Q1 2023 Sonoco Products Company Earnings Call
Speaker 1: Good day and thank you for standing by. Welcome to the first quarter, 2023 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 a press star, one on your telephone.
Speaker 1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press start 1-1 again. 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 of Investor Relations. Please go ahead.
Speaker 2: Thank you operator and thanks to everyone for joining us today for Sunoco's first quarter 2023 earnings call. Joining me this morning are Howard Coker, President and CEO , Rob Dillard, Chief Financial Officer and Roger Fuller, Chief Operating Officer.
Speaker 2: Last evening, we issued a new to relief highlighting our financial performance for the first quarter and we prepared a presentation that we will reference during its cost. The press release and presentation are available online under the Investor Relations section of our website.
Speaker 2: As a reminder, during today's call, we will discuss the number of forward-looking statements based on current expectations, estimates, and projections.
Speaker 2: These segments are not here in the use of future performance and are subject to certain terms for potential performance.
Speaker 2: Therefore, actual results made it for materially.
Speaker 2: Please take a moment to review the forward-looking statement on page 2 of the presentation.
Speaker 2: Additionally, today's presentation includes the use of non-GAAP financial vendors which management believe provides useful information to investors about the company's financial condition and results of operations.
Speaker 3: After management prepares remarks, we will hope to see you in the next session. If you will please turn the slide for in our presentation, I will now turn the call over to our CEO , Howard Cookers. Thank you, Lisa, and thanks to all of you for joining us today. As our first quarter results show, we've had a good start to the year. I'll let Rob cover the detail of the National Assault, but our commercial excellence program and the proving productivity.
Speaker 3: the underpin what we consider a strong Q1 performance. As I mentioned before, we are not immune to the secular headwinds around our customers and the economy in general. We are not immune to the secular headwinds around our customers and the economy in general.
Speaker 3: But this step in straights are better portfolio management and business mix provides less volatile results than in previous.
Speaker 4: Those are the cycles.
Speaker 3: We have a backlog of growth and efficiency investments that are material to future earnings, while we navigate near-term macro volatility for going to invest in the businesses.
Speaker 3: and place our investments on projects with the highest returns for our shareholders. We'd like to say to our Seneca employees and our operations within our sales and engineering teams
Speaker 3: and all those that support the business around the world, thank you for what you do. And thank you for supporting our customers, Sunoco, and your focus on execution day in and day out.
Speaker 3: But before the Roth takes you through the financial results of guidance, please turn to slide five.
Speaker 3: When a highlight we released our updated corporate responsibility report last week and provided the QR code in this presentation that you can scan.
Speaker 3: To highlight, we released our updated corporate responsibility report last week and provided a QR code in this presentation that you can scan to directly download the document.
Speaker 3: Now if you're not going to put it forward later to our senior leadership team or board on the ESC.
Speaker 3: amendments we're making, including those highlighted in our refresh document.
Speaker 3: We're excited or at least our first report and then reference to GRR, PCFD and FASD standards and report progress to 2030 in line with the Science-based target of the Nation's.
Speaker 3: On the social side, we have updated our workplace diversity hiring progress as well as updates on our supplier diversity.
Speaker 5: and spending programs.
Speaker 3: And lastly, we have many R&D efforts centered on developing new and innovative products to meet the sustainability goals of our customers.
Speaker 3: We are tremendously proud of our capabilities.
Speaker 3: and a work on this format.
Speaker 3: And with that, I'm going to try to withdraw to walk us through the corner and the finance.
Speaker 3: to walk us through the corner and the financials.
Speaker 6: Thanks, Eric. I'll begin on slide 7 with a review.
Speaker 6: to achieve financial results for the first quarter.
Speaker 6: Please note that all results discussed are adjusted and all growth metrics are on a year-over-year basis unless otherwise stated.
Speaker 6: The GAP and non-GAP EPS right-hand side.
Speaker 6: You can't tell if you have seen your friend a while ago.
Speaker 7: patient.
Speaker 6: as well as unopensually.
Speaker 6: First quarter financial results again reflect the no-go's ability to deliver solid performance through strategic pricing and operational excellence despite uneven end market conditions.
Speaker 6: Sales were down 2% to 1.73 billion on the first quarter. Sales for the quarter were in our expected range. The supply chain variability continued in the back month following that. January sales were stronger than planned and March sales were weaker than planned.
Speaker 6: We do not believe that this reflects the trend and we anticipate sequential sales growth in Q2 just as we achieved sequential sales growth in Q1.
