Sonoco said first quarter net income dropped almost $15m (€11.4m) year-on-year, and added that it was facing an ‘uncertain’ time with customer orders due to the economic climate.
The closure of a German paper mill and a thermoforming plant in Canada also saw restructuring costs spike to $15.2m (€11.6m) from $2.3m (€1.7m).
However, gross profits increased 12% year-on-year while base earnings before interest and taxes (EBIT) improved by 3% for the period ending 1 April.
The acquisition of protective packaging firm, Tegrant Corporation in November last year, led to first quarter sales rising 8.5% to $1.21bn (€0.9bn).
‘Tough time ahead’
Commenting on the outlook, chairman and chief executive officer, Harris E. DeLoach, Jr said market conditions pointed towards a tough year.
“While we were encouraged by the better- than- expected first quarter performance, we remain cautious about the remainder of 2012 as our customers continue to schedule orders based on known demand due to economic uncertainty.
“We were extremely pleased with the return of productivity improvements to more historical levels and with the sequential improvement in industrial-related volumes.
“However, our long-term visibility into customer volumes remains uncertain and we remain focused on minimizing downtime in our paper mills and further reducing our cost structure through proactive operating excellence initiatives and necessary restructuring actions."
In the firm’s year-to-date segment breakdown, it reported protective packaging sales soared $114m (€86.7m) to $138m (€105m) in the first quarter after the acquisition of Tegrant and operating profit more than doubled to $7m (€5.3m).
Consumer packaging sales, including rigid containers and trays, moulded plastic bottles and jars and printed flexible packaging and closures, dipped slightly to $496m (€377.2m).
Sales for the packaging services arm, including designing, manufacturing, assembling, packing and distributing point-of-purchase displays, fell $8m (€6.1m) to $115m (€87.4m) and operating profit was down 25% to $4.8m (€3.7m), attributed to the loss of a large contract packaging customer.
The paper and industrial converted products sales were down 2% from the first quarter of last year to $464m (€352.8m) but operating profits were up 7% to $32.3m (€24.6m).
During an analyst call regarding the results, Ghansham Panjabi from Robert W. Baird and Co, asked about a ‘cautious customer outlook’ and DeLoach added: “Our outlook for each forecast really is a bottoms-up starting with the customer. And I think most of – I’m not going to say 100%, but most of our customers are still fairly cautious about the balance of the year.”