Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Third Quarter 2017 Sonoco Earnings Conference Call. At this time, all participants are in a listen-only mode to prevent background noise. [Operator Instructions] We will have a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. Now we like to welcome and turn the call to Mr. Roger Schrum, Vice President of Investor Relations.

Thank you, Carmen. Good morning and welcome to Sonoco's investor conference call to discuss our 2017 third quarter financial results and future outlook. Joining me today are Jack Sanders, President and Chief Executive Officer; Rob Tiede, Executive Vice President and Chief Operating Officer; and Barry Saunders, Senior Vice President and Chief Financial Officer. A news release reporting our financial results was issued before the market opened today and is available on the Investor Relations section of our website at sonoco.com. In addition, we will reference a presentation on the third quarter results, which was also posted on our Investor Relations 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 operations. 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 in the Investor Relations section of our website. Now, with that, let me turn it over to Barry.

Thank you, Roger. I'll begin on Slide 3, where you see that earlier this morning we reported third quarter earnings per share on a GAAP basis of $0.72 and base earnings of $0.76, which is near the high side of our guidance of $0.71to $0.77 and compares to base earnings of $0.72 for the same period last year. The differences between GAAP and base earnings were acquisition related expenses of $0.02 and non-base tax items of $0.02. Looking briefly at our base income statement on Slide 4, you see sales were 1.325 billion, up 116 million or just under 10% from the prior year. And you will see the key drivers and the sales bridge in just a moment, but in summary, it was driven by higher selling prices, the impact of acquisitions and the favorable impact of exchange rates while volume was essentially flat for the quarter for the company as a whole. Gross profit was 250.9 million or 15.5 million above the prior year due, while the gross profit margin dropped slightly to 18.9% versus 19.5% at the same time last year. Selling, general and administrative and other income and expense items was 127.6 million which was up right at 7 million from last year, due to entirely to the impact of acquisitions as normal inflation was offset by what we're spending. All then resulting in base EBIT of 123.3 million, up 8.5 million or just over 7% from the prior year and you'll see all of the drivers of the change in the EBIT bridge in just a moment. Below EBIT, interest of 13.6 million was higher than last year, due to acquisition financing. Income taxes of 34.9 million were higher than last year due most notably to higher pretax earnings and a slightly higher effective tax…

Thanks, Barry. Let me talk briefly about the quarter and then address some key opportunities and challenges we see heading into the fourth quarter. Let me start by thanking our team for delivering a strong quarter, both at the top line with record quarterly sales and at the bottom line with record base earnings, which exceeded consensus estimates. Our businesses were well managed during the quarter as they delivered strong improvements in total productivity and successfully navigated a volatile raw material environment. And looking at the segments, we were very pleased with the record sales and operating profits generated by our Consumer Packaging segment, particularly in the challenging package food market. Segment operating margins remain strong at 12%. Our Paper and Industrial segment continues a strong rebound with sales up nearly 14% and operating profit up 27% to the highest level in three years. This performance was particularly impressive considering the impact of higher recovered paper costs. Results from our Display and Packaging and Protective Solutions segments lagged last year's quarter, but each produced sequential quarterly improvements as we continue to adjust these businesses to changing market conditions. For instance, Display and Packaging continues to ramp production in a new battery pack center near Atlanta. During the quarter, we increased our temporary workforce from about 60 associates to nearly 600, just to handle the tremendous volume demand resulting from four hurricanes in August and September. This ramp up increased our operating cost and negatively impacted results. In Protective Solutions, volume in our legacy consumer protective packaging business and our temperature-assured packaging business were solid, while our components business continues to be impacted by weak demand for automotive sedans. During the quarter we added Clear Lam Plastics to our Consumer Packaging segment and we are very pleased with this new addition.…

Thank you. [Operator Instructions] And our first question is from the line of Ghansham Panjabi with Robert W. Baird. Your line is open.

Hi guys, good morning. I guess first, if you have any color on strength in food within consumer, may be you can give some color as to what drove that, and also what end markets were weaker in the non-food portion within plastics.

Yeah, some of the strength in the consumer packaging relative to food is really thermoforming. As Barry said, it was up a solid 6% on the food service area that represents some new won volume, and an improvement overall I think in frozen foods as well.

And Ghansham, this is Barry, just to follow along the areas that we really saw weakness for non-food related items such as even some of the components sold into automotive and other industrial business.

