HARTSVILLE — Sonoco produced record sales and its second-best base earnings performance ever in 2008, despite the global economic crisis, the company’s chairman, president and chief executive officer told shareholders at their annual meeting Wednesday.
“I’m pleased to report that the state of our company is strong and our financial health continued to improve in 2008,” Harris E. DeLoach Jr. said. “Our solid balance sheet and robust cash flow from operations provides us the flexibility to be able to fund our growth plans and return value to shareholders.”
Sonoco’s Board of Directors on Wednesday declared a regular quarterly dividend of 27 cents per common share. This 336th consecutive quarterly dividend will be payable June 10 to shareholders of record as of May 15.
Because of economic conditions, the board decided to keep the quarterly dividend payout at the same level that it was in 2008, DeLoach said, but the board remains committed to its long-term policy of increasing dividends when business conditions allow.
For the year 2008, cash generated from operations totaled $379 million, and while that was down 15 percent from the previous year largely because of changes in working capital, cash flow in 2008 ranked as the third highest in company history, DeLoach said.
By year’s end, Sonoco’s total debt had declined to $690 million versus $850 million at the end of 2007, he said.
“Our strategy to grow our businesses serving consumer markets paid strong dividends during 2008 as our consumer packaging segment achieved record sales and operating income with sales increasing 9 percent and operating income growing 25 percent,” he said. “New product development and market extensions are providing a strong catalyst for growth.”
In 2008, the company generated about $136 million in new consumer and industrial product sales, DeLoach said, adding the company expects to see new product sales average between $100 million to $150 million annually.
He also said the company anticipates targeted opportunities for growth in its businesses through strategic acquisitions in 2009.
The meeting date, April 15, was significant because it was on that date 11 decades ago that Sonoco’s founder and first president, Maj. James Lide Coker and Walter E. Smith, a New Bedford, Mass., textile cone manufacturing expert, signed an agreement to form Southern Novelty Co., with an initial capitalization of $6,000.
“Sonoco has faced many challenges throughout its history and we have always responded decisively in ways that have helped us emerge a stronger, more competitive and successful company,” DeLoach said.
“Our strategy to grow our businesses serving consumer markets paid strong dividends during 2008,” DeLoach said.
“Our consumer growth strategy is working the way we thought it would and we are taking the necessary steps to better position our industrial products businesses for a rebound when the economy improves,” he said.
The company found itself forced to make some difficult decisions in the face of the economic challenges it faced in 2008, DeLoach said.
“The credit crisis, market volatility and hyper inflation impacted consumers, our customers and suppliers in 2008,” he said. “Unfortunately, some of our customers and suppliers have been unable to survive and filed for bankruptcy.”
DeLoach said the downturn in the economy started for Sonoco in the second half of 2007 and the company doesn’t expect to see significant improvement in the global economy until the end of 2009.
Cost-cutting measures aimed at positioning the company to better respond to market conditions included closing about 15 manufacturing plants, reducing hours for some employees and eliminating more than 700 positions globally, he said.
“Also, in 2009, we are deferring all wage increases for salaried and hourly employees and temporarily suspending the company’s matching contributions for those employees participating in the company’s 401(K) plan,” DeLoach said. “These actions, while very difficult, are necessary so that we can remain competitive in a dramatically changing marketplace.
“We continue to work to maximize cash flow and improve margins by enhancing productivity, reducing costs, improving working capital and effectively managing the relationship between our selling prices and material costs,” he said.
Sonoco’s consumer packaging businesses, including rigid paper and plastic containers, flexible packaging and metal and flexible membrane ends and closures contributed about $1.6 billion in sales in 2008 or about 42 percent of the company’s total sales, DeLoach said.
The company’s packaging services business, which DeLoach said the company is growing internationally, contributed about $520 million in sales, or about 12 percent of total sales, he said.
Since 2000, the company has returned more than $1 billion in cash to shareholders in the form of dividends and share repurchases, he said.
“Few companies can match the 84 consecutive years that Sonoco has paid dividends to its shareholders,” he said.
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