Head of Investor Relations and Global Marketing Communications. Roger, please go ahead.
Thank you, Warren, and good morning, everyone. Last evening, we issued a news release and posted an investor presentation that reviews Sonoco's third quarter 2026 financial results. Both are posted in the Investor Relations section of our website at sonoco.com. A replay of today's conference call will be available on our website later today, and we will also post a transcript. If you will turn to slide two, I will remind you that during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates, and projections. These statements are not guarantees of future performance and are subject to certain risksa and uncertainties. Therefore, actual results may differ materially. Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations.
Further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations to GAAP measures, is available under the Investor Relations section of our website. Joining me this morning are Howard Coker, President and CEO, and Paul Joachimczyk, Chief Financial Officer. For today's call, we will provide remarks followed by your questions. If you will turn to slide four in your presentation, I will now turn the call over to Howard.
Thank you, Roger, and good morning, everyone. During the third quarter, our business has faced a combination of challenges. Through strong productivity initiatives and rigorous cost control, our teams were able to mitigate a significant portion of these issues and deliver resilient operating results. Paul will cover the detailed financial results. If you will turn to slide five, I will focus my comments on the operating performance of our Industrial and Consumer Packaging segments, where we maintain leadership positions in uncoated recycled paperboard, metal and paper cans, and closures. Our Industrial segment delivered another solid quarter with results essentially in line with the second quarter, despite a dynamic operating environment. Productivity continued to be a key driver. North America URB trade ton sales increased 10% year-over-year, and mill utilizations remained strong at 94%. Wire and cable reel sales continued to perform well with double-digit sales growth.
Overall, volume mix in the Industrial segment was modestly positive. An additional URB pricing realized in September further strengthens our ability to recover rising input costs moving forward. Results from our Consumer Packaging segments were below our expectations. Volume mix was down 3% year-over-year, primarily due to hot and dry weather conditions and unfavorable price-cost relationships during the quarter. There were several encouraging areas of performance into the Consumer segment. Our international paper can operations delivered double-digit volume growth, supported by continued solid demand for snack products across emerging markets. Also, U.S. Aerosol Can demand was up 7%, while productivity initiatives generated strong operational benefits across the business. As illustrated on slide six, we faced several external factors in the third quarter. Drought conditions across part of both Europe and the United States negatively impacted crop yields, reducing demand for food cans.
At the same time, inflationary pressures across raw materials, freight, energy, and other operating inputs were simply beyond our expectations. As shown on slide seven, we have spent much of 2026 managing a dynamic business environment. Freight costs alone increased $17 million year-over-year in the quarter, while diesel prices, which had stabilized in early July, accelerated to record levels, topping $6.50 per gallon in the U.S. Energy, raw materials, other operating costs also continued to rise. Old corrugated containers, or OCC, our largest industrial raw material input, increased another $25 per ton during the quarter and is now 90% higher than a year ago. As a result, total URB production costs have increased more than $60 per ton year-over-year. In addition, the euro is adjusted relative to the U.S. dollar during the quarter, which reduced the translated value of our European sales and earnings.
While these factors were significant, our focus has not changed. We are driving productivity, we are managing costs aggressively, and implementing pricing actions where appropriate. With that brief summary, let me turn it over to Paul, and then I will come back with some final comments.
Thank you, Howard. Before I review the quarter, two reminders. Unless otherwise noted, all metrics are adjusted. Reconciliations to the most directly comparable GAAP measures are included in our earnings materials. Also, third quarter 2025 results included ThermoSafe, which was divested in the fourth quarter of 2025. Where relevant, I will compare results both as reported and excluding ThermoSafe.
During the quarter, we recorded an $829 million non-cash goodwill impairment, primarily related to the consumer EMEA business. The adjustment reflects an updated assessment of the carrying value based on current market conditions and business performance. It does not affect adjusted results that I will be discussing today. Turning to the third quarter results on slide nine. The third quarter reflected changing market conditions. We responded with targeted pricing, productivity, and cost actions. Let me walk through the results. Net sales were $2 billion, down 4% year-o ver- year. Excluding the ThermoSafe divestiture last year, sales were essentially flat. Industrial contributed $32 million of growth driven by healthy trade and URB demand, along with pricing realization in North America.