Okay, and then in terms of price/cost for 3Q, which was up 11 million verses being down during the first half, how should we sort of think about 4Q for that line item, I realize there's lots of moving pieces with OCC and resin et cetera, but just can you give us some parameters to think of that line item.

Yeah obviously, Ghansham, as you said there's a lot of moving pieces, there is the issues related to resin rising, OCC being down, I do want to point out that a lot of the price/cost positive that we're seeing is based upon our procurement productivity, we expect that to continue as we enter the quarter. I wouldn't expect there to be a lot of difference quarter-over-quarter. It's really hard for us to kind of really project it because of the way the odd rolls up, but again I expect a positive fourth quarter as well.

Okay, and just one final one I protective and the call out on automotive for 3Q, I mean those are pretty widely known dynamics in terms of auto production going lower during the quarter. Can you share some early thoughts on 4Q, particularly, in light of some of the auto sales numbers looking pretty good for the last month in the context of the weather disruptions? Thanks so much.

Yeah, I certainly think that we do expect auto sales or automotive in general to be up, obviously for the same reasons that you do. How it impacts sedans is the key part, sedans is where we have the vast majority of our components, so we'll have to see how the buying actually goes and then how it impacts us. It is sedan related verses trucks really.

Got it, thanks so much.

Thank you and our next question comes from the line of George Staphos with Bank of America. Your line is open.

Thank you. Hi everyone, good morning. Thanks for the details. I wanted to kick off Jack perhaps, you'd mentioned, you saw continued opportunities on paraphrasing obviously. Opportunities to consolidating industrial business and optimize the portfolio, so I am assuming that's more of commentary around productivity, perhaps looking at mills, perhaps looking at converting operations. Can you provide a bit more clarity; if I have interrupted it correct in the first place, what you are getting at there?

Well, George, I think you framed it pretty it well. There are some opportunities in the market place on the industrial side, to consolidate both converting operations and potentially paper mills as well. And really when it finally comes down to it, that is really about pulling more assets over an existing asset base. So we've always taken those opportunities, we are really the business of choice to take a look at those kind of opportunities and they come to us and as they comes to us, we take a real hard look at it.

Okay, I know this is maybe getting a little bit too close for comfort, but I'll give it a shot. Should we anticipate that this is one of the themes of the upcoming Analyst Day in December, both your opportunity to optimize your portfolio within that segment and perhaps avail yourself of any opportunities that might be in the marketplace to do that as well and why or why not?

Well, let me just answer like this George, I certainly think the theme in New York is going to be grow and optimize and cover those areas absolutely.

Okay, I appreciate the commentary there. Can you - perhaps you mentioned and I'd missed it, talk a little bit to what was occurring in your flexible volumes being off a bit, was any of it related to supply chain disruptions with the storm and otherwise what else was occurring in that segment that led to some - at least forces our models not here and there some degradation in margin from what we would have otherwise expected?

Well, again the consumer margin hold has down only slightly, so I wouldn't put a lot of weight on that. But, definitively we've heard our customers say that they were impacted a bit by the disruptions caused by the hurricane. There were other disruptions that have occurred over the last couple of years including cyber-attacks in the last couple of quarters, including cyber-attacks that ultimately trickle down to us. It was about our customers volume, with one exception, we had some quality related issues early in the year relative to some particular form of flexible, we are beyond that now, and are re-qualifying, so we expect that to return to us as we enter into the fourth quarter and into 2018. But for the most part, it's driven really by direct impact on our customers from any number of different fronts, including weather cyber in general.

Thanks Jack. My last one and I'll turn it over. You mentioned I thought back to PSEP, some sheer loss in US and Canada, it didn't seem like it was that big of a deal given the performance in the quarter, but nonetheless can you provide a bit more clarity in terms of what was going on there? Thanks, I'll turn it over.

Yeah, let me kind of go back to something I've said now for a couple of quarters in a row. One of the things we realize that you can't be everything to everybody, but who do you want to be everything to? So, we're defining really, who are our customers, who do we really want to focus on and we are building a business and a cost structure to focus on those customers. Consequently some customers that we serve are better served by other suppliers and some of our competitors, so that's a little bit of what you are seeing George.

Thank you, Jack.

Thank you and our next question is from the line of Brian Maguire with Goldman Sachs.

