Q4 2021 Reynolds Consumer Products Inc Earnings Call
[music].
Yeah.
Ladies and gentlemen.
Speaker 1: Ladies and gentlemen...
Speaker 1: Thank you for standing by and welcome to the Reynolds Consumer Product 4th Quarter 2021 earnings call.
Thank you for standing by and welcome to the Red Dog's Kinsey them, a productive fourth quarter 2021 earnings calls.
Speaker 1: At this time, all participants are in listen-only mode.
At this time, all participants are in listen only mode.
Speaker 1: After the speaker presentation, there will be a question and answer session.
After the Speakers' presentation, there will be a question and answer session.
Speaker 1: If anyone should require operator assistance, please press star 0 on your telephone keypad.
If anyone should require operator assistance. Please press star zero on your telephone keypad.
Speaker 1: Please be advised that today's call is being recorded.
Please be advised that todays call is being recorded.
Speaker 1: And I'd like to hand the conference over to your speaker today, Mark Swartzberg. Thank you. Please go ahead.
And I like to hand, the conference although to your speaker today, Mark Schwartz Bert.
Thank you. Please go ahead.
Speaker 2: Good morning and thank you for joining us on Reynolds Consumer Products fourth quarter and fiscal year 2021 earnings conference call. On the call today are Lance Mitchell, President and Chief Executive Officer, and Michael Graham, Chief Financial Officer. For our agenda today, Lance will focus on market conditions, our fundamentals, and our 2022 priorities, and Michael will review our quarter and outlook. Together, our remarks will be approximately 20 minutes. Then we will open it up for your questions.
Good morning, and thank you for joining us on Reynolds consumer products' fourth quarter and fiscal year 2021 earnings conference call.
On the call today are Lance Mitchell, President and Chief Executive Officer, and Michael Graham Chief Financial Officer for our agenda today.
And so we'll focus on market conditions are fundamental and our 2022 priority and Michael will review our quarter end outlook together, our remarks will be approximately 20 minutes then we'll open it up for your questions during.
Speaker 2: During the course of this call, management may make forward-looking statements within the meaning of the federal securities law. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results and outcomes to differ materially from those described in these forward-looking statements.
During the course of this call management may make forward looking statements within the meaning of the federal Securities law.
Statements are based on management's current expectations and involve risks and uncertainties that could cause actual results and outcomes to differ materially from those.
As described in these forward looking statements.
Speaker 2: Please refer to Reynolds Consumer Products annual report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and its press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.
Please refer to Reynolds consumer products annual report on Form 10-K , and other reports filed from time to time with the Securities and Exchange Commission and its press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward looking statements made today. Please.
Speaker 2: Please note, management's remarks today will focus on non-GAAP or adjusted financial measures. The reconciliation of GAAP measures to non-GAAP financial measures is available in the earnings truly posted under the investor relations heading on our website at ReynoldsConsumerProducts.com.
Please note management's remarks today will focus on non-GAAP or adjusted financial measures a reconciliation of GAAP measures to non-GAAP financial measures is available in the earnings release.
Under the Investor relations heading on our website at Reynolds consumer products Dot com.
Speaker 2: The company has also prepared a few presentation slides and additional supplemental financial information which are posted on Reynolds website under the investor relations heading. This call is being webcast and an archive of it will also be available on the web.
The company has also prepared a few presentation slides and additional supplemental financial information, which are posted on reynolds' website under the Investor relations heading.
This call is being webcast and an archive of it will also be available on the website.
Speaker 2: While we would like to answer all of your questions during the question and answer session, in the interest of time, we ask that you ask one question and a follow up, and rejoin the queue if you have additional questions. And now I'd like to turn the call.
While we would like to answer all of your questions. During the question and answer session. In the interest of time, we ask that you ask one question and a follow up.
And rejoin the queue if you have additional questions.
And now I'd like to turn the call over to Lance Mitchell.
Speaker 2: Thanks Mark. We delivered another year of record net revenues, finishing the year with continued strong demand and in line with our expectations in spite of continued supply chain challenges.
Thanks, Mark we delivered another year of record net revenues, finishing the year with continued strong demand and in line with our expectations. In spite of continued supply chain challenges.
Speaker 3: Thanks to the resilience and hard work of our team, we grew revenue 9% on top of last year's record net revenue.
Thanks to the resilience and hard work of our team.
We grew revenue, 9% on top of last year's record net revenues.
Speaker 3: We grew volume another 1% on top of 2020's 9% increase. We grew market shares for most of our products. We start out with a 2% harvest Romans within the 12 week period.
We grew volume another 1% on top of 20, 29% increase.
We grew market shares for most of our products.
We grew both of our billion dollar brands.
Speaker 3: The hefty brand grew and exceeded 1.3 billion in retail sales in 2021.
The brand grew.
One 3 billion in retail sales in 2021.
Speaker 3: And the Reynolds brand continue to grow strongly off the $1 billion in retail sales achieved in 2020.
And the Reynolds brand continued to grow strongly off the $1 billion in retail sales achieved in 2020.
Speaker 3: We anticipated and fulfilled strong holiday-related demand, and we mitigated ongoing supply chain challenges.
We anticipated unfulfilled strong holiday related demand.
And we mitigated ongoing supply chain challenges include.
Speaker 3: including production disruptions at third-party suppliers, import delays, and significant staffing and logistics-related headway.
Including production disruptions.
Third party suppliers import delays and significant staffing and logistics related headwinds.
Speaker 3: We also accelerated revolution cost savings in 2021 and began increasing our emphasis on revolution, growth, and cost savings initiatives, strengthening our earnings potential for 2022 in the long term.
We also accelerated revolution cost savings at 2021.
We began increasing our emphasis on revolution growth and cost savings initiatives strengthening our earnings potential for 2022 and the long term.
Speaker 3: Michael will walk through the details of our 2022 outlook, but let me set the stage.
Michael will walk through the details of our 2022 outlook.
Let me set the stage.
Our four rounds of price increases since late 2020.
Speaker 3: Our four rounds of price increases since late 2020 have been implemented as planned.
Had been implemented as planned.
Speaker 3: Inflation remains a watch out but may be moderating and we anticipate profit growth this year. We are forecasting that to commence with our second quarter results.
Inflation remains a watch out, but maybe moderating and we anticipate profit growth this year we.
We are forecasting that to come out with our second quarter results.
Now, let's turn to the top line.
Speaker 3: We expect consumer demand, price increases, innovation, and expanded manufacturing and supply chain capabilities to remain our main drivers of growth.
We expect consumer demand price increases innovation and expanded manufacturing and supply chain capabilities to remain our main drivers of growth.
First consumer demand.
Speaker 3: Household use of our products remains elevated versus pre-pandemic levels.
Household use of our products remains elevated versus pre pandemic levels.
According to our latest Harris poll, which we conducted a get in December it is our ninth since we started the start of the pandemic.
Speaker 3: Every day use of foil is up five-fold versus pre-pandemic levels and weekly use of waste bags and food bags
Everyday use of boils up fivefold versus pre pandemic levels and weekly use of waste bags food bags.
Speaker 3: He's up more than 20% versus pre-pandemic levels.
It was up more than 20%.
Versus pre pandemic levels.
Speaker 3: And according to our fifth numerator poll, the overwhelming majority of respondents continue to expect to maintain or increase their foil, waste bag, and food bag use beyond 2021 levels.
And according to our fifth numerator poll. The overwhelming majority of respondents continue to expect to maintain or increase their foil waste bags food.
