Q3 2022 Sonoco Products Co Earnings Call

November 1, 2022

Good day and thank you for standing by welcome to the third quarter 2022, Sonoco earnings Conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

To ask a question during the session you will need to press star one one on your telephone.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Lisa weeks, Vice President Investor Relations. Please go ahead.

Thank you operator, and thanks to everyone for joining us today for Sonoco third quarter 2022 earnings call.

Joining me. This morning are Howard Coker, President and CEO , Ross Taylor, Chief Financial Officer, and Rodger Fuller Chief operating officer.

Last evening, we issued a news release, highlighting our financial performance for the third quarter, we prepared a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of our website at Www Dot Sonoco Dot com.

As a reminder, 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 risks and uncertainties. Therefore actual results may differ materially. Please take a moment to review.

The forward looking statements on page two of the presentation.

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 operation.

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.

For today's call Howard will begin by covering a brief summary of third quarter performance. Rob will then review our detailed financial results for the third quarter and along with Rodger Fuller will discuss our guidance update for the fourth quarter and full year 2022.

We'll then provide a progress report on our strategic priorities followed by a Q&A session. If you will turn to slide four in our presentation I will now turn the call over to our CEO Howard Coker.

Thank you Lisa and good morning.

Thanks to all of you for joining our third quarter call.

As you read in our press release, we reported strong year over year performance, where revenue grew 34% to $1 9 billion.

And we expanded base EBITDA margins 200 basis points to 15%.

Our base earnings per share of $1 60, with a 60% increase over the third quarter of last year.

These results, which were above the high end of our guidance range were enabled by stable consumer packaging demand, mainly from staple food items strategic pricing and our commercial excellence initiatives.

And overall improving supply chain conditions.

As a result of our strong results year to date, we have increased our full year 2022 guidance.

This performance is another positive proof point.

Successful execution of our strategic priorities and what remains a dynamic environment.

Our teams have remained diligent in support of our customers. While we continue the journey to build a better sunoco.

I want to express a warm thanks to all of our team members for their incredible hard.

Art work during this period.

I'm going to turn it over to Rob if I can take you through our financials for the quarter.

Thanks, Howard I'll begin on slide six with a review of key financials for the third quarter. Please note that all results discussed will be adjusted to base and all growth metrics will be on a year over year basis, unless otherwise stated the GAAP to non-GAAP EPS reconciliation can be found in the appendix of this presentation as well to them.

Our press release.

Third quarter financial results again represented smokers ability to deliver strong results from our core market positions.

Sales increased 34% to $1 9 billion in the third quarter. This sales growth was driven primarily by the Sunoco metal packaging acquisition.

The 18% increase in prices, our strategic pricing efforts continue to both offset inflation and reflect the value. We provide our customers we've been steadfast in providing excellent service and availability to our customers and we believe we are being rewarded for this in the marketplace.

Grew volumes, one 6% of consumer largely as a result of this commitment. Furthermore, our strong revenue growth is translating into operating leverage base operating profit increased 67% to $225 million and base operating profit margin increased 240 basis points to 11, 9%.

Turning to slide seven.

EBITDA increased 55% to $284 million and base EBITDA margin increased 200 basis points to 15%. This focus on margin improvement is strategic and is backed by ongoing portfolio management actions footprint optimization activities value enhancing capital investments and strategic self help programs.

Finally base earnings per share increased 60% to $1 67. This increase in earnings is attributable to strong operating performance offset by five cents of negative FX and nonsense of negative tax rate. The sales bridge on slide eight provides the primary drivers for revenue growth in the quarter volume.

Mix was negative $52 million or three 7% our consumer segment continues to season.

Growth in core RPC and flexible businesses. However, industrial volumes were down nine 5% with the greatest impact in Europe , and Asia, while notably the U S was also negative due to the number Tim.

Paper machine downtime and continued weakness in the white goods market.

<unk> was 250 million positive up 18% in the third quarter.

<unk> prices increases were led by strong performance in our core RPC and flexible businesses.

Industrial price increases were led by strong performance in the U S and in Europe .

Acquisitions increased sales $334 million as metal packaging completed their peak food can season with food volumes up sequentially offset by mid single digit year over year decline in aerosols aerosol volumes would decline were impacted by inventory destocking as volumes normalize to pre COVID-19 levels.

While acquisitions have been an important part of our historical revenue growth excluding acquisitions organic sales growth was still 10% in the quarter.

Foreign exchange and other was negative $57 million in the third quarter.

Minder, 75% of our sales are generated in the U S.

Page nine has our base operating profit bridge.

The operating leverage of our core businesses and the current market environment.

Overall volume mix was negative $14 million again with strengthened RPC and flexible offset by lower volumes in industrials industrials was impacted by the shutdown at the number 10 paper machine as we completed the grade conversion from corrugated medium to high value you RB we estimate this volume impact to operating profit.

It was between seven and $8 million price cost was a positive 90 million benefit to base, the operating profit or core.

Franchisees continue to achieve strong strategic pricing performance and price cost improved sequentially from the 79 million we achieved in the second quarter. The consumer business overall had strong price cost performance generating over $20 million of favorability the.

The industrial business had a strong price cost performance as well as we continue to benefit from strategic pricing, while OCC costs continue to decline.

<unk> averaged $123 per ton in the quarter and OCC prices are currently $45 per ton based on the southeast Caribbean.

Year to date, we have achieved $254 million of price call.

As a reminder, we experienced approximately 40% to 45 per share of metal product overlap in the first half of this year most of which is accounted for in acquisition under the metal packaging business and not accounted for in price cost.

Acquisitions, and divestitures generated $32 million in the quarter as metal packaging continues to perform as expected margins in the business were lower than previous quarters due to normal seasonality associated with heavier mix towards seasonal food cans and lower volumes in aerosols.

Other impacts on the quarter were negative $18 million due to higher depreciation nonrecurring COVID-19 benefits and FX headwinds, which impacted operating profit of $6 million in the quarter.

Slide 10 has our segment performance for the quarter.

<unk> sales grew 72% to 1 billion and operating profit grew 93% to $128 million operating profit margin increased 130 basis points to 12, 4%. The primary drivers of this performance were metal packaging and strategic pricing, while productivity and volumes were also positive.

Industrial sales grew 4% to $661 million and operating profit grew 48% to $82 million.

Operating profit margin increased 365 basis points to 12, 4%.

Primary driver of this performance were strong price cost performance with prices up and otp declining offset by lower volume mix.

Especially in international markets and lower productivity due to planned downtime at the number 10 paper machine.

All other sales increased 10% to $198 million and operating profit increased 19% to $15 million. This growth was driven by strong strategic pricing performance, while volume was essentially flat.

Turning to slide 11, our capital allocation framework is aligned to our business strategy to drive value creation for our shareholders. Our priority is to allocate capital to high return investments in core businesses to drive growth and improve efficiencies from a free cash flow perspective, we remain committed to increasing the dividend which is up <unk>.

<unk> 49 per share on a quarterly basis or a greater than 3% average yield over the last 12 months year to date, we paid $193 million in dividend.

After capital investments and the dividend, we prioritize investments and accretive M&A transactions are aligned with our long term strategy, we'll manage capital to optimize our balance sheet and to retain our investment grade credit ratings during the quarter operating cash flow was $138 million and capital investments were $87 million.

On slide 12, we have our updated guidance for fourth quarter, our EPS guidance is $1 20 to $1 30.

We're increasing our full year EPS guidance to $6 40 to $6 50.

<unk> increased from previous guidance.

Our full year expected base EBITDA guidance to $1 4 billion to $1 $1 6 billion. This record performance is based on our continued strong strategic price performance and a stable market environment and our defensive consumer markets, we're reducing our operating cash flow and free cash flow guidance by $100 million due to increase.

Working capital demands.

Current elevated working capital is associated with your with inflation and disrupted supply chain, both from our suppliers and our customers.

By chance normalize, we anticipate inventories to normalize and benefit cash flows. While this is occurring now we expect higher free cash flow in 2023.

For your reference we've included additional modeling information in the appendix of this presentation now Roger will discuss our outlook on a segment basis. Okay. Thanks, Rob. So please turn to slide 13 for our view on segment performance, which supports our fourth quarter guidance.

Cross consumer volume trends are seasonally lower in the fourth quarter.

<unk> packaging businesses, we had lower planned shipments from pre holiday stocking of some packaged foods and lower seasonality of fresh fruits and vegetables in a plastic clamshell business, but we see another overall solid volume quarter for both global rigid paper containers and flexible as given the seasonality.

Packaging space, we're seeing solid volume in food cans sequentially to Q3.

<unk> aerosol cans, which continued to trend lower than the Covid highs we.

We continue to invest heavily across the consumer business for innovation around new sustainability programs to support global growth and snack packaging.

And overall efficiency projects aligned to our operational excellence programs.

Finally in consumer we believe will continue to benefit from previous strategic pricing initiatives as well as relative stability in our raw material cost.

And industrial converting we don't expect volume recovery in Europe , and Asia in Q4, and we are seeing slowing industrial demand in North America as many of our customer bases are reducing inventories prior to calendar year end, the global tube and core market is experiencing swelling demand in paper mill core supply in the containerboard market and housing related markets.

Like textiles and flooring products.

On the paper side of the business with our number 10 machine now operational in North America, we've begun production qualification ramp ups for new paper grades and are balancing supply with demand to maintain reasonable backlog levels in Asia, Europe , and Latin America weaker economic conditions continue to drive lower demand lower demand for <unk>.

Globally is allowing us to complete some overdue maintenance in the fourth quarter, which will allow our paper machines to return to more normal run sizes.

And reduce changeovers, which should positively impact productivity as we move into 2023.

Similar to consumer products will continue to execute our capital investment plan and industrial sustainability will continue to drive the need for additional paper production capacity and we will continue to invest capital for machine upgrades on our desks paper assets.

On the pricing side of commercial excellence programs continue to generate beneficial strategic pricing.

With the steady Tan bending chip index to which the majority of our pricing is set with lower overall OCC pricing and the management of our ongoing energy challenges, we expect favorable price cost benefits to continue in the fourth quarter.

Finally in our all other businesses, we have stable demand across most of our products, including Trans transit packaging for pharmaceuticals, and seasonally improved demand for vaccine shipments similar to consumer and industrial segments European markets remain soft we're.

We're continuing to drive value from strategic pricing activities managed non material inflation and expect to benefit from declining resin prices in the fourth quarter.

So with that update and look at the fourth quarter I will turn it over to out okay. Thanks, Roger if youll turn to slide 15, I'm pleased to announce that in the third quarter. We did release, our updated corporate responsibility report, which demonstrates <unk> commitment to environmental social and governance principles I'm very very proud of the progress.

We've made.

Okay, We just lost power.

Yes.

At our location if you guys can bear with us for one minute if youre still alone we'll try to get that rectified.

Rectified.

Okay.

Okay, we have had to shift from.

Yes.

My last two.

We did pay the bill Rob business.

Two flashlights.

Let me see.

If we can pick up close to where I left off.

And we'll keep going if we try to figure out what's going on there.

Sustainability is a key driver for innovation and our new product design activities as Roger had mentioned and we continue to grow with both existing and new customers for our solutions provide differentiation and enable our customers to win in their markets.

