceeds, which we used to significantly reduce debt and strengthen our balance sheet.

[Howard Coker, President and CEO at Sonoco Products Company]

We do extend our best wishes for continued success to our approximately 4,500 former TFP teammates and our new Topan team. On April 1, we completed the first phase of the integration of Ebiosis by rebranding the business, the NoCo Metal Packaging EMEA. As shown on Slide seven, we're changing our digital imagery as well as physical signage, trucks. Overall, while early, it's been a real nice start to the integration. We're going to treat our global metal packaging businesses as a single enterprise to better capture the best ideas, innovations and synergies.

[Howard Coker, President and CEO at Sonoco Products Company]

Our integration efforts produced strong synergy savings across the global metal packaging enterprise in the first quarter and we now believe we should be able to achieve approximately $40,000,000 of savings in 2025 on our way towards our two year synergy target of $100,000,000 Working together, our global can businesses are also identifying long term savings and commercial opportunities that will benefit our customers for years to come. We're encouraged by the performance of our combined global metal packaging business and we continue to find opportunities to work with our customers to provide even greater value to enhance innovation and a much stronger global supply chain. After one quarter together, our global metal packaging sales are tracking at our expectations and adjusted EBITDA margins was near 16%. Our U. S.

[Howard Coker, President and CEO at Sonoco Products Company]

Metal packaging business had strong year over year results as the business achieved 10% organic volume mix improvement, a strong growth in aerosols and food cans coming from both existing customer demand and new customer wins. Adjusted EBITDA for our EMEA metal packaging business was up approximately 23% in the first quarter on productivity savings and positive year over year price cost environment. Can volumes in Europe reflect the slower market conditions in the region, but we're encouraged by new customer wins, particularly in the pet food segment where we will start seeing benefits in the second half and continuing into future years as we build out additional production capability. Finally, our global rigid paper can business had a solid first quarter as low single digit volume mix growth in North America and South America was somewhat offset by slower European and Southeast Asia volumes. With that brief introduction, I'm turning the call over to Gerry to review the numbers.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Thanks, Howard. I'm pleased to present the first quarter financial results starting on Page nine of the presentation. Please note that all results on an adjusted basis and all growth metrics are on a year over year basis unless otherwise stated. GAAP to non GAAP EPS reconciliation is in the appendix of this presentation as well as in the press release. As Howard mentioned, on 04/01/2025, we finalized the sale of our thermal formed and flexible packaging business, marking a significant milestone in advancing our fewer bigger businesses strategy.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

This divestiture strengthens our focus on core sustainable packaging platforms and positions us to reinvest in higher return opportunities that drive long term earnings growth and margin expansion. Looking ahead, our leadership in two core markets will enable us to operate more efficiently and serve our customers with greater focus and agility. Adjusted EPS was 1.3 dollars Earnings per share increased 23% year over year, mainly driven by continued strong productivity of 17,000,000 and favorable pricecost performance across our core businesses. These gains were partially offset by unfavorable volume mix, other nonrecurring items and currency translation. First quarter net sales increased 31% to $1,700,000,000 excluding discontinued operations of three twenty one million dollars This change was driven by favorable price and the impact of the full quarter of S and P EMEA's sales.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Adjusted EBITDA of $338,000,000 was up by an outstanding 38%, and adjusted EBITDA margin improved 170 basis points to 16.6%. This was driven by positive pricecosts, sustained favorable productivity and the impact of acquisitions and partially offset by volume softness in the Industrial segment and the impact of currency translation. Page 10 has our Consumer segment results on a continuing operations basis. Consumer sales were up 83% due to the S and P EMEA acquisition and favorable volume mix. Global rigid paper containers sales increased marginally compared to the prior year, while our domestic packaging business our domestic metal packaging business achieved double digit growth, reflecting solid demand and continued commercial execution.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Consumer adjusted EBITDA from continuing operations grew a remarkable 127% year over year due to the impact of acquisitions, favorable pricecost dynamics, continued productivity gains and positive volume mix. Page 11 has our Industrial segment results. Industrial sales decreased 6% to $558,000,000 Results were impacted by lower volumes, the planned exit of our industrial operations in China and unfavorable currency translation. These headwinds were partially offset by low single digit improvements in selling prices driven by index based price resets. Adjusted EBITDA margins expanded 200 basis points year over year in the first quarter, primarily driven by favorable price cost dynamics and productivity gains.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

