SONOCO PRODUCTS CO 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. FORWARD LOOKING STATEMENTS Statements included in this Quarterly Report on Form 10-Q that are not historical in nature, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, Sonoco Products Company (the “Company” or “Sonoco”) and its representatives may from time to time make other oral or written statements that are also “forward-looking statements.” Words such as “aim,” “anticipate,” “assume,” “believe,” “can,” “committed,” “consider,” “continue,” “could,” “develop,” “estimate,” “expect,” “forecast,” “foresee,” “future,” “goal,” “guidance,” “intend,” “is designed to,” “likely,” “maintain,” “may,” “might,” “objective,” “ongoing,” “opportunity,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “strategy,” “target,” “will,” “would,” or the negative thereof, and similar expressions identify forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding: • availability and supply of raw materials and energy, and offsetting high raw material and energy costs; • the effects of economic downturns, tariffs or other changes in trade policy, inflation, volatility and other macroeconomic factors on the Company and its industry, including the Company’s ability to manage such matters and their effects on consumers and customers; • the resiliency of the Company’s operating model; • supply chain disruptions; • consumer and customer actions in connection with political, social, and economic instability, war and other geopolitical tensions; • improved productivity and cost containment; • the Company’s acquisition of Titan Holdings I B.V. (“Eviosys”) and the anticipated benefits of the acquisition, including with respect to market leadership, strategic alignment, customer relationships, sustainability, innovation and cost synergies; • effects and timing of, and anticipated costs, synergies and gains resulting from our other contemplated, pending, and completed acquisitions, including the Company’s acquisitions of Ball Metalpack Holding, LLC, renamed Sonoco Metal Packaging, the remaining ownership interest in RTS Packaging, LLC, a paper mill in Chattanooga, Tennessee, and Inapel Embalagens Ltda.; • effects and timing of, and anticipated gains and costs, of the Company’s restructuring and portfolio simplification activities, including with respect to streamlining of the Company’s organizational structure and the Company’s contemplated, pending, and completed divestitures, including the Company’s sale of its Thermoformed and Flexibles Packaging business and its global Trident business (collectively, “TFP”), its Protective Solutions business (“Protexic”), and two production facilities in China, and the potential divestiture of the Company’s ThermoSafe business; • adequacy and anticipated amounts and uses of cash flows; • capital allocation, including expected amounts of capital spending; • the Company’s capital structure, including the incurrence of debt and the repayment of debt; • the Company’s ability to adhere to restrictive covenants in its debt agreements; • financial and business strategies and the results expected of them; • producing improvements in earnings; • profitable sales growth and rates of growth; • market opportunities and anticipated growth thereof; • expected impact and costs of resolution of legal proceedings; • extent of, and adequacy of provisions for, environmental liabilities; • adequacy of income tax provisions, realization of deferred tax assets, outcomes of uncertain tax issues and tax rates; • goodwill impairment charges and fair values of reporting units; • future asset impairment charges and fair values of assets; • anticipated contributions to pension and postretirement benefit plans, fair values of plan assets, long-term rates of return on plan assets, and projected benefit obligations and payments; • expected impact of implementation of new accounting pronouncements; • creation of near-term and long-term value and returns for shareholders; 41 SONOCO PRODUCTS COMPANY • continued payment of dividends; and • planned stock repurchases. Such forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management. Such information includes, without limitation, discussions as to guidance and other estimates, perceived opportunities, expectations, beliefs, plans, strategies, goals and objectives concerning our future financial and operating performance. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed or forecasted in such forward-looking statements. Such risks, uncertainties and assumptions include, without limitation: • ability to manage the mix of business and execute on the Company’s portfolio simplification strategy, including with respect to divestitures, such as the potential divestiture of its ThermoSafe business; • ability to identify suitable acquisitions at the levels needed to meet growth targets; • ability to satisfy closing conditions and close acquisitions, and to finance such acquisitions on acceptable terms; • ability to successfully integrate newly acquired businesses, including Eviosys, into the Company’s operations, retain key employees, and realize expected cost savings, synergies and other anticipated benefits relating thereto within the expected time period, or at all; • the potential impact of acquisitions, including the acquisition of Eviosys, on relationships with customers and other third parties; • availability, transportation and pricing of raw materials, energy and transportation, including the impact of changes in tariffs or sanctions and escalating trade wars, and the impact of war, general regional instability and other geopolitical tensions (such as the ongoing conflict between Russia and Ukraine as well as the economic sanctions related thereto, and the ongoing conflicts in the Middle East), and the Company’s ability to pass raw material, energy and transportation price increases and surcharges through to customers or otherwise manage these commodity pricing risks; • costs of labor; • work stoppages due to labor disputes; • success of new product development, introduction and sales, including successful timing of new product or product innovation introductions; • success of implementation of new manufacturing technologies and installation of manufacturing equipment, including the startup of new facilities and lines; • consumer demand for products and changing consumer preferences, including changes related to inflation, tariffs, and other macroeconomic factors; • ability to be the low-cost global leader in customer-preferred packaging solutions within targeted segments; • competitive pressures, including new product development, and technological market leadership, reputation for quality, industry overcapacity, customer and supplier consolidation, and changes in competitors’ pricing for products; • financial conditions of customers and suppliers; • ability to maintain or increase productivity levels, contain or reduce costs, and maintain positive price/cost relationships; • ability to negotiate or retain contracts with customers, including in segments with concentration of sales volume; • inventory management strategies of customers; • collection of receivables from customers; • ability to maintain or improve margins and leverage cash flows and financial position; • ability to attract and retain talented and qualified employees, managers, and executives; • ability to profitably maintain and grow existing domestic and international business and market share; • availability of credit to us, our customers and suppliers in needed amounts and on reasonable terms; • effects of our indebtedness on our cash flow and business activities; • fluctuations in interest rates and our borrowing costs; • fluctuations in obligations and earnings of pension and postretirement benefit plans, including the timing of funding plan obligations, and the accuracy of assumptions of underlying projections of benefit plan obligations and payments, valuation of plan assets, and projections of long-term rates of return; • foreign currency exchange rate fluctuations, interest rate and commodity price risk and the effectiveness of related hedges; • cost of employee and retiree medical, health, and life insurance benefits; 42 SONOCO PRODUCTS COMPANY • resolution of income tax contingencies; • changes in U.S. and foreign