Q3 2023 Sealed Air Corp Earnings Call

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Okay.

Good day and thank you for standing by welcome to the Q3 2023 sealed Air earnings Conference call.

At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will be depressed star one one on your telephone and you will hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.

Please be advised today's conference is being recorded I would now like to hand, our conference over to your feet. Our first speaker today, Brian Sullivan Investor Relations. Please go ahead.

Thank you and good morning, everyone.

With me Tonight, Ramiele, Shamus interim co CEO and CFO as.

As well as vesting simak interim co CEO and CFO.

Before we begin I would like to note that we have provided a slide presentation to supplement it.

Please visit <unk> dot com, where today's webcast and presentations can be downloaded from our investor Relations page.

Statements made during this call, stating that outlook or estimates for future periods are forward looking statements.

These statements are based solely on information that is now available to us.

We encourage you to review the information in the section entitled forward looking statements in our earnings release, and slide presentation, which applies to this call.

Additionally, our future performance may differ due to a number of factors.

Many of these factors are listed in our most recent annual report on Form 10-K, and as revised and updated on our quarterly reports on Form 10-Q, and current reports on form 8-K, you can also find on our website or on the Sec's website.

Yeah.

We discuss financial measures that do not conform to U S. GAAP.

You will find important information on our use of these measures and the reconciliation to U S. GAAP in our earnings release.

Included in the appendix of today's presentation, you will find U S. GAAP financial results that correspond to the non U S. GAAP measures, we reference throughout the presentation.

I'll now turn the call over to Neil Industrial operator, please turn to slide three.

Neil.

Thank you Brian and thank.

Thank you for joining our call.

Today, I will discuss the leadership transition.

An update on the markets we serve.

We are seeing and how we operate in this dynamic environment.

Rustin will take you through our third quarter results provide updates on our 2023 outcome and talk about our progress and plans around capital allocation.

After that we will open the call for your questions.

Moving to slide three.

As previously announced customer myself, our interim co Ceos in addition to our current rules.

Before we move to the market and business update I would like to talk through how our co CEO operating model works.

First we expect this model to accelerate the turnaround of our results.

Overall execution.

Together, we will all see strategy.

That strategy to the overall business and deliver results.

I am focused on driving our innovation supply chain and commercial teams.

Typically bringing these teams closer to improve our market intelligence.

To innovate.

To deliver and commercial execution.

Thus it would be more focused on driving our cost takeout to grow program.

Optimizing our portfolio and strengthening our balance sheet.

Bryan automation digital sustainability continues to be key enablers of long term growth.

We are shifting our focus to address the current market dynamics.

As a result, we are reevaluating our solutions portfolio and go to market strategy with an intense focus on meeting our customers' evolving packaging needs and our core protective markets.

Now turning to the market and business update our end markets remain challenged and visibility limited.

We are facing multiple headwinds, including soft retail demand.

And consumer trade down and the food markets compounded by a global capital cycle that is markdown due to the U S.

Europe remains firmly into recession and the recovery across Asia has been smaller than we initially expected earlier in the year.

On the protective sides industrial output remains flat to down.

Economic uncertainty is increasing driving customers to put inventory below historical levels and reduced capital spending.

Destocking is moderating in North America continues.

I mean back to you.

Pricing pressures have increased as consumers and customers react to major fragmentation.

Despite these headwinds since the beginning of the year.

Packaging business delivered largely flat sequential performance in.

In our prior back fluids, and liquids and automation businesses have performed very well.

Yeah.

In this economic environments, where our existing customers are challenged to grow.

Focused on acquiring new customers and taking share in the market. Thanks.

We are actually increased by first investing and redeploying resources towards regeneration marketing a new sales roles that are closer to the markets our customers are operating.

Second.

Improving the competitive positioning of certain solutions within both food and protective by rationalizing the cost to serve across our portfolio.

Third.

Balancing our innovation efforts between long term higher risk reward and shorter term projects that address our customers' more immediate needs.

Lastly.

Continuing to meet with automation, which is our customers with a single point of contact for both materials and equipment.

These solutions solve their most critical packaging challenges and drive longer term sustainable efficiencies within their operations.

Yes.

On cost takeout to grow we have actions of approximately $40 million in annualized run rate savings.

<unk>, 25% of our $140 million to $160 million program.

As of September year to date, we have exited over 600 positions related to both reductions in volume with our network and workforce optimization.

On portfolio optimization, we've completed the previously announced closure of keeping with thermal temperature assurance business in quarter three.

Separately, we decided to exit our plant base roll stock business.

A sustainable offering within our consumer ready vertical that was displaced by more competitive solutions in the market.

Moving forward, we will continue to bring new sustainable solutions, while maintaining an enhanced emphasis our market competitiveness.

Whitewater and good progress on cost takeout to grow and portfolio optimization, we need to accelerate to get a handle future market impacts.

Before I turn it over to Doug.

I wanted to just say that I'm excited to see what happen.

He has only been here for a short period, yes quickly come up to speed on the business.

Just to challenge every aspect of how we operate and became a trusted business partner.

Together, we are looking through the entire company for opportunities to grow in a cost effective way to drive further efficiencies and ensure we are world class in everything.

This is an ongoing process and we will keep you updated as key decisions on rates.

Now I'd like to turn it over to Duston to review our financial results.

<unk>.

Thank you Emil and good morning, everyone I would like to start by saying its a privilege to coli C with the mill.

Let's see for 13 years and has done a tremendous job transforming our supply chain is a proven leader with well respected within the industry and across all of C. I can't wait to see its impact across our commercial and innovation efforts and I'm really excited about all that we can accomplish together.

Now moving to third quarter results, let's turn to slide four.

In the quarter net sales were $1 3 billion flat on a constant currency basis, adjusted EBITDA was $285 million down 6%, excluding currency compared to last year.

Volumes have improved sequentially, excluding M&A and FX since the beginning of the year.

Sequentially adjusted EBITDA improved about 2% from 280 million in the second quarter, mainly driven by improved volumes and better net operating cost.

Adjusted earnings per share in the quarter of 77 were down 27% compared to a year ago on a constant currency basis, primarily driven by lower adjusted EBITDA and higher interest expense.

Turning to slide five.

Local box contributed 6% to total company sales or approximately $82 million.

But was offset by organic declines driven by continued market pressures and customer destocking at protective as well as continued weakness in food retail end markets.

Third quarter adjusted EBITDA was 185 million, which included 17 million contribution to from local box decreased $8 million or 3% compared to last year with margins of 26% down 30 basis points.

This performance was mainly driven by lower volumes within protective.

As it relates to adjusted earnings per diluted share in the third quarter of <unk> 77.

Our adjusted tax rate was 25, 7% compared to 25, 6% in the same period last year.

We did not repurchase any shares in the third quarter.

Our weighted average diluted shares outstanding in the third quarter of 2023 was $144 9 million.

Moving to slide six.

In the third quarter food net sales of $893 million were flat on an organic basis with price favorability offsetting organic volume decline.

Volume decreased year over year by approximately 1% driven by continued weakness in retail demand, partially offset by growth in our food automation solutions.

<unk> adjusted EBITDA of $194 million in the third quarter was up 7% in constant dollars compared to last year with.

With margins at 21, 7% down 60 basis points.

The increase in adjusted EBITDA was mainly due to contributions from local box, partially offset by lower volume and unfavorable net price realization of $5 million.

Protective third quarter net sales of $488 million were down 15% organically driven.

Driven by volume declines in all regions from continued market pressures in the industrial fulfillment markets and continued customer destocking activities within our Aps business.

Protective adjusted EBITDA of 95 million was down 15% in constant dollars third work with margins at 19, 5% up 30 basis points of.

The decrease in adjusted EBITDA was driven by lower volume, partially offset by favorable net price realization of $2 million and cost control activities.

Our effective adjusted EBITA margin improved 30 basis points compared to the second quarter, primarily driven by favorable cost control.

On slide seven we review our third quarter net sales by segment and by region.

Tom.

Net sales were flat with 10% growth in food protective was down 15%.

By region, we grew EMEA by 1% offset by a decline of 1% in Americas and with Asia Pac flat.

Now, let's turn to free cash flow and leverage on slide eight.

During the third quarter, excluding the impact of the IRS to positive $175 million free cash flow was a source of cash of $183 million compared to $137 million source of cash in the same period a year ago.