Hi, good morning everyone. Hi Jack, pretty big shift in the recycle paper markets since the last earnings call and you guys are a little bit closer to it, having your recycle and operations there, yeah I just wonder if you could take a dab at what the outlook might be over the next couple of months there, including what's kind to baked into the fourth quarter guidance. And then sort of related to that, big gaps opened up between mixed paper and OCC and just wondering if you guys are looking into more opportunities to use more mixed paper in your feedstock for free or be there?

Yeah, first Brian, how did that do in the second quarter?

Yeah, I think at the end of the day you were pretty right on the industrial real life tier.

That's lucky. As we kind of move into the end of the quarter or the fourth quarter, obviously OCC is down, we expect down, I don't know, maybe another $10 to $20 and then potentially start rising. I think it is kind of all dependent upon when the permits are reissued in China and what happens there, we do think they'll be back in the market. Is it going to be tomorrow, is it going to be later in the fourth quarter or is it going to be in the first quarter, that is much farther for us to predict. But, right now, I guess, our thought process, it will probably be like fourth quarter or early first quarter or sometime in the first quarter, before that all happens. We'll just have to see, but right now, we expect it to trend down a little bit, but not a lot, so it's kind of fixed there.

And just on ability to use more mixed paper in your feed or do you see some capital projects to do that?

Absolutely that spreads over $100 in the Southeast right now and Roger Fuller is really focused on how do we use more and more and more mixed paper internally and we are working hard to do that as well because there is an opportunity there. I don't know what China is going to be, I think it's a 0.3% contaminates per bail, that's a very low standard, asking for a very high standard at very low percentage, is it realistic? I don't know, so that would make it widely available domestically and we are working hard, to see how we use more mixed paper.

Is it safe to say that we require some capital in at least a couple of quarters worth the effort before you could see a kneel mover there?

Yeah, certainly I think it's going to have a lot to do with filters and other types of cleaning systems, but yes, the payback should be pretty strong. So, it we'd be more than really in dispended and more incapable of spending it so, taking a hard look at it.

Okay, just one last one on the topic. Any pushback from customers now that OCC has fallen to sort of pass that through - I know you have some of that's contractually linked and I think positively for you to the September price which was higher, but beyond that any pressure to pass it through in the form of lower URB prices.

Well, certainly we have not seen that yet. Just say there won't be - I think would be kind of naive and there probably will be, but this could go up very, very rapidly just like it did at the first of the year, so we are going to resist that and just talk about the volatility in the market place. There should be no reason to do it because it could rise just as quickly and there were some benefit that they received, when it rose so quickly that we are a little bit behind the recovery curves, so we are kind of making up a little bit of ground right now.

Got it, I mean thanks very much.

Thank you and our next question is from the line of Scott Gaffner with Barclays. Your line is open.

Thanks. Good morning, guys. Just a quick follow up on one of Brian's questions. I think he asked about the OCC forecast that you are actually using in your guidance for the fourth quarter, can you give us that number?

That number is four us.

What you are assuming OCC prices are going to be in the fourth quarter that's actually embedded in the guidance that you've given us?

Yeah, I think I'm not sure what it's pegged at, but starting at the135.

Okay, alright. And then if I look at productivity year-to-date, obviously it's - I think you'd said only about 7 million year-to-date. And the volumes obviously have been a little bit disappointing relative to what you are originally expecting, I mean I think you originally thought they were going to be up 2%, now it seems like maybe flat is a better number. How much of the productivity efforts are linked to the volume and can you get the productivity one in a flat volume environment if it continues into 2018?

Well, certainly manufacturing productivity volume plays a strong - has a strong impact on manufacturing productivity and in order to drive through productivity as we invest, we'd like to pull more volume across the assets, so it does. However, if you step back and look at total productivity for the company, we're actually exceeding our expectations. Some of that comes from, working on your fixed cost structure, consolidating facilities and doing those types of things, that's having a positive impact on fixed cost, but also negatively impacting manufacturing productivities, you shift jobs; the receiving plant just doesn't run the job as well as the plant that you might be closing or shutting down. So, it takes a little bit, so you see some of that in the mix. Again I expected better manufacturing productivity this year driven by an improvement in volume. As we enter next year, we continue to work on right sizing the business. So, I think you are going to see manufacturing productivity continue to improve as we get closer to the right cost structure from a fixed cost standpoint. Did I answer your question?