tariffs, tax rates, tax laws, regulations and interpretations thereof, including income, sales and use, property, value added, employment, and other taxes; • accuracy in valuation of deferred tax assets; • the adoption of new, or changes in, accounting standards or interpretations; • accuracy of assumptions underlying projections related to goodwill impairment testing, and accuracy of management’s assessment of goodwill impairment; • accuracy of assumptions underlying fair value measurements, accuracy of management’s assessments of fair value and fluctuations in fair value; • ability to maintain effective disclosure controls and internal controls, including with regard to financial reporting, to prevent or detect errors or acts of fraud; • liability for and costs of resolution of litigation, regulatory actions, or other legal proceedings; • liability for and anticipated costs of environmental remediation actions; • effects of environmental laws and regulations, including with respect to climate change and emissions reporting; • operational disruptions at our major facilities; • failure or disruptions in our information technology systems; • loss of consumer or investor confidence; • ability to protect our intellectual property rights; • changes in laws and regulations relating to packaging for food products and foods packaged therein, other actions and public concerns about products packaged in our containers, or chemicals or substances used in raw materials or in the manufacturing process; • changing consumer attitudes toward plastic packaging; • changing climate and greenhouse gas effects; • ability to meet environmental, sustainability and other similar goals; • actions of domestic or foreign government agencies, the impact of new and evolving laws, regulations, rules and standards affecting the Company, and increased costs of compliance; • international, national, and local economic and market conditions and levels of unemployment; • economic disruptions resulting from changing tariff policies and trade wars, war, and other geopolitical tensions (such as the ongoing military conflict between Russia and Ukraine and the ongoing conflicts in the Middle East), public health events, terrorist activities, and natural disasters; and • inflation and the activities and operations in highly inflationary economies. More information about the risks, uncertainties, and assumptions that may cause actual results to differ materially from those expressed or forecasted in forward-looking statements is provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 under Item 1A - “Risk Factors” and throughout other sections of that report and in other reports filed with the Securities and Exchange Commission. In light of these various risks, uncertainties and assumptions, the forward-looking events discussed in this Quarterly Report on Form 10-Q might not occur. The Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. You are, however, advised to review any further disclosures we make on related subjects, and about new or additional risks, uncertainties and assumptions, in our future filings with the Securities and Exchange Commission on Forms 10-K, 10-Q, and 8-K. 43 SONOCO PRODUCTS COMPANY COMPANY OVERVIEW Sonoco is now a multi-billion dollar global designer, developer, and manufacturer of a variety of highly engineered and sustainable packaging products serving multiple end markets serving some of the world’s best-known brands around the globe from approximately 285 locations in 40 countries. The Company’s operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other. Sonoco competes in multiple product categories, with the majority of the Company’s revenues attributable to products and services sold to consumer and industrial products companies for use in the packaging of their products for sale or shipment. The Company also manufactures uncoated recycled paperboard for both internal use and open market sale. Each of the Company’s operating units has its own sales staff and maintains direct sales relationships with its customers. Sonoco’s goal is to increase its long-term profitability and return capital to shareholders. Over the past several years, we have simplified our portfolio around fewer, bigger businesses, which has reduced operating complexity and improved agility. On December 4, 2024, Sonoco completed the acquisition of Eviosys, Europe’s leading food cans, ends and closures manufacturer, from KPS Capital Partners, LP, for net cash consideration of approximately $3.8 billion. The transaction advances Sonoco’s portfolio transformation strategy to simplify and realign its portfolio and position the Company for long-term growth and value creation. The transaction, the largest in the Company’s history, expands Sonoco’s global leadership in metal food can and aerosol packaging and facilitates our ability to partner with global customers to advance innovation and sustainability in metal packaging offerings. During 2025, Eviosys will complete its transition to the Sonoco brand and operate under the Consumer Packaging segment. Sonoco’s portfolio transformation strategy also includes significant divestitures. For example, on April 1, 2025, subsequent to the end of the first quarter, the Company completed the sale of TFP to TOPPAN Holdings Inc. (“Toppan”) for a purchase price of approximately $1.8 billion on a cash-free and debt-free basis and subject to customary adjustments. On a standalone basis, TFP had revenue of $1.3 billion in 2024. As previously disclosed, the Company initiated a review of strategic alternatives for ThermoSafe, its leading temperature-assured packaging business. On a standalone basis, ThermoSafe, which is part of the All Other group of businesses, had revenue of $245 million in 2024. The Company expects to complete its review of strategic alternatives for ThermoSafe in the second half of 2025. The Company believes that these completed and potential divestitures will enable greater strategic and operational focus while also generating proceeds to fund deleveraging and further focus capital investments in our core Consumer Packaging and Industrial Paper Packaging businesses. The Company is focused on efficient capital deployment into these larger, core business units to improve economic returns and improve integration effectiveness and speed for acquired strategic assets. In parallel, the Company continues to work on commercial, operational, and supply chain excellence programs to shift the mix of its business towards higher-valued products and increase overall productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives, as well as strategic pricing initiatives intended to better capture input costs and the value of the services provided. Global Trade Developments Recent developments in U.S. and foreign trade policy have increased uncertainty for the global economy and the Company’s business. On March 4, 2025, the U.S. Government (the “Administration”) imposed a 25% tariff on all imports from Canada or Mexico. After imposing this tariff, the Administration allowed for the temporary exemption from the tariff for any goods that comply with the United States-Mexico-Canada Agreement (“USMCA”), which has helped mitigate the impact of the tariff on the Company’s operations in North America. On February 10, 2025, the Administration announced the expansion of Section 232 steel and aluminum tariffs (“Section 232 Tariffs”) on steel and aluminum imported into the United States, effective March 12, 2025, and the termination of the granting of new exclusions to mitigate these tariffs. As a result, imported steel and aluminum is now subject to a 25% duty. Further, on April 2, 2025, the Administration announced an across-the-board 10% tariff on imported goods from most countries, with materially higher tariffs imposed on many of the countries, as well as other trade policy changes. The Administration subsequently suspended the implementation of certain of these trade policy changes, with many of the affected countries expected to negotiate separate trade agreements with the Administration during the suspension. In response to the Administration’s tariff actions, some countries have announced additional trade measures, including 44 SONOCO PRODUCTS COMPANY reciprocal tariffs, which may continue to give rise to further escalations of trade measures by the United States and impacted countries. Canada has imposed retaliatory tariffs on goods coming from the United States, including a 25% tariff on a variety of enumerated goods on March 4 and March 13, 2025. At the same time, Canada has not exempted USMCA-qualified goods from these tariffs on U.S.