logging in or signing up SON 02 06 Morgan Stanley Basic Materials Stefanie Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 191 Category: Education License: All Rights Reserved Like it (0) Dislike it (0) Added: January 15, 2008 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript February 2006: February 2006Forward-looking Statements: Forward-looking Statements Today’s 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. Information about the Company’s use of non-GAAP financial measures, why management believes presentation of non-GAAP financial measures provides useful information to investors about the Company’s financial condition and results of operations, and the purposes for which management uses non-GAAP financial measures is included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. Pursuant to the requirements of Regulation G, the Company has provided definitions of the non-GAAP measures discussed during this annual meeting with the financial community as well as reconciliations of those measures to the most closely related GAAP measure on its Web site at www.sonoco.com.Business Segments: Business Segments Plastic Containers Global Composite Cans Consumer Flexible Packaging Rigid Paper & Plastic Containers Tubes/Cores/Paper Global Tubes and Cores Global Paper All Other Protective Packaging Paperboard Specialties Wire and Cable Reels Machinery Mfg Molded Extruded Plastics Adhesives Services Service Centers Point-of-Purchase Metal & Plastic ClosuresGrowth Initiatives: Growth Initiatives Change historical ratio of sales from industrial and consumer markets Objective over next 2000 2005 several years Industrial Consumer Industrial Consumer Industrial Consumer 59% 41% 51% 49% 45% 55%Operating Environment (2005): Operating Environment (2005) 2005 Increased costs for: Raw materials Energy Hedging natural gas Positive price/cost relationship Steel surcharge contractual price recovery began 1/05 Paperboard increase $30-40/ton, 6/13/05 Tube and core increase Up to 5%, 6/27/05 Tube and core energy surcharge 1.375%, 9/19/05 Paperboard energy surcharge $10/ton, 9/16/05 Flexible Packaging increase 7 – 9%, 10/5/05 2006 Expect continued pressure on raw materials and energy costs Hedging natural gas Will continue aggressively managing price/cost N.A. paperboard increase $30-$40/ton, 2/6/06 N.A. tube and core increase 6%, 2/20/06 European tube and core increase U.K., central and western 12%-16%, 3/1/06 Nordic region 5%-8%, 3/1/062005 – A Strong Operating Performance: 2005 – A Strong Operating Performance Double-digit increase in sales Record base (non-GAAP) operating earnings Continued strong cash flow generation Ongoing productivity improvement Improved margins Increased volume Positive price/cost relationship U.S. pension plan fully funded at year-end Debt-to-capital ratio reduced to 35.7% Best safety performance in 107-year historyAreas for Improvement in 2006: Areas for Improvement in 2006 Need increased flexible packaging capacity for growing opportunities with major CPGs Reduce working capital Reduce number of underperforming plants Stay focused on putting the right people in the right jobs to execute growth strategy Growth Strategy: Total Packaging Solutions for Consumer Product Companies Substantial Cash Flow Consecutive Quarterly Dividends Since 1925 Average Annual Double-digit Total Returns for Shareholders Strategic Acquisitions and Joint Ventures Strong Balance Sheet Continuous Productivity Improvement Appropriate Cost Structure Geographic Expansion Balance of Sales and Earnings from Consumer and Industrial Markets One Sonoco Face to the Customer Growth Strategy Top Line Growth “Managing the Guts” Base for Growth New Product and Service DevelopmentGrowth Base: Growth Base Dividends Substantial cash flow Dividends Capital expenditures Pension and postretirement Acquisitions Debt reduction Stock buy backs In process of repurchasing 2.5 million shares Current authorization – 5,285,762 shares Strong balance sheetGrowth Strategy: Total Packaging Solutions for Consumer Product Companies