Food values beyond 2021 levels.
And our brands and product portfolio are performing very well.
In the fourth quarter.
On an omnichannel basis branded a dollar a share well waste bags and disposable cost of dishes is up versus year ago levels.
Speaker 3: Those figures include e-commerce and in tracked channels it's the same trend. Branded dollars share in foil, waste bags, and disposable cups and dishes higher than year ago levels. We also continue to build on e-commerce momentum.
Those figures include e-commerce and in tracked channels, it's the same trend.
Dollar share in foil waste bags, and disposable cost and dishes higher than year ago levels. We also continue to build on e-commerce momentum.
Speaker 3: E-commerce related sales grew strong double digits in the quarter.
E Commerce related sales grew strong double digits in the quarter.
Speaker 3: Growth remains broad-based across RCP and major e-commerce retailers.
Both remains broad based across our C P and.
And major e-commerce retailers.
Speaker 3: We tested holiday themed product bundles and we continue to expand, participating in third-party marketplaces while also continuing work on multiple direct-to-consumer initiatives.
We tested a holiday themed product bundles and we continue to expand participating in third party marketplaces, while also continuing work on multiple direct to consumer initiatives.
Speaker 3: The next driver of our revenue growth is price. Our fourth round of pricing has been implemented as planned.
The next driver of our revenue growth is price our fourth round of pricing.
And as planned.
Speaker 3: We have been vigilant and quick to adjust pricing to inflation and market conditions, and we will implement further price increases when required. However, inflation rates began moderating late last year, and we anticipate generally stable resin and aluminum rates versus current levels.
We have been quick.
Quick to adjust pricing to inflation on market conditions, and we will and will not further price increases when required.
Sure.
Placement rates began moderating late last year and we did.
Chesapeake generally stable RASM and aluminum rates versus current levels.
Speaker 3: We therefore expect margin recovery to begin in second court.
We therefore expect margin recovery to begin in the second quarter.
Speaker 3: In terms of elasticity, as you know, historically our categories have demonstrated low elasticity by comparison to many consumer staples categories. We continue to monitor that very closely.
In terms of elasticity as you know historically our categories has demonstrated low elasticity.
Comparison to many consumer staples categories.
We continue to monitor that very closely.
The third driver of our strong growth is innovation.
Speaker 3: Innovation has been a major driver of Reynolds and Hefe brand's strong performance.
Innovation has been a major driver of Reynolds and happy brands strong performance.
Speaker 3: and our continued category leadership and our expansion into adjacent.
And our continued category leadership and our expansion into Adjacencies.
Speaker 3: Reynolds Wrap everyday non-stick foil, hefty Fabuloso waste bags, and hefty EcoSave disposable tableware have been true standouts, recruiting new users and demonstrating the velocities to drive additional distribution gains this year.
Reynolds wrap everyday Nonstick dwell.
That would be fabulous of waste bags, and happy Eco say disposable tableware I've been true standouts recruiting new users and demonstrating the velocity used to drive additional distribution gains this year.
Speaker 3: Reynolds kitchen unbleached parchment paper, Reynolds kitchen butcher paper, Heppy slider half gallon storage bag.
What else kitchen, Unbleached parchment paper Reynolds kitchens, Butcher paper happy slider half gallon storage bags.
Speaker 3: at hefty 20 ounce food storage containers, also scaled substantially in 2021.
Roughly 20 ounce food storage containers also scaled substantially in 2021.
Speaker 3: And we innovated extensively in Private Label, introducing functionally embossed waste bags, recyclable Fresh Lock sliders, holiday printed food bags, and more.
And we innovated extensively in private label, introducing functionally and boss waste bags recyclable fresh lot sliders.
Holiday printed food bags and more.
We enter 2022.
Speaker 3: We honor 2022 not only with momentum from these products, but also with a strong pipeline of innovation, including a number of sustainable product solutions.
Not only with momentum from these products, but also with a strong pipeline of innovation, including a number of sustainable product solutions.
Speaker 3: Finally, in 2022, we also plan to extend the Hefty Energy Bag program to new municipalities.
Finally in 2022, we also plan to extend the hefty energy bag program to new municipalities.
Speaker 3: building upon last year's doubling of eligible households with our expansion to the greater Atlanta market.
Building upon last year's doubling of eligible households, with our expansion to the greater Atlanta market.
Yeah.
Speaker 3: Our fourth growth driver is Expanded Manage Bactoring and Supply Chain Capability.
Our fourth growth driver is expanded manufacturing and supply chain capabilities.
Our market share trends have been healthy across our C. P. Reflecting the capacity additions we undertook at the start of the pin down like in our affected us managing the supply chain.
Speaker 3: Our market share trends have been healthy across RCP, reflecting the capacity additions we undertook at the start of the pandemic and our effectiveness managing the supply chain.
Speaker 3: That's not to say that staffing and logistics pressures are not a significant challenge. We're working hard to minimize the impact of those and other supply-related impediments to our ability to produce and ship our products.
It's not to say the staffing and logistics pressures are not a significant challenge.
We're working hard to minimize the impact of those and other supply related impediments.
Our ability to produce and ship our products.
Speaker 3: Before I pass the call over to Michael, I'd like to leave you with the following.
Before I pass the call over to Michael I'd like to leave you with the following.
Speaker 3: The business environment remains dynamic, but we've shown time and time again our ability to stare down challenges.
The business environment remains dynamic, but we've shown time and time again, our ability to stare down challenges.
Speaker 3: Our ability to adapt and change is a tremendous asset, and meeting adversity has only made us better at what we do. We expect to start seeing profits growing in the second quarter.
Our ability to adapt and change is a tremendous asset and meeting adversity has only made us better at what we do we.
We expect to start seeing profits growing in the second quarter.
Speaker 3: And we are doing the work to make our business and earnings potential stronger.
And we are doing the work to make our business and earnings potential stronger.
Speaker 3: I have enormous confidence in our people and see a bright future for our company, our partners, and our shareholders. With that, I'll turn it over to you, Michael.
Enormous confidence in our people.
A bright future for our company, our partners and our shareholders with that I'll turn it over to you Michael.
Speaker 3: Thanks Lance and good morning everyone. I will briefly review our fiscal year 2021 and four quarter results, then turn to our.
Thanks, Lance and good morning, everyone I will briefly review our fiscal year 2021 and fourth quarter results, then turn to our outlook.
Speaker 3: For the fiscal year 2021, net revenues were $3.6 billion, up 9% over a record $3.3 billion net revenues we had in 2020. Growth was driven by pricing to offset higher material costs, continued strong demand, and continued benefits from innovation.
Fiscal year 2021, net revenues were $3 6 billion.
9% over a record $3 3 billion net revenues. We had in 2020. We're also was driven by pricing to offset higher material costs continued strong demand and continued benefits from innovation adjusted.
Speaker 2: Adjusted EBITDA was $601 million, down 16% versus last year as price increases lagged higher material, labor and logistics costs, partially offset by higher volume and lower SG&A.
Adjusted EBITDA was $601 million down 16% versus last year as price increases lagged higher material labor and logistics costs, partially offset by higher volume and lower SG&A.
Speaker 3: Adjusted earnings per share for the year was $1.59. Now turning to the quarter, revenues in the fourth quarter were $1 billion, an increase of 15% over the prior year, record net revenues of $888 million.
Adjusted earnings per share for the year was $1 59.
I'm turning to the corner revenues in the fourth quarter were $1 billion, an increase of 15% over the prior year record net revenues of $888 million.