Representing an increase of 33% year over year.

The primary driver of this improvement was significant inventory reduction, partially offset by lower earnings and higher interest costs.

Since the peak of Q2, we have reduced total debt by approximately $100 million exiting Q3 with a net leverage ratio of approximately four one times.

Our total liquidity position of $1 2 billion, including $281 million in cash and the remaining amount in our committed undrawn revolver.

Our capital allocation, we remain laser focused on debt reduction targeting to drive below three five times net debt to adjusted EBITDA over the next two years.

We also plan to refinance our December 2024 notes over the coming months.

Let's turn to slide nine to review our 2023 outlook.

Our full year 2023 guidance, which we reaffirmed last week remains unchanged.

Q3 top line performance was right in line with our expectations and adjusted EBITDA has exceeded original expectations due to better pricing and cost control activities.

However.

Into Q4 will be a greater than expected FX headwinds and now target cell to be slightly below the midpoint of our full year range driven by approximately $30 million impact from FX with volume projections still in line with our original estimates.

We continue to expect adjusted EBITDA and free cash flow to be in line with the mid point of our respective.

The respective guidance ranges.

Adjusted EPS will be at the higher end of the range driven by lower depreciation and amortization expense, reflecting improved discipline around capital deployment.

Reaffirming our current guidance ranges despite exceeding expectations in Q3 reflects the limited visibility environment, we continue to operate in.

The outcome of our fourth quarter will depend on the strength of our seasonal tailwind related to the holiday cycle in both food and protective.

We continue to expect an L shaped recovery through 2023 and enter 2024, reflecting.

Reflecting an increasingly uncertain macroeconomic environment driven by lingering destocking.

Weakening consumer demand and a higher for longer rate environment.

At this point in time for fiscal year 2024.

Targeting flattish revenue growth low single digit volume growth offset by negative pricing.

We expect a duration of our cost reduction and operational excellence initiatives to continue to position us to deliver adjusted EBITDA growth next year.

While the transition in leadership and raised questions about disruption, let me be clear.

<unk> is a full bore support take any necessary actions to navigate the current market and maximize value for our shareholders and thats exactly what we intend to do.

Lastly, I'd like to close by thanking the 17000 plus seat team for their commitment to each other and for solving our customers' most critical packaging challenges.

Dollars and day out.

With that.

Our mill and I look forward to your questions.

Operator, we would like to begin the Q&A session.

Thank you at this time, we will conduct the question and answer session. Please note you will be limited to one question as a reminder to ask a question you need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Okay.

And our first question comes from George Staphos from Bank of America Securities.

Hi, everyone. Good morning. Thanks.

Thanks for the details.

I mean, all it doesn't congratulations and best of luck with the transition.

The question that I had you talked about putting more resources.

Closer to the market and changing both Europe. It sounded like your commercial and if you will transformation strategies can you talk a bit more to what that means.

Specific examples and what you hope to gain from that and Relatedly in terms of being closer to the market.

What are you directly doing now to be out in the sites and now with your customers more frequently many changes to the way you're scheduling the way youre visiting with your employees as you mentioned, it's a transition you want to keep everybody focused thank you.

Thank you George.

Thank you for your question. So again to the prepared remarks, we talked about two items. So the way, we're going to get closer to the markets.

Operate faster is essentially on two fronts. One is we're investing into.

Better revenue ops Cape.

Our capabilities into the company, but also we're moving more resources from working on longer term projects at a global level closer to the market from the customers that we.

Similarly, we're doing the same around our technical resources by balancing the efforts around those longer term higher risk reward projects and the shorter term.

Projects to address the customers more immediate needs in this tough environment.

And a couple of follow up points George to that and just in general when we talk about resources and you think about the shift in leadership that we've had now it's about making sure that we think of it as resource allocation, we're replacing our efforts, particularly as we reinvest some of the cost efficiencies. We drive from CTO that was part of that broader program, it's about getting more feet on the <unk>.

As an example, investing more in marketing, but at the regional level investing more and.

And some of our revenue operations capabilities. The second piece of your question around meeting with our specifically customers.

Customers and plants and Neil and I are going to start obviously in two weeks with our first beginning setup plant visits as an example, and we've already been meeting with customers. So I think in both fronts, while we're dividing and conquering the short term, we're making sure that we're out in the field more than we have been historically.

Thank you please standby for our next question.

Our next question comes from Adam.

Olson from Goldman Sachs.

Hi, yes. Thank you good morning, everyone.

Maybe keying off of that discussion a little bit more.

Our mill in the in the prepared remarks, there was a discussion or mention of reevaluating.

Some of the automation solutions offering.

And I guess.

I think longer term and as a growth driver for the company automation solutions digital had been kind of a key.

Key kind of status drivers.

They are market outgrowth over time.

Is that still the intention, but maybe less kind of big whale hunting and more.

For big projects and trying to just drive shorter term shorter term business wins, while we continue to pursue those longer term opportunities maybe help bridge kind of how how we think about.

Reallocating resources from longer term growth opportunities to near and kind of feed.

Feet on the street.

Yes.

Just bear in again.

Automation digital sustainability, we're not abandoning those these pay these are key enablers of our strategy in terms of our execution on winning in the marketplace and we continue to drive and lead with automation, which provides the customers with a single point of contact for the entire solution.

We're continuing to drive more automation capabilities in parts of our portfolio, which are lagging so with that said.

The effort continues and there are key enablers, but while we're working on some of those more longer term capabilities, we need to execute on within the marketplace and thats, what we mean by shifting in allocating resources.

Thank you please standby for our next question.

Our next question comes soon guests MBP Titan Zavvi from Baird.

Hey, guys good morning.

Going back to George's question, I mean, the interim designation suggests a very short period of time and some of the things you are talking about or sort of longer term improvements and so on and so forth. So at this time as you see it over the timeline update interim designation is the cost outs that are going to take priority versus anything else on the commercial.

<unk> side I'm, just trying to think about prioritization.

So it's a it's a great question I think what's important.

To think about whether that statement is that while it's an interim designation <unk> been partnering already together to run cost take out to grow which is really encapsulating, both the cost takeout as well as efforts we're already driving with commercial so you have continuity with that program and then the two leaders that were already drive date today and so in both cases is being bounce.

Or that's part of the discussion in terms of the co CEO model, where we're focused on where our mill is now spending even more time than you already was in the commercial teams you have myself now focus more still dedicated to cost takeout to grow as an overall program. So it's really balancing both.

And then in the middle of that in the heart of that message is that we're focused on execution right and go ahead and improving how we can execute day to day is as we kind of move along that continuum and improve our overall results profile.

Thank you please standby for our next question.

Our next question comes from Matt Roberts from Raymond James.

Hey, good morning, everybody. Thanks for the time.

Wanted to dig in a little bit more on the near term versus long term decisions you are taking.

<unk> end markets or product Rollouts.

Referring to if I look at specific end market. It seems like automation is trended down which is consistent with your prior commentary. So should we expect that deceleration to continue.

In other words.

E Commerce is trending down as a percent of your mix is that more market share losses or potentially end market related just trying to see where some of those decisions are allocated.

Hello.

Thank you for that question so.

So in terms of the automation in terms of a trending down. This is mostly driven in terms of the current economic environment.

The interest rates on the uncertainty there is hesitation by many customers in terms of the timing of driving the capex.

What's driving that piece of it is not driven by reduction in focus and facts.

We have very strong automation solutions in many parts of our portfolio and other parts. We don't have automation solutions and we are actively driving to to create those capabilities through partnerships and other pieces. So stay tuned on that as we go forward.

So it's really about the amount of it's the allocation of resources and balancing how many resources, we have whether it's within our innovation teams. Our commercial teams that are focused on very long projects versus those are focused on.

Driving winning solutions today and winning today in the marketplace.

Thank you please standby for our next question.

Our next question comes from Jeff Zucker from J P. Morgan.

Okay. Thanks very much.

Two part question.

Sure.

The.

First part is when you look at liquid box.

Its growth initiatives since you've acquired it how would you assess it that is our the growth initiatives.

Strong as you expected or are stronger or weaker.

And second on slide 16.

You show your protective prices.

2% lower after they've been positive can you discuss what's behind that.

Alright, let me let me first off on the first question and then Duston will take over the second one.

So first of all let's talk about just in general what's.

Driving fluids, including the local box the first piece is the <unk>.