Consumer offset those gains primarily because of the lower pack season volumes in North America and Europe, reflected with the effects of high temperatures, rainfall, and other weather events on crop yields. Adjusted EBITDA was $352 million with a margin of 17.2%. This was down 9% year- over- year, or 4% excluding ThermoSafe. Productivity and cost actions mitigated a portion of more than $30 million in input costs. Adjusted EPS was $1.67, down 13% year- over- year, or 7% excluding ThermoSafe. Higher input costs and softer global food can demand affected the reported results, while productivity and the Profitability Performance Plan, or PPP, benefits helped mitigate those pressures. Our businesses again generated strong operating cash flows in the third quarter, delivering $285 million despite seasonal working capital headwinds.
We also strengthened the balance sheet by reducing total debt by $162 million and net debt by $176 million while successfully refinancing an $800 million term loan. That refinancing extends our maturity profile and enhances financial flexibility, supporting our capital allocation priorities while maintaining our investment-grade credit ratings. Although volumes and related inventory affected quarterly cash generation, year-to-date cash flow remains above last year. We are taking significant actions to create advantageous financial outcomes. Industrial sales increased 5%, and productivity initiatives helped offset input costs. Our PPP program delivered an additional $60 million of savings, its strongest quarterly contribution to date. These results demonstrate the disciplined execution and position us well as the market conditions improve. Turning to the EPS bridge on slide 10. Adjusted EPS of $1.67 included $0.26 of operational performance headwinds. In Consumer, input costs and the softer global food can demand affected earnings.
In Industrial, higher OCC costs preceded contractual price resets during the quarter. Non-operational items provided a net $0.02 benefit to EPS. Lower interest expense from debt reductions contributed $0.12, while SG&A savings added $0.06. Depreciation and amortization, tax rate impacts and other items offset these non-operational benefits. PPP contributed an additional $0.12 to EPS, up from $0.07 in the second quarter. This was the third consecutive quarter of realized savings and the program's largest contribution to date. Year- to- date, these actions have delivered $0.25 of EPS benefit, offsetting some of the input costs through the first nine months of 2026. Overall productivity, disciplined cost management, and PPP helped mitigate the effects of lower volume and higher input costs in the quarter. Turning to cash flow on slide 11.
We continued to generate solid free cash flow, up 2% year-over-year, even with softer sales and seasonal working capital increases. Disciplined capital spending, now tracking at 3.3% of sales for the year, demonstrates our fiscal responsibility. As a reminder, our year-to-date cash flow includes $103 million of one-time tax payments related to the gains of our 2025 divestitures, which will not repeat. We remain focused on delivering our cash flow commitments and maintaining our strong balance sheet. With that context, let's turn to slide 12. This quarter, we added an additional detail to provide greater transparency into our balance sheet, liquidity, and disciplined approach to managing financial cycles. We reduced total debt by $162 million and net debt by $176 million during the quarter. We also refinanced an $800 million term loan, extending our maturity profile, enhancing our financial flexibility, and maintaining our low funding costs.
The strong cash-generating power of this business allows us to reduce our debt, invest back into the company, and continue our 43-year track record of increasing dividends paid to shareholders. Turning to the segment performance on slide 13. Consumer sales were down 3% year-over-year, including a 1% foreign exchange impact, primarily from euro movements, along with softer global metal food can volume. Harvest and quality in high temperatures affected crop yields across several key customers and end markets. Other parts of the portfolio remained resilient. Pricing in paper cans, international volume growth partially offset lower metal food can volumes. We expect paper can volume to remain steady through the end of the year. Improving canned seafood volumes also supported the segment, with that market now representing 10% of our consumer portfolio. Consumer EBITDA was down 9% in the quarter.
The team is responding with urgency through productivity, operational excellence, and pricing initiatives. Investments in plants efficiencies and asset utilizations are strengthening the segment's earnings profile. We are also accelerating footprint optimization by closing two sites in Europe, which we will expect to generate $15 million-$20 million of savings in 2027. Industrial sales increased 5% year-over-year to $646 million, supported by pricing and strong North American executions. Mill utilization also remained strong. Reels continued to grow, benefiting from the recent capacity investments and higher wood demand, particularly for wire and cable applications, supporting data center construction, and broader U.S. infrastructure investments. Industrial Adjusted EBITDA was down 5% year-over-year as higher OCC, freight, and diesel related transportation costs preceded price recovery. Productivity and operational improvements mitigating a meaningful portion of these cost increases. The industrial team continues to execute well through productivity and commercial initiatives.