Speaker 4: Growth was driven by pricing to offset increased material costs, continued strong demand, and continued benefits from innovation. Just an even up for the fourth quarter was $181 million compared to $198 million in the prior year. The decrease was primarily due to price increases lagging higher material labor and logistics costs, and was partially offset by higher volume and lower SG&A. Adjusted earnings per share for the quarter was $0.51.
It was driven by pricing to offset increased material costs continued strong demand and continued benefits from innovation adjusted EBITDA for the fourth quarter was $181 million compared to $198 million in the prior year. The decrease was primarily due to price increases lagging higher material labor and logistics costs.
Partially offset by higher volume and lower SG&A adjusted earnings per share for the quarter was 51 cents.
Speaker 4: Turning to our segment results for the quarter, there were three main drivers of our year-on-year earnings decline. Price increases, which lacked commodity cost increases, higher labor and logistics costs, and continued staffing and logistics-related challenges.
Turning to our segment results for the quarter number three main drivers of our year on year earnings decline price increases, which lag commodity cost increases and higher labor and logistics costs and continued staffing and logistics related challenges partially offsetting these factors was continued strong demand for our categories and products.
Speaker 4: Partially offsetting these factors was continued strong demand for our categories and product portfolio.
Yeah.
Speaker 4: In Reynolds Cooking and Banking, net revenues increased 23% driven by higher pricing and a 9% volume increase. Adjusted even arose 4% as higher volume and lower SG&A more than offset material cost increases in excess of price.
And rentals cooking and banking net revenues increased 23% driven by higher pricing and a 9% volume increase adjusted EBITDA rose, 4% as higher volume and lower SG&A more than offset material cost increases in excess of price increases volume grew 9% driven by strength across.
Speaker 4: Volume grew 9% driven by strength across Reynolds cooking and baking categories.
Reynolds cooking and baking categories for hefty waste <unk> storage net revenues grew by 9% driven by price increases partially offset by a volume decline of 4% adjusted EBITDA decreased 13%, reflecting material cost increases in excess of price increases and the volume decline.
Speaker 4: For hefty waste and storage, net revenues grew by 9%, driven by price increases, partially offset by a volume decline of 4%.
Speaker 4: adjusted EBITDA decreased 13% reflecting material cost increases in excess of price increases and the volume decline.
Speaker 4: The 4% volume decline is substantially weaker than consumer takeaway, reflecting the adverse impact of staffing and logistics-related disruption.
The 4% volume decline substantially weaker than consumer takeaway, reflecting the adverse impact of staffing and logistics related disruptions.
Speaker 4: Perhaps in tableware, net revenues were up 12% driven by higher prices and a 2% increase in volume. Adjusted EBITDA declined 34% as price increases lacked higher material, labor, and logistics costs and was partially offset by the volume increase. The 2% volume gain was driven by continued strength from higher everyday usage, social gatherings, and innovation, partially offset by the adverse impact of labor shortages at third-party suppliers. The EBITDA was proposed to manage hon freedeele Highard Home Depot and South headlineB
For hefty tableware net revenues were up 12% driven by higher prices and a 2% increase in volume.
Adjusted EBITDA declined 34% as price increases lagged higher material labor and logistics costs and was partially offset by the volume increase the 2% volume gain was driven by continued strength from higher everyday usage, social gatherings and innovation, partially offset by the adverse impact of labor shortages at third.
Party suppliers.
Speaker 4: Finally, Presto products net revenues in the quarter increase 9% driven by pricing partially offset by a 5% volume decline adjusted even decline 6% driven by a volume decline as price increases offset material costs.
Presto products net revenues in the quarter increased 9% driven by pricing, partially offset by a 5% volume decline adjusted.
Adjusted EBIT declined 6% driven by a volume decline as price increases offset material cost increases the 5% volume decline was substantially weaker than consumer takeaway, reflecting the adverse impact of staffing and logistics related disruptions and important device now to our guidance.
Speaker 4: The 5% volume decline was substantially weaker than consumer takeaway, reflecting the adverse impact of staffing and logistics-related disruptions and import delays. Now to our guidance, I will review our expectations for the year and the first quarter, followed by a couple additional comments on the expected phasing by...
I will review our expectations for the year and the first quarter followed by a couple of additional comments on the expected phasing by quarter, we expect 9% to 12% net revenue growth for fiscal 2022, driven primarily by pricing as well as continued strong consumption across our categories innovation in retail.
Speaker 4: We expect 9 to 12 percent net revenue growth fiscal 2022, driven primarily by pricing, as well as continued strong consumption across our category.
Speaker 4: innovation and retail replenishment. We're assuming elasticity remains lower than pre-pandemic rates that we effectively mitigate staffing, third-party manufacturing and logistics-related disruptions. We are increasing trade investments to help drive growth, spending against zero-based budgets to drive traffic and loyalty suited to today's market.
Punishment were seeming elasticity remains lower than pre pandemic rates that we effectively mitigate staffing third party manufacturing and logistics related disruption.
We are increasing trade investments to help drive growth spending against zero based budget should that drive traffic and loyalty suited to today's mark.
Speaker 4: We estimate 2022 cost pressures of nearly $400 million.
We estimate 2022 cost pressures of nearly $400 million.
Speaker 4: Rates for resin and aluminum are assumed to be stable by comparison to current levels. On that basis, we expect to fully recover material cost increases in all but hefty waste bags by the end of the first quarter.
Rates for resin or aluminum are assumed to be stable by comparison to current levels on that basis, we expect to fully recover material cost increases and all but hefty waste bags by the end of the first quarter.
Speaker 4: We expect gross profit dollars to grow well in excess of volume growth, resulting in approximately 100 basis points in gross profit margin expansion by comparison to 2021 levels.
We expect gross profit dollars to grow well in excess of volume growth resulted in an approximate 100 basis points and gross profit margin expansion by comparison to 2021 months.
Speaker 4: This implies margins below pre-pandemic percentages and is largely due to the effect of significant price increases on the structure of our P&L. This also reflects our expectation to restore pre-pandemic profitability, but not entirely this year. We anticipate significant additional revolution of cost savings in 2022 and continue the capital investment in high return programs that improve our cost structure beyond.
This implies margins below pre pandemic percentages and is largely due to the effect of significant price increases on the structure of our P&L is also reflects our expectation to be still pre pandemic profitability, but not entirely this year.
We anticipate.
Michigan additional revenues in a cost savings in 2022, and continued capital investment and high return programs and improve our cost structure beyond 2020.
Speaker 4: We estimate capital spending at approximately 4% of net revenues. This includes the spooling automation project we mentioned in November . Our focus across all segments is on identifying other attractive RRI automation and intelligent factory projects, particularly in light of the labor and supply chain conditions, which are improving RRI's for many projects.
We estimate capital spending at approximately 4% of net revenues. This includes the Spooling automation project. We mentioned in November our focus across all segments is on identifying other attractive ROI automation intelligent factory projects, particularly in light of the labor supply chain conditions, which are improving our.
Rise for many projects.
Speaker 4: We estimate depreciation and amortization to be approximately 10 million higher than 2021 levels and an estimated $120 million in 2022. We estimate our effective tax rate at 25%.
Estimated depreciation and amortization to be approximately 10 million higher than 2021 levels and an estimated $120 million in 2022.
We estimate our effective tax rate at 25% for the year.
Speaker 4: The details of our guide for fiscal year 2022 are as follows. Net revenues to grow 9 to 12% on $3,556,000,000 in 2021. Adjusted net income to be in the range of $327,000,000 to $357,000,000.