-origin goods. Some of the enumerated goods subject to this tariff include products and materials shipped to Sonoco’s plants in Canada. While the exact scope of any tariffs or other trade policy changes that will ultimately be implemented is not known at this time, the Company does not currently expect these recently announced tariffs and proposed future tariffs to have a material direct effect on the Company’s profitability or cash flows over the remainder of 2025 because the Company’s manufacturing network is designed to serve local markets, reducing its exposure to cross-border disruptions and tariff-related risks, and while the Company is actively working with its customers to help manage the impacts of higher input costs driven by tariffs, its business model allows for pricing adjustments when necessary. In addition, the Company believes its transformed portfolio following the Eviosys acquisition and the sale of TFP is significantly more resilient, with over two-thirds of the Company’s sales for the three-month period ended March 30, 2025 coming from the Consumer Packaging segment, a segment that has historically demonstrated strong performance across economic cycles. In addition, while the Section 232 Tariffs impact input costs for the Company’s U.S.-based metal packaging and rigid paper container businesses (part of the Consumer Packaging segment), which source a portion of their steel and aluminum purchases from outside the United States, the Company intends, and has the contractual ability, to pass such increases in cost due to tariffs to its customers. The ultimate resolution and consequences of these trade policy developments, and their effect on the Company in uncertain and the Company will continue to monitor the Administration’s trade policy changes closely in order to adapt its strategies and to maintain competitiveness in a challenging market environment. See “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. RESULTS OF OPERATIONS The Company’s financial statements are prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Sonoco’s management considers a variety of both GAAP and non-GAAP financial and operating measures in assessing the Company’s financial performance. The key GAAP measures used are net sales, operating profit, gross profit margin, net income attributable to Sonoco and diluted earnings per share. The key non-GAAP measures used are Adjusted operating profit, Adjusted net income attributable to Sonoco, Adjusted diluted earnings per share, Adjusted EBITDA and Adjusted EBITDA margin. For information about the Company’s use of non-GAAP measures and reconciliations of these measures to the most directly comparable GAAP measures see “Non-GAAP Financial Measures” below. Management may also assess year-over-year changes in operating performance in terms of productivity savings or usage, which is driven by procurement savings or losses, production efficiencies or inefficiencies and the effect of fixed cost reduction initiatives. Management views productivity as a measure of operational excellence of the business and uses it to evaluate improvements in manufacturing efficiency, including automation, and other fixed and variable cost reduction initiatives. Management provides investors with this information to evaluate Sonoco’s operating results in a manner similar to how management evaluates operating performance. The Company calculates productivity savings as the difference between applicable current period costs and prior year costs, excluding the impact of estimated inflation or deflation, and volume changes where appropriate. On December 18, 2024, the Company announced that it had entered into an agreement to sell TFP to Toppan. This sale was completed on April 1, 2025, subsequent to the end of the first quarter. In accordance with applicable accounting guidance, the results of TFP are presented as discontinued operations in the Condensed Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods presented in this Quarterly Report on Form 10-Q. Further, the Company reclassified the assets and liabilities of TFP as assets and liabilities of discontinued operations in the Condensed Consolidated Balance Sheets as of March 30, 2025 and December 31, 2024. The Condensed Consolidated Statements of Comprehensive Income, Changes in Total Equity, and Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations. All amounts, percentages and disclosures for all periods presented in this Quarterly Report on Form 10-Q reflect only the continuing operations of Sonoco unless otherwise noted. 45 SONOCO PRODUCTS COMPANY First Quarter 2025 Compared with First Quarter 2024 The following discussion provides a review of results for the three-month period ended March 30, 2025 versus the three-month period ended March 31, 2024. Overview Consolidated net sales for the first quarter of 2025 were $1.7 billion, a $400.6 million or 30.6% increase from the first quarter of 2024. The increase was driven by $464.3 million in sales from the Eviosys acquisition in December 2024 and increased sales of $22.2 million as a result of increased selling prices across the Industrial Paper Packaging and Consumer Packaging segments. These increases were partially offset by a decrease of $51.5 million of sales related to divestitures and a net decline in volume/mix of $9.7 million. GAAP operating profit for the first quarter of 2025 was $126.9 million, an increase of 74.8% from the $72.6 million reported in the first quarter of 2024. The increase in GAAP operating profit was primarily due to a $82.5 million increase in gross profit, and a decrease in restructuring related costs of $17.4 million from the prior year, partially offset by an increase of $41.5 million in selling, general and administrative expenses including acquisition and integration costs, and a net loss on dispositions of $4.2 million. Adjusted Operating Profit for the first quarter of 2025 was $212.7 million, an increase of 63.1% from the $130.4 million reported for the same period in 2024. GAAP net income attributable to Sonoco for the first quarter of 2025 decreased to $54.4 million, or $0.55 per diluted share, compared to $65.2 million, or $0.66 per diluted share, for the first quarter of 2024. This decrease was primarily due to the increase in GAAP operating profit as described above, more than offset by an increase in net interest expense, a decrease in GAAP Net Income from discontinued operations, and an increased provision for income taxes as described below. Adjusted net income attributable to Sonoco and Adjusted diluted earnings per share for the first quarter of 2025 were $136.8 million ($1.38 per diluted share), compared with $111.5 million ($1.12 per diluted share) for the same period in 2024. Costs and Expenses Cost of goods sold increased by $318.1 million, or 30.7%, in the first quarter of 2025 compared with the first quarter of 2024. This increase was primarily driven by the Eviosys acquisition, partially offset by the decline in costs from the sale of the Protexic business in April 2024, improved productivity from procurement savings, production efficiencies, fixed cost reduction initiatives, and materials price reductions. Gross profit margins were flat at 20.7% in each of the first quarter of 2025 and the first quarter of 2024 . Selling, general and administrative costs increased by $41.5 million, or 24.8%, and were 12.2% of sales in the first quarter of 2025, compared to 12.8% of sales in the first quarter of 2024. This increase was primarily due to the acquisition of Eviosys and the increase in acquisition, integration, and divestiture-related costs. Restructuring/Asset impairment charges totaled $13.6 million in the first quarter of 2025, compared with $31.0 million during the same period last year. The higher cost in the prior year was primarily related to the closure of the Company’s paper mill in Sumner, Washington during the first quarter of 2024. Additional information regarding restructuring