Q3 2023 Reynolds Consumer Products Inc Earnings Call
Speaker 1: Greetings and welcome to the Reynolds consumer product third quarter 2023 earnings conference call at this time all participants are no listen on
Greetings and welcome to the Reynolds consumer Products' third quarter 2023 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Speaker 1: A brief question and answer session will follow the formal presentation.
Speaker 1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a...
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker 1: It is now my pleasure to introduce your host, Mark Flexberg, Vice President of Investor Relations. Thank you, sir.
It is now my pleasure to introduce your host Mark Plattsburgh, Vice President of Investor Relations. Thank you Sir you may begin.
Speaker 2: Thank you operator, good morning everyone and thank you for joining us on Reynolds Consumer Products 3rd quarter 2023 earnings conference call. Please note that this call is being recorded in webcast on the investor relations section of our corporate website at rentalsconsumerproducts.com.
Thank you operator, good morning, everyone and thank you for joining us on Reynolds consumer Products' third quarter 2023 earnings Conference call. Please note that this call is being recorded and webcast on the Investor Relations section of our corporate website at Reynolds consumer products Dot com.
Speaker 2: Our earnings press release and accounting presentation slides are also available.
Our earnings press release and accompanying presentation slides are also available.
Speaker 2: With me on the call today, our Lance Mitchell, our president and chief executive officer, Michael Graham, our chief financial officer, and Scott Huckins, who recently joined our CP and becomes chief financial officer on November 13th.
With me on the call today are Lance Mitchell, our President and Chief Executive Officer, Michael Graham, Our Chief Financial Officer, and Scott Huckins, who recently joined our CPE and becomes Chief Financial Officer on November 13th.
Speaker 2: For our call, Lancel discuss our results, the macroeconomic environment, and our category performance. Michael will provide additional detail on the third quarter, our guide and capital allocation. Following, prepare the March 2,
For our call Lance will discuss our results the macro economic environment and our category performance.
Michael will provide additional detail on the third quarter, alright, guys and capital allocation.
Following prepared remarks, we will open the call for questions.
Speaker 2: Before we begin, I would like to provide a couple reminders. First, this morning's discussion may contain four looking statements based on current expectations and beliefs. These statements are subject to risks and certain keys and changes and circumstances that could cause actual results and outcomes to differ materially from those described today. Please refer to our risk factors section in our SEC filing, including in our annual report on form 10K and our quarterly report on form 10Q.
Before we begin I would like to provide a couple of reminders first this mornings discussion may contain forward looking statements based on current expectations and beliefs. These statements are subject to risks uncertainties and changes in circumstances that could cause actual results and outcomes to differ materially from those described today.
Please refer to our risk factors section in our SEC filings, including in our annual report on Form 10-K, and our quarterly report on Form 10-Q.
Speaker 2: Please note that the company does not intend to update or alter these four looking statements to reflect events or circumstances arising after the call.
Please note that the company does not intend to update or alter these forward looking statements to reflect events or circumstances arising after the call.
Speaker 2: Second, during today's call, we will refer to certain non-GAPH or adjusted financial measures.
Second during today's call, we will refer to certain non-GAAP or adjusted financial measures.
Speaker 2: Reconciliation of these gaps and on- GAAP financial measures are available in our earnings press release, investor presentation deck and 4102. Copies of which can be found on the investor relation section of our site. Now I'd like to turn.
Reconciliations of these GAAP to non-GAAP financial measures are available in our earnings press release Investor presentation deck and Form 10-Q.
Copies of which can be found on the Investor Relations section of our site.
Now I'd like to turn the call over to Lance. Thank.
Speaker 2: Thank you, Mark, and good morning, everyone. Please join me in welcoming Scott Huckins.
Thank you Mark and good morning, everyone.
Please join me in welcoming Scott Huckins.
Speaker 2: God comes to our C.P. to great moments our history of our company.
Scott comes to our C. P was a great moment of our history of our company.
Speaker 2: with our brands, our market position, and financial profiler strong and getting stronger. He's with us on the call of days.
When our brands our market position and financial profile are strong and getting stronger.
He is with us on the call today as part of the transition plan.
Speaker 2: I'll begin by discussing our results. Then I will turn to the macroeconomic environment, our performance in our largest categories, and what we're doing to improve the volume trends in disposable tableware.