Speaker 6: Operating profit was $213 million, and operating profit, large one was $12.38%.
Speaker 6: Likewise, EBITDA was 276 million and EBITDA more than was 16%. This level of profitability was anticipated as we experienced negative 86 million of expected metal price over a lot in the period.
Speaker 6: excluding the impact of metal, even though it increased, and even though it was more than increased, over 7 ha.
Speaker 6: Finally, earnings per share was $1.40.
Speaker 6: Next we have the sales and operating profit bridges on slide 8. On the sales bridge, volume mix was negative 116 million or negative 6.5%. Volume mix was driven by low industrial volumes that benefited from acquisitions. As a stern integration is progressing its plan and QI included an additional partial month of metal packaging. Price was 98 million positive, up 5.5%. QI continues to reflect the efforts of our commercial excellence strategy.
Speaker 6: Manly selling the value and managing contracts to recover in place. Next, the operating profit price.
Speaker 6: Volume X was negative 40 million, as low volumes impacted the standard larger performance. Price cost was negative 22 million, as negative price cost and metal packaging, offset positive price cost and major containers, and industrial.
Speaker 6: Volume X was negative 40 million, as low volumes impacted standard larger performance. Price cost was negative 22 million, as negative price cost and metal packaging offset positive price cost and major containers and industrial. Industrial price cost was positive 44 million.
Speaker 6: to continue benefits of moving to index-based pricing and his normal Clue LVOTC. But if you see, he has his $35 per tonne Q12023 versus $160 per tonne Q12022 and $38 per tonne Q42022. Productivity was meaningfully improved at $20.
Speaker 6: as we continue to execute our discipline operating model. We've built a strong basis for meaningful productivity once volume's normalized. Slide 9 has an overview of our segment performance for the quarter.
Speaker 6: The general sales group 5% and 909 million data acquisition and strong price performance.
Speaker 6: So it will increase 3% sequentially. However, elevated cost random for it.
Speaker 6: and normalizing the piloting continues to answer our volumes across the consumer.
Speaker 6: business. And our near term volume outlook is less positive than it was at the beginning of the year.
Speaker 6: And our near term volume outlook is less positive than it was at the beginning of the year. And to more volume, it's declined one percent.
Speaker 6: including aqua, this and the vestigers. Bodies and pups, holes and paper containers were essentially flat. Metal packaging can volumes were down, it was good growth. Growth and food was offset by a little aerosol volume. Did their high cuts ran into our levels? No.
Speaker 6: of the rest of the year. Volume of what's full and paper containers were essentially flat. Metal packaging can volumes were down to the growth. Growth and food was offset by a little aerosol volume. Did their high cost ran into a level? Consumer operating profit was $92 million.
Speaker 6: as flexible as she's the second best quarter in history and paper containers continue to achieve strong operating profit and margins.
Speaker 6: industrial sales to count 12% to 616 million lower volumes of the higher price.
Speaker 6: Industrial volumes were down 13%. Volumes remained lowest in Europe and Asia. The US volumes were lower due to increased maintenance and lack of business data.
Speaker 6: as well as the impact of acting, acting in the currogated media market and the vestitures.
Speaker 6: It's important to note that industrial scales grew sequentially based on higher sequential volumes.
Speaker 6: It's up to operating profit with 30%, $10.94 million, as price calls of that low of equalization. Operating profit margin increased 490 basis points.
Speaker 6: 90% to 94 million as price calls of level of equalization. Operating profit margin increased 490 basis points at 15.3%.
Speaker 6: for select on the efforts. All weather operating profit increased 88% to 27 million to strong price calls and productivity.
Speaker 6: All others are notable examples of results of our systems on operating model as we continue to operate these important businesses for optimal results.
These results contained that indicate that our operating model is working. Markins are up across all but a few of our businesses.
We're focused on achieving appropriate prices for our value-oriented product and de-impliciting our exiting commodity markets like the recently X-Ecstatic Curricated Medium Market.
or the quarter operating cash flow is $9,8 million, and purchase of property payment equivalent was $80,9 million. Now to the proceeds from assets sales, capital investments were 12 million. On slot 11, we have our Q2, 2020 free dial. In Q1, we beat our initially BS guidance to make you the top end of the revised range. For Q2, our EPS guidance is $1.45, so $1.50 by sunset. We have tight control over our businesses, and they are brought in well. This guidance includes $26,000,000.
of negative year of year metal price over that and continue low volumes and industrial and Q2. We're raising our full year 2023 just guidance to $5.70. The $6.00 or cautiously optimistic about the remainder of the year and we're managing our business with it.