Demand across key end markets remains healthy and additional pricing actions are underway. On slide 14, I'll review the progress on the Profitability Performance Plan. Our three-year Profitability Performance Plan is a company-wide program designed to deliver structural margin improvement, simplify the organization, and strengthen commercial effectiveness. The program is gaining momentum and directly offsetting input costs. Results through the first nine months reinforce our confidence in the earnings and margin opportunities in 2027 and beyond. The plan delivered $16 million of savings in the third quarter, up from $10 million in the second quarter to $8 million in the first. Year- to- date savings reached $34 million, and now annualized savings are at $51 million, or one third of the low end of the range of our three-year target of $150 million-$200 million.
We remain on track and continue to pursue opportunities to accelerate savings toward the high end of that range. These structural savings create a durable foundation for continued profitability improvement. Turning to our full-year outlook on slide 15. We remain confident in our strategic direction, including the move to one consumer business, and in the progress of our productivity and profitability initiatives. We are driving additional improvements to offset higher input costs and softer volumes. Based on the current market conditions and the third quarter performance, we are updating our full year expectations. We now expect net sales of $7.2 billion-$7.4 billion, Adjusted EBITDA of $1.2 billion-$1.25 billion, adjusted EPS of $5.30-$5.50, and operating cash flow of $600 million-$650 million. Our updated outlook reflects current market conditions. The underlying pace and quality of our execution remains strong.
In the third quarter, we delivered solid industrial growth, significant productivity gains, and meaningful Triple P benefits while accelerating select European footprint actions. These steps are building a more agile, efficient, and profitable Sonoco, and we remain confident in our ability to expand margins, strengthen earnings power, and create long-term shareholder value. With that, I'll turn the call back to Howard.
Thank you, Paul. If you'll turn to slide 16, I want to spend a few minutes on what we're doing to improve performance and position the business for future growth. In August, we aligned our Can businesses as one global consumer packaging segment. This creates one team focused on driving greater alignment across operations, technology, R&D, procurement, supply chain, and commercial execution around the world. Ernest Haynes has been made P resident of our $5 billion global consumer segment, with operations in America, EMEA, and APAC. Ernest has 30 years of leadership experience at Sonoco and has already hit the ground running, building a strong global team and spending significant time with our operations and customers around the world. As Paul mentioned, we are accelerating actions to improve profitability, including optimizing facilities and taking additional cost saving initiatives under our PP P program.
At the same time, we're staying focused on cost recovery while continuing to invest in opportunities that support long-term growth. Turning to slide 17, our Industrial business continues to perform well despite rising input costs that we've managed throughout the year. URB demand remains healthy with global trade ton sales up 6% in the third quarter. Operating rates in the U.S. continue to run in the mid-90s as we enter the fourth quarter. We also see strong demand drivers for wire and cable reels. Those positive trends give us confidence in the long-term outlook for our business, and we're evaluating additional investments to support further growth. On slide 18, you can see the actions we're taking to address rising input costs. In the Industrial segment, we successfully implemented two price increases this year, totaling $110 per ton.
Because of the timing of the most recent increase, we will realize some of the benefit in the fourth quarter, with the full impact showing up as we move into 2027. Finally, we have implemented surcharges across both our Industrial and Consumer business to help offset the input cost increases we have experienced in freight and diesel. As we wrap up on slide 19, the third quarter was clearly dynamic, but we also believe we are entering an important period of opportunity. In Industrial, we are benefiting from strong URB demand and continued growth in reels. In Consumer, our innovation pipeline in both metal and paper positions us for future growth. Most importantly, we remain confident in our strategy, our market-leading positions, and the ability of our team to execute through economic cycles. With that, operator, we would be more than happy to answer any questions.
We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of George Staphos with Bank of America. Your line is open. Please go ahead.
Thank you. Hi, everyone. Good morning. Appreciate the details.
Morning.
I guess for my two questions, Howard, I guess to begin, the range implied for the fourth quarter is relatively wide, and I was wondering, at this juncture, what is giving you the pause, if there is any, to narrowing the range? Since we are obviously now nine months into the year, where is most of the uncertainty, if there is any, showing up? Is it inflation? Is it in volume? The second question, recognizing that it does not affect your cash flow, can you talk about what went into, as I understood it, the impairment charge related to the Food Can business, and what the considerations were and what it means or what your accountants thought in terms of what is going forward in terms of cash flow generation from that business that led to that charge? Thank you, and good luck in the quarter.