These benefits were partially offset by negative volume mix as well as the impact of unfavorable currency translation and other items. Adjusted EBITDA increased by $6,000,000 to $101,000,000 representing a 6% increase. Page twelve has our results for the all other business. The All Other sales were $85,000,000 and adjusted EBITDA was $14,000,000 These sales and adjusted EBITDA results were affected by the divestiture of Protective Solutions combined with the ongoing softness in some key end markets. Turning to Page thirteen, we are reporting on our debt reduction progress.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

As of today, we have reduced our net leverage to just under four times net debt to adjusted EBITDA. We used approximately $1,500,000,000 in after tax proceeds from the TFP sale to fully repay our $1,500,000,000 term loan. Our primary focus is to delever the business through strong organic cash flow and by using divestiture proceeds to reduce debt. We've established a clear and actionable road map to achieve this over the next eighteen to twenty four months. Our liquidity position remains strong with approximately $915,000,000 in available capacity, providing us with ample financial flexibility to support our operations, navigate market conditions and invest in strategic initiatives as needed.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Slide 14 provides a summary of the full year guidance. We are reaffirming our full year guidance. We expect to deliver adjusted EPS within the range of $6 to $6.2 This outlook reflects continued strength in our legacy businesses, the accretive impact of S and P EMEA acquisition and the now completed divestiture of TFP, which is expected to be modestly dilutive. We also anticipate some headwinds, including a higher effective tax rate and some softness on the industrial volume mix. This will be more than offset by the expected favorable pricecost outlook, actions to reduce fixed costs, strong volumes in the Consumer segment and the favorable impact of currency translations due to a weaker U.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

S. Dollar. The previously announced price increases on our URB and converted products in North America were intended to defend our margins from continued inflation. The implementation is going well, and we anticipate seeing those benefits in our second half results. We expect another strong year of cash generation, with operating cash flow projected between 800,000,000 to $900,000,000 and free cash flow between $450,000,000 to $550,000,000 And now I'll hand it over to Howard to walk us through our transformation journey.

[Howard Coker, President and CEO at Sonoco Products Company]

Right. Thanks, Gerry. One of the things we don't talk enough about due to our quarterly results is the unbelievable work and dedication our team is putting in the transformation of the new Sonoco into a simpler, stronger and more sustainable company. In the past quarter, our team successfully completed a complex carve out divestiture of the TFP business. In addition, our 6,500 new teammates with Sunoco Metal Packaging, EMEA are quickly working to integrate the business and drive expected synergies.

[Howard Coker, President and CEO at Sonoco Products Company]

As we show on Slide 15, since we began this journey five years ago, we have reduced the number of divisions in our portfolio from 18 down to three for Consumer and Industrial businesses while creating an enterprise that is positioned for future growth. As we show on Slide 16, Sunoco was recently recognized by Newsweek as one of the most trustworthy and respected companies in The United States. In addition, just last week on Earth Day, USA Today named Sunoco one of America's Climate Leaders for 2025 in recognition of our efforts over the past several years to reduce carbon emissions from our operations. These honors belong to our employees who work every day to make life better for our customers, our communities and shareholders. We've been asked a lot recently about tariffs and how Sonoco may perform during periods of economic stress.

[Howard Coker, President and CEO at Sonoco Products Company]

Let me make a couple of observations. First, Sonoco's consumer packaging business tends to perform well during periods of economic stress as consumers typically shift to center of the store packaged food. While industrial paper packaging business has experienced some slowing during past recessions, I would point out that our industrial business in 2025 is significantly stronger and the markets we serve have matured since the COVID recession of twenty twenty. Now does that mean that Sunoco is immune to an economic downturn or tariffs? Certainly not.

[Howard Coker, President and CEO at Sonoco Products Company]

If you turn to Slide 17, you'll see we believe Sunoco is better positioned than ever to navigate the evolving geopolitical landscape. First, our manufacturing network is designed to serve local markets, reducing our exposure to cross border disruptions and tariff related risks. Second, while we are actively working with our customers to help manage the impact of higher input costs driven by tariffs, our business model allows for pricing adjustments when necessary. Most importantly, our transformed portfolio is significantly more resilient with over two thirds of our sales now coming from consumer food packaging, a segment that has historically demonstrated strong performance across economic cycles. Turning to Slide 18.