We are affirming our each is all guidance of 1.1 billion to 1.15 billion. Likewise, we are affirming our operating cash flow guidance of 925 million to 975 million. We anticipate continued benefits from networking capital management throughout 2020.
Now Roger will discuss the outlook on a second bit.
Thanks, Ross. Please turn slide 13 for our view on seconded performance drivers for the second quarter of 2020.
across the receiver of the second quarter of 2003, which takes sequential volume growth across the segment, including bellcans.
We see increasing demand for sustainable packaging solutions and new products, and we're closely monitoring any potential softening based on consumer spending. And Q2, as Rob noted, will work through the remaining inventory impacted by metal price overlap, which will not continue in the second half of the year.
Beyond this year, we continue to invest capital to expand capacity for sale, action in 2024 and beyond.
On our industrial segment, we see continued softness and volumes globally in our converting and trade paper sales in the second quarter.
We're monitoring Europe and Asian demand recovery carefully, and that will be critical to the overall volume outlet for the full use.
thus far we have yet to see any significant improvements with IS reflected in our forecast. The man remains soft in our core industrial markets and it protects the acting for the consumer-like goods market.
We model price-cult benefits to moderate as we progress to the year in the industrial segment, but still expect full-year price cost to be positive.
While some in-place scenario impacts are lessening, labor and related costs continue to increase.
We will maintain reasonable backhaul levels by region. In North America for the second quarter, there is no plan lack of business downtime. With normal levels of scheduled maintenance downtime, similar to the first quarter, as we've seen the North American U.R.D. network supply and demand stabilized in the last month. We will continue to take periodic lack of business downtime in Europe and Asia at similar levels to the first quarter until demand improves. And our other businesses we continue to have net stable log of demand across this collection of business.
with improving productivity and favorable pricing actions. We expect continued increases in profitability this year.
Overall, we had a good start to productivity in the consumer and all other businesses, and we expect to see the benefits and industrials when volume growth returned. We're seeing the positive impact of our increased capital spending in the last years focused on productivity, and apparently significant easing of supply change constraints on our materials and labor. With improvements across the breadth of our excellence programs, it's just really executing well.
The final of the impacting solution designs provides enough of a long runway for the opportunity to cross our businesses.
We are continuing to transform this great company to portfolio management and strategic cabinet. We have spent the last 18 months in beyond working on structural transformation to solidify our base.
In the future, you're going to see increased efforts to further focus the poor quality on.
You will exit some business to expand others all with the right timing to maximize value
and we will keep you informed, obviously, as we progress to this journey.
We're in the early stages of leveraging our operating model to expand more. Our operating model is solid, it's high.
Through our excellence program, footprint optimization, enterprise standardization, how we operate the business will only get better through time and is reflective of our solid performance and uncertain times as we live in the day.
As Rob covered very well earlier, we remained disciplined in capital allocation.
earlier we remain disciplined in capital allocation and we expect to continue.
and thus Mr. Brough. And lastly and importantly, we are committed to improving the lives of our team members, our customers and the communities at which we live.
and work. Recit CRR report only scratches the surface of the great thing happening. Lifting another.
to fulfill these commitments. We look forward to keeping you informed along the way.
fulfill these commitments. We look forward to keeping you informed along the way of all the approachinamo to where I'm aroud a cake.
And with that operator, we are pleased to open up the questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile our Q&A roster.
Our first question comes from the line of Gunsham Panjabi with Baird. Your line is open. Please go ahead.Mr Hamburg, this is Ab oranges with heartslawdouble.
Yeah, thank you. Good morning, everybody. I guess first off, could you just give us some more granularity on the first quarter volumes across the various consumer verticals? If you covered some of this, I apologize. We had some audio issues on our end during the prepared comments.
Yeah, we can talk about the different consumer verticals and Q1. So, you know, from a volume perspective or from an OPE perspective.
But I moved be helpful.
Okay. Yeah. From the volume perspective, you know, I think the primary trend we saw, you know, think.
A strong star and a soft finish to the quarter. Really, when you think about flexible and rigid paper containers, those both had really good quarters, but ended up relatively flat with kind of a uncertain trend for the rest of the year.
Metal would damp slightly really due to weakness in aerosol. So those were the primary drivers there.
Gotcha. And then in terms of productivity, you know, you hit the first quarter was around 20 million plus. How should we think about the rest of 2023? And then also on price cause, you said you expected the full year to be positive, just expand on that in terms of sequencing for the full year. Thanks. Yeah.