Substantial Cash Flow Consecutive Quarterly Dividends Since 1925 Average Annual Double-digit Total Returns for Shareholders Strategic Acquisitions and Joint Ventures Strong Balance Sheet Continuous Productivity Improvement Appropriate Cost Structure Geographic Expansion Balance of Sales and Earnings from Consumer and Industrial Markets One Sonoco Face to the Customer Growth Strategy Top Line Growth “Managing the Guts” New Product and Service Development Base for Growth“Managing the Guts”: “Managing the Guts” Margin Improvement Objective: Return EBIT margins to historical levels Structural cost reductions Working capital management Price micro-management Operating execution Six Sigma Lean Manufacturing Scrap reductionSales Growth Sales Excluding Divestitures ($ in Millions): Sales Growth Sales Excluding Divestitures ($ in Millions) 6.8% CAGR 4.6% CAGRGrowth Strategy: Total Packaging Solutions for Consumer Product Companies Substantial Cash Flow Consecutive Quarterly Dividends Since 1925 Average Annual Double-digit Total Returns for Shareholders Strategic Acquisitions and Joint Ventures Strong Balance Sheet Continuous Productivity Improvement Appropriate Cost Structure Geographic Expansion Balance of Sales and Earnings from Consumer and Industrial Markets One Sonoco Face to the Customer Growth Strategy Top Line Growth “Managing the Guts” New Product and Service Development Base for GrowthTop Line Growth Acquisitions : Top Line Growth Acquisitions Acquisition criteria Not dilutive in first year Meet cost of capital in three to four years Complementary to existing businesses Example: CorrFlex Graphics, LLC One of North America’s largest point-of-purchase (P-O-P) display companies acquired 5/28/04 Accretive in first year; exceeding pro forma expectationsTop Line Growth Joint Ventures: Top Line Growth Joint Ventures Sonoco-Alcore, joint venture with Ahlstrom of Finland Combined Ahlstrom’s and Sonoco’s respective European paper-based tube/core and coreboard operations – 11/02/04 Sonoco owns 64.5%. Can acquire remainder through put/call provisions Similar agreement with Demolli of Italy Sonoco owns 25% with option to acquire 100% after 12/06Top Line Growth Geographic Expansion: Top Line Growth Geographic Expansion Brazil Sonoco is largest tube and core manufacturer Newest venture: steel easyopen closures China Sonoco is largest tube and core manufacturer Five converting plants/one paper mill A sixth tube and core plant to open in 2006 Germany New service center for P&G European baby care division Also manages Mitsubishi tube and core requirements Poland New service center for P&G/Gillette Sonoco moved with Gillette from U.K. to Poland Turkey Completed second tube and core plant in 2005 Principally serving textile industry India Reviewing entry opportunitiesTop Line Growth Total Solutions Strategy: Top Line Growth Total Solutions Strategy Creation Package development Filling Market testing Brand artwork management Graphics reproduction: Laser cylinder engraving Consumer Products Delivery of packaged products to customer’s destination Service Centers - Custom packing - Fulfillment - Purchasing - Inventory control Consumer Packaging Development Center Sonoco Trident P&G The Body Shop Keating JV MasterFoods Phillip Morris Internal Rigid paper and plastic containers Kraft P&G Flexible Packaging MasterFoods Kraft Metal and plastic closures Ball Planters Point-of-purchase P&G Gillette Sonoco CorrFlex P&G Gillette Packaging Services P&G Gillette razors Gillette blades Hewlett-Packard inkjet cartridges P&G Germany baby care products Packaging Services Sonoco CorrFlex P&G Gillette A full range of packaging supply chain products and services for consumer product companiesTop Line Growth Total Solutions Strategy: Top Line Growth Total Solutions Strategy “One Sonoco Face” to the customer Our large consumer product goods (CPG) customers want fewer suppliers, capable of handling an increasingly wider range of their packaging supply chain needs These large CPG customers are interested in building stronger alliances with strategic