I think so. The follow up to that has been just on wage inflation, is there anything that you've seen in particularly on hourly wages in 2017 going into 2018, I mean, there is a lot of headlines out there on rising wages, especially for retailers, which is not you guys. But anything in particular, you can highlight that maybe you think that's going to be a bit more of a headwind in 2018 versus 2017?

I certainly think that that possibility exists and it really comes in the acquisition of talent. The biggest issue we're having is getting the right people into the facilities and making sure they are trained properly, so we are going to be willing to pay for someone who's really good and going to stick around, yes. So that could have some impact on wage inflation, but it's more focused around making sure we have the right people and getting the right people in the facility.

Okay, thanks. Good luck in the quarter.

Thanks Scott.

Thank you and the next question is from the line of Debbie Jones with Deutsche Bank.

Hi, thanks for taking my question. I want to make sure that you kind of missed OCC prediction and just be clear, you're saying 135 in Q4 and I just want to connect square that with the southeast price that is currently being close to 130 in October? And then wanted to talk about your container board business?

Yeah, 135 was the price that we pegged into the marked as we looked into the fourth quarter. That was the starting point and I said we expect it to drift down some $10 to $20 dollars over the next 90 days. How that occurs? I'm not exactly sure, but we'll see as they come out. And then I think at the bottom out there and then probably will begin to strengthen a little bit, again, depending upon timing of China.

Okay and then I just - I wanted to talk about your container board business and just how that contributed to earnings in the quarter and just kind of updated thoughts on your strategy for that business?

Well, that hasn't - our strategy for that business hasn't changed. We continue to look for take-up partner for someone to really handle the output of that mill. The mill is running very well and we are pleased with the way it's running. I'd say as far as there was improvement in the mill, but it's left in half of the improvement you see overall on the industrial businesses. The industrial businesses in total performed extremely well, corrugated did - the medium machine was a part of that, but was less than half of that improvement.

Okay, thanks. That's helpful and then can you just provide some clarity on the volume growth two or three quarters in Europe, was that broad based or was there something specific that was driving that?

Yeah, that was pretty broad based across most segments as Barry pointed out minus paper and it's across the area in general, it was in what we call the legacy piece of business, I think you have been generous probably picking up from a manufacture - I think the globe was actually picking up from manufacturing standpoint and Europe experienced some of that, we continue to do well in the areas we call the frontier as well.

Okay, thank you. I'll return it over.

Thank you and our next question is from Chris Manuel with Wells Fargo Securities. Your line is open.

Good morning, gentlemen. I just wanted to kind of drill into two of your small business, Protective Solutions and the light packaging. If I start with Protective Solutions, I know revenue is still up modestly, it sounds like the temperature-assured business and different components that are still doing well. But, I mean the margins had a pretty big fall, like its run about 8% the whole year and run closer to 10 last year. I know you said the automotive businesses is been struggling a bit and you sited some pretty big volumes down, but, what else is happening there, what is the kind of outlook to go forward. If memory serves I thought that the temperature businesses had a better margin than some of the auto businesses. And maybe I am mistaken; can you maybe give us a sense of the mix and what's happening in there?

Yeah, a couple of things there Chris, we got behind the price cost curve early in the business, in total we are just now catching up and expect to be much improved in the fourth quarter of the price cost for Protective Solutions in aggregate. The deleverage that's occurring is really being driven by the automotive decline, that's where we're seeing the deleverage, that's having an impact and that's impacting the earnings and the margin. And the one thing that is probably has been delayed is the number of new drug launches this year on the ThermoSafe side hasn't been as expansive as we thought it would be. I think it's - again that's usually just kind of a taming issue, we're beginning the see some of that occur from a large perspective and that'll have a positive impact. On the relative percentage of that business to sales, I also want to point out however, that our legacy business, which is our paper based Sonopose [ph] business has done quite well. It did experience some of the price increases associated with the paper that came through and are recovering those costs, to contract recess with their buy has been good. So, it's really been a combination of behind the price cost curve being deleveraged on the automotive side and probably not as enough or certainly not to our expectation of the new drug launches on the ThermoSafe side.

Okay. So this -

That's one of the things here.

