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Hartsville, S.C.-based Sonoco Products (NYSE: SON ) is hiking prices on its signature product: cardboard.
On Friday, Sonoco announced an across-the-board price hike on "all grades of uncoated recycled paperboard (URB) products by $40 per ton, effective with shipments in the United States and Canada beginning July 8, 2013." The company's Primary Materials Group, North America, Vice President Marty Pignone explained that "the price increase is necessary to recover rising recovered paper and other raw materials costs."
Posted prices for old corrugated containers (used cardboard boxes) are said to be up 60% over the past nine months, and some of this recyclable material is selling above even these higher posted prices. Demand for the raw material, as you can imagine, is strong.
Despite the reported cost increases, however, Sonoco's gross margins have held up well over the past three quarters, averaging 50 basis points better (17.5%) than what the company earned in the previous three quarters (17%).