Good day and thank you for standing by. Welcome to the Sonoco fourth quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press star-one-one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-one-one again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Lisa Weeks, Vice President, Investor Relations and Communications. Please go ahead.

Thank you Operator, and thanks to everyone for joining us today for Sonoco’s fourth quarter 2022 and full year 2022 earnings call. Joining me this morning are Howard Coker, President and CEO, Rob Dillard, Chief Financial Officer; and Rodger Fuller, Chief Operating Officer. Last evening, we issued a news release highlighting our financial performance for the fourth quarter and we’ve prepared a presentation that we will reference during this call. The supplements and presentation are available online under the Investor Relations section of our website at www.sonoco.com. As a reminder, during today’s call we will discuss 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. Please take a moment to review the forward-looking statements on Page 2 of the presentation. Additionally, 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 to GAAP measures, is available under the Investor Relations section of our website. For today’s call, Howard will begin by covering a summary of 2022 performance. Rob will then review our detailed financial results for the fourth quarter and the full year and, along with Rodger Fuller, will discuss our guidance update for the first quarter and full year of 2023. Howard will then provide closing comments, followed by a Q&A session. If you will please turn to Slide 4 in our presentation, I will now turn the call over to our CEO, Howard Coker.

Thank you Lisa, and thanks to all of you for joining our call this morning. We really look forward to sharing our transformational results for the past year and provide our outlook for 2023. As we look at 2022, it was a pivotal year for Sonoco where we made significant progress on a strategy to continue growth as a world-class packaging company with a portfolio of highly engineered and sustainable products to support our customers. When I took this role three years ago, we started on a journey to fundamentally change the trajectory of long term profit for the company, and to do that, we had to take a pretty complex business and simplify both our portfolio and the way we run the company to drive improved growth and profitability. These changes were necessary for us to deploy capital more efficiently to our larger core business units and to better integrate acquisitions. In fact, the metal packaging acquisitions was the largest in the company’s history and performance and integration are well ahead of schedule. In parallel, we worked hard on commercial excellence to reposition pricing to less volatile indices while improving the timing of recovery for higher manufacturing costs. It’s taken several years, but the efforts of these programs are reflected in our 2022 results and we expect them to continue well into the future. In 2022, we saw strong year-over-year performance in which revenue grew 30% to $7.3 billion, base EBITDA grew 51% to $1.15 billion, and base earnings per share grew 65% to $6.48. These results obviously were a record in the 24-year history of this company. I couldn’t be more proud of the team for these results, which were achieved in another year which was nothing short of chaotic, all while staying true to the mission of Sonoco and further advancing our ESG and sustainability initiatives, which are intently aligned to the values of this company and a part of our everyday lives. With that, I’m going to turn it over to Rob to take you through the financial results and our forward guidance.

Thanks Howard. I’ll begin on Slide 6 with a review of key financial results for the fourth quarter. Please note that all results discussed will be adjusted to base and all growth metrics will be on a year-over-year basis unless otherwise stated. The GAAP to non-GAAP EPS reconciliation can be found in the appendix to this presentation as well as in the press release. The fourth quarter and full year 2022 financial results again represented Sonoco’s ability to deliver strong results from our core market position despite challenging market conditions. Sales increased 16.5% to $1.7 billion in the fourth quarter. This sales growth was driven primarily by the Sonoco metal packaging acquisition and an 11.5% increase in price as strategic pricing efforts continue to both offset inflation and reflect the value we provide our customers. Volumes in the fourth quarter declined 8.5% due primarily to declining demand in the global URB and converted paper products markets and also due to soft consumer volumes, particularly in the last weeks of the quarter. Base operating profit increased 34% to $184 million and base operating profit margin increased 145 basis points to 11%. This strong performance was due to strategic pricing that offset inflation and a lack of operating leverage due to low volume. While metal packaging was important to these results, excluding metal packaging, operating profit would have grown 28% and operating profit margin would have been 12.2%. The base EBITDA increased 31% to $241 million and base EBITDA margin increased 160 basis points to 14.4%. This margin improvement has been strategic and is backed by ongoing portfolio management actions, footprint optimization activities, value enhancing capital investments, and structural transformation. These actions have enabled a reduction in SG&A as a percent of sales from 9.8% in 2020 and 8.8% in 2021, to…