While there is much more work to be done you can see from our numerous partnerships of memberships that the decisions we make are motivated.

<unk>.

Is to create sustainable packaging solutions that help build our customers' brands and have the quality of their products and improve the quality of life for people around the world.

That's why I am pleased to announce progress on one of the most significant investments in Sunoco This history.

Page 16, Slide 16, we have an update on project horizon and.

In mid 2020, we announced our efforts to modernize our Hartsville paper mill operations with plans for one of the largest and lowest cost <unk> manufacturing centers in the world.

This project fully aligns with our sustainability mesh them to transition sonoco globally into production from only 100% recycled fiber, while reducing electrical consumption and greenhouse gas emissions and total water use.

In the third quarter, we successfully completed the number tank conversion for medium to ERP and now have the capability to make a number of high end paper prices.

Plan, we have taken down the number one and number nine machines and hartzell and expect to wrap up number 10 through this quarter and into next year.

Volume or cost savings opportunities should be somewhere in the neighborhood of $30 million.

Additionally, as indicated on slide 17, I am very pleased to announce our intent to acquire <unk> paper in Denmark.

The rationale for this deal is straightforward for sonoco.

We need more lightweight production capacity in Europe to support our customers' transition to sustainable paper packaging.

We see a long runway of opportunities for our rigid paper containers in Europe , and Scone as a key part of insurance.

Continuity of supply.

Car manufacturers only from 100% recycled paper and.

And has robust sustainability programs in place for renewable.

Energy powered by a biomass boiler system.

Similar to the one we have here in the Hartsville complex.

In 2022, the company is expected to achieve $50 million in sale and this transaction is expected to be accretive to both earnings per share and cash flow.

We expect the transaction to close this quarter.

Now if you'll turn to slide 18, I want to remind you that we continue to execute our playbook to fundamentally change the company.

We are simplifying our portfolio into fewer larger businesses, where we have a right to win.

If you look back over the last several years, we have purposely realigned our portfolio to a more stable consumer defensible markets, which now represent over 50% of our annual sales.

In parallel we continue to refine our global footprint to maximize efficiency.

We support our customers' changing needs.

We also remain focused on aligning our organizational structure and talent to support these larger scale businesses with a supplement infrastructure as part of our structural transformation initiatives.

These changes is our commitment to build a diverse and inclusive workforce at all levels of the organization, which is vital to the heart of the Sunoco culture.

As project Horizon, and the <unk> type of acquisition demonstrate.

Have invested and will continue to invest for the long term growth of our core businesses.

These investments along with our commitment to self help actions will sustain and expand margins well into the future.

Central to all our activities is our commitment to execute on our sustainability initiatives, we have a number of innovative projects.

Our customers and suppliers, where we are intentionally aligning our long term development road maps for our improved recyclability and the commitment of a circular economy.

Some of the best technical experts in the business focused on these initiatives day in and day out.

So in closing all of these activities are focused on creating a better portfolio.

A more resilient foundation.

And ultimately a more agile company.

Confident in our long term strategy and the foundation that we're building.

As we look ahead, we will remain focused on consistent execution as we continue to invest in the future.

So let me say thank you for your support and we'll open up for any questions that you may have.

As a reminder, if you'd like to ask a question at this time. Please press star one one on your telephone.

Please standby, while we compile the Q&A roster.

Yes.

Our first question comes from the line of Anthony Pettinari with Citi. Your line is now open.

Hi, good morning.

Good morning.

Hi on the updated free cash flow guidance and inventory headwinds that you called out can you talk about maybe expectations or visibility into maybe recovering some of that $100 million in 2023, and I guess relatedly.

Directionally, how much price cost benefit do you expect that you could carryover into next year, just given kind of current run rates for inflation and the pricing that you have in place now I guess im thinking specifically on <unk>, but maybe just for the broader company.

Bob do you want to grab that.

Yes for networking capital I'd say, there's two parts to that I mean, what we anticipated was really the impact on 2020 is really just the timing.

Anticipated supply chain with cure somewhat in the third quarter and that we would be able to take out some.

On working capital, which is the delta really between the year.

What we had initially expected we do see that coming out now and we anticipate that that will come out through the balance of this year, though I think that that $100 million just rolls into next year, where we think next year.

Working capital should be.

Around $100 million benefit versus.

This year being a negative $200 million to $250 million detriment to cash flow next year. So we're really.

English on how next year is going to shape up from a working capital perspective.

Supply chain has normalized and we're able to really get back to normal in how we operate the business on how we are buying.

How are you utilizing our procurement assets.

On price cost.

I would say, we're more thinking about the headwind.

The metal price overlap from last year.

The benefit that we got in the first half of the year, we're thinking a lot about industrial price cost right now obviously, that's a that's a real tailwind.

But I think that we're we're very cautious to think a lot about.

Industrial volumes in the fourth quarter and then the first half of next year, and really kind of tempering, our price cost expectations to do that.

Okay, that's very helpful.

And then just in the consumer business can you talk about how demand trended over the three months of the quarter and then into October did you see any kind of meaningful change or step down there.

And then just on customer inventories levels, you referenced that quickly, but it isn't.

Inventory destocking kind of a significant headwind.

In the consumer business or is it something that you anticipate as being a headwind in <unk>.

Yes, Anthony I would say, we felt pretty normal seasonal build during the quarter.

And.

Towards the end of October and again seeing very robust activity on the consumer side and I think Roger talk to that in terms of the volumes.

So I feel very very good about the trends we're seeing in consumer.

On the inventory side that really was more driven off of what we're hearing from our industrial customers, saying theyre needing to.

The drawdown just as we and many many folks.

Across the border are talking to in terms of their working capital and Roger I don't know if he's got any more to add.

So anthony globally, especially textiles and some of.

Kind of housing related activity.

Seeing a real pullback just about all textile companies announced incremental downtime over the holidays. So what we're doing is trying to we're getting out in front of that so we're getting out in front of that but taking the maintenance downtime that we need in the fourth quarter.

And for now what our customers are telling us.

<unk> inventory reduction is not necessarily consumer spending will have to see how that plays out in the first quarter of next year.

Okay. That's very helpful I'll turn it over.

Our next question comes from the line of George Staphos with Bank of America. Your line is now open.

Hi, everyone. Good morning, Thanks for the details.

I wanted to.

Hit on a couple of.

Strategic points, one on value based pricing the other on on self help and productivity.

Can you talk a bit about <unk>.

All of <unk> or in terms of talking on initiatives.

Where do you stand on value based pricing I'm not looking for a dollar amount of benefit next year, Although I would take that if you wanted to give it but more in terms of the types of activities.

The type of analysis that youre doing by 'twenty. Three are you largely done or are you largely done now.

It's the flavor I'm looking for in terms of self help.

For call self help is going to be a larger driver of 'twenty. Three is there a way you could give us a bit of an update there and what's the dollar amounts in this case could actually benefit 'twenty three and then a couple of follow ons.

George Let me handle the self help side I'll pass on the Roger.

Fully understanding the first part of the question sorry, we've got technical issues here in Hartsville.

And on the self help side not to put out.

Specific number but kind of walk through.

Some of what I talked about in my narrative and have been discussing all year is really how we're looking at the structure of the company focusing on the four core businesses.

To be clear, what where did the parenting strategy that we're undertaking right now is that we have the all other category and in the four foundational switch, we're calling our can business as our industrial and our flexible businesses those will be supported from center right.

As opposed to the other and with that is going to drive productivity and opportunities and we're finishing that work up yet.

As we get into our budget season, which is just happening right now we.

We will have better clarity on exactly what type of economic.

Applications, that's going to have.

The other self help has to do with the investments that we've been making number 10 has been the poster child.

It is the largest single, but as you can follow over the last several years, we have increased our capital outlay.

From an organic perspective.

Materially and so there's just a number of projects that actually would surpassed in totality the.

The size of number 10 that are going across those core businesses that we see are that should be and will generate really really nice.

Productivity.

And that started about two years ago or so so it takes about that period of time, we should see that that's a big expectation for next year, you can see our productivity numbers.

We're going to say those are.

Not only return to the normal level.

Apply chain disruptions.

Lesson, but also as.

These capital initiatives.

Stop coming into place and I guess finally, I would say on a capital perspective, that's both top end and.

Bottom line, so not able to give you a number to anchor right now.

But.

That will become as we get ready to.

To give you guys our guidance and outlook for next year.

However, it would be fair to say that we're looking at more of a comment posted more already having been digested would that be fair.

Yes.

Little has been then same thus far so we're viewing that as a tailwind going in the coming periods.

Thank you and good pricing.

How are you Roger yes.

Yes.

We kicked off our commercial excellence initiatives four ish years ago, and what we're seeing is continued really nice improvements from that.

Focus on preparing our teams for large contract negotiations really digging in to oil price change mechanisms, which certainly has helped us through the last couple of years of spiking inflation.

Turning our attention now to share gain opportunities in some of our businesses and as Rob said earlier with the tremendous performance of our team through the through the supply chain challenges. The last two years were seeing numerous opportunities. There. So strategic pricing will continue regardless of inflation and deflation and that's been a pretty consistent contributor.

Over the last three years and we expect that to continue as we can.

Move into 2023.

Let me add let me just add to that just to reinforce that.

<unk>.

Certainly we've got cost movements up and down.

All the time, but we what.

What we're saying and through these initiatives as recognition because it really help with this was supply chain interruptions in our ability to keep our customers running.

Is that.

We're being recognized for our value through the margins.

They always talk can we do it as well price cost price cost but.

We deserve a certain level of margin our customers are recognizing that.

And it's really about cost pass through.

Over cover.

But.

Intentions or is that the margins should be reflective of the value generation that we are that we are providing the market.

And Thats, what Roger is talking about and our focus in that area. Okay.

Howard if I could get a quick one and then number three and I'll turn it over in the past quarters. This year, you've talked about even with the very tough comparison because of metal.

And other factor you're still.

Becker to grow earnings and 23 since we last spoke industrial has gotten tougher in terms of the outlook.

FX has probably gotten tougher in terms of your outlook.

Would you still expect to be growing earnings next year or is that too tough to call at this juncture and thanks I'll turn it over.

Yes, again, I'd say, it's too close to call.

Do they have that headwind. So I think if you look at next year. It's certainly first quarter, maybe even second quarter is going to be very tough.

Comps because of that.

<unk>.

But as we put our budgets together, we'll look at how that materializes through the course of the year, what I would say from a from a cash perspective and an EBITDA perspective, we are very bullish as we released the working capital from this year.

That.

I would I would say this I would be rather disappointed that we werent able to.

Generate the type of EBITDA levels that we've.

We have this year.

Thanks very much.

Our next question comes from the line of Adam Josephson with Keybanc capital markets. Your line is now open.

Good morning, everyone. Thanks.

I, maybe wanted to start paying closer attention to your accounts payable.

In the future given this.

Issue year again with this morning.

Onto more serious question.

Rob in terms of your price cost guidance for the year I think last quarter you mentioned.

Do you expect it to $250 million to $300 million benefit year to date, you mentioned, it's $254 million have you changed your expectation along those lines this year.

And then.

Relatedly your sonoco metal pack expectation for the year I think last quarter was trending toward the $200 million range can you give us any update there.

Yes.

We're seeing continued.

Positive direction in terms of price cost as we go through the year.