Yeah. Thanks, George. I am going to flip over to Paul to get a little more color and depth to your question. From a range perspective, after exiting Q2, as we were reaching the end of Q2, we thought we had peaked out in terms of inflation. Who would have thought that diesel would have run up from $4 at that point in time to, as I noted, $6.50? So it is wide, yeah. You also have to add in what is going to happen as it relates to the holiday seasons, et cetera, on the macro side of things. As we enter the quarter
things seem to be tracking to our midpoint type expectations. So it is really about the unknowns and what amount of surprises that we have seen from a macro. Let me talk just briefly about the impairment. Paul can get into more of the technical side of it. We are as bullish about the strategy as we have ever been. There is no doubt about it that if you look inside the four walls of the acquisition, that we have had a sluggish type of start and it starts with leadership. Unfortunately, we lost our key leader midway through the first year. But I am really, really excited about the new structure and the benefit under Ernest and his global team that he has got in place. It is great assets that we have across the portfolio, not just in Europe, but in the U.S. as well. Great team, great people, dynamic market.
We see just the same thing we saw from day one. It is just taken us a little bit more time. Again, I will pass it on to Paul, but the benefits that we have defined from the very beginning was that as we entered into this market three, four years ago, that scale mattered, and we felt like this acquisition was going to be a benefit on the global perspective. Well, that is not how you test. You test on performance within the four walls of the acquisition. But we have seen strong benefit in North America and other parts of the world that we are very happy with. Paul talked to SG&A type savings, and I am referring to more procurement, but SG&A savings that are now captured in PP P that we are moving forward. Strategy is intact, alive and well. We are excited about it.
Paul, if you would like to add-
Absolutely.
-any further color.
Yeah. George, the impairments, we annually test our goodwill in the third quarter, and this really is a normal cycle for us. If I take you back to what happened in 2025, it's a very narrow margin that we disclosed in our Q and our K that they were passing with a 3% margin. You fast-forward to the first half of this year, business was performing on track, and then really in Q3, battling the volume challenges that were over there and the inflation headwinds that really hit us did lead us into a space where we actually had to take the impairment charge. Nothing really changes on the long-term viability of the business, the overall global strategy for us.
It is just the fact that we have to test this business still independently and it has to stand alone, and we can't capture those global synergies across the portfolio. But really it's just more of a, there was no triggering event. It's just our normal annual process that we have to go through.
All right, I'll pass it on. Thank you very much.
Your next question comes from the line of Mike Roxland with Truist Securities. Your line is open. Please go ahead.
Yes, thank you Howard, Paul, Roger, for taking my questions. First one, relative to your expectations, how much were incremental costs in the quarter, and how much were you able to offset with productivity initiatives and other cost control?
Yeah, it's a good question. So really, if you'll break it into two parts, and that's really kind of the theme that happened in Q3 is, there was a volume impact and there was an inflationary impact, and they were both relatively equal, and you could say roughly the total impact was around $40 million-$50 million, almost split between volume and inflation. Productivity did offset some of that. You saw in our EPS bridge, call it $0.26 of EPS headwinds that was there. You'd say of that $50 million headwinds that we did have and experience, $0.24 of it was offset, and then $0.26 fell negatively to the bottom line.
Got it. That's very clear, Paul. Then just in terms of how we think about maybe 2027 and 2028 EBITDA, obviously for 2027, could you provide us with some of the larger buckets, key items to get to 2027 EBITDA? Because now you're starting at a lower midpoint, or a lower point, I should say, for 2026. You're down about $75 million. So obviously you're starting from a lower base. So help us bridge to 2027 with some of the larger buckets or key items. Then also, if you don't mind, can you help us understand how you're going to achieve the $1.5 billion in EBITDA in 2028 that you targeted at your Analyst Day last year?
Yeah. Good questions there on the 2027 bridge. We gave a couple snippets in there on the call. If you picked up on the two site closures that we are talking about in Europe, that is going to enhance our EPS or EBITDA by $15 million- $20 million that are out there. We are expecting relatively flat volumes year-over-year. You add in some of the PP P productivity that is going to enhance some of the earnings that are there. We do experience inflation that is going to carry through. I will say, as long as inflation holds, here are some of the positives. On the Industrial side, we should be in a positive price cost recovery mode into the first half of 2027. We are still going through the negotiations on our steel buy and our Consumer business.