Thanks Rob. Please turn to Slide 13 for our view on segment performance and drivers for the first quarter and the full year of 2023, which supports our guidance. Across the consumer segment for the first quarter of 2023, we expect sequential volume growth in all products, including metal cans, rigid paper packaging and flexibles. The only exception we expect is plastic packaging for fresh fruits and vegetables, which continues to be hampered by weather issues. On a year-over-year basis for Q1, we expect to see positive volume driven primarily by the one extra month of metal packaging sales as we closed the acquisition at the end of January in 2022. For first quarter earnings, we have projected headwinds in our guidance from lower steel prices and are managing through other raw material costs and availability issues with energy, adhesives and laminates. For consumer, during the first full year of 2023, we see volume increases year-over-year across the portfolio, including mid-single digit volume increases in our metal can business. We’ll continue to invest for growth and productivity led by the increasing demand for sustainable packaging in our rigid and flexible packaging businesses. In our industrial segment, we see continued softness in volumes globally in our converting and trade paper sales in the first quarter. In North America, protective packaging for appliances and household goods remains weak and we expect little near term recovery for products that support residential homebuilding and construction markets. We’re monitoring the Europe and Asia demand recovery carefully as this will be critical to the overall volume outlook in industrial for the full year, which at present we believe will be down low single digits versus 2022 levels. Like Howard mentioned, we’ve transitioned our contracts to more stable indices, putting in better cost recovery mechanisms and current lower input costs on OCC. Our pricing in industrials remains stable. Even with the most recent modest decline of $20 a ton for URB on the RISI index and some expectations of modestly higher OCC costs in 2023, we expect positive price cost benefits this year in industrial. With planned downtime in our global paper operations, we continue to maintain reasonable backlog levels and are ramping up all paper grades on our number 10 machine in Hartsville. In our all other businesses, we continue to have net stable volume demand across this collection of businesses with improved productivity and favorable pricing actions. We expect slight increases in profitability for the all other segment this year. As we look to 2023, we have a keen focus on all forms of productivity as we see the benefits of fewer supply chain and labor disruptions. Over the past several years, we’ve taken decisive actions to help offset inflation and build resiliency in our operating model. At the same time, we’ve invested capital in our core consumer and industrial businesses to position us for long term growth and profitability. With that, I’ll turn it back to Howard.

Okay, thanks Rodger. If you would, turn to Slide 15. The base earnings per share view demonstrated visually here clearly shows the step change in profit improvements for Sonoco. Our full year results include the benefit of metal pricing over the life of the company, which was approximately $0.53. Without this benefit, you would still see a very strong roughly $6 per share earnings for the period. Since 2022, the high return investments we’ve made, while reshaping the portfolio and improving the operating model, have also resulted in an expected 15% CAGR in earnings per share for 2023, based on the midpoint of our 2023 annual guidance. While 2022 was a year of progress, we are only just beginning. We intend to grow profits through organic and M&A investments, as well as better efficiency in how we run the business day in and day out. In closing, if you turn to Slide 16, we carry sustained momentum from our strategy and operating model into the new year, which we believe positions us well to navigate near term volatility. We expect stable operating performance in the coming year where the midpoint of our base EBITDA guidance is essentially the same as last year; but let me be clear, the operating environment does remain very tough right now, but our expected performance reflects our better portfolio and business mix that is expected to be less volatile through business cycles. We expect the first quarter to be the low water mark for the year based on our customer forecasts, with improvements in the second and third quarter and then concluding the year with a more seasonal Q4. With improvements in working capital, we expect free cash flow for the year to be at the midpoint, around $600 million. We also remain focused on $180 million of incremental base EBITDA improvements through 2026 based on additional actions planned to further improve our core businesses and refine our operating model. As always, for Sonoco capital allocation remains a cornerstone of our strategy and we intend to continue increasing dividends while maintaining an investment grade balance sheet. In 2023 and beyond, we’re focused on improving returns on invested capital through organic investments in core accretive acquisitions and through further portfolio rationalizations. I have never been more positive about the long term outlook for Sonoco. At this time, we would be pleased to take any questions that you may have.

Thank you. [Operator instructions] Our first question comes from the line of Kyle White with Deutsche Bank. Your line is now open.

Hey, good morning. Thanks for taking the question. Correct me if I’m wrong, but I think the food can business, I think you said you expect mid-single digit volume increases for this year. What gives you this confidence? I’m curious what is driving that just as we look at some of the industry data that shipments have been, frankly, a little bit weaker than that.

Thanks Kyle, it’s Howard. Yes, if we’re talking from a sequential perspective, and we just have visibility of that through our conversations with our customers, their expectations. A bit of a share lift, but that’s exactly what our customers are reflecting to us and that’s what we’re building into our models.

Got it, so sorry, was that--you’re saying it’s a sequential uplift of mid single digits, it’s not year-over-year?

Well, year-over-year, yes.

Okay. Within that business, just to follow up, can you remind us what the impact was from the sell-through of lower priced steel inventory last year, and then maybe what you’re projecting as a headwind in 1Q and possibly 2Q from that impact?