[Howard Coker, President and CEO at Sonoco Products Company]

Sunoco's goal is to increase long term profitability and return capital to shareholders. Over the past two years, Sunoco has generated a record 1,700,000,000 in operating cash flow and approximately $1,000,000,000 in free cash flow. We've used much of this cash to invest in ourselves for future growth and to drive productivity savings. While we are currently focusing on using free cash to lower leverage, our dividend remains an important part of our value creation story. Since 1925, which was roughly one hundred consecutive years, Sonoco has paid quarterly dividend.

[Howard Coker, President and CEO at Sonoco Products Company]

That's why the investment service Sure Dividend is named Sonoco its number four up dividend in Champion for 2025. It's also why our Board of Directors recently increased our quarterly dividend for the forty second consecutive year and it provides a strong yield of 4.6%. In closing, I thought it would be worthwhile to review my priorities for the rest of the year, which is shown on Slide 19. First and foremost is to mind the store, to continue to drive improved performance of our core consumer industrial business. Embedded in that priority is to manage risk associated with the changing macroeconomic conditions.

[Howard Coker, President and CEO at Sonoco Products Company]

Next, we'll continue to manage the metal packaging EMEA integration and look to further optimize our global manufacturing network and organization. We'll continue to prepare for the planned divestitures of our attractive, the non core temperature assured business. And finally, we must better communicate our value creation story to help improve our very much underappreciated stock. Slide 20 was developed to better illustrate the new Sonoco, our businesses, our served markets and our geographic footprint. As Gerry mentioned, we reaffirmed our full year 2025 guidance as we expect to grow net sales by approximately 20% to nearly $8,000,000,000 We expect adjusted earnings to grow approximately 20% and adjusted EBITDA by approximately 30.

[Howard Coker, President and CEO at Sonoco Products Company]

Despite seasonal working capital changes in the first quarter, Sonoco remains a strong cash flow generator and we expect operating cash flow this year to be between 800,000,000 and $900,000,000 Even with economic uncertainty, we remain confident in our ability to deliver continued growth, margin expansion and strong cash flow generation enabling us to drive even greater long term value for our shareholders. And with that, operator, we're ready to take questions.

[Operator]

Thank you. We will now begin the question and answer Your first question comes from the line of George Staphos from Bank of America. Your line is open.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Hi, everyone. Good morning. Thanks for the details. I guess, first question I would have, if you could just give us a bit more color, on the volume performance by region, by key segment or product line. I know you touched on a lot of it, Howard, during your remarks, but if you could just give us sort of a quick review, North America versus Europe versus rest of world, if you care, to talk to that, in a rigid paper, metal and industrial on an organic, if you have that, that would be great.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

And then a couple of other questions.

[Howard Coker, President and CEO at Sonoco Products Company]

Sure, George. Well, I am going start with the consumer side. Felt really positive in total. But to drill into that and we're talking mid single digits over the consumer on a global basis. But when you drill into that, what we're seeing is rigid paper North America was actually slightly up and South America is the same.

[Howard Coker, President and CEO at Sonoco Products Company]

South America was actually really strong. You go over to Europe and we were down. Similarly, which is for the first time in a long time, we saw that our Southeast Asia rigid paper volumes were down. Europe and Southeast Asia and to some extent in North America, 1 discrete customer, very large customer is going through a transition at this point in time and we've seen some pullback. So we don't see that as being nothing more than a timing issue and particularly in Europe and South America and benefit not South America, Southeast Asia and benefit as things clear up there.

[Howard Coker, President and CEO at Sonoco Products Company]

On the industrial side, really a lot of red but low single digits. Like North America, I would suggest again low single digits. The real issue call out there would be Europe. Europe was softer than we expected. But if you take South America, which is basically flat, slightly down and U.

[Howard Coker, President and CEO at Sonoco Products Company]

S, we're pretty much holding our own on the industrial side as well. That's kind of the big picture. Oh, and you said asked about metal. So metal, in North America, as I said, we said 10%, but let unpack that a bit. Our aerosol business was up roughly 25% quarter over quarter.