As you know that gets closed out as we close this year. We go into those contract negotiations with our customers in the first quarter. Still too early to speculate on where that will land. We will give you the full 2027 outlook as we get into February, when we give that guide.
Just quickly, Paul, just in 2028, how do you expect to bridge that as well?
The 2028, we will give that context on that as well in February.
Got it. Thank you.
Your next question comes from the line of John Dunigan with Jefferies. Your line is open. Please go ahead. As a reminder, if you are muted locally, please remember to unmute your device. Your next question comes from the line of Anthony Pettinari with Citi. Your line is open. Please go ahead.
Good morning.
Morning.
Just following up on George's question earlier. Consumer vol mix was down 3% year-over-year in Q3. Looking at the guidance range for Q4 and just looking at how October's played out, any thoughts on what that range might be? Second question, from a cost perspective, are you expecting costs for Q4 to sequentially be just stable with Q3? Are you penciling in a little inflation or a little relief, or just any finer point you can put on that?
Thanks, Anthony. Right now, what we're forecasting into Q4 is relatively flat year-over-year on consumer. We think industrial is going to be up slightly. You're hitting on the issue is inflation. Right now, we're assuming that things have fairly well leveled out, so we're not expecting things to get worse from an inflationary perspective. Keep in mind, again, we talked through it in the prepared remarks that while we received good recognition on the two price increases we put on industrial. The second recognition, first off, we were $50 recognized with an increase in cost of $60. The first was consumed in the third quarter.
The second one was recognized late in the quarter, so we will not get 100% recovery of that second $60 until January 1 or the first quarter of this coming year. On the Consumer side, as Paul just said, it's really we've got surcharges and price increases out there where available. Contracts really don't reset till the beginning of the year. So there's still a bit of an inflation headwind, some improvement and as it relates to the recovery I just talked to, but flat in consumer and slightly up in industrial.
Okay. That's very helpful. I'll turn it over.
Your next question comes from the line of Mark Weintraub with Seaport Research Partners. Your line is open. Please go ahead.
Thank you. I appreciate the flat end consumer volume expectation for 4Q. Could you provide a little bit more color on specifically for Europe and also in 3Q, I think you talked about 3% overall. If you could talk through why volume came out the way it did because you referenced things about weather, et cetera. I am trying to get a sense as to how much is quasi one-time versus thinking about the underlying structural growth in the business and things like that.
Yeah, Mark, great question. If we think about answering the 3Q first, the drought and impacts like that did impact our volumes across the globe. It does not matter if it was in the U.S. or Europe. I would say those are all negatively impact. We did have some bright spots, though, and if you point to the bright spots, those are on our aerosol business in the U.S., those are on our fish and seafood business across the European, primarily our pet food business, the PIF business as well. Those were all strong volume gains. It really goes to this one time, I will call it a seasonal impact related to the drought that is there. Do not expect that to continue forward.
If anything, I would say that gives us more confidence as we go into the out years that more crops will have to be planted, more acreage will have to be in the ground. There will be canning opportunities for us as we go into 2027 and beyond. So, I really want to quantify as Q3 as that kind of seasonal impact one time. Unfortunately, you do not have the ability to go recover that in the fourth quarter because once the crop harvest has passed, you really do kind of get stale in that space. The other bright spots here too was around our snacking portfolio. If you think our Paper Can business internationally, that did grow strong both in Europe and in Asia. You are seeing really strong growth down in Mexico as well. Those facilities are sold out.
This is a really strong opportunity for us on different fronts of our portfolio. But really the impact this quarter was our food can volumes.
Okay, super. Thank you. If you could just update us with your thoughts. Obviously, you've had a competitor reenter the URB market. As you've gotten a little bit more color, thoughts on possible impact for you guys?
Yeah. Mark, we're really not seeing that particular competitor in our space. I'm sure they're having some success in markets that we really don't participate in. So it's kind of business as usual as far as we're concerned.
Maybe just as a quick follow-up, the way your pricing contracts are set up, even if the competitor is not competing directly where you do, does it potentially have impact because perhaps contracts are tied to parts of the market where they do compete, or are you able to insulate yourself from that risk?
