Sonoco (SON) Q4 2025 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Tuesday, Feb. 17, 2026 at 8 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Howard Coker
• Chief Financial Officer — Paul Joachimczyk
• Head of Investor Relations — Roger P. Schrum
• President, Industrial Paper Packaging — James Harold
• President, Consumer Packaging EMEA/APAC — Sean Karnes
• President, Consumer Packaging Americas — Ernest Haynes

Need a quote from a Motley Fool analyst? Email pr@fool.com

TAKEAWAYS

• Net Sales (Q4) -- $1.8 billion, up 30%, driven by the Metal Packaging EMEA acquisition, pricing, and favorable FX, partially offset by a volume/mix decline of about 2%.
• Adjusted EBITDA (Q4) -- $272 million, a 10% increase, with margin expansion of 51 basis points reflecting operational discipline despite lower volumes.
• Adjusted EPS (Q4) -- $1.05, a 5% year-over-year increase, primarily attributed to favorable price-cost in Consumer Packaging.
• Operating Cash Flow (Q4) -- $413 million, reflecting strong seasonal cash generation in the metal can businesses and including a onetime divestiture-related tax payment.
• Net Debt Reduction -- Net debt reduced by approximately 40% year over year, with net leverage ratio decreased from 6.4x to approximately 3x following receipt of $656 million in cash from the ThermoSafe divestiture.
• Revenue (Full Year) -- $7.5 billion, up 42%, primarily due to the Metal Packaging EMEA acquisition, FX, and pricing, partially offset by volume/mix softness.
• Adjusted EBITDA (Full Year) -- $1.3 billion, increasing by 28%, with margin up 120 basis points to 16.9%, led by acquisition impact and price-cost improvements.
• Adjusted EPS (Full Year) -- $5.71, up 17%, with key drivers including the Metal Packaging EMEA acquisition, price-cost, productivity, and FX, partially offset by divested business drag and higher interest expense.
• Normalized Operating Cash Flow (Full Year) -- $906 million, excluding one-time items, highlighting strong cash-generation capacity.
• 2026 Guidance -- Targeting sales of $7.25 billion to $7.75 billion, adjusted EBITDA of $1.25 billion to $1.35 billion, adjusted EPS of $5.80 to $6.20, and operating cash flow of $700 million to $800 million, including approximately $100 million in divestiture-related tax.
• Future Cost Savings -- Management targets $150 million to $200 million cost savings and roughly 200 basis points adjusted EBITDA margin improvement by 2028 via simplification and integration of the Consumer Packaging segment.
• Portfolio Transformation -- The transformation is complete with focus now on execution, structural cost savings, and value-creation across two core global packaging franchises.
• Geographic Sales Mix -- EMEA represents approximately 40% of sales post-acquisition, while more than half of revenue is still generated in the United States.
• Segment Highlights -- Metal Packaging U.S. achieved record unit volume growth (U.S. food can units up 10% in Q4 and 9% for the year), while Metal Packaging EMEA food can units decreased about 3% due to customer inventory adjustments.
• Strategic Initiatives -- Sonoco Products Company expects continued organic sales growth by emphasizing customer partnerships, mix improvement, value-based pricing, and operational excellence over volume chasing.

SUMMARY

Sonoco Products Company (NYSE:SON) significantly accelerated deleveraging by reducing net leverage to approximately 3x after executing its portfolio transformation and major business divestiture. The company achieved margin expansion in both quarters and the full year, with strong operational discipline driving improvements across consumer and industrial segments. Management stated, "We are targeting an additional $150,000,000 to $200,000,000 of cost savings which translates into roughly 200 basis points adjusted EBITDA margin improvement by the end of 2028." Recent organizational consolidation and geographic integration, especially in the Consumer segment, are expected to enhance go-to-market strategies and yield additional synergies. The company projects double-digit EPS growth for 2026, supported by improved volume/mix, pricing, productivity, and lower interest expense, partially tempered by a higher effective tax rate.

• Leadership articulated precise cost-savings targets and an explicit net leverage goal of below 2.5x.
• Business unit presidents provided specific examples of innovation—such as new product launches in APAC and process improvements in Europe—driving growth and margin expansion.
• Integration of Consumer Packaging business lines into single geographic structures is expected to streamline operations and improve capital allocation.
• Management highlighted a disciplined approach to capital returns and sustainability, referencing the operational commissioning of a virtual power purchase agreement to reduce emissions by 25% before 2030.

INDUSTRY GLOSSARY

• URB (Uncoated Recycled Board): Recycled paperboard used in packaging and converted products, forming a significant revenue stream for Sonoco Products Company.
• EPR (Extended Producer Responsibility): A regulatory framework requiring producers to bear the costs of recycling and disposal of packaging, directly affecting packaging design and customer requirements in EMEA/APAC.
• OEE (Overall Equipment Effectiveness): A manufacturing metric used to assess the efficiency and productivity of equipment across Sonoco Products Company’s production facilities.

Full Conference Call Transcript

Roger P. Schrum: Let me make sure we are there. Again, good morning everyone and thanks for joining us at today's Sonoco Products Company’s 2026 Investor Day. I am Roger P. Schrum. I am Head of Investor Relations. The company. It has been my honor to work for Sonoco Products Company for 20 years, although I did have a couple of years off for good behavior. This morning, Howard Coker, our President and CEO, and Paul Joachimczyk, our Chief Financial Officer, will start with a brief review of our fourth quarter and full year results. Sonoco Products Company issued a news release and posted a presentation on our website at sonoco.com yesterday evening providing detailed information on our financial results.

We also will post today's presentation on our website after we conclude prepared remarks. Once we finish with our review of 2025 results, Howard will come back on the stage and do our strategic review and follow that with our presentations from our three business unit presidents on our industrial and consumer businesses. We are then going to take a short break, and Paul will come back up and provide further financial review and present our targets for 2026 through 2028. Howard will close our formal presentation, and then we will take your questions. For those of you that are listening virtually, we do have an option for sending us questions as well.