[Howard Coker, President and CEO at Sonoco Products Company]

Our food can business was probably 10 plus. But what's embedded in there is our intercompany sales related to components, So loose ends, etcetera, again, we have one discrete customer that has pulled back on their volumes that we expect to see return in the relatively near future. So if you're really talking about canned bodies, you're up probably in that 15% type range in total between aerosol and food. Europe, while we are very pleased with how things have started and improvement year over year in terms of profitability of the business, a little slower than our expectations, and I'd say right on mid single digits down to our expectations. Okay.

[Howard Coker, President and CEO at Sonoco Products Company]

We see that as a bit of a timing issue as typically a softer first quarter and as you're well aware a ramp up through second and third.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Okay, Howard. And just you're pleased with Europe, but it's down mid single digits in metal so far. Correct?

[Howard Coker, President and CEO at Sonoco Products Company]

Say that again?

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Europe, you're pleased, but it's down mid single digits in metal. Correct?

[Howard Coker, President and CEO at Sonoco Products Company]

Yes.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Okay.

[Howard Coker, President and CEO at Sonoco Products Company]

Yes, on volume. Yes. Profitability was up EBITDA was up about 25% year over year.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Thanks for that rundown, Howard. Two quick ones, and I'll turn it over. One, are you seeing any changes in purchasing behavior, any changes in supply chain, anything to call out on customer promotional activity given tariffs, given the macro? And that's sort of a

[George Staphos, Managing Director at Bank of America Merrill Lynch]

big question. You don't have

[George Staphos, Managing Director at Bank of America Merrill Lynch]

to go through everything, but if there's anything in particular we as analysts should know about, well, how we're modeling you going forward, that's kind of what's behind that question. And then you talk about messaging and and trying to, you know, this is my wording, not yours, get the story out to a larger degree on Sunoco. It's not here nor there, but what do you think needs to be better understood by the market relative to the discount you see in the stock versus where you think it should be? Thanks and I'll turn it over.

[Howard Coker, President and CEO at Sonoco Products Company]

Sure. What percent of changes, supply chain, customers, etcetera, really not a lot. I think when we'll start feeling that is when we start seeing what I would suspect would be increased pull through from our consumer customers, which historically our consumer businesses have performed very well. But not a lot. What I would suggest that unique to Sonoco is that we do have our largest paper can customer in the midst of an acquisition.

[Howard Coker, President and CEO at Sonoco Products Company]

And so to your point about marketing, etcetera, we've seen decreases there as they anticipate the turnover of that business. So a little stagnation in the last quarter or so with that customer and we have very, very strong opinions about where the new owner can take this business. So we'll see how that manifests itself post close midyear. The message is really more about as we're ending this whole transition, as you guys know, as you know, the numbers are it's tough to follow what's all going on and to be able to start reaching a point of, I would never say finish state, but certainly on the trajectory we've been over literally the last five years, start being able to connect the significantly improved performance the company has seen over the last couple of years and the inverse relationship to our stock and start telling the story on where we are, where we're landing, where we're going. And I think even starting today, it should be a little more clear, a lot more clear than would have been in earlier periods.

[Howard Coker, President and CEO at Sonoco Products Company]

So that is just it, just getting the message out about who we are, where we're going, what the opportunities look like, and it's a pretty exciting go forward story for the company.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

All

[George Staphos, Managing Director at Bank of America Merrill Lynch]

right. Howard, I appreciate it. Thanks. I'll turn it over. Good luck in the quarter.

[Operator]

Thanks. Your next question comes from the line of Michael Roxanne from Truist Securities. Your line is open.

[Michael Roxland, MD - Equity Research at Truist Securities]

Thank you, Howard, Jerry, Roger and Roger for taking my questions and congrats on all the progress. Can you help us you mentioned managing your global network. Can you give us a sense of where there are opportunities and some of the things that you're considering doing around your global network?

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

Yes, Michael, is Roger. I think that's specifically talking about our metal end, our metal can business, our metal end supply and Howard has already mentioned that how that's integrated into our paper can business. With significant added operations in Europe with a lot of the strategic template supply being provided out of Europe, we're looking across the platform, our European platform, our Asia and The U. S. And deciding where is the best location primarily to produce easy open ends, non easy open ends components for all of our businesses, all of our consumer business now, our can businesses, and making those decisions over the next couple of years strategically where can we provide the lowest cost solution to our operations and to our customers and working through that as we speak.

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

So that's really in my opinion outside of the tremendous synergy opportunity which we can talk about later that we have just combining our two metal businesses. So again, it's looking at this global platform we have now and making those longer term decisions on where is the low cost opportunities, how do we use that to gain market share to grow our business, which is the ultimate objective of looking at that global platform.

