Q1 2021 Sonoco Products Co Earnings Call

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Yeah.

Good afternoon, ladies and gentlemen, and welcome to the Q1 2021 cycle earnings Conference call. At this time all participants are on a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require.

Operator <expletive>istance, Please press star zero.

As a reminder, the conference call is being recorded I would now like to turn the conference over to your host Roger Schrum. Please go ahead.

Thank you al.

And good morning, everyone and welcome to Sonoco is first quarter, 2020, one Investor Conference call.

And me today are Howard Coker, President and Chief Executive Officer, Rodger Fuller Executive Vice President and Julie Albrecht, Vice President and Chief Financial Officer.

As release reporting our financial results was issued before the market opened today and is available on the Investor Relations website at Sonoco Dot com.

In addition, we will reference that represent a presentation on our first quarter financial results, which also posted on our website. This morning.

Before we go further let me remind you that today's call and presentation contains 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.

Furthermore, 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 as well as reconciliations of those measures to the most closely related GAAP measure is also available and the Investor Relations section of our website.

Now with that let me turn it over to Julie.

Thanks, Roger I'll begin on slide three where do you see that earlier. This morning, we reported first quarter earnings per share on a GAAP basis of <unk> 71.

And base earnings of <unk> 90 per share, which was at the top end of our guidance range of 80 to 90 per share.

At a high level, our first quarter results reflect solid top and bottom line results. Despite various unexpected headwinds from severe weather in the U S and global supply chain disruptions.

In terms of the 19th the difference between base and GAAP earnings per share.

And <unk> related to restructuring and <expletive>et impairment.

<unk> was from non operating pension costs.

<unk> reflects the loss on our display and packaging U S divestiture.

And six primarily is related to acquisition and divestiture transaction costs.

Moving to our base income statement on slide four and starting with the top line you see that sales were $1.353 billion up $50 million from the prior year period.

I'll review more details about our key sales drivers on the sales bridge and just a moment.

Gross profit was $278 million $11 million above the prior year's quarter.

This performance resulted in a solid 25% gross profit as a percentage of sales, which was equivalent to the first quarter of last year.

SG&A expenses net of other income were $138 million and increase of $15 million year over year.

This increase was expected and key drivers were higher expenses for normalized management incentives.

Strategic spend as well as property insurance premiums.

All of this resulting in first quarter 2021 operating profit of $140 million.

I will discuss the key drivers of the operating profit bridge and a few minutes.

Net interest expense of $18 million was $2 million higher than last year due to higher debt balances than and the first quarter of 2020.

As a reminder, this relates to our conservative liquidity actions and the uncertain COVID-19 environment.

Income tax expense of $31 million was $2 million below last year due to both our lower pretax profits and slightly lower effective tax rate.

Our current quarter's base effective tax rate was 25, 7%.

Moving down to net income our first quarter 2021 base earnings were $92 million compared to $95 million last year.

On slide five you see our new operating and reporting structure that is more simplified and better reflects how we are managing our businesses going forward.

With this change we are reporting our results and two segments consumer packaging and industrial paper packaging.

The remaining businesses are presented and and all other group.

Our previous protective solutions and display and packaging segments have been eliminated and their businesses moved into this new structure.

Changes to the consumer packaging segment includes moving our T EQ healthcare packaging and.

And industrial plastics business businesses and to all other.

Industrial paper packaging is relatively unchanged, except that our fiber protective packaging. The unit has been added from the former protective solutions segment.

All other includes our health care and protective packaging businesses, including <unk>.

Thermos safe are consumer and automotive molded foam business as well as our alloyed retail security packaging unit.

Now looking at the sales bridge on slide six you see volume mix was higher by $46 million, our three and 5% for the company as a whole.

This increase reflects solid demand and two additional shipping days and this quarter versus last year.

I will add that the severe U S weather event in February of this year had a negative impact on our topline of around $9 million.

Our consumer packaging segment volume was up $24 million or four and 5%.

We continue to have impressive growth and global rigid paper containers, which saw volumes increase by 8%.

Plastics food volumes were up almost 3%, while our flexible volumes were essentially flat.

And our industrial paper products segment volume mix was up $13 million or two 6% driven by strong recoveries and our protective fiber and our global tubes cores and cones businesses.

Finally, our all other group saw an increase of $9 million or three 3%.

This was driven by stronger volume across our industrial plastics business as well as our medical plastics and <unk> businesses.

Moving to price you see the selling prices were higher year over year by $48 million.

This was primarily in our industrial segment as we work to recover escalating OCC costs around the globe.

Moving to acquisitions and divestitures, you see of topline reduction of $60 million, which is mostly driven by the display and packaging Europe divestiture, but partially offset by the addition of can packaging and August of 2020.

And finally, the sales impact from foreign exchange and other was positive by $16 million.

The primary driver was foreign exchange translation <expletive>ociated with the weaker U S dollar year over year.

So moving to the operating profit bridge and starting with volume mix, our higher sales volume combined with favorable sales mix had a strong lift on operating profit of $20 million.

This favorable impact was spread among the segments, but with a more pronounced impact and industrial due to improved sales mix across our global paper Mills.

Shifting to price cost I will remind you that this category includes the earnings benefit from higher selling prices as well as the impact of total inflation.

And our first quarter, we had $28 million of unfavorable price cost.

Our industrial segment was hit the hardest with price cost challenges due to the higher OCC costs internationally as well as higher than expected inflation and operating costs like energy and freight.

As usual there is a slide in the appendix that shows recent OCC price trends and you'll see that southeast OCC official board market pricing was at $85 per ton and January and February of this year until market pressures caused the jump to $90 in March.

This resulted in an average of $87 per ton and the first quarter of $45 increase over the first quarter of last year.

We do anticipate continued headwinds and OCC cost escalation of this year and this is evidenced in April when the market moved to $95 per ton.

Next is the impact of productivity, which includes all the results from our productivity actions, including manufacturing procurement and fixed cost.

You see that our total productivity with the solid $22 million year over year with a favorable impact across all three segments.

Our productivity actions remain an important focus area across our business as we work to overcome inflation and ultimately drive higher margins.

Moving to acquisitions and divestitures and the $3 million decrease and operating profit is the net impact from the display and packaging Europe divestiture and the can packaging acquisition.

Finally, the operating profit change and foreign exchange and other was unfavorable by $15 million with various moving pieces, mostly within SG&A expense.

Moving to slide eight you'll find our segment analysis, where you see that consumer packaging sales were up almost 8% driven by the addition of can packaging and higher volume driven by Covid eat at home behaviors and the two additional shipping days in the period.

Consumer segment operating profit increased by almost 19% driven by strong volume mix and productivity results. Our consumer segment margins increased by 120 basis points to a very strong 13%.

Our industrial segment sales grew by 12, 5% due to year over year price increases as well as recovering demand and the increased days and the period.

However, industrials operating profit declined by almost 16% due to much weaker price cost dynamics compared to the prior year. These headwinds were somewhat offset by improvements and productivity and volume mix.

Our industrial segment's operating profit was eight 9% down by 300 basis points when compared to the first quarter of last year.

And finally, all other sales declined by 21%, primarily driven by the sale of display and packaging Europe.

Operating profit decreased by 32, 5% due to the divestiture as well as price cost headwinds.

For this all other group operating profit margins declines of six 8% 110 basis points lower than the prior year period.

Yes.

So for the total company sales increased almost 4%, but operating margin declined slightly to 10, 3%.

Moving to cash flow on slide nine our first quarter of 2021 operating cash flow was a very solid $139 million and increase of $51 million over last year.

This increase was primarily driven by a reduced consumption of working capital and this year's first quarter compare it compared to the same period of last year.

Our global teams focus on disciplined working capital management continues to show and our strong cash flow results.

Looking at Capex and the first quarter, our net spend was $39 million this year compared to $31 million and the first quarter of 2020.

We do expect our capex spend of ramp up over the balance of this year as we make progress on project horizon and other important projects Howard will be providing additional comments on this activity and a few minutes.

Yeah.

This takes us to our free cash flow generation of $99 million for the first quarter of this year compared to $57 million last year.

And finally, we paid cash dividends of $45 million and the first quarter of 2021 compared to $43 million and last year's first quarter.

On slide 10, you see that our balance sheet and our liquidity position remains extremely strong.

Our first quarter 2021, ending consolidated cash balance of $588 million.

Includes approximately $340 million of cash held and short term investments that are very liquid and of high credit quality.

I will add that while we recognize the display and packaging U S divestiture in the first quarter. We received the cash proceeds on the first day of our fiscal second quarter.

Our consolidated debt totaled $1 $7 billion at the end of the first quarter of 2021, essentially flat from year end.

As we move through this year, we expect to reduce these cash balances and rebalance our debt portfolio to our historical split between floating and fixed rate debt. We expect to take actions focused on putting our cash balances to work, while delivering shareholder value and continue.

<unk> to position ourselves for further growth.

So moving to slide 11, you see that our guidance range for second quarter base EPS is <unk> 82 to <unk> 88 per share.

As Howard will discuss in more detail. This outlook reflects solid demand trends, but also continued intense inflation headwinds as well as the divestiture of display and packaging U S.

Shifting to our updated full year 2021 base earnings per share guidance, we are narrowing our guidance to the upper half of our original full year guidance range.

Our new guidance is $3 50 to $3 60.

As we have increased confidence and the macro economic and and environment and the related impact on our business, especially as we look into the second half of this year.

This outlook does include the impact of the display and packaging U S divestiture, which removes around nine of.

Of base EPS for the last three quarters of this year.

I'll also note that our cash flow guidance is unchanged for the full year, our guidance range for operating cash flow remains at $517 million to $600 million and.

And our outlook for full year free cash flow is still $270 million to $300 million.

This outlook does exclude the approximately $150 million pension contribution that we expect to make later in the second quarter related to our pension termination process.

So this concludes my review of our first quarter results and our outlook for the second quarter and full year of this year, So I'll turn it over to Howard.

Thanks, Joe and good morning, everyone.

Excuse me and let me provide some additional color regard and our first quarter performance and then I'll talk about what we see and are in the second quarter.

Let me start by saying how proud I am of our team came together to work through the challenges stemming from severe winter weather.

And global supply chain disruptions to meet the needs of our customers, while delivering better than expected start to point of 21.

Our operations were impacted by winter storm Aerie and February with more than 40 of our U S plants and <unk>.

Temporarily shut down due to a lack of natural gas and electricity.

Yes of the shutdown of enrollment for a few days and we were able to meet the needs of our customers. However, the storm aggravated already tight supply chains, which is further impacting the availability and and prices for resins and chemicals and <unk>.

And through the.

Despite these headwinds our consumer packaging segment and a strong result.

So the produced and the second best operating profit ever.

Many of our products continue to benefit from consumer eating.

And habits.

And as an example, our global rigid paper container business registered 8% improvement and volume mix with North America up 6%.

Europe of 9% and Asia up nearly 30%.

Our customers are telling us they are seeing young consumers rediscovering, the staple foods and the experiment with cooking at home.

For example.

We have seen a resurgence and products such as refrigerated.

Which was up 27% this quarter and North America, and equally as strong and Europe.