And on the metal pack side, I think youre right in that ballpark of the expectation for this year.

Perfect. Thanks, Adam.

Adam the way you should think about it.

Q2 was 79.

Q3 was 90 in terms of positive price cost benefit.

The phasing of that is consumer has been relatively consistent.

Industrial has picked up as we've gotten the benefit of some strategic pricing offsetting declining.

Declining OTT input prices, so that trend, we expect to continue through the fourth quarter.

Some volume uncertainty in the fourth quarter as we said.

I appreciate it and how much of that Rob did you did you say you expect it to in effect reverse in the first half of next year, specifically in metal pack.

Well I mean, what we've disclosed is that there was a 40% to 45%.

You know, what we're calling metal price overlap.

And Tom EPS basis in the first quarter of last year we.

We do expect that to not recur next year, which should overall.

A relatively meaningful headwind in the first half.

Yes, not perfect in terms of the progression of volume trends can you just help us with compared to the volume mix down 4%.

How volume was by month and then into October if you have such data.

Okay.

Yes, I'll take a shot of that but I think the trends are pretty similar as we went through the quarter into until October I mean, if you break down the $1 six growth.

Overall consumer global paper cans was up 9% pretty consistent through the quarter and as I've already said seem to be holding up will hold up in the fourth quarter based on our guidance flexible is up 4% still pretty consistent across the quarter and we look at similar.

For the fourth quarter, so from a consumer standpoint volumes seem to be holding up fine and with no real slowing as the quarter went along if thats, what youre asking and industrial we have seen some accelerated slowing we talked about Rob talked about the nine 5% down for industrial remember.

Number 10 is in this number but.

If you strip that out just like these tube and core globally. As an example was down six 5% with highs in the mid Twenty's in Asia and down to negative two 2% in U S and Canada. So it gives you a feel that we have seen slowing that we've already talked about with our customers taking inventory out of the system.

At the end of the year in both our paper and achieving core market. So we have seen some accelerated slowly that is built into our guidance for the fourth quarter.

I appreciate that and Howard just one last one on the long term EBITDA guidance, you gave right around a year ago, I think if I take metal pack out of that.

You'd be basically well that was pre bought pall metal pack, but effectively you're at that 2026 guidance already.

Aided by the price cost benefits.

Benefit you've had this year at what point would you think it necessary to update that 2026 guidance.

Do you think Thats still applies any thoughts there I would appreciate it.

Yes, we're in process right now Adam of.

Really really looking all of our longer term objectives.

And obviously, we are at our five year, we reached a five year target one year of the acquisition.

We're continuing for Georgia.

A question that walk of $180 million of self help over the five year period, we have not backed off on that at all but.

You should hear from us.

Early next year.

The end of the first early second quarter as.

<unk> got us through our next five year horizon and objectives.

And Adam wanted to go back to your comments about.

And question for both of them are related to the metal.

The metal business.

Thanks, and now it is one is we had 11 months of this year. So we do have a month extra going into next year.

And we.

Aerosols is an important part of that business and we are actually forecasting at this point in time growth in aerosol next year, the previous buyers that they run that business.

With the inflation come in and replace last January this past January .

There was a big pre buy programs. So we were very very weak in aerosols in the first quarter coupled with.

The optics, we have on.

On share expansion going into next year. So there's some positive thanks to help offset that.

But.

The headwind that we are waking up with from a price cost perspective, but we'll just see how that all unfolds.

As we finish up our plans for the for next year.

Thanks, so much higher.

Our next question comes from the line of Mark Wilde with BMO capital markets. Your line is now open.

Yes.

Thank you good morning, Howard Good morning, Rob and Roger.

Good morning.

Rob I Wonder if you just start out can you give us some sense for kind of benefit from.

Just lower OCC and lower resin as we think about the third quarter and then what you're expecting in the fourth quarter.

So it sounds like OCC in the fourth quarter might be down 70, or 80 Bucks a tonne.

Yes.

It's down more than that actually I mean, OCC, we averaged kind of $1 23, we started the third quarter and the $1 50 range.

Were more probably below that.

Quote right now.

With some softness.

<unk> in the fourth quarter.

OCC has had a historical decline in NOI.

Four months.

And there is relatively little inventory in the end.

And our system in terms of OTT.

And so that's really kind of flowing through on a on a real time basis.

That has been a positive for price cost two thirds of our price cost benefit in the third quarter was from the industrial business.

We anticipate that trend to increase.

We are steadfast in kind of providing value to our customers and.

Ensuring that.

Power prices reflect that so.

So we think fourth quarter should have some benefit there that we do as I said.

We're very mindful of that.

Downtime, we're expecting today, which will be more than the third quarter and the fourth quarter as a result of just market weakness.

As we bring the number 10 machine up.

Okay second question Im just curious Rob either.

Sorry.

Or maybe Howard from your study.

Got a new CFO , Rob you've got a little different background, the past CFO , but I've dealt with the pad.

Also got hired a new head of M&A and I'm just curious about just broadly how you think this is going to change the capital allocation process.

<unk>, particularly around acquisitions.

I mean no change.

<unk> always been really mindful of what the opportunities are out there I think we've been really intentional as Howard said about really formulating a really forward looking strategy and focusing on the core and what we really do well and how we can drive value prospectively.

Now more than ever we've really got that.

<unk> list of things that we do really well that really add value in other businesses, where we're actually the better owner of those assets.

And I think that we're showing that in the metal packaging acquisition, how we've really kind of brought new energy to that business into that industry.

That's really the gist of the strategy from an M&A perspective, we're thinking a lot about what are the.

One 5% to 10% off.

Current market that are really kind of additive and we do view that Cam business is just the can business that they were completely adjacent and are additive to each other so we're constantly looking for other opportunities to add to the strategy, we're being really thoughtful about what we can do prospectively and we've got the.

<unk> internally to really execute M&A at a really high level, yes.

Yes, Mark let me add to this.

Does relate to acquisition.

The type of growth opportunities that we're seeing right now, particularly on our paper can business.

Tied to sustainability the can packaging again it was hardly a notable with a 40 man Euro acquisition.

The eve of Covid.

We're now able as things have opened up to take that technology and start leveraging that and we're seeing really really well.

Tremendous opportunities from an organic perspective.

And frankly, we're <unk>.

And a lot of time now looking at it.

Our investment capital.

In terms of.

Really we have to be cautious about how we deploy it we have got so many global deaths.

Up opportunities from an organic base.

That's the kind of thing we're looking at.

<unk> and again.

<unk> sales <unk> complex.

We don't we're not in the lightweight business.

In Europe , it's 100% consumer facing.

We actually represent 15% of the.

Volume in our can business. So it gives us as I said in my commentary Securities security of supply.

But gives us a forward look in the other markets on the consumer side in Europe before we just weren't able to participate in at least from a board perspective.

Okay, Alright last real quick one for me just as you talk about fewer and bigger businesses can you can you help us with what that might mean for some of the joint ventures that you have going forward.

Okay.

Now I'll spend a whole lot of time contemplating those.

Several.

Some the partner is managing it.

Certainly on the board and a part of the.

Part of the business others more like a 50 50, but.

We don't really have that many in that in any of the other that material.

So we don't we don't spend a whole lot of time there.

Okay, Alright sounds good good luck in the fourth quarter and into next year.

Thanks.

Okay.

Our next question comes from the line of Mark Weintraub with Seaport Research Partners. Your line is now open.

<unk>.

On the $180 million of self help which you're targeting over the next several years.

This is a difficult question to parse but.

How much would you say.

He is going to be delivering on the cost type side of things versus how much.

Might be more volume driven and all of that.

It might be sort of more market dependent on.

Good backdrop versus for instance, it sounds like with the number 10, maybe youre, increasing addressable market a little bit as well with the new products that you have and any color you could provide.

On those would be great.

Yes.

I'm going to let Roger handle that.

I don't want to leave that without noting that.

The commentary about.

Capital investment growth opportunities new products.

The war on plastics, and our opportunity with a 90% 95% paper solution all of that is totally disconnected from from this conversation a lot of 180, and it's really a walk of.

Several key areas that we're focused on sort of Rogers.

If you remember we I think we were pretty specific about how we divided into the category.

Let's say a quarter or so is commercial excellence, which we've already touched on.

And really ramping up the look of commercial excellence beyond specific.

Major customer negotiations or getting into other areas like deeply into pricing that price change.

Mechanism deeply into share gain deeply into driving volume growth into some of these adjacent markets that we're talking about so therefore opening up the opportunity for grid.

Productivity is really a lot of this around the capital projects in our capital planning that Hal has already talked about in addition to growth focused like a sustainability projects you've talked about tremendous amount of <unk>.

Energy saving type projects.

Productivity generating.

Improvements those are ongoing and Youll see Rob talked about the capital spending for this year that accelerates as we get into next year focused on on the integrated business and from the cost side, we've talked about some structural transformation work. We're working on now as we as we set up these fewer bigger businesses, we've taken the opportunity to consolidate.

Alidade some.

Some businesses into larger businesses within the integrated business, which leads to strictly cost out now of course is offset through labor inflation that we've seen this year, but that strictly cost out and then supply management supply chain. I think is the biggest opportunity we see over the coming years as we really get into this integrated.

Supply chain on our four integrated businesses and drive continued productivity on how we manage those businesses highly managed data, giving our plants. The best data on a daily basis to make the best decisions to drive productivity and serve our customers and thats more longer term and somewhat dependent on <unk>.

It forces in volume going forward. So I think it's a pretty even split between cost and driving value through the businesses and.

Through the markets and the opportunities in the market.

Okay. So so for the second part which would be more volume driven.

It comes but it may come more when the market is in a place to support it is that kind of a fair way to think about it.

Yes, I think so I think if you think about if you look at our productivity. This year, we're not we're not the only one that's having tough productivity.

<unk> this year.

Some of it is frankly, just the better operating of our equipment as we were able to schedule out I think about our global paper footprint. This year, we've had tremendous volume demands, which led to many changeovers and exactly how you do not want to run major paper complex, so managing that going forward based on volume demands.

It will be it will be very helpful.

Great and then as a second question and again, it's a tough one but since everybody I think wondering about it I'll ask and see what you feel comfortable sharing.

The U R B markets kind of historically there have been sometimes volatile pricing things are good price go out things are not so good prices go down you have been working a lot on your commercial excellence, where in this environment, where you've got wastepaper going lower demand is weaker.

As we're trying to figure out what's likely to happen in this market is there anything that you would share.

As we do our prognostications and analysis.

Yes, I think al touched on that earlier.

Focus is on margin and generating the value and getting the value that we're adding through our integrated products, including <unk>, which we sell on the outside and our Anacrotic integrated products.

Paper cans in tubes and cores. So that's that's our focus we talked about what we're doing in the fourth quarter, adding more maintenance too to offset some of the reduced demand.

Look at look at the third quarter. Excellent example of how we handled reduce volume we had number turned down for.

For a good part of the quarter, we had soft volume in Asia, and Europe look at our operating margin in the industrial segment for the third quarter. So we manage that through strategic pricing, we manage that through changing most of our contracts to tan bending chip index in the U S. So for me, it's about maintaining that margin.

Going forward, if OCC stays down versus continuing to drive a positive price cost.

With higher prices.

<unk> managed it extremely well.