Prior back fluid side, we've been making.

Very good inroads both in terms of automation and driving our flex prep solution. We're now present in more than 25000 stores globally by.

This was the solution, mostly in the U S and it's been expanded.

So we have that.

That's part of our portfolio Thats continuing to drive growth on the liquid bulk side as was shared in the last quarter.

There were many operational issues, we've addressed those we've actually accelerated the integration and brought in more resources from a broader company to address up we've also.

We expanded the portfolio so that we can attack the broader set of the markets.

Which was not accepting the.

Limited portfolio of solutions, So we put those behind us and with.

Accelerate our growth into Q3 and into next year.

Yeah.

And Jeff This is a follow up point.

Point number two on.

On slide 16 in general some of the commentary in the prepared remarks references the pricing environment beginning to shift if you think about resin prices and protective is more affected by where we're at from a spot perspective in the first half it kind of came down to about the middle of the year and it has trended sideways now is actually ticking up a little bit going going into the fourth quarter and so that's really what's reflected now.

Is that overall intensification of because volumes are down so intensifying of competition, coupled with a breadth of trend is what's leading to that impact.

And the commentary we talked about 2024, that's what's playing into some of our thinking right now the impacts could potentially see into the following year.

Thank you please standby for our next question.

Our next question comes from Josh Spector from UBS.

Yeah, Hi, Thanks for taking my question. So just regarding the guidance for this year you reiterated the midpoint that EBITDA. If you do the math and <unk> is down about $100 million from <unk>, which would be incredible abnormal seasonality just wondering I understand the need to be conservative and want to be conservative on your.

And but what are the moving pieces that gets you to that scenario and our customer conversations reflecting that view at all at this stage. Thanks.

Josh I appreciate the question and as I mentioned back in the prep remarks on the commentary you just made around being cautious.

Again, our fourth quarter right now this point in time and kind of when you think about how we came through the first half into the second half of the year. It does reflect some of the limited visibility environment that we're in right now and so the second piece. If you go back the prepared remarks, we talked about fourth quarter.

Impact, which is primarily driven by GBP in Europe piece of our business is also having a corresponding impact on our bottom line, which is obviously non operational now what could lead in terms of differences.

Got it how we talk about the fourth quarter, we talked about in prior remarks, and it's really driven by the strength of our seasonality in our business, whether it's think of it as the e-commerce cycle I can affect effect, our protective business or the food cycle relative to holidays that can affect our food business.

So those are the two areas the strength of that could really determined that outcome and what we've seen so far in the month of October that we're on track and but obviously more and more to come there.

That's kind of the variability in outcomes.

Okay.

Thank you. Please standby for your next question.

Our next question comes from Anthony Petrone <unk> from Citi.

Good morning.

You talked you've talked about rationalizing cost to serve across the portfolio and exiting some product lines like that roll stock business I'm, just wondering with the new management approach are there components of the business that might be larger than it might have a more logical owner and maybe you could help accelerate deleverage.

King or would those kinds of dispositions or asset sales or larger portfolio moves would those be kind of outside the mandate given kind of the interim designation or how should we think about that.

Great question. This is Dustin speaking so as we mentioned beforehand kind of even going back into Q2, we've really kicked off this effort portfolio optimization right.

Chemotherapy was already announced out we've talked about the plant based roll stock business, we've announced today that effort is continuing and now accelerating right. As we go from here. The mandate is really to take any actions necessary to create value, whether it's large and small so we're looking at the entire portfolio trying to understand whats best fit for purpose moving forward.

And then obviously deleveraging as our primary focus we talked about that in terms of getting trying to get below three five times within the next two years or less and certainly opportunities to deleverage now many other factors come into that perspective in terms of where we sit right now and overall.

We believe to be nearing the bottom of an overall cycle. So again, we're factoring timing factoring kind of overall environment, we're operating with and from a rate environment that markets et cetera, and but all of those things are kind of factored into.

How we're thinking about things, but just again just to finalize that point is this is intended to accelerate those type of actions not decelerate it or whether they are small or large.

Thank you please standby for our next question.

Our next question comes from Lawrence de Maria from William Blair.

Hey, Thanks, good morning.

Two quick things here.

We ended the bylaws.

Maybe more difficult to nominate director show. The question really is whether that's preemptive or reactionary to any potential actavis and secondly.

And related to that you have.

Look to the protected portfolio, assuming youre thinking about doing comparing so curious if youre still looking at that and any updates on how much of that portfolio might be considered preparing and where we are in that process. Thank you.

Hey, Larry This is Dustin speaking so on the first point on the on the 8-K, we filed related to the amendment to our bylaws is really related to an updated SEC roll around universal proxy, it's very common for all kind of companies in a process of doing some form of that which is really just combining the ability for I won't give you the technical details but.

The ability for whether our shareholder ourselves to raise kind of nominees and devoting aspect of it that consolidates onto a car and as part of improving and continuing to improve our overall corporate governance and.

And then the last piece when you talk about protect the portfolio in line with the prior question protective were absolutely go into the portfolio and looking at areas, where we can optimize both thermal is an example of that.

I won't give an update relative to status of backup right now in the process of dissecting, many different pieces, which each in their own way take level of effort and energy to get through understand.

Obviously viability in the market today.

<unk>, and then really that disposition going forward relative to timing so.

There is no update in terms of like a progress personally other than it's underway and we're accelerating the pace.

Thank you please standby for our next question.

Our next question comes from Arun Viswanathan from RBC capital markets.

Great. Thanks for taking my question.

Congrats on the on the new roles there to both of you.

Just wanted to understand maybe yes.

Continuing on the last theme.

Maybe you can help us understand.

The synergies between the two businesses and where automation and maybe some of the other initiatives you have overlap I'm just thinking that we have seen these huge double digit declines on volume in protective.

And do you think it's necessary to take more decisive action and maybe.

Separate the protective portfolio.

What really makes it important to keep within the portfolio as this thanks.

So I'll answer that question really in two parts, obviously the businesses obviously, there's a lot of similarity in terms of overall raw materials right. The resins that are used within both businesses and so one of the key advantages of our company and the scale that we operate at is the level of purchasing power that we have in that particular <unk>.

Space right and so any form of action like that could like.

<unk> <unk> type of dis synergy beyond.

Beyond kind of thinking about how you would structure kind of that disposition between the two businesses the second pieces.

Of the.

The comment about should you be more decisive about where we're at and what I want to remind everybody is thinking about protective as we are sitting at from our point of view towards the bottom of an overall cycle right, which is really important to take into consideration from a timing point of view.

Broader market dynamics that are in play around taking an action like that that could effectuate the timing if and when you chose to make an action like that and the second piece around.

Protective holistically and the comment about shared aspects underneath it.

Some of these strategies, whether it's automation, they're very independent for each business, but there are effects Duane the same outcome right relative to the point that bill made earlier around because the combination of materials and and equipment together, drawing a bigger pull through for us, but having huge advantages for overall customers relative to having a single point of contact from a relationship perspective from a service.

Active and their overall value creation. So that's that's where we're at.

Thank you please standby for our next question.

Our next question comes from Gabe <unk> from Wells Fargo.

Doug.

Thank you and thanks for the Chris messaging this morning.

Two part question. The first is you had a large customer put out a press release, saying that they are they are migrating I think one of the first locations here in Ohio actually to 100% paper base. So I'm curious if this is specifically what you were referencing in terms of working more closely with your customers.

And this does require sort of additional investment either in the P&L and our Capex side.

And I guess Relatedly, if there is some sort of P&L impact.

Would that be sort of incorporated or included in.

Still being able to achieve your 140 to 160 of course ought to grow.

Apologize if I missed it so the second part is I think duston, you mentioned, a $30 or $30 million discrete.

Fourth quarter revenue item, what was that associated with and then in your commentary as well I know you talked about going into 'twenty for price cost being a headwind, but specifically.

In Q4 with the moves that we've seen in polyethylene as it relates to timing.

Is there a.

Bracket that you can give us $5 million to $10 million or so.

You guys are incurring specifically in the fourth quarter.

Yeah, Great question, So I'm going to hit the first question you have around the discrete item and then I'll bring it back to Neil you can walk through your points around kind of paper based solutions and where we're headed so on the first one for what we call it out for the fourth quarter. The non operational issue with FX. So if you think about where we were in July and then we're right now today.