Details of our guide for fiscal year 2022 are as follows net revenues to grow 9% to 12% on $3.556 billion in 2020 one.
Net income to be in the range of $327 million to $357 million.
Speaker 4: Adjusting EPS to be in the range of $1.56 to $1.70. Adjusting EBITDA to be in the range of $615 to $655 million. Net debt to be approximately $1.8 to $1.9 billion at December 31, 2022.
The EPS to be in the range of $1 56 to $10 70, adjusted EBITDA to be in a range of $615 million to $655 million net debt to be approximately 1.8 to $1 9 billion at December 31 2022.
Speaker 4: For the first quarter, we expect 10 to 14 percent net revenue growth through and primarily by price increases. We expect growth profit dollars to be down slightly year on year driven by higher labor costs. And the fact that price increases will go into effect over the course of the quarter. I'm a crime and recent winter storms have impacted staffing and production. And these factors continue to be significant challenges that we are working to mitigate.
For the first quarter, we expect 10% to 14% net revenue growth driven primarily by price increases we expect gross profit dollars to be down slightly year on year, driven by higher labor costs and the fact that price increases will go into effect over the past quarter I'm, a crowd and recent winter storms have impacted staffing.
Production and these factors continue to be significant challenges that we are working to mitigate.
Speaker 4: The details of our first quarter guide are as follows. Net revenues to grow 10 to 14% on $757 million in the prior year. Adjusted net income to be in the range of $51 to $59 million. Adjusted EPS to be in the range of 24 cents to 28 cents. Adjusted EPS to be in the range of $110 to $120 million.
The details of our first quarter Guy are as follows net revenues to grow 10% to 14% on $757 million in the prior year adjusted net income to be in the range of 50 $159 million just EPS to be in a range of 24 to 28 cents adjusted EBIT to be in a range of 110.
$220 million.
Speaker 4: As you revisit your models, also keep in mind, we expect sequentially easy rates of revenue growth each quarter this year as we lap last year's pricing increases, which ramps throughout the year.
As you revisit your models also keep in mind, we expect sequentially easy rates of revenue growth each quarter. This year as we lap last year's price increases, which ramped throughout the year. We also expect revenue growth remained positive in the fourth quarter, we expect EBIT to grow each quarter after the first quarter.
Speaker 4: We also expect revenue growth to remain positive in the fourth quarter. We expect even to grow each quarter after the first.
Speaker 4: Now before I turn the call back over to Mark and your questions.
Now before I turn the call back over to Mark and your questions I'd like to leave you with the following as you can see we expect another year of record net revenues returned to profit growth driven by recovery of material cost and pricing.
Speaker 4: I'd like to leave you with the following. As you can see, we expect another year of record net revenues in return to profit growth driven by recovery of material costs through pricing, generally stable commodity rates, further improvements to our cost structure, and continued investment to growth.
Generally stable commodity rates further improvements to our cost structure and continued investments for growth.
Speaker 4: The moves we're making strengthen our business, not only for 2022, but also for the long term. And our capital allocation priorities are unchanged.
Moves, we're making strengthen our business not only for 2022 awesome from a long time and our capital allocation priorities are unchanged invest to strengthen and extend our competitive advantage earnings potential.
Speaker 4: Invest, to strengthen and extend our competitive advantage, earnings potential.
Speaker 4: the leverage with the target ratio of two to two and a half times EBITDA, return excess cash to shareholders via dividends, and pursue strategic vote on acquisitions. With that, I'll hand the call back over to Mark. Thanks.
Leverage with the target ratio of two to two five times EBITDA return excess cash to shareholders via dividends and pursue strategic bolt on acquisitions with that I'll hand, the call back over tomorrow. Thank you.
Speaker 2: Thanks, Michael. As I turn it over to the operator for the questions, I'd like to remind you that we asked that you ask one question and a follow up and then rejoin the queue if you have additional questions. Operator.
Thanks, Michael.
Turn it over to the operator for questions I'd like to remind you that we ask that you ask one question and a follow up and then rejoin the queue. If you have additional questions operator.
Thank you very much.
Speaker 1: At this time, we will be conducting our question and answer session.
At this time, we'll be conducting a question and answer session.
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If you'd like to ask a question. Please press Star then one on your telephone keypad.
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One moment, please why do we pull for questions.
Okay.
Yeah.
Speaker 1: Our first question comes from the line of Rob Ottenstein from Evercore ISI. Please go ahead.
Our first question comes from the line of Rob <unk> from Evercore ISI. Please go ahead.
Speaker 5: much and well done guys. So just a couple of points of clarification from your comments.
Much and well done guys.
So just a couple of points of clarification from your comments.
Speaker 5: You mentioned that demand patterns remain very strong and elevated, and based on your surveys, you expect them to continue.
You mentioned that demand patterns remain very strong and elevated and it based on your surveys you expect them to continue.
Speaker 5: Can you help us kind of think through what?
Can you help us kind of think through what is driving that given that you. Obviously were a big benefit from people quarantining for more work from home and now is mobility increases people start going back out to restaurants more start going back to the office even.
Speaker 5: is driving that, given that you obviously were a big benefit.
Speaker 5: from people quarantining, from work from home, and now as mobility increases, people start going back out to restaurants more, start going back to the office, even if it's part time. How should we think about the impact of that on demand and how you see that playing out?
If its part time.
How should we think about the impact of that on on demand and and how you see that playing out.
Robert Thank you.
Speaker 3: You know, we have seen consumer demand shift fundamentally. We talked about that during the course of the pandemic that our consumer reason.
We have seen consumer demand shift fundamentally we talked about that during the course of the pandemic that are.
Consumer research said that consumers fundamental habits of spending more time at home spending more time cooking and baking and utilizing our products more frequently with a fundamental shift.
Speaker 3: consumers' fundamental habits of spending more time at home, spending more time cooking and baking and utilizing our products more frequently, was a fundamental shift.
Speaker 3: and we've seen that continue. What we've seen is...
And we've seen that continue.
What we've seen is.
Speaker 3: After the pandemic, people are staying home more frequently, part-time at the office.
After the pandemic people are staying home more frequently part time at the office.
Speaker 3: going to restaurants perhaps more frequently, but still changing their habits and behaviors from pre-pandemic level.
Going off restaurants, perhaps more frequently but still changing their habits and behaviors from pre pandemic levels. So demand for our products continue to be very strong. They continued strong through the fourth quarter, we're seeing.
Speaker 3: So demand for our products continue to be very strong. They continue strong through the fourth quarter, and we're seeing the same through the beginning of this year.
The same through the the beginning of this year.
Speaker 5: Terrific. And then just a clarification on the commodity outlook.
Terrific and then just a clarification on the commodity outlook.
Speaker 5: It's my understanding that polyethylene inventories in the U.S. are very high.
I mean, it's my understanding that polyethylene inventories in the U S are very high.
Speaker 5: So I'm assuming that kind of undergirds your view on resins. Can you maybe talk a little bit about what's going on in aluminum and remind us of what's going on in aluminum?
So I'm, assuming that's kind of Undergirds. Your view on resins are can you maybe talk about a little bit about what what's going on in in aluminum and remind US you know where I you know what percentage of your business is a straight pushed through cost pushed through how much hedging you do.
Speaker 5: You know, what percentage of your business is a straight push through, cost push through, how much hedging you do, and any other kind of factors around that in terms of understanding what the commodity outlook looks like for you for the next six to 12 months.
And any other kind of factors around that in terms of understanding you know.