After we conclude Q&A, we will be hosting a short modeling across the hall over here, Hubbard Room 1, to answer any of your detailed questions you may have. With that in mind, we hope that you will limit your financial modeling questions during the Q&A. We will take care of them over there. But before we get started, let me remind you that during today's presentation, we will discuss a number of forward-looking statements based on current expectations, estimates, and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. The company undertakes no obligation to revise any forward-looking statements.

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 operation. Further information about the company's use of non-GAAP financial measures, including definitions and reconciliations to GAAP measures, is available in the Investor Relations section of our website. Now with that, let me turn it over to Howard.

Howard Coker: Okay. Well, morning.

Howard Coker: And thank you, Roger. It is really great to see so many of you who I have come to know over so many years, and I certainly look forward to getting to know those that I do not know through the course of this conversation and others. Before Paul and I review fourth quarter and full year 2025 financial results and present our 2026 guidance, let me open with a few comments about what you will hear today. First, our portfolio transformation is complete.

In fact, what differentiates us from so many in our industry today is that the most difficult part of our transformation journey is behind us, and we are poised to create greater value for our customers and shareholders going forward. Second, there was purpose behind our portfolio changes, and we have built global market-leading franchises in both metal and paper consumer and industrial packaging. While our portfolio is set, we have plans to further improve profitability and cash flow generation. Finally, we believe we are in the best position to deliver consistent earning growth going forward. Our Sonoco Products Company team executed well in the fourth quarter despite a difficult macroeconomic environment.

Delivering strong operating results, we reduced net debt by approximately 40% year over year and lowered the company's net leverage ratio to approximately three times. And we concluded our portfolio transformation following the successful divestiture of ThermoSafe and further simplified our consumer packaging segment by consolidating our global metal packaging and rigid paper containers business into a single integrated structure driven geographically, which we believe enhances our go-to-market strategy and will drive additional synergies across global channels. I will let Paul go through the numbers in detail. But we improved revenue, operating profit, adjusted EBITDA, and adjusted EPS above consensus and our own expectations. We achieved this improvement despite the divestiture of ThermoSafe earlier in the quarter.

Providing some context for the quarter, October was a strong month for all of our businesses, while November was a bit weaker than we had expected. December is always a difficult month to predict, due to our customers' inventory management practices and consumer demand at year end. But overall, the month was better than we had planned. Productivity, favorable price-cost environment, and structural cost savings drove the quarter improvement, meaning we were effective in controlling the controllables. Demand was about what we expected with volume mix overall down just under 2%. Metal Packaging U.S. had a record quarter and a record year.

U.S. food can units were up 10% in the quarter and 9% for the full year, exceeding reported industry averages. Results from Metal Packaging EMEA exceeded our expectations although food can units were down about 3% as some of our customers managed inventories below what they had done historically. Rigid paper containers were down in North America on soft construction, stacked chip, and other food categories while unit volumes in Europe were flat. Industrial had another solid quarter on top of a record year and margins expanded for the ninth consecutive quarter.

I mentioned, we completed the sale of ThermoSafe, our temperature assured packaging business, in early November and received $656,000,000 in cash which equates to a valuation of approximately 13 times. We used net proceeds and free cash flow in the fourth quarter to reduce debt by $966,000,000. Year over year, we reduced net debt by approximately $2,700,000,000 if you include the proceeds from our TFP divestiture and free cash flow. This debt reduction effort lowered our net leverage ratio from 6.4 times starting the year to approximately three times at year end. As you recall, we had targeted to reduce our leverage to 3.3 times to three times by 2026. So we are tracking ahead of our expectations.

Net-net, it was a good end to the year, an excellent setup for 2026. Now I am going to turn the podium over to Paul to go over the numbers in more detail and review our 2026 guidance.

Howard Coker: Paul?

Paul Joachimczyk: Thank you, Howard, and thanks, everybody, for being here today.

Roger P. Schrum: I will walk through our fourth quarter and full year 2025 financial performance.

Sean Karnes: All of the results are presented on an adjusted basis with growth on a year-over-year basis unless otherwise noted. The GAAP to non-GAAP EPS reconciliation is included in the appendix and in our press release. As Howard noted, 2025 was a pivotal year for Sonoco Products Company. With our portfolio transformation complete, we now have global market-leading positions across two focused segments, positioning the company for more consistent execution and sustainable long-term performance. Turning to the fourth quarter. Results reflected strong execution across the businesses despite a mixed demand environment. From a revenue perspective, fourth quarter net sales for continued operations increased 30% to $1,800,000,000 driven by the Metal Packaging EMEA acquisition, strong pricing, and favorable FX.

This was partially offset by volume and mix, which declined approximately 2%. Adjusted EBITDA increased 10% to $272,000,000 with margin expansion of 51 basis points, reflecting strong operational discipline despite softer volumes. Adjusted EPS was $1.05, up 5% year over year, driven primarily by favorable price-cost largely in our Consumer segment. Continued productivity gains were evenly split between Consumer and Industrial. FX tailwinds and lower SG&A also contributed to that. These benefits were partially offset by softer volume and mix, slightly higher interest expense, and lost net earnings from our divestitures. Operating cash flow was $413,000,000 for the quarter.

While that includes a onetime tax payment from divestitures, it also demonstrates the strong seasonal cash generation of our metal can businesses. Turning to the full year results. Full year net sales for continued operations increased 42% to $7,500,000,000, driven by the Metal Packaging EMEA acquisition, favorable FX, and pricing, which was partially offset by volume and mix. Adjusted EBITDA of $1,300,000,000 increased 28% with margin expanding 120 basis points to 16.9%. This improvement was driven by the Metal Packaging EMEA acquisition, strong price-cost execution, continued productivity, lower fixed costs, and favorable FX, partially offset by volume softness primarily in our converting and consumer business. We also had lost earnings from our divested businesses within the year.

Adjusted EPS was $5.71, representing a 17% increase year over year. This improvement was driven by Metal Packaging EMEA acquisition, favorable price-cost, productivity gains, and FX, partially offset by divested businesses, unfavorable volume, a higher tax rate, and interest expense. Operating cash flow was $690,000,000 including $216,000,000 of onetime items, primarily $196,000,000 in taxes paid on capital gains from our divestiture. On a normalized basis, full year operating cash was $906,000,000, underscoring the strong cash-generating capability of the portfolio. Looking ahead to 2026, we expect continued earnings growth supported by improving volume and mix, disciplined pricing, strong productivity, and lower interest expense.

