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SONOCO PRODUCTS CO (SON)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 showed solid top-line growth and year-over-year margin expansion, but Sonoco missed EPS consensus ($1.37 vs $1.45) while slightly beating revenue consensus ($1.910B vs $1.907B). Strength came from SMP EMEA integration and robust U.S. Metal Packaging; headwinds were higher interest expense and European seasonality .
  • Adjusted EBITDA rose 25% YoY to $328M; adjusted EBITDA margin expanded to 17.2% (+101 bps YoY), driven by price/cost and productivity, though sequential EBITDA declined vs Q1 due to seasonality and EMEA timing .
  • Guidance maintained: FY25 adjusted EBITDA $1.3–$1.4B; adjusted EPS targeted to the low end ($6.00); operating cash flow targeted to the low end ($800M). Management also affirmed net sales guidance of $7.75–$8.00B .
  • Near-term catalysts: accelerating harvest season in EMEA, procurement synergy ramp in 2H25/2026, and URB price increases flowing through in Q3/Q4. Risks include tariff uncertainty, European macro softness, and elevated working capital in EMEA that is expected to reverse in 2H .

What Went Well and What Went Wrong

  • What Went Well

    • “Adjusted EBITDA margins improved by 101 basis points to 17.2%, primarily driven by favorability in price/cost and productivity” .
    • Consumer segment adjusted EBITDA up 115% YoY; U.S. Metal Packaging saw ~10% volume/mix growth; SMP EMEA synergy run-rate raised to $40–$50M in 2025 with line-of-sight to >$100M cost savings through 2026 .
    • Net debt reduced by ~$1.9B with Q2 operating cash flow of $193M, aided by TFP divestiture proceeds; capex of $94M deployed towards growth/productivity initiatives .

  • What Went Wrong

    • EPS miss vs consensus driven by higher-than-expected interest expense (~$0.07 headwind) and stranded costs from divestitures; sequential EBITDA down vs Q1 due to seasonality .
    • SMP EMEA volumes softer in 1H due to delayed vegetable harvest (~three weeks) and sardine catch declines; seasonal mix weighed on incremental margins .
    • Working capital usage higher than anticipated, lowering the operating cash flow target to the low end (~$800M), and tariffs likely to pressure retail pricing and working capital .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Billions)$1.363 $1.709 $1.910
Adjusted EPS (Diluted) ($)$1.00 $1.38 $1.37
Adjusted EBITDA ($USD Millions)$247 $338 $328
Adjusted EBITDA Margin (%)n/an/a17.2%
SegmentQ2 2024 Net Sales ($MM)Q2 2025 Net Sales ($MM)Q2 2024 Adj. EBITDA ($MM)Q2 2025 Adj. EBITDA ($MM)
Consumer Packaging$583 $1,227 $99 $213
Industrial Paper Packaging$601 $588 $98 $113
All Other$95 $95 $17 $16
KPIQ1 2025Q2 2025
Operating Cash Flow ($USD Millions)$(208) $193
Capital Expenditures ($USD Millions)$92 $94
Total Debt ($USD Billions)$7.2 (as of 3/30/25) $5.4 (as of 6/29/25)
Net Leverage Ratio<4.0x (post TFP close) <3.8x

Actual vs Consensus (Wall Street – S&P Global):

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD Billions)$1.907*$1.910
EPS (Adjusted, Diluted) ($)$1.452*$1.37

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 2025$7.75–$8.00 (maintained) $7.75–$8.00 Maintained
Adjusted EBITDA ($USD Billions)FY 2025$1.30–$1.40 $1.30–$1.40 Maintained
Adjusted EPS (Diluted) ($)FY 2025$6.00–$6.20 ~ $6.00 (low end) Lowered to low end
Operating Cash Flow ($USD Millions)FY 2025$800–$900 ~ $800 (low end) Lowered to low end
Dividend per share ($)Quarterly$0.52 (Q4 2024) $0.53 (declared) Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
SMP EMEA integration & synergiesEviosys acquisition closed; integration priority Rebranded SMP EMEA; synergy execution; net leverage <4.0x Run-rate synergies raised to $40–$50M in 2025; >$100M cost savings by 2026 Improving execution; raising targets
European seasonality & macron/an/a~40% EMEA sales seasonal; vegetable harvest delayed ~3 weeks; sardine catch lower Seasonal ramp expected Q3; cautious near-term
Tariffs & price/costPrice/cost headwinds, productivity offsets Portfolio resilient; tariff management through pricing Tariffs impacting retail; mitigation via price pass-through; working capital pressure Manageable but a macro headwind
URB pricing & industrial marginsIndustrial margins stable; productivity Industrial margins up; price/cost favorable URB hike flow-through: every $10/ton ≈ $6M annualized; $40/ton starting Q3 Positive margin tailwind 2H25
Interest expense & stranded costsHigher acquisition-related costs Higher taxes/FX/interest; leverage reduction planned Interest +$0.07 EPS headwind in H1; stranded cost removal roadmap; H2 interest ~ $50M/qtr Improving H2 profile
Capex & growth projectsRecord $378M 2024 capex $92M Q1 capex; growth/productivity focus $188M 1H25 capex; $30M A&S expansion (+100M units) Focused growth, automation