Our customers are also telling us that the.

The option of remote work is providing the structural change of demand for convenient frozen prepared meals.

This trend of helping our recyclable plastic food tray business, which has been a free.

The double digit growth for the past several quarters and as.

I believe we'll start seeing some COVID-19 impacted category of short term of improve as markets continue to reopen.

Categories, such as confection, and foodservice and some of medical products are showing signs of growth.

And we expect this to continue as the year goes along.

Switching and switching to our industrial business, we are clearly seeing global industrial markets reopen which helped our industrial paper segment report sequential improvement and results for the third consecutive quarter of.

Although operating profits remain down year over year.

And the first quarter industrial segment sales grew 12, 5% due primarily to volume growth and higher selling prices implemented to offset higher raw material costs and non material inflation.

Global tube core and cone volume mix and improved 3% of.

Of North America volumes were down about 1%, which more and more than offset the strong improvements in Europe, Brazil and Asia.

Unfortunately, our industrial business continues to be negative the negative negatively impacted by price calls.

The rising recovered paper chemicals, the teasers and fruit.

We have mobilized our inflation recovery plans with targeted pricing actions already and the market.

All of those communicated to our customers and so.

And yet to come.

Year over year raise the Tan bending chip index has moved up 11% to $780 a ton and medium prices have moved nearly 20% to $735 per ton.

Demand for Europe, and medium remained strong and backlogs and North America are at the highest levels and recent history.

So we fully believe additional increases that had been announced will be reflected later and the second quarter.

Yeah.

After flow start due to the pandemic, we're still making solid progress from project horizon and still expect the conversion of our number 10 type of machine to you or be the the completed and the second quarter of 2022.

As we previously mentioned, we are investing approximately $300 million and capital this year and of our consumer and industrial businesses.

In addition to project Horizon, we've identified a number of excellent projects that we expect to provide solid growth and margin improvement with returns well above our cost of capital.

For instance.

We're building the new thermal forming line and our Waynesville, North North Carolina plastic food tray plant to meet the increased demand and I spoke to earlier for retail and institutional flows of mills.

We're expanding our proprietary son of post appliance packaging technology into Europe with the opening of the new manufacturing facility in Poland.

This new facility will open this summer of the service new customers with the 100% recycled paper based protective packaging.

I will mention that we saw a 29% increase and so on and I oppose appliance packaging volumes in North America, and the first quarter alone.

In addition, we are funding the launch of two new products and our firm of safe temperature <expletive>ured packaging business, including our new Pegasus USB system, which offers the first of its kind of p<expletive>ive temperature <expletive>urance unit load devices that can provide a cost effective alternative for shipping sensitive pharmaceuticals.

Aircraft around the world.

Finally, we're not and we're finding a number of automation and technology projects to boost productivity and our operations.

Earlier this year, we announced we will be partnering with ISI and advanced manufacturing automation and robotics company to help us advance use of automation throughout our global operations.

In addition, we're funding capital projects across multiple businesses that will speed production lower operating costs and reduce the need for product handling labor, which is proving to be extremely difficult to recruit and retain and the current work environment.

After capital spending and returning cash to our shareholders remains a top priority.

For 96 consecutive years, we have paid cash dividends to shareholders.

And we have increased our dividend for 38 straight years and our payout provides just under a 3% yield.

Nearly twice the S&P index.

In addition to our proven our regular quarterly dividend yesterday, our board has approved a new share repurchase authorization of up to $350 million.

The new authorization further demonstrates our financial strength and illustrates our focus on the balance capital allocation strategy.

Finally, we will continue to improve our portfolio of about selectively acquiring and divesting businesses to strengthen our core consumer and industrial base or.

Our strong balance sheet and robust cash flow and provides us the flexibility to evaluate and pursue most internal and external opportunities.

However, we do remain committed to maintaining our investment grade credit rating.

Let me wrap up with a few remarks regarding our second quarter and full year outlook.

While we are cautious near term above inflationary risks, we are becoming more confident and our ability to benefit from the developing post pandemic economic recovery, particularly and the second half of the year.

As I mentioned, and we expect to see continued inflation and recycled fiber resins and chemicals adhesives freight and other operational calls.

We have a number of operational and commercial levers that we can pull to offset this pressure of course, including price.

We also expect demand and most of our consumer and industrial businesses to remain solid for the foreseeable future.

The pandemic has provided a period of significant elevated consumer demand and we believe consumers will largely maintained and the habits the acquired over the past year.

With 80% of our consumer portfolio focused on fresh frozen and processed foods. We believe we are uniquely positioned to continue benefiting from the consumer.

And needs.

Demand for uncoated recycled paperboard remains strong globally and our two core income products. We're also seeing a resurgence in the name.

And frankly to near pre COVID-19 levels and most of our share of losses.

Finally, I'd be remiss of it did not mention our sustainability efforts, particularly since the day is the 50 <unk> anniversary of Earth day, and we have quite a number of the activities planned.

Recently, we hired a senior leader of sustainability reporting directly to me to work more closely with our customers to identify opportunities to meet their challenging product requirements.

With that in mind, we continue to expand our environment since the line of sustainable packaging and that incorporates increased recycled content and improved recyclability.

And <unk> represented across our portfolio from rigid plastics, the flexible through our iconic paper containers and.

We recently began working with the customer and Europe to transition their products and one of our MRO can paper containers from the less sustainable subsidiary.

We do expect this trend to continue.

Now operator.

Operator would you. Please review the question and answer procedures.

Ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

First question is from the line of day.

H with Wells Fargo. Please go ahead.

Good morning, guys. Thanks for taking the questions and congrats on the Hello start to the year.

Good morning, I was curious maybe.

And maybe Howard if you can talk a little bit about the consumer segment and I think.

One of the questions or a lot of interest that we're getting as folks are somewhat fixated on the week to week Nielsen data that is obviously negative because we're comping some pantry stocking but.

The the extent you have any visibility.

And your comment at all about inventory levels, either within your operations or.

Again kind of what you detect on the cusp.

Customer side.

And I guess the potential for any kind of choppiness over the course of the year.

Thanks, Gabe and I would say inventories are tight right now, particularly if you think in context of the impact of the one.

Winter storm.

Yeah.

As well as our customers in terms of their feedstocks of had too.

Go through the various different channel <expletive>ist to ensure that we're able to maintain the flow of goods and products of.

And our inventories are low right now and.

And what we're hearing from our customers very similar.

So really haven't seen a bit of concern the the other I'll just note that we've talked about in the past as it relates to the products that we actually serve on the consumer side.

And the relatively quickly concerned.

So we're just not seeing.

Any of what which of referencing here as it relates to.

Two.

Inventories and the system.

And our side of our customer side and their customer sign from the from that standpoint, and the best of my comment about the turnover of our products and the batteries.

Alright, Thank you and then I guess Julie the.

The one thing itself and the operating profit bridge and I think you called it out mostly was.

Maybe some management and incentive comp.

That $15 million or so is that expected to kind of continue over the course of the year core can you give us any look into how that might play out.

Yes sure.

Yes, we actually I would say that type of variance of our bridge item, probably will continue as we'd mentioned and our full year guidance.

And we absolutely plan for higher.

Strategic spend.

Property insurance premiums were going up and as well.

As long as 2021 played out like we expected we would be back to accruing incentives at target vs or appropriately depending on our outlook for the business versus what we were doing last year, where obviously there was weakness very specific to COVID-19. So yeah I think.

I think I mentioned that our SG&A results, while higher year over year and the first quarter were pretty much as expected and so I would expect that to continue.

And really through the year.

Okay. Thank you and good luck.

Your next question is from the line of George Staphos with Bank of America. Please go ahead.

Hi, everyone and good morning, Thanks for the details.

Wind drops I apologize if you already answered this question.

Howard Congratulations on the performance and consumer.

When you were talking about where you're adding capital. This year you enumerated a number of projects one.

One of you didn't really mention was composite cans, even though the paper Ken business seems like it's having a great year.

Why are you spending or why are you not spending behind the growth that youre seeing and composite cans I missed if you are spending where are you where are you putting in terms of the growth outlook there.

Yes, Thanks George.

And the intent and what.

The the left and went through was just the kind of give you a snapshot of across the portfolio.

And we absolutely are engaged and our capital expenditures on the can side of the business.

Yeah.

From a project perspective, we've got a.

It looks like of second line that we're going to be putting into Brazil for growth that we're seeing there.

And can packaging is just absolutely starting to.

I hate to use the word explode the same to lock in fact actually not that it wasn't listen the Giulia bundles check and my emails. While she was speaking and just got and note that we picked up even another series of customers related to that technology.

And so.

We are extremely bullish and putting a lot of dollars.

The <unk>, particularly on and international perspective and.

And finally then.

And then spent a lot of time talking about automation, but.

And thats across the portfolio.

And it's something that.

Drives the return in and of itself, but it also addresses what I think we have a problem just across the country in terms of labor availability.

No, we're very focused and.

And are excited about the opportunities that we have going forward on the can side of the business.

I appreciate that Howard again, even listening to this and it sounds like again, you have very impressive growth and some great returns so far we can packaging.

And you didn't really say much about North America, even though again, we're seeing volumes that frankly, we haven't seen the and the.

Whatever.

25 years and we've covered your company. So are you is that does that suggest that you're not as optimistic about the composite side in North America, even though youre, saying consumers are rediscovering.

The packaged foods again or are you being modest and there is investment and growth. There that you expect will be sustained and how would you answer that question, yes, absolutely.

Absolutely, we're still very bullish on North America and.

And yes, we've seen.

Good growth really for the last multiple quarters and and North America.

The group to say, what I've already said was surprising to us and to see some categories that are highly seasonal net.

And that of just lifted.

So.

Yes.

Yes, we're very bullish as we talk about the can packaging yes.

And I'll speak to it in terms of of Europe, but we're looking that as the global play.

It's a new acquisition that was we had hoped the start deploying the technologies on a pretty rapid basis around the world and Covid came around here. We are we're starting to make progress in Europe, we've got projects identified and elsewhere globally.

And it also relates to the automation and partnership that we just engaged and with the company ISI that I noted.

With the one of the major intense is to help us further leverage here in North America and around the world. The technologies that we've acquired through the can packaging.

Acquisitions of.

Again, very very pleased with the performance and.

And the look forward.

Across all markets that we serve with our Kansas.

Alright, Thanks, a lot and my last one and I'll turn it over just a quick one for.

Richard plastic.

You noted growth, but it seems like and just remembering from the press release pressure.

Fresh food was a bit of of weak patch, where you there.

And im <expletive>uming thats just related to Covid and shopper is still not being out necessarily and shifting shopping and the perimeter of the store but.

If I remember correctly, what is what was driving that relative weakness and is any of it related to kind of the ongoing issues, you've had and and that business over time, thanks, and I'll and I'll turn it over sure. Thanks George.

Thank you kenzie and from a proud of our perspectives and somewhat seasonal as it relates to the Berry harvest that Roger.

George Ross and the only comment and some of that volume.

Weakness you are seeing is from our consolidation efforts that we took from.

And the West coast last year and.

Use of the EBIT impact is where we expect it to the but we did give us from volume and net consolidations.