What the commodity outlook look street looks like for your for the next six to 12 months.
Speaker 3: Yeah, as you know, predicting commodity prices is very challenging and something we've...
Yeah as you know predicting commodity prices is very challenging and it's something we've.
Speaker 3: face during the course of last year, but what we have seen now, as you mentioned, is resin has fabilized. The two main resins that we use are polyethylene and polyspera.
Base during the course of last year, but what we have seen now.
As you mentioned as resin has.
Stabilized the two main resins that we use our polyethylene polystyrene.
Speaker 3: And they have plateaued at a higher level than during the pandemic. But we do see
And they have plateaued at a higher level than during the pandemic.
But we do see them down moderating.
Speaker 3: Aluminum was moderating in Q4 and took a spike up in Q1 in a state elevated sense. So we have factored that into our guide and are obviously looking for other mitigations against that, but it is part of our plan for 2022.
Aluminum.
Was moderating in Q4 and it took a spike up in Q1 and has stayed elevated sensor. So we have factored that into our guide.
And are obviously looking for other mitigation against that but it is part of our plan for 2022.
Speaker 3: We do expect aluminum to moderate and come down in the back half of the year.
We do expect aluminum to moderate and come down in the back half of the year.
The commodity.
Speaker 3: Contractual pass-through is approximately 25% of our business overall. So 75% of our business we price to the market.
Contractual pass through was approximately 25% of our business overall, so 75% of our business. We are we price to the market.
And so what was the last question I forgot.
Oh hedging.
Speaker 3: So we don't hedge any of our raw materials. We do have a physical hedge with aluminum that we've talked about previously. We have approximately between...
So we don't hedge our any of our raw materials, we do have a physical hedge with aluminum and we've talked about previously.
Approximately between <unk>.
Speaker 3: work in process, finished goods, and raw materials. We have about six months of supply in the pipeline.
Work in process finished goods and raw materials, we have about six months of supply in the pipeline.
Speaker 3: So therefore we have a physical hedge of aluminum, but none of our raw materials are financially hedged.
So therefore, we have a physical hedge of aluminum, but none of our raw materials are financially hedged.
Great. Thank you.
Okay.
Thank you.
Speaker 1: We have next question from the line up Jason English from Goldman Sachs, please go ahead. Hey, good morning folks.
We have next question from the line up Jason English from Goldman Sachs. Please go ahead.
Yeah.
Hey, good morning folks.
Good morning.
Morning couple of quick questions.
Speaker 5: First, you pulled back on a lot of SG&A last year in the face of all the commodity pressure. And in your outlook, how much reinvestment are you assuming?
First you pulled back on a lot of SG&A last year and in the face of all the commodity pressure.
In your in your outlook, how much reinvestment or are you assuming.
Yes.
Speaker 4: Yeah, so in our outlook, you know, we are clearly investing further in our advertising. We reduced our investment last year as you stated. Primarily, do the service levels. But in 2022, we plan to return to more of our historical levels of advertising spend. So that will be up sizeably.
Yeah. So.
We are clearly investing further in our advertising.
We reduced our investment last year as you're staying at Pri.
Primarily due to service levels, but 2022 week on our plan to return to more historical levels of advertising spend so that would be upside.
Yeah.
Okay.
Speaker 3: And you're clearly putting a lot of price in the market. We see it in your P&L. We're seeing a lot more price come through your P&L than we are.
And Youre clearly, putting a lot of pricing in the market and we see it in your P&L, we're seeing a lot more price come through your P&L. Then we are H P. C peers, although I know the category mix can be different from one to the other.
Speaker 6: HPC peers, although I know the category makes me different from one to the other. What do you see in terms of price gaps out there? And is there any reason to be concerned that price gaps may be coming unsustainably high, either that be relative to branded competitors or private label?
What are you seeing in terms of price gaps out there and is there any reason to be concerned that price gaps maybe coming on sustainably high either that'd be relative to branded competitors or private label.
Is it the price gaps have narrowed.
Speaker 3: from what they were previously and some of the categories, but it varies across different categories. Private label foil, for example, has also increased along with our branded foil. So you've got to look at it category by category, but in total, these total categories have increased in price during the course of 2021 and going into 2022. Okay.
From what they were previously and in some other categories, but it's it varies across different categories private label foil. For example has also increased along with our branded foil so.
I don't look at it category by category.
Yes.
In total these total categories have increased in price during the course of 2021 and going into 2022.
Okay.
Thanks, I'll pass it on.
Okay.
Thank you.
Speaker 1: We have next question from the line up, Lauren Lieberman from Barclays, please go ahead.
We have next question from the line up.
Lauren Lieberman from Barclays. Please go ahead.
Great. Thanks, good morning, everyone.
Speaker 7: I wanted to ask about the logistics and staffing issues that you talked a little bit about. So, curious, I guess, as you stand even today, where the things stand on that front. I know you mentioned that things are getting better, but any kind of further color you could offer would be great, be it pandemic, Omicron related, or otherwise. And then anything you could offer on fill rates.
I wanted to ask about the logistics and staffing issues that you talked a little bit about so curious I guess as you kind of as you stand even today, you know where where the things stand on that front. I know you mentioned that things are getting better, but any kind of further color you could offer would be great be it pant.
Panic omicron.
I'm, a crime related or otherwise.
And then anything you could offer on fill rate and in stock levels. During during this period and how that may or may not be improving at this point.
Speaker 7: and in stock levels during this period and how that may or may not be improving at this time.
Yeah.
Speaker 3: Thank you, Lauren. Yes, staffing is a geographical challenge, right? Some plants and areas are more challenged than others.
Thank you Laurent yes.
Staffing is a geographical challenge right some plants in areas are more challenged than others.
Speaker 3: Particularly in Q4 and Q1, it was Omnicron related as well as just the general labor availability
Particularly in Q4 and Q1, it was omnicare unrelated as well as just the general labor availability.
Speaker 3: We call it out specifically in two segments with Presto and our hefty waste and storage segments. Those plants and those particular geographies were the most affected in Q4.
We call it out specifically in two segments with <unk>.
Presto, and our hefty waste and storage segments those plans in those particular geographies, where the most affected in Q4.
Speaker 3: We are seeing improvement. In January with Omnicron there was continued challenges.
We are seeing improvement.
Do you any worry with omni crime. There was there was continued challenges.
Speaker 3: But with the cases reducing and with our changes to our wage rate structures, we've seen improvement in overall staffing levels across our manufacturing location. So we're optimistic that we're improving this.
But with the with this case cases, reducing and with our changes to our wage rate structures, we've seen improvement in overall staffing levels across our manufacturing locations. So we're we're optimistic that we're improving this.
Speaker 3: We, from a case-fill standpoint, we did take a backward step in Q4 in some of our product lines. And those are starting to improve in Q1, but it continues to be a challenge from an in-stock standpoint.
We from our case fill standpoint.
We did take a backward step in Q4, and some of our product lines.
And those are starting to improve in Q1, but it continues to be a challenge to from an in stock standpoint.
We do measure in stocks in our categories across all of our retail partners.
Speaker 3: We do measure in stocks in our categories across all of our retail partners.
Speaker 3: And in most of our products, we're doing better, or as good as our competitors in the catacombs.
And in most of our products, we're doing better or as good as our competitors in the categories.
Speaker 3: So it's a challenge across all of the categories. We do see it improving throughout the year, but staffing and logistics continues to be a challenge.
So it's a challenge across all of the categories, we do see it improving throughout the year, but staffing in logistics continues to be a challenge.