Yeah, Chris let me add a little bit of color with respect to that as well. So we did see a step up in our ThermoSafe business at the end of the quarter, as for heading into full season. The previous two months were a little quieter than anticipated, the white goods business continues to be strong, performing well across those white goods and HVAC type products. And then the other thing that occurred in that business in the quarter, you heard Jack talk about addressing rooftops, and moving business around, and we did address some of the cost structure in the automotive side where we did shift some business around and did have a negative impact on margins as they were learning how to run through these products and other plans.

Okay, is that discreet component with automotive or just that line of business, is that something that you would still consider or target or take a look at as a long term keep or how it fits in the portfolio?

Yeah, Chris, I really like to avoid talking about in that manner. Let me just say our focus is on thermoform and Flexibles and Protective Solutions especially temperature-assured packaging and our legacy businesses of cans and cores. Does that answer your question?

Sure Jack. I think I am picking up with your line now. Okay, if I can switch gears and go with display packaging. I appreciate that it's a sort of a similar type question, so I mean that business is normally been running in the three or a little bit above three over the last several years or so. I appreciate you did a bunch of work, kind of life for a battery guy, this quarter. Is that just a timing issue as well, I mean? I know that you typically don't like to do these things for practice. So, how does that change, as you kind of look forward or back towards that?

Two issues in this play, well we had some - we had some slow time in the general display business domestically earlier in the year, but what's happening right now is you have a convergence of three issues. We're starting up a new pack center operation in Atlanta for batteries, that now converges with hurricane season comes across that and of course batteries are a huge demand and now they are into the peak season, which is holiday season for batteries. All that's converging and really for us it's a focused to work with the customers to get everything we can out of the door into the stores and it will be what it will be. All that we are trying to ramp up and run the business, so it's going to take - we are going to have to get through the season before it can settle down, then we can begin to go back to ramp the business up properly, get machines working at the proper speeds et cetera and get the business staff right. So, there is a bit of convergence that is negatively impacting that business. Let me have Rob comment otherwise on that

No, I would tell you that you covered it well. It was a vertical start up and nobody could have predict us getting hammered by four hurricanes, worst hurricane season since 1890's and so it put a lot of pressure in. And one of those hurricanes actually came rumbling right through at Atlanta, so it took the operation off line for a couple of days, until we got the people back in. So it was a number of things and as Jack said, our focus as it relates to that business, Europe runs exceptionally well. As it relates to that specific business, we are going to have to work through the fourth quarter because we got to get everything done before the Thanksgiving week, which is when all the products need to be at the stores for holiday season. So, it was a number of factors coming together all at once.

So, I mean the bottom-line for both these businesses and I'll be maybe a little less [indiscernible] as we move into18', profitability at normalized marginal levels should resume, it sounds like.

That would be my expectation, yes.

Okay, thank you guys, good luck.

Thank you and our next question is from the line from Mark Wilde with BMO Capital Markets.

Good morning, Jack. Good morning, Barry. I wondered if you guys can just help me a little bit in terms of kind of puts and takes around raw materials in the fourth quarter. I mean how do you think about sort of - you're getting a big benefit from kind of OCC's falling, but you've taken some pressure from resin rising, as you run through it what's the math?

Well, it's very hard for us to get to that number only because of the way that the information kind of comes up to us to roll up the forward projection in the quarter. But just kind of back of the envelope, I don't see it being a lot different than what was experienced in the third quarter, could be a little bit less, but something like what we saw in the third quarter. Again, that's assuming that our assumptions are right about how everything plays out. Barry any?

No, I think that's it.

Okay, kind of along those lines Jack, just a benefit for you from kind of supplemental OCC or corrugating medium increase from that went in as we moved through the third quarter? Was that a benefit in the third quarter, do you expect more in the fourth quarter?

Yeah, Mark to a degree we were able to really pass that through and get at our customers. Yes, it was a benefit. I don't think there will be anymore in the fourth quarter than we've already gotten, so we'll probably see - we are probably where we are. It's really what we push through from the export side of the businesses as far as prices on the export side have solidified and that's been the strongest past even in the corrugated business.

Is there any way you cold kind of quantify, how much of a lift that is been in the export market?

I don't know it. We can get back to you.

Okay fine, that's fine. Just a couple of other ones, it sounds like when you talk about your North American tube and core business, we're not seeing quite the strength we might expect given the - as strong as the manufacturing numbers, like the IFM is right now, any thoughts on that?