vendors They want a single point of account leadership – “One Sonoco Face” – to simplify their relationship across multiple Sonoco businesses Sonoco is uniquely able to take advantage of this opportunity because we have the broadest offerings of packaging products and services in the industry We have assigned seasoned executives to handle these relationshipsTop Line Growth New Product and Market Development: Increased expenditures and new patent applications annually since 2001 Sales from new products alone reached $74.7 million in 2005 New products = those commercialized two years or less Objective is to average in the $100 to $125 million range of annual sales from new products Top Line Growth New Product and Market DevelopmentTop Line Growth New Products and Technology Extensions Flexible Packaging : Top Line Growth New Products and Technology Extensions Flexible Packaging Kraft’s Snack ‘n Seal™ technologyTop Line Growth New Products and Technology Extensions Flexible Packaging: Top Line Growth New Products and Technology Extensions Flexible Packaging Flexible stick packs for powdered beverages Gum package with laser-scored opening Retort pouches stand out in stores and provide consumer convenienceTop Line Growth New Products and Technology Extensions Packaging Services: Top Line Growth New Products and Technology Extensions Packaging Services PointofPurchase displayTop Line Growth New Products and Technology Extensions Rigid Paper: Top Line Growth New Products and Technology Extensions Rigid Paper SonoWrap™ single-wrap packTop Line Growth New Products and Technology Extensions Rigid Plastic: Top Line Growth New Products and Technology Extensions Rigid Plastic Thermoformed containers are portable, non-breakable and can be microwaveableTop Line Growth New Products and Technology Extensions Rigid Plastic: Top Line Growth New Products and Technology Extensions Rigid Plastic Molded plastic squeeze tubes for adhesives and sealantsTop Line Growth New Products and Technology Extensions Rigid Plastic: Top Line Growth New Products and Technology Extensions Rigid Plastic Multi-wall, high-barrier self-heating containerTop Line Growth New Products and Technology Extensions Closures: Easy-open closures serving many markets including coffee; pet foods; infant formulas; soups and meats; prepared pastas; fruits and vegetables Top Line Growth New Products and Technology Extensions ClosuresTop Line Growth Technology Enhancements Sonotube Forms with Rainguard™ Technology: Top Line Growth Technology Enhancements Sonotube Forms with Rainguard™ Technology Financial Review : Financial Review Earnings per Share: Earnings per ShareEarnings per Share and Base EPS: Earnings per Share and Base EPSReconciliation of EPS to Base EPS: Reconciliation of EPS to Base EPS 2002 2003 2004 2005 Diluted EPS, as reported 1.39 $ 1.43 $ 1.53 $ 1.61 $ Adjusted for: Restructuring .09 .38 .14 .13 Recognition of Tax Benefits - - (.09) - Tax on Repatriation - - - .10 Legal Settlement - - .03 - Exec Life Insurance - - .04 - Environmental Reserve - - - .08 Gain on Sale of Disc. Ops. - (.51) - - Base EPS 1.48 $ 1.30 $ 1.65 $ 1.92 $ Base P&L Summary 4th Qtr: 2005 vs. 2004 ($ Millions, except Base EPS): Base P&L Summary 4th Qtr: 2005 vs. 2004 ($ Millions, except Base EPS) 2005 2004 % Better/(Worse) Net sales 954.9 $ 885.0 $ 7.9% Base EBIT 91.0 $ 68.1 $ 33.5% Base earnings 58.4 $ 42.8 $ 36.3% Base EPS, diluted .58 $ .43 $ 34.9%Base P&L Summary 2005 vs. 2004 ($ Millions, except Base EPS): Base P&L Summary 2005 vs. 2004 ($ Millions, except Base EPS) 2005 2004 % Better/(Worse) Net sales 3,528.6 $ 3,155.4 $ 11.8% Base EBIT 308.5 $ 268.5 $ 14.9% Base earnings 192.6 $ 162.9 $ 18.3% Base EPS, diluted 1.92 $ 1.65 $ 16.5%Sales Bridge 4th Qtr: 2005 vs. 2004 ($Millions): Sales Bridge 4th Qtr: 2005 vs. 2004 ($Millions) 2004 Net Sales 885.0 $ Volume / Mix 43.2 Price 11.9 Acquisitions/Divestitures 11.0 Exchange / Other 3.8 2005 Net Sales 954.9 $ Comments Consumer segment and Packaging Services, Wire and Cable Reels and Protective Packaging Higher average prices in most