[Howard Coker, President and CEO at Sonoco Products Company]

Michael, let me add one other. And when we if you look at our global rigid paper container business, this is how we operate. We operate under one single umbrella globally. And the benefit and we started that probably ten, twelve, fifteen years in earnest and be able to take the best of the best of each market in terms of technology, R and D, innovation and how that's centralized where there's not cross border challenges or competition, but being able to create the best of global in terms of those categories. And it's worked well for us on the paper can side and you'll see us over time with that same type structure and again taking the best of one region and the best of the other region and creating something that no one else has been able to do.

[Michael Roxland, MD - Equity Research at Truist Securities]

Got you. That's very helpful, guys. On Ebiosis, this transitioning,

[Michael Roxland, MD - Equity Research at Truist Securities]

I think I heard you

[Michael Roxland, MD - Equity Research at Truist Securities]

said that EBITDA was up 23% year over year 1Q. I think you reiterated the guide for EBITDA to be up 10%. Is that just conservatism? Or is that some concerns over your tariff and economic uncertainty? Like why reiterate the more modest guide relative to what strong 1Q performance?

[Howard Coker, President and CEO at Sonoco Products Company]

I just think it's conservative in comps. So no doubt about it. Last year was a weaker quarter, stronger quarter this year, being conservative as we go forward.

[Michael Roxland, MD - Equity Research at Truist Securities]

Nothing operationally stands out though? It's just work? Is it just Nah. Nah. It's just slow.

[Michael Roxland, MD - Equity Research at Truist Securities]

Yeah. Gotcha. And then last last question before turning it over. Just in terms of the AWS integration, last quarter, you mentioned having a very strong leadership team there. What has the company done to ensure that the team is retained and there's not turnover in the near term that could cause disruption and negatively impact results?

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

Yes, Michael, it's Roger. Let me just talk a little bit about the integration and maybe this gets out in front of a couple of questions, but I know it's on people's mind. But you're right, we're pleased with the integration, very impressed with the capabilities and talents of the new team and seeing nice progress on the integration across the board. I think number one is spending time with the leadership team and the critical people in the business across the board from our customers from the market standpoint and our people are very pleased to see a strategic buyer stepping in and taking a leadership position in the boot camp market in Europe. So in general, the team is very pleased to be part of Sunoco and they understand the vision, they understand what we're trying to do with the global business and they want deliver the results that we're looking at.

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

So typically as you go through these, I think you know there are retention type discussions that we have around timing, around packages, around the business. That's all going extremely well. The leadership team has tremendous experience in the metal can market. They want to continue with the business. So it's really just that constant communication and really the culture of Sunoco is making people feel involved with the business, making people feel part of something bigger.

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

And again, I can tell you across the board we feel comfortable that the critical people that we need in the business will continue to stay with us. Let me go ahead and talk about synergies because I know it will come up from a cost synergy standpoint. Howard has already mentioned we're upping our run rate this year to the $40,000,000 level by the end of the year, becoming more and more confident that we can at least hit that $100,000,000 level by the end of twenty twenty six, which has been our commitment. Direct synergies, materials, direct materials, we're looking at it from a global template business standpoint. Indirect logistics, business S and A we're looking at it from a European footprint standpoint.

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

Keep in mind that over 40% of Synovgo is now based in Europe and we're looking at synergies across our paper can business, our industrial business and our metal business in Europe. And then finally, EDIOS as you know is a standalone business. So from a corporate S and A standpoint good synergies there as well with the team that we have here primarily in Hartsville. But we're most excited about the market and the customer synergies. As I said, tremendous response from our local customers with a strategic stepping into a leadership position.

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

Global customers that we may serve in both regions or one of the other regions are very interested in our global capabilities now. That gets back to your earlier questions on the global capability and the platform that we're looking at. Self manufacture opportunities, Howard talked about innovation. So all in all, feel very good about it. They're very good about the team.

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

From a turnover standpoint, at this point, we're not concerned. The team is very involved, very engaged and we feel good about the connection that they have with our leadership team here and Sunoco in general. So all in all going well and we're depending on that leadership team to continue to help us work our way and lead the business and deliver on the commitments we've made from a synergy standpoint.

