Sonoco Q3: Freight Costs Jump $17 Million, Consumer Dip Wipes Out Industrial Gains

Freight costs at Sonoco rose $17 million year over year in the third quarter, and CEO Howard Coker said diesel prices, which had stabilized in early July, accelerated to record levels. The quarter brought a "combination of challenges" to the packaging maker, Coker said during Thursday's earnings call, driven by input cost inflation across raw materials, freight and energy.

"We have spent much of 2026 managing a dynamic business environment," Coker said. The pressure runs through the company's core material base. Old corrugated containers now cost 90% more than a year ago, and Coker said the total cost to produce uncoated recycled paperboard has climbed more than $60 per ton year over year.

Higher productivity partially offset the inflation and lower volumes. Sonoco also captured gains from the $60-per-ton URB price increase that Fastmarkets RISI recognized in September.

Where did the gains and losses land?

The split between segments defined the quarter. The industrial segment contributed $32 million of growth, "driven by healthy trade and URB demand, along with pricing realization in North America," said CFO Paul Joachimczyk. Wire and cable reel sales posted double-digit growth, extending strength executives had previously tied to wire and cable customers building out data centers.

Consumer packaging told the opposite story. Results came in "below our expectations," Coker said. Hot weather and drought in both Europe and the U.S. hit the agriculture sector and reduced demand for food cans. Two bright spots stood out: the international paper can business delivered double-digit volume growth, and U.S. aerosol can demand rose 7%. Even so, the consumer declines largely erased the industrial segment's $32 million in gains.

Is the turnaround plan working?

The three-year Profitability Performance Plan is "gaining momentum and directly offsetting input costs," Joachimczyk said. Savings reached $16 million in Q3, up from $10 million in Q2 and $8 million in Q1. That trajectory tracks toward the low end of the three-year target of $150 million to $200 million. "We remain on track and continue to pursue opportunities to accelerate savings," the CFO said.

Coker detailed structural moves already underway. Sonoco will reorganize again, consolidating the entire global consumer packaging workforce into a single unit rather than geographically oriented units. In August, the company named Ernest Haynes president of global consumer packaging to lead that structure.

Footprint optimization is accelerating alongside the reorganization. Joachimczyk said Sonoco will close two sites in Europe, a move expected to generate $15 million to $20 million of savings in 2027.

What comes next?

The outlook splits along the same segment lines that shaped Q3. Sonoco expects strong industrial demand and steady paper can volumes through year's end, with consumer volumes flat in Q4 and through 2027. Industrial should trend slightly higher in Q4. The company is "bullish on the aerosol side," Coker said, though that segment is unlikely to sustain its 7% growth pace.

One new piece of business anchors the paper can expectation: Mars Snacking announced in September that it will offer some types of crackers in Sonoco's paper cans. "Hopefully you'll be consuming your Cheez-Its in the future out of a Sonoco paper can," Coker said.

On costs, management assumes the inflation shock has largely run its course for 2026. "Right now, we're assuming that things are fairly well leveled out," Coker said — a signal that pricing, productivity savings and the European closures, rather than cost relief, will carry the margin recovery into 2027.