consumer packaging businesses, Wire/Cable Reels and Molded Plastics Primarily related to Sonoco Alcore JV Impact of dollar weakening against foreign currenciesSales Bridge 2005 vs. 2004 ($ Millions): Sales Bridge 2005 vs. 2004 ($ Millions) 2004 Net Sales 3,155.4 $ Volume / Mix 100.0 Price 60.4 Acquisitions/Divestitures 166.6 Exchange / Other 46.1 2005 Net Sales 3,528.6 $ Comments Consumer segment and Packaging Services, Wire and Cable Reels and Protective Packaging Primarily Consumer segment, but higher average prices in most all business units Approximately half related to Sonoco Alcore JV and half related to acquisition of CorrFlex Impact of dollar weakening against foreign currencies Base EBIT Bridge 4th Qtr: 2005 vs. 2004 ($Millions): Base EBIT Bridge 4th Qtr: 2005 vs. 2004 ($Millions) 2004 Base EBIT 68.1 $ Volume / Mix 6.7 Price / Cost 8.0 Productivity 14.1 Other (6.1) 2005 Base EBIT 91.0 $ Comments Consumer segment and Packaging Services, Wire and Cable Reels and Protective Packaging Lower OCC costs in North American paper operations; Material purchasing savings in Consumer segment Engineered Carriers/Paper N. A., Rigid Paper and Plastics N. A., Flexible Packaging, and Packaging Services were main drivers Increases in energy, freight, and wages/salaries, and Asian impairment partially offset by Gains on sale of two operations Base EBIT Bridge 2005 vs. 2004 ($ Millions): Base EBIT Bridge 2005 vs. 2004 ($ Millions) 2004 Base EBIT 268.5 $ Volume / Mix (.5) Price / Cost 15.7 Productivity 46.1 Other (21.3) 2005 Base EBIT 308.5 $ Comments Volume decreases and unfav. mix in Engineered Carriers/Paper segment offset fav. vol/mix in Consumer and Packaging Services segments 4th quarter drop in OCC costs, material purchasing savings in Sonoco CorrFlex, higher prices in Molded Plastics business and Wire/Cable Reels Increases in Energy, Freight, and Wages/salaries, Asia impairment partially offset by Acquisitions, Gains on sale of two operations Engineered Carriers/Paper N. A., Rigid Paper and Plastics N. A., Flexible Packaging, Packaging Services and Wire/Cable Reels were main drivers Cash Flow YTD through 4th Quarter ($ Millions): Cash Flow YTD through 4th Quarter ($ Millions) 12/31/2005 12/31/2004 $ Change Net Income 161.9 $ 151.2 $ 10.6 $ Asset Impairment 9.5 6.2 3.4 Depreciation and Amortization 163.1 163.9 (.9) NWC Change (38.5) (48.9) 10.4 Pension / FAS 106 Funding (77.0) (33.4) (43.7) Other 8.4 13.2 (4.7) Operating Cash 227.4 $ 252.2 $ (24.8) $ Use of Cash: Capital Expenditures (129.1) (119.8) (9.3) Dividends (90.1) (85.1) (5.1) Balance Sheet ($Millions): Balance Sheet ($Millions) Note: Debt / Total Capital ratio is adjusted to increase capital by deferred taxes. 2006 EPS Guidance: 2006 EPS Guidance 1st Quarter $.41 - $.44 Full Year $1.94Conclusions and Outlook Why Invest in Sonoco?: Conclusions and Outlook Why Invest in Sonoco? Effective management of price/cost Through 2006, expect average annual cash flow from operations of approximately $300 million, excluding any discretionary pension plan contributions, with capital expenditures from $125 million to $150 million annually Volumes and margins improving in Consumer Packaging Aggressive new product development, geographic expansion and integration of new acquisitions and joint venturesConclusions and Outlook cont’d Why Invest in Sonoco?: Conclusions and Outlook cont’d Why Invest in Sonoco? Dividends yielding more than 50% higher than the S&P average and paid consistently since 1925 First quarter 2006 EPS estimated in range of $.41 to $.44 per diluted share, including approximately $.02 related to expensing of stock options and excluding restructuring charges and/or significant general economic changes First quarter usually weakest Fullyear 2006 EPS estimated in range of $1.90 to $1.94, including ($.03) for expensing of stock options and excluding onetime items and/or significant general economic changes Company expects to be at the high end of that range With greater clarity into year, will determine if guidance should be readdressed You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