Vesting and our best paper assets and Howard talked about and this was announced when we announced project Horizon. We took number one number nine machines down in hartsville, which were older higher cost less efficient machines. So we're sticking with that strategy that we started four or five years ago and so far in the third quarter is paying off.

Great. Thanks, I appreciate the color.

Our next question comes from the line of Gabe <unk> with Wells Fargo. Your line is now open.

Good morning, Howard Rob monitor.

I wanted to dig in on.

I guess it's.

Your Q4 guidance slide 13.

And you May have mentioned about lower food shipments.

I guess I'm trying to understand what exactly that is.

Maybe it's timing related in terms of when you shipped some product, but then on the composite can side.

I think you are investing in some.

New capacity, there and we're expecting kind of positive volumes.

Elasticity is seem to be.

I don't want to say nonexistent, but consumers pretty resilient.

In terms of Cpg's taken hefty price increases.

Any feedback from your customers in terms of expectations kind of going forward as it relates to composite cans and snacking are as such.

No go ahead.

On the last part of that.

As I said earlier.

We've got a tremendous funnel.

So, bringing new capacity on on our paper.

Paper can business here in the U S.

In Brazil, we've got a new plant going into place.

That is just starting up now and in Southeast Asia.

We've got investments going in multiple locations in Europe around our foundational.

<unk> products.

More exciting.

As the.

Can packaging type products that are 90% 95%.

Paper and in Europe , where the.

The funnel there is just phenomenal in terms of how many machines that were going to have to build over the next.

Period of time to service not only Europe , but other parts of the world.

It is an impressive looking runway to the point.

We just looked at our capital review just for North America over over a couple of years period that we're going to be spending somewhere around $40 million in that business from a recapitalization standpoint productivity standpoint, a growth standpoint, and that's just in one area of the world.

On that side of the business just could not be.

More pleased with the amount of opportunity that we have.

And the comment on slide 13 is really about sequentially fourth quarter versus the third quarter I mean seasonally if you think about infection.

The holiday has been pre packed callaway has been pre tax Christmas been pre tax and then the fresh fruit and vegetable business and plastic clamshell business seasonally very low in the fourth quarter, but as I said, given the seasonality and Howard just mentioned in our paper can business, our flexible business should be should be solid so.

If the question is are we seeing any reduced demands our customers are not telling us that yet at this point.

We expect again pretty solid demand in consumer outside of those very specific seasonally lower markets.

And 0.2 is there has been some choppiness in Europe , and that's not demand that has to do with energy and food industry energy is a major component.

We saw customers in September October .

Pushing out orders waiting to see whether there is a particular market or country was going to put caps and then.

They didn't want to put inventory on the floor.

Realizing that there was a fairly large reduction in the cost of energy just around the corner.

Okay No that's super helpful. And then I guess on the metal packaging side.

It seems like we're navigating a couple of different unique or discrete items. We had some pre buy at the end of 2021 that impacted 2022, it sounds like youre, making some organic investment for volumes, maybe picked up a customer there. So I guess, maybe going into 2023, all else equal what im.

Hearing as you would expect aerosols.

Despite what might be a week.

The economic backdrop for small cans.

Yes.

That's what we're seeing that I'll talk through that.

From a year over year perspective.

The first half of this year was.

Not good from a volume perspective, just due to the amount of.

Pre buy activity the previous owner.

To put in.

But in place coming into the inflation and yes, there is.

And value recognition.

So I say that.

We have we have extremely good assets, well capitalized business and we continue to put capital into that as well so.

No.

From an aerosol, which is the more sensitive side of the business as it relates to the slowdown we see the opposite of what you normally would have thought would expect.

Okay, and one last one if I may.

I guess getting into both of Mark's questions on the industrial side of the house.

As we think about again it sounds like price cost is expected to be positive here in the fourth quarter.

So a lot of different influences that impact OCC prices, but at least.

To the extent that OCC on a year over year basis is lower.

And we don't see any change in pricing indices.

Is there a reason why price costs would not be positive in the industrial business in the first half of 'twenty three.

Well.

At this point in time, we've got a lot of inflation.

We spent a lot of time talking about OCC that.

All the chemicals starch.

So.

Labor there is just a lot of in place and still out there.

OCC, obviously is the biggest driver of the mall look if it.

Didn't know that.

I really don't know how to answer that I'd say, yes, probably we would be on a more positive side, but we don't see any indications right now wanting them to cities.

Yes.

Alright, great. Thank you and good luck.

Okay.

Our next question comes from the line of Ghansham Panjabi with Baird. Your line is now open.

Hi, Good morning, everyone and thanks for taking my question. This is actually Matt Krieger sitting in for Ghansham.

I wanted to take a step back.

Think about.

The potential EPS variances for next year, So I use the midpoint of your guidance for 2022 as a starting point can you talk about what the major EPS variances could look like heading into 2023 Im just thinking about factors such as Impac.

Impact from higher interest rates FX headwinds.

<unk>.

Rollover acquisition contributions synergy capture of productivity that you hinted at.

The metal impact from year over year, just other big picture factors would be would be helpful.

Yes, I can tell you where we're.

Going through budgeting and planning as we have been for a while I would say that this environment is really unique in that.

We're on the precipice of potentially having a recession and we're very mindful of that amount and the impact that has on demand.

We're controlling the controllable.

Rogers.

We've got a really robust pipeline of productivity activities and were anticipating SG&A to be lower as a result of our structural activities.

We also do have kind of some known knowns, which is that the metal pricing overlap.

Anniversary and the depreciation will be higher than that.

The growth.

Of those two of those two was in excess of $100 million negative.

Though we do feel like there.

As Howard said there is.

Consumer volume opportunity.

And we're continuing to watch industrial demand and the availability of industrial price call.

Got it that's helpful. And then just following up and maybe digging in and some of that consumer strength that you are referencing.

Many of the CPG food and beverage customers.

Clearly employing a value over volume strategy currently to offset inflation in their own portfolios.

What are you experiencing from consumer demand elasticity perspective, as it relates to.

The massive level of pricing being pass through the supply chain.

It sounds like you've been very resilient do you expect that this could be any sort of natural volume headwind into 2023.

Any thoughts there would be.

Really helpful.

Well, yes, we're really not seeing that right now and we do.

We participate.

Slightly.

And this half.

Across.

So from the store brand.

<unk>.

So the brand later.

So trade downs.

Not a negative to us at all.

Thanks for the others.

Particularly on the plastic side of the business.

Continues to be good.

Right.

And our mill business from the <unk>.

Walker at home.

Okay.

Assuming that.

And that up and we just right now unless you have any additional color to add that we're not we're not feeling it on our end there may be substitution, but we benefit from that substitution as well depending on the substrate.

Yes, Ryan how our customers are telling us they are bigger challenges supply chain constraints of certain raw materials versus versus demand I mean global stat chips.

It's put out there by one of our largest customer in that market they are producing and publicizing their volumes good growth there.

Snacks cookies good growth there. So we're not hearing it we're hearing their biggest challenge is more getting material to get the product on the shelf.

Versus see any significant reduction in demand at this point and five curtailing marketing because I don't want to stimulate more demand.

Got it got it that's helpful. That's it for me. Thank you.

Our next question comes from the line of Kyle White with Deutsche Bank. Your line is now open.

Hey, good morning, Thanks for squeezing me in here.

The strategy of focusing on the core if we go back 10 years ago, or so or actually the 2014 analyst day.

Company has a similar strategy of focusing on its core business and optimizing the portfolio. I think you had the blow molding divestiture around that time, but other than that I don't recall too much more happening.

And then obviously the strategy focus be more on growth later on but I guess what is different this time around versus <unk>.

2014, or 10 years ago is there more of a focus to actually optimize the portfolio and then what kind of implications that have from a capital allocation of our capex standpoint going forward.

Yes.

The easiest thing that one way to answer that is we've got a whole new leadership team.

With a different vantage point.

And a lot more work that we've put in on what is truly core really Rob discussed that.

Pat.

18 months doing exactly what youre doing on that 10, and 20 years and saying what is the journey that we've been on and.

What have we learned from that.

And we woke up.

We finished this analysis and said I'll tell you what we learned is that the foundational businesses that this company has really driven the success that we've enjoyed for all these many years.

And we need.

Because you can't just look at 14 years ago, you can look at five years ago, or again 20 years ago.

And so on.

We own a self fulfilling prophecy, but we're optimizing industrial businesses for cash as opposed to.

Acting as who we are the market leader in global market leader in <unk> and <unk>.

In the case in point is <unk>.

Next horizon, that's not an optimized activity that is saying that we're going to invest in these these foundational business I hate to keep saying it that way.

And they are going to continue to deliver.

Strong value generations to come.

And so it is different.

There has been all of them had a heck of a lot more.

Paul and processes has gone into the journey that we're on.

And that's how we've landed where we landed.

And.

We've got our all other category and we're managing those businesses as best we can as best as best owners.

And we're seeing improvements in those businesses.

And we'll just see where that takes us going in the long term, but even equally important is if you go back as you know the 2014, we did structurally changed how we manage the company. We are actually structuring the parenting of the company in such that the focus is only on the core and these other businesses.

They were frankly burdened by.

By centralized support in some areas and that their markets that they serve require a totally different approach.

The competitive landscape in that customer.

Bill so.

It's a different day and time and this is not the feet of.

Anything that we've done certainly in my in my tenure.

Got it that's helpful. And then I just had a real quick one on rigid paper containers that business continues to perform very well on volume growth can you just help us understand the divergence there. That's why volumes are still very strong metal food is seeing some some declines both benefit from oil consumption and I would think it would be somewhat correlated.

Yeah.

Yes.

I don't know if I caught the whole question.

Yes.

Metal food is.

Our really mature defensive market that our business is growing along with the industry and the CMI kind of.

Down a little bit this year.

We anticipate that to kind of.

Really saw demand trends over the long run so.

Around kind of GDP mine.

But I think what we've seen with Howard.

Howard you've been talking about with our rigid paper containers businesses.

Just a real revitalization and a real focus on growth and opportunity, there and having great customers and partners and really kind of.

Identifying and going to be opportunities. So we've got a great innovation funnel with powered with can packaging and that that's really driving a lot of this opportunity along with just some really focused market participation.

Partner, Don and I would say on the metal side.

The integration has gone extremely well we have synergies on the com.

And those are building.

We've been able.

We will be.

In January that we have for dedicated metal plants than legacy Sunoco that will be falling in and being run by who they should be run.

Which is the metal exports, which will also drive additional synergies.

I guess the most impressive to me is.

I have an opportunity to be out in the market.

Type of reception that we've received from the.

<unk> customer base has just been.

Exceptional flow.

We'll see how it plays out.

Extremely encouraged about.

What's the volume profile may look against.

A business that on a macro perspective, as Rob said GDP or.

Lightly.

Got it. Thank you good luck in the quarter.

Hi.

Our next question comes from the line of George Staphos with Bank of America. Your line is now open Hey, guys. Thanks very quickly I know it's late in the.

Call, Rob first off can you.

You have a view on what FX would be if we mark to market relative to your guidance for 'twenty two in terms of what's the headwind could be for 2003.