I'll begin by discussing our results then I will turn to the macro economic environment.
Our performance in our largest categories of what we're doing to improve the volume trends and disposable tableware.
Speaker 2: After that, I'll turn the call over to Michael to provide more detail on the quarter in our guide.
After that I'll turn the call over to Michael to provide more detail on the quarter and our guidance.
Speaker 2: The RCP team continues to perform very effectively in a dynamic, challenging, economic environment. And I'm extremely proud of all that we would come.
We are C. P team continues to perform very effectively in a dynamic challenging economic environment and I'm extremely proud of all that we've accomplished we've.
Speaker 2: We've delivered net revenues and earnings at the upper end of our expectations for the quarter. We've expanded EBITDA margin more than 500 basis points than each of our businesses reflecting effective execution of our plans to increase share across our CP, continue discipline investments in our business, and additional successful implementation of the Reynolds Coaching and Baking Recovery Plan.
Delivered net revenues and earnings at the upper end of our expectations for the quarter, we expanded EBITDA margin more than 500 basis points in each of our businesses, reflecting the effective execution of our plan is to increase share across our C. P.
Continued disciplined investments in our business.
And additional successful implementation of the Reynolds cooking and baking recovery plan.
Speaker 2: We converted higher earnings into significant cash flow, resulting in our de-labouraging more quickly than previously anticipated.
We've converted a higher earnings into significant cash flow.
Solving and our deleveraging more quickly than previously anticipated.
Speaker 2: We introduced the HEPI brand in Presto Close, who's that category, and increased loyalty with Gen Z and millennial.
We introduced the hefty bran impressed to close feedback category increased loyalty with Gen Z and millennials.
Speaker 2: And following quarter end, we acquired a company that is a research driven business, which will allow us to accelerate production and commercialization of affordable, high quality sustainable products and material blood.
And following quarter end, we acquired a company that has a research driven business.
Will allow us to accelerate production and commercialization of affordable.
Quality sustainable products material blends as.
Speaker 2: As you know, US households are facing significant economic challenges, including inflation and rising interest rates and other pet wins, which have impacted sales volume across consumer states.
As you know U S households are facing significant economic challenges, including inflation and rising interest rates and other headwinds, which have impacted sales volume across consumer staples.
Speaker 2: We continue to respond to these challenges by adapting and innovating to meet consumers' needs. Leveraging our unique business model, including brands and store brands, executing plant increases in promotion and advertising, and continuing strong management of costs and manufacturing productivity.
We continue to respond to these challenges by adapting and innovating to meet consumers' needs leveraging our unique business model, including brands and store brands executing planned increases in promotion and advertising.
And continuing strong management of costs and manufacturing productivity.
Speaker 2: And the result, our retail sales volume is stable growing.
As a result, our retail sales volume is stable to growing.
Speaker 2: in our three largest categories in your implementing actions to improve disposable tableware trust.
In our three largest categories and you're implementing actions to improve disposable tableware trends.
Speaker 2: We are also benefiting from continued consumer shifts to on track channels. As a reminder, a large portion of our business is not tracked. I...
We are also benefiting from continued consumer shifts to untracked channels. As a reminder, a large portion of our business is not tracked.
I will now review our performance by business segment.
Speaker 2: The Reynolds cooking and baking team has done an outstanding job executing the Reynolds recovery plan while also increasing market
The Reynolds cooking and baking team has done an outstanding job executing the Reynolds recovery plan, while also increasing market share.
Speaker 2: Volume, operational and growth profit objectives set at the start of the year were met for the third quarter in a row.
Volume operational and gross profit objectives set at the start of the year.
For the third quarter in a row.
Speaker 2: Our primary fuel production facility located in Louisville has stabilized at historical production rates. An extensive work continues to further increase efficiencies to expand March.
Our primary foil production facility located in Louisville.
Has stabilized with historical production rates and extensive work continues to further increase efficiencies to expand margins.
Speaker 2: Reynolds wrap continued to drive the household oil category, our second largest category, retaining the first half significant share gains and increasing share nearly 300 bases points in the course.
Throughout continued to drive D household foil category, our second largest category retaining the first half significant share gains and increasing share nearly 300 basis points in the quarter.