Speaker 7: Okay, and so that's really helpful. And so with it being comparable to others in your category, you're not seeing any impact on market share or shelf sets or those sorts of things that we should think about if there'd be sort of more lasting effects.
Okay, and so that's really helpful and so with it being comparable to others in your category, you're not seeing any.
Impact on market share or shelf facts or those sorts of things that we should think about it you know can't be sort of more lasting effect.
No distribution has been fairly stable across our categories throughout 2021.
Speaker 3: Now, distribution has been fairly stable across our categories throughout 2021.
Speaker 3: So it has not been an impact to share either, which I'm sure you watched the share across all of our products in TRAP channels, and you can see it's been improving or stable depending on the category.
<unk>.
So it is not been an impact to share either which I'm sure you watch the share across all of our products in tracked channels and you can see it's been improve.
Improving or stable depending on the category.
Terrific. Thanks, I'll pass it on.
Yeah.
Thank you.
Okay.
Speaker 1: We have next question from the lineup, Andrea Teixeira from JP Morgan. Please go ahead.
We have next question from the lineup Andrea to shut it off from J P. Morgan. Please go ahead.
Speaker 8: Thank you. Good morning. So I wanted to follow up on the cost impacts, but beyond commodities, but also transportation, labor. Are you michael-assuming that your state, or are you, in169, assume that you're staying from inconsistency?
Thank you good morning.
It's a follow up on the cost impacts, but beyond commodities, but also transportation labor I you, Michael assuming that you stay.
Speaker 8: as current or you're assuming some improvement as we go. And just to follow up on what you said, lands on the private label, are you seeing your retail partners asking for more private label visa visa or branded just to improve it for the ability or we are not there yet? And hope we will not be. Thank you.
S S current or you're assuming some improvement as we go and just a follow up on what you said last Sunday.
On the private label are you seeing your retail partners asking for more private label vis a vis your branded just to chain proof of affordability or we are not there yet and hopefully will not be.
Yeah.
Speaker 4: Yeah, the transportation front, we are anticipating that we'll see that those costs continue to increase. We've baked that into our guide appropriately. We're taking the appropriate actions, whether it be through pricing or our cost reductions, initiatives to offset that. So, you know, we think we've baked all that into our guide and we have coverage around that.
Yeah on the transportation front, we are anticipating that we will see that those costs continue to increase we baked that into our guide appropriately we're taking the appropriate actions, whether it be through pricing or our cost reduction initiatives to offset that show.
We think we baked all that into the overall guide too and we have coverage around that relative to the numbers will be presented.
Speaker 3: And from a brand and private label standpoint, things have remained stable there. We have not seen any fundamental changes in our categories between brand and private label. If anything the brands have performed.
And for our branded private label standpoint things have remained stable. There are we have not seen any fundamental changes in our categories between brand and private label if anything the brands have performed.
Speaker 3: more strongly than private label in these categories through the pandemic and that's not shifted and seeing any change from our retail partners.
More strongly than private label in these categories through the pandemic and that has not shifted and seen any change from our retail partners.
Very helpful. Thank you.
Okay.
Speaker 1: Thank you. We have next question from the line of Peter Grom from UBS. Please go ahead.
Thank you we have next question from the line of Peter Grom from UBS. Please go ahead.
Speaker 9: Hey, good morning, everyone. So I just wanted to ask about the future of Grossamard.
Hey, good morning, everyone. So I just wanted to ask about the future of gross margins.
Speaker 9: you know, when you think about the gross margin compression, like, have you given any thought to whether some of these costs could prove to be more structural, rather than cyclical? And I guess, like, how does that inform your view of restoring gross margin kind of back to the mid to high 20s over time? I recognize you probably don't want to provide an outlook beyond, you know, this year, but, you know, how should we think about a potential timeline in terms of getting back to those margin levels?
When you think about the gross margin compression like have you given any thought to whether some of these costs could prove to be more structural rather than cyclical and I guess like how does that inform your view of restoring gross margin kind of back to the mid to high Twenty's overtime.
Recognize you probably don't want to provide an outlook beyond this year, but how should we think about a potential timeline.
In terms of getting back to those margin levels.
Speaker 4: Yeah, so as we think about Mark gross profit dollars, we see us getting back to those those pre
Yeah. So as we think about Mark gross profit dollars, we see us getting back to those those.
Craig.
Speaker 4: those previous levels in 2023. And I think we got the plans in place to initiate that. And it's gonna take some time, but we're pretty structured very well to get recovered back to those over the pandemic.
So those previous levels.
In 2023, and we think we've got the plans in place to eat.
To initiate that and it's kind of you know is going to take some time, but you know we were pretty structured running well to get recover back to those pre pandemic levels.
Speaker 9: Okay, thanks for that. And then I guess just, you know, Michael falling up on the phasing of top line, you know, growth for the year, I just, when we look at 10 to 14% growth for one queue, you know, I realize more pricing is going to build, but I think you said using rates of growth from here, but can you just help us understand how much we should really be modeling post one queue? Because it just seems it, it would be harder to hit, you know, the high end of the full year range, assuming sales moderate from one queue, in which I think at the midpoint is 12%.
Okay. Thanks for that and then I guess, just you know Michael following up on the phasing of topline.
For the year.
When you look at 10% to 14% growth for <unk> I realize more pricing is going to build but I think he said using rates of growth from here, but can you just help us understand how much easing we should really be modeling post <unk> because it just seems that it will be harder to hit the high end of that full year range, assuming sales moderate from <unk>, which I think at the midpoint is 12.
<unk>.
Speaker 4: So I think in my remarks, I kind of stated that we expected after Q1 that our growth rates were rise and then over the period of...
So I think in my remarks.
Remarks, I kind of stated that we expected after Q1 that our growth rates will rise and then over the period is.
Speaker 4: over the period of the year, it was kind of declined a bit, slowly, as we approach Q4.
Over the period of the year it was kind of.
The decline a bit slowly because we've reached or approached Q4.
Speaker 4: Okay, got it. So top line growth will accelerate from the 10 to 14 percent and then the seller in the back. Okay, sorry. You have to think about the standpoint of our cost increased over the course of the year and our pricing took place over the course of the year. So as we lap those additional pricing, you will see that decline a bit.
Okay got it.
So top line growth will accelerate from the 10% to 14% and then accelerate in the back half Okay, sorry, yeah yeah.
Thank you.
Standpoint are you know cost increased over the course over the course of the year and our are our.
Our pricing took place over the course of the year. So as we lap those additional pricing you will see that itself decline a bit.
Yeah.
Okay. Thanks for that.
Speaker 1: Thank you. We have next questions on the line up, Karmil Gajrawala from Credit Suisse. Please go ahead.
Thank you we.
We have next question from the lineup call Milton <unk> from Credit Suisse. Please go ahead.
Speaker 9: Thank you. By the way, fantastic pronunciation operator. I don't get that.
Thank you.
By the way.
Tastic pronunciation, operator, I don't get that frequently.
Speaker 9: If you guys don't mind talking a bit about revolution cost savings, where you were last year and perhaps what you're incorporating in your dive for 2022.
If you guys don't mind talking a bit about resolution cost savings.
Where you were last year, and perhaps what you're incorporating in your guide for 2022.
Speaker 4: Yeah, I appreciate that question. You know, we delivered a little more than two points of margin improvement through revolutions cost savings in 2021. And, you know, we set out to do that and we actually beat that. We're planning to deliver a similar range this year. So we feel pretty good about our position on continuing to drive revolution.