Yes, for the full year last year, it was $0.54 of detriment. There’s actually--because tin plate is declining this year 10% or so, there’s actually going to be detriment as well this year from metal price overlap from the inventory we’ve carried over. I think that will be an incremental $0.20 to $0.30.

Got it, thank you. I’ll turn it over.

Thank you. Our next question comes from the line of George Staphos from Bank of America. Your line is now open.

Hi everyone, good morning. Thanks for the details. Congratulations on the progress in ’22. I wanted to hit on consumer trends that you’re seeing - you know, you talked about some inventory management by your customers at the end of the quarter. Can you talk about what they’re saying and what you’re seeing as you’re entering 1Q across some of your key, either end markets and product lines, and if you would, kind of differentiate in the center of store paper versus plastic, we get that plastic for fresh is having its issues, but center store, what are you seeing in terms of your paperboard consumer packaging versus your plastic-based packaging?

George, let me try to hit on that, and Rodger, if you’ve got any follow-up. It wasn’t just on the consumer side, it was across the entire portfolio that we just saw tremendous brakes hit towards the latter part of last quarter, and I think that’s across all industry, actually.

Yes.

You know, on the consumer side, we were being told that that really is a reflection of inventory draw-downs, etc. As we’ve entered the quarter, we have not finished out and closed out our January, but looking at the top line, we’re pretty impressed with the comeback that we’re seeing across the board. The plastics side, the real issue there is the weather events both in Florida with the freeze and in California with the floods and the impact on the fresh produce. We’re seeing really solid signs and reflects, I think, this year somewhere in the neighborhood of a 4% to 5% type lift year-over-year on the consumer side. But coming out of the gate, we’re pretty impressed with what we’re seeing right now. Rodger, you got anything to add?

No, you hit it, Howard. I think the modest declines in the rigid paper cans in the fourth quarter, George, as Howard said, seeing a nice recovery in January. Really another nice quarter by flexibles - 4% growth in the fourth quarter, budgeting something 5% for the year and expect more of the same as we head into next year, so the pressure really was from our plastics business.

Understood, that’s very helpful, guys. Secondly, can you talk to what benefit--realizing it’s a moving target, it’s going to be based on the evolution of the market, evolution of your inputs, but what benefit we should expect for Sonoco from commercial excellence this year and other self-help measures, and where we stand in terms of ultimately realizing the targets you would have on both of those during the transformation.

Yes George, it’s Rodger again. Commercial excellence - I mean, you see the results from last year on price cost, and frankly that’s from a couple of years of really hard work around commercial excellence. We’ve talked about what we see in the guidance for the next year from a price cost standpoint, so those efforts continue and continue to pay off. You can see it in our operating margins. On the self-help side, it’s really all about productivity. As you look at 2023, we expect our productivity results to return to more historical levels and then probably plus some with the easing of supply chain and labor issues. George, you know our historical levels of productivity as well as anyone - we expect to get back to those levels and beyond, so the self-help, the structural transformation we did this year is paying off from the operating margin standpoint, so I think across the board we’re still confident in that $180 million over the next several years.

George, let me just add onto that. I’d just talk year-to-year and the journey that we’ve been on. I know there’s a lot of folks on the call that are pent-up to either ask or are thinking about, okay, we’re slowing down, you are in a paper business, you guys have performed extremely well or well at all historically in recessionary type environments. I just want to touch on--you can call it self-help, whatever you want to call it, but the amount of focus and energy that we’ve put over the last four or so years in terms of improving our performance in our industrial sector, and I think you can see that sequentially in terms of the returns that we’ve demonstrated over the periods. But if you look at the profile of the company now and you take--you know, number 10 machine is one, that’s an interesting conversation, and of course we’ve spent a lot of time talking about it, but creating the lowest cost URB mill in North America, certainly within our network on a global basis, and the productivity that’s going to drive and how that is going to be attracting volume from our higher cost mills, and then we’re seeing that happening now, so the benefit from that. But the unseen benefit that we haven’t spent a lot of time talking about is controlling what we can control to reduce the amount of variability within this business. Getting out of corrugated medium, I cannot tell you how volatile being in that market with such a small machine non-vertically integrated that has been for us over the course of the last, call it eight to nine years within the company. Then you add to it the amount of effort on a global basis in terms of consolidations, again focusing only solely on industrial right now, really right-sizing our locations, the investments we’ve made in automation, and I’ve said it before and I’ll repeat it, it feels like we are in a recession from our perspective on industrial, that we are in a much better position today than we have ever been and we do not expect to see the type of variability that we saw pre-engaging in the activities this global team has put forth. So sorry for the dissertation, but I know there’s going to be questions about that. But you know, it kind of gets frustrating when you just look at quarter to quarter and what’d you do yesterday versus tomorrow, and not look at the runway of efforts that this global team has put in place to create the appropriate level of margins that we deserve for the value we generate for the market and our customers.