Thank you Roger I'll turn it over thanks Howard.

Your next question is from the line of Adam Josephson with Keybanc. Please go ahead.

Thanks, Good morning, everyone.

Julian one question on the guidance. So you lost nine cents from the sale of the U S display you. Nonetheless raised your full year range by five cents of the midpoint, so 14% underlying increase I <expletive>ume thats all volume related.

Any other moving parts there are your inflation expectations higher than they were of three months. So of good can you just talk about whatever moving parts, there were and that 5% uplift.

Yes sure.

So really and you are right about noting the fact that.

And that we did have display and packaging U S and our original full year guidance and so you know very specifically that <unk> nine is coming out of the balance of the year.

But absolutely I mean the.

The the.

The increase there in the guidance is really just second half.

And are pretty optimistic about volumes continuing to increase as we move through the year as well as low as we move through what we think is going to be of challenging Q2 from a price cost perspective. We think we will then be well positioned we're expecting and hoping that inflation pressures, let's say <unk>.

Moderate into the third and fourth quarter and then we will be again, just better positioned from a price cost perspective. So.

And really again a lot of it relates to.

You know our bullish outlook for the second half of the year I don't know if Roger and wants to add any more color there where again the company.

Wonderful ups and.

And Julie speaking of raw materials, and thank you and Howard talked about your expectation that OCC will continue to go up beyond.

And what it went up in April to 95, and the southeast what exactly.

Are your expectations, there as well as on resin and chemicals and just back the OCC. Obviously, there were significant production disruptions in February and really throughout the first quarter and either significant maintenance happening and the southeast specifically, so one would think that OCC would be going up by too much but obviously it is so.

Can you just talk about what exactly you are experiencing and how much more you expect it to go up and why and then also in Europe I think OCC is at an all time high just any thoughts there as to when that you would expect that to moderate.

Yes. This is Roger I'll start and the power and Julian can add in the.

As we look at the second quarter and so this is pretty recent but we're expecting OCC throughout the quarter to get up into the 100 Twenty's at this point.

And that's more than probably it was expected 30 days ago.

Everyone knows the strength of the of the.

Containerboard market that continues we're seeing very strong bids for any new open.

Opportunities that come forward and for future contracts for OCC I'm, starting to see some more availability of containers.

Still pretty tight, but they are coming available and so youll start to see more exports. So all of that and our opinion is going to drive OCC.

And therefore.

The expected.

Probably 30 days ago. So the answer your question nothing to the $120 by the end of the second quarter.

And to hit the price side of that you've seen the mood and Brissey last week and both contain medium and <unk>. So we fully expect we can offset that but we do expect the additional OCC of headwinds.

And on resin.

And seeing the impact of the first quarter tremendous we expect most RASM will peak and the second quarter.

How about if you look of the basket of Sonoco resins about half of what we buy is P. T. We see that peaking this month.

And polypropylene probably peaked at the end of the second quarter of the rest of the basket all of the other resins will take sometime in the second quarter. So as Julie said, we expect second quarter to be our toughest quarter from a price cost standpoint.

And our resin based businesses and finally Europe, we are starting to see those record OCC prices.

The start to peak out and Italy, and Spain. So as you said they are at record levels, but we expect those of the op moderate and.

We're in the midst of our third and fourth price increase announcement and Europe.

To recover that inflation as well.

Thanks, a lot Roger and just last one from me can you talk about freight and labor.

I forget if you mentioned it earlier on the call, but are you expecting those pressures to moderate I, <expletive>uming youre not expecting the labor pressures to moderate given the.

And the enhanced unemployment benefits, but any thoughts freight and labor how consequential that has been for you what your expectations are et cetera.

Yes, you said it on labor Adam very difficult, we are struggling to hire the people, we need and many of our operations at least that goes back to Howard's comments on automation and we've got four of them really.

Really strong and projects and our tier one plans to help us with head count not to remove jobs of people, we have today, but two to operate our lines and supply of products to our customers. The labor will continue to be of challenge, we don't see that moderating and all of this year.

Free again, another difficult quarter, and the first quarter I.

And I think we projected the 10% increase and freight for the year, we saw probably saw more than that and the first quarter.

We're seeing some moderation so I'd say, that's still a good number for.

For the year it tightens from time to time, but at that level of inflation is probably still a pretty good now.

Number to use and your and your evaluation.

Thanks, a lot Roger.

Your next question is from the line of Josh Spector with UBS. Please go ahead.

Yeah, Hi, Thanks for taking my question just curious on the industrial volume side of things.

And in the first quarter impact from storms and the U S.

Just curious what utilization and the output deal from the volume perspective sequentially into the second quarter I don't know if you could provide any characterization of how youre thinking about that.

Yes. This is Roger as we look at the second quarter, we're seeing the sequential of 1% to 2% improvement and volumes from the first quarter, obviously year over year of very strong improvement because we are in the midst of the beginning of the pandemic, but if you look at achieving core and that one to one to one 5% range <unk> will get.

We'll get recovery from the storm, so probably and the 3% to 4% range. So sequentially again, I think that 2% quarter over quarter of volume improvement is a good number to use.

Thanks, that's helpful and just within the consumer paper packaging side, the kind of come back to that.

So if there the way that you can frame the typical churn that you see and that business sort of like a win loss ratio and just curious if things are any different now versus two years ago, So and some of the consumption trends normalize what do you expect sales to the higher or lower versus of that timeframe.

Yes, Josh this is Howard.

And I'd say right now.

Things are fairly stable.

And here in North America as I noted earlier.

We are seeing volume pick ups and Europe and Asia.

Europe actually substantially.

So and.

That seems to be related to.

Not only the.

The <unk> packaging acquisition, but the overall sustainability footprint of the <unk>.

Dockage and Asia.

Just continuation.

And then double digits for us.

Multiple multiple quarters and as we.

Know that earlier of 30% and this quarter.

And if there is a win loss I would say, it's probably we don't really track it that way, particularly on the global base, but I'd say, we're on the winning side of this point and time.

Got it thank you.

Our next question is from the line of Mark <unk> with Bank of Montreal. Please go ahead.

Good morning, Good morning, Julie Roger Good morning Lana.

Just to start off.

Howard or Julia I Wonder if you could talk about that share repurchase authorization.

And some thoughts on cadence, saying and.

Historically, you've used the repurchases just the offset option dilution.

Are there any shifts and kind of strategy and and <unk>.

Of how youre thinking about share repurchase maybe as a part of your overall capital deployment strategy.

Hi.

Yes, Mark I will I'll start and and Howard can add some comments there and I think.

And our view on share repurchase at really as usual is that we have.

As a tool right as a part of our overall capital allocation strategy and how we return cash and value to shareholders.

We did refresh the board refresh the authorization this week to shift from number of shares to a dollar amount, which we do think kind of better signifies again this kind of.

The return of value to shareholders, although quite frankly, we do keep our eye on dilution, but it's not the sole driver for and how we would now look at share repurchase.

So I think the bottom line is we're just as usual and extremely right now very well positioned with our balance sheet. The cash are leveraged to.

And have share repurchase on the table as a way that we again continue returning value to shareholders.

Okay and then.

Okay.

And how would you do you have any thoughts or the kind of cover all of them that Julie summed it up nicely.

And then I'm just curious in terms of the new divisional segmentation.

For the time, you had been kind of breaking up protective and temperature <expletive>ured and.

I'm just wondering whether we should read anything into this new segmentation in terms of your strategy for which businesses you're going to grow our net growth.

And if I if mark.

Really it was triggered.

Because of the display and packaging.

<unk> the one.

Once we divested Europe, we recognize and as you know today, we've sold the U S side and we knew.

That sector or segment was going to.

To dissolve and so we took a took a different approach in terms of how we are going the structure ourselves and the and.

And that's how we've landed at this point with what you see today. So it was driven by the the divestitures Franklin.

Okay and the last one from me Howard is is it possible. The just get a few thoughts about how you're thinking about acquisitions at the moment, which areas you're focusing on and whether you have shifted focus at all over the last 12 months to 18 months as you settled into the CEOC.

Yes.

Mark I would say no really and up.

And of course was evolution over time, we've talked about the strategic planning review process. At this team has been through over the last.

Last year or so and.

And our focus really is on what we've what I've stated from the very beginning is that we're going to focus on markets.

Segments that where you feel like we have and a right to participate in that we have core competencies around.

And that and that does give the across the breadth of our portfolio some stronger than others, but.

Still active and engaged and.

And we'll let you know.

The next the next one comes through but it's all around where we've got of Brian.

To.

To be in that particular.

The business be it the bolt on or otherwise.

Okay very good thanks, all right I'll turn it over thanks.

Yeah.

Your next question is from the line of Ghansham Panjabi with Baird. Please go ahead.

And thank everybody.

Howard as you kind of think about previous economic cycles and how your industrial segment has recovered is there anything that you think could be different with the current recovery cycle than maybe what you've seen in the past from a macro perspective and also how is the segments specifically positioned differently. If at all this time around.

And.

Thanks.

And thanks to feel different coming out of out.

The last years recession, if you want to call it that the.

The the growth of around the world is.

Looking looking very positive.

From a structural perspective, we think that the.

The markets here in North America.

And in good shape.

And orderly if I can say that.

We go to say around the world.

And South America, we've done a lot of work.

Not only there, but Europe and the U S and terms of of rash.

Rationalizing our operations.

Right sizing the business.

Positioning ourselves for.

For the.

The declines when we see those but certainly being able to take the.

The opportunity when we sit and see situations like we're seeing right now where it feels like things are really starting to heat up so.

The borrowing the inflation that were facing right now and I think we should see us driving through and the second quarter.

Feel like we're structurally and a very very sound position to come.

Come out stronger than possibly we had and previous recoveries.

Over our history.

Okay and then on the.

Consumer packaging volumes I mean, just stripping out the two extra selling days of shipping days.

The growth and rigid was there any pull forward of <expletive>ociated with that.

And then also I'm trying to get a sense, maybe Julie the margin increase and that segment year over year was that a function of mix.

Or was there anything else that kind of boosted the margins of the context of obviously higher inflationary costs et cetera.

Yes, Jonathan and I would say on the pull forward no.

And would not.

And I cl<expletive>ify that.

That's what's going on right now at all so we're seeing.

Pretty stable, but much higher demand on the global basis.

And to your just a quick question about the margin improvement we did have some positive mix, absolutely and the from US and net sales volume perspective really across that portfolio of not in every business, but and and the larger businesses and consumer very nice mix.

As well just good productivity right when you think about.

The higher volumes, and we're able to leverage our fixed costs.

Very effectively that obviously helps margins as well.

And what's the pricing increased two so it was really kind of across the board, but I would definitely attribute.

A lot of the margin improvement two very nice sales mix as well as the strong volumes, just helping drop through a better productivity to the bottom line.

So Julian just to clarify so for Q2, which is seasonally I think stronger than <unk>, but that segments of 13% operating margins and the first quarter do you think margins will be at that level of higher or lower for the second quarter.

Our outlook right now because of the price cost challenges that we've mentioned several times on this call. We don't expect the consumer margins to be quite as of 13%. So.

And maybe 100 basis points or so below that but.