Management Commentary

  • “Adjusted EBITDA margins improved by 101 basis points to 17.2%, primarily driven by items that affected sales growth in addition to productivity improvements.”
  • “We continue to progress our transformation journey…with successful divestiture of TFP and…reducing our net leverage ratio to below 3.8x.”
  • “We are maintaining our guidance…net sales $7.75–$8.0B…adjusted EBITDA $1.3–$1.4B…adjusted EPS at the low end ($6–$6.2). Operating cash flows targeted at the lower end due to higher working capital usage.”
  • SMP EMEA: “Multi-year contract with a pet food customer in Eastern Europe…up to 400 million incremental units annually…ramping in 2026.”

Q&A Highlights

  • SMP EMEA volumes: mid-single digit organic decline in Q2 due to delayed harvest; seasonal mix pressured margins; Q3 expected mid-to-upper single digit YoY growth .
  • Interest expense: H2 quarterly interest ~ $50M; H1 EPS impact ~$0.07 due to amortization fees and higher commercial paper balances .
  • Stranded costs: roadmap to full elimination; simplification into two large businesses to structurally reduce support costs .
  • Tariffs: pass-through mechanisms in place; expect retail impact; working capital balances higher .
  • URB pricing: every $10/ton ≈ $6M annualized benefit; $40/ton expected to flow through starting Q3 .
  • ThermoSafe: sale process targeted to sign by year-end, expected to reduce leverage further .
  • FX sensitivity: €/$ each 1¢ ≈ $0.025 EPS annualized; FY guide embeds euro at $1.17–$1.18 vs Q3 end $1.13 .

Estimates Context

  • Revenue modest beat; EPS miss: Actual Q2 revenue $1.910B vs consensus $1.907B; adjusted EPS $1.37 vs $1.45 .
  • Sequentially, Q1 was above estimates on EPS ($1.38 vs $1.41) but below on revenue ($1.709B vs $2.041B); Q3 later came in line/beat on both revenue/EPS .
  • Expect estimate revisions: upward for Consumer margins (U.S. Metal Packaging, URB flow-through) and synergy capture; downward bias for international volumes amid macro softness and tariffs .

Estimates comparison (S&P Global):

PeriodRevenue Consensus ($MM)Revenue Actual ($MM)EPS Consensus ($)EPS Actual ($)
Q1 20252,040.5*1,709.2 1.407*1.38
Q2 20251,906.7*1,910.4 1.452*1.37
Q3 20252,152.7*2,131.1 1.926*1.92

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • EPS miss was primarily financial (interest/stranded costs) rather than operational; margin expansion and segment profitability suggest the core is intact .
  • U.S. Metal Packaging strength and URB price increases underpin margin trajectory into 2H; watch SMP EMEA harvest ramp and seasonal mix in Q3/Q4 .
  • Guidance discipline: EBITDA maintained; EPS/cash flow shifted to low end—monitor H2 interest and working capital reversal to support targets .
  • Synergy and cost actions are credible tailwinds for 2026; procurement, stranded cost removal, and simplification likely to lift earnings power .
  • Tariff/European macro remain headwinds; company has pass-through mechanisms, but these can elevate working capital—expect potential volatility in cash conversion .
  • Capital deployment is targeted: $30M A&S capacity (+100M units) and automation investments should drive productivity and growth; dividend raised to $0.53 reflects confidence in cash generation .
  • Near-term positioning: constructive into Q3 on seasonal EMEA ramp and URB flow-through; balance this against tariff impacts and continued caution in Europe .