"Overall, net sales grew by 3.0% while GAAP net income attributable to Sonoco was flat. Base net income attributable to Sonoco gained 14.0%, primarily due to a lower effective tax rate and higher earnings from affiliates. Base operating profit declined slightly in the third quarter as a positive price/cost relationship and acquisitions were more than offset by operating cost inflation, the impact from the hurricane, and the negative impact of foreign exchange."
Hurricane Florence Impact
As previously reported, Sonoco's paper mill operations in Hartsville, SC, were temporarily shut down following unprecedented flooding from Hurricane Florence. The storm impact also temporarily idled operations at several recycling operations, tube and core plants and other operations in Virginia, North Carolina and South Carolina.
All operations impacted by Hurricane Florence are back in production. Mill operations in Hartsville lost approximately 22,300 tons of uncoated recycled paperboard and corrugated medium paper production during the storm outage in the third quarter. Sonoco carries property and business interruption insurance, subject to a $1-million self-insured retention, and is actively working on insurance recovery. The negative earnings impact from Hurricane Florence through the end of the third quarter was approximately $.04 per fully diluted share. This impact was primarily driven by lost production and sales at impacted facilities.
"Up to 350 restoration contractors worked alongside our nearly 500 mill associates and maintenance crews to perform the largest cleanup, restoration and repair operation in our nearly 120-year history," says Tiede. "Through their dedication, we were able to minimize the impact and bring back most production well in advance of our original expectations."
Third Quarter 2018 Review
Net sales for the third quarter were $1.36 billion, an increase of $40.1 million, or 3.0%, from last year’s quarter. The improvement reflects an increase in sales added by acquisitions; higher volumes, particularly in our Display and Packaging businesses; and higher selling prices implemented to recover rising freight and other operating cost inflation.
Gross profits were $259.6 million in the third quarter, an increase of $6.8 million or 2.7%, compared with $252.9 million in the same period in 2017. Gross profit as a percentage of sales was 19.0%, compared with 19.1% in the same period in 2017. Third-quarter selling, general and administrative expenses increased $6.9 million from the prior year to $136.0 million. This increase was driven by expenses related to acquired businesses, wage inflation and higher management incentives.