So again, we expect volumes to remain solid.

Sequentially and the segment, but again.

Net of concern over let Roger was mentioning resins, and how we're able to p<expletive> through those costs the timing of that especially we expect that to be a slight headwind Q1 to Q2 for consumer.

Got it thanks, so much.

Yes.

Your next question is from the line of Kyle White with Deutsche Bank. Please go ahead.

Hey, good morning, Thanks for taking the question and I actually wanted to ask about the rats can follow up on that is there a way to put a finer point on the the impact of the lag and the p<expletive> through of whereas and.

That was that occurred this quarter and then also of what Youre expecting for next quarter in terms of the dollar amount.

Yes. This is Roger everybody is pointing at me, so I'll answer and I can't really give you a specific a specific dollar amount and I think if you look at the.

The impact Julie has mentioned the impact on consumer and the other impact will be and the all other category with the removal of the U S display and business display and packaging business.

At the segment will be of 100% resin based so we are expecting some margin pressure and that segment as well, but I went through kind of where we saw the resin speaking so again and I think the second quarter is our toughest quarter, but at this point I cant put a specific dollar amount of Oreo.

Okay.

Just shifting gears to temperature <expletive>ured packaging and regards to the vaccine rollout how does it go into lots of what's your expectation and.

Does the current pause and one of the major of vaccine the <unk>.

Major impact on your relative to the other bad things out there.

Yes. This is Roger.

It's going okay.

If you think about again going back a little bit of history, we supply about half of the packaging for the normal flu vaccine.

Every year and to the tune of the 20 million U S dollars and sales or so.

Over time, we expect the COVID-19 vaccine to get into that normal level of routine and sales for us are closest relationships frankly are with J&J and Astrazeneca you just mentioned one of the headwinds there. So yes, we've gotten off to a slow start we did have impact from the first quarter with the.

With those and.

Some support areas for vaccines, we expect that the ramp up throughout the year as these vaccines get full approval by the FDA. They are being distributed by the government today, primarily in larger and larger packages as it gets more and so the retail environment and these.

And last mile smaller packages and we expect the impact for sonoco to improve at that point. So I would think it's a lot like the flu vaccine going forward for us and the second half of this year and into 2022.

Got it thank you I'll turn it over and good luck in the quarter.

Thanks.

Your next question is from the line of Salvador <unk> with Seaport Global. Please go ahead.

Yes, Hi, Howard and Rodger.

First of all of couple of questions on some items that are in your updated guidance. So if I understood correctly with the use of display and packaging sales that was mined since were just three quarters now so we're talking about roughly the 16th.

The raise in the full year number so firstly with regard to just through the use of <unk> pricing.

Is it correct to <expletive>ume based on what you said before that Youre now incorporating even the third.

And the price hike that you announced in March and the guidance.

And secondly.

I wanted to ask about productivity here also because I think you're.

The initial bridge from last quarter showed around $655 million productivity improvements for the year of yogurt deliver 22, and a single quarter. So <unk> got something Thats also is coming up of what you expected earlier.

Yes, maybe I'll start with the I'll start with the productivity question and Howard and Rodger can clarify little more on the pricing increases because theres. So much activity. There you can help the extremely dynamic environment with price and cost changes.

Youre right, we started out the year of the 22 million operating profit delivered from productivity is a really really solid start to what we were expecting for this year and what's in our guidance.

And so I'd say embedded and our guidance is probably a slight increase and what we expected before but I would say at the same time nothing really dramatic there.

And when I looked at it we delivered about a third of our gross productivity in the first quarter of our full year expectations. So a little ahead of what we expected, but not dramatically. So.

But it's possible that we could land the year and I would hope we would land the year above our expectations.

But I would say and the guidance nothing really material related to productivity above expectations that may be slightly and.

Briefly on the EUR of our last increase is not was not baked into guidance. It's effective I think April 26, or so and.

And you really should not be surprised if you see further increases as we progress through the quarter.

And just to clarify when you set aside of the inquiries you mean.

In Europe, the price shortened the guidance.

All right.

Okay.

And certainly you RMB, but with what we're seeing with us.

<unk> already talked about we're seeing everything we buy is and flooding and thats.

Yes.

Okay and just.

Sorry go ahead.

Go ahead.

And just.

And one last question on vascular paper packaging.

And you breakdown and the essentially how the legacy business tubes cores and et cetera.

And we would have performed in terms of operating profitability.

If you didn't have the fiber protective business that I think has been doing very well and the past few quarters.

And we really don't look at it that way and Ah.

Again, we're we're happy with.

Both both businesses performed.

And both of them being impacted equally as it relates to the U R B and OCC type the increases that we're seeing.

This is Roger Schrum, and I'll, just remind you that that's an integrated products. So it uses paper that's produced in our paper Division and then is converted into the products. The post that we sell so it obviously makes sense to be in that particular segment, but there was already profitability for the paper.

That was being sold into the into that segment of anyway. So.

And again, it's not a material number to talk about well and.

Honestly the.

That's a really nice business, but it's really not that material and quite frankly, when you look at the entire industrial.

Paper segment that we have so.

It wouldn't be the.

Meet needle mover anyway.

Thank you very much.

Thanks.

Your next question is from the line of George Staphos with Bank of America. Please go ahead.

Hi, guys. Thanks for taking the follow ons.

And be quick so can you update us on project horizon.

Both in terms of where you stand relative to your prior guide plus it sounds like you maybe were off to a little bit of a slow start with the storms.

So where do you stand in terms of starting the stock prep area and related what projects beyond This project horizon might you have.

Down the Pike, maybe you can share a little bit of color on in terms of your ability to use mixed waste and other types of furnace relative to OCC.

Question is just one more on composite cans I think of one point and time you'd expected volume to be down for the year modestly.

Because of the comparison of the very strong comp from.

From 2020 that you had is that still the case could you give us the number for the year.

And then last question in fact, maybe to Adam's question on guidance. So I think looking out this year. If this is two quarters ago.

The ballpark with somewhere around 340 ish when we did the math on the.

And the divestiture of the dilution and you've done a good job, obviously of performing and raising the guidance. When you think about that variance from the $3 40 to three.

<unk> 50 of 360 is it mostly mix is it mostly pricing is it volume as the productivity. If you could just stack ranked and thank you guys. Good luck in the quarter I appreciate the time.

Alright, Thanks, George on Horizon. Thanks.

We are going extremely well.

Yes, we are delayed by a quarter and that really relates to the to.

So the actual machine conversion and just to remind the project.

Was the.

Couple of things one was of course to take the medium machine and converted to the largest European machine.

And North America, but the other portion was.

The logistics and flow around the campus.

And if you come down here now the Ma.

Is that the the amount of activity.

Going on.

So we expect stock and you mentioned stock products.

Specifically I think thats expected to be up probably late October ish.

Sometime late third quarter early fourth quarter.

That particular system will be set up to with the cleaning.

The equipment to managed.

<unk> ways.

Sure.

And that's exactly what you meant and what other projects that.

And that we may be see coming into the future.

But.

And the kind of of what I was talking through with the.

And my prepared comments that we've got do we have $100 million project horizon and that's.

And you know visible at this point in time, but the answer of that is what we do.

But we're working on that and that may be some time to come before we actually.

For the trigger on that but we've got just the multitude of projects that.

We are representatives of the examples I gave in.

And my commentary I'll, just finish on horizon, just saying that.

Yes things are holding as we had expected with the one quarter delay and to add to that.

The media market.

And this is good right now so it does not impact the financial expectations of that.

And we built into the models the way the machine is performing right now.

And can I would just asked Joe the issue would give a couple of comments and move on to the.

The guidance Doug.

Yes, George you're right.

Our volume expectations for the global the global paper containers business, where originally to be down kind of that 2% to 3% range.

And I think we are more bullish on that business now for the full year, we had the great start and again, we are optimistic about again these eat at home and.

And different types of at home cooking trends are going to kind of remain more and place than maybe we did when we started the year. So.

It.

Is the rigid paper container business flat year over year versus down 2% to 3% I think that would probably be our outlook at this point.

And to your if I captured your question on the on the guidance.

Yes, I think most of this again improvement that win and the tightening the slight raise of that mid point really is volume mix driven with some of small contribution from productivity like I was mentioning a few minutes ago, but.

And I'd, probably put it two thirds and volume mix and a third and productivity just at a high level.

That's perfect. Thank you so much.

Your next question is from the line of Adam Josephson with Keybanc. Please go ahead.

Thanks for taking my follow up Howard just one strategic question. So.

You have project horizon, and you're talking about these other projects. It seems as though of the company is investing more and itself and perhaps it has.

In years past and at the same time, you are pruning the portfolio by selling display just to simplify the business mix all of which suggests that youre focusing really on growing earnings internally rather than relying on the M&A to do so.

But at the same time, obviously Bloomberg.

You mentioned that.

You are and the running for the Crown business. So can you just talk about how you're thinking about growing the company.

In the years to come how much just from internal investments how much from M&A.

And what your preferences are to the extent you have any and why.

Thank you.

Thanks, Adam.

Yes, as we talk about investing and ourselves.

Have recognized that they are a lot of opportunities to mine and your words more profitability, but equally important is there's opportunities demand growth.

And so we think that if you were to freight of the uses of cash.

Best use of if you can grow with what you've got.

And the top and bottom line, that's the wise use.

But acquisitions are extremely important to us.

And they will be going forward.

And the market at all times looking at.

And what opportunities May lie and.

So I can simply say that the.

And that youll be hearing from us on both sides youll be hearing that.

The acquisitions will not stop us from continuing to do what we think of the right things.

As it relates to.

The capital investments going into our base as we broaden the portfolio where strength and the base through through acquisitions sort of TBD.

And you guys will be the first of those when we pull the trigger.

Thanks, so much higher and good luck and the quota.

Your final question is from the line of Mark Wilde with Bank of Montreal. Please go ahead.

Hi, Yeah, just two quick ones can you just put a little more color on what you think is tightened the UART business up and I'm hearing one thing that might be coming into play as some of your BMO is actually running some containerboard where possible.

And have not heard that Roger do you have.

Maybe just on the.

On the margin on the fringes of.

Mark.

It was tight.

Really what what tightened it up is coming out of thin.

And thank everyone came into the reopening with very low inventories and then you.

Tack on top of that the storm impacts the demand for tissue and towel.

Through the pandemic, just very low inventories across the.

Across the system.

Yes, there may be owned franchise from some of the mill is running.

The other products on potential of <unk> mills, but mostly <expletive>ist demand from the recovery and not all.

We didn't notice that and our first quarter, while we had the outages related to the storm. We had two really significant shutdowns of the entire Hartsville complex was down for close to a week.

The planned downtime that we had pushed and pushed and pushed and even as tight as we were there was just no way that we could p<expletive> on the.

And the shutdowns.

Some of them self inflicted as well at least in terms of our position and our performance for the quarter, but we had we had the complete those downtowns.

Okay, and then just the other one just a quick update on your efforts to reengineer. The composite can and I think a lot of this has been going on over in Europe.

But also maybe with that just how important is that reengineering of of the can in terms of the structures to the customers around the world.

Or is it just Europe I think.