There've been a couple of questions around this bottom line do you expect or what do you expect your consumer volumes to look like fourth quarter year on year versus fourth quarter, and then lastly, Scott is there a way to size what benefit to earnings Youll get from having that business. Thanks, guys. Good luck on the quarter.

Yes, we are still evaluating FX I mean, we don't we don't take a position versus where it currently is.

If you if you just held it where it currently as you would anticipate that next year would be up.

A mild headwind.

And then I can pass off on consumer volumes.

Scott.

Yes.

We are anticipating that to be an accretive acquisition for the size of it was it was a really.

Beneficial transaction, it's going to be.

High single digit percent accretive on a year on a full year basis, and we anticipate that to close in the fourth quarter. So we'll get the full benefit.

In 2023 with some synergies on top of that.

Yes, George I think on the.

Fourth quarter, we said that we expect similar volumes in rigid paper containers globally and flexible and then we're going to see weakness in our resin based businesses due to the fresh fruit seasonality.

Being down so we finished at one 6% up for the segment in the third quarter. So I would expect it to be down slightly from there. Thank.

Thank you Roger good luck on the quarter guys.

Okay.

That concludes today's question and answer session I would like to turn the call back to Lisa weeks for closing remarks.

Thank you again for joining our call today and thank you for your interest in Sunoco, We had published a press release earlier that indicates all of our conference activity in the fourth quarter, we definitely hope to see you. There if you didn't have any.

Don't hesitate to reach out and we hope that all of you enjoy the rest of your day.

This concludes today's conference call. Thank you for participating you may now disconnect.

The conference will begin shortly.

So raise your hand during Q&A you can dial one one.

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Good day, and thank you for standing by and welcome to the third quarter 2022, Sonoco earnings Conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

To ask a question. During this session you will need to press star one one on your telephone.

Please be advised that today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Lisa weeks, Vice President Investor Relations. Please go ahead.

Thank you operator, and thanks to everyone for joining us today for Sonoco third quarter 2022 earnings call. Joining me. This morning are Howard Coker, President and CEO , Rob Taylor, Chief Financial Officer, and Rodger Fuller Chief operating officer.

Last evening, we issued a news release, highlighting our financial performance for the third quarter and we prepared a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of our website at Www Dot Sunoco Dot com.

The forward looking statement on page two of the presentation.

<unk> will then provide a progress report on our strategic priorities followed by a Q&A session.

We'll turn to slide four in our presentation I will now turn the call over to our CEO Howard Coker.

Thank you Lisa and good morning, and thanks to all of you for joining our third quarter call.

As you read in our press release, we reported strong year over year performance for revenue grew 34% to $1 9 billion and we expanded base EBITDA margins 200 basis points to 15%.

Based on earnings per share of $1 60 was a 60% increase over the third quarter of last year.

And overall improving supply chain conditions.

As a result of our strong results year to date, we have increased our full year 2022 guidance.

This performance is another positive proof point for our continued successful execution of our strategic priorities and what remains a dynamic environment.

Our teams have remained diligent in support of our customers. While we continue the journey to build a better sunoco.

I want to express a warm thanks to all of our team members for their incredible hard work. During this period with that I'm going to turn it over to Rob and let me take you through our financials for the quarter.

Thanks, Howard I'll begin on slide six with a review of key financials for the third quarter. Please note that all results discussed will be adjusted debate and all growth metrics will be on a year over year basis, unless otherwise stated the GAAP to non-GAAP EPS reconciliation can be found in the appendix of this presentation as well within the press.

Release the.

The third quarter financial results again represented sonoco its ability to deliver strong results from our core market position.

Sales increased 34% to $1 9 billion in the third quarter. This sales growth was driven primarily by the Sunoco metal packaging acquisition, and an 18% increase in prices our strategic pricing efforts continue to both offset inflation and reflect the value we provide our customers we've been steadfast in providing.

Excellent service and availability to our customers and we believe we are being rewarded for this in the marketplace.

We grew volumes one 6% of consumer largely as a result of this commitment. Furthermore, our strong revenue growth is translating into operating leverage base operating profit increased 67% to $225 million and base operating profit margin increased 240 basis points to 11, 9%.

Turning to slide seven base, EBITDA increased 55% to $284 million and base EBITDA margin increased 200 basis points to 15%. This focus on margin improvement is strategic and is backed by ongoing portfolio management actions footprint optimization activities value enhancing.

Capital investments and strategic self help programs finally base earnings per share increased 60% to $1 67. This increase in earnings is attributable to strong operating performance offset by five cents of negative FX and nine since a negative tax rate the sales bridge on slide eight provides the.

Mary drivers for revenue growth in the quarter volume mix was negative $52 million or three 7% our consumer segment continues to season.

Growth in core RPC and flexible businesses.

However, industrial volumes were down nine 5% with the greatest impact in Europe , and Asia will notably the U S was also negative due to the number 10.

Paper machine downtime and continued weakness in the white goods market.

Price was 250 million positive up 18% in the third quarter.

Consumer prices increases were led by strong performance in our core RPC and flexible businesses and.

Industrial price increases were led by strong performance in the U S and in Europe .

While acquisitions have been an important part of our historical revenue growth excluding acquisitions organic sales growth was built 10% in the quarter.

Foreign exchange and other was negative $57 million in the third quarter.

Minder, 75% of our sales are generated in the U S. P.

Page nine has our base operating profit bridge.

The operating leverage of our core businesses and the current market environment.

Overall volume mix was negative $14 million again with strength in RPC and flexible offset by lower volumes in industrial Industrial's was impacted by the shutdown at the number 10 paper machine as we completed the grade conversion from corrugated medium to high value you RB we estimate the volume impact to operating profit.

It was between seven and $8 million price cost was a positive 90 million benefit to base, the operating profit or core.

Franchises continued to achieve strong strategic pricing performance and price cost improved sequentially from the 79 million, we achieved in the second quarter.

<unk> business overall had strong price cost performance generating over $20 million of favorability.

The industrial business had a strong price cost performance as well as we continue to benefit from strategic pricing, while OCC costs continue to decline.

<unk> averaged $123 per ton in the quarter and OCC prices are currently $45 per ton based on the southeast and up.

Year to date, we have achieved $254 million a private call. As a reminder, we experienced approximately 40% to 45 per share of metal product overlap in the first half of this year most of which is accounted for in acquisition under the metal packaging business and not accounted foreign products call.

Other impacts on the quarter were negative $18 million due to higher depreciation nonrecurring COVID-19 benefits and FX headwinds, which impacted operating profit of $6 million in the quarter.

Slide 10 has our segment performance for the quarter consumer sales grew 72% to 1 billion and operating profit grew 93% to $128 million operating profit margin increased 130 basis points to 12, 4%. The primary drivers of this performance were metal packaging and strategic pricing while productivity.

<unk> volumes were also positive.

Industrial sales grew 4% to $661 million and operating profit grew 48% to $82 million.

Operating profit margin increased 365 basis points to 12, 4%.

The primary driver of this performance were strong cost performance with prices up and otp declining offset by lower volume.

Especially in international markets and lower productivity due to planned downtime at the number 10 paper machine.

All other sales increased 10% to $198 million and operating profit increased 19% to $15 million. This growth was driven by strong strategic pricing performance, while volume was essentially flat.

<unk> 49 per share on a quarterly basis or a greater than 3% average yield over the last 12 months year to date, we paid $193 million in dividend.

After capital investments and the dividend, we prioritized investments in accretive M&A transactions aligned with our long term strategy, we'll manage capital to optimize our balance sheet and to retain our investment grade credit rating during the quarter operating cash flow was $138 million in capital investment for $87 million.

On slide 12, we have our updated guidance for fourth quarter, our EPS guidance is $1 20 to $1 37.

We're increasing our full year EPS guidance to $6 40 to $6 50.

<unk> increased from previous guidance.

Our full year expected base EBITDA guidance to 114 billion to $1 $1 6 billion. This record performance is based on our continued strong strategic price performance and a stable market environment and our defensive consumer markets, we're reducing our operating cash flow and free cash flow guidance by $100 million due to increase.

Working capital demands.

Current elevated working capital is associated with your with inflation and disrupted supply chain, both from our suppliers and our customers and supply chains normalize we anticipate inventories to normalize and benefit cash flows. While this is occurring now we expect higher free cash flow in 2023.

For your reference we've included additional modeling information in the appendix of this presentation now Roger will.

To discuss our outlook on a segment basis. Okay. Thanks, Rob. So please turn to slide 13 for our view on segment performance, which supports our fourth quarter guidance.

Across consumer volume trends are seasonally lower in the fourth quarter and our legacy packaging businesses, we have lower planned shipments from pre holiday stocking of some packaged foods and lower seasonality of fresh fruits and vegetables in a plastic clamshell business, but we see another overall solid volume quarter for both global rigid paper containers.

And flexible given the seasonality.

And the metal packaging space, we're seeing solid volume in food cans sequentially to Q3, offset by aerosol cans, which continued to trend lower than the COVID-19 highs.

We continue to invest heavily across the consumer business for innovation around new sustainability programs to support global growth and snack packaging and.

And overall efficiency projects aligned to our operational excellence programs.

Finally in consumer we believe will continue to benefit from previous strategic pricing initiatives as well as relative stability in our raw material costs.

And industrial converting we don't expect volume recovery in Europe , and Asia in Q4, and we are seeing slowing industrial demand in North America as many of our customer bases are reducing inventories prior to calendar year end, the global tube and core markets experiencing slowing demand in paper mill core supply in the containerboard market and housing related markets.

Like textiles and flooring products.

On the paper side of the business with our number 10 machine now operational in North America, we begun production qualification ramp ups for new paper grades and are balancing supply with demand to maintain reasonable backlog levels.

In Asia, Europe , and Latin America weaker economic conditions continue to drive lower demand lower demand for U R. B globally is allowing us to complete some overdue maintenance in the fourth quarter, which will allow our paper machines to return to more normal run sizes, and reduce changeovers, which should positively impact productivity as we move into <unk>.

<unk> 2023.

Similar to consumer products, we're continuing to execute our capital investment plan and industrial sustainability will continue to drive the need for additional paper production capacity and we will continue to invest capital for machine upgrades on our desks paper assets.

On the pricing side of commercial excellence programs continue to generate beneficial strategic pricing.

We're continuing to drive value from strategic pricing activities managed non material inflation and expect to benefit from declining resin prices in the fourth quarter.

That update and look at the fourth quarter I will turn it over to Al <unk> project.

Turning to slide 15, I'm pleased to announce that in the third quarter. We did release, our updated corporate responsibility report, which demonstrates <unk> commitment to environmental social and governance principles.

Very very proud of the progress we've made.

Okay, We just lost power it.

And our location if you guys can bear with us for one minute if youre still along we'll try to get that.

Rectified.

Okay, we have had to shift from.

From our last two.

We did pay the Bill Roth.

Two the flashlights.

Let me see if we can pick up close to where I left off.

And we will keep going if we try to figure out what's going on here.

Sustainability is a key driver for innovation on our new product design activities of Roger had mentioned and we continue to grow with both existing and new customers for our solutions provide differentiation and enable our customers to win in their markets.

While there is much more work to be done you can see from our numerous partnerships of memberships that the decisions we make are motivated.

Mission.

Which is to create sustainable packaging solutions that help build our customers' brands and have the quality of their products and improve the quality of life for people around the world.