Howard, we appreciate that. My last quick one is a great segue to that. Within industrial, within paperboard, you talked about the change in the contracts to commercial excellence and productivity. Can you give us some guardrails, i.e. if prices drop in the published indices by X or OCC goes up by Y, what that might mean to the business on a going forward basis, so that we also are managing our forecasts with less volatility or more accuracy? Thanks, and I’ll turn it over.

Yes, thanks George. What I would say is we have assumed that price is going to moderate by X and cost is going to go up by Y, and that’s built into what we feel like is going to happen this year. That’s probably the best I can do, but that’s a good question, I get it. I want folks to understand that we feel like there’s going to be some moderate pressure on price and there’s going to be--OCC cannot stay at 35, so we’ve built an upward look and plan for that in our go-forward models.

All right, I’ll turn it over to the other folks. Thanks.

Thank you. Our next question comes from the line of Cleve Rueckert with UBS. Your line is now open.

Hey, good morning. Thanks for taking our questions. I wanted to follow up on the industrial business while we’re talking about. I’m just curious how much visibility you have into the industrial backlog, and just given what you know about it right now, whether there is the potential for any volume growth in 2023 or if you have visibility on a longer term basis. Then Howard, you just sort of mentioned, what are the puts and takes--you know, I know there’s some transition going on in that business, but if you could give us some help on what you’re seeing for volume growth overall in the plan, that’d be helpful.

Yes, on the backlog question - this is Rodger - industrially, if you look at the fourth quarter, our capacity utilization across our paper business was in line with the published numbers of the industry, and as I said in my opening comments, we did take some lack of business downtime in our global paper system, more in Asia and Europe than in the U.S., and some maintenance downtime to match market demand, and we’re seeing that continue at about the same levels in January. As far as we can see, we think we’ve reached the bottom there and we’re starting to see some slight change to that in the right direction, but again, in our guidance we’re projecting year-over-year down a couple percentage points for industrial, based on what we saw. If you remember, our first two quarters of 2022 were down around 2% year-over-year, so the real deceleration happened in the second half of the year. We expect it to turn the other way. Our toughest volume quarter should be the first quarter, and then we expect some recovery.

Yes, I think what we’re seeing around the world, it looks like we’re bouncing around at bottom, at least first part of January, so expecting to see a bit of a turn. Cleve, can you explain deeper of what you mean by transition beyond what I shared earlier? I don’t want to repeat what I’d shared under George.

I’m just wondering how much headwind you have coming out of container board and whether there’s some other businesses that are growing. I’m just wondering what that balance is, but if you can’t share anymore, that’s fine.

Yes, that’s a good question, Cleve. We definitely look at all the various end markets, and we do sell into a number of end markets and a number of kind of final end markets, and we’ve done a really deep analysis on where did that URB or the product that’s made or facilitated by that URB product ends up going, and it’s a lot more--I’d say that those are much more consumer and stable end markets that you would anticipate with things like container board or tissue and towel in there in a meaningful way, and that’s been a part of our strategy, is to manage the mix, and one reason why we bought RTS, or are in the process of buying RTS, and one reason why we like Skjern, is because it gives us access to really utilizing the utility and the sustainability profile of URB in new markets that we think have some final growth and long term opportunity.

Cleve, you know, that’s one of the things that the team is working on now. We keep talking industrial, and it gets the connotations it’s pure industrial. When you really get into it, there’s a huge consumer connection, and roughly 30%-- I think I’m saying this correctly, 30% of our URB ends up in the trade sale tissue and towel sector. You wouldn’t define that as industrial, so we owe it to you guys, and I know Lisa and the team are working on helping you guys better understand the true nature of cyclicality that would tie to an industrial type slowdown.

That makes a lot of sense. That’s very helpful. So it sounds like maybe more stable--you’re driving towards that stable, less volatile run rate as we move through--

That’s the strategic direction that we are continuing to focus on, yes.

Okay. Then I’m sorry if I missed it earlier, but I just--you know, just sort of recapping at a higher level on the guidance, you’ve talked about, I guess, in two of the three segments, you’ve got up--flat to up volumes, it sounds like price cost is expected to be positive pretty broadly. But you know, ultimately margins and earnings are falling a little bit year-over-year, so I’m just wondering if you could lay out at a high level what the negatives or what the headwinds are. I don’t want to belabor the negative aspects of the guidance, but just so we know what the puts and takes are.