SON 02 06 Morgan Stanley Basic Materials Stefanie Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 191 Category: Education License: All Rights Reserved Like it (0) Dislike it (0) Added: January 15, 2008 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript February 2006: February 2006Forward-looking Statements: Forward-looking Statements Today’s 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. Information about the Company’s use of non-GAAP financial measures, why management believes presentation of non-GAAP financial measures provides useful information to investors about the Company’s financial condition and results of operations, and the purposes for which management uses non-GAAP financial measures is included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. Pursuant to the requirements of Regulation G, the Company has provided definitions of the non-GAAP measures discussed during this annual meeting with the financial community as well as reconciliations of those measures to the most closely related GAAP measure on its Web site at www.sonoco.com.Business Segments: Business Segments Plastic Containers Global Composite Cans Consumer Flexible Packaging Rigid Paper & Plastic Containers Tubes/Cores/Paper Global Tubes and Cores Global Paper All Other Protective Packaging Paperboard Specialties Wire and Cable Reels Machinery Mfg Molded Extruded Plastics Adhesives Services Service Centers Point-of-Purchase Metal & Plastic ClosuresGrowth Initiatives: Growth Initiatives Change historical ratio of sales from industrial and consumer markets Objective over next 2000 2005 several years Industrial Consumer Industrial Consumer Industrial Consumer 59% 41% 51% 49% 45% 55%Operating Environment (2005): Operating Environment (2005) 2005 Increased costs for: Raw materials Energy Hedging natural gas Positive price/cost relationship Steel surcharge contractual price recovery began 1/05 Paperboard increase $30-40/ton, 6/13/05 Tube and core increase Up to 5%, 6/27/05 Tube and core energy surcharge 1.375%, 9/19/05 Paperboard energy surcharge $10/ton, 9/16/05 Flexible Packaging increase 7 – 9%, 10/5/05 2006 Expect continued pressure on raw materials and energy costs Hedging natural gas Will continue aggressively managing price/cost N.A. paperboard increase $30-$40/ton, 2/6/06 N.A. tube and core increase 6%, 2/20/06 European tube and core increase U.K., central and western 12%-16%, 3/1/06 Nordic region 5%-8%, 3/1/062005 – A Strong Operating Performance: 2005 – A Strong Operating Performance Double-digit increase in sales Record base (non-GAAP) operating earnings Continued strong cash flow generation Ongoing productivity improvement Improved margins Increased volume Positive price/cost relationship U.S. pension plan fully funded at year-end Debt-to-capital ratio reduced to 35.7% Best safety performance in 107-year historyAreas for Improvement in 2006: Areas for Improvement in 2006 Need increased flexible packaging capacity for growing opportunities with major CPGs Reduce working capital Reduce number of underperforming plants Stay focused on putting the right people in the right jobs to execute growth strategy Growth Strategy: Total Packaging Solutions for Consumer Product Companies Substantial Cash Flow Consecutive Quarterly Dividends Since 1925 Average Annual Double-digit Total Returns for Shareholders Strategic Acquisitions and Joint Ventures Strong Balance Sheet Continuous Productivity Improvement Appropriate Cost Structure Geographic Expansion Balance of Sales and Earnings from Consumer and Industrial Markets One Sonoco Face to the Customer Growth Strategy Top Line Growth “Managing the Guts” Base for Growth New Product and Service DevelopmentGrowth Base: Growth Base Dividends Substantial cash flow Dividends Capital expenditures Pension and postretirement Acquisitions Debt reduction Stock buy backs In process of repurchasing 2.5 million shares Current authorization – 5,285,762 shares Strong balance sheetGrowth Strategy: Total Packaging Solutions for Consumer Product