And whereas the GDP and the Euro moved right thats, creating an FX impact in the fourth quarter to the tune of about $30 million right in the secondary point, we made to that was that underlying volume estimates that we made are still still intact right for both businesses and then I'm going to turn it to a meal to hit on the question on the first question.

And then just paper or plastic threes around the sustainable offerings that we bring to the marketplace and thats both.

On the protective.

On the food side, so, yes, getting closer to our customers. So that's where we're at the table, helping our customers.

<unk> is the right solution.

And you can see in our.

And parts of our portfolio, we were light and we've seen some of that impact.

In terms of share loss, but our paper solution continues to make progress on the protective side, both on the automation piece of protective as well as on the material side on the food side.

No.

We are we are continuing to push them.

Our sustainability pledge around bringing our solutions to being.

100% recyclable reusable just to give you a perspective, we're around 51% of the portfolio.

Wait today.

We did try to bring in that plant based <unk> solution.

But unfortunately that was not successful in the market as the market shifted and it will be.

Shortly announcing.

Interesting sustainable solution will bring in some markets around roll stock.

But.

Let's talk about that on our next call.

Thank you please standby for our next question.

Our next question comes from Mike <unk> from <unk> Securities.

Thank you.

Yeah.

Mentioned PC.

You mentioned in the past facing headwinds you mentioned it again today.

U S catalyst cycle.

Perhaps shifting needs.

Automation slowdown can you can you talk about any of the initiatives, you're starting to see or maybe you have accelerated in your new roles to reverse that and to drive better growth.

Quickly on the second question, if you take out liquid box into the queue what would volume.

What they would be able to have grown alone declined X liquid months. Thank you.

So great great questions and a couple of points to make one is and I wanted to just clarify the comment on automation just to make this really clear is that automation is still performing very well in this quarter and very well for the full year right. What we're referencing in terms of your commentary is that going forward from a sales perspective.

<unk>, which is indicative of some of the pressure in 2024, it's under pressure and that's really related to orders when when someone purchases. The automation solution. There is a decent lead time before it's delivered which is a statement about kind of the future into 2024, but it continues to be very strong our offerings continue to be very relevant and we're still very focused on those platforms in both businesses and bring them to market.

Okay, and then going back to food overall relative to the cattle cycle.

And impacts in the quarter in general I think that we're doing to accelerate it I would tell you go back to the mills commentary around competitive positioning in certain products as part of our cost takeout to grow within food and protective we're specifically focused within that business going back to this concept around plant. The plant based Rostock business that we are disposing of where for.

<unk> on a roll stock business, right and our competitive positioning within our bags business in the bags and the food automation, we have run our <unk> business. We're performing actually ahead of market and doing very well this year, considering some of the kind of negative market trends and our roll stock business, which we had commentary beforehand.

If you go back to last year. This is the one that was really impacted by the specialty raising prices we had in 2022 into 2023.

And so as that business, specifically theres continued to intensifying pressure around competitiveness pricing and so we're working on is reducing the cost to serve and including the cost to deliver and produced in that area. So it can be more competitive and more relevant in the marketplace and drive growth going into 2020.

Thank you please standby for our next question.

Our next question comes from Phil <unk> from Jefferies.

Hey, guys.

Just any kind of breathe through your early 2020 for outlook. So I just want to make sure I heard you correctly, you're effectively calling for flat sales up volumes in.

<unk> EBITDA in 2024 can you kind of help on tax component a little more between how you're thinking about volume growth between the two segments, particularly protective just because it's been under pressure price Cross and then progress on the restructuring efforts last quarter, you're calling for mid single digit EBITDA growth.

Don't know if thats still achievable, especially with the FX headwinds youre seeing at this point.

Yeah, Great question and thank you for raising it.

Couple of comments keep in mind that right now we're sitting in November we talked about the limited visibility environment. We're operating in so we're still very much in our process of firming up kind of how we think about 2024.

And so when you think about.

Think about the food business.

The cycle, we still believe the beef cycle in general is going to be the cattle cycle overhaul listed <unk> continue to be a headwind in 2024 are being more of a trough year and embraer, but keep in mind, we're still headed.

Head of market gain share. This year, we continued to gain share I believe last year into this year and going into next year. So we think gained share it's going to help alleviate some of that concern and then in our food business the competitive positioning and our Rostock portfolio. The permits we plan to make there. We believe the combination of these coupled with what we alluded to in some of our newer sustainable.

Offerings will be bringing to market will give us some lift.

Yet as to low single digit volume within our food business protective.

It is conditional based on markets beginning to move with us and if you think about the year of 2020.

Downside as you see no doubt, obviously 2020, and now Youre seeing 15 and thinking about volume in the fourth quarter, you're going to be looking at roughly mid single digit down a couple of getting hit by price.

But the positive news within that hit it a little bit earlier is a statement about volume stabilization throughout 2023 really since the beginning of this year. So as soon as markets begin to inflect and we are seeing that right and it really is going to be a statement about the strength of our four quarter cycle stronger our fourth quarter is from a seasonal perspective, we very indicative about how we head into next year.

And so that is that's what we're kind of getting it on.

Beyond again broadly speak for Scott.

And CTO to grow et cetera that is intended to continue to improve our overall competitive positioning within protective.

Thank you please standby for our next question.

Our next question comes from George Staphos from Bank of America.

Yes.

Hi, everyone. Thanks for taking the follow on just on the discussion and again, thanks for all the detail and.

Again, the a much cleaner presentation I think.

Can you talk broadly about within food and within protective.

How much of your portfolio do you think right now as a percentage roughly.

Disadvantage on the cost curve.

Versus your your competition and how much would <unk> to grow in the other imperatives basically catch you up if need be in those businesses relatedly.

Some of your peers have highlighted recently, even though they're small wins.

We don't really remember this happening in the past.

Some small wins in the protein markets can you talk to why you think you're gaining share even with some of these headwinds thanks, guys and good luck in the quarter.

Yes, Thank you George and thank you for the commentary on the slides.

A couple of points I would make going back to food more broadly.

And I am actually aware of what you're referencing from who's making comments around taking share in our business in food and just to be clear there how we're performing relative to competition, how we're performing relative to the overall markets. We serve particularly the protein markets, specifically, where we have higher market share, but think of it. This is steve as well as pork, so red meat more broad.

<unk> do.

We do not see any form of competition in terms of real competitive threat within our bags business and the automation solutions that we offer we don't see a combination of what do you look at the materials, we provide or that you look at in the bag themselves. When you look at the automation equipment to provide there is no I would say from my perspective, we're in a competitive advantage.

We continue to be and will remain in the near term.

But going back to your point about than Canada.

To that question and so when you go back in the share gains go back from Q4 or coming to this year, where we're very confident that theyre not just share gains in the sense of their small customers that were taken over but large customers large plants that were taken away from competition that will continue to yield tailwind, which gave us a tailwind this year to perform better than market in that specific end market and.

We will continue to give us a tailwind going into next year.

So specifically about the pieces of the portfolio, where we have price sensitivity right. When you think about food youre looking at probably and this is a rough estimate, but maybe 10% to 15% of that business is specifically in the area and because when we talk about roll stock Holistically, it's really in sub segments of that business. There is areas, where there is I would say more.

Imperative differentiation in areas, where there's less competitive differentiation is in those areas that are less that we're focused on rationalizing the particular cost to produce so we can compete at a more pricing it becomes more and more of a factor than the competitive differentiation of materials themselves and then in protective we've talked about beforehand. The areas of our business that tend to be more pricing.

Different areas, where we are not coupled with automation and so youre thinking about roughly 25% of that portfolio that we're focused on and but the good news there is even though theres different products within that the overall manufacturing process innovation processes and the cost to serve is very similar roles. So when you. When you. When you are while it may sound like a larger piece of the portfolio.

So solving that problem in some ways a simpler because the applications are more there's less of them relative to the overall portfolio offering versus our Wal stock business.

George I would just.

So that very well just add on the roll stock part of the portfolio also the fact that we are pitching ourselves into very niche premium markets right now with the consumer's downgrading too.

Different products, we have.

Tend to open up.

The aperture of our roll stock business, not just to stay in the coronary market, but to go after a broader set of opportunities.

Thank you I'm showing no further questions at this time I would now like to turn it back to a meal for closing remarks.