[Michael Roxland, MD - Equity Research at Truist Securities]

That's great, Paul. Really appreciate it and good luck in 2Q.

[Operator]

Your next question comes from the line of Mark Weintraub from Seaport Research Partners. Your line is open.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

Thanks so much. So appreciate that you've upped the target on synergies by 10,000,000 At the same time, you've talked about the volume environment being weaker. I think you had originally come into your thinking like a 2% to 3% type of growth in Consumer Packaging was viable. Correct me if I'm wrong there, but what would your updated view be? And then presumably that delta would be more than a $10,000,000 negative delta.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

So I'm curious what are some of the other explicit drivers you think are going to help offset that in keeping the guidance where it had been?

[Howard Coker, President and CEO at Sonoco Products Company]

Yes, Mark, we're when you say consumer, we're actually all looking at an increase in terms of volumes as we head into the upcoming quarters. So really, you just kind of look at the first quarter, particularly in this business, which does have seasonality. So as we're looking out, we're seeing that much stronger second quarter, third quarter rates really across both the paper can as well as the global metal can businesses. So we're not really factoring saying, hey, there's there was a 7% down in the first quarter that translates for the year. That will work our expectations are that will work itself out through the course of the year.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

So just to clarify, so you're still kind of embedding a 2% to 3% volume increase for the year, which I think is what you had been talking about three months ago?

[Howard Coker, President and CEO at Sonoco Products Company]

Yes.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

Okay. Fair enough.

[Howard Coker, President and CEO at Sonoco Products Company]

That's correct.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

And then second, any update on ThermoSafe and where your thought process there might be?

[Howard Coker, President and CEO at Sonoco Products Company]

Yes. Well, first off, very pleased with the continued solid performance from the team. Really not a formal update. I would say that we're preparing ourselves and we will make a decision on when to go on frankly what it's going turn out to be, what is the macro situation like at that time. But officially, now, I'd say we're still looking at by the end of the year coming to a resolution on that.

[Howard Coker, President and CEO at Sonoco Products Company]

But again, happy with the trajectory of the business, and we'll see how that unfolds through the course of the year.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

Thanks very much.

[Operator]

Your next question comes from the line of Matt Roberts from Raymond James. Your line is open.

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

Hey, good morning everybody. Thanks for the time. Quick question on leverage, post the TFP pay down on April 3, what where does your net adjusted debt stand? I know you said it was less than four times, but what would that have been at the end of 1Q? And recognizing there is some seasonality with the larger metal business, where do you expect that leverage to be by year end 'twenty '5?

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Yes. This is Jerry. As we stated, we expect it to be, by the end of this year, under 4x. And we're still on track to reach our target of three to 3.3 times by the end of twenty twenty six.

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

Okay. Thank you for the clarification. Sort of less important than the $0.25 Got it. And secondly, on the price cost expectations, could you say where your OCC cost expectation now is versus where you had it in January? And what kind of market conditions inform that?

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

And we're hearing some constructive commentary around the URB list price increase, although it's not yet reflected in the index. Does the guide assume any incremental benefit there? And if so, how much? Usually, it's not reflected unless passed through, but just curious your thoughts or any color you have there. Thank you again.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Yeah. What we assumed in our original guide was an average OCC of around $100 Obviously, it was around $80 80 5 dollars in the first quarter. We expect it to be that similar in the second. And we're expecting it to average somewhere between $90 and $95 in the second half of the year.

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

Thanks, Jay. And on the URB price?

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Yes. On the URB price, it's been you're right, pretty unique against all paper grades. We're running in probably 92% to 93% utilization rates right now. We're seeing strong yield on against the $70 increase in the market. So would be extremely disappointed if the appropriate indices did not pick that up at their next go round.

[Matthew Roberts, Equity Research Analyst at Raymond James Financial]

All right, Jerry. Thank you again.

[Operator]

Your next question comes from the line of Gabe Hodge from Wells Fargo. I

[Gabe Hajde, Analyst at Wells Fargo]

had a question, maybe a point of clarification. I apologize. It's a busy morning. Did you talk about consumer volumes in aggregate on an organic basis? Question number one.

[Gabe Hajde, Analyst at Wells Fargo]

And question number two, Howard, you threw out a bunch of numbers for the metal food business. And so maybe if we could break it down North America versus Europe and organic. You talked about some pretty big numbers, I think double digit growth in the North American metal business. It's quite a bit better than what we saw for the industry data, maybe suggesting you guys are winning some business there. Can you talk about that?