Well certainly the North American businesses being impacted by the continued decline in the paper and printing, and writing in the newsprint area. We were very, very big in that segment, about four other dominant players, so that's negatively impacting the business. Again, I want to reiterate, the other piece that's impacting that business is our conscious decision to focus on a specific customer base and then build a business that's really dedicated to serving that customer - base, so it's causing a little bit of that. But that performance - that business too is probably taken some price from the paper division that's impacting the year-over-year results as well. So, on an integrated basis you don't see it, but if you break the business apart it's absorbing a little bit of cost from internal pricing transfer.

Okay. And then just finally can you share a few thoughts on what all of this turmoil in retailing is or isn't doing to that display and packing business and how you think it might change that business over the next three to five years?

Yeah, let me turn it over to Rob, I think he has a better feel for that.

Yeah, I think there's a couple things as we think about it, we've got - obviously the display business, it's about interrupting your shopping experience if you're walking through Bricks and Mortar and as people migrate more to e-commerce, the intersection is not at the Bricks and Mortar, but it's going to be online and that's where our Trident business is very active in terms of 3D graphics and helping improve the graphics for some of these retailers for you to look at products a little bit differently. But if you look at the macro trend and we believe that this will continue the ability interrupt that shopping experience over time will start to digress.

Okay, great. Thanks, Rob. We'll look forward to seeing you in December.

Okay.

Thank you. And our next question comes from the line of Adam Josephson with KeyBanc. Your line is open.

Good morning, everyone.

Hey, Adam.

Jack, I just want to follow-up to one of Mark's questions. Can you help us with what resin drag on OCC benefit specifically you're expecting in your 4Q guidance in millions roughly.

I just don't have the numbers in that format.

Okay.

And the best I've been able to say is that it's directionally what you'll see in the third quarter probably little bit less.

That will be on a total year-over-year basis

But you're expecting it to roughly offset each other it sounds like.

Well, more than offset again, I think that price cost should be a benefit in the fourth quarter.

Okay. And on resin Jack, what are you expecting? Are you expecting polyethylene to crash in December, January or February as some others do or what are you thinking along those lines?

Well, we're worse in projecting the price of resin almost. Why are you asking this I don't know, but based upon what - we've had a couple of meetings obviously about resin, it's a very important component to us, obviously supply issues are critical. We really don't see this having - going back to more normalized supply well into the first quarter of next year. Rob made a point a few minutes ago, it took six months after Katrina for this to come back online I think that first quarter would put us into that six month time window again. That feels about right based upon what we're hearing and seeing, so maybe more of a first quarter issue before we start seeing the really.

Okay. On OCC Jack, it sounds like you think China's effective ban on recovered paper import is not sustainable. If so why and would you continue to think that if local Chinese OCC prices were to start declining without imports resuming - coming back end?

I'm not sure I actually understood what you asked.

Well, it sounds like you're saying OCC is going to drop by another 10 to 20 before coming back up either late in 4Q or at some point early next year, right. The implication being China has to get back in at some point soon, right. Why do you think that? Why do they have to get back in anytime soon?

Yeah. Well again everything what I tell you is anecdotal. First of all one thing is we hear is that the price for OCC in China right now is between $400 and $500 a ton, the functional equivalent. Well, whatever they may be using be it pulp or some sort of locally collected is roughly $400 to $500 a ton, obviously that is a significant disadvantage globally in the price of OCC, so I think that they need it. The other piece is that a OCC is long been known for a long fibre which is critically important domestically. They don't tend to have that type of fibre supply even though their recycling rates go up, they need an influx of long fibre to make sure that the paper is strong enough is my understanding. So those are a few things. I mean they are building their recycling network, they are improving their recycling rates, but I think they're going to need a OCC for fibre and in order to kind of keep the price in line with more of a global market.

And you know think they'll use pulp as increasingly more of a substitute?

Well, again it's - that's an option. It's a relative - what's the relative cost to pulp. As I said, $400 to $500 a ton the equivalent OCC, again that's anecdotal, but that's pretty expensive.

Right, thanks. Just a couple others, what is your - I know last quarter your volume forecast for the year was flat, it had been up to and then it was flat. Are you still expecting flat and forgive me if I missed that earlier.

Yeah, as we kind of roll into the fourth quarter, we're more or less - it's been down for the first and second quarter, so flat in the third quarter. So that was kind of up and we expect the fourth quarter to be basically flat again year-over-year.