I'd like to thank everyone for their time today, Dustin and I are excited about the opportunities ahead foresee and we look forward to speaking again in February.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

[music].

[music].

Good day and thank you for standing by welcome to the Q3 2023 sealed Air earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will be depressed star one one on you.

Telephone and you will hear an automated message advising you had just raised to withdraw your question. Please press star one one again. Please be advised today's conference is being recorded I would now like to hand, our conference over to your first speaker today, Brian Sullivan Investor Relations. Please go ahead.

Okay.

Thank you and good morning, everyone.

With me today are Neil Shamus interim co CEO and CFO.

As well as investments Simak interim co CEO and CFO.

Before we begin I would like to note that we have provided a slide presentation to supplement the call.

Please visit <unk> dot com, where today's webcast and presentations can be downloaded from our investor Relations page.

Statements made during this call, stating that outlook or estimates for future periods are forward looking statements.

These statements are based solely on information that is now available to us.

We encourage you to review the information in the section entitled forward looking statements in our earnings release, and slide presentation, which applies to this call.

Additionally, our future performance may differ due to a number of factors.

Many of these factors are listed in our most recent annual report on Form 10-K, and as revised and updated on our quarterly reports on Form 10-Q and current.

It reports on form 8-K, you can also find on our website or on the Sec's website.

We discuss financial measures that do not conform to U S. GAAP.

You will find important information on our use of these measures and the reconciliation to U S. GAAP in our earnings release.

Included in the appendix of today's presentation, you will find U S. GAAP financial results that correspond to the non U S. GAAP measures, we reference throughout the presentation.

I'll now turn the call over to Neil and Dustin Operator, Please turn to slide three and.

Neil.

Thank you Brian and.

Thank you for joining our call.

Today, I will discuss the leadership transition.

An update on the markets we serve.

Trends, we are seeing and how we operate in this dynamic environment.

<unk> will take you through our third quarter results provide updates on our 2023 outcome and talk about our progress and plans around capital allocation.

After that we will open the call for your questions.

Moving to slide three.

As previously announced customer myself, our interim co Ceos in addition to our product Roadmaps.

Before we move to the market and business update I would like to talk through how our co CEO operating model works.

First we expect this model to accelerate the turnaround of our results and improve overall execution.

Together, we will all see strategy connect that strategy to the overall business and deliver results.

I am focused on driving our innovation supply chain and commercial teams specifically, bringing these teams closer to improve our marketing strategies.

We innovate cost to deliver and commercial execution.

<unk> would be more focused on driving our cost takeout to grow program.

Optimizing our portfolio and strengthening our balance sheet.

While the automation of interest on our sustainability continues to be key enablers of long term growth. We are shifting our focus to address the current market dynamics.

As a result, we are reevaluating our solutions portfolio and go to market strategies with an intense focus on meeting our customers' evolving packaging needs and our core some protective markets.

Now turning to the market.

Our end markets remain challenged and visibility limited.

We are facing multiple headwinds, including soft retail demand.

And consumer trade down and the food markets compounded by a global capital cycle that has met down due to the U S.

Europe remains firmly in recession and the recovery across Asia has been smaller than we initially expected earlier in the year.

On the protective sides industrial output remains flat to down.

Economic uncertainty is increasing driving customers to put inventory below historical levels and reduced capital spending.

Destocking is moderating in North America continues.

In APAC.

Pricing pressures have increased as consumers and customers react to menu presentation.

Despite these headwinds since the beginning of the year.

The packaging business delivered largely flat sequential performance in.

In our prior back fluids, and liquids and automation businesses have performed very well.

Yeah.

In this economic environment, where our existing customers are challenged to grow.

Focused on acquiring new customers and taking share in the market. Thanks.

We are actually influenced by first investing and redeploying resources towards regeneration marketing and new sales roles that are closer to the markets our customers are operating.

Second.

Improving the competitive positioning of certain solutions within both food and protected by rationalizing the cost to serve across our portfolio.

Third.

Financing, our innovation efforts between long term higher risk reward and shorter term projects that address our customers' more immediate needs.

Lastly.

Continuing to meet with automation, which is our customers with a single point of contact for both materials and equipment.

These solutions solve their most critical packaging challenges and drive longer term sustainable efficiencies within their operations.

Yes.

On cost takeout to grow we have actions approximately $40 million in annualized run rate savings.

<unk>, 25% of our $140 million to $160 million protocol Graham.

As of September year to date, we have exited over 600 positions related to both reductions in volume on our network and workforce optimization.

On portfolio optimization, we've completed the previously announced closure of keeping with thermal temperature assurance business in quarter three.

Separately, we decided to exit our plant based roll stock business.

This was a sustainable offering within our consumer lending vertical.

We've displaced by more competitive solutions in the market.

Moving forward, we will continue to bring new sustainable solutions, while maintaining an enhanced emphasis our market competitiveness.

Whitewater and good progress on cost takeout to grow and portfolio optimization.

We need to accelerate to get ahead of future market impacts.

Before I turn it over to Duston I wanted to say that I'm excited to see with them.

While he has only been here for a short period, yes quickly come up to speed on the business pushed us to challenge every aspect of how we operate and became a trusted business partner.

Together, we are looking through the entire company for opportunities to grow in a cost effective way.

Further efficiencies and ensure we are world class in everything that we do.

This is an ongoing process and we will keep you updated as key decisions are made.

Now I would like to turn it over to <unk> to review our financial results.

Yeah.

Thank you Emil and good morning, everyone I would like to start by saying its a privilege to co lead C with the mill.

<unk> C for 13 years and has done a tremendous job transforming our supply chain is a proven leader with well respected within the industry and across all of <unk> I can't wait to see its impact across our commercial and innovation efforts and I'm really excited about all that we can accomplish together.

Now moving to third quarter results, let's turn to slide four.

In the quarter net sales were $1 3 billion.

Constant currency basis, adjusted EBITDA was $285 million down, 6%, excluding currency compared to last year.

These have improved sequentially, excluding M&A and FX since the beginning of the year.

Sequentially adjusted EBITDA improved about 2% from 280 million in the second quarter, mainly driven by improved volumes and better net operating cost.

Adjusted earnings per share in the quarter of 77 were down 27% compared to a year ago on a constant currency basis, primarily driven by lower adjusted EBITDA and higher interest expense.

Turning to slide five.

Local box contributed 6% to total company sales or approximately $82 million.

But was offset by organic declines driven by continued market pressures and customer destocking at protective as well as continued weakness in food retail end markets.

Third quarter adjusted EBITDA was 185 million, which included 17 million contribution to from local box decreased $8 million or 3% compared to last year with margins of 26% down 30 basis points.

This performance was mainly driven by lower volumes within protective.

As it relates to adjusted earnings per diluted share in the third quarter of <unk> 77 or.

Our adjusted tax rate was 25, 7% compared to 25, 6% in the same period last year.

We did not repurchase any shares in the third quarter.

Our weighted average diluted shares outstanding in the third quarter of 2023 was $144 9 million.

Moving to slide six.

In the third quarter food net sales of $893 million were flat on an organic basis with price favorability offsetting organic volume decline.

Volume decreased year over year by approximately 1% driven by continued weakness in retail demand, partially offset by growth in our food automation solutions.

<unk> adjusted EBITDA of $194 million in the third quarter was up 7% in constant dollars compared to last year with.

With margins at 21, 7% down 60 basis points.

The increase in adjusted EBITDA was mainly due to contributions from local box, partially offset by lower volume and unfavorable net price realization of $5 million.

Protective third quarter net sales of $488 million were down 15% organically driven.

Driven by volume declines in all regions from continued market pressures in the industrial and fulfillment markets and continued customer destocking activities within our Aps business.

Protective adjusted EBITDA of 95 million was down 15% in constant dollars third work with margins at 19, 5% up 30 basis points of.

The decrease in adjusted EBITDA was driven by lower volume, partially offset by favorable net price realization of $2 million and cost control activities.

Our effective adjusted EBITA margin improved 30 basis points compared to the second quarter, primarily driven by favorable cost control.

On slide seven we review our third quarter net sales by segment and by region.

Tom.

Net sales were flat with 10% growth in food, while protecting was down 15%.

By region, we grew EMEA by 1% offset by a decline of 1% in Americas and with Asia Pac flat.

Now, let's turn to free cash flow and leverage on slide eight.