That's why I am pleased to announce progress on one of the most significant investments in Sunoco This history.

On page 16, Slide 16, we have an update on project horizon.

In mid 2020, we announced our efforts to modernize our Hartsville paper mill operations with plans for one of the largest and lowest cost <unk> manufacturing centers in the world.

This project fully aligns with our sustainability mesh then to transition sonoco globally into production from only 100% recycled fiber, while reducing electrical consumption greenhouse gas emissions and total water use.

In the third quarter, we successfully completed the number 10 conversion from medium to Europe , and now have the capability to make a number of high end paper grades.

The plan, we have taken down the number one and number nine machines than hartzell and expect to wrap up number 10 through this quarter and into next year.

Volume or cost savings opportunities should be somewhere in the neighborhood of $30 million.

Additionally, as indicated on slide 17, I am very pleased to announce our intent to acquire <unk> paper in Denmark.

The rationale for this deal is straightforward for Sunoco.

We need more lightweight production capacity in Europe to support our customers' transition to sustainable paper packaging we.

We see a long runway of opportunities for our rigid paper containers in Europe , and <unk> is a key part of insurance.

Got annuity of supply.

Car manufacturers only from 100% recycled paper and.

And has robust sustainability programs in place for renewable.

Energy powered by a biomass boiler system.

Similar to the one we have here in Hartsville complex.

In 2022, the company is expected to achieve $50 million in sale and this transaction is expected to be accretive to both earnings per share and cash flow and we expect the transaction to close this quarter.

Now if you'll turn to slide 18, I want to remind you that we continue to execute our playbook to fundamentally change the company.

We are simplifying our portfolio into fewer larger businesses, where we have a right to win.

If you look back over the last several years, we have purposely realigned our portfolio to a more stable consumer defensible markets, which now represent over 50% of our annual sales and.

In parallel we continue to refine our global footprint to maximize efficiency, while we support our customers' changing needs.

We also remain focused on aligning our organizational structure and talent to support these larger scale businesses with.

With a software infrastructure as part of our structural transformation initiatives.

Quarterly changes is our commitment to build a diverse and inclusive workforce at all levels of the organization.

Which is vital to the heart of the Sunoco culture.

As project Horizon, and the scar on paper acquisition demonstrate we have invested and will continue to invest for the long term growth of our core businesses.

These investments along with our commitment to self help actions will sustain and expand margins well into the future.

Central to all our activities is our commitment to execute on sustainability initiatives, we have a number of innovative projects.

With our customers and suppliers, where we are intentionally aligning our long term development roadmaps for improved recyclability and the commitment of a circular economy.

We still have some of the best technical experts in the business focused on these initiatives day in and day out.

So in closing all of these activities are focused on creating a better portfolio.

More resilient foundation.

And ultimately a more agile company.

I am confident in our long term strategy and the foundation that we're building.

As we look ahead, we will remain focused on consistent execution as we continue to invest in the future.

So let me say thank you for your support and we'll open up for any questions that you may have.

As a reminder, if you'd like to ask a question at this time. Please press star one one on your telephone.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Anthony Pettinari with Citi. Your line is now open.

Hi, good morning.

Good morning.

Directionally, how much price cost benefit do you expect that you could carry over into next year, just given kind of current run rates for inflation and the pricing that you have in place now I guess I'm thinking specifically on <unk>, but maybe just for the broader company.

Rob you want to go on forever.

Yes for networking capital I'd say, there's two parts to that I mean, what we had anticipated was really the impact on 2020 is really just timing, we had anticipated supply chains with cure somewhat in the third quarter that we would be able to take out.

Some working capital, which is the delta really between the year end.

Round $100 million benefit versus.

This year being a negative $200 million to $250 million detriment to cash flow next year. So.

We're really bullish on how next year is going to shape up from a working capital perspective.

Supply chain is normalizing and we're able to really get back to normal in how we operate the business and how we're buying.

Power.

Utilizing our procurement assets.

On price cost.

I would say, we're more thinking about the headwinds.

The metal price overlap from last year.

The benefit that we got in the first half of the year, we're thinking a lot about industrial price cost right now obviously, that's a that's a real tailwind.

But I think that we're we're very cautious to think a lot about.

Industrial volumes in the fourth quarter and then the first half of next year, and really kind of tempering, our price cost expectations to do that.

Okay, that's very helpful.

And then just in the consumer business can you talk about how demand trended over the three months of the quarter and then into October did you see any kind of meaningful change or step down there.

And then just on customer inventory levels.

That quickly, but it is inventory destocking kind of a significant headwind.

In the consumer business or is it something that you anticipate as being a headwind in <unk>.

Yes, I would say, we saw pretty normal seasonal build during the quarter.

And towards the end of October and again seeing very robust activity on the consumer side and I think Roger talk to that in terms of the volumes.

So feel very very good about the trends we're seeing in consumer.

On the inventory side that really was more driven off of what we're hearing from our industrial customers, saying theyre needing to.

The drawdown just as we and many many folks.

Across the border are talking to in terms of the working capital and Roger I don't know if he's got any more to add to that.

So anthony globally, especially textiles, and some of the kind of housing related activity.

We're seeing a real pullback just about all textile companies announced incremental downtime over the holidays. So what we're doing is we're getting out in front of that so we're getting out in front of that but taking the maintenance downtime that we needed in the fourth quarter.

And for now what our customers are telling US is inventory reduction is not necessarily consumer spending will have to see how that plays out in the first quarter for next year.

Okay. That's very helpful I'll turn it over.

Our next question comes from the line of George Staphos with Bank of America. Your line is now open.

Hi, everyone. Good morning, thanks for the detail.

I wanted to.

Hit on a couple of strategic points, one on value based pricing other on on self help and productivity.

Can you talk a bit about.

All of <unk> or in terms of talking on initiatives.

Where do you stand on value based pricing I'm not looking for a dollar amount of benefit next year, Although I would take that if you wanted to give it but more in terms of the types of.

Activities.

Type of analysis that Youre doing by 'twenty. Three are you largely done or are you largely done now.

Flavor I'm looking for in terms of self help.

It seemed for call self help is going to be a larger driver of 'twenty. Three is there a way you could give us a bit of an update there and what's the dollar amounts in this case could actually benefit 'twenty three and then a couple of follow ons.

George.

Let me handle the self help side and I'll pass on the Roger I have difficulty understanding the first part of the question sorry, we've got technical issues here in Hartsville.

On the self outside.

To put out a specific number but kind of walk through.

Some of what I've talked about in my narrative and have been discussing all year is really how we're looking at the structure of the company focusing on the four core businesses.

And to be clear what were the parenting strategy that we're undertaking right now is that we have the all other category and in the four foundational switch, we're calling our can business as our industrial and our flexible businesses those will be supported from center right.

As opposed to the all other and with that is going to drive productivity and opportunities.

And we're finishing that work up yet.

As we get into our budget season, which is just happening right now we will have better clarity on exactly what type of economic.

Applications, that's going to have.

Other self help has to do with the investments that we've been making number 10 has been the poster child.

It is the largest single, but as you can follow over the last several years, we have increased our capital outlay.

From an organic perspective.

Materially and so there's just a number of projects that actually would surpassed in totality the.

The size of number 10 that are going across those core businesses that we see or if it should be and will generate really really nice.

Productivity.

And that started about two years ago or so so it takes about that period of time, we should see that that's a big expectation for next year, you can see our productivity numbers.

We're going to see those.

Not only return to the normal level.

<unk> chain disruptions.

Lesson, but also less seats.

These capital initiatives.

Stop coming into place and I guess finally, I would say on a capital perspective, that's both top down.

Bottom line, so not able to give you a number to anchor right now.

But that.

That will become and as we get ready to.

To give you guys our guidance and outlook for next year, but it would be fair to say that we're looking at more of a comment posted more already having been digested would that be fair.

Yes.

Little has been then same thus far so we're viewing that as a tailwind going in the coming period.

Thank you and on pricing.

How are you Roger.

All of them.

Yes.

We kicked off our commercial excellence initiatives four ish years ago, and what we're seeing is continued really nice improvements from that.

On preparing our teams for large contract negotiations really digging into all price change mechanisms, which certainly helped us through the last couple of years of spiking inflation.

Turning our attention now to share gain opportunities in some of our businesses and as Rob said earlier with the tremendous performance of our team through the through the supply chain challenges. The last two years were seeing numerous opportunities. There. So strategic pricing, we will continue regardless of inflation and deflation and that's been a pretty consistent contributor.

Over the last three years, and we expect that to continue.

As we move into 2023.

Let me add let me, let me just add to that just to reinforce that.

Certainly we've got cost movements up and down.

All the time that we were seeing in through these initiatives as recognition of Covid really help with this with supply chain interruptions in our ability to keep our customers running.

That.

We are being recognized for our value through the margins and what you are.

We always talk and we do it as well price cost price cost but.

We deserve a certain level of margin our customers are recognizing that.

And it's really about cost pass through.

Or recover.

But.

Our intentions are is that the margins should be reflective of the value generation that we are that we are providing the market.

And Thats, what Roger is talking about and our focus in that area. Okay.

Okay, Howard if I could get a quick one and number three and I'll turn it over in the past quarters. This year, you've talked about even with the very tough comparison because of metal and other factor you're still.

Becker to grow earnings and 23 since we last spoke industrial has gotten tougher in terms of the outlook.

FX has probably gotten tougher in terms of the outlook.

Would you still expect to be growing earnings next year or is that too tough to call at this juncture and thanks I'll turn it over.

Yes, again, I'd say, it's too close to call and.

We do they have that headwind. So I think if you look at next year, certainly fourth quarter, maybe even second quarter is going to be very tough.

Comps because of that.

<unk>.

But as we put our budgets together, we'll look at how that materializes through the course of the year, what I would say from a from a cash perspective, and an EBITDA perspective.

We are very bullish as we released the working capital from this year.

I would I would say this that would be rather disappointed that we werent able to gen.

Generate the type of EBITDA levels that leave.

We have this year.

Thanks very much.

Our next question comes from the line of Adam Josephson with Keybanc capital markets. Your line is now open.

Good morning, everyone. Thanks.

I, maybe wanted to start paying closer attention to your accounts payable.

In the future given this.

Issue Youre dealing with this morning.

Hi.

Onto more serious question.

Rob in terms of your price cost guidance for the year I think last quarter you mentioned.

Do you expect that to $250 million to $300 million benefit year to date, you mentioned, it's 254 million have you changed your expectation along those lines this year.

And then.

Relatedly your Sunoco metal pack expectation for the year I think last quarter was trending toward the $200 million range can you give us any update there.

Yes.

We're seeing continued.

Positive direction in terms of price cost as we go through the year.

And on the metal pack side, I think youre right in that ballpark of the expectation for this year.

Perfect. Thanks, Adam.

Adam the way you should think about it.

Q2 was 79.

Q3 was 90 in terms of positive price cost benefit.

The phasing of that is consumer has been relatively consistent.

Industrials picked up as we've gotten.

And if it of some strategic pricing offsetting declining.

Decline in OCC input prices.

That trend, we expect to continue through the fourth quarter.

Some volume uncertainty in the fourth quarter as we've said.

I appreciate it and how much of that Rob did you did you say you expect it to affect reverse in the first half of next year, specifically in metal pack.