Yeah, on productivity, guys, on this Roger, I think you should expect pretty similar levels backwater. As I said, we're seeing the 5 tank constraints. He's up, labor, he's up to some degree, and the team executing extremely well on the capital that we put in place over the last year's focus on productivity, but the prep optimization is Howard already mentioned.
and the supply chain team working extremely well at the businesses. So I think you should see some wear levels going forward.
On price cost, I'd say for the balance of the year, we probably started the year a little bit pessimistic on where we would end up in price cost. We've seen pretty good performance and pretty good results from the balance of the year.
how input costs and our ability to get price off it, input costs and recover inflation has come out. That's one of the reasons for some of the upside. And uh...
input cost and our ability to get price off it and put costs in our cover question has come out. That's one of the reasons for some of the upside and the forecast.
Got it. Thanks so much. Thank you and one moment for our next question.
And our next question comes from the line of Anthony Pentineri with Citi. Your line is open. Please go ahead. Good morning. I was wondering if you could talk a little bit more about maybe customer inventory positions that needs to be pieces with customers or information management, or just do you think
maybe starting with consumer, you know, where are we in the stocking cycle and
you know, metal composite food cans, maybe versus aerosol versus flexibles. And then on the industrial side, are there any sort of trends you'd flag, you know, in North America versus rest of world in terms of...
customer inventories and that de-stocking cycle and where we are.
This is Howard. As Rob said, and we noted when we updated our guidance,...............
the first quarter, when we came out. the
In January , it really fell through in terms of the deep stocking activities.
on the consumer side, particularly in our legacy businesses. And we came out of the box really, really strong January , early February . And I don't think it's unique to Sonoca, we started seeing a taper and all for the banking crisis, other uncertainties. Simulator
in the macro environment. But we did see some backing down there. So I would suggest to you that on our legacy side of the business that there's still question marks in terms of the full value chain from retailer to supplier of folks like us, basic raw materials.
But not as a concern as what we had first expected and how we came out of the blocks. On the metal side, you know s
The results are relatively consistent with what you've heard from others as well as CMI, up on the food camp side, down on the aerosol side. In our case, we've got a couple of customers that the destocking...
activities or have extended longer than they and all we expected.
that we were looking at secular improvements quarter to quarter and getting assurances that they should be working through their situations.
Let's call it through the men to the end of this.
So, unique one-off situation on the aerosol side, and we'll just have to ride that out.
And at the all-industrial, Mr. Roger, we modeled in a mid-single digit.
And have they all industrial, Mr. Roger, we modeled and I admit single digit continued to climb industrial lines in Q2.
And that's really driven by Europe and Asia, this continued weakness there. One went off the textile business out of Turkey with...
the impact earthquake has a significant impact. But that's that earlier, the North American market, we've seen stabilized. We're not modeling any growth there, but we've seen it stabilized over the last month, and that's what we're expecting for this.
So really the watch out is Europe and Asia as far as the second half of the year.
Yeah, and that's what I would say, you know, going back to my prepared remarks.
this team and frankly the activities we've undertaken over the last, I said 18 months, the two, three years, terms of transforming how we manage the data data, the business, the operation side.
I just cannot be prouder of a relatively
week volume scenarios and posting the type of productivity numbers that we're posting.
And I'll say it just gives me a nice warm feeling that volume as it will return over time, that we're in an extremely solid position.
to leverage that productivity in a more material way. So I guess thanks to Roger and the team and let them know.
the line on the operation side and others. Okay, that's very helpful. And maybe just one follow-up on productivity. All other, obviously, a smaller part of the business, but the margins there were quite strong in the quarter, certainly versus historical levels. I'm just wondering if you could talk about maybe some of the internal improvements you've made in those businesses, maybe the sustainability of that kind of margin and just how you're thinking about that segment.
in the all other category, a more entrepreneurial type environment, allowing them to operate within the guidelines of the business, unique businesses that they support. And from that, we're seeing results. And again, you know, pockets and across the rest of the company, similarly you're seeing. How we're looking at it for the long term, you know, these are good businesses.
many of which are one or number two in the market segments. And we're going to continue to operate to the full.
So there's a full capability and continue to drive through well the operate and dependent. We're still driving through the productivity and other.
other transformational type programs that we have in place for them. So they really set up well to show you in the snapshot of what we're seeing across the company.