Europe is where it really really is.

And here in North America.

And I think it's another way to talk about sustainability and our package.

And we've been collected and recycled through the sales frame for a long long time and that continues today. So.

Recent data so that it may be 90% of our cans were captured and armor and auto Mers.

So it's.

It's more of a perception issue I think is what youre, saying in Europe.

We recycled within the carton stream.

And there, but it's what we're seeing is right or wrong.

Reception around plastics and and.

And our customers or.

And our future customers are coming through of say and look we'd like to get out of this format that we're in from a perception perspective, maybe it is or is not recyclable, but the customers perceive it.

And our package is a paper as the <unk>.

More friendly.

And friendly alternatives, so, it's really Europe, where we're seeing the benefit and.

And.

And where we're focusing on most of our attention.

Okay. That's helpful. Thanks, Good luck and the second quarter and through the year.

Thanks Mark.

Ladies and gentlemen.

And Im showing no further questions at this time I would now like to turn the conference back to Roger for closing remarks, Okay. Thank you again, Angela and again, let me thank everyone for joining US today, we certainly appreciate your interest and the company and as always if you have further questions. Please don't hesitate to contact us and have a good day.

Ladies and gentlemen. This concludes today's conference call. Thank you for your participation have a wonderful day you may all disconnect.

[music].

[music].

Good afternoon, ladies and gentlemen, and welcome to the Q1, 2020 one cycle earnings conference call. At this time, all participants are on a listen only mode.

Later, we will conduct the question answer session and instructions will follow at that time, if anyone should require operator <expletive>istance. Please press star zero.

As a reminder, the conference call is being recorded and now I'd like to turn the call price over to your house Roger Shrunk. Please go ahead.

Thank you al Angela and good morning, everyone and welcome to Sonoco is first quarter 2021 Investor Conference call.

Joining me today are Howard Coker, President and Chief Executive Officer, Rodger Fuller Executive Vice President and Julie Albrecht, Vice President and Chief Financial Officer and.

And Theres release reporting our financial results was issued before the market opened today and is available on the Investor Relations website at Sonoco Dot com.

In addition, we will reference of represents a presentation on our first quarter financial results, which also posted on our website. This morning.

Before we go further let me remind you that today's call and presentation contains 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.

Furthermore, 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 as well as reconciliations of those measures to the most closely related GAAP measure is also available and the Investor Relations section of our website.

Now with that let me turn it over to Julie.

Thanks, Roger I'll begin on slide three where you see that earlier. This morning, we reported first quarter earnings per share on a GAAP basis of <unk> 71.

And base earnings of <unk> 90 per share, which was at the top end of our guidance range of 80 to 90 per share.

And a high level, our first quarter results reflect solid top and bottom line results. Despite various unexpected headwinds from severe weather in the U S and global supply chain disruptions.

In terms of the 19th the difference between base and GAAP earnings per share.

<unk> related to restructuring and <expletive>et impairment.

<unk> was from non operating pension costs.

<unk> reflects the loss on our display and packaging U S divestiture.

And six cents, primarily is related to acquisition and divestiture transaction costs.

Moving to our base income statement on slide four and starting with the top line you see the sales were $1 billion $353 million up $50 million from the prior year period.

I'll review more details about our key sales drivers on the sales bridge and just a moment.

Gross profit was $278 million $11 million above the prior year's quarter.

This performance resulted in a solid 25% gross profit as a percentage of sales, which was equivalent to the first quarter of last year.

SG&A expenses net of other income were $138 million and increase of $15 million year over year.

This increase was expected and key drivers were higher expenses for normalized management incentives.

Strategic IP spend as well as property insurance premiums.

All of the resulting in first quarter 2021 operating profit of $140 million.

I will discuss the key drivers of the operating profit bridge and a few minutes.

Net interest expense of $18 million was $2 million higher than last year due to higher debt balances than and the first quarter of 2020.

As a reminder, this relates to our conservative liquidity actions and the uncertain COVID-19 environment.

Income tax expense of $31 million was $2 million below last year due to both our lower pretax profits and slightly lower effective tax rate.

Our current quarter's base effective tax rate was 25, 7%.

Moving down the net income our first quarter of 2021 base earnings were $92 million compared to $95 million last year.

On slide five you see our new operating and reporting structure that is more simplified and better reflects how we are managing our businesses going forward.

With this change we are reporting our results and two segments consumer packaging and industrial paper packaging.

The remaining businesses are presented and and all other group.

Our previous protective solutions and display and packaging segments have been eliminated and their businesses moved into this new structure.

Changes to the consumer packaging segment include moving our T EQ healthcare packaging and.

And industrial plastics business businesses and to all other.

Industrial paper packaging is relatively unchanged, except that our fiber protective packaging and the unit has been added from the former protective solutions segment.

All other includes our health care and protective packaging businesses, including <unk>.

Thermos safe are consumer and automotive molded foam business as well as our alloyed retail security packaging unit.

Now looking at the sales bridge on slide six you see volume mix was higher by $46 million, our three and 5% for the company as a whole.

This increase reflects solid demand and two additional shipping days and this quarter versus last year.

I will add that the severe U S weather event in February of this year had a negative impact on our topline of around $9 million.

Our consumer packaging segment volume was up $24 million or four and 5%.

We continue to have impressive growth and global rigid paper containers, which saw volumes increase by 8%.

Plastic food volumes were up almost 3%, while our flexible volumes were essentially flat.

And our industrial paper products segment volume mix was up $13 million or two 6% driven by strong recoveries and our protective fiber and our global tubes cores and cones businesses.

Finally, our all other group saw an increase of $9 million or three 3%. This.

And this was driven by stronger volume across our industrial plastics business as well as our medical plastics and <unk> businesses.

Moving to price you see the selling prices were higher year over year by $48 million.

This was primarily in our industrial segment as we work to recover escalating OCC costs around the globe.

Moving to acquisitions and divestitures, you see of topline reduction of $60 million, which is mostly driven by the display and packaging Europe divestiture, but partially offset by the addition of can packaging and August of 2020.

And finally, the sales impact from foreign exchange and other was positive by $16 million.

The primary driver was foreign exchange translation <expletive>ociated with the weaker U S dollar year over year.

So moving to the operating profit bridge and starting with volume mix.

Our higher sales volume combined with favorable sales mix had a strong lift on operating profit of $20 million.

This favorable impact was spread among the segments, but with a more pronounced impact and industrial due to improved sales mix across our global paper Mills.

Shifting to price cost I will remind you that this category includes the earnings benefit from higher selling prices as well as the impact of total inflation.

And our first quarter, we had $28 million of unfavorable price cost.

Our industrial segment was hit the hardest with price cost challenges due to the higher OCC costs internationally as well as higher than expected inflation and operating costs like energy and freight.

As usual there is a slide in the appendix that shows recent OCC price trends and you'll see that southeast OCC official board market pricing was at $85 per ton and January and February this year until market pressures caused the jump to $90 in March.

This resulted in an average of $87 per ton and the first quarter of $45 increase over the first quarter of last year.

We do anticipate continued headwinds and OCC cost escalation of this year and this is evidenced in April when the market moved to $95 per ton.

Next is the impact of productivity, which includes all the results from our productivity actions, including manufacturing procurement and fixed cost.

You see that our total productivity with the solid $22 million year over year with the favorable impact across all three segments.

Our productivity actions remain an important focus area across our business as we work to overcome inflation and ultimately drive higher margins.

Moving to acquisitions and divestitures, the $3 million decrease and operating profit is the net impact from the display and packaging Europe divestiture and the can packaging acquisition.

Finally, the operating profit change and foreign exchange and other was unfavorable by $15 million with various moving pieces, mostly within SG&A expense.

Moving to slide eight you'll find our segment analysis, where you see that consumer packaging sales were up almost 8% driven by the addition of can packaging and higher volumes driven by Covid eat at home behaviors and the two additional shipping days and the period.

Consumer segment operating profits increased by almost 19% driven by strong volume mix and productivity results. Our consumer segment margins increased by 120 basis points to a very strong 13%.

Our industrial segment sales grew by 12, 5% due to year over year price increases as well as recovering demand and the increased days and the period.

However, industrial operating profit declined by almost 16% due to much weaker price cost dynamics compared to the prior year. These headwinds were somewhat offset by improvements and productivity and volume mix.

Our industrial segment's operating profit was eight 9% down by 300 basis points when compared to the first quarter of last year.

And finally, all other sales declined by 21%, primarily driven by the sale of display and packaging Europe.

Operating profit decreased by 32, 5% due to the divestiture as well as price cost headwinds.

For this all other group operating profit margins declines of six 8% 110 basis points lower than the prior year period.

Yes.

So for the total company sales increased almost 4%, but operating margin declined slightly to 10, 3%.

Moving to cash flow on slide nine our first quarter of 2021 operating cash flow was a very solid $139 million.

And increase of $51 million over last year.

This increase was primarily driven by a reduced consumption of working capital and this year's first quarter compared compared to the same period of last year.

Our global teams focus on disciplined working capital management continues to show and our strong cash flow results.

Yeah.

Looking at Capex and the first quarter, our net spend was $39 million this year compared to $31 million and the first quarter of 2020.

We do expect our capex spend of ramp up over the balance of this year as we make progress on project horizon and other important projects.

And we'll be providing additional comments on this activity and a few minutes.

Yes.

This takes us to our free cash flow generation of $99 million for the first quarter of this year compared to $57 million last year.

And finally, we paid cash dividends of $45 million and the first quarter of 2021 compared to $43 million and last year's first quarter.

On slide 10, you see that our balance sheet and our liquidity position remains extremely strong.

Our first quarter 2021, ending consolidated cash balance of $588 million includes approximately $340 million of cash held and short term investments that are very liquid and of high credit quality.

I will add that while we recognize the display and packaging U S divestiture in the first quarter. We received the cash proceeds on the first day of our fiscal second quarter.

Yes.

Our consolidated debt totaled $1 $7 billion at the end of the first quarter of 2021, essentially flat from year end.

As we move through this year, we expect to reduce these cash balances and rebalance our debt portfolio to our historical split between floating and fixed rate debt. We expect to take actions focused on putting our cash balances to work, while delivering shareholder value and continue.

Going to position ourselves for further growth.

So moving to slide 11, we see that our guidance range for second quarter base EPS is <unk> 82 to <unk> 88 per share.

As Howard will discuss in more detail. This outlook reflects solid demand trends, but also continued intense inflation headwinds as well as the divestiture of display and packaging U S.

Shifting to our updated full year 2021 base earnings per share guidance, we are narrowing our guidance to the upper half of our original full year guidance range.

Our new guidance is $3 50 to $3 60.

And as we have increased confidence and the macro economic and environment and the related impact on our business, especially as we look into the second half of this year.

This outlook does include the impact of the display and packaging U S divestiture, which removes around nine.

Of base EPS for the last three quarters of this year.

I'll also note that our cash flow guidance is unchanged for the full year, our guidance range for operating cash flow remains at $570 million to $600 million and our outlook for full year free cash flow is still $270 million to $300 million.

This outlook does exclude the approximately $150 million pension contribution that we expect to make later in the second quarter related to our pension termination process.