and asset impairment charges is provided in Note 6 to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Loss on divestiture of business and other assets of $4.2 million in the first quarter of 2025 reflects a $5.4 million loss from the sale of the Company’s tube and core operations in Venezuela, partially offset by a $1.2 million gain from the sale of a small construction tube operation in France, both part of the Industrial Paper Packaging segment. See Note 4 to the Company’s Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information. Other expense, net totaled $6.5 million in the first quarter of 2025. The amount represents charges from third-party financial institutions related to our centralized treasury program under which the Company sells certain trade accounts receivables in order to accelerate its cash collection cycle primarily within our Consumer Packaging segment. Net interest expense for the first quarter of 2025 increased to $48.7 million, compared with $27.0 million during the first quarter of 2024. The increase was primarily due to higher year-over-year debt levels resulting from financing transactions related to the Eviosys acquisition. The effective tax rates for continuing operations reflected in GAAP net income and Adjusted net income attributable to Sonoco in the first quarter of 2025 were 30.9% and 25.7%, respectively, compared with 18.6% and 26.2%, respectively, in the corresponding prior year quarter. The increase in the GAAP effective tax rate was primarily due to an adjustment to 46 SONOCO PRODUCTS COMPANY record deferred tax liabilities on certain entities considered to be held for sale, as well as discrete non-GAAP charges for which no tax benefit will be realized. Discontinued Operations Net income from discontinued operations totaled $5.2 million for the first quarter of 2025, compared with $29.7 million for the first quarter of 2024. The decrease in net income is primarily due to the increase in interest expense related to debt required to be repaid upon closure of the sale of TFP. Reportable Segments The Company’s operating and reporting structure consists of two reportable segments, Consumer Packaging and Industrial Paper Packaging, with all remaining businesses reported as All Other. The following table summarizes net sales attributable to each of the Company’s segments and the All Other group of businesses for the first quarters of 2025 and 2024: Three Months Ended (Dollars in thousands) March 30, 2025 March 31, 2024 % Change Net sales: Consumer Packaging $ 1,066,593 $ 581,670 83.4 % Industrial Paper Packaging 557,709 593,060 (6.0) % Total reportable segments 1,624,302 1,174,730 38.3 % All Other 84,926 133,906 (36.6) % Net sales $ 1,709,228 $ 1,308,636 30.6 % The following table summarizes operating profit attributable to each of the Company’s reportable segments, the All Other group of businesses, and Corporate-related activity during the first quarters of 2025 and 2024: Three Months Ended (Dollars in thousands) March 30, 2025 March 31, 2024 % Change Operating profit: Consumer Packaging $ 140,771 $ 58,567 140.4 % Industrial Paper Packaging 71,124 65,844 8.0 % Segment operating profit 211,895 124,411 70.3 % All Other 11,926 17,125 (30.4) % Corporate Restructuring/Asset impairment charges (13,581) (31,010) Amortization of acquisition intangibles (41,961) (17,894) Loss on divestiture of business and other assets (4,183) — Acquisition, integration and divestiture-related costs (27,266) (5,504) Other corporate costs (11,098) (11,088) Other operating income/(expense), net 1,128 (3,468) Operating profit $ 126,860 $ 72,572 74.8 % 47 SONOCO PRODUCTS COMPANY Consumer Packaging The products produced and sold within the Consumer Packaging segment are generally used to package a variety of consumer pro ducts and consist primarily of round and shaped rigid paper, steel and plastic containers; and metal and peelable membrane ends, closures, and components. These products primarily serve the consumer staples market, focused on food, beverage, household, personal, and pharmaceutical products. Segment sales increased $484.9 million over the corresponding prior year quarter primarily due to increased sales from the 2024 Eviosys acquisition of $464.3 million and increased volumes/mix of $23.3 million. Year-over-year prices remained fairly flat. Segment operating profit increased over the corresponding prior year quarter primarily due to operating profits from the Eviosys acquisition of $49.2 million and positive price/cost of $27.1 million. As a result, segment operating profit margin increased to 13.2% in the first quarter of 2025 from 10.1% in the same period last year. Industrial Paper Packaging The primary products produced and sold within the Industrial Paper Packaging segment include goods produced from recycled fiber, including paperboard tubes, cones, and cores; paper-based protective packaging; and uncoated recycled paperboard for folding cartons, can board and laminated structures. Products across this segment support end markets, primarily in paper, textile, and films. Segment sales decreased $35.4 million from the corresponding prior year quarter primarily due to lower sales of $26.0 million from a decline in volume/mix, lower sales of $11.6 million due to the disposition of facilities in China during the fourth quarter of 2024, and $16.4 million unfavorable impact from foreign currency exchange rates. These headwinds were only partially offset by a $20.7 million increase from higher selling prices. Segment operating profit increased over the corresponding prior year quarter primarily due to a $10.3 million increase from a positive price/cost environment combined with a $7.3 million increase attributable to strong productivity from procurement savings, production efficiencies, and fixed cost reduction initiative. These increases were partially offset by a decline of $5.8 million attributable to lower volumes and an unfavorable impact from foreign currency exchange rates. As a result, segment operating profit margin increased to 12.8% in the first quarter of 2025 from 11.1% in the same period last year. All Other The primary products produced within the All Other group of businesses consist of a variety of packaging materials, including plastic, paper, foam, and various other specialty materials serving a wide variety of end markets including consumer staples, consumer discretionary, and industrial. Sales declined from the same period of the prior year primarily due to the sale of the Protexic business and the decline in volume/mix. Pricing was flat year over year. All Other operating profit decreased in the first quarter of 2025 compared to the same period last year, primarily due to volume declines in our Industrial Plastics businesses and the sale of the Protexic business in April 2024. Price/cost was also a headwind from 2024, but this impact was largely offset by higher productivity from procurement savings, production efficiencies, and fixed cost reduction initiatives. As a result, operating profit margin increased to 14.0% in the first quarter of 2025 compared to 12.8% in the same period last year. NON-GAAP FINANCIAL MEASURES The Company uses certain financial performance measures, both internally and externally, that are not in conformity with GAAP (referred to as “non-GAAP financial measures”) to assess and communicate the financial performance of the Company. These “non-GAAP” financial measures, which are identified using the term “Adjusted” (for example, “Adjusted Operating Profit,” “Adjusted Net Income Attributable to Sonoco,” and “Adjusted Diluted EPS”) reflect adjustments to the Company’s GAAP operating results to exclude amounts, including the associated tax effects, relating to: • restructuring/asset impairment charges 1 ; • acquisition, integration and divestiture-related costs; • gains or losses from the divestiture of businesses and other assets; • losses from the early extinguishment of debt; 48 SONOCO PRODUCTS COMPANY • non-operating pension costs; • amortization expense on acquisition intangibles; • changes in last-in, first-out ( “ LIFO ”) inventory reserves; • certain income tax events and adjustments; • derivative gains/losses; • other non-operating income and losses; and • certain other items, if any. 1 Restructuring and restructuring-related