Yeah. Right now, even in those markets, it's hard for me to answer that question. I would say no. I think that the bigger players in the market are going to carry more weight than some of the smaller, less demanding sides of the business. So, at this point in time, we're not concerned about it. Frankly, we're just not even seeing a pricing issue in the market at this point in time.
Got it. Thank you.
Your next question comes from the line of John Dunigan with Jefferies. Your line is open. Please go ahead.
Hey, guys. Good morning. Can you hear me now?
Yep. John, fine.
Sorry about the technical difficulties before, but I appreciate the time and all the details this morning. I just wanted to start off on the can businesses. Can you remind us if there's any aspect of a cost pass-through tied to PPI for those businesses? Or it's just really as you get to year-end, talking about the steel pricing, and getting that re-upped?
Yeah, John, really if you go into how we do price this, there is those indices that are out there. But going back to how the whole can business works is you go through your primary component of your steel, which gets negotiated annually. And then there is two opportunities, kind of at some of the customers, kind of at the Q1 point and Q2. But for other items that are ancillary, and if you think about tariffs or other surcharges, we do have those accelerators that can go through there. But it is primarily to two points in time where you go and negotiate prices with customers.
Very similar on both sides. It's very similar on the Paper Can side of the business as well.
Okay. Just for the two sides of the pond, any differences in how those contracts are structured with some of those cost pass-throughs and material causes?
Nothing materially different. No.
Okay. Appreciate it. Paul, I think I heard you say you are tracking towards and targeting the high end of the PP P program. You talked about trying to accelerate some of those initiatives now given the current environment. I am just wondering if you could update us on how you are thinking about the cadence over the remaining three-year timeframe. Appreciate it, guys.
Absolutely, John, and great question. If you think about how we are going to end 2026, we are targeting right now right around $50 million. We have already identified $15 million-$ 20 million of the two site closures that are happening into 2027, and we expect 2027 to be incrementally higher than 2026. You can call it $10 million to $15 million to $20 million higher. As we get into 2028, it will be higher than 2027 because these are more of those structural investments that we have to make, optimizing the footprint, but also investing in our own facilities to get more productivity out of them and yielding better results. So expect a steady ramp. You can call it 50, call it 60, 70, if you wanted to, or in that ballpark. But we are targeting in the 180 range, right in the middle of the 150 to 200.
Great. Thank you very much, guys. I will turn it over.
Your next question comes from the line of Hillary Cacanando with Deutsche Bank Securities. Your line is open. Please go ahead.
Hi, thank you for taking my questions. Could you talk about how you're thinking about the OCC cost for the fourth quarter and as we enter 2027? If OCC remains elevated or moves higher from here, how effectively can you recover that additional inflation under your current pricing mechanism?
Yeah. So right now we're assuming OCC to be flat as we go into the fourth quarter. If I'm understanding your second part of your question, certainly we talked through what the current market conditions are. Too soon for me to say, "Hey, are we going back out again or not?" But those are certainly opportunities for us to take a look at as we enter into the new year. I think I had a little bit of difficulty understanding your second half. I hope that answered.
Mm-hmm. Yep, you did. Thank you. As a follow-up, in terms of your Reels business, obviously sales continue to be strong. As the additional capacity ramps, how are you thinking about growth in 2027? I was just wondering if you've seen any change in data center demand, just given some of the opposition to data center construction that we've seen in recent months. Thank you.
Yeah. As we're looking into next year, we're probably similar type growth rates that we've seen over the last couple of years. We've added the capacity to support that growth, actually productivity as well, to drive efficiencies as we grow. Data centers, it's hard for me to sit here today and say that's even been a big part of what we're seeing here. Just the entire from greening of the grid to the internet expansions into rural areas, et cetera. I would say that the data center situation, while obviously it's happening, it's slower than I think most people have expected. Hey, if it happens in a big way, then that's just more opportunity for us going forward. But we're kind of saying we're going to be keeping the same kind of growth pace, consistent with the investments we've made in the business.
Got it. Thank you very much.
Your next question comes from the line of Ghansham Panjabi with Baird. Your line is open. Please go ahead.