During the third quarter, excluding the impact of the IRS to positive $175 million free cash flow was a source of cash of $183 million compared to $137 million source of cash in the same period a year ago.

Representing an increase of 33% year over year.

The primary driver of this improvement was significant inventory reduction, partially offset by lower earnings and higher interest costs.

Since the peak of Q2, we have reduced total debt by approximately $100 million exiting Q3 with a net leverage ratio of approximately four one times.

Our total liquidity position of $1 2 billion, including $281 million in cash and the remaining amount in our committed undrawn revolver.

Our capital allocation, we remain laser focused on debt reduction targeting to drive below three five times net debt to adjusted EBITDA over the next two years.

We also plan to refinance our December 2024 notes over the coming months.

Let's turn to slide nine to review our 2023 outlook.

Our full year 2023 guidance, which we reaffirmed last week remains unchanged.

Q3 top line performance was right in line with our expectations and adjusted EBITDA has exceeded original expectations due to better pricing and cost control activities.

However, going into Q4 will be a greater than expected FX headwinds and now target cell to be slightly below the midpoint of our full year range driven by approximately $30 million impact from FX with volume projections still in line with original estimates.

We continue to expect adjusted EBIT free cash flow to be in line with the mid point of the respective guidance ranges.

Adjusted EPS will be at the higher end of the range driven by lower depreciation and amortization expense, reflecting improved discipline around capital deployment.

Reaffirming our current guidance ranges despite exceeding expectations in Q3 reflects the limited visibility environment, we continue to operate in.

The outcome of our fourth quarter will depend on the strength of our seasonal tailwind related to the holiday cycle in both food and protective.

We continue to expect an L shaped recovery through 2023 and enter 2024.

Reflecting an increasingly uncertain macroeconomic environment driven by lingering destocking.

Getting consumer demand and a higher for longer rate environment.

At this point in time for fiscal year 2024.

Targeting flattish revenue growth low single digit volume growth offset by negative pricing.

We expect the duration of our cost reduction and operational excellence initiatives to continue to position us to deliver adjusted EBITDA growth next year.

While the transition in leadership can raise questions about disruption, let me be clear.

<unk> is a full bore support take any necessary actions to navigate the current market and maximize value for our shareholders and thats exactly what we intend to do.

Lastly, I'd like to close by thanking the 17000 plus seat team for their commitment to each other and for solving our customers' most critical packaging challenges.

And day out.

With that.

Our mill and I look forward to your questions.

Operator, we would like to begin the Q&A session.

Thank you at this time, we will conduct the question and answer session. Please note you will be limited to one question as a reminder to ask a question you need to press star one on yourself phone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

Okay.

And our first question comes from George Staphos from Bank of America Securities.

Hi, everyone. Good morning.

Thanks for the details.

Our mail it doesn't congratulations and best of luck with the transition.

The question that I had you talked about putting more resources.

Closer to the market and changing both Europe. It sounded like your commercial and if you will transformation strategies can you talk a bit more to what that means.

Specific examples on what you hope to gain from that and Relatedly in terms of being closer to the market.

Are you directly doing now to be out in the sites and now with your customers more frequently any changes to the way you're scheduling the way youre visiting with your employees as you mentioned, it's a transition you want to keep everybody focused thank you.

Thank you George.

Thank you for your question.

Again in the prepared remarks, we talked about two items. So the way, we're going to get closer to the markets.

And operate faster is essentially on two fronts. One is we're investing into.

Better revenue ops.

And capabilities into the company, but also we're moving more resources from working on longer term projects at a global level closer to the markets from the customers that we have.

Similarly, we're doing the same around our technical resources by balancing the efforts around those longer term higher risk reward projects and the shorter term.

Projects to address the customers more immediate needs in this tough environment.

And a couple of follow up points George to that and just in general when we talk about resources and you think about the shift in leadership that we've had now it's about making sure that we think it is resource allocation, we're replacing our efforts, particularly as we reinvest some of the the cost efficiencies we drive from CTO Debra was part of that broader program, it's about getting more feet on the <unk>.

As an example, investing more in marketing, but at the regional level investing more and.

And some of our revenue operations capabilities. The second piece of your question around meeting with our specifically customers and plants and Neil and I are going to start obviously in two weeks with our first beginning setup plant visits as an example, and we've already been meeting with customers. So I think in both fronts, while we're dividing and conquering in the short term, we're making sure that we're.

We're out in the field more than we have been historically.

Thank you please standby for our next question.

Our next question comes from Adam.

Olson from Goldman Sachs.

Hi, yes. Thank you good morning, everyone.

Maybe keying off of that discussion a little bit more.

Bill in the prepared remarks, there was a discussion or mention of reevaluating.

Some of the automation solutions offering.

And I guess.

I think longer term and as a growth driver for the company automation solutions digital has been the kind of.

Key kind of status drivers of sealed air market outgrowth over time.

Is that still the intention, but maybe less kind of big whale hunting and more.

For big projects and trying to just drive shorter term shorter term business wins, while we continue to pursue those longer term opportunities maybe help bridge kind of how how we think about.

Reallocating resources from longer term growth opportunities to near and kind of feel.

Feet on the street.

Yes.

Just again.

Automation digital sustainability, we're not abandoning those this day. These are key enablers of our strategy in terms of our execution on winning in the marketplace and we continue to drive and lead with automation, which provides the customers with a single point of contact for the entire solution.

We're continuing to drive into more automation capabilities in parts of our portfolio, which are lagging so with that sense.

The effort continues and there are key enablers, but while we're working on some of those more longer term capabilities, we need to execute on wins in the marketplace and thats, what we mean by shifting allocating resources.

Thank you please standby for our next question.

Our next question comes soon guests AMB Zavvi from Baird.

Hey, guys good morning.

Going back to George's question, I mean, the interim designation suggests a very short period of time and some of the things you are talking about or sort of longer term improvements and so on and so forth. So at this time as you see it over the timeline update interim designation is the cost outs that are going to take priority versus anything else on the commercial.

<unk> side I'm, just trying to think about prioritization.

So it's a it's a great question I think what's important.

To think about within that statement is that while it's an interim designation Amelia island partnering already together to run cost takeout to grow which is really encapsulating, both the cost takeout as well as efforts we're already driving with commercial so you have continuity with that program and then the two leaders that were already drive date today and so in both cases is being balance.

Or as part of the discussion in terms of the co CEO model, where we're focused on where our meals now spending more time than you already was in the commercial teams you have myself now focus more still dedicated to cost takeout to grow as an overall program. So it's really balancing both.

And then in the middle of that in the heart of that message is that we're focused on execution right and go ahead and improving how we can execute day to day is as we kind of move along that continuum and improve our overall results profile.

Thank you please standby for our next question.

Our next question comes from Matt Roberts from Raymond James.

Hey, good morning, everybody. Thanks for the time.

I just wanted to dig in a little bit more on the near term versus long term decisions you are taking.

Specific end markets or product Rollouts, you're referring to if I look at specific end market seems like automation is trended down which is consistent with your prior commentary. So should we expect that deceleration to continue or in other words like E. Commerce is trending down as a percent of your mix is there.

<unk> market share losses, or potentially end market related just just trying to see where some of those decisions are allocated.

Hello.

Thank you for that question so.

So in terms of the automation in terms of a trending down. This is mostly driven in terms of the current economic environment with the <unk>.

Rates on the uncertainty there is hesitation by many customers in terms of the timing of driving the capex.

That's what's driving that piece of it is not driven by reduction in focus and facts we.

We have very strong automation solutions in many parts of our portfolio and other parts. We don't have automation solutions and we are actively driving to to create those capabilities through partnerships and other pieces. So stay tuned on that as we go forward.

So it's really about the amount of it's the allocation of resources on balancing how many resources, we have whether it's within our innovation teams. Our commercial teams that are focused on very long projects versus those that are focused on.

Driving winning solutions today and winning today in the marketplace.

Thank you please standby for our next question.

Our next question comes from Jeff Zucker from J P. Morgan.

Okay. Thanks, Thanks very much.

But two part question.

Sure.

First part is when you look at liquid box.

And its growth initiatives since you've acquired it how would you assess it that as far as the growth initiatives as strong as you expected or are stronger or weaker.

And second on slide 16.

You show your protective prices.

2% lower after they've been positive can you discuss what's behind that.

Alright, let me let me first off on the first question and then Duston will take over the second one.