We are projecting sales of $7,250,000,000 to $7,750,000,000, adjusted EBITDA of $1,250,000,000 to $1,350,000,000, and adjusted EPS of $5.80 to $6.20, operating cash flows of $700,000,000 to $800,000,000. This includes approximately $100,000,000 of taxes related to our capital gains from the businesses divested in 2025. Before reviewing the 2025 to 2026 bridges, let me clarify our definition of pro forma. It reflects our 2025 reported results adjusted to exclude divested businesses and represents the comparable asset base for growth in 2026. Relative to the 2025 pro forma sales of $7,300,000,000, we expect low- to mid-single digit sales growth driven by favorable volume mix, pricing, and FX.

We are also projecting EPS growth of approximately 20% versus our 2025 pro forma EPS of $4.97 driven by our operational improvements, favorable volume mix, lower year-over-year interest expense, and FX. This growth will be partially offset by a 150 to 200 basis point increase in our effective tax rate. In summary, 2025 was a year of disciplined execution and strategic processes. We entered 2026 with a stronger portfolio, improved margins, and enhanced cash flow generation, positioning Sonoco Products Company well for durable earnings growth. This concludes our recap of 2025 and our outlook for 2026. At this time, we invite you to watch a short video transitioning into our Investor Day. Where we will focus on 2026 and beyond.

If you do not know where you are going,

Unknown: any road will take you there. When it comes to realizing a vision and reaching a specific

Howard Coker: May seem disconnected. Are, in fact, deliberate and have been designed to help determine the future. At Sonoco Products Company, we know where we are going and the road that will take us there. We have been thoughtfully transforming our business and firmly believe our future is in focus. A future defined by a focus on simplifying our structure, optimizing our portfolio, maximizing our assets, and concentrating our customer base. We are leveraging our manufacturing and technology legacy in fiber-based packaging, and we have transitioned into strategically advantaged metal packaging. Combined, we are uniquely positioned to drive increased productivity, and operational efficiency, expanded margins, a greater share of customer, and greater returns on disciplined capital allocation.

Fine-tuning our focus has a multiplier effect across our business. A greater focus on fewer, larger customers in more disciplined markets creates the opportunity for higher asset utilization rates and increased economies of scale. This level of customer concentration also builds the foundation for long-term value-added relationships based on elevated quality, service, and customer intimacy, rather than short-term transactions. And a more focused solutions portfolio creates an environment where we can be product agnostic, making us even more customer centric. And our future at Sonoco Products Company is clearly in focus. Sonoco Products Company, a future in focus. If you do not know where you are going,

Roger P. Schrum: Alright. Again, thank you for joining us today. I really, really am looking forward to the next portion of our presentation, which, as you just saw, is all about our focus towards the future. Sonoco Products Company has transformed over the last several years to create a more focused, simplified business. This focus allows us to move faster, allocate capital with greater discipline, and hold ourselves accountable for returns. After reviewing our strong finish to 2025, and our outlook for 2026, we now want to take a step back to talk about our transformed portfolio, our focused strategy, and the experienced leadership team that we have in place which you will hear from today.

Importantly, what is different today is not just where we are, but how decisively we will run the business going forward. Focusing management attention, capital, and resources on fewer, but scaled businesses where we have a strong competitive advantage. I have been at Sonoco Products Company for over four decades, and have experienced a wide range of economic cycles, changing competitive dynamics, and shifting consumer trends. But I have never been more excited about the opportunities we have for the next phase of our growth. What gives me confidence today is not simple optimism, but clarity. Clarity around our portfolio, our strategy, and our ability to execute through cycles.

Our scaled, well-capitalized asset base underpins our belief that Sonoco Products Company is the investment of choice in packaging. We are a global leader in high value paper and metal cans as well as uncoated recycled paperboard and associated converted products. Significant prior investments in our operations, systems, and people operating model enables accelerated margin expansion and consistent earnings growth. We focus on essential center-of-the-store food categories, and partner with large growing brands and private label customers. Through strong relationships, product quality, and service excellence, core to Sonoco Products Company’s culture, we continue to gain share.

With more than 125 years of value creation, strong cash flow generation, and disciplined capital allocation, we are investing for growth, strengthening our balance sheet, and returning capital to shareholders, including 100 consecutive years of sector-leading dividends. Today, Sonoco Products Company has grown to become a $7,800,000,000 global packaging leader with 22,000 team members working in 265 facilities across 37 countries, serving some of the best known brands around the world. Guided by our purpose of better packaging, better life, we strive to foster a culture of innovation, collaboration, and excellence to provide solutions that better serve our customers.

Over the past several years, we have balanced our geographic sales mix, growing in the EMEA region, which now accounts for approximately 40% of sales, while still maintaining more than half of our revenue right here in the United States. We believe there are significant economies of scale in our global platform, particularly in Consumer Packaging, that are a significant competitive advantage to serving large, global customers with complex needs. In 2020, only 42% of our sales came from Consumer Packaging, while 44% was Industrial, and the remainder of sales came from a variety of diversified businesses.

Since then, we have purposefully shifted our mix to more consumer-focused packaging where today, more than two-thirds of sales are generated by our leadership positions in paper and metal. The remaining one-third of our sales come from our leading position in uncoated recycled paperboard and converted

Howard Coker: products.

Roger P. Schrum: Furthermore, in our URB business, approximately 70% of our paper and converted product sales are, in fact, in consumer staple and durable end markets. Both our Consumer and Industrial businesses are strategically aligned around technology, innovation, of course, customers, service, and sustainability. During our transformation, we followed a set of principles that helped us determine what markets we would participate in and how we expect to win. We focused on value-added packaging, where we can drive a competitive advantage, advanced material science and technology expertise, where our products possess high functionality, and where we can best leverage continuous process manufacturing

Howard Coker: to drive efficiency

Roger P. Schrum: and scale. Our operating model leverages our quality, and partnership approach to help our customers respond to a dynamic marketplace where customer preferences and buying habits, along with regulations, are indeed constantly changing. Today, we have developed a focused portfolio serving a mix of large growing global customers who value the competitive advantages that we provide. I have been asked many times why we went through this transformation. The objective was straightforward: to improve the quality, predictability, and durability of our earnings and cash flow over the long term. Early in our transformation, we increased investment in technology and innovation in our core operations to drive growth and efficiency.

