Sonoco Products Co. Inc. has experienced delays in the rollout of new plastics business for some customers.
Work that was expected to begin early this year is only now gearing up, CEO Rob Tiede said during a recent conference call to discuss third quarter earnings.
"If you take a look at our plastics business, I think that one of the things that we've clearly seen is a slowdown in terms of our customers rolling out some new products that we have won," he said.
"We thought that early in the first quarter we'd be ramping up some business in our plastics business. As it turns out, we are now ramping it up in the fourth quarter. So we really won't see the benefit of that run rate until the first quarter [of 2020]," Tiede said.
The CEO told stock analysts that Sonoco should see "some additional benefit in the rigid plastic side as we move into the second half of next year."
Changes in the Hartsville, S.C.-based company's thermoforming operations for also have had impact for the company in 2019, the CEO said.
Thermoformed containers are often used to hold fresh foods such as produce and baked goods and are commonly found along the outer ring of grocery stores.
"Perimeter-of-the-store performance also lagged as we continued to deal with operating issues involving the relocation of thermoforming lines into three of our facilities earlier this year," the CEO said.
The relocation of that equipment followed the closure of a thermoforming location in California in 2018, the company said.
"We had a challenge when we shuttered a facility in the fourth quarter of last year. We got some air cover because of the weather in the first quarter of this year. But we were unable to catch up with the inventory levels required. And as a result of that, that cost us some revenue dollars, and it was not inconsequential," Tiede said.
"We're in the process of upgrading equipment and tooling at several of our perimeter-of-the-store thermoforming facilities to improve quality, which should allow us to better meet customer orders more effectively in 2020 and beyond," he said.
Sonoco also said that efforts to cut costs initially set at $15 million were bumped to $20 million. But now Sonoco expects those efforts to achieve $25 million in savings.
"It's a broad spectrum of things," Tiede said about the savings. "We started the process in late January and set out some targets. Our folks have come back with a lot more than what we initially set out, so we've got a game plan going forward,' he said.