So first of all let's talk about just in general what's driving fluids, including the local box. The first piece is the.

The prior back fluid side, we've been making very good inroads both in terms of automation and driving our flex prep solution. We're now present in more than 25000 stores globally. By this was the solution mostly in the U S and it's been expanded.

So we have.

That part of our portfolio Thats continuing to drive growth on the liquid bulk side as was shared in the last quarter.

There were many.

<unk> issues.

Those we've actually accelerated the integration and brought in more resources from a broader company to address up.

We've also.

We expanded the portfolio so that we can attack the broader set of the markets.

Which was not accepting the law.

Limited portfolio of solutions, So we put those behind us.

Accelerated our growth into Q3 and into next year.

And Jeff This is a follow on point.

Point number two on.

On slide 16 in general some of the commentary in the prepared remarks references the pricing environment beginning to shift if you think about resin prices and protective is more affected by where we're at from a spot perspective in the first half it kind of came down to about the middle of the year and then it's trended sideways now is actually ticking up a little bit going going into the fourth quarter and so that's really what's reflected now.

Is that overall intensification of because volumes are down so intensifying of competition coupled with the rest of the trend is what's leading to that impact.

And the commentary we talked about 2024, that's what's playing into some of our thinking right now.

We could potentially see into the following year.

Thank you please standby for our next question.

Our next question comes from Josh Spector from UBS.

Yeah, Hi, Thanks for taking my question. So just regarding the guidance for this year you reiterated the midpoint that EBITDA. If you do the math and <unk> is down about 100 million from <unk> with you. The incredible abnormal seasonality just wondering I understand the need to be conservative and want to be conservative on Europe.

But what are the moving pieces that gets you to that scenario and our customer conversation, reflecting that view at all at this stage. Thanks.

Josh I appreciate the question and as I mentioned back in our prep remarks on the commentary you just made around being cautious.

Again, our fourth quarter right now this point in time and kind of when you think about how it came through the first half into the second half of the year. It does reflect some of the limited visibility environment that we're in right now and so the second piece. If you go back to prepared remarks, we talked about our quarter.

Impact, which is primarily driven by GBP in Europe piece of our business is also having a corresponding impact on our bottom line, which is obviously non operational now what could lead in terms of differences.

How we talk about the fourth quarter, we talked about in prior remarks, and it's really driven by the strength of our seasonality in our business, whether it's think of it as the e-commerce cycle I can affect effect, our protective business or the food cycle relative to holidays that can affect our food business.

So those are the two areas the strength of that could really determined that outcome and what we've seen so far in the month of October that we are on track and but obviously more to more to come there.

That's kind of the variability in outcomes.

Thank you please standby for our next question.

Our next question comes from Anthony Petrone <unk> from Citi.

Good morning.

You talk you've talked about rationalizing cost to serve across the portfolio and exiting some product lines like that will stock business. Just wondering with new management approach are there components of the business that might be larger than it might have a more logical owner and maybe could help accelerate deleverage.

King or would those kinds of dispositions or asset sales or larger portfolio moves would those be kind of outside the mandate given kind of the interim designation or how should we think about that.

Great question. This is Dustin speaking so as we mentioned beforehand kind of even going back into Q2, we've really kicked off this effort portfolio optimization right.

Chemotherapy was already announced out we've talked about the plant based roll stock business, we've announced today that effort is continuing and now accelerating right. As we go from here. The mandate is really to take any actions necessary to create value, whether it's large and small so we're looking at the entire portfolio trying to understand whats best fit for purpose moving forward.

And then obviously deleveraging is a primary focus we talked about that in terms of getting trying to get below three five times within the next two years or less and certainly opportunities to deleverage now many other factors come into that perspective in terms of where we sit right now and overall.

We believe to be nearing the bottom of an overall cycle. So again, we're factoring timing factoring kind of overall environment, we're operating with and from a rate environment that markets et cetera, and but all of those things are kind of factored into.

How we're thinking about things, but just again just to finalize that point is this is intended to accelerate those type of actions that decelerated or whether they're small or large.

Thank you please standby for our next question.

Our next question comes from Lawrence de Maria from William Blair.

Hi, Thanks, good morning.

Two quick things here.

We ended the bylaws I guess, maybe more difficult to nominate director show. The question really is whether that preemptive or reactionary to any potential actavis and secondly.

And related to that.

Look to the protective portfolio, assuming youre thinking about doing comparing so curious if you are still looking at that and any updates on how much of that portfolio might be considered preparing and where we are in that process. Thank you.

Hey, Larry This is Dustin speaking so on the first point on the on the 8-K, we filed related to the amendment to our bylaws, that's really related to an updated SEC rule around universal proxy, it's very common for all kind of companies in the process of doing some form of that which is really just combining the ability for I won't give you the technical details but.

The ability for whether a shareholder ourselves to raise kind of nominees and devoting aspect of it that consolidates onto a card in as part of improving and continuing to improve our overall corporate governance and.

And then the last piece when you talk about the protect the portfolio in line with the prior question protective were absolutely go into the portfolio and looking at areas, where we can optimize both thermal is an example of that.

I won't give an update relative to status of backup right now in the process of dissecting, many different pieces, which each in their own way take level of effort and energy to get through understand.

Obviously viability in the market today.

<unk>, and then really that disposition going forward relative to timing so.

There's no update in terms of like a progress personally other than it's underway and we're accelerating the pace.

Thank you please standby for our next question.

Our next question comes from Arun Viswanathan from RBC capital markets.

Great. Thanks for taking my question.

Congrats on the on the new roles there to both of you.

Just wanted to understand maybe yes.

Continuing on the last theme.

Maybe you can help us understand.

The synergies between the two businesses and where automation and maybe some of the other initiatives you have overlap.

Thinking that we have seen these huge double digit declines on volume in protective.

And do you think it's necessary to take more decisive action and maybe.

Separating protective portfolio.

What really makes it important to keep within the portfolio as is.

So I'll answer that question really in two parts, obviously the businesses, obviously create theres a lot of similarity in terms of overall raw materials resins that are used within both businesses and so one of the key advantages of our company and the scale that we operate at is the level of purchasing power that we have in that particular.

Space right and so any form of action like that could lead to.

Form some type of dis synergy beyond beyond kind of thinking about how you would structure kind of that disposition between the two businesses the second pieces.

In terms of.

The comment about should you be more decisive about where we're at and what I would remind everybody is thinking about protective as we are sitting at from our point of view towards the bottom of an overall cycle right, which is really important to take into consideration from a timing point of view second broader market dynamics that are in play around taking an action like that that could effectuate the timing is.

When you chose to make an action like that and the second piece.

Round.

Protective holistically and the comment about shared aspects underneath it.

Some of these strategies, whether it's automation they are very independent for each business with the refresh Duane the same outcome right relative to the points that bill made earlier around the combination of materials and and equipment together, drawing a bigger pull through for us, but having huge advantages for overall customers relative to having a single point of contact from a relationship perspective from a service.

Perspective, and an overall value creation. So that's that's where we're at.

Thank you please standby for our next question.

Okay.

Our next question comes from Gabe from Wells Fargo.

Doug.

Thank you and thanks for the Chris messaging this morning.

Two part question. The first is you had a large customer put out a press release, saying that they are migrating I think one of the first.

Locations here in Ohio actually to 100% paper based.

Curious if this is specifically what you were referencing in terms of working more closely with your customers.

And this is require sort of additional investment either in the P&L and our capex side.

And I guess Relatedly, if there is some sort of P&L impact.

Or would that be sort of incorporated or included in <unk>.

Still being able to achieve your 140 to 160 of cost out to grow and I apologize if I missed it. So the second part is I think duston, you mentioned, a $30 or $30 million discrete.

Fourth quarter revenue item, what was that associated with and then in your commentary as well I know you talked about going into 'twenty for price cost being a headwind, but specifically in Q4 with the moves that we've seen in polyethylene as it relates to timing.

Is there.

Bracket that you can give us $5 million to $10 million or so.

You guys are incurring specifically in the fourth quarter.

Yeah, Great question, So I'm going to hit the first question you have around the discrete item and then I'll bring it back to Neil Eagle walk through your points around kind of paper based solutions and where we're headed so on the first one for what we call it out for the fourth quarter. The non operational issue with SaaS. So if you think about where we were in July and then we're right now today.