Okay, which would imply down somewhat for that. And just the last one, I mean obviously both significant industrial and consumer exposure. Industrial has obviously been picking up this year; consumer seems to be going in somewhat of the opposite direction at least as it relates to your business. What do you make of the apparent divergence between these two economists?

Yeah, let me go back to something you asked first and I'll get to that question. When I say, flat year-over-year, we expect normal seasonality going into the fourth quarter to be - we get a pretty strong October and now into November and then it falls off in the December. That flow that we expect to be flat, we expect that to be similar, adjusted for seasonality. I just want to make sure you understood what I was saying you. As far as the divergence of those two, Adam, I'm not exactly sure. I do believe the industrial business globally is picking up. I think a lot of it has to do with what I call capital investment there, building infrastructure, building roads, buying large pieces of equipment, oil and gas coming back on. And all of that is on the periphery and customer sentiment or consumer sentiment, although up, that's not really swinging that number one way or the other. I do think now however as you get closer to expansion, particularly expansion in incomes that you might see an improvement in consumer spending as that tends to strengthen, the industrial economy tends to strengthen and then the consumer is beginning to feel it or people are going to feel it in their wallets that may actually impact consumers spending in a more positive manner than it has so far.

Thanks a lot, Jack.

Thank you. And our next question is from the line of Chip Dillon with Vertical Research. Your line is open.

Hi guys, this is Roger [indiscernible] filling in for Chip. How are you?

Fine, good morning. We're good.

Great, so just a couple of questions, firstly, trying to understand versus where we were exactly three months ago in your 2Q release. It seems like the implied Q4 guidance is slightly lower, given of course you did better than the midpoint in Q3, yet every development since then OCC prices, FX has been positive. So is there anything we're missing? We probably would have expected the implied guidance to move marginally higher.

It is higher. We've moved annual guidance up about a penny.

Yeah. But essentially that would be - it's I think $0.015 higher, but $0.02 was above - the Q3 benefit, but was above with the midpoint. So essentially, it's primarily higher in Q3, and lower in -

This is Roger. Two things I'll mention, one, of course year-over-year improvement is very substantial. Going from 62 to 71 at midpoint for our guidance for the fourth quarter is a substantial move. We did not provide guidance other than for the full year, which we again have raised based on performance in the third quarter. So our fourth quarter guidance is fairly stable than what we had been projecting. So I don't know if that doesn't match your model that's one thing, but certainly we're not moving down guidance for the fourth quarter, if anything we're staying relatively flat based upon the puts and takes of rising resin and offsetting by lower OCC.

Okay. That's very helpful. And the last thing I think you can use that you discussed before about composite camps I would be the how do you see the outlook there and potentially would need to add any capacity?

No. I think that certainly, domestically we have plenty of capacity and globally we are adding capacity as our customers expand their product offering. Globally we added Malaysia, those facilities are running full and you have to take advantage of that when we have opportunities to expand.

Perfect. Thank you very much.

Thank you. And our next question is from the line as Steve Chercover with D.A. Davidson. Your line is open.

Thanks. Good morning everyone.

Good morning, Steve.

So I suppose these are primarily associated with consumer, but to start with acquisitions and divestitures were of effectively a wash at the EBIT level. So two questions based on that, do you think the revamped portfolio is better poised for growth than it would be absent the swap?

I do and that the reason I'll tell you that is because we are the blow moulding business because of our relative position and what we saw as a change in that business from morally highly decorated a value added product to less decorated and lower value added product was occurring and also tell you that we're just now bringing these acquisitions and we've only had them for partial years you've not seen the full year-over- year impact. So I think when that kind of plays out it will be a better be a better mix and blow moulding probably had its best year that we have had it in quite some time in that final year but as I said going forward we saw some headwinds to that that we really weren't a position to overcome. Let me ask Rob to anything else on that.

No. I think you answered right we had the blow moulding which had its best third quarter ever last year and we only have partial for the acquisition a Clear Lam and Peninsula business which is heavily skewed towards Q1 and Q2 because that's when the growing season goes on starts to decline towards the end of the years. So I think there's an offset but in terms of portfolio and where we're going strategically absolutely agree we're much better off in terms of where we want to go and these are integral pieces to making that happen.

Really Clear Lam and Peninsula are perimeter.

Yeah. And that's my second question is on the perimeter so once the migration from the centre of the growth restore to the perimeter largely complete you expect to resume growth just on an organic level?