Yes, I can give you that color, Cleve. Consumer volumes, really excited about the volumes this year, mid single digit positive across the board, across the various businesses. All those businesses have great consumer oriented strategies. Price cost in consumer is actually going to be meaningfully negative, and it’s because of this metal price overlap that we talked about, the $0.54 from last year and then another carryover this year from the deflation that we’re having in tin plate, so that will be actually a pretty meaningful negative price cost. Then we’re also anticipating that resin prices will turn over in the year and that will provide some price cost headwind as well, so consumer will actually see relatively meaningful negative price cost, which is a big driver for the bridge between 2022 to 2023. Industrial volumes, yes, we think they’re going to be down low single digits on price, you know, as we’ve talked about down low single digits, but not in such a meaningful way that price cost will be a meaningful headwind for the year. The other business, it’s got so much diversity in it. What we really--the way to really characterize that is normalizing end market trends and taking cost out of those businesses should result in some pretty meaningful operating profit improvement. Then there is just normal way headwind from non-operating items, like depreciation and amortization going up $32 million, interest going up and tax kind of normalizing to the statutory levels that we project at.

Thank you very much. That’s it for me.

Thank you. Our next question comes from the line of Mark Weintraub with Seaport Research Partners. Your line is now open.

Thank you. Just to clarify, I think you’ve stated it, but if the metal pack overlay benefit was $0.54 last year and you’re looking at $0.20 to $0.30, are you expecting a negative $0.74 to $0.84 comparison from metal pack overlay ’23 versus ’22? Is that the way to understand it, or are we just giving up $0.20 of $0.30 of the $0.54?

Yes, it’s not just metal pack because there was--you know, we did have a pretty meaningful tin plate business in RPC, and then--yes, but that is discretely the impact of the positive going away and the negative coming in.

Got it, so that $6.48, we can actually back off--as we’re bridging to the guidance, we can back off $0.74 to $0.84, so that’s--as you say, that’s a very big part of the seeming bridge. Am I getting that correct?

Right, and when we normalize it, I don’t think that that--I think that there’s opportunity there from normal operating conditions versus just taking it away and saying that was all one-time.

Well, would we just add back the $0.20 to $0.30 to get to normal, or is there something above then or different from that?

I don’t think we’ve modeled it that finely, but we definitely have a lot of productivity in that business.

Okay, and then I guess the other elements of the--and thanks for the bridge in the last question. I guess M&A, with RTS, maybe that’s not so big, but how impactful M&A and self-help as we’re thinking about the bridge is that in the calculation of what you think ’23 will be versus ’22?

RTS is not in our forward-looking numbers at this point in time. I think Rodger said, or maybe Rob earlier, that we hope to have that closed by midyear, second half of the year, but we haven’t built that in. Only Sjkern, of course, closed late last year and it’s nominal.

Okay, super. That is helpful. I guess one last try, and understand that there’s sensitivity, but on the URB, can you share, are the contracts still tied directly or indirectly to indexes or is that not even how your product is getting priced anymore?

It’s Rodger. Yes, if you look at in general at our total URB tons, about 60% or so is tied to the RISI [indiscernible] index, 20% or so is still tied to OCC moves, and the final 20% is open market.

Super, that’s very helpful. Thanks so much.

Thank you. Our next question comes from the line of Adam Josephson with Keybanc Capital Markets. Your line is now open.

Thanks, good morning everyone. I hope you’re well. Rob, just a couple of clarification questions to start off, if you don’t mind. The mid single digit consumer volume growth that you’re expecting, is that organic? It just seems like--I don’t remember the last time consumer volumes were up mid single digits in a year. I think that would be a multi-year high growth rate amid these pretty weak conditions, so just trying to understand that volume expectation a little bit better in consumer.

Hey Adam, let me handle at least the macro view of that and let Rob take over from there. We’ve talked really over the last several years, and you can see it in our capital spend pool, of how much new growth capital we’ve put towards our overall businesses, but it’s been disproportionately weighted against the consumer side, so we’ve just got known--I mean, we’ve got a launch that’s going national right now, a new line in Chicago. Actually, I was watching Squawk Box this morning and the CFO of the company was touting a new product, so we’ve got a lot of things going on within our legacy businesses that give us great confidence in terms of what we’re forecasting. Then you take the big hit we took in the end of the fourth quarter and that 4 to 4.5 tangibly in terms of new growth opportunities organic that we’ve talked about in terms of how much capital we’re deploying around the world, as well as a bit of softness towards the end of the fourth quarter, that gives us great confidence there, so. Rob, on the--

Yes Adam, it’s obviously an incredible focus of the business to develop the right strategies and really invest behind them, and you saw that with the flexible business, which had mid single digit growth throughout last year, even in December with the difficult market conditions that everybody saw. But we’ve done this--we’ve got new leadership in the global can business and a really unified strategy. I’d say most of the regions in the world are growing high single digits and Asia is growing double digits in paper cans, and we’re really excited about bringing innovation to that segment and enabling our customers to launch new products there. Plastics is another area that really we’ve invested behind and they’ve started to really grow, so each one of those businesses has mid single digit growth prospects and we’re anticipating that that will come through this year.