We then reshaped our portfolio by exiting noncore businesses and we recycled that capital to acquire and create scale in our market-leading segments. By the end of our journey, we reduced the number of our highly diversified businesses from 20 to two core segments. And we simplified our operating systems and concentrated our resources where we could best drive profitable growth. Today, our foundation is set and the transformation of our portfolio is complete. Since we began this journey in 2020, we have grown revenue by 50%, we have increased adjusted EBITDA by 67%, and expanded EBITDA margin by approximately two basis points.

Adjusted earnings grew 50% during this period, and we generated over $3,000,000,000 of operating cash flow, and share repurchases returned $1,200,000,000 to shareholders through dividends. We believe there is much more we can accomplish by focusing on our strategic priorities: sustainable growth, margin improvement, and efficient capital allocation. During their upcoming presentations, each of the business unit presidents will detail specific actions we will be taking to drive these strategic priorities. But let me provide an overview of each of these initiatives. First is sustainable growth.

We have a targeted strategy to take advantage of long-term trends and believe we can grow organic sales by focusing on customer partnerships to gain share, not by chasing volume, but by improving mix, strengthening customer service and relationships, and achieving fair value-based pricing. We have a track record of improving profitability and margin by deploying our operating model. Our model is centered around structural transformation, operational improvement, including commercial, supply chain, and operational excellence, strategic capital allocation, and maintain, sustain

Howard Coker: Our

Roger P. Schrum: sustainability goals. We are excited about the early results we are experiencing in deploying this model, across a more streamlined and simplified organization. We have an opportunity to further improve our business through structural transformation. As an example, we recently announced we are simplifying our Consumer segment by consolidating our global metal and rigid paper container businesses into a single integrated structure divided geographically. This action, which you will hear much more from our business unit presidents, will enhance our consumer go-to-market strategy

Howard Coker: footprint.

Roger P. Schrum: across our global

Howard Coker: and drive

Roger P. Schrum: additional cost savings, respond to changes in the market, focus our technology and service model. We are targeting an additional $150,000,000 to $200,000,000 of cost savings which translates into roughly 200 basis points adjusted EBITDA margin improvement by the end of 2028. And importantly, this improvement is driven by actions within our control, not portfolio exits or large acquisitions. Paul will provide more color on the specific initiatives when he reviews our KPIs and financial targets later in the presentation. But this is the path the team, our team, is working on to control the controllables and deliver on our long-term financial goals. We, Sonoco Products Company, has consistently generated strong operating cash flow.

And we are expecting that trend will continue. Efficiently allocating capital remains a key element of our operating model. Our top three priorities going forward will be to invest in high-return growth and margin expansion projects, maintain a strong balance sheet by focusing on further debt reduction, and continuing to return capital to shareholders. Our focus on sustainability excellence remains an important initiative for many of our customers and shareholders. Earlier this month, we announced that a virtual power purchase power agreement developed between Sonoco Products Company and ENGIE North America consisting of 60 wind turbines in Crockett County, Texas has become operational.

This project is another step in Sonoco Products Company’s integrated sustainability efforts to reduce our global carbon emissions by 25% before 2030 by improving packaging design, installing energy-efficient equipment, and renewable energy sources such as solar power installations. Me close by focusing on high level strategic targets for 2026 through 2028. Paul will build on these with a more detailed framework in his section. To achieve our strategic priorities of sustainable growth, margin expansion, and efficient capital allocation, we have set specific targets, developed detailed plans, and will measure our progress and we will hold ourselves accountable. We expect our future organic, and finally, we expect to achieve a cumulative

Howard Coker: finally,

Roger P. Schrum: improvement, which will result in between $150,000,000 and $200,000,000 in savings by 2028. We also target a net leverage ratio of below 2.5x. I am proud to say that Sonoco Products Company has one of the packaging industry’s best and most experienced leadership teams to drive our focused mission going forward. Simplifying our structure also means we now have a simplified business and functional leadership team. I would like to take a minute and provide you some background on our three business unit presidents. All three of which have long tenures with Sonoco Products Company as well as deep experiences in the businesses they run. Let me start with James Harold.

James is President of our Industrial Paper Packaging segment, which successfully completed a record year in 2025. James has 41 years with the company, leading the Industrial segment since 2020 and is considered one of the leading experts in the global URB industry. Sean Karnes is President of Consumer Packaging EMEA/APAC. He has been with Sonoco Products Company for 17 years, and previously was President of our global rigid paper container operations. Before coming to Sonoco Products Company, Sean was a business unit leader for Crown’s EMEA can business which, of course, we now own. Sean is an engineer by training, but he has strong commercial skills and led the team that significantly grew our paper can business internationally.

Ernest Haynes is President of Consumer Packaging Americas. Ernest has 28 years of experience with Sonoco Products Company, and was previously President of Metal Packaging U.S., which is coming off a record year of performance. Prior to that role, Ernest was General Manager of our rigid paper container operations in North America. Also an engineer by training,

Howard Coker: Ernest started

Roger P. Schrum: as a shift supervisor in our rigid paper container business, later serving as Head of Operations for our North American Industrial Paper Packaging business before taking the leadership role in Consumer. Ernest also has strong commercial skills and led his team to more than double EBITDA for our U.S. Metal Packaging business since it was acquired in early 2022. I would also like to recognize our functional leadership team, who has manufacturing and operational leadership and experience in addition to being an expert in their fields. Andrea White is our Chief Human Resource Officer and has 20 years with Sonoco Products Company.