Yes, I appreciate that question you know, we did learn a little more than two points of margin improvement through revolutions cost savings in 2021.
And you know, we set out to do that and we actually beat that.
We're planning to deliver is somewhere in that range. This year. So we feel pretty good about our position on continue to drive Revolution savings.
Speaker 9: Okay, great. And as it relates to inflation's impact on the consumer, it sounds not just from yourselves, but from many others that price-lapse to continue just, isn't where it is lower than what might have been expected. What are you looking at to gauge if that's going to continue to be true or if at some point we reach an area where the consumer does indeed start to respond?
Okay, great and as it relates to inflation impact on the consumer it sounds not just from yourselves, but from many others that price elasticity.
Isn't where it is lower than what might have been expected.
What are you looking at too.
Gauge, if that's going to continue to be true or if at some point, we reach out to an area, where you know the consumer doesn't start to respond.
Speaker 3: Well, we're using two tools to analyze that. The first is subconsumer research, which we directly reach out to consumers.
Well, we're using two tools to analyze the first is some consumer research, which we directly reach out to consumers.
Speaker 3: that are buying in our categories to determine their purchase behavior.
That are buying in our categories to determine their purchase behavior and the second is to just moderate.
Speaker 3: And the second is to just moderate the overall consumer takeaway and just monitor that very closely.
The overall consumer takeaway and just monitor that very closely.
Speaker 3: The consumption caters continue to be very strong and consumer behaviors, what they're telling us is that they're continuing to use our products more frequently despite the higher prices.
The consumption patterns continue to be very strong and consumer behavior is what they're telling us is that they're continuing to use our products more frequently despite the higher prices.
Great. Thank you.
Speaker 1: Thank you. We have next question from the lineup. Eric Rasmussen from Stifle. Please go ahead.
Thank you.
Next question from the lineup Erik Rasmussen from Stifel. Please go ahead.
Yeah.
Okay.
Speaker 3: I don't know if that's me or not. Can you guys hear me? I'm pretty sure you guys can hear me.
Oh I don't know if that's that's me or not can you guys hear me, it's mark Astrachan here.
Speaker 2: Hey Mark. I'm R. It shows up. It shows up as Eric on the cue for some reason. We recognize your voice. Good morning.
Mark O'meara it shows it shows up as Eric on the queue for some reason we recognize your voice good morning.
Speaker 3: I don't know what to say. I think I'll talk to him by boss after this call. Make sure he's not trying to send me a message.
I don't know what to say I think I'll talk to buy box. After this call I'm just curious I'm not trying to send me a message.
Speaker 3: I guess two questions, one on just aluminum broadly. Aluminum is up another 3% today, not that you guys didn't already know that, but is current levels, is that what's based into what you refer to as stable, so from here and then I guess kind of elaborating on previous comments.
[laughter] as well.
So I guess two questions one on just the aluminum broadly so aluminum is up another 3% today not that you guys didn't already know that but yeah.
The current level that was baked into what you. What you referred to is stable. So from here and then I guess kind of elaborating on previous comments.
Speaker 6: Michael, it sounds like then resin maybe pricing comes down. So on products that have that as a component, that's how we should think about it. If aluminum stays where it is, should we be thinking about the rental oil business continue to have pricing go up? And is that a good way to think about it? And then obviously have to think about the volume impacts and so the vaccine remains fairly stable.
Michael.
It sounds like then rather than maybe pricing comes down so on products and how.
That is a component that's how we should think about it.
<unk> stays where it is should we be thinking about the rental oil business.
Half pricing go up and is that a good way to think about it and then obviously you have to think about the volume impact since those back to you remain fairly stable.
Speaker 4: So let's start out with the aluminum question as it relates to current levels. So our assumptions in our overall guide and our plan is that aluminum will be stable at current levels through the rest of the year. And so our overall planning and recovery actions are all around that assumption.
So let's start out with the aluminum question as it relates to current levels, our assumptions and our overall guide and our plan is that aluminum we stable at current levels through the rest of the year and so our overall planning and recovery actions are all around that assumption.
Yeah.
Speaker 6: Okay, and from here then, are you anticipating more price or is it a fair way to think about it? Is it maybe that business gets more price versus some of the other, where you have lower anticipated resin cost that reasonable?
Okay and from here then are you anticipating more price or is that a fair way to think about it maybe that business get more price versus some of the others, where you have.
Lower anticipated hasnt resin cost is that reasonable.
Speaker 3: We are planning some targeted, or aluminum increases because of where the prices are at now, not necessarily across the board, but on some specific products.
We we are planning some targeted resin or aluminum increases because of where the prices are at now are not necessarily across the board, but on some specific products.
Speaker 3: to offset that, as well as some other cost reduction initiatives.
To offset that as well as some other cost reduction initiatives.
Speaker 3: From a residence standpoint, yeah, it's moderated and we've recovered the resin prices in all of our segments except hefty branded waste bags.
From a from a present standpoint, you know from a resin standpoint, yes, it's moderated and we've recovered the resin prices of all of our segments, except hefty branded waste bags.
Right got it okay.
Speaker 6: And then Michael, on pre-catalytic inversion, I guess, broader strokes, A, how should we be thinking about that?
And then Michael on free cash flow conversion I guess.
Or strokes.
How should we be thinking about that.
Speaker 6: in 22. How should we be thinking about debt reduction priorities in the net debt levels, or actually a little above where you had forecast 12 months ago at this time? And I say that with part with the commentary and the release that continues to be the old pursues of strategic bolt ad acquisition. So let's pick a path to these. And how should we be thinking about that and kind of what should we be thinking about from, from that standpoint, in terms of what your target is?
'twenty two.
How should we be thinking about debt reduction priority as you know the net debt levels are actually a little bit above where you would forecast 12 months ago at this time.
And I say that in part with the commentary in the release that continues to be that youll pursue strategic bolt on acquisitions. So what's the capacity and how should we be thinking about that and kind of what should we be thinking about from that standpoint in terms of what your carpet.
Speaker 4: So, you know, our capital allocation strategy is pretty much unchanged. We still want to get to 2.5 times.
So our capital allocation strategy is pretty much unchanged, we still want to get to two and two two and a half times and we're pursuing that obviously.
Speaker 4: And we're pursuing that. Obviously, last year had its challenges. And as a result of that, we decided to invest more heavily in capital.
Last year had its challenges and as a result of that we decided to invest more heavily in capital to support our growth in automation projects and you know, we think thats going to pay off in the long run so.
Speaker 4: to support our growth and automation projects. And we think that's gonna pay off in the long run. So overall, I mean, our strategy is the same. We're gonna continue to drive that down and that will be a focus area for us going forward. You know.
So overall I mean, our strategy is the same we're going to continue to drive that down and that will be a focus area for us going forward.
You know.
Speaker 6: So the only thing I would say is that, you know, as you think about our capital structure, we'll look opportunistically to refinance long-term debt, you know, if that makes sense for us. And that would be the only potential change as interest rates fluctuate. Got it. OK.
The only thing I would say is that you know as you think about our capital structure and we'll we'll look opportunistically refinanced long term debt.
That makes sense for us.
And that would be the only potential change as interest rates fluctuate.
Got it okay, Eric finding off here thanks, guys.
Speaker 1: Thank you. We have an express train from the line of Wendy, New Calcyn, or city, please go ahead.
We might.
Thank you.
We have next question from the line of Wendy Nicholson of Citi. Please go ahead.