Yeah, thanks. Good morning, everybody. I'm not sure if I missed this, but for 2026 in total on an EPS basis, what do you estimate price costs will be for the full year? Are you currently anticipating that you'll recover the full extent of that shortfall in 2027 if costs hold at current levels?
Yeah, Ghansham, that's a great question. I'd say our price costs for all of 2026, it's really kind of, I'll say we've been lagging behind in our Consumer business pretty substantially throughout the year. Our Industrial business is also lagging behind. Unfortunately, some of that cost will be foregone. We will not be able to fully recover that because as you get through that quarter. As we get through successive quarters, we will be able to fully recover that. As we talk to the Industrial side, we're going to be call it positive price cost as we go into the end of, let's call it the end of fourth quarter, and then starting into the Q1 of 2027. As Ernest goes through his pricing negotiations for 2027, we do expect to recover the inflation and be relatively neutral in the space.
But I'd say the 2026 was more of a one-time event, and do not look forward to that trend to continue in the future.
Got it. As it relates to the variances for 2027, just high level. Is it basically the cost savings flow through that you kind of went through? I think you called out $50 million of incremental savings and then some of the price cost recovery. As it relates to volumes, all the costs that you're absorbing, certainly the consumer's going to be absorbing as well. We already have this issue with affordability, and obviously that's impacted volumes for many different verticals, including yours on the consumer side. How are you thinking about that dynamic in 2027? I understand the cyclical nature or the weather-dependent nature of some of the businesses that you're exposed to, but as it relates to the affordability compounding, are you at this point expecting any sort of deterioration in the consumer volume business from a non-volatiles standpoint? Thank you.
Yeah, Ghansham, we really aren't. We are seeing trade downs. We do participate fairly heavily in the private label side of things and have noted that shift. But staple food items we really aren't concerned about. In fact, if history repeats itself, the tighter the market is or the tighter the consumer's wallet is, we see more benefit and more drive through the center of the store. We have seen that historically in our canned business for a long time. So we're not building in. Basically, we're saying, "Look, things are going to kind of normalize itself out and flatten out post the harvest." In fact, there's another side of it says, "Hey, is there going to be more acreage planted next year?" Et cetera. Right now, we're saying things are going to kind of stay stable.
The other side of it is, we're seeing some pretty exciting new launches in the paper can side of the business. Hopefully, you'll be consuming your Cheez-Its in the future out of a Sonoco Paper Can. There are other SKUs that our customers are putting out to differentiate and drive traffic to the center of the store, to the aisles, to the snack aisle. Then, of course, I talked about in detail, not in great detail, but what's happening growth international, Southeast Asia, and in Europe on the snacking side of the business. Sorry about the long-winded nature of it, but no, we don't think if anything, while it's for consumer becomes more stressed, it's going to potentially drive more positive to the business.
Just to clarify, you don't see any real offset from GLP-1 usage, et cetera?
No. Again, if there is, our portfolio, if you just look at it today, is much different than it was before. So we're less on the confectionary, hard baked goods side of things, QSR, than we ever have been. So remains to be seen, but again, growth in international markets on the snack side, and we've got new launches that are rolling through on the snack side here in the U.S. that if there is a GLP-1 impact, hopefully, or the expectation would be that it would mitigate that impact.
Okay. All right, thank you.
Your next question comes from the line of Matt Roberts with Raymond James. Your line is open. Please go ahead.
Hey, Howard, Paul, Roger. Good morning. Howard, on the 2027 volumes, I might be regurgitating exactly what you just said, but when I think about flat year-over-year, you just noted you're not expecting impacts from inflation on staples. You should have an easy comp in Europe given the pack season this year. In the Paper Cans, you still have international growth and new products. Why should consumer not be up in that scenario? Similarly, on paper, it seems like you're exiting with some strength in European reels. Why should that not carry over and be positive in 2027? Are there other categories within industrial paper that are offsetting that could be better or worse in 2027?
Well, Matt, we're really kind of early in the season in terms of forecasting for next year. Am I being conservative? I'd rather be that way based off of how optimistic I was going into 2026, not expecting the macro of a war, et cetera, that has hit us every corner you turn. So if anything, I think to your point, are we being conservative? Possibly, but we'll certainly get deeper into this as we finish out the year and get into early next year. You guys will be the first to know.