asset impairment charges are a recurring item as the Company’s restructuring programs usually require several years to fully implement, and the Company is continually seeking to take actions that could enhance its efficiency. Although recurring, these charges are subject to significant fluctuations from period to period due to the varying levels of restructuring activity, the inherent imprecision in the estimates used to recognize the impairment of assets and the wide variety of costs and taxes associated with severance and termination benefits in the countries in which the restructuring actions occur. The Company’s management believes the exclusion of these amounts improves the period-to-period comparability and analysis of the underlying financial performance of the business. More information about the Company’s use of non-GAAP financial measures is provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, under Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-GAAP Financial Measures.” In addition to the “Adjusted” results described above, the Company also uses Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is defined as net income excluding the following: interest expense; interest income; provision for income taxes; depreciation, depletion and amortization expense; non-operating pension costs; net income/loss attributable to noncontrolling interests; restructuring/asset impairment charges; changes in LIFO inventory reserves; gains/losses from the divestiture of businesses and other assets; acquisition, integration and divestiture-related costs; other income; derivative gains/losses; and other non-GAAP adjustments, if any, that may arise from time to time. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales. The Company’s non-GAAP financial measures are not calculated in accordance with, nor are they an alternative for, measures conforming to generally accepted accounting principles, and they may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. The Company presents these non-GAAP financial measures to provide investors with information to evaluate Sonoco’s operating results in a manner similar to how management evaluates business performance. The Company consistently applies its non-GAAP financial measures presented herein and uses them for internal planning and forecasting purposes, to evaluate its ongoing operations, and to evaluate the ultimate performance of management and each business unit against plans/forecasts. In addition, these same non-GAAP financial measures are used in determining incentive compensation for the entire management team and in providing earnings guidance to the investing community. Material limitations associated with the use of such measures include that they do not reflect all period costs included in operating expenses and may not be comparable with similarly named financial measures of other companies. Furthermore, the calculations of these non-GAAP financial measures are based on subjective determinations of management regarding the nature and classification of events and circumstances that the investor may find material and view differently. To compensate for any limitations in such non-GAAP financial measures, management believes that it is useful in evaluating the Company’s results to review both GAAP information, which includes all of the items impacting financial results, and the related non-GAAP financial measures that exclude certain elements, as described above. Further, Sonoco management does not, nor does it suggest that investors should, consider any non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Whenever reviewing a non-GAAP financial measure, investors are encouraged to review the related reconciliation to understand how it differs from the most directly comparable GAAP measure. 49 SONOCO PRODUCTS COMPANY Quarterly Reconciliations of GAAP to Non-GAAP Financial Measures The following tables reconcile the Company’s non-GAAP financial measures to their most directly comparable GAAP financial measures in the Company’s Condensed Consolidated Statements of Income for the three-month periods ended March 30, 2025 and March 31, 2024. Adjusted Operating Profit, Adjusted Income Before Income Taxes, Adjusted Provision for Income Taxes, Adjusted Net Income Attributable to Sonoco, and Adjusted Diluted Earnings Per Share (“EPS”) For the three-month period ended March 30, 2025 Dollars in thousands, except per share data Operating Profit Income Before Income Taxes Provision for Income Taxes Net Income Attributable to Sonoco Diluted EPS As Reported (GAAP) 1 $ 126,860 $ 68,543 $ 21,147 $ 54,429 $ 0.55 Acquisition, integration and divestiture-related costs 2 27,266 27,266 6,637 30,295 0.30 Changes in LIFO inventory reserves 562 562 142 420 — Amortization of acquisition intangibles 41,961 41,961 9,604 32,144 0.32 Restructuring/Asset impairment charges 13,581 13,581 3,200 10,715 0.11 Loss on divestiture of business and other assets 4,183 4,183 372 3,811 0.04 Non-operating pension costs — 3,121 798 2,323 0.02 Net gains from derivatives (2,949) (2,949) (744) (2,205) (0.02) Other adjustments 3 1,259 1,259 (603) 4,908 0.06 Total adjustments 85,863 88,984 19,406 82,411 0.83 Adjusted $ 212,723 $ 157,527 $ 40,553 $ 136,840 $ 1.38 Due to rounding, individual items may not sum appropriately. 1 Operating profit, income before income taxes, and provision for income taxes exclude results related to discontinued operations of $37,791, $12,979 and $7,807, respectively. 2 Acquisition, integration and divestiture-related costs relate mostly to the Company’s December 2024 acquisition of Eviosys and the divestiture of the TFP business, which was completed on April 1, 2025. 3 Other adjustments include discrete tax items primarily related to a $3,500 tax expense due to the reduction of the deferred tax asset on the outside basis of certain held-for-sale entities. For the three-month period ended March 31, 2024 Dollars in thousands, except per share data Operating Profit Income Before Income Taxes Provision for Income Taxes Net Income Attributable to Sonoco Diluted EPS As Reported (GAAP) 1 $ 72,572 $ 42,246 $ 7,871 $ 65,177 $ 0.66 Acquisition, integration and divestiture-related costs 5,504 5,504 1,408 4,209 0.04 Changes in LIFO inventory reserves 431 431 108 323 — Amortization of acquisition intangibles 17,894 17,894 4,368 17,366 0.18 Restructuring/Asset impairment charges 31,010 31,010 6,980 24,584 0.25 Non-operating pension costs — 3,295 823 2,472 0.02 Net gains from derivatives (286) (286) (72) (214) — Other adjustments 3,323 3,323 5,653 (2,425) (0.03) Total adjustments 57,876 61,171 19,268 46,315 0.46 Adjusted $ 130,448 $ 103,417 $ 27,139 $ 111,492 $ 1.12 Due to rounding, individual items may not sum appropriately. 1 Operating profit, income before income taxes, and provision for income taxes exclude results related to discontinued operations of $39,881, $39,250 and $9,489 , respectively. 50 SONOCO PRODUCTS COMPANY Adjusted EBITDA 1 Three Months Ended Dollars in thousands March 30, 2025 March 31, 2024 Net income attributable to Sonoco $ 54,429 $ 65,177 Adjustments Interest expense 80,938 31,220 Interest income (7,629) (3,558) Provision for income taxes 28,954 17,360 Depreciation, depletion and amortization 121,492 90,559 Non-operating pension costs 3,121 3,295 Net income attributable to noncontrolling interests 60 96 Restructuring/Asset impairment charges 14,007 31,618 Changes in LIFO inventory reserves 562 431 Loss on divestiture of business and other assets 4,183 — Acquisition, integration and divestiture-related costs 39,942 5,661 Net gains from derivatives (2,949) (286) Other non-GAAP adjustments 646 3,180 Adjusted EBITDA $ 337,756 $ 244,753 1 Adjusted EBITDA is calculated on a total Company basis, including both continuing operations and discontinued operations. The Company does not calculate net income by segment; therefore, Adjusted EBITDA by segment is reconciled to the closest GAAP measure of segment profitability, segment operating profit. Segment operating profit is the measure of segment profit or loss reported to the chief operating decision maker for purposes of making decisions about allocating resources to the segments and assessing their performance in accordance with Accounting Standards Codification 280, “Segment Reporting,” as prescribed by the