We'll be evaluating businesses over time. I think I did mention it.
and I prepared remarks that my timing is right because some businesses may belong better off with others and from an acquisition perspective we see the inverse of that as well. So we'll keep you posted, we'll let you know, but the intent right now is we're going to run these businesses. Not cool at all.
to the best they can possibly perform to deliver the amount of value that our shareholders say. And they're very resonant, as you know, Anthony, and they manage price costs extremely well in the first quarter and we'll do the same in a second.
to the best they can possibly perform to deliver the amount of value that our shareholders should set. And they're very resonant, as you know, Anthony, and they manage price costs extremely well in the first quarter and we'll do the same in a second. Okay, that's very helpful. I'll turn it over.
Thank you and one moment for our next question.
And our next question comes from the line of George Deppos with Bank of America Securities. Your line is open. Please go ahead.
Thanks a lot. Hi everyone. Good morning. Thanks for the details. I guess the first question I had, if you already mentioned it, I apologize, but can you provide the lack of order downtime by region in the first quarter?
Right at 10% in North America closer to 20 in Europe and pushing 25 in the United States. So pretty significant.
Okay, and if you Roger if you could help us just in terms of tons, what would that look like? I mean, we can go back into it, but just, you know, while I have you quickly. If you don't have it, go ahead.
It's all times across the system about 70,000...
times across the system about $70,000. I don't really have it. I don't have it by Regent George.
That's fine. Perfect. Perfect. I guess the next question I had
And you're right. Other companies saw a deceleration as the quarter went on and March was in some ways year on year weaker for many companies than was the beginning of the quarter.
Given the number of consumer companies you talk to, the breadth of your product line, and therefore the input that you get back.
And a couple of sentences, not solving for world peace here, but what do you think happened because your businesses are relatively stable. Going into the quarter, I think you were looking for mid-single growth and food cans.
I think pretty similar growth and flexibles. Follings don't swing around that much. So what you're hearing from your customers, what happened to the consumer that they went into the bunker to such a degree?
And maybe it's just that, but what are your thoughts there? Yes, George. The fraud from our large consumers. You can't see in there.
It's just that, but what are your thoughts there? Yes, George. The frauds are from our large consumers. You can't see in their results. They're taking.
George, this is Roger. From our large consumers, you can see in their results, they're taking significant price.
marketplace. And some of our customers products are price-sensitive and I think you're seeing that start to impact some of their volumes or it did it into the first quarter and you see the major big box guys starting to push back hard on price. But as we said our food camp, milk food camp business was up 5%. So that came in about where we expected. Maybe the other maybe the other supply was some of the inventory and some of our other customers. The supply chain challenges they had and they've just built up more inventory than we expected going coming into the first quarter.
So if I keep, it sounds like you're being very sort of consistent, basically assuming very little sequential improvement, what do you have, I think, Roger, you said you're looking for mid-single digit declines, correct me from wrong, on industrial and 2Q, what do you have dialed in across the big categories for 2Q and for the year on a volume basis?
embedded in your guidance? Consumer, high single digits sequentially in the second quarter over first and then all other you know you like yeah I think somewhere
So that's what we're saying across the category, and we're saying the same sequential recovery. Exactly. And again, if it stays an old... That's what we're saying across the category, and we're saying the same sequential recovery.
Part of it is certainly that. OK, thanks I will turn it over. Thank you guys.
Thank you and one moment for our next question. Our next question comes in the line of Mark Reinth Rob with Seaport Research Partners. Your line is open. Please go ahead.
Thank you. Just one question. I'm not sure I heard exactly what you said something on the metal price overlap. I thought you said it was a negative, you're thinking of it as a negative 26 for this year or last year, the suspecting I misheard you. Could you just clarify that? Yeah, the metal price overlap this year.
Question I I'm not sure I heard it exactly right what you said something on the the metal price overlap I thought you said it was a negative you're thinking of it as a negative 26 for this year or slash year I'm suspecting I misheard you well, could you just clarify that? Yeah, the metal price overlap this year was negative 86.
86, ok. 86, yes. And we still anticipate that for the full year it will be slightly more than what we had originally.
So more than 100. So as you look into this, there is carryover, but we expect to have completely worked through this. The answer to channel...
So, that's the end of the second quarter. Okay, thank you. That makes a lot more sense than what I thought I heard, which was wrong. Second, I'm just trying to understand a little bit. I think you said that you don't see any lack of order downtime in your North American industrial business.
across the system and the URB system in the birth quarter, I think the AFBA published numbers came out. Capacity utilization was something like 80%. So there was pretty significant downtime across the...
across the market in the first quarter. And so I think that worked out some of the high mentors. And as I said earlier in my opening comments, at this point, or the North American market, or the market, we expect not to business downtown in the second quarter, the market has stabilized. And volume's not significantly improving, but it's not that it's stabilized.