Wow, okay. Just to be clear, for the total company, Rob, what is--roughly what is your volume expectation for the year? I assume you’re assuming up something, even with industrial being down.

Yes, up 1% to 2%.

One to two - okay. One other clarification, Rob - on the working capital, you said that you’re expecting a meaningful benefit. Can you be any more specific than that?

Well, I think that we’re targeting at least $100 million of improvement, and mainly through inventory management.

Got it - lower inventories, okay. Howard, you expressed, I think, some frustration about some of the questions you’re getting, and I guess from our seat, most--well, really all paper-based packagers had historic price cost benefits last year, for reasons you’re well aware of, and many experienced historic margin expansion, as did you, so it’s hard for us just on the outside to parse out the rising tide lifting all boats versus these company-specific operational initiatives that you have. Is there any help, more help you can give us in terms of parsing those two out, and understanding how you’re thinking that will shake out this year and thereafter, for that matter?

Yes, first Adam, I deeply apologize if you felt like I was frustrated. I look forward to these calls like you have no idea each quarter and having subsequent meetings within the quarter. But it does become frustrating when--and I’m sorry again, yes, the dissertation, as you may say, but--. You know, again, going back not too many years ago, 50% of this company was a paper industrial company. It’s now in the 30%, 35% range, and that is a tale in and of itself. I can’t answer your question specifically other to say that if there is a frustration, the peanut butter spread of your paper company is a paper company is a paper company, it’s trying to give you guys a little bit more color in terms of how we’re looking at our segment within the paper industry and how we’re doing things to take away as much of the volatility that we historically have had through those self-help actions that I described. All inclusive, as I said, we’re expecting to see price moderation, we’re expecting to see cost inflation as OCC cannot stay where it is forever, but we’ve taken actions over many years to reduce our exposure, be it from ultimate price to controlling productivity, etc. I’m backing down a bit, Adam, so--.

No, I just--no, it’s helpful to hear you, because again, it really is hard for us to know how much of a rising tide lifting all boats situation this is, because we just--we obviously don’t have the visibility that you do. Just a last thing, Rob, just back to the volume for one moment, if you don’t mind. Compared to the 1% to 2% up for the year, what are your expectations for the first quarter? I’m trying to understand how back half weighted that expected volume growth is.

Yes, that’s a good question. Quarter to quarter, I’d say consumer volume growth is coming through now on a year-over-year basis and sequentially. For industrial, we’re kind of--we’re probably going to be flat sequentially with some back end improvement, and we’ve modeled in our core--our base scenario for that business is that we’re going to see kind of a flat recession or a soft landing and then some recovery in the second half of the year, which we think is the consensus from those sources. Then the other businesses are expected to--and we’re seeing kind of a good start to the year that will flow through both--through the full year.

Thanks very much.

Thanks Adam.

Thank you. Our next question comes from the line of Ghansham Panjabi with Baird. Your line is now open.

Hi everybody, this is Matt Krueger sitting in for Ghansham. Thanks for taking my questions. You know, you highlighted customer inventory destocking on the consumer side of the business late into the fourth quarter, but it doesn’t sound like there’s any expectation for lingering impact or carryover in the first quarter. Are you seeing real time improvement here already, and it seems like a quick inventory destock cycle, can you just talk through some of the dynamics that you’ve seen in that business and why the confidence on such a quick improvement in the first quarter here?

This is Rob. I don’t know if I’d even describe it as a quick improvement, but I think Rodger’s already said, if you look at our rigid paper can business globally, we’re seeing strength as we head into January. A lot of it’s coming from the investments that we’ve made in capacity expansions and some new products that are being introduced, so the paper can business looks up for the first quarter, and what we see after one month is meeting expectations. Flexibles also, just like the fourth quarter, continues the strong growth. We expect another strong year from flexibles - they’re volumes’ coming in. They are putting new products into the marketplace and we’re seeing that as additive in the first quarter. Metal cans, we didn’t own the metal can business in first quarter last--in January of last year, but we have seen recovery. Our metal food can business is strong, so in that case we assume it was just inventory reductions end of last year. If you look at aerosol last year, we were somewhat heavily weighted to a couple of segments like disinfectants, spray paints that built up inventory through COVID and they worked that off last year, so we’re seeing some recovery there as well. Again, the only exception is our Primrose Store plastics business for fresh fruits and vegetables, it continues to be very soft. Other than that, we’ve seen a nice start in consumer to the year from a volume standpoint.