Well I mean, what we've disclosed is that there was 40 to 45 cents.

What we're calling metal price overlap.

EPS basis in the first quarter of last year.

We do expect that to not recur next year, which should.

Overall.

B, a relatively meaningful headwind in the first half.

Yes, no perfect in terms of the progression of volume trends can you just help us with compared to the volume mix down 4%.

How volume was by months and then into October if you have such data.

Okay.

Yes, I'll take a shot at that but I think the trends are pretty similar as we went through the quarter and two until October I mean, if you break down the $1 six growth in overall consumer global paper cans was up 8% pretty consistent through the quarter and as has already said seem to be holding.

We will hold up in the fourth quarter based on our guidance flexible is up 4% still pretty consistent across the quarter and we look at similar for the fourth quarter. So from a consumer standpoint.

<unk> seem to be holding up fine and with no real slowing as the quarter went along if thats, what youre asking and industrial we have seen some accelerated slowing we talked about Rob talked about the nine 5% down for industrial remember now number 10 is in this number but.

If you strip that out just like new Steven core globally. As an example was down six 5% with highs in the mid <unk> in Asia and down to negative two 2% in U S and Canada. So it gives you a feel that we have seen slowing that we've already talked about with our customers taking inventory out of the system by.

At the end of the year in both our paper and are achieving core market. So you have seen some accelerated slowing that is built into our guidance for the fourth quarter.

I appreciate that Howard just one last one on the long term EBITDA guidance, you gave right around a year ago, I think if I take metal pack out of that.

You'd be basically well that was pre bought pall metal pack, but effectively you're at that 2026 guidance already.

Aided by the price cost benefit.

Benefit you've had this year at what point would you think it necessary to update that 2026 guidance.

Do you think Thats still applies any thoughts there I would appreciate it.

Yes, we're in process right now Adam.

<unk>.

Really really looking all of our longer term objectives.

And obviously, we are at our five year, we reached our five year target one year of the acquisition.

We're continuing our Georges.

Question that walk up a $180 million of self help over the five year period, we have not backed off on that at all but.

You should hear from us.

Early next year.

In the end of the first early second quarter as we.

While key gas through our next five year horizon and objectives and Adam wanted to go back to your comments about.

And question for both me and Rob as it related to the metal.

The metal business a couple of things. One is we had 11 months of this year. So we do have a month extra going into next year.

And we.

Aerosols is an important part of that business and we're actually.

Forecasting at this point in time growth in aerosol next year.

Previous buyers that they run that business.

With the inflation come in and replace last January this past January .

There was a big pre buy programs. So we were very very weak in aerosols in the first quarter coupled with.

The optics, we have on.

All share expansion going into next year so.

There are some positive thanks to help offset the what.

The headwind that we are waking up with from a price cost perspective, but we'll just see how that all unfolds.

As we finish up our plans for next year.

Thanks, so much higher.

Okay.

Our next question comes from the line of Mark Wilde with BMO capital markets. Your line is now open.

Thank you good morning, Howard Good morning, Rob and Roger.

Good morning.

Rob I Wonder if you just start out can you give us some sense for kind of benefit from.

Lower OCC and lower resin as we think about the third quarter and then what youre expecting in the fourth quarter.

It sounds like OCC in the fourth quarter might be down 70, or 80 Bucks a tonne.

Yes.

It's down more than that actually I mean, OCC, we averaged kind of $1 23, we started.

Third quarter, and the $1 50 range.

Were more probably below that.

To quote right now.

With some softness to go in the fourth quarter.

OCC.

The historical decline in NOI.

Four months.

And there is relatively little inventory in the <unk>.

Our system in terms of OTT.

And so that's really kind of flowing through on a on a real time basis.

It has been a positive for price cost two thirds of our price cost benefit in the third quarter was from the industrial business.

We anticipate that trend to increase.

We are steadfast in kind of providing value to our customers.

Ensuring that.

Prices reflect that.

So we think fourth quarter should have some benefit there.

With that said.

We're very mindful of the downtime, we're expecting today, which will be more than the third quarter.

Fourth quarter as a result of just market weakness.

As we bring the number 10 machine up.

Okay second question Im just curious Rob either.

Mirrors.

Side or maybe Howard from your study.

We've got a new CFO , Rob you've got a little different background, the past CFO , but I've dealt with that.

<unk> also got hired a new head of M&A and I'm just curious about just broadly how you think this is going to change the capital allocation process that Seneca, particularly around acquisitions.

I mean no change.

We've always been really mindful of what the opportunities are out there I think we've been really intentional as Howard said about really formulating a really forward looking strategy and focusing on the core and what we really do well and how we can drive value prospectively. So I think now more than ever we've really got that.

The things that we do really well that really add value in other businesses, where we're actually in a better owner of those assets.

And I think that we're showing that in the metal packaging acquisition, how we've really kind of brought new energy to that business into that industry.

That's really the gist of the strategy from an M&A perspective, we're thinking a lot about what are the one 5% to 10% off.

Abilities internally to really execute M&A at a really high level, yes.

Yes, Mark let me add to this.

Does relate to acquisition.

The type of growth opportunities that we're seeing right now, particularly on our paper can business.

Tied to sustainability the can packaging again it was hardly a notable it was 40 million euros of acquisition like the eve of Covid.

We're now able as things have opened up to take that technology and start leveraging that and we're seeing really really well.

Tremendous opportunities from an organic perspective.

Frankly.

And a lot of time now looking at it.

Our investment capital.

<unk>.

In terms of.

Really we have to be cautious about how we deploy it we have got so many global.

Up opportunities from an organic base.

That's the kind of thing we're looking at.

<unk> and again that $50 million sales <unk> complex, so well, we don't we're not in the lightweight business.

In Europe , it's 100% consumer facing.

We actually represent 15% of the.

Volume in our own can business. So it gives us as I said in my commentary Securities security of supply.

But gives us a forward look in the other markets on the consumer side in Europe before we just weren't able to participate in at least from a board perspective.

Okay.

Now I'll spend a whole lot of time contemplating those.

We're in several.

Some the partner is managing that.

Certainly on the board and a part of the.

Part of the business others more like a 50 50, but.

We don't really have that many in that in any of that or that material.

So we don't we don't spend a whole lot of time there.

Okay, Alright sounds good good luck in the fourth quarter and into next year.

Thanks.

Our.

Question comes from the line of Mark Weintraub with Seaport Research Partners. Your line is now open.

You.

On the $180 million of self help which you're targeting over the next several years.

This is a difficult question to parse but.

How much would you say is going to be delivering on the cost type side of things versus how much.

Might be more volume driven and all of that.

It might be sort of more market dependent on.

I don't know a good backdrop versus for instance, it sounds like with the number 10, maybe youre, increasing addressable market a little bit as well with the new products that you have any color you could provide.

On those would be great.

Yes.

I'm going to let Roger handle that but.

Don't want to leave that without noting that.

The commentary about.

Capital investment growth opportunities new products.

The war on plastics, and our opportunity with the 90% to 95% paper solution. All of that is totally disconnected from from this conversation a lot of 180, and it's really a walk of.

Several key areas that will focus on some others.

Yes.

It really I think we were pretty specific about how we divided into the category.

Let's say a quarter or so is commercial excellence, which we've already touched on.

And really ramping up the look of commercial excellence beyond specific.

Major customer negotiations are getting into the other areas like deeply into pricing that price change.

Mechanism deeply into share gain deeply into driving volume growth into some of these adjacent markets that we're talking about so therefore opening up the opportunity for grid.

Productivity, it's really allowed us around the capital projects in our capital planning that Hal has already talked about in addition to growth focused like the sustainability projects, you've talked about tremendous amount of.

Energy saving type projects.

Productivity generating.

Improvements those are ongoing and Youll see Rob talked about the capital spending for this year that accelerates as we get into next year focus on on the integrated business and from the cost side, we've talked about some structural transformation work. We're working on now as we as we set up these fewer bigger businesses with <unk>.

Taking the opportunity to consolidate some businesses into larger businesses within the integrated business, which leads to strictly cost out now of course is offset through labor inflation that we've seen this year, but thats strictly cost out and then supply management supply chain I think is the biggest opportunity we see over the coming years as we really.

Get into this integrated supply chain on our four integrated businesses and drive continued productivity on how we manage those businesses how do we manage data, giving our plants. The best data on a daily basis to make the best decisions that drive productivity and serve our customers and thats more longer term and somewhat dependent on.

On market forces and volume going forward. So I think is a pretty even split between cost.

And driving value through the businesses.

Through the markets and the opportunities in the market.

Okay. So for the second part which would be more volume driven.

It comes but it may come more when the market is in a place to support it is that kind of a fair way to think about it.

Yes, I think so.

I think if you think about if you look at our productivity. This year, we're not we're not the only one that's done with having tough productivity.

<unk> this year.

Some of it's frankly, just the better operating of our equipment as we were able to schedule that I think about our global paper footprint. This year, we've had tremendous volume demands, which led to many changeovers and exactly how you do not want to run major paper complex, so managing that going forward based on volume.

Demand will be there will be very helpful.

Great and then as a second question and again, it's a tough one but since everybody I think wondering about it I'll ask and see what you feel comfortable sharing.

Yeah.

The <unk> market has kind of historically they have been sometimes volatile pricing things are good price go up if they are not so good prices go down you have been working a lot on your commercial excellence, where in this environment, where you've got wastepaper going lower demand is weaker.

We're trying to figure out what's likely to happen in this market is there anything that you would share.

As we do our prognostications and analysis.

Yes, I think Alex touched on that earlier.

Focus is on on margin and generating the value and getting the value that we're adding through our integrated products, including <unk>, which we sell on the outside and our Anacrotic integrated products.

Paper cans in tubes and cores. So that's that's our focus we talked about what we're doing in the fourth quarter, adding more maintenance to offset some of the reduced demand.

Look at look at the third quarter. Excellent example of how we handled reduce volume we had number turned down for.

For a good part of the quarter, we had soft volume in Asia and Europe look at our operating margin in the industrial segment for the third quarter. So we've managed that through strategic pricing, we manage that through changing most of our contracts to tan bending chip index in the U S. So for me, it's about maintaining that margin.

Going forward, if OCC stays down versus continuing to drive positive price cost.

With higher prices that I think <unk> managed it extremely well.

Vesting and our best paper assets and Howard talked about and this was announced when we announced project Horizon. We took number one number nine machines down and hartzell, which were older higher cost less efficient machines. So we're sticking with that strategy that we started four or five years ago, and so far I look at the third quarter is paying off.

Great. Thanks, I appreciate the color.

Our next question comes from the line of Gabe <unk> with Wells Fargo. Your line is now open.

Good morning, Howard Rob monitor.

I wanted to dig in on.

Yes.

Your Q4 guidance slide 13.

And you May have mentioned about lower food shipments.

I guess I'm trying to understand what exactly that is.

Maybe it's timing related in terms of when you shipped some product, but then on the composite can side.

I think you are investing in some.

New capacity, there and we're expecting kind of positive volumes.

Elasticity is seem to be.

I don't want to say nonexistent, but consumers pretty resilient.

In terms of Cpg's taken hefty price increases.

Any feedback from your customers in terms of expectations kind of going forward as it relates to composite cans and snacking under such.

No go ahead.

On the last part of that.