Fair enough. Those things weren't in my 2026 preview either, so forgive me there. Then on consumers, maybe on the aerosols, you talked about, I think, last quarter's restock that seemed to show up with strength this quarter. Was that one-time strength in Q3 or given higher interest rates, potentially weaker housing outlook? What are you expecting for aerosols in Q4 and 2027 as far as the eye can see? Thanks again for taking the question.
We're bullish on the aerosol side. We've got a good mix of customers that are doing the right things in the marketplace. So really strong in the third. Is it going to maintain itself at a 5%-7%? I don't think so, but we're tied to some very good customers that continue to push forward. So we expect it to not step backwards in any material type of way. In fact, should continue to flow through it.
Thanks again, Howard.
Appreciate it, Matt.
Your next question comes from the line of Anojja Shah with UBS. Your line is open. Please go ahead.
Hi, good morning.
Morning.
I just wanted to ask about the refi that you did, the $800 million term loan. I may have missed it, but can you talk about the impact to your interest expense next year?
Yeah. The impact to our interest expense is going to be roughly immaterial, call it $2 million-$3 million in total. That's there, but it does give us a lot more optionality with nothing coming current in the 2027 time period, and pushes out all current maturities out into 2028 and beyond.
Great. Thank you. I'll turn it over.
Your next question comes from the line of George Staphos with Bank of America. Your line is open. Please go ahead.
Thanks, guys. Appreciate you taking my follow ones. One short-term, one longer-term question. In terms of the shorter term, Howard and Paul, we normally go into a period now where you have more OCC generation in the fourth quarter into early one Q. How would you characterize the environment right now? Should we see continued inflation in OCC, or will generation hopefully level things off? How would you characterize that?
George, I'd say it's kind of normal. At this point in time, we're not expecting and not planning for any increase. As you point out, through the holiday season, early part of next year, more generation, could we see a decline? Pure speculation when you talk about OCC, but certainly could happen. The good news is we've got our first full look of all the pricing true-up January 1. So any pullback on OCC would certainly be highly welcome as always for the company.
Okay. Understood. The second question, maybe quickly now, maybe more depth, kind of next Analyst Day or maybe the fourth quarter. As you think about the consumer business, and there's been a lot of questions in terms of the volume growth for the business for Sonoco Consumer on this call, rightly so. If you think about your large categories, has your volume outlook changed at all on a secular basis? I know this year you've been buffeted by things, but last year the sardines didn't swim. So every year there can be something. As you look out, has the business and your volume outlook changed at all? Has it gotten better? Has it gotten worse? Any thoughts related to the end markets? Because remember with Eviosys and its predecessor, it was frequently an up and down performer volume-wise. Why should it be better on a going forward basis?
Thanks, guys, and good luck in the quarter.
Yeah, sure. In fact, we dug pretty heavily into that going into the acquisition and even coming out. If you look at Sonoco and our portfolio as recently as 2019, taking out the COVID effect, we are probably 5%-7% related to quote, weather, agriculture. Today, we are probably around 15%-17% in total company. Has there been an increase of exposure? Yeah, slightly. At the same time, we are pretty excited about markets that we have already talked about. Relatively flat in pet for the quarter, but it has been riding on an upward trajectory. Powdered infant formula up. When we talk about seafood, it is in massive demand right now, and our growth really is showing up to 10% we saw in the third quarter is on the tuna side of things, which is a global supply chain, less of an issue than some others.
I think if you combine that with on the P aper Can side of the business and what we are seeing on the snack side of things, growth there, as we have talked to in pretty solid detail as it relates to Southeast Asia, Europe, sold out in South America, new applications showing up here in the U.S. We are extremely bullish about the go forward. You can have weather issues. I was speaking to a large group of very interested Sonoco folks earlier in the week, and we were supposed to have the most hurricanes in the history of the country in the Atlantic, and we have had one. I do not wish for hurricanes, but it certainly helps our construction and caulking business when it is time to repair rooftops, et cetera. Weather-related
is not just agriculture. It can be a lot of different things. We are, again, very bullish, and we are focused on all of the markets that we serve today, and think we got a pretty good mix.
Thank you very much, Howard.
Sure.
We have reached the end of the question and answer session. I will now turn the call back to Roger Schrum for closing remarks.
Certainly want to thank everybody for their participation today and your interest in Sonoco. As always, if you have any further questions, please don't hesitate to reach out. Thank you.
This concludes today's call . Thank you for attending. You may now disconnect.