Days, and where the GBP and the Euro moved right thats, creating an FX impact in the fourth quarter to the tune of about $30 million right and other secondary point, we made to that was that underlying volume estimates that we made are still still intact right for both businesses and then I'm going to turn it to a meal to hit on the question on the first question.

And then just paper or plastic threes around the sustainable offerings that we bring to the marketplace and thats both.

On the protective on the on.

The flip side, so, yes, getting closer to our customers, so thats where we.

We're at the table, helping our customers choose the right solution.

And you can see in our.

Parts of our portfolio, we were nights and we've seen some of that impact.

In terms of share loss, but our paper solutions continues to make progress on the protective side, both on the automation piece of protective as well as on the materials side on the food side.

We are we aren't continuing to push.

So our sustainability pledge around bringing our solutions to being.

100% recyclable reusable just to give you a perspective, we're around 51% of the portfolio.

Wait today.

We did try to bring in that plant based <unk> solution.

But unfortunately that was not successful in the market as the market shifted.

It will be.

Shortly announcing.

Interesting sustainable solution will bring in some markets around roll stock.

But.

Let's talk about that in our next call.

Thank you please standby for our next question.

Our next question comes from Mike <unk> from <unk> Securities.

Thank you.

You mentioned PC.

You mentioned your parents facing headwinds you mentioned again today.

U S catalyst cycle customer preference shifting needs the food automation slowdown.

Can you talk about any of the initiatives, you're starting to see where maybe you have accelerated your new roles to reverse that and to drive better growth and then just quickly on the second question. If you take out liquid box in Q what would volume.

But again.

<unk> declined X liquid luck. Thank you.

So great Great question and a couple of points to make one is and I wanted to just clarify the comment on automation just to make this really clear is that automation is still performing very well in this quarter and very well for the full year right. What we're referencing in terms of commentary is that going forward from a sales person.

<unk>, which is indicative of some of the pressure in 2024, it is under pressure and Thats really related to orders when someone purchases. Our automation solution. There is a decent lead time before it's delivered which is a statement about kind of the future into 2024, but it continues to be very strong our offerings continue to be very relevant and we are still very focused on those platforms in both businesses and bring them to me.

Market.

Okay, and then going back to food overall relative to the cattle cycle.

And impacts in the quarter in general I think that we're doing to accelerate it I would tell you go back to the mills commentary around competitive positioning in certain products as part of our cost takeout to grow within food and protective we're specifically focused within that business going back to this concept around the plant the plant based for all of our business that we are disposing of where for.

<unk> on a roll stock business right at a competitive positioning within our bags business in the bags and the food automation, we have around our <unk> business. We're performing actually ahead of market and doing very well this year, considering some of the kind of negative market trends and our roll stock business, which we had commentary beforehand.

If you go back to last year. This is the one that was really impacted by the specialty raising prices we had in 2022 into 2023.

And so as that business, specifically theres continued intensifying pressure around competitiveness pricing and so we're working on is reducing the cost to serve including the cost to deliver and produced in that area. So it can be more competitive more relevant in the marketplace and drive growth going into 2020.

Thank you please standby for our next question.

Our next question comes from Phil <unk> from Jefferies.

Hey, guys.

Just any kind of breezed through early 2020 for outlook. So I just want to make sure I heard you correctly, you're effectively calling for flat sales up volumes in.

<unk> EBITDA in 2024 can you kind of help on tax component a little more between how.

How youre thinking about volume growth between the two segments, particularly protective just because it's been under pressure price Cross and then progress on the restructuring efforts last quarter, you're calling for mid single digit EBITDA growth.

Don't know if thats still achievable, especially with the FX headwinds youre seeing at this point.

Yeah, Great question, Thank you for raising it.

Couple of comments keep in mind that right now we're sitting in November we talked about the limited visibility environment. We're operating in so we're still very much in our process of firming up kind of how we think about 2024.

And so when you think about.

Think about the food business.

The cycle, we still believe the beef cycle in general is going into the cattle cycle overhaul listed <unk> continue to be a headwind in 2024 being more of a trough year than in prior but keep in mind. We're still ahead of market to gain share. This year, we continue to gain share of legal and last year into this year and going into next year. So we think gained share it's going to help alleviate some of that concern.

And then in our food business, the competitive positioning and our Rostock portfolio. The permits we plan to make there. We believe the combination of these coupled with what we alluded to in some of our newer sustainable offerings, we will be bringing to market will give us some lift and get us to low single digit volume within our food business protective again as it is.

Conditional based on markets beginning to move with Us and if you think about the year of 2020.

The downside is you see no doubt, obviously 2020, and now Youre seeing 15 and thinking about volume in the fourth quarter, we will be looking at roughly mid single digit down a couple of weeks getting hit by price but.

The positive news within that hit it a little bit earlier is a statement about volume stabilization throughout 2023 really since the beginning of this year. So as soon as markets begin to inflect and we are seeing that right and it really is going to be a statement about the strength of our four quarter cycle a stronger our fourth quarter is from a seasonal perspective, we very indicative about how we head into next year.

And so that is that's what we're kind of getting it on.

Beyond again broadly speak for Scott and CTO to grow et cetera that is intended to continue to improve our overall competitive positioning within protective.

Thank you please standby for our next question.

Our next question comes from George Staphos from Bank of America.

Hi, everyone. Thanks for taking the follow on just on the discussion and again, thanks for all the detail and.

Again, the a much cleaner presentation I think.

Can you talk broadly about within food and within protective how much of your portfolio do you think right now as a percentage roughly is disadvantaged on the cost curve versus your.

Competition, and how much would <unk> to grow in the other imperatives basically catch you up if need be in those businesses relatedly.

Some of your peers have highlighted recently, even though they're small wins we.

We don't really remember this happening in the past.

Some small wins in the protein markets can you talk to why you think you're gaining share even with some of these headwinds thanks, guys and good luck in the quarter.

Yes, Thank you George and thank you for the commentary on the slides. So a couple of points I would make going back to food more broadly and I am actually aware of what you're referencing from who's making comments around taking share in our business in food and just to be clear there how we're performing relative to competition, how we're performing relative to the overall markets we serve.

Particularly the protein markets, specifically, where we have higher market share of I think of it. This is Steve as well as pork, so red meat more broadly.

Not see any form of competition in terms of real competitive threat within our bags business and the automation solutions that we offer we don't see a combination of what you look at the materials, we provide or that you look at the banks themselves are you look at the automation equipment to provide there is no I would say from my perspective, we're in a competitive advantage.

We continue to be and will remain in the near term.

So, but going back to your point about Canada.

So that question and so when you go back in the share gains go back from Q4 or coming due this year, where we're very confident that theyre not just share gains in the sense of they are small customers that we're taking over but large customers large plants that were taken away from competition that will continue to yield tailwind, which gave us a tailwind this year to perform better than market in that specific.

And market and we will continue to give us a tailwind going into next year.

Specifically about the pieces of the portfolio, where we have price sensitivity right. When you think about food youre looking at probably and this is a rough estimate, but maybe 10% to 15% of that business is specifically in the area and because when we talk about roll stock Holistically, it's really in sub segments of that business. There is areas, where there is I would say more.

Imperative differentiation in areas, where there's less competitive differentiation is in those areas that are less that we're focused on rationalizing the particular cost to produce so we can compete in a more pricing it becomes more and more of a factor than the competitive differentiation of materials themselves and then in protective we've talked about beforehand. The areas of our business that tend to be more pricing.

For areas, where we are not coupled with automation and so youre thinking about roughly 25% of the portfolio that we're focused on and the good news there is even though theres different products within that the overall manufacturing process innovation processes and the cost to serve is very similar roles. So when you. When you. When you are while it may sound like a larger piece of the portfolio.

<unk> solved that problem in some ways simpler because the applications are more there's less of them relative to the overall portfolio offering versus our roll stock business.

And George I would just.

So that's very well just add on the roll stock part of the portfolio also the fact that we are pitching ourselves with two very niche premium markets right now with the consumer's downgrading too.

Different products, we have.

<unk> tend to open up.

The aperture of our Rose-slug business not just to stay in the coronary market, but to go after a broader set of opportunities.

Thank you I'm showing no further questions at this time I would now like to turn it back to the meal for closing remarks.

I'd like to thank everyone for their time today, Dustin and I are excited about the opportunities ahead foresee and we look forward to speaking again in February.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.