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Sonoco (SON) Arm Increases Recycled Paperboard Prices in EMEA

Sonoco's (SON) subsidiary is increasing prices for all recycled paperboard grades in the EMEA region in response to the mounting energy costs.

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Sonoco Product Company’s SON wholly-owned subsidiary, Sonoco Alcore S.a.r.l., announced that it will hike prices by €50 (£50) per ton for all recycled paperboard grades sold in the EMEA (Europe, Middle East & Africa) regions. The price hike will be effective for all shipments, starting Oct 4. This move is in response to the rapidly rising energy costs in Europe.

The company has been witnessing unprecedented surge in energy costs across all European regions, which are likely to remain high throughout the upcoming winter period. The company is evaluating the situation and will provide updates on future movements in energy prices.

Apart from this, Sonoco is facing increased raw material, transport, packaging and labor costs. The company’s focus on optimizing businesses through productivity improvement, standardization and cost control will aid its performance in the upcoming period.

Sonoco projects adjusted earnings per share to lie between $3.50 and $3.60 for the current year. In 2020, it reported adjusted earnings per share of $3.41. For third-quarter 2021, Sonoco projects adjusted earnings per share between 87 cents and 93 cents compared with the earnings of 86 cents reported in third-quarter 2020. The upbeat guidance is driven by an anticipated strong demand for most of its consumer and industrial businesses.

Sonoco’s consumer-related business volumes are forecast to be above the pre-pandemic levels despite more normalized demand for food packaging as consumers moderate at-home eating patterns. It believes the confectionery, food service and construction products’ markets, which had been mostly impacted by the pandemic, will continue to recover. Sonoco’s industrial-end markets will gain from the historically high backlogs for uncoated recycled paperboard in the United States and Canada, coupled with robust demand for global tubes, cores and cones returning to the pre-pandemic levels. Moreover, the company is focused on growing sustainable packaging solutions.

Sonoco’s Consumer Packaging and Industrial Paper Packaging segments are likely to witness a negative price/cost in the third quarter due to rising recycled fiber and resin prices, as well as higher freight costs.

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Price Performance

Sonoco’s shares have gained 20.8% over the past year compared with the industry's growth of 28.4%.

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Zacks Rank & Stocks to Consider

Sonoco currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Industrial Products sector include Encore Wire Corporation WIRE, Alcoa Corporation AA and Lincoln Electric Holdings, Inc. LECO. While Encore Wire and Alcoa flaunt a Zacks Rank #1 (Strong Buy), Lincoln Electric carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. So far this year, the company’s shares have gained 45%.

Alcoa has an estimated earnings growth rate of 573.2% for 2021. The company’s shares have rallied 108%, so far this year.

Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 22%, year to date.

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