Financial Accounting Standards Board. Segment results, which are reviewed by the Company’s management to evaluate segment performance, do not include the following: restructuring/asset impairment charges; amortization of acquisition intangibles; acquisition, integration and divestiture-related costs; changes in LIFO inventory reserves; gains/losses from the sale of businesses or other assets; gains/losses from derivatives; or certain other items, if any, the exclusion of which the Company believes improves the comparability and analysis of the ongoing operating performance of the business. Accordingly, the term “segment operating profit” is defined as the segment’s portion of “operating profit” excluding those items. All other general corporate expenses have been allocated as operating costs to each of the Company’s reportable segments and All Other, except for costs related to discontinued operations. Total operating profit is composed of the sum of segment and All Other operating profit plus certain items that have been allocated to Corporate, including amortization of acquisition intangibles; restructuring/asset impairment charges; changes in LIFO inventory reserves; acquisition, integration and divestiture-related costs; gains/losses from the sale of businesses or other assets; gains/losses on derivatives; and certain other items that were excluded from segment and All Other operating profit. 51 SONOCO PRODUCTS COMPANY Segment and All Other Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation For the Three Months Ended March 30, 2025 Excludes results of discontinued operations Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total Segment and Total Operating Profit $ 140,771 $ 71,124 $ 11,926 $ (96,961) $ 126,860 Adjustments: Depreciation, depletion and amortization 1 48,955 28,333 2,554 41,961 121,803 Other expense, net 2 — — — (6,517) (6,517) Equity in (loss)/earnings of affiliates, net of tax (51) 1,972 — — 1,921 Restructuring/Asset impairment charges 3 — — — 13,581 13,581 Changes in LIFO inventory reserves 4 — — — 562 562 Acquisition, integration and divestiture-related costs 5 — — — 27,266 27,266 Loss on divestiture of business and other assets 6 — — — 4,183 4,183 Net gains from derivatives 7 — — — (2,949) (2,949) Other non-GAAP adjustments — — — 1,259 1,259 Segment Adjusted EBITDA $ 189,675 $ 101,429 $ 14,480 $ (17,615) $ 287,969 Net Sales $ 1,066,593 $ 557,709 $ 84,926 Segment Operating Profit Margin 13.2 % 12.8 % 14.0 % Segment Adjusted EBITDA Margin 17.8 % 18.2 % 17.1 % 1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $36,502, the Industrial Paper Packaging segment of $5,265, and the All Other group of businesses of $194. 2 These expenses relate to charges from third-party financial institutions related to our centralized treasury program under which the Company sells certain trade accounts receivables in order to accelerate its cash collection cycle, primarily within the Consumer Packaging segment. 3 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $1,220 and the Industrial Paper Packaging segment of $12,401, and a gain in the All Other group of businesses of $40. 4 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $562. 5 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $20,072 and the Industrial Paper Packaging segment of $218. 6 Included in Corporate are losses on the divestiture of businesses associated with the Industrial Paper Packaging segment of $4,183 related to the sale of a production facility in France and the entirety of our business in Venezuela. 7 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(284), the Industrial Paper Packaging segment of $(2,552), and the All Other group of businesses of $(113). 52 SONOCO PRODUCTS COMPANY Segment and All Other Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation For the Three Months Ended March 31, 2024 Excludes results of discontinued operations Dollars in thousands Consumer Packaging segment Industrial Paper Packaging segment All Other Corporate Total Segment and Total Operating Profit $ 58,567 $ 65,844 $ 17,125 $ (68,964) $ 72,572 Adjustments: Depreciation, depletion and amortization 1 24,897 28,503 3,652 17,894 74,946 Equity in earnings of affiliates, net of tax 13 1,124 — — 1,137 Restructuring/Asset impairment charges 2 — — — 31,010 31,010 Changes in LIFO inventory reserves 3 — — — 431 431 Acquisition, integration and divestiture-related costs 4 — — — 5,504 5,504 Net gains from derivatives 5 — — — (286) (286) Other non-GAAP adjustments — — — 3,323 3,323 Segment Adjusted EBITDA $ 83,477 $ 95,471 $ 20,777 $ (11,088) $ 188,637 Net Sales $ 581,670 $ 593,060 $ 133,906 Segment Operating Profit Margin 10.1 % 11.1 % 12.8 % Segment Adjusted EBITDA Margin 14.4 % 16.1 % 15.5 % 1 Included in Corporate is the amortization of acquisition intangibles associated with the Consumer Packaging segment of $11,057, the Industrial Paper Packaging segment of $6,631, and the All Other group of businesses of $206. 2 Included in Corporate are restructuring/asset impairment charges associated with the Consumer Packaging segment of $4,317, the Industrial Paper Packaging segment of $22,603, and the All Other group of businesses of $1,148. 3 Included in Corporate are changes in LIFO inventory reserves associated with the Consumer Packaging segment of $92 and the Industrial Paper Packaging segment of $339. 4 Included in Corporate are acquisition, integration and divestiture-related costs associated with the Consumer Packaging segment of $(280) and the Industrial Paper Packaging segment of $655. 5 Included in Corporate are net gains from derivatives associated with the Consumer Packaging segment of $(43), the Industrial Paper Packaging segment of $(190), and the All Other group of businesses of $(53). 53 SONOCO PRODUCTS COMPANY Financial Position, Liquidity and Capital Resources Operating activities used cash of $208.1 million in the first three months of 2025 , while they provided cash of $166.2 million in the same period of 2024, a year-over-year decrease of $374.3 million. GAAP net income decreased by $10.8 million year over year as described in the “Results of Operations” section above. Net working capital used $309.4 million of cash in the first three months of 2025, while providing $0.8 million in the same period of 2024, for a year-over-year decrease in operating cash flow of $310.1 million. Accounts receivable used $21.0 million more cash during the first three months of 2025 than in the same period of 2024 as a result of the impact of the changing mix in customer payment terms combined with higher revenues year over year. Inventory was a use of cash of $110.2 million in the first three months of 2025, while it was a source of cash of $18.4 million in the same period of 2024 due to higher overall inventory levels, mainly in tinplate steel, the impacts of inflation, and seasonality. Accounts payable used cash of $134.9 million in the first three months as compared to a provision of cash of $25.7 million in the same period of 2024 due to timing of purchases and scheduled payments. The Company has continued to actively manage inventories and review payment terms with customers and suppliers to address risk and balance economic benefit. Changes in accrued expenses and other assets and liabilities used cash totaling $100.2 million in the first three months of 2025 and $7.1 million in the same period of 2024, for a year-over-year increase in use of cash of $93.2 million. The primary drivers contributing to the change include the higher year-over-year payments related to management incentive compensation of $24.3 million, interest of $22.1 million, and the Company’s restructuring initiatives of $16.8 million. Investing activities used $88.6 million of cash in the first three months of 2025, compared with $81.7 million in the same period of 2024, a higher year-over-year use of cash of $6.9 million, primarily attributable to higher capital expenditures. Capital expenditures during the first three months of 2025 totaled $92.7 million, a $6.2 million increase year over year. Proceeds from divestitures provided $3.5 million in the first three months of 2025, including $2.0 million of proceeds related to the July 1, 2023 sale of the Company’s U.S. BulkSak business released from escrow in February 2025 and $1.5 million of proceeds from