As I said earlier.

We've got a tremendous funnel.

For bringing new capacity on on our paper.

Paper can business here and there.

The U S.

In Brazil, we've got a new plant going into place.

Thats, just starting up now in southeast Asia.

We've got investments going in multiple locations in Europe around our foundational.

<unk> products.

More exciting.

As the.

Can packaging type products that are 90% 95%.

Paper and in Europe , where the.

The funnel there is just phenomenal in terms of how many machines that were going to have to build over the next.

Period of time to service not only Europe , but other parts of the world. So.

It is.

Cost of looking runway to the point.

We just looked at our capital review just for North America over over a couple of years period that we're going to be spent and somewhere around $40 million in that business from a recapitalization standpoint productivity standpoint, a growth standpoint, and that's just in one one area of the world.

On that side of the business just could not be.

And are more pleased with the amount of opportunities that we have.

And the comment on slide 13, it was really about sequentially fourth quarter versus the third quarter I think seasonally if you think about confection.

The holiday has been pre pack, how he's been Prepacked Christmas and then pre tax and then the fresh fruit and vegetable business and plastic clamshell business seasonally very low in the fourth quarter, but as I said, given the seasonality and Howard just mentioned our paper game business, our flexible business should be should be solid.

If the question is are we seeing any reduced demands our customers are not telling us that yet at this point.

So we expect again pretty solid demand in consumer outside of those very specific seasonally lower.

Yes, I can point to is there's been some choppiness in Europe , and that's not demand that has to do with energy and food industry energy is a major component.

We saw customers in September October that we're.

Pushing out orders waiting to see whether there are particular market our country was going to put caps then.

They didn't want to put inventory on the floor.

Realizing that there was a fairly large reduction in the cost of energy just around the corner.

Okay No that's super helpful. And then I guess on the metal packaging side.

Hearing as you would expect aerosol the beat.

Despite what might be a week.

The economic backdrop for small cans.

Yes.

That's what we're seeing that that's.

I'll talk through that.

From a year over year perspective.

First half of this year was not.

Not good from a volume perspective, just due to the amount of play.

Pre buy activity the previous owner wanted to put in.

Put in place coming into the inflation and yes, there's been value recognition.

Essentially say that.

We have we have extremely good assets, well capitalized business and we continue to put capital into there as well so.

No.

From an aerosol, which is the most sensitive side of the business as it relates to the slowdown we see the opposite of what you normally would effect would expect.

Okay, and one last one if I may.

I guess getting into both of Mark's questions on the industrial side of the house.

As we think about again it sounds like price cost is expected to be positive here in the fourth quarter.

So a lot of different influences that impact OCC prices, but at least.

To the extent that OCC on a year over year basis is lower.

And we don't see any change in pricing indices.

Is there a reason why price costs would not be positive in the industrial business first half of 'twenty three.

Well.

At this point in time, we've got a lot of inflation, where we spent a lot of time talking about OCC that.

All the chemical starch diesel.

Labor.

Just a lot of inflation still out there.

OCC, obviously is the biggest driver of the mall look if it didn't it didn't move.

That.

I really don't know how to answer that I'd say, yes, probably we would be on a more positive side, but we don't see any indications right now while the indices.

No.

Alright, great. Thank you and good luck.

Okay.

Our next question comes from the line of Ghansham Panjabi with Baird. Your line is now open.

Hi, Good morning, everyone and thanks for taking my question. This is actually Matt Krieger sitting in for Ghansham.

Wanted to take a step back and think about.

The potential EPS variances for next year, So Houston the midpoint of your guidance for 2022 as a starting point can you talk about what the major EPS variances could look like heading into 2023 Im just thinking about factors such as.

Impact from higher interest rates FX headwinds.

<unk>.

Rollover acquisition contributions synergy capture of productivity that you hinted at.

The metal impact from year over year, just other big picture factors would be would be helpful.

Yes, I can tell you, where we're going through budgeting and planning as we have been for a while I would say that this environment is really unique in that.

We're on the precipice of potentially having a recession and we're very mindful of that and the impact that has on demand.

We're controlling the controllable.

As Roger said, we've got a really robust pipeline of productivity activities and were anticipating SG&A to be lower as a result of our structural activities.

We also do have kind of some known knowns, which is that the metal pricing overlap.

Anniversary and the depreciation will be higher than that.

The growth.

Those two of those two was in excess of $100 million negative.

So we do feel like.

As Howard said there is.

Consumer volume opportunity.

And we're continuing to watch industrial demand and the availability of industrial protocol.

Got it that's helpful. And then just following up and maybe digging in on some of that consumer strength that you are referencing.

Any of the CPG food and beverage customers.

Clearly employing a value over volume strategy currently to offset inflation in their own portfolios.

What are you experiencing from consumer demand elasticity perspective, as it relates to.

The massive level of pricing being pass through the supply chain. It sounds like you've been very resilient do you expect that this could be any sort of natural volume headwind into 2023.

Any thoughts there would be.

Helpful.

Well, yes, we're really not seeing that right now and we do.

We participate purposely.

And this half.

Across the aisle so from.

The store brand to the.

So the Grand later.

Trade Downs.

Not a negative to us at all.

The other is if you will.

Particularly on the plastic side of the business.

We continue to see good strength in our.

Our mail business from the more walkers at home.

Okay.

And at home.

So.

And that we just right now on larger unless you have any additional color to add that we're not we're not feeling it on our end there may be substitution, but we benefit from that substitution as well depending on the substrate.

And that's really how our customers are telling us they are bigger challenges supply chain constraints of certain raw materials versus versus demand I mean global stat chips.

It's put out there by one of our largest customer in that market they are producing and publicizing their volumes good growth there.

Snacks cookies good growth there. So we're not hearing it we're hearing their biggest challenge is more getting materials to get the product on the shelf.

Versus see any significant reduction in demand at this 0.5, curtailing marketing because I don't want to stimulate more demand.

Got it got it that's helpful. That's it for me. Thank you.

Our next question comes from the line of Kyle White with Deutsche Bank. Your line is now open.

Hey, good morning, Thanks for squeezing me in here.

The strategy of focusing on the core if we go back 10 years ago, or so or actually you know the 2014 analyst day.

And then obviously the strategy focus to be more on growth later on but I guess what is different this time around versus 2014 or 10 years ago is there more of a focus to actually optimize the portfolio and then what kind of implications that have from a capital allocation of our capex standpoint going forward.

Yes.

Sure.

The easiest.

The way to answer that is we've got a whole new leadership team.

With a different vantage point.

Lot more work that we've put in on what is truly core and it really Rob discussed that we've spent.

At least 18 months doing exactly what youre doing on that 10 and 20 years.

What is the journey that we've been on.

What have we learned from that and we woke up in.

We finished this analysis and said I'll tell you what we learned is that the foundational businesses. This company has really driven the success that we've enjoyed for all these many years.

We need.

And because you can't just look at 14 years ago, you can look at five years ago.

Or again 20 years ago.

And so.

Are we on a self fulfilling prophecy where were.

Was optimizing industrial businesses for cash.

As opposed to.

Acting as who we are the market leader in global market leader in <unk> and <unk>.

The case a case in point is project horizon, that's not an optimized activity.

That is saying that we're going to invest in these.

Foundational business I hate to keep saying it that way.

They are going to continue to deliver.

<unk> value generations to come.

And so it is different.

Then I'll have a heck of a lot more.

Paul and <unk>.

Processes, that's gone into the journey that we're on and that's how we've landed where we landed.

And.

We've got our all other category and we're managing those businesses as best we can as best as best owners.

And we're seeing improvements in those businesses.

And we'll just see where that takes us going in the long term, but even equally important is.

You go back as you know the 2014, we did structurally change how we manage the company.

We are actually structuring the parenting of the company in such that the focus is only on the core and these other businesses. They were frankly burdened by.

By centralized support in some areas and that their markets that they serve require a totally different approach.

Competitive landscape in that customer.

Bill so.

It's a different day and time and this is not <unk>.

Feet of.

If anything that we've done certainly in my.

My tenure.

Got it that's helpful. And then I just had a real quick one on rigid paper containers that business continues to perform very well on volume growth can you just help us understand the divergence. There. That's why volumes are still very strong metal food is seeing some declines both benefit from alcohol consumption I would think it would be somewhat correlated.

Yes.

I don't know if I caught the whole question.

Metal metal food is.

Our really mature defensive market that our business is growing along with the industry and the CMI kind of.

Down a little bit this year.

We anticipate that to kind.

No.

Really saw demand trends over the long run so.

Around kind of GDP mine.

But I think what we've seen and how it has been talking about with our rigid paper containers businesses.

Just a real revitalization and a real focus on growth and opportunity there and having great customers as partners and really kind of.

Identifying and going to be opportunities. So we've got a great innovation funnel with Howard with can packaging and that that's really driving a lot of this opportunity along with just some really focused market participation that we partnered on yes, and I would say on the metal side.

The integration has gone extremely well we have synergies on the com.

Those are building.

We've been able.

We'll be announcing January that we have for dedicated metal plants than legacy Sunoco that will be falling in and being run by who they should be run by which is the metal exports, which will also drive additional synergies.

But I guess the most impressive to me is.

We have an opportunity to be out in the market.

Type of reception that we've received from the.

<unk> customer base has just been.

Exceptional.

We'll see how it plays out.

Extremely encouraged about.

What's the volume profile may look against a.

A business that on a macro perspective, as Rob said GDP or slightly less.

Got it. Thank you good luck in the quarter.

Thanks.

Our next question comes from the line of George Staphos with Bank of America. Your line is now open Hey, guys. Thanks very quickly I know it's late in the.

Call Rob first off.

You have a view on what FX would be if we mark to market relative to your guidance for 'twenty two in terms of what the headwind could be for 2003.

There've been a couple of questions around this bottom line do you expect or what do you expect your consumer volumes to look like fourth quarter year on year versus fourth quarter, and then lastly, scarring is your way to size what benefit to earnings Youll get from having that business. Thanks, guys. Good luck on the quarter.

Yes, we are still evaluating FX I mean, we don't we don't take a position versus where it currently is.

If you if you just held it where it currently is.

I anticipate that next year would be up.

A mild headwind.

And then I can pass off on consumer volumes.

Scott.

Ed.

We are anticipating that to be an accretive acquisition for the size of it was it was a really.

Beneficial transaction, it's going to be.

High single digit percent accretive on a year on a full year basis, and we anticipate that to close in the fourth quarter. So we'll get the full benefit.

In 2023 with some synergies on top of that.

Yes, George I think on the fourth quarter, we said that we expect some more volumes in rigid paper containers globally and flexible and then we're going to see weakness in our resin based businesses due to the fresh fruit seasonality being down. So we finished at one 6% up for the segment.

In the third quarter, so I would expect it to be down slightly from there.

Thank you Roger good luck on the quarter guys.

That concludes today's question and answer session I would like to turn the call back to Lisa weeks for closing remarks.

Thank you again for joining our call today and thank you for your interest in Sunoco, We had published a press release earlier that indicate all of our conference activity in the fourth quarter, we definitely hope to see you. There if you do have any.

Don't hesitate to reach out and we hope that all of you enjoy the rest of your day.

Thank you.

This concludes today's conference call. Thank you for participating you may now disconnect.

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