Andrea is also an engineer by training, and started out her career as a manufacturing excellence expert and has used her process improvement skills to simplify our global HR function. John Florence, our General Counsel, has more than a decade with the company, although he did outside legal work for Sonoco Products Company for nearly 10 years. John also recently was a General Manager of our U.S. and Canada Industrial Paper and Packaging operations working very closely with James. Finally, as you know, Paul Joachimczyk is our Chief Financial Officer. Paul joined the company in July with a proven track record of successfully leading financial functions for large multinational publicly traded companies in the building materials and manufacturing industry.

Paul is comfortable in both finance and manufacturing, and is taking on the task of helping drive our profitability performance plan along with developing and tracking the company's key performance indicators. Before I turn the podium over to James, I want to leave you with one final thought. Today, Sonoco Products Company is a simpler company, running fewer but market-leading businesses, with clearer priorities, consistent earnings growth, stronger cash flow generation, and a management team focused on execution, not reinventing the strategy. So with that, let me turn it over to James. James?

James Harold: Thank you, Howard, and good morning, everyone. I am incredibly proud

Howard Coker: to introduce you to our industrial packaging group. As you heard from Howard, I have spent more than 40 years at Sonoco Products Company, in the last 30 with the Industrial team. I absolutely love being the industrial guy. Very proud of this team and what they have accomplished. This is Sonoco Products Company’s oldest business, spanning our full 125 plus years. Generation after generation of team leaders and team members have found ways to keep reinventing this business and this team is no different. I know I am biased, but I wake up every day knowing I am competitively bringing the best talent to task to continue to create value for our customers and our shareholders.

Our best is still ahead of us. There are a number of key themes I would like for you to consider as I take you through this business. We are the URB global leader focused on vertically integrated, low system producing paper, and converted paper products. We have a proven track record of EBITDA growth, cash generation, and high returns on investment.

Roger P. Schrum: We

James Harold: With our focus on customers and solutions through R&D and technology, we expect to achieve better than industry growth rates. As you have heard from Howard, we have been focused on simplifying our portfolio and structure. And this business has gone through those same filters. Five years ago, this business operated as seven separate P&Ls, and leadership teams. Today, it operates as one. From 2021 through 2024, we consolidated all the converting platforms, tubes and cores, post, partitions and cones together into paper converting. Early last year, we brought together paper mills and paper converting groups as one team.

We, this has removed the silos and focused our single leadership team on value creation along the full supply chain, and significantly reduced our critical decision-making timelines. Complementing our paper business, we have a wood, metal, and poly fiber business driven by the growing power demand in North America. Today, we are a $2,400,000,000 business operating across 25 countries with around 9,000 focused team members. 73% of our sales are from North America, and 16% from EMEA. Now we do call this the Industrial business. But as you can see from the graphic, over 65% of our products support customers in consumer-facing end markets.

As mentioned, our paper business is vertically integrated, from fiber collection through paper mills to paper converting, producing over 2,000,000 tons per year which are split 52% internal and 48% external. Our internal versus external sales balance is the result of positioning to deliver the highest value from the products that we make based on the end markets we choose to serve. We target trade URB markets that are less correlated with our converting markets and allow us to use product development and tech service capabilities to add value to both our customers and our business. In some end markets like tissue and towel, the majority of value add in papermaking is in the papermaking and less in converting.

In other markets like tubes and cores and paper cans, we deliver critical value add across both papermaking and converting. As a result, we have reoriented our business toward more sustainable consumer end markets. The mix of internal versus external tons has managed to reflect where we believe we can deliver the most value. It is not directed or dictated by the need to cover tons through internal consumption. More than half of the URB that we produce is utilized by our converted paper products business that produces tubes and cores, protective posts, partitions, cones, and paper for the paper can side of our Consumer business which you will hear more about from Sean and Ernest.

Our converted paper business is focused on partnering with customers that have leadership positions in markets they serve and where we have the right to win, with approximately two-thirds of our converted paper product sales into consumer staple and durable end markets. The URB that we sell externally is focused on the following markets: tissue and towel, food packaging, floor paper, and core board. These markets provide long-term stable growth and are aligned with our differentiated capabilities. We are biased to markets that are less cyclical, and consumer facing. Based on estimates from RISI, URB markets are expected to grow annually at just over 1% through 2028.

RISI is also projecting that mill operating rates, which averaged around 90% in 2025, should continue to improve to the mid-90s as URB production levels increase through the expected growth. The industry has adjusted capacity to better align with post-COVID demand levels.

Roger P. Schrum: We

James Harold: The Industrial team has driven solid EBITDA results through strong customer value focus, acquisitions like Skjern and RTS, footprint leverage, and a robust internal productivity process. Capital is driven by a disciplined allocation process focused on keeping our system operating at high yields and delivering automation solutions in our converting operations. Our operation model is strong and it is resilient. The bottom line of this slide is you can depend on us to continue to deliver strong EBITDA and margin results. We expect the macroeconomic backdrop to continue to present both challenges and opportunities.

Roger P. Schrum: As you will see later,

James Harold: in the presentation, we believe the preference for sustainable recycled packaging, power grid reinvestment, power growth from data centers and AI, will provide us continued opportunities to grow. Geopolitical uncertainties continue to drive volatility. And tariffs will put upward pressure on equipment-related expenditures. We are also seeing efforts to lightweight packaging and this could adversely affect some markets. Investments that allow us to drive greater efficiency and better service customers will continue to be a priority in how we allocate capital. Forward margin improvement will be driven by getting our European and APAC regions to higher return levels along with opportunities to further simplify and streamline our processes.

We continuously pursue new opportunities for growth through innovation, entering new markets that reward us for delivering the highest quality levels and service to our customers. Our entry into the high-pressure laminates market is a great example of this. Recognizing an unmet need in the market, we developed a URB replacement for saturated kraft that supports high-pressure laminate products in countertops, flooring, composite boards, and decorative panels. We are in final testing and expect to have our product in the market early this year. We believe this market opportunity is in the range of 20,000 to 30,000 tons per year.

This is another great example of how our chemists, our process engineers, our paper engineers can develop new value-added products in our URB converted paper space to meet new and evolving customer and consumer preferences. An absolutely exciting area for us and the strongest organic growth engine we have in the Industrial Group is our reels business, focused on the wire and cable markets in North America. We have seen a doubling of revenue over the last five years in this business driven by North American power demand, greening of the grid, infrastructure rebuild, and the AI data center boom.