It's not following so we feel like that will hold for the court. Okay, so is it fair to think that the level of downtime taken in the first quarter essentially overshot you to a point where even with demand a little bit weaker there's a bit of cushion and then hopefully we get a little bit stronger demand.
in the latter part of the year and if that's the case then we're in good shape and otherwise we potentially have some more lack of order downtime later in the year. Is that a reasonable way to think of it?
I think if you think about the volumes on a year-by-year basis, there is a reduction in volume on the URB side associated with the conversion of number 10 and the remainder of the project horizon activities. That's actually our mill system being appropriately sized for the market right now, which we feel good about. Where do we send more65' data back to the market? What do we absolutely do about this? Nikola dom rice
Got it, got it. And then lastly, just to come back to kind of questions coming up a few times, I think you had suggested you thought consumer volumes this year could be up as much as 4 to 5% last quarter, recognizing it's gotten murkier, there's lots of uncertainty, and you've talked about the consumer pulling back. Do you have kind of a perspective on what you think that number for 2023 year over year built into your guidance might look like? I assume it's lower than that 4 to 5%, is that fair?
Got it, got it. And then lastly, just to come back to kind of questions coming up a few times, I think you had suggested you thought consumer volumes this year could be up as much as 4 to 5% last quarter, recognizing it's gotten murkier, there's lots of uncertainty, and you've talked about the consumer pulling back. Do you have kind of a perspective on what you think that number for 2023 year over year built into your guidance might look like? I assume it's lower than that 4 to 5%. Is that fair? Yeah, that is fair, Mark. Again,
And as we came out of the year, it was pretty impressive of what we were seeing and then it sort of exploded down. So we're moderating our expectation for the full year. We did thank you both, these slightly up, on the consumer side by the time it both ended on, but gosh, I guess we missed it in terms of the exuberance that we were failing as we entered the year with that same thing was it.
I'm just going to keep going back and pointing towards the education side of the business and being able to modeling. All right. Thank you for the call. Thank you and one moment for our next question.
And our next question is going to come from the line of Kyle White with Deutsche Bank. Please go ahead.
Hey, good morning. Thanks for taking the questions. I wanted to follow up a little bit on that last question, but also just broader. Looking at your full-year outlook, can you just talk about some of the moving parts, considering 1Q from an earnings standpoint was a bit above your initial expectations, but yet you're maintaining the EBITDA range for the full year? Is that just driven by the mercury and the softness in terms of the volume backdrop that we're seeing right now?
Or was it also driven by maybe, you know, tan-binding ship prices being a little bit weaker than what was initially assumed? Maybe just any details you can provide there would be helpful.
Yeah, I think that the biggest driving there was really the range and the mechanics of it all. We feel really good about where the e-bizal range is, you know, in a $50 million. So I think you can read it to kind of where the guy is in terms of where we think we're going to...
in that range. The volume is, as we think about it, productivity was really an off-set and the early part of the year and we feel good about how productivity is unfolding through the rest of the year, even at volumes in the consumer side, are a little bit weaker than what we had originally planned. Okay and we have to add a bit of some gehtgen.
Yeah, that's fair, and we're also assuming, let's call it a $15 to $20 increase in the average OCC price between now and the end of the year. There are some costs increases coming in, but only...
And we're also assuming, let's call it a $15 to $20 increase in the average OCC price between now and the end of the year. There are some costs decreased coming in, but we left hand in just flat for the year.
For my second question, there's a lot of weather events in the past quarter. Just curious if that had any impact on your fresh fruit packaging business and then also if there's any anticipated impacts for the pack harvest related to it. Yeah, Kyle, we certainly felt it in the variant trade business, which is, as you'll note, California and that season's literally coming off in that late winter, January timeframe, strawberries, etc. And then of course we have the false activities down in Florida. So it's certainly reflective to some extent in the performance of that business that one goes.
in the first quarter. Think we're working through that as we move forward. On the metal side, our focus in the being that the tomato markets are really in the Midwest and where we have not seen the type of environmental issues that you see on the...
on the West Coast, but our customers are telling us business as usual as it relates to that kind of business. Got it, that's helpful. I'll turn it over. Thanks. Thank you and one moment for our next question.
Our next question is going to come from a line of Clea Rooker with UBS. Your line is open. Please go ahead.