So this concludes my review of our first quarter results and our outlook for the second quarter and full year of this year, So I'll turn it over to Howard.

Thanks, Joe and good morning, everyone.

On the excuse me, let me provide some additional color regard and our first quarter performance and then I'll talk about what we see and are and the second quarter.

Let me start by saying how proud I am of our team came together.

Work through the challenges stemming from severe winter weather and.

And global supply chain disruptions to meet the needs of our customers, while delivering better than expected start of 2021.

Our operations were impacted by winter storm Aerie and February with more than 40 of our U S plants being temporarily shut down due to a lack of natural gas or electricity most.

And most of the shutdown of enrollment for a few days and we were able to meet the needs of our customers.

However, the strong aggravated already tight supply chains, which is further impacting the availability and and prices for resins and chemicals and.

Pieces and fluid.

Despite these headwinds our consumer packaging segment and a strong result.

So the produced and the second best operating profit however, as many of our products continue to benefit from consumers and.

The eating habits as.

And as an example of our global rigid paper container business registered 8% improvement and volume mix with North America up 6%.

Europe of 9% and Asia up nearly 30%.

Our customers are telling us they are seeing young consumers rediscovering the staple foods as the experiment with cooking at home.

For example, we have seen a resurgence and products such as refrigerated.

Which was up 27% this quarter and North America, and equally as strong and Europe.

Our customers are also telling us that the adoption of remote work is providing the structural change of demand for convenient frozen in the prepared meals.

This trend of helping our recyclable plastic food tray business, which has been has seen double digit growth for the past several quarters and as I believe we will start seeing some COVID-19 impacted category historically of improve as markets continue to reopen cash.

<unk>, such as confection foodservice and some of medical products are showing signs of growth and.

And we expect this to continue as the year goes on.

Switching to our industrial business, we are clearly seeing global industrial markets reopen which helped our industrial paper segment report sequential improvement and results for the third consecutive quarter of.

The operating profits remain down year over year.

And the first quarter industrial segment sales grew 12, 5% due primarily to volume growth and higher selling prices implemented to offset higher raw material costs and non material inflation.

Global tube and core income volume mix and improved 3% of.

Of North America volumes were down about 1%, which is more and more than offset the strong improvements in Europe, Brazil and Asia.

Unfortunately, our industrial business continues to be negative the negative negatively impacted by price calls.

The rising recovered paper chemicals, the teasers and freight.

We have mobilized our inflation recovery plans with targeted pricing actions already and the market.

All of those communicated to our customers and so.

And yet to come.

Year over year raise the Tan bending chip index has moved up 11% to $780 a ton and medium prices have moved nearly 20% to $735 per ton.

Demand for Europe, and medium remained strong and backlogs and North America are at the highest levels and recent history as of <unk>.

So we fully believe additional increases that have been announced will be reflected later and the second quarter.

Okay.

After a slow start due to the pandemic, we're still making solid progress from project horizon and still expect the conversion of our number 10 type of machine to you or be the the completed and the second quarter of 2022.

As we previously mentioned and we're investing approximately $300 million and capital this year and of our consumer and industrial businesses.

In addition to project Horizon, we've identified a number of excellent projects that we expect to provide solid growth and margin improvement with returns well above our cost of capital.

For instance for building the new thermal forming line and our Waynesville, North Carolina plastic food tray plant to meet the increased demand and I spoke to earlier for retail and institutional flows of mills.

We're expanding our proprietary Sino post appliance packaging technology into Europe with the opening of the new manufacturing facility in Poland.

This new facility will open the summer the service new customers with our 100% recycled paper based protective packaging.

I will mention that we saw a 29% increase and sonar and post appliance packaging volumes in North America, and the first quarter alone.

In addition, we are funding the launch of two new products and our foreign of safe temperature <expletive>ured packaging business, including our new Pegasus USB system, which offers the first of its kind p<expletive>ive temperature <expletive>urance unit low device that can provide a cost effective alternative for shipping sensitive pharmaceuticals.

Aircraft around the world.

Finally, we're not and we're finding a number of automation and technology projects to boost productivity and our operations.

Earlier this year, we announced we will be partnering with ISI and advanced manufacturing automation and robotics company to help us advance use of automation throughout our global operations.

In addition, we're funding capital projects across multiple businesses that will speed production lower operating costs and reduce the need for product handling labor, which is proving to be extremely difficult to recruit and retain and the current work environment.

After capital spending and returning cash to our shareholders remains a top priority.

For 96 consecutive years, we have paid cash dividends to shareholders and.

And we have increased our dividend for 38 straight years and our payout provides just under a 3% yield nearly.

Nearly twice the S&P index.

In addition to our proven our regular quarterly dividend yesterday, our board has approved the new share repurchase authorization of up to $350 million.

This new authorization further demonstrates our financial strength and illustrates our focus on the balanced capital allocation strategy.

And finally, we will continue to improve our portfolio of by selectively acquiring and divesting businesses to strengthen our core consumer and industrial base and our strong balance sheet and robust cash flow and provides us the flexibility to evaluate and pursue most internal and external opportunities.

However, we do remain committed to maintaining our investment grade credit rating.

Let me wrap up with a few remarks regarding our second quarter and full year outlook.

While we are cautious near term above inflationary risks, we are becoming more confident and our ability to benefit from the developing post pandemic economic recovery, particularly and the second half of the year.

As I mentioned, and we expect to see continued inflation and recycled fiber resins and chemicals adhesives freight and other operational costs.

We have a number of operational and commercial levers that we can pull to offset this pressure of course, including pause.

We also expect demand and most of our consumer and industrial businesses to remain solid for the foreseeable future.

The pandemic has provided a period of significant elevated consumer demand and we believe consumers will largely maintained and the habits of the acquired over the past year.

With 80% of our consumer portfolio focused on fresh frozen and processed foods and we believe we are uniquely positioned to continue benefiting from the consumer home heating needs.

Needs.

Demand for uncoated recycle paperboard remains strong globally and our two core income products. We're also seeing a resurgence in demand.

And frankly to near pre COVID-19 levels and most of our share of losses.

Finally, I'd be remiss, if I did not mentioned and our sustainability efforts, particularly since today is the 50 <unk> anniversary of Earth day, and we have quite a number of the activities planned.

Recently, we hired a senior leader of sustainability reporting directly to me to work more closely with our customers to identify opportunities to meet their challenging product requirements.

With that in mind, we continue to expand our environment since the line of sustainable packaging and that incorporates increased recycled content and improved recyclability.

And for all of a sense is represented across our portfolio from rigid plastics to flexible to our iconic paper containers and.

In fact, we recently began working with the customer and Europe to transition their products and one of our MRO can paper containers from the less sustainable substrate.

We do expect this trend to continue.

Now with that operator.

Operator would you. Please review the question and answer procedures.

Ladies and gentlemen, if you have a question at this time. Please press. The Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the pound key.

Our first question is from the line of day.

H with Wells Fargo. Please go ahead.

Good morning, guys. Thanks for taking the questions and congrats on a solid start to the year.

I was curious maybe.

And maybe Howard if you can talk a little bit about the consumer segment and I think.

One of the questions or a lot of interest that we're getting as folks are somewhat fixated on the week to week Nielsen data that is obviously negative because we're comping some pantry stocking, but to the extent you have any visibility.

Can you comment at all about inventory levels, either within your operations or.

And again kind of what you detect on the on your customer side.

And I guess the potential for any kind of choppiness over the course of the year.

Thanks, Gabe and I would say inventories are tight right now, particularly if you think in context of the impact of the <unk>.

Winter storm.

And we.

As well as our customers in terms of their feedstocks of had too.

And go through the various different channel Sis to ensure that we're able to maintain the flow of goods and products.

And our inventories are low right now.

And what we're hearing from our customers very similar.

So really haven't seen a bit of concern that the.

I would just note that we've talked about in the past as it relates to the products that we actually serve on the consumer side.

The relatively quickly concerned.

So we're just not seeing.

Any of what what you're referencing here as it relates to.

Two.

Two inventories and the system.

And our side of our customer side and their customers from the from that standpoint, and the best of my comment about the turnover of our products and the batteries.

Alright, Thank you and then I guess Julie.

The one thing Thats all from me on the the operating profit bridge and I think you called it out mostly was.

Maybe some management and incentive comp.

That $15 million or so is that expected the kind of continue over the course of the year can you give us any look into how that might play out.

Yes sure.

Yes, we actually I would say that type of variance or bridge item, probably will continue as we'd mentioned and our full year guidance.

We absolutely plan for higher.

Strategic spend.

The new property insurance premiums were going up and as well.

And as long as 2021 played out like we expected we would be back to accruing incentives at target vs or are appropriately depending on our outlook for the business versus what we were doing last year, where obviously there was weakness very specific to COVID-19. So yeah I think.

I think I mentioned that our SG&A results, while higher year over year and the first quarter were pretty much as expected and so I would expect that to continue.

Generally through the year.

Okay. Thank you and good luck.

Yeah.

Your next.

Next question is from the line of George Staphos with Bank of America. Please go ahead.

Hi, everyone. Good morning, thanks for the detail.

My line dropped and I apologize if you already answered this question.

Congratulations on the performance and consumer.

When you were talking about where you're adding capital this year.

And a number of projects.

And are you didn't really mention was composite cans, even though the paper Ken business seems like it's having a great year.

Why are you spending or why are you not spending behind the growth that youre seeing and composite cans and niche. If you are spending where you where are you putting in terms of the growth outlook there.

Thanks George.

And the intent and what the.

The the left and went through was just the kind of give you a snapshot of across the portfolio.

We absolutely are engaged and our capital expenditures on the cash flow of the business.

From a project perspective, we've got it looks like of second line that we're going to be putting into Brazil for growth that we're seeing there.

<unk> packaging is just absolutely starting to.

And to use the word explode that seems like in fact.

Actually not that it wasn't listened and Julia bundles checking my emails and while she was speaking and just got a note that we picked up even another series of customers related to that technology.

And so.

We are extremely bullish and putting a lot of dollars.

Deservedly, particularly on and international perspective.

And then finally the.

And spent a lot of time talking about automation, but.

And that's across the portfolio.

And it's something that <unk>.

Drives the return in and of itself, but it also addresses what I think we have a problem just across the country in terms of labor availability.

No we're very focused on.

And are excited about the opportunities that we have going forward on the can side of the business.

I appreciate that Howard again, even listening to this and it sounds like again, you have very impressive growth and some great returns so far with can packaging.

You didn't really say much about North America, even though again, we're seeing volumes that frankly, we haven't seen the and the whatever.

The 25 years and we've covered your company so.

Are you is that does that suggest that you're not as optimistic about the composite side in North America, even though youre, saying consumers are rediscovering.

Packaged foods again or are you being modest and there is investment and growth. There that you expect will be sustained and how would you answer that question, yes, absolutely.

Absolutely, we're still very bullish on North America and.

And yes, we've seen.

Good growth really for the last multiple quarters and and North America.

The group to say, what I've already said was surprising to us and to see some categories that are highly seasonal net.

And just lifted.

So.

Yes.

Yes, we're very bullish as we talk about the can packaging yes.