We continue to invest capital in this business and to expand capacity to increase automation to ensure we stay ahead of demand. And yes, that reel is real. It is truly that big. We have now moved the industrial and specialty packaging business into our Industrial Group as there are product overlaps and internal supply chains that allow our paper converting, reels, and INS business to leverage from each other. We will continue to build on these internal supply chain elements, and cross-selling opportunities. INS also has a strong foodservice product portfolio that we will continue to drive for growth.

In summary, I am truly excited about this team and the opportunity to continue to deliver on the business we have built. We are committed to continued top line and EBITDA growth through strong value-based relationships with our customers. 1% to 2% growth in our URB markets, and between 5% to 8% in our reels business. We will remain focused on being the best operators in the URB space, driving internal productivity, and managing our footprint versus market needs. We will also continue a strong focus on improving returns in both our European and APAC regions, along with continued investment in our reels business to drive growth.

In closing, you can count on us to be disciplined in how we allocate capital, as we focus on creating customer value with great products, maintaining a strong mill system, and using automation and data to support optimization and decision-making. I want to thank you for your time this morning. I hope I have created for you that same excitement and confidence that I feel every day about this business. We have a great team capable of adjusting to whatever challenges we face and will continue to deliver and win for both our customers and our shareholders. I am honored to represent this team and this business for you here today. And I do love being the industrial guy.

I will now turn the podium over to Sean Karnes.

Sean Karnes: Good morning, everybody, and thank you, James. So I am actually super excited to be here today to share with you my passion for this business. As over the past years, my team and I have helped reshape how paper packaging is perceived globally by inventing, commercializing, and scaling all paper packaging solutions that resonate with both brand owners and consumers. Late last year, Howard asked me to lead our newly combined Consumer Packaging business in EMEA and APAC. And after my early career as a merchant marine, I spent 13 years at Crown in the rivet metals business that we acquired.

Today, I will walk you through how we are going to integrate these two businesses and to continue to grow this region. We are the only player in EMEA and APAC that produces both paper and metal packaging, the two most sustainable and circular packaging substrates. Our customers require packaging solutions to meet increasing regulations and unique sustainability demands and, of course, their performance requirements. The streamlined organization improves flexibility, lowers cost to serve, and strengthens customer partnership. Our Consumer EMEA/APAC business is around about $2,900,000,000 in revenue, with about 8,000 employees across 65 facilities. That scale creates meaningful advantages from procurement leverage, operational agility, supply security, and of course, capital efficiency.

I am proud to say we serve many of Europe’s most iconic brands, across food, household, and health and beauty, with an innovative and versatile portfolio. In fact, I challenge any of you to look into any European household and not see many of our products. Rigid paper continues to grow strongly, now enhanced by our ability to deploy assets across both paper and metal networks, and our market leadership in innovation and service helps us position that growth in both metal and paper with new and existing customers. Importantly, we can leverage our combined resources to deliver the highest service and value to our customers.

What is unique about this region is when I have the opportunity to sit down with customers and brand owners, sustainability is at the forefront of that conversation. And the good news is we have the right sustainable, fit-for-purpose solutions to meet our consumers' needs. No one else delivers packaging solutions across the region in metal and paper. And that makes us unique in this market. We actually have over 200 years of experience in can design and innovation, and our customers come to us to meet their design objectives, which actually significantly vary by country. Trust is actually essential in this business.

And our technical and service support teams enhance quality, improve consistency for our customers to reduce their waste and contamination risks. And as I said before, our manufacturing footprint and scale allows us to respond to variations in design all while constantly delivering on productivity. Our footprint allows us to optimize across our network to drive better value to our customers. And finally, our dedicated R&D and regulatory teams are a clear differentiator in the business. Our footprint is a key strategic advantage. Our can network needs to be located close to our customers' filling operations.

For example, if you think about vegetables, from the time to pick into packaging, it is incredibly important to lock in that very freshness that consumers demand. However, of course, we centralize operations where it makes sense to exploit our shared economies of scale. A great example of this is our new can bottom for Pringles. We will produce all the world's demand out of two locations, one in Europe and one in Asia. Importantly, we are not simply merging these two businesses, as since November, we have been undertaking a real deep dive structural review from the very top of this combined organization, directly down to the shop floor, to reduce the organization's layers while establishing best practices.

I am proud to say we have already implemented changes and we expect further actions as we complete this review. Finally, it would be amiss of me if I did not mention APAC. APAC is a meaningful growth factor for us, as new all-paper packaging solutions are being launched within this region. In fact, as we sit here today, in the coming weeks, we will launch yet another new innovative product within the APAC region. Our new factory, which we just recently opened in Thailand, is actually directly connected to the Mars Pringles plant. And this facility is being built to serve this region and has the capability of being the world's largest paper can plant.

And it is a perfect example of disciplined customer-backed expansion. I am proud that our portfolio spans metal, metal enclosures, rigid paper, aerosols, and premium specialty packaging. Metal provides over 80% recycling rates, unmatched shelf life, and exceptional food protection, making it essential for food security, flexibility, and quality. Meanwhile, paper cans deliver high recycled content, full recyclability, and strong consumer appeal, which is driving rapid brand adoption. While premium cans deliver high margin and emotional brand

Howard Coker: creates resilience, premium upside,

Sean Karnes: and powerful substrate conversion opportunities for Sonoco Products Company. So from pate to pet foods, stacked chips to infant formula, this portfolio, household to health, unlocks opportunity with some of the highest growth end markets. And we are incredibly proud to operate across more than 70 countries with all those differences in languages, constant changes in regulation, customer's requirements, formats, and supply chains. Put simply, our job is to manage that complexity so effectively our customers have to. Regulation across EMEA and APAC is ever changing, and accelerating conversions away from more difficult-to-recycle substrates such as plastics. And that unlocks real opportunity for us. Sonoco Products Company has been at the forefront of this movement, even before mono

Howard Coker: solutions

Sean Karnes: by developing monomaterial package programs. EPR puts in place higher fees for manufacturers and brand owners to cover the cost of collecting, recycling, and disposing of product packaging. These fees are designed to incentivize sustainable designs, shifting the burden of waste management from local governments to producers. This means as our customers require solutions to reduce their EPR exposure, Sonoco Products Company has the knowledge and the solutions in both paper and now metal to enable them to have a smooth transition.