[Gabe Hajde, Analyst at Wells Fargo]

Would it be your view that customers are trying to buy ahead of any potential price increases and material costs? And again, apologize if that if you covered it.

[Howard Coker, President and CEO at Sonoco Products Company]

Yes. No problem, Gabe. We're looking at consumer from an organic perspective about 4% up for the first quarter in total. That's excluding acquisition. On the metal side of the business, in terms of breaking down further North America, that kind of details, less so on Europe.

[Howard Coker, President and CEO at Sonoco Products Company]

But North America, we saw about 10% improvement in Food and about a 25%. And keep in mind, about a third of our business is Aerosol. Aerosol has recovered nicely, up about 25%. And then what I also noted was that we when you look at units, and we've got some work to do in terms of how we report this stuff, but we've got metal ends that go to a select customer, legacy Tenoco customer, that there's been some drawdowns that we expect that we'll recover. That's what brought the total.

[Howard Coker, President and CEO at Sonoco Products Company]

The math doesn't work. If 10% of your food cans up, 25% of your aerosol, but you're 10% up in total, it's because of low low value Netherlands are calculated in that number. We'll we'll work on on that going forward. Europe, really it's one discrete market, a seasonal market that hasn't kicked in 6%, seven %. It's the fish market and normally doesn't really start taking off until now or through up until early June or so.

[Howard Coker, President and CEO at Sonoco Products Company]

So we're expecting to see that turn here in the very near future. Other than that, most of the other markets were exactly where we expected them to be. Unless, Roger, you have other commentary to it. No, that's right. So in terms of pre buy, no, not seeing any activity there.

[Howard Coker, President and CEO at Sonoco Products Company]

Saying, I mean, there could be an isolated case, but as we talk to our customers going in, as we're rolling into the second quarter, it's very encouraging in terms of what the volume profile looks like, particularly here in North America, but it's not pull forward.

[Gabe Hajde, Analyst at Wells Fargo]

Okay. So to be clear, guess, for the end sales, which seems like it should balance out over the course of the year, you would expect pretty darn strong volumes in aerosol and food cans also to be up for the full year in North America?

[Rodger Fuller, Chief Operating Officer at Sonoco Products Company]

Correct.

[Gabe Hajde, Analyst at Wells Fargo]

Okay. And then a point of clarification, I think, Gary, you mentioned embedded in the guidance, you talked about getting early realization on the URB price increase, but you'd expect that to flow through in the back half of the year. A, is that in fact what you said? And b, quantification of what that benefit would look like in the second half?

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

Yeah. Let me answer that kind of in a two part way. The increase is going well in the marketplace, but you got to realize that about 80 of the business is really tied to contracts. And some of those contracts reset based off the timing of when the the TAM bidding chip move, which is what the majority of those contract contractual customers are on. So that's why we expect the benefit to mostly occur in in in the second half of the year, just depending on the timing of when the TAM and the chip index move.

[Jerry Cheatham, Interim CFO at Sonoco Products Company]

It has not reflected the open market increase as we speak today, but we do expect that to happen in the coming month or two. In terms of the impact, as we previously stated, tough to say how much the tan bending chip index will move, but what I would say is that with each $10 move in that index typically represents about an incremental $6,000,000,000 a year on an annualized basis of revenue.

[Gabe Hajde, Analyst at Wells Fargo]

Perfect. Super helpful. Thank you.

[Operator]

And that concludes our question and answer session. I will now turn the call back over to Roger Schrum for closing remarks.

[Roger Schrum, Interim Head of Investor Relations at Sonoco Products Company]

Certainly appreciate everybody participating in today's call. I know you've had a very busy day. If you've got follow-up questions, please don't hesitate to give me a call at your convenience. You can disconnect now.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Roger Schrum, Interim Head of Investor Relations
• Howard Coker, President and CEO
• Jerry Cheatham, Interim CFO
• Rodger Fuller, Chief Operating Officer

Analysts

• George Staphos, Managing Director at Bank of America Merrill Lynch
• Michael Roxland, MD - Equity Research at Truist Securities
• Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners
• Matthew Roberts, Equity Research Analyst at Raymond James Financial
• Gabe Hajde, Analyst at Wells Fargo