And I'll speak to it in terms of of Europe, but we're looking that as the global play.

It's a new acquisition that was we had hoped the start deploying the technologies on a pretty rapid basis around the world and Covid came around here. We are we're starting to make progress in Europe, we've got projects identified and elsewhere globally.

And then also relates to the automation and partnership that we just engaged and with the company of ISI that I noted.

With the one of the major and tenants is to help us further leverage here in North America and around the world. The technologies that we've acquired through the can packaging.

Acquisitions of.

Again, very very pleased with the performance and.

And the look forward.

Across all markets that we serve with our Kansas.

Alright, Thanks, a lot and last one and I'll turn it over just a quick one for.

Richard plastic.

You noted growth, but it seems like and just remembering from the press release pressure.

Fresh food was a bit of of weak patch for you there.

Im <expletive>uming thats just related to Covid and shopper is still not being out necessarily and shifting shopping and the perimeter of the store but.

If I remember correctly, what is what was driving that relative weakness and is any of it related to kind of the ongoing issues, you've had and and that business over time and I'll turn it over sure. Thanks George.

Thank you again from the proud of our perspectives and somewhat seasonal as it relates to the Berry harvest that Roger.

George Ross and the only comment that some of that volume.

Weakness you are seeing is from our consolidation efforts that we true okay.

And the West Coast last year and yes.

And as the.

The.

EBIT impact is where we expect it to the but we did give up some volume and net consolidations.

Thank you Roger I'll turn it over thanks Howard.

Your next question is from the line of Adam Josephson with Keybanc. Please go ahead.

Thanks, Good morning, everyone.

Julian one question on the guidance. So you lost <unk> from the sale of the U S display you. Nonetheless raised your full year range by five cents of the midpoint so 14th.

Underlying increase I <expletive>ume thats all volume related.

And any other moving parts there are your inflation expectations higher than they were of three months of good can you just talk about whatever moving parts.

And we're in that 5% uplift.

Yes, sure I mean really and you are right about noting the fact that.

And that we did have display and packaging U S and our original full year guidance and so and a very specifically that nine is coming out of the balance of the year.

But absolutely I mean the.

The.

The increase there in the guidance is really just second half.

And are pretty optimistic about volumes continuing to increase as we move through the year as well as <unk>.

And we move through what we think is going to be of challenging Q2 from a price cost perspective, we think we will then be well positioned.

The expecting and hoping that inflation pressures, let's say moderate into the third and fourth quarter and then we will be again, just better positioned from a price cost perspective. So.

Really again, a lot of it relates to.

You know our bullish outlook for the second half of the year I don't know Roger and wants to add any more color there where again the company said it well.

Wonderful and and.

Julie speaking of raw materials, and thank you and Howard talked about your expectation that OCC will continue to go up beyond.

It went up in April to 95, and the southeast what exactly.

Are your expectations, there as well as on resin and chemicals and just back the OCC. Obviously, there were significant production disruptions in February and really throughout the first quarter and there is significant maintenance happening and the southeast specifically, so one would think that OCC would be going up by too much but obviously it is so.

Can you just talk about what exactly you are experiencing and how much more you expect it to go up and why and then also in Europe I think OCC is at an all time high just any thoughts there as to when that you would expect that to moderate.

Yes. This is Roger I'll start and the power and Julian can add in but as we look at the second quarter and some of this is pretty recent but we're expecting OCC throughout the quarter to get up into the 100 Twenty's at this point.

That's more than probably it was expected 30 days ago.

Everyone knows the strength of the of the.

The containerboard market that continues we're seeing very strong bids for any new open.

Opportunities that come forward from our future contracts for OCC I'm, starting to see some more availability of containers.

Still pretty tight and so they are coming available and so youll start to see more exports. So all of that and our opinion is going to drive OCC.

Sure.

The expected.

Probably 30 days ago. So the answer to your question up into the 120% by the end of the second quarter.

The hit the price side of that you've seen the mood and Brissey last week on both the container medium and <unk>. So we fully expect we can offset that but we do expect the additional OCC of headwinds.

On resin.

And the impact from the first quarter tremendous we expect most resins will peak and the second quarter.

If you look at the basket of Sonoco resin is about half of what we buy is P. T. We see that peaking this month.

And polypropylene and probably peaked at the end of the second quarter of the rest of the basket all of the other resins will take sometime in the second quarter. So as Julie said, we expect second quarter to be our toughest quarter from the price cost standpoint.

And our resin based businesses and finally Europe, we are starting to see those record OCC prices.

And start to peak out and Italy, and Spain. So as you said they are at record levels, but we expect those of the off moderate and we.

We're in the midst of our third or fourth price increase announcement and Europe.

To recover that inflation as well.

Thanks, a lot Roger and just last one from me can you talk about freight and labor.

I forget if you mentioned it earlier on the call, but are you expecting those pressures to moderate I, <expletive>uming youre not expecting the labor pressures to moderate given the.

And the enhanced unemployment benefits, but any thoughts freight and labor how consequential that has been for you what your expectations are et cetera.

Yes, you said it on labor Adam very difficult, we are struggling to hire the people, we need and many of our operations at least that goes back to Howard's comments on automation.

We've got four of them really strong projects and our tier one plans to help us with head count not to remove jobs of people, we have today, but two to operate our lines and supply of products to our customers. The labor will continue to be of challenge, we don't see that moderating and all of this year.

Freight again, another difficult quarter, and the first quarter I.

I think we projected the 10% increase and freight for the year, we saw probably saw more than that and the first quarter.

We're seeing some moderation so I'd say, that's still a good number for.

For the year of Titans from time to time, but that level of inflation is probably still a pretty good now.

Number to use and your and your evaluation.

Thanks, a lot Roger.

Yes.

Your next question is from the line of Josh Spector with UBS. Please go ahead.

Yes, hi, Thanks for taking my question just curious on the industrial volume side of things.

And in the first quarter impact from storms and the U S.

Just curious what utilization and the output deals from the volume perspective sequentially into the second quarter I don't know if you could provide any characterization of how youre thinking about that.

Yes. This is Roger as we look at the second quarter, we're seeing the sequential of 1% to 2% improvement and volumes from the first quarter, obviously year over year of very strong improvement because we are in the midst of the beginning of the pandemic, but if you look at achieving core and that one the one to one 5% range <unk> will get.

We'll get recovery from the storm, so probably in the 3% to 4% range. So sequentially again, and I think that 2% quarter over quarter of volume improvement is the good number to use.

Thanks, that's helpful and just within the consumer paper packaging side, the kind of come back to that I don't know if there the way that you can frame. The typical churn that you see in that business sort of like a win loss ratio and just curious if things are any different now versus two years ago, So and some of the consumption trends normalize when you.

Expect sales to the higher or lower verse of that timeframe.

Yes, Josh this is Howard.

And I'd say right now.

Things are fairly stable.

And here in North America as I noted earlier.

We are seeing volume pick ups and Europe and Asia.

Europe actually substantially.

So and.

That seems to be related to.

Not only the.

The can packaging acquisition, but the overall sustainability footprint of the package and Asia.

Just continuation.

And then double digits for.

Multiple multiple quarters and as we noted earlier, 30% and this quarter.

And if theres a win loss I would say, it's probably we don't really track it that way, particularly on the global base, but I'd say, we're on the winning side at this point and time.

Got it thank you.

Your next question is from the line of Mark <unk> with Bank of Montreal. Please go ahead.

Good morning, Good morning, Julie Roger Good morning Lana.

Just to start off.

Howard or Julia I Wonder if you could talk about that share repurchase authorization.

Some thoughts on cadence, saying and and historically you've used repurchases just the offset option dilution.

Is there any shifts and kind of strategy and in terms of how youre thinking about share repurchase maybe as a part of your overall capital deployment strategy.

Okay.

Yeah, Mark I'll start and Howard can add some comments there.

And our view on share repurchase at really as usual is that we have.

<unk> as a tool right as a part of our overall capital allocation strategy and how we return cash and value to shareholders. So we did refresh the board refresh the authorization. This week to shift from number of shares to a dollar amount, which we do think kind of better signifies again this kind of.

Of.

The return of value to shareholders, although quite frankly, we do keep our eye on dilution but.

It's not the sole driver for and how we would now look at share repurchase.

So I think the bottom line is we're just as usual and extremely right now very well positioned with our balance sheet. The cash are leveraged to.

Have share repurchase on the table as a way that we again continue returning value to shareholders.

Okay and then.

Okay.

How would you do you have any thoughts or the kind of cover all of the jewelry summed it up nicely.

Okay, and then I'm just curious in terms of the new divisional segmentation.

For the time, you've been kind of breaking up protective and temperature <expletive>ured and I'm just.

Wondering whether we should read anything into this new segmentation and <unk>.

Terms of your strategy for which businesses, you're going to grow or not growth.

Thanks Mark.

It was triggered.

And with the because we had the display and packaging.

Segment once we divest of Europe, we recognize and as you know today, we've sold the U S.

The.

And that sector was or segment was going to.

To dissolve and so we took the took a different approach in terms of how we are going to structure ourselves and and.

And.

And that's how we've landed at this point with what you see today. So it was driven by the the divestitures Franklin.

Okay and last one from me Howard is is it possible. The just get a few thoughts about how you're thinking about acquisitions at the moment, which areas you're focusing on and whether you have shifted focus at all over the last 12 months to 18 months as you settled into the CEOC.

Yes.

Mark I would say no really and up.

And of course was evolution over time, we've talked about the strategic plan and review process. At this team has been through over the last.

Last year or so and.

And our focus really is on what we've what I've stated from the very beginning is that we're going to focus on markets.

Segments that where you feel like we have and a right to participate in that we have core competencies around.

And that that does get across the breadth of our portfolio of some stronger than others, but still.

Still active and engaged and.

And we'll let you know as the.

The next the next one comes through but it's all around where we've got of Brian.

The two.

To be in that particular.

The business via the bolt on or otherwise.

Okay very good thanks, all right I'll turn it over.

Yes.

Your next question is from the line of Ghansham Panjabi with Baird. Please go ahead.

Thanks, everybody.

Howard as you kind of think about previous economic cycles and how your industrial segment. It's recovered is there anything that you think could be different with the current recovery cycle than maybe what you've seen in the past from a macro perspective and also how is the segments specifically positioned differently. If at all this time around.

And from.

Yeah.

The strength.

Thanks to fulfill different coming out of that.

The last years recession, if you want to call it that.

The the growth of around the world is.

Looking looking very positive.

From a structural perspective, we think that the.

The markets here in North America.

And in good shape.

And orderly if I can say that.

We go as you say around the world.

Down in South America, we've done a lot of work.

Not only there, but Europe and the U S and terms of of rash.

A rationalized and our operations.

Right sizing the business.

<unk> and ourselves for.

For the.

The declines when we see those but certainly being able to take the.

The opportunity when we sit and see situations like we're seeing right now where it feels like things are really starting to heat up so.

The borrowing the inflation that were facing right now and I think we should see us driving through and the second quarter.

Feel like we're structurally and a very very sound position to come.

Come out stronger than possibly we had and previous recoveries.

Over our history.

Okay and then on the.