the sale of a small construction tube operation in France. Financing activities provided $29.6 million of cash in the three-month period ended March 30, 2025, compared with using $62.7 million of cash in the corresponding prior-year period. The primary driver of the $92.3 million year-over-year increase was the receipt of proceeds from the issuance of commercial paper of $528.0 million, partially offset by $448.8 million in net debt repayments during the first three months of 2025, including the repayment upon maturity of the $400 million aggregate principal amount of the Company’s 1.800% note s due February 2025. N et debt repayments in the first quarter of 2024 were $1.8 million. Cash used to pay dividends increased by $1.1 million year over year, reflecting the increase in the quarterly dividend payment from $0.51 per share to $0.52 per share, which increase was approved by the Company’s Board of Directors in April 2024. Cash used to repurchase the Company’s common stock to satisfy employee tax withholding obligations in association with the exercise of certain share-based compensation awards was $10.6 million in the three-month period ended March 30, 2025, compared to $9.1 million in the corresponding prior-year period. During the three-month period ended March 30, 2025, the Company reported a net increase in cash and cash equivalents of $15.7 million due to currency translation adjustments resulting from a weaker U.S. dollar relative to certain foreign currencies in which cash and cash equivalents were held. The Company’s cash balances are held in numerous locations throughout the world. At March 30, 2025 and December 31, 2024, approximately $161.4 million and $190.1 million, respectively, of the Company’s reported cash and cash equivalents balances of $181.8 million and $431.0 million, respectively, were held outside of the United States by its foreign subsidiaries. Cash held outside of the United States is available to meet local liquidity needs or for capital expenditures, acquisitions, and other offshore growth opportunities. The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under this pooling arrangement, the Company and its participating subsidiaries may maintain either a cash deposit or borrowing position through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash deposit. Because it maintains a security interest in the cash deposits and has the right to offset the cash deposits against the borrowings, the bank provides the Company and its participating subsidiaries favorable interest terms on both the cash deposit and borrowing positions. 54 SONOCO PRODUCTS COMPANY The Company maintains a revolving credit facility with total commitments of $1.25 billion and a maturity date of May 3, 2029. The Company’s $1.25 billion commercial paper program is supported by the revolving credit facility. At March 30, 2025 , the Company had $528.0 million in commercial paper balances outstanding; accordingly, the committed capacity available for drawdown under its revolving credit facility at March 30, 2025 was $722.0 million. The Company has the contractual right to draw funds directly on the underlying revolving credit facility, which could possibly occur if there were a disruption in the commercial paper market. On February 3, 2025, the Company repaid the $400 million aggregate principal amount of its 1.800% notes due February 2025 upon maturity using proceeds from the issuance of commercial paper. At March 30, 2025, the Company had scheduled debt maturities of approximately $2.15 billion over the next twelve months. On April 1, 2025, subsequent to the end of the three-month period ended March 30, 2025 , the Company completed the sale of TFP and used a portion of the cash proceeds from the sale to repay the outstanding $1.50 billion principal amount of borrowings under its 364 -day term loan facility. The Company believes that cash and cash equivalents on hand, expected net cash flows generated from operating and investing activities, available capacity under the Company’s increased borrowing arrangements, and proceeds from potential divestitures, will provide sufficient liquidity to cover the remaining debt maturities and other cash flow needs of the Company over the next twelve months and beyond. Certain of the Company’s debt agreements impose restrictions with respect to the maintenance of financial ratios and the disposition of assets. The most restrictive covenants currently require the Company to maintain a minimum level of interest coverage and a minimum level of net worth, as defined in the agreements. As of March 30, 2025 , the Company’s interest coverage and net worth were substantially above the minimum levels required under these covenants. The Company continually explores strategic acquisition opportunities that may result in the use of cash. Given the nature of the acquisition process, the timing and amounts of such expenditures are not always predictable. The Company expects that any additional acquisitions requiring funding in excess of cash on hand would be financed using existing credit facilities or additional borrowings. The Company anticipates making additional contributions to its other pension and postretirement plans of approximately $19 million durin g the remainder of 2025, resulting in expected total contributions to these plans of approximately $23 million in 2025. Future funding requirements beyond the current year will vary depending largely on investment performance, future actuarial assumptions, and legislative actions. Fair Value Measurements, Foreign Exchange Exposure and Risk Management Certain assets and liabilities are reported in the Company’s financial statements at fair value, the fluctuation of which can impact the Company’s financial position and results of operations. Items reported by the Company at fair value on a recurring basis include derivative contracts and pension-related assets. The valuation of a majority of these items is based either on quoted prices in active and accessible markets or on other observable inputs. As a result of operating globally, the Company is exposed to changes in foreign exchange rates. The exposure is well diversified, as the Company’s facilities are located throughout the world, and the Company generally sells in the same countries where it produces with both revenue and costs transacted in the local currency. The Company monitors these exposures and uses foreign currency forward contracts and other risk management instruments to manage exposure to changes in foreign currency cash flows and the translation of monetary assets and liabilities on the Company’s condensed consolidated financial statements by hedging a portion of forecasted transactions that are denominated in foreign currencies, foreign currency assets and liabilities, or its net investment in foreign subsidiaries. The Company’s foreign operations are exposed to political, geopolitical, and cultural risks, but these risks are mitigated by diversification and the relative stability of the countries in which the Company has significant operations. The economy in Venezuela has been considered highly inflationary under U.S. GAAP since 2010. Accordingly, the Company considered the U.S. dollar to be the functional currency of its Venezuelan operations and used the official exchange rate when remeasuring the financial results of those operations since January 1, 2010. Economic conditions in Venezuela worsened considerably over the past several years with no indications that conditions were likely to improve in the foreseeable future. As a result, the Company sold its operations in Venezuela during the first quarter of 2025, recognizing a loss in the amount of $5.4 million, including $3.8 million of cumulative translation losses that were reclassified from accumulated other comprehensive income. 