Hey, good morning everybody. Thanks for taking my question. It's just a couple of follow-ups for me because I think a lot of the key points have been addressed. But, yeah, I just wanted to dig in a little bit more specifically on the volume decline that you're talking about. You know, I think we've talked a couple of times about industrial volumes being weak, they're stabilizing at a low level, but not really quite growing yet. Is that...
pretty much entirely coming from the container board industry or is that a sort of more broad comment across other end markets? Yeah, clearly this is Roger, it's broad. It's across all markets, textiles, especially week. Really it affects most every region, globally.
Film, also down, as you said, container more down. So it's really across the board, especially anything housing related was down fairly significantly. So it was broad based across all four of the categories that we tried.
Yeah okay but but it sounds like you're getting some confidence that orders are starting to pick back up and at least from a you know from a volume from like tons produced standpoint you're confident that Q1 was the trough.
Yeah, okay, but but it sounds like you're getting some confidence that orders are starting to pick back up and at least from a Volume from like tons produced standpoint you're confident that Q1 was to trough
continued by the clients in the second quarter driven by weakness in Europe and Asia. Yeah, sorry, but North America is stirring a firm. Relatively flat. Yeah, and then and then just quickly on that so in terms of the variability.
in the outlook, you know, just the kinds of things that we should track through the balance of the year as we think about, you know, skewing towards the top or the bottom end of the guidance. It sounds like really the European and Asian regions are where, you know, there's just some more question marks about how the second half can materialize.
Yeah, four investors specifically. Yeah. Yeah. Probably more Europe than H is really incredible. A good and good and good in consumers only about 2%.
Right, got it. It was a nice set of results for the quarter test. But that's not going on notice. Thanks, everybody. I'll turn it over.
It kicked off and created the vibe. Yeah, no, I'll talk to you guys later. Thanks. Thank you. And one moment for our next question. And our next question comes in line of Gabe Haged with Wells Fargo Securities. Your line is open. Please go ahead.
because if memory serves, December was a pretty bad month on the consumer side. And then January snapback, and we kind of had a similar experience in March. So I'm curious, if you could comment at all about sort of how April was trending, I think you said howard that.
you're expecting sort of the normal seasonal sequential step up in the food can business, maybe some moderation and de-stocking in the aerosol side, but then just maybe the the legacy consumer business and then maybe as we think about monitoring the the quarters and the rest of year as it progresses.
maybe paying more attention to what your customers are saying in terms of maybe modulating their own purchases and responding to consumer behavior. I mean, if that...
to what your customers are saying in terms of maybe modulating their own purchases and responding to consumer behavior. I mean, is that sort of the…
the wild car or the fact that we should be most mindful of or is there something else going on? Yeah, in that example I would say it's certainly way too soon to say as a new operating environment around from our customers perspective. That's probably, I'd like to thank you to it, it's related to really...
that we should be most mindful of or is there something else going on?
So I noted and we all noted, it was a lot of question marks, January and March with what was going on in the 19th world sector and how was that gonna reverberate through the global economy. So can I hang my hat on, is that the decline that we saw? Certainly in December the expectation was just that, that they were trying to draw all the inventories down and complete the...
quarter to quarter, I don't think we're seeing a new phenomenon here that's sustainable. And they see it in December , which we all do in December , trying to pull back on our working capital as much as possible. You know, and talk about improvements going into the second quarter on the consumer side. You know, it's from the base that we're at right now, and from a sequential perspective, and yes, I mean, it's just natural that.
or I should say historical that we see elements of summer build-ups in the spring as well as you noted and I noted on the camp site, the business, the Trump attack season, etc.
I don't see a pattern here at this point in time, such a change, but I think it has to do with what's going on around the world.
and reactions and the timing of those reactions that impacted us more. Okay, and then maybe getting back to this all other segment and the enhanced profitability, is there any way to maybe frame up for us, yes, sequentially, and then maybe the segment overall? I mean, should we?
kind of expect this level of profitability to persist sort of on an either absolute dollar basis or margin perspective? Or was there something unique to the first quarter, you know, more sales of reels or something like that, that maybe swung things around a little bit more?
So yeah, Gabe, this is Rob. Hey, that's a good question. Those businesses, you know, as Howard said, we have kind of really changed the operating model and really both challenged them but given them a lot of freedom to operate. And what they've done is they've been really entrepreneurial and are generating really great results.
as a result. So those aren't one-off or specific results that across the board down the line of those businesses.