Howard Coker: Topail.

Sean Karnes: It is a Sonoco Products Company innovation. It shows how regulation innovation translates into growth. It reduces CO2 emissions by 20%, improves the consumer experience, and simplifies production. ARPIS, the

Howard Coker: updated potential ahead of this for this. Across EMEA and APAC,

Sean Karnes: private labels are growing, while pet food premiumization and plant-based protein trends are accelerating. All of these trends are influenced by continuous emphasis on sustainability. A key differentiator related to the U.S. Private label brands and own brands are constantly looking for differentiation. And we are partnering directly with retailers and brands to meet these shifts often before they become mainstream. The result is diverse, resilient growth across the categories and geographies. Pringles is a flagship example. Together, we moved the can from over nine to over 90% recycled paper content without compromising shelf life, manufacturing speed, or most importantly, consumer experience.

This is the single largest change to one of the world's most iconic packs in the past 50 years. And in effect, we have future-proofed the brand. And now, with Mars owning Pringles, we are their partner for the next phase of growth. As I mentioned earlier, technology underpins our competitive advantage. Be it automation, artificial intelligence and analytics, and, of course, our productivity. They improve our quality, help us improve our safety, while reducing our energy use and waste. As an engineer, I could tell you productivity is never,

Howard Coker: In fact, Orbit is a great example how we view you innovation to meet unmet consumer needs. Who in the audience has not struggled to open a glass jar? Well, Orbit is the solution to that problem. Orbit is the only vacuum closure for glass jars that makes opening jars easy for anybody. How it works, the outer ring rotates separately from the center panel. And this is another great creative innovation from Sonoco Products Company. Kikkoman started with one SKU and due to its success in the marketplace, they are currently rolling this across their entire product range. And we see this as yet another growth vehicle as other brands realize its value.

We are going to drive growth across the region by focusing on three levers. We have been discussing, driving rigid paper can adoption. We expect to grow faster than any other substrate by capturing sustainability and substrate conversion trends. With combined commercial teams, we have the right people and the right resources to approach the market with solutions that are sustainable and agnostic across paper and metal. And lastly, by creating a disciplined approach to our commercial processes, which will include standardization and improve our value-based pricing. And I am really pleased to say our teams will stay deeply embedded with our customers as they constantly evolve.

Capital investment will be prioritized by customer-backed programs such as the Mars example that I mentioned earlier. We will invest where regulatory demand and commitments align across both metal and paper. Another example of our customer-backed investments includes our all-new 60 millimeter all-paper can line in France, a brand new product to serve a new market with an entirely new product. Similarly, our two-piece aluminum pet food line in France was built to support the growing preferences for single-serve formats. And of course, every project is valued through strict return on invested capital criteria to ensure long-term value creation.

To summarize, we are driving growth through the region's obsession with having sustainable packaged solutions driven by changing consumer preferences and regulation. We are expanding margins through integration and operational excellence. Strategic sourcing of materials remains a key competitive advantage which we can leverage to deliver value for our customers. Continuing to drive footprint optimization, standard processes and procedures with automation will be accretive to our margin profile. And we are allocating capital with discipline where it is aligned with our customers or drives productivity enhancements. As I close out my section, in my 31 years in the packaging industry, I have never experienced so much demand for change. This is mainly driven by the region's unique sustainability demands.

And I am incredibly proud that Sonoco Products Company is ahead of the curve with our proprietary sustainable packaging solutions. As you can see, I am extremely excited about the future of Consumer Packaging EMEA and APAC and the value it will bring and deliver for Sonoco Products Company and its shareholders. Thank you, Isit, for your time this morning, and I will now hand over to my friend, Ernest. Thank you, Sean, and good morning, everyone.

Ernest Haynes: I am Ernest Haynes. And it is really good to be with you all in New York. As Howard mentioned, I have had the great fortune to spend over 28 years with Sonoco Products Company. Between both our Consumer and Industrial businesses I feel positioned well to now lead Consumer Packaging Americas. No matter the economic climate, one principle remains constant, consumers vote with their wallets every time they shop. That vote is shaped by where they are today, and more specifically, how they think about grocery decisions, affordability, and value. And brands must meet them where they are.

We have a really clear view of how consumers are shopping, how retailers are responding, and how our customers are adjusting to win those choices. My team's role is to help our customers earn that shopper's choice by making our packaging a competitive advantage through quality, service, advanced technology, and sustainability. That is why we have rebuilt our Consumer Packaging business into a simpler, substrate-agnostic, geographical platform designed to enable a more nimble organization that creates enhanced value for our customers. Over the next 15 minutes, I will step you through how this new structure positions us to grow across The Americas and unlock meaningful opportunity for Sonoco Products Company’s future.

Our integrated metal and paper can business has immediately simplified our approach with customers, while also better aligning every functional group to a common purpose focused on value creation. This is critical as our customers now operate in an incredibly challenging macroeconomic environment, consumer affordability governs spending decisions every day. We are well positioned with our portfolio of both metal and paper can options where innovation, supply continuity, and best-in-class technical services are a cornerstone of Sonoco Products Company’s DNA. The Americas region will generate over $2,100,000,000 in annual turnover in service of 800 plus customers. We are fortunate to have 3,200 plus employees that support our efforts.

And I can promise you they are entirely focused on earning the right to serve our customers every single day. We serve some of the most recognizable consumer brands in the industry including Bush Brothers, Mars, Red Gold, and RPM, just to name a few. Consumer Americas is a leader in the markets we serve, which includes steel aerosol and food cans, along with rigid paper cans across the entire region. Over the past several years, we have made strategic investments to advance our offerings of sustainable packaging, while also investing in ourselves with a particular focus on automation.