Companies Substantial Cash Flow Consecutive Quarterly Dividends Since 1925 Average Annual Double-digit Total Returns for Shareholders Strategic Acquisitions and Joint Ventures Strong Balance Sheet Continuous Productivity Improvement Appropriate Cost Structure Geographic Expansion Balance of Sales and Earnings from Consumer and Industrial Markets One Sonoco Face to the Customer Growth Strategy Top Line Growth “Managing the Guts” New Product and Service Development Base for Growth“Managing the Guts”: “Managing the Guts” Margin Improvement Objective: Return EBIT margins to historical levels Structural cost reductions Working capital management Price micro-management Operating execution Six Sigma Lean Manufacturing Scrap reductionSales Growth Sales Excluding Divestitures ($ in Millions): Sales Growth Sales Excluding Divestitures ($ in Millions) 6.8% CAGR 4.6% CAGRGrowth Strategy: Total Packaging Solutions for Consumer Product Companies Substantial Cash Flow Consecutive Quarterly Dividends Since 1925 Average Annual Double-digit Total Returns for Shareholders Strategic Acquisitions and Joint Ventures Strong Balance Sheet Continuous Productivity Improvement Appropriate Cost Structure Geographic Expansion Balance of Sales and Earnings from Consumer and Industrial Markets One Sonoco Face to the Customer Growth Strategy Top Line Growth “Managing the Guts” New Product and Service Development Base for GrowthTop Line Growth Acquisitions : Top Line Growth Acquisitions Acquisition criteria Not dilutive in first year Meet cost of capital in three to four years Complementary to existing businesses Example: CorrFlex Graphics, LLC One of North America’s largest point-of-purchase (P-O-P) display companies acquired 5/28/04 Accretive in first year; exceeding pro forma expectationsTop Line Growth Joint Ventures: Top Line Growth Joint Ventures Sonoco-Alcore, joint venture with Ahlstrom of Finland Combined Ahlstrom’s and Sonoco’s respective European paper-based tube/core and coreboard operations – 11/02/04 Sonoco owns 64.5%. Can acquire remainder through put/call provisions Similar agreement with Demolli of Italy Sonoco owns 25% with option to acquire 100% after 12/06Top Line Growth Geographic Expansion: Top Line Growth Geographic Expansion Brazil Sonoco is largest tube and core manufacturer Newest venture: steel easyopen closures China Sonoco is largest tube and core manufacturer Five converting plants/one paper mill A sixth tube and core plant to open in 2006 Germany New service center for P&G European baby care division Also manages Mitsubishi tube and core requirements Poland New service center for P&G/Gillette Sonoco moved with Gillette from U.K. to Poland Turkey Completed second tube and core plant in 2005 Principally serving textile industry India Reviewing entry opportunitiesTop Line Growth Total Solutions Strategy: Top Line Growth Total Solutions Strategy Creation Package development Filling Market testing Brand artwork management Graphics reproduction: Laser cylinder engraving Consumer Products Delivery of packaged products to customer’s destination Service Centers - Custom packing - Fulfillment - Purchasing - Inventory control Consumer Packaging Development Center Sonoco Trident P&G The Body Shop Keating JV MasterFoods Phillip Morris Internal Rigid paper and plastic containers Kraft P&G Flexible Packaging MasterFoods Kraft Metal and plastic closures Ball Planters Point-of-purchase P&G Gillette Sonoco CorrFlex P&G Gillette Packaging Services P&G Gillette razors Gillette blades Hewlett-Packard inkjet cartridges P&G Germany baby care products Packaging Services Sonoco CorrFlex P&G Gillette A full range of packaging supply chain products and services for consumer product companiesTop Line Growth Total Solutions Strategy: Top Line Growth Total Solutions Strategy “One Sonoco Face” to the customer Our large consumer product goods (CPG) customers want fewer suppliers, capable of handling an increasingly wider range of their packaging supply chain needs These large CPG customers are interested in building stronger alliances