55 SONOCO PRODUCTS COMPANY Turkey has been deemed to be a highly inflationary economy under U.S. GAAP since the first quarter of 2022. Accordingly, the Company considers the U.S. dollar to be the functional currency of its operations in Turkey and has remeasured monetary assets and liabilities denominated in Turkish lira to U.S. dollars with changes recorded through earnings. The cumulative impact of applying highly inflationary accounting to Turk ey has been a pretax charge to earnings of $8.5 million ($6.5 million after tax), including $0.6 million ($0.4 million after tax) during th e three-month period ended March 30, 2025. Th e magnitude of future earnings impacts, however, is uncertain as such impacts are dependent upon unpredictable movements in the Turkish lira relative to the U.S. dollar. In addition to remeasurement-related charges, significant deterioration in the Turkish economy could result in the recognition of future impairment charges. However, the Company believes its exposure is limited to its net investment in Turkey, which was approximat ely $51.5 million as of March 30, 2025. The Company is a purchaser of various raw material inputs such as recovered paper, energy, steel, aluminum, and plastic resin. The Company generally does not engage in significant hedging activities for these purchases other than for energy and, from time to time, aluminum, because there is usually a high correlation between the primary input costs and the ultimate selling price of its products. Inputs are generally purchased at market or at fixed prices that are established with individual suppliers as part of the purchase process for quantities expected to be consumed in the ordinary course of business. On occasion, where the correlation between selling price and input price is less direct, the Company may enter into derivative contracts such as futures or swaps to manage the effect of price fluctuations. In addition, the Company may occasionally use traditional, unleveraged interest-rate swaps to manage its mix of fixed and variable rate debt and control its exposure to interest rate movements within select ranges. At March 30, 2025, t he Company had derivative contracts outstanding to hedge the prices on a portion of anticipated aluminum purchases. These contracts, some of which qualify as cash flow hedges, include aluminum swaps totaling 4,179 metric tons. The total fair value of the Company’s commodity cash flow hedges netted to gain positions of $0.1 million and $0.7 million at March 30, 2025 and December 31, 2024, respectively. The amount of the gain included in accumulated other comprehensive income at March 30, 2025 expected to be reclassified to the income statement during the next twelve months is $0.1 million. The Company routinely enters into derivative currency contracts to mitigate the risk of unfavorable fluctuations in the exchange rate on certain anticipated foreign currency cash flows. T he total market value of these instruments resulted in a net gain position of $1.1 million and a net loss position of $1.8 million at March 30, 2025 and December 31, 2024, respectively . In addition, at March 30, 2025, the Company had various currency contracts outstanding to hedge the currency exposure of intercompany debt and foreign currency denominated receivables and payables. Although placed as economic hedges, the Company does not apply hedge accounting to these instruments. As such, changes in fair value are recorded directly to income and expense in the periods that they occur. The fair value of the Company’s non-designated deriva tives position was a gain of $3.0 million and a loss of $2.7 million at March 30, 2025 and December 31, 2024, respectively. In 2023, the Company became a party to cross-currency swap agreements with a total notional amount of $500 million to effectively convert a portion of the Company’s fixed-rate U.S. dollar denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The swap agreements, which had a maturity of December 18, 2026, provided for the Company to receive semi-annual interest payments in U.S. dollars at a fixed rate and to make semi-annual interest payments in euros at a fixed rate. The risk management objective of entering into the swap agreements was to manage foreign currency risk relating to net investments in certain European subsidiaries denominated in euros. The agreements were designated as net investment hedges for accounting purposes. On April 15, 2024, as a result of the strengthening of the U.S. dollar against the euro, as well as a reduction in the differential between U.S. and European interest rates, the Company terminated its swap agreements and received a net cash settlement of $9.1 million. The foreign currency translation gain of approximately $3.1 million, net of tax, is included as a component of “Accumulated other comprehensive loss.” 56 SONOCO PRODUCTS COMPANY Following the unwind of the swaps, the Company entered into new cross-currency swap agreements with a total notional amount of $500 million in April 2024 to effectively convert a portion of the Company’s fixed-rate U.S. dollar-denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt. The new swap agreements, which have a maturity of May 1, 2027, share the same risk management objective as the terminated cross-currency swap agreements and are also designated as net investment hedges for accounting purposes. In December 2024, the Company entered into additional cross-currency swap agreements with a total notional amount of $1.5 billion, including $500 million maturing on September 1, 2026, $500 million maturing on September 1, 2029, and $500 million maturing on May 1, 2030. The swaps effectively convert a portion of the Company’s fixed-rate U.S. dollar-denominated debt, including the semi-annual interest payments, to fixed-rate euro-denominated debt at the prevailing market rate at execution. The new swap agreements share the same risk management objective as the Company’s previously existing cross-currency swap agreements and are also designated as net investment hedges for accounting purposes. The gain or loss on the net investment hedge derivative instruments is included in the “Foreign currency translation” component of “Accumulated other comprehensive loss” until the net investment is sold, diluted, or liquidated. Interest payments received for the cross-currency swaps are excluded from the net investment hedge effectiveness assessment and are recorded in “Interest expense” in the Company’s Condensed Consolidated Statements of Income. The assumptions used in measuring fair value of the cross-currency swaps are considered level 2 inputs, which are based upon the Euro-to-U.S. dollar exchange rate market. The fair value of the Company’s net investment hedges was a loss position of $49.2 million and a gain position of $11.9 million at March 30, 2025 and December 31, 2024, respectively. Foreign currency translation loss of $36.7 million (net of income taxes of $12.6 million) and gain of $8.9 million (net of income taxes of $3.0 million) were reported as components of “Accumulated other comprehensive loss” within “Foreign currency items” at March 30, 2025 and December 31, 2024, respectively. The Company has an investment in preferred stock of a nonaffiliated private company that is accounted for under the measurement alternative of cost less impairment, adjusted for any qualifying observable price changes. Observable price changes would consist of Level 2 inputs based on privately negotiated transactions with the nonaffiliated company. The preferred stock balance of $21.2 million is included in “Other assets” in the Company’s Condensed Consolidated Balance Sheet as of March 30, 2025 . During the first three months of 2025, the U.S. dollar weakened against the euro, the British pound, the Moroccan dirham, the Polish zloty, the Brazilian real, the Danish krone, the Mexican peso, and the Colombian peso, all of which are functional currencies in which a large amount of the Company’s foreign investments are held. During this same period, the U.S. dollar strengthened against the Indonesia rupiah and the Chinese yuan. The net impact of these changes, and the changes in the net investment hedge discussed above, resulted in a net translation gain of $172.1 million being recor ded in “Accumulated other comprehensive loss” during the three-month period ended March 30, 2025. Restructuring and Impairment Information regarding restructuring charges and restructuring-related asset impairment charges is provided in Note 6 to the Company’s Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q. New Accounting Pronouncements Information regarding new accounting pronouncements is provided in Note 3 to the Company’s Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Form 10-Q.