Okay, great. That’s helpful. Then switching over to the cost side of things, what do you expect from cost inflation overall for 2023? What do you expect from cost inflation for the raw material basket specifically, and then can you talk through some of the key constituents and the dynamics there for the upcoming year? Thanks.

Yes, we have our base case assumptions for what we think is going to happen for cost. I can tell you kind of discretely with a couple segments, resin we’re anticipating that down with a front-end orientation really kind of driven by a broad basket that we buy. It’s a meaningfully broad basket that we buy, we anticipate that’s going to be down high single digits to double digits. OCC, obviously less important than it has historically been because it’s not really driving price, but as a cost factor, we talked about kind of a meaningful deflation that we saw at the end of last year. We think that that will somewhat recover just to a normal level because the handling cost around OCC is probably $60 to $80 a ton, and so we think that it has to go up to that kind of level in order to just have some stasis. Otherwise, things that you should know is just employee variable labor has definitely gone up and we’re anticipating it to go up, and that will be an inflation headwind through the year. Other costs like fixed and depreciation will also be going up.

Got it, so what is that too for the overall inflation budget for Sonoco?

We don’t--I mean, we look at kind of business by business, and we also measure it against where the price and the ability to get recovery on productivity is, so we don’t have a discrete number that I have off the top of my head, but we can definitely follow up with you.

Okay, great. That’s it for me. I’ll turn it over, thank you.

Thank you. As a reminder, to ask a question at this time, please press star-one-one on your touchtone telephone. Our next question comes from the line of Anthony Pettinari with Citi. Your line is now open.

Good morning. Just a couple follow-ups. I guess on the industrial segment and the volume guidance for industrial volumes down low single digits for the full year, apologies if I missed this, but is there a specific view on volumes for 1Q on a year-over-year basis?

It’s going to be flat sequentially, which is kind of about the same magnitude down as it was in fourth quarter.

Okay, and on RTS, there was some discussion of synergies, and I’m just wondering, you’ve been kind of minority owner of that for a number of years, if you could talk to maybe sources of synergies or maybe just more broadly how you can run that business differently, now that you’re the full owner.

Well, so we’re not the full owner yet. We’re anticipating closing it in the second half of the year. We’re excited about that project as much as we ever have and anticipate the synergies will be--you know, justify the transaction.

Okay, that’s helpful. I’ll turn it over.

Thank you. Our next question comes from the line of Gabe Hajde with Wells Fargo. Your line is now open.

Howard, Rodger, good morning. I’ll leave the Plato references out, I guess, but just from a philosophical standpoint, you guys did a really good job in 2022, you were able to beat and raise over the course of the year. Given the economic backdrop uncertainty and some of the headwinds that you’re facing in tin plate, I guess what some of us are trying to struggle with is why be aggressive seemingly out of the gate, again when Q1 is a little bit below, and/or what gives you the confidence? I mean, you mentioned conversations with customers but just from our vantage point, there is a lot of uncertainty. And then from a geographic perspective in industrial, maybe there’s a knock-on effect from trying to reopen and that’s why you’re feeling better about the second half? Just anything from a geographic standpoint that you could talk about.

Sure Gabe, this is Howard. I’m going to let Rob answer the bulk of the question, just to say. Just so you understand, as we build our bottom-up budgets, we do a very, very thorough--go through a very, very thorough process with all of our business units and understanding the puts and takes that they see in their individual businesses and their markets. We stress-test that so that when we have these conversations and these forecast, based on what we know today, these all feel like very realistic targets for the coming years. Rob maybe will be able to get a little deeper into that, but this is not lick your thumb and see which way the wind’s blowing. I mean, we put a lot of effort over the fourth quarter to--and manage it almost up until the day of announcement of what we think from our teams’ perspective, what we’re seeing from a macro perspective and what our customers are telling us. Rob, I don’t know if you have more to add in that?

Yes, we feel really good about the budget and the guide. We think that it’s very balanced. We think that there’s obviously opportunities that we go after every day, but there are certainly risks that we’ve seen in the last two to three years like we’ve never seen before. I’d say with regards to Q1 and then thinking about the full year, a big part of that really is this metal impact, and that business has seen absolutely unusual inflation and now deflation, which has really meaningful bottom line impacts. So as I said, Q1 total impact just from metal is going to be $0.50 to $0.60, and if you took that away, we would almost be at the $1.85 that we were at last year. I think that industrial certainly has some impact there, but we’re anticipating kind of a good year from productivity and a good year from performance, so rolling those--taking that metal price impact off and then rolling forward, because we think that that metal price impact is most acute in Q1, though with some lingering impact in Q2, but then completely gone in Q3 and Q4, you can think about our year in that regard and get to the number in a pretty straight line.