Consumer packaging volumes I mean, just stripping out the two extra selling days of shipping days.

The growth and rigid was there any pull forward of <expletive>ociated with that.

And then also I'm trying to get a sense, maybe Julie the margin increase and that segment year over year was that a function of mix.

Or was there anything else that kind of boosted the margins of the context of obviously higher inflationary costs et cetera.

Yes, and I'd say on the pull forward.

And would not.

Cl<expletive>ify the.

What's going on right now at all so we're seeing.

And to your second question about the margin improvement, Yes, we did have some positive mix, absolutely and the from US and net sales volume perspective really across that portfolio of not in every business, but and and the larger businesses and consumer very nice mix.

As well just good productivity right when you think about.

And the higher volumes, and we're able to leverage our fixed costs.

Very effectively that obviously helps margins as well.

And there was some pricing increased two so it was really kind of across the board, but I would definitely attribute.

A lot of the margin improvement two very nice sales mix as well as the strong volumes, just helping drop through better productivity to the bottom line.

So Julian just to clarify so for Q2, which is seasonally I think stronger than <unk>, but that segments of 13% operating margins and the first quarter do you think margins will be at that level of higher or lower for the second quarter.

Our outlook right now because of the price cost challenges that we've mentioned several times on this call. We don't expect the consumer margins can be quite at the 13%. So.

Maybe 100 basis points or so below that but.

So again, we expect volumes to remain solid.

Sequentially and the segment, but again.

Net of concern over let Roger was mentioning resins, and how we're able to p<expletive> through those costs the timing of that especially we expect that to be a slight headwind Q1 to Q2 for consumer.

Got it thanks, so much.

Yes.

Your next question is from the line of Kyle White with Deutsche Bank. Please go ahead.

Hey, good morning, Thanks for taking the question and I actually wanted to ask about the rats can follow up on that is there a way to put a finer point on the impact of the lag and the p<expletive> through of Verizon.

That was that occurred this quarter and then also of what Youre expecting for the next quarter in terms of the dollar amount.

Yes. This is Roger everybody is pointing at me, so I'll answer and I can't really give you a specific a specific dollar amount and I think if you look at the.

The impact Julie has mentioned and the impact on consumer and the other impact will be and the all other category with the removal of the U S display and business display and packaging business.

Net segment will be of 100% resin based so we are expecting some some margin pressure and that segment as well that I went through and kind of where we saw the resin speaking so again and I think the second quarter is our toughest quarter, but at this point I cant put a specific dollar amount of Oreo.

That's great.

Just shifting gears to temperature <expletive>ured packaging and regards to the vaccine rollout how does it go into lots of what's your expectation and.

Does the strength Pas and one of the major of vaccine.

Major impact on your relative to the other bad things out there.

Yes. This is Roger.

It's going okay.

If you think about again going back a little bit of history, we supply of about half of the packaging for the normal flu vaccine.

Every year and to the tune of 20 million U S dollars and sales or so.

Over time, we expect the COVID-19 vaccine to get into that normal level of routine and sales for us are closest relationships frankly are with J&J and Astrazeneca you just mentioned one of the headwinds there. So yes, we've gotten off to a slow start we did have impact from the first quarter with both with.

With those.

Some support areas for vaccines, we expect that the ramp up throughout the year as these vaccines get full approval by the FDA. They are being distributed by the government of today, primarily in larger and larger packages as it gets more and so the retail environment and these.

And last mile smaller packages as we expect the impact for sonoco to improve at that point. So I would think it's a lot like the flu vaccine going forward for us and the second half of this year and into 2020 two.

Got it thank you I'll turn it over and good luck in the quarter.

Thanks.

Your next question is from the line of Salvador <unk> with Seaport Global. Please go ahead.

Yes.

Yes, Hi, Howard and Rodger.

First of all of couple of questions on some items that are in your updated guidance. So if I understood correctly with the use of display and packaging sales that was my sense from just three quarters now so we're talking about roughly the 16th.

Raise in the full year number so firstly with regard to just through the use of <unk> pricing.

Is it correct to <expletive>ume based on what you said before that Youre now incorporating even the third.

And the price hike that you announced in March and the guidance.

And secondly.

I wanted to ask about productivity here also because I think you're.

Initial bridge from last quarter showed around 655 million productivity improvements for the year of yogurt delivered 22, and a single quarter. So <unk> got something Thats also coming in above what you expected earlier.

Yes, maybe I'll start with the I'll start with the productivity question, and Howard and Rodger kind of clarify a little more on the pricing increases because theres. So much activity there and you could help the extremely dynamic environment with price and cost changes.

You are right. We have started out the year of the 22 million. The operating profit delivered from productivity is a really really solid start to what we were expecting for this year and within our guidance.

And I'd say embedded and our guidance is probably a slight increase and what we expected before but I would say at the same time nothing really dramatic there.

When I looked at it we delivered about a third of our gross productivity in the first quarter of our full year expectations. So a little ahead of what we expected, but not dramatically. So.

But it's possible that we could land the year and I would hope we would land the year above our expectations.

But I would say and the guidance nothing really material related to productivity above expectations that may be slightly and.

Briefly on the EUR of note.

Our last and <unk>.

<unk> is not was not baked into guidance, it's effective I think April 26, or so and.

And you really should not be surprised if you see further increases as we progress through the quarter.

Yes.

And just to clarify when you sort of further inquiries you mean.

In Europe, the price sort of the guidance.

Oh, yes.

Although the board.

But certainly <unk> with what we're seeing with us.

Already talked about we're seeing everything we buy is and flooding and thats.

Okay and.

Sorry go ahead.

Go ahead.

Just one.

And one last question on industrial paper packaging.

And you breakdown the essentially how the legacy business tube scores et cetera.

Have performed in terms of operating profitability.

You didn't have the fiber protective business, but the thing has been doing very well and the past few quarters.

And we really don't look at it and that way.

And again, we're we're happy with.

Both both businesses performed.

And both of them being impacted equally as it relates to the Europe and the OCC type increases that we're seeing this is Roger schrum and I'll just remind you that that's an integrated products. So it uses paper that's produced in our paper Division and.

And it's converted into the products the posts that we sell so it obviously makes sense to be in that particular segment, but there was already profitability for the paper.

That was being sold into the into that segment of anyway. So.

Again, it's not a material number to talk about well and honestly the.

It's a really nice business, but it's really not that material and quite frankly, when you look at the entire industrial.

Paper segment that we have so.

It wouldn't be the.

Needle mover anyway.

Thank you very much.

Thanks.

Your next question is from the line of George Staphos with Bank of America. Please go ahead.

Hi, guys. Thanks for taking the follow ons.

The quick so can you update us on project horizon.

Both in terms of where you stand relative to your prior guide posts. It sounds like you maybe were off to a little bit of slow start with the storms.

So where do you stand in terms of starting the stock prep area and related what projects beyond This project horizon might you have.

Down the pipe, maybe you can share a little bit of color on in terms of your ability to use mixed waste and other types of furnace relative to OCC.

Second question is just one more on composite cans I think of one point and time you'd expected volume to be down for the year modestly.

Because of the comparison of the very strong comp.

2020 that you had is that still the case could you give us a number for the year and then last question back maybe to Adam's question on guidance. So I think.

Looking out this year. If this is two quarters ago.

The ballpark with somewhere around 340 ish when we did the math on the.

And the divestitures and dilution and you've done a good job, obviously performing and raising the guidance. When you think about that variance from the $3 40 to three.

<unk> 50 of 360 is it mostly mix is it mostly pricing is it volume is the productivity. If you could just stack ranked and thank you guys. Good luck in the quarter I appreciate the time.

Alright, Thanks, George on Horizon things are going extremely well.

Yes, we are delayed by a quarter and that really relates to the.

To the actual machine conversion and just to remind the project flow.

And <unk>.

Couple of things one was of course through to take the medium machine and converted to the largest European machine.

And North America, but the other portion was.

The logistics and flow of around the campus.

And if you come down here and now the Ma.

Is that the the amount of activity.

Going on.

So we expect stock and you mentioned stock perfect.

And specifically I think thats expected to be up probably late October ish.

Sometime late third quarter early fourth quarter.

Of that particular system will be set up to with the cleaning.

The equipment to managed.

Ways.

Sure.

And that's exactly what you meant and what other projects that.

And that we may be see coming into the future.

But.

And the kind of what I was talking through with the.

And my prepared comments that we've got do we have $100 million price on a project horizon and that's.

Visible at this point in time, but the answer of that is what we do.

But we're working on that and that may be some time to come before we actually.

For the trigger on that but we've got just the multitude of projects that were represented to the examples I gave in my.

And my commentary I'll, just finish on horizon, just saying that.

Yes things are holding as we expected with a one quarter delay and to add to that.

The media market is.

And this good right now so it does not impact the financial expectations of that.

We have built into the models the way the machine is performing right now.

On cans and I would.

Just ask Joe the issue would give a couple of comments and move on to the.

The guidance Doug.

Yes, George you're right.

Our volume expectations for the globe and global paper containers business.

And were originally to be down kind of that 2% to 3% range.

And I think we are more bullish on that business now for the full year, we had the great start and again, we are optimistic about again these eat at home and <unk>.

And different types of at home cooking trends are going to kind of remain more and place than maybe we did when we started the year. So.

It is the rigid paper.

The container business flat year over year versus down 2% to 3% I think that would probably be our outlook at this point.

And to your puts and if I captured your question on the on the guidance.

Yes, I think most of this again improvement that win and the tightening the slight raise of that mid point really is volume mix driven.

With some of <unk>.

The contribution from productivity like I was mentioning a few minutes ago, but.

And I'd, probably put it two thirds and volume mix and a third and productivity just at a high level.

That's perfect. Thank you so much.

Your next question is from the line of Adam Josephson with Keybanc. Please go ahead.

Yes, Thanks for taking my follow up Howard just one strategic question. So.

And you have project horizon, and you're talking about these other projects. It seems as though the company is investing more and itself and perhaps it has and <unk>.

Yours past and at the same time, you're pruning the portfolio by selling display just to simplify the business mix all of which suggests that youre focusing really on growing earnings internally rather than relying on the M&A to do so.

But at the same time, obviously Bloomberg mentioned.

You mentioned that.

You are and the running for the Crown business. So can you just talk about how you're thinking about growing the company.

In the years to come how much just from internal investments how much from M&A.

What your preferences are to the extent you have any and why.

Thank you.

Thanks, Adam.

Yes, as we talk about investing in ourselves.

Recognize that there are a lot of opportunities to mine and your words more profitability, but equally important is there is opportunities demand growth.

And so we think that if you were to freight of the uses of cash.

Best use is if you can grow with what <unk> got.

The top and bottom line, that's the wise use.

But acquisitions are extremely important to us.

And they will be going forward.

And the market at all times looking at.

And what opportunities May lie and.

So I can simply say that the.

And that youll be hearing from us on both sides, you'll be hearing that.

The acquisitions will not stop us from continuing to do what we think of the right things.

As it relates to.

The capital investments going into our base as we broaden the portfolio where strength and the base through through acquisitions of TBD.

And you guys will be the first of all when we pull the trigger.

Thanks, so much higher and good luck and the court.