Speaker 10: Hi, I wanted to go back to the line of questioning kind of around the consumer and the lack of price sensitivity and just the increase in demand for your products. I mean, I think you said at the very beginning there's been a five-fold increase. I mean, that's just huge in terms of incremental usage, if you will.
Hi, I wanted to go back to the line of questioning kind of around.
The consumer and the lack of price sensitivity and just the increase in demand for your products. I mean, I think you said at the very beginning there spent a fivefold increase I mean, that's just it's huge in terms of incremental you said you search if you will.
Speaker 10: And so my question is, you know, as you think about the business kind of a little bit longer terms, assuming these rates of usage and the lack of price sensitivity continues, does it give you kind of more license to think creatively about the innovation?
And so my question is you know as you think about the business kind of a little bit longer term, assuming these rates of usage and the lack of price sensitivity continues does it give you kind of more license to think creatively about innovation.
Speaker 10: You know, can you say, oh, we can add more value to these?
You know I can you can you say oh, we can add more value to these categories or products because people certainly aren't showing the price ceiling that they used to do with the price resistance and also are you seeing any reaction from the retailers I mean, if the retailers are seeing sustained higher velocity in the.
Speaker 10: categories or products because people certainly aren't showing the price ceiling that they used to at a price resistance and also are you seeing any reaction from the retailers?
Speaker 10: If the retailers are seeing sustained higher velocity in your aisles, if you will, are they giving the category more shelf space, more end caps, all that kind of stuff? I'm just wondering if we really are seeing sustained higher demand, how does the category change, maybe sort of from a bigger picture perspective?
Your I O. If you will are they giving the category more shelf space more end caps, all that kind of stuff I'm. Just wondering if we really are seeing sustained higher demand how does the category change maybe sort of from a bigger picture perspective. Thanks, so much.
Speaker 3: Thanks, Wendy. From an innovation standpoint, certainly, and I've said in our prepared remarks, this has provided us the environment to really step up innovation across these product lines.
Thanks Wendy.
From an innovation standpoint, certainly is and I've said in our prepared remarks. This has provided us the environment to really step up innovation across these product lines. So we've got a lot of innovation going into 2021.
Speaker 3: So we've got a lot of innovations going in in 2021.
Speaker 3: Our pipeline is very strong because of the change in consumer behavior.
Our pipeline is very strong because of the change in consumer behavior, and we're looking to introduce a lot more products as we go through 2022 and beyond so innovation has been a significant beneficiary from the pandemic and the change in consumer behavior.
Speaker 3: We're looking to introduce a lot more products as we go through 2022 and beyond. So innovation has been a significant beneficiary from the pandemic and the change in consumer behavior.
Speaker 3: From an overall category standpoint in merchandising, you know, we've restrained that a bit because of supply capabilities. As Mike mentioned in his prepared remarks, we are returning to promotional action.
From from an overall category standpoint, and merchandising, we've restrained out a bit because of supply capabilities as Mike mentioned in his prepared remarks, we are returning to promotional activity. So.
Speaker 3: So we did not have a lot of end caps and promotions in the last two years, because we've significantly reduced our promotional activity because of lack of supply in case fill. As that's improving, we are seeing significant opportunities for secondary placements and improved distribution. And that is factored in also to our plans for 2022 and beyond.
So we did not have a lot of end cap some promotions.
In the last two years, because we have significantly reduced our promotional activity because of lack of supply and tasteful as that's improving we are seeing significant opportunities for secondary placements and improved distribution.
And that is factored in also to our plans for 2022 and beyond.
Got it that's helpful. Thank you so much.
Thank you.
Speaker 1: We have next question from the line of Jason English with Goldman Sachs.
We have next question from the line up Jason English with Goldman Sachs. Please go ahead.
Speaker 5: Hey folks, thanks for stopping me for a follow up, I appreciate it. So thanks earlier for your comments on private label. And while I appreciate its status quo at the moment, many investors, well, and frankly, as well as myself, believe that there's a reasonable chance that private label share could begin to bounce back when spending power for the lower income consumer begins to squeeze a bit lower throughout the course of the year. Assuming this played out in your categories and knowing that you play both sides.
Hey, folks thanks for Slotting me for a follow up I appreciate it.
So thinks earlier for your comments on private label.
I appreciate it status quo at the moment, many investors well and frankly as well as myself believe that theres, a reasonable chance that private label share could begin to bounce back when spending power for the lower income consumer begins to squeeze a bit lower throughout the course of the year.
So in this played out in your categories and knowing that you play both sides.
Speaker 5: How do you think this would impact your P&L from a revenue margin bottom line perspective?
How do you think this would impact your P&L from a revenue margin and bottom line perspective.
Well I'll talk about the trends and I'll, let Michael speculate about the P&L.
Speaker 3: Well, I'll talk about the trends and I'll let Michael speculate about the P&L.
The trends for the long term in these categories because there are already highly penetrated between brands and private label.
Speaker 3: trends for the long term in these categories. Because there are already highly penetrated between brand and private label, had been stable. We saw some...
Stable.
We saw some balance towards brands in 2020 in 2021.
Speaker 3: towards brands in 2020 and 2021, but not a significant shift like we've seen in some other household categories.
But not a significant shift like we've seen in some other household categories.
Speaker 3: So our expectation and forecast is it going to continue to remain relatively stable. But as you mentioned, we do play both sides of that, so we're beneficiaries regardless of how that plays out in the long term.
So our expectation and forecast is it going to continue to remain relatively stable.
But as you mentioned, we do play both sides of that so we're beneficiaries regardless of how that plays out.
And in the long term.
Speaker 4: I would just add one thing. One of the things that we benefited from is our reliability in this environment, although everyone was challenged, was significantly greater than competition. So we are benefiting from some potential staying power as a result of that shortages that were coming from other players.
No I would just add one thing one of the things that we benefited from is our reliability in this environment. Although everyone was challenges was significantly greater than the competition. So I mean week. So we're benefiting from.
Two potential staying power as a result of the bed shortages that were coming from other players as it relates to our overall P&L implications you know we've shared in the past that you know while there is a margin difference.
Speaker 4: As it relates to our overall P&L implications, you know, we've shared in the past that while there's a margin difference, we wouldn't consider that significant. And so we still feel that there's not going to be a material impact to our overall profitability picture as it mixes the change slightly.
We wouldn't consider that significant.
And so we still feel that there is not going to be a material impact to overall profitability picture it as it mixes to change slightly.
Understood very helpful. Thank you guys.
Thank you.
Speaker 1: Ladies and gentlemen, we have reached the end of the question and answer session. And I'd like to turn the call back to Lance Mitchell, CEO , for closing remarks. Over to you.
Ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call back to Lance Mitchell CEO for closing remarks over to you.
Yeah.
Speaker 3: Well, thank you everybody for joining us today. We appreciate your time and
Well. Thank you everybody for joining us today, we appreciate your time and.
Speaker 3: I just want to reinforce our business is strong and growing and we're forecasting profit growth beginning in the second quarter.
I just want to reinforce our business is strong and growing and we're forecasting profit growth beginning in the second quarter.
Speaker 3: I particularly want to thank our employees, as they've been continuing to put safety first as we grow this business in this exceptional time.
Particularly want to thank our employees they've been continuing to put safety first.
As we grow this business in this exceptional time.
Stay safe and stay well thank you.
Thank you.
Speaker 1: Thank you. This concludes today's conference. You may now disconnect your lines. Thank you for.
This concludes today's conference you may now disconnect your lines.
You for your participation.
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