Leaning into AI technology within the manufacturing network has become the next leg of our operations excellence tool to continue driving productivity and lower our cost footprint. Our organization operates an efficient network of 34 manufacturing facilities across five countries, specializing in the production of steel cans and the associated components, as well as rigid paper cans and cartridges for the adhesives and sealants construction sector. Each facility is equipped with advanced automation affording us significant cost efficiencies. In addition, we implement lean technologies to promote operational excellence throughout our entire network. Today, we produce over 3,000,000,000 steel food and aerosol cans in both two-piece and three-piece formats.

Whether you are in the center aisle of a grocery store, or working on your DIY projects on a Saturday afternoon at home, our cans are likely very well represented. Within our leading paper can portfolio, we provide solutions for addressable markets like baby formulas, snacks, chilled dough, and nuts. For decades, we have partnered with global CPGs to innovate every single component of our cans to satisfy the sustainable packages consumers both want and need. In addition to our metal and paper cans, we have also invested in expanding our footprint and capacities to provide cartridges that serve the adhesives and sealant space within the construction markets.

At Sonoco Products Company, sustainability is an integral component of our approach to both material selection and product development. Steel remains the most recyclable consumer packaging material globally. Approximately 85% of all steel ever produced is still in use, supporting a genuinely circular economy that ensures long-term material availability and contributes to decarbonization. Our rigid paper cans feature approximately 85% post-consumer recycled content, directly supporting brand objectives related to recycled content and performance on many important retail sustainability metrics. From a market standpoint, these attributes are incredibly significant. Sonoco Products Company’s metal and paper can solutions enable customers to lead with confidence by mitigating risk, safeguarding shelf visibility, and ensuring consistent supply.

The macroeconomic environment significantly influenced our industry and our market dynamics. Whether we are mitigating the high impact cost of steel-related tariffs for our entire domestic customer base, or adapting to evolving extended producer responsibility regulations, our strategies are specifically designed to manage those challenges and enable our customers to capitalize on emerging opportunities. Our global template procurement capabilities ensure continuity of supply, a critical factor for all of our clients, while our ongoing investments to innovate monomaterial paper cans demonstrates our commitment to reducing environmental impact. While additional challenges are likely to arise, we remain steadfast in our mission to lead the industry by delivering sustainable solutions.

As we look toward 2026 and 2027, shoppers are not pulling back, but they are rebalancing. Inflation, slower job growth, and tighter markets are reshaping budgets. While about 5,000,000 U.S. adults are now using GLP-1 specifically for weight loss, driving diverse shopping baskets and new eating behaviors. But this is actually where Sonoco Products Company thrives. The majority of our Consumer America’s volume sits in the center of the store, where consumers turn for value, substance, and meals that stretch further. As budgets tighten and eating patterns change, we are uniquely positioned to help brands rethink pack sizes, formats, and shelf execution.

These moments of disruption actually create opportunity and they play directly into Sonoco Products Company’s strengths in helping our customers win the shelf and protect volume. Commercial excellence forms a fundamental component of our strategic initiative to drive earnings growth. The newly implemented organizational structure enables deeper analysis of customer requirements and facilitates the optimization of internal processes. Our sales teams are now equipped to represent our entire can portfolio irrespective of substrate, ensuring that the customer remains central to all commercial initiatives. Additionally, we have recently launched a global CRM system within our Business Technology Suite that enhances collaboration and operational efficiency across every work group.

Our customers rely on our capacity for collaboration and innovation to sustain competitiveness in their respective markets. While production costs remain a primary consideration for all can makers, our operating model is distinguished across The Americas by its commitment to superior quality and service. We foster long-term partnerships with our customers, enabling value creation and supporting their growth in market share. Few partnerships illustrate this better than ours with Bush, where we are colocated on their site. As the market has evolved, Bush is protecting volume through premium promotions, like its new Bluey Beans collaboration, designed to bring younger consumers into the category.

Our colocated model has expanded our two-piece food can capabilities and enables daily collaboration with their teams, helping move faster on shelf, drive demand, and create value for both companies. Within our aerosol segment, we have recently introduced a digital case study featuring CRC, a globally recognized and trusted brand with Sonoco Products Company serving as a key contributor to their ongoing reliability. Sonoco Products Company provides supply assurance and tailored aerosol solutions ensuring that CRC products remain available on shelves even amidst significant external challenges. This partnership demonstrates Sonoco Products Company’s commitment to creating lasting value for our customers through a combination of global scale, dependability, and operational excellence.

Within South America, Brazil represents a high-value growth vector for the business. The country's dietary supplement market is expanding at nearly 10% annually, evolving rapidly from a sports nutrition focus to a broader everyday health and wellness category. Sonoco Products Company is positioned to capitalize immediately, supported by established end market capacity, strong customer and market intelligence, and a purpose-built team capable of scaling powdered supplement formats without the need for incremental platform investment. Investing in ourselves is something you have often heard Howard refer to as a part of our greater strategy to drive long-term earnings and profitability.

Our commitment to this philosophy is most evident in our Consumer America’s platform, where we have invested millions to enhance capacity, increase output across multiple lines raising OEE, and installed advanced automation that continues to reduce our production cost. Additionally, we have recently adopted AI technologies within our manufacturing networks, aiming to further expand capabilities across various back office processes. Over the next three years, we are focused on driving growth by expanding our market share through strong customer partnerships. We aim to increase EBITDA through commercial excellence and the use of efficient capital allocation focused on the highest returns.

Combining metal and paper solutions makes it easier for our customers to work with us, speeds up execution, and strengthens margins, supporting both private label growth. Our portfolio matches current consumer trends and targeted premium products in what is expected to be a challenging 2026 marketplace. As the leading supplier in The Americas, we provide dependable supply through disciplined operations and smart capital investment. We are ready for market pressure backed by a long-range plan designed to navigate tariffs and drive innovation-based growth. I have confidence in our new organizational structure and our capacity to implement this growth strategy.

But most importantly, our trust in the dedication of Sonoco Products Company’s employees, who have been instrumental in shaping our company over the past 125 plus years. I feel certain their commitment remains a driving force in our continued success. Thank you. Now we will take a short break so please join us back in just a few minutes for our financial review, led by Mr. Joachimczyk. Thanks, everybody.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.