Speaker 2: We increased household penetration for Reynolds raft among all major demographics, while also raising aid in and un-aided awareness for Reynolds, oil and parchment among millennials.
We increased household penetration for Reynolds wrap among all major demographics, while also raising aided and unaided awareness for Reynolds foil and parse but among millennials.
Speaker 2: And we expanded distribution of Reynolds Kitchens Air Fireliners in the US and Canada while increasing distribution of Reynolds Kitchens' day flat parchment paper with smart grid, national.
And we expanded distribution of Reynolds kitchens are for airliners in the U S and Canada, while increasing distribution of Reynolds kitchen stay flat parchment paper with smart grid nationally.
Speaker 2: Reynolds now surpasses $1 billion in annual retail sales.
Reynolds now surpasses $1 billion in annual retail sales.
Speaker 2: And we on the capabilities, share strength and plans to grow runnels cooking and baking volume. And more.
And we have the capabilities share strength and plans to grow Reynolds cooking and baking volume and margins.
Speaker 2: Our waste and food bag businesses are also performing well driven by the hefty brand and our integrated brand and store brand model.
Our waste and food bank businesses are also performing well driven by the hefty brand and our integrated brand and store brand model.
Speaker 2: FD recal sales are growing and continue to climb towards $2 million led by sales of waste bags, our largest category.
<unk> retail sales are growing and continued decline towards $2 billion led by sales of waste bags, our largest category.
Speaker 2: FFD-acquired additional waste bags here in the quarter driven by innovation.
Etsy acquired additional waste bags here in the quarter driven by innovation.
Speaker 2: Our largest innovation of the last three years, Happy Fabuloso, was recently recognized by Cercana, previously known as
Our largest innovation over the last three years <unk> was recently recognized by its your Cana.
Previously the us IRI.
Speaker 2: As the number three pay setter brand for 2023, an ACB for both fabulous and since, Lavender and Leman continued to increase.
As the number three pacesetter brand for 2023, and ACD for both Fabulous incentives lavender in London continue to increase.
Speaker 2: Our Presto business gained additional shares for brand food backs, our third largest category.
Our Presto business gained additional share of store brand food bags, our third largest category.
Speaker 2: And hefty introduced, hefty branded press to close through the extra in the quarter.
<unk> introduced <unk> branded press to close food bags during the quarter.
Speaker 2: Heptive press to close through bags, come at multiple sizes, and offer consumers the features and reliability of a hefty brand.
Happy for us to close three bags come in multiple sizes and offer consumers the features and reliability of the hefty brand.
Speaker 2: Happy Renew, our community-based program to aid curbside recycling and part of recycled plastics, expanded to the greater Cincinnati market in October .
Empty renewed our community based program to a curbside recycling or hard to recycle plastics expanded to the greater Cincinnati market in October.
Speaker 2: And we drove a major pickup in social media impressions with hefty, cinema, and pumpkin spice waste bags available for a limited time this fall. And the reintroduction of hefty, zoon-piles disposable plates and August .
And we broke a major pickup in social media impressions with hefty cinnamon pumpkin spice waste bags.
Billable for a limited time this fall.
And the reintroduction of <unk> disposable place in August.
Speaker 2: DuPal's online-only launch drove more than 3 billion social media impressions for the Hepti brand, and we plan to extend the relaunch to other major channels in 2024.
Do online only launch drove more than 3 billion social media impressions for the hefty brand and we plan to extend the relaunch to other major channels in 2024.
Turning now to our disposable tableware segment.
Speaker 2: The Hefty Fableware team has done an exceptional job recovering profitability, and the Hefty brand is holding share in the category.
With hefty tableware team has done an exceptional job of recovering profitability and the Pepsi brand is holding share of the category.
Speaker 2: In recent months, the team has also done extensive research to identify opportunities to improve paperware volume trends in response to elasticity pressures, which are impacting the entire category.
In recent months. The team has also done extensive research to identify opportunities to improve tableware volume trends in response to elasticity pressures, which are impacting the entire category.
Speaker 2: As a result, we have begun implementing comprehensive plan to improve tableware's top line performance, drawing on proprietary consumer insights and extensive experience aligning with our retail partners on pack sizes and promotions. That hit key retail price points. Here are some