Yes, I think just finally, Gabe, Slide 14, I spoke to at the end of my prepared remarks. That’s the point here, is that we are on the appropriate trajectory without one-time benefits, and an unbelievable trajectory without the one-time benefits. Look, I won’t belabor the point, we’re really bullish about the long term of the company and the actions that the global teams have been taking over the years that are getting us to this point.

Understood, all right. One last one, I don’t think we’ve mentioned it or it has been mentioned - capex being 325 to 375. I thought we were sort of thinking about a step down post Project Horizon, so maybe you guys found some other discrete projects in there that you’re spending on?

Yes, it’s a big part of our strategy. We’ve been really focused on trying to identify as many good projects as we could, and we’ve got--you know, we are in a really good position right now where we’ve got so many good projects that we’re really managing it and we’re really identifying the best projects and the ones that fit our strategy the best. I’d say that number is a reflection of that. It’s also a reflection of us just being a bigger company than we’ve ever been before, and so as a percent of sales, it’s still kind of in line with what we’ve been targeting, and it’s also as a percent of sales a way for us to kind of continually ratchet up what we call value enhancing projects as a component of that spend, so that we’re getting better and better ROI.

Okay, thank you.

Thank you. Our next question is a follow-up from Adam Josephson with Keybanc Capital Markets. Your line is now open.

Howard, just one follow-up. Thanks for taking it, by the way. George asked a question about what you’re seeing in center of the store in terms of plastic versus paper board, any shifts you’re seeing from one substrate to the other. Just given that you’re uniquely positioned to answer that question, can you--forgive me if you answered it and I didn’t hear it, but can you address that question?

Sure Adam. You know, it’s really where it resonates paper versus plastic and the beachhead right now is really in Europe, and we are seeing a lot of opportunities. We’re commercializing--where once a product was in a plastic container, it’s now coming to one of our all-paper containers. We’re just now rolling out the all-paper solutions that we’ve developed internally, as well as through our acquisition of Can Packaging several years ago just as COVID hit, and so we’ve got some assets coming into North America. We just don’t have the same level of pull here in the U.S. Certainly there’s focus and attention on the CPGs, but in Europe it’s almost a mandate and how quickly can you get us out of substrates such as plastic or flexibles into an all-paper or mostly paper product, so our expectation is that will continue to build on a more enhanced basis here in the United States. We’re seeing it in Asia and South America almost to the equivalent of the situation in Europe.

I appreciate that. Just one--because I read, I think, that the EC was classifying any paperboard packaging with poly coating as technically a single-use plastic, and that was limiting the appeal at least to some CPGs in Europe. Any thoughts on that issue in Europe, and the States for that matter?

Yes, I don’t know if I have a good answer for that because it’s a moving target and it’s by member country in the EC. But there it is required, and we’ve been really focused on paper content percentages, and so we’ve got solutions out there in the market today that are 95% paper, that are able to be recycled in the paper stream. Different countries in the EU, there will be different states that take on different positions here, but the reality is you do need some type of barrier and our focus, again, is to create solutions that have are easily managed through the recycling systems and programs, so we’re actually seeing a positive reaction in countries like the U.K., France, etc. with the products that we’re putting out in the market today.

Thanks very much. Best of luck.

Thank you. Our next follow-up comes from George Staphos with Bank of America. Your line is now open.

Hi guys. Just given that Adam segued that for us, just one quick one then. Why are you comfortable, or are you, that North America won’t see kind of a similar impact as you’re seeing in Europe in terms of your customers trying to get out of plastic to go to paper? Is it from their research or yours, the consumer here cares less, or is there more confidence about the sustainability merit of the plastic packages you and others are bringing to the market and maybe it’s something else? Thanks, and good luck in the quarter. Thanks for taking the last one quick.

Yes George, I’d say I’m just going to wait and see here if the U.S. in totality follows the trends in Europe, but there’s just different--it’s a totally different environment right now, and I don’t know how to answer that. We are not seeing a lot of pressure right now, but these are fit for purpose solutions. We’ve got a lot more space and opportunity to either recycle and/or other options for waste streams. I’d just say just watch the space over time. Typically we do end up following what’s going on in Europe.

Yes, hopefully EPRs have a good benefit, too. All right, guys, I’ll turn it over. Thank you so much.

Thank you, and I’m showing no further questions at this time. I’d like to hand the call back over to Lisa Weeks for closing remarks.

Thank you all for joining our call today, and if you have any follow-up questions regarding our results, please let us know. We look forward to giving you an update on our Q1 results in May and thank you all again, and have a wonderful day.

This concludes today’s conference call. Thank you for participating. You may now disconnect.