I mean yes. What's it kind of gets in balance you would seem that would grow with food consumption whatever that may be which I've always said is around population and having said that, I think there's tremendous opportunity on the periphery or the perimeter store for innovation, they've not really seen a lot of innovation and in packaging and portion control that's much more throw but easy open reclose type features that we think the combination of these two businesses together going to be bringing some pretty interesting things to these customers.

Is that the new acquisitions are pretty cutting edge. Okay, that's great. And forgive me for one on OCC but I want to go with you something that China has to get back into the markets will just start with that. Is there a long term impact on your cost structure maybe due to sorting or is that something you can address with capital?

Well again from an OCC perspective we don't we didn't really have any issues relative to export it is around mix waste and yes if we wanted to export mix waste. We'd have to do some sort of sorting because of the again the way the industry works. I'm not certain China is going to be willing to pay for that standard that they've established so I don't know if that standard stays or goes. But we'll just see how that plays out. As far as the impact on us high low or indifferent there's at some point when OCC falls below a threshold it becomes more costly for us to collect and to that it does the price recover, but as long as stays above that point. It's kind of neutral to us if it's high priced or low price it is the same impact on the company because of the price of the past two mechanisms on the end products.

Got it, okay. Thank you.

Thank you. And our last question is from the line of Arun Viswanathan with RBC Capital Markets. Your line is open.

Thanks, good morning.

Good morning.

You guys addressed some of those are questions I had as well here, but I just want to get your perspective historically when you have seen some changes in raw materials like this. Do you characterize kind of a steadily rising raw material inflation market is positive or negative high when prices are treat like this on OCC side, do you typically hold on your price increases? Thanks.

If you think about how the price mechanism is reset it usually first of quarter and it's really what happens inside of a quarter that determines impact. Steadily rising or consciously rising would be a negative, constantly falling would be always positive, it's the volatility that makes it kind of really work for us that it sets a point either goes up or there goes down and that creates positive or negative so the volatility that you see really kind of has an overall positive impact overall in fact and we sure slatted over the last ten years eight of those we've had a positive impact on price/cost and it's just the way that contract resets works because it goes up and down as opposed to constantly accelerating or decelerating.

Great, that's helpful. And just as a follow-up on the portfolio you discussed that there is a lot of opportunity in the perimeter. Of the store how do you that kind of or graph that opportunity is there a vibrant pipeline that you're looking at you to increase your position there and if not what would be the opportunities to either - you seeing stabilization in the centre of the store or anything else you can help me put there. Thanks

Well certainly our customers in the centre of the store aren't standing still. We've attended several meetings with customers where they're bringing in a lot of different suppliers up packaging suppliers all kind of suppliers talk about how they improve their products, make them more healthy, make it more palatable appealing to consumers so they're working on that. We certainly see the opportunity on the perimeter, we see it that there's other businesses that we can add to the portfolio that would district in our position on the perimeter and we're concentrating on that. And on the final piece I think that our organizations done a great job of last five years of creating this ability to understand and will really deal with what we call insights where is the market going our ability to bring that not only to adjusting customers but new customers help us create packaging that is truly innovative and we believe can help our customers grow that not only their revenue but their profitability as well.

Thanks.

Thank you. And ladies and gentlemen this concludes our Q&A session. I will turn the call back to Roger Schrum for his final remarks.

Thank you again, Carmen. Sonoco will be hosting its annual breakfast meeting with the financial community on Friday December 1, 2017 in the Villard Room at the New York Palace Hotel at 455 Madison Avenue. Breakfast will begin at 07:30 am and presentations will begin just around 8 o'clock and as usual all have a number of business and strategy updates and of course Barry will be providing you with the first look at our financial targets for the coming year. And of course there will be plenty of time for your questions. As always will be mindful of your time and we should be completed around 09:30 am. Invitations for the event will be going out as soon as we finish this call, so please look for them and if you have any questions just contact my assistant Robin Heater by phone or by email. Those who cannot attend in person, you can join the meeting via webcast at sonoco.com under the Investor Relations website. In closing, let me again thank you for your time today and we certainly appreciate all your questions and you have any further questions please don't hesitate to give us a call. Thanks.

And with that, ladies and gentlemen we conclude our conference for today. Thank you for participating you may all disconnect. Have a wonderful day.