with strategic vendors They want a single point of account leadership – “One Sonoco Face” – to simplify their relationship across multiple Sonoco businesses Sonoco is uniquely able to take advantage of this opportunity because we have the broadest offerings of packaging products and services in the industry We have assigned seasoned executives to handle these relationshipsTop Line Growth New Product and Market Development: Increased expenditures and new patent applications annually since 2001 Sales from new products alone reached $74.7 million in 2005 New products = those commercialized two years or less Objective is to average in the $100 to $125 million range of annual sales from new products Top Line Growth New Product and Market DevelopmentTop Line Growth New Products and Technology Extensions Flexible Packaging : Top Line Growth New Products and Technology Extensions Flexible Packaging Kraft’s Snack ‘n Seal™ technologyTop Line Growth New Products and Technology Extensions Flexible Packaging: Top Line Growth New Products and Technology Extensions Flexible Packaging Flexible stick packs for powdered beverages Gum package with laser-scored opening Retort pouches stand out in stores and provide consumer convenienceTop Line Growth New Products and Technology Extensions Packaging Services: Top Line Growth New Products and Technology Extensions Packaging Services PointofPurchase displayTop Line Growth New Products and Technology Extensions Rigid Paper: Top Line Growth New Products and Technology Extensions Rigid Paper SonoWrap™ single-wrap packTop Line Growth New Products and Technology Extensions Rigid Plastic: Top Line Growth New Products and Technology Extensions Rigid Plastic Thermoformed containers are portable, non-breakable and can be microwaveableTop Line Growth New Products and Technology Extensions Rigid Plastic: Top Line Growth New Products and Technology Extensions Rigid Plastic Molded plastic squeeze tubes for adhesives and sealantsTop Line Growth New Products and Technology Extensions Rigid Plastic: Top Line Growth New Products and Technology Extensions Rigid Plastic Multi-wall, high-barrier self-heating containerTop Line Growth New Products and Technology Extensions Closures: Easy-open closures serving many markets including coffee; pet foods; infant formulas; soups and meats; prepared pastas; fruits and vegetables Top Line Growth New Products and Technology Extensions ClosuresTop Line Growth Technology Enhancements Sonotube Forms with Rainguard™ Technology: Top Line Growth Technology Enhancements Sonotube Forms with Rainguard™ Technology Financial Review : Financial Review Earnings per Share: Earnings per ShareEarnings per Share and Base EPS: Earnings per Share and Base EPSReconciliation of EPS to Base EPS: Reconciliation of EPS to Base EPS 2002 2003 2004 2005 Diluted EPS, as reported 1.39 $ 1.43 $ 1.53 $ 1.61 $ Adjusted for: Restructuring .09 .38 .14 .13 Recognition of Tax Benefits - - (.09) - Tax on Repatriation - - - .10 Legal Settlement - - .03 - Exec Life Insurance - - .04 - Environmental Reserve - - - .08 Gain on Sale of Disc. Ops. - (.51) - - Base EPS 1.48 $ 1.30 $ 1.65 $ 1.92 $ Base P&L Summary 4th Qtr: 2005 vs. 2004 ($ Millions, except Base EPS): Base P&L Summary 4th Qtr: 2005 vs. 2004 ($ Millions, except Base EPS) 2005 2004 % Better/(Worse) Net sales 954.9 $ 885.0 $ 7.9% Base EBIT 91.0 $ 68.1 $ 33.5% Base earnings 58.4 $ 42.8 $ 36.3% Base EPS, diluted .58 $ .43 $ 34.9%Base P&L Summary 2005 vs. 2004 ($ Millions, except Base EPS): Base P&L Summary 2005 vs. 2004 ($ Millions, except Base EPS) 2005 2004 % Better/(Worse) Net sales 3,528.6 $ 3,155.4 $ 11.8% Base EBIT 308.5 $ 268.5 $ 14.9% Base earnings 192.6 $ 162.9 $ 18.3% Base EPS, diluted 1.92 $ 1.65 $ 16.5%Sales Bridge 4th Qtr: 2005 vs. 2004 ($Millions): Sales Bridge 4th Qtr: 2005 vs. 2004 ($Millions) 2004 Net Sales 885.0 $ Volume / Mix 43.2 Price 11.9 Acquisitions/Divestitures 11.0 Exchange / Other 3.8 2005 Net Sales 954.9 $ Comments Consumer segment and Packaging Services, Wire and Cable Reels and Protective Packaging Higher average