What we're seeing is operating improvement that's really generated by really tight cost controls, investment in productivity, and very disciplined investment in growth where they feed it. So those levels of profitability are sustainable. Frankly, there's a couple businesses that are.
yet to really catch on and we're excited to when those businesses start performing as well. Okay, and one last one as it relates to the guidance. I mean, I think you guys kind of widen the range a little bit which you know I maybe understand but following a Q1B just just feels a little odd.
The one thing that jumped out at me and interest expense was tracking a little bit higher. I think you guys guided us $115 million. Has that assumption changed and then maybe just sort of the rationale or the thought process behind the wider range versus what you had before? Yeah, interest expense is...
has trended higher, so I've kind of all other expenses in that category. It's really just related to how we post it at the year. You know, it looks like you know maybe we'll see some recovery and very good interest rates by the end of the year, but we certainly.
budget and it's flat with the raise and have a fair amount of variable rate debt. So that's what's really flowing through there and then also kind of modeling it and have what we think we're going to do with the balance sheet for the balance of the year. You know with regards to the range and moving it up, I think what we were thinking really was as we evaluated the risk and opportunities we felt really comfortable as we were leaving.
Q1 that we had identified a lot of opportunities, but there was still this uncertainty in the operating environment. So we wanted to make sure that that was a wide enough range that we could achieve it. And that's why we really kept the E4S range where it was as well.
Thank you and again if you would like to ask a question at this time, please press star 1-1 on your touch tone telephone.
One moment for our next question. Our next question is a follow-up question from the line of George Stafos with Bank of America Securities. Your line is open. Please go ahead. Thanks very much. Hi guys. Thanks for taking the follow-ons. Two questions from me.
One, to the extent that you can comment, and again, if you'd mentioned this, apologies that I missed it. One price cost for the year, where does that currently stand in terms of your expectation for 23 relative to what you would have had coming into the year and or your last guide?
So, what was the positive variance here which seems to offset the volume uncertainty that you have, understandably, and similarly on productivity, where's productivity, where's operations if there's a way to quantify to some degree, now for the year.
relative to where you would have been entering the year again, which helps to offset the volume uncertainty. The second question I had is just in terms of volume and I think
you had mentioned that you expect consumer to be up modestly this year. And recognizing there are no guarantees in life, is there a level of volume degradation that would begin to undercut especially the low end of your guidance range? So instead of low, very low single digit, if you put up a minus two or minus...
a little bit of volume positive here and there. The price cost was the big driver for the performance in Q1 and then it'll be a big driver throughout the year, really overcoming the metal price overlap with a lot of really strong performance across the broader business. So I'd say...
So that's just a greater headwind than we anticipated. And then we're seeing pockets of strength. But overall, I think price costs will probably be weaker than what we anticipated. Weaker. Okay. Okay. So we're seeing a lot of hypocris Horn, I think tonight, though, in terms of lots of things about, let's say,
And productivity then what was kind of if you had a ballpark with that that's adding to you relative to your prior expectation?
What was kind of if you had a ballpark with that, that's adding to you relative to your prior expectation? Yeah, George and this is Roger and our original plan for 2020 through. We have wrapped up productivity throughout the year expecting it to take more time for something.
capital projects and supply chain challenges that he said first quarter was probably twice what we expected. So, if you think about the next several quarters you know we're pretty optimistic.
it will be at plan or when you can slightly above that. Okay. And then just on the volume question, again, no guarantees, but is there a level, certainly there is, what level would you say if you're seeing, you know, X amount of volume degradation where we start to, you know, you'd start to worry about your guidance factors. Thank you.
George, you're right. That's a tough one to really get a handle on. What I would say is that I think what we modeled out is...
what we believe to be true on the lower side of the foot of that way, to the course of the minor of the year. And if you take a, you know, you're the question is more about whether it's the negative application. What I would say is that we have...
history does not necessarily predict the future. But because we for the most part on the consumer side, we participate in staple foods.
Center to the Store, but really only one exception there. When things get tougher, it seems to attract more folks to the products that we're privileged to represent. And that's both the store brand as well as the name brand.
I'd like to think that if things get tougher, consumer sizes would potentially benefit from that, but of course they could have ramifications on other parts of the board. No, sure. Historically though, on a relative basis, it does work for you, but thinking about it in absolute terms is what was driving that question.
Thank you and I am showing no further questions at this time and I would like to hand the conference back over to Ms. Lisa Weeks for her closing remarks.
Yes, thank you all for joining us here today. I would highlight that we will be out on the road for the rest of the quarter, so please consult our website and you'll see where you can connect with us. In the meantime, if you have any further questions, please don't hesitate.
to reach out. I hope you all have a wonderful day until we talk to you in our good starting call. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.