prices in most consumer packaging businesses, Wire/Cable Reels and Molded Plastics Primarily related to Sonoco Alcore JV Impact of dollar weakening against foreign currenciesSales Bridge 2005 vs. 2004 ($ Millions): Sales Bridge 2005 vs. 2004 ($ Millions) 2004 Net Sales 3,155.4 $ Volume / Mix 100.0 Price 60.4 Acquisitions/Divestitures 166.6 Exchange / Other 46.1 2005 Net Sales 3,528.6 $ Comments Consumer segment and Packaging Services, Wire and Cable Reels and Protective Packaging Primarily Consumer segment, but higher average prices in most all business units Approximately half related to Sonoco Alcore JV and half related to acquisition of CorrFlex Impact of dollar weakening against foreign currencies Base EBIT Bridge 4th Qtr: 2005 vs. 2004 ($Millions): Base EBIT Bridge 4th Qtr: 2005 vs. 2004 ($Millions) 2004 Base EBIT 68.1 $ Volume / Mix 6.7 Price / Cost 8.0 Productivity 14.1 Other (6.1) 2005 Base EBIT 91.0 $ Comments Consumer segment and Packaging Services, Wire and Cable Reels and Protective Packaging Lower OCC costs in North American paper operations; Material purchasing savings in Consumer segment Engineered Carriers/Paper N. A., Rigid Paper and Plastics N. A., Flexible Packaging, and Packaging Services were main drivers Increases in energy, freight, and wages/salaries, and Asian impairment partially offset by Gains on sale of two operations Base EBIT Bridge 2005 vs. 2004 ($ Millions): Base EBIT Bridge 2005 vs. 2004 ($ Millions) 2004 Base EBIT 268.5 $ Volume / Mix (.5) Price / Cost 15.7 Productivity 46.1 Other (21.3) 2005 Base EBIT 308.5 $ Comments Volume decreases and unfav. mix in Engineered Carriers/Paper segment offset fav. vol/mix in Consumer and Packaging Services segments 4th quarter drop in OCC costs, material purchasing savings in Sonoco CorrFlex, higher prices in Molded Plastics business and Wire/Cable Reels Increases in Energy, Freight, and Wages/salaries, Asia impairment partially offset by Acquisitions, Gains on sale of two operations Engineered Carriers/Paper N. A., Rigid Paper and Plastics N. A., Flexible Packaging, Packaging Services and Wire/Cable Reels were main drivers Cash Flow YTD through 4th Quarter ($ Millions): Cash Flow YTD through 4th Quarter ($ Millions) 12/31/2005 12/31/2004 $ Change Net Income 161.9 $ 151.2 $ 10.6 $ Asset Impairment 9.5 6.2 3.4 Depreciation and Amortization 163.1 163.9 (.9) NWC Change (38.5) (48.9) 10.4 Pension / FAS 106 Funding (77.0) (33.4) (43.7) Other 8.4 13.2 (4.7) Operating Cash 227.4 $ 252.2 $ (24.8) $ Use of Cash: Capital Expenditures (129.1) (119.8) (9.3) Dividends (90.1) (85.1) (5.1) Balance Sheet ($Millions): Balance Sheet ($Millions) Note: Debt / Total Capital ratio is adjusted to increase capital by deferred taxes. 2006 EPS Guidance: 2006 EPS Guidance 1st Quarter $.41 - $.44 Full Year $1.94Conclusions and Outlook Why Invest in Sonoco?: Conclusions and Outlook Why Invest in Sonoco? Effective management of price/cost Through 2006, expect average annual cash flow from operations of approximately $300 million, excluding any discretionary pension plan contributions, with capital expenditures from $125 million to $150 million annually Volumes and margins improving in Consumer Packaging Aggressive new product development, geographic expansion and integration of new acquisitions and joint venturesConclusions and Outlook cont’d Why Invest in Sonoco?: Conclusions and Outlook cont’d Why Invest in Sonoco? Dividends yielding more than 50% higher than the S&P average and paid consistently since 1925 First quarter 2006 EPS estimated in range of $.41 to $.44 per diluted share, including approximately $.02 related to expensing of stock options and excluding restructuring charges and/or significant general economic changes First quarter usually weakest Fullyear 2006 EPS estimated in range of $1.90 to $1.94, including ($.03) for expensing of stock options and excluding onetime items and/or significant general economic changes Company expects to be at the high end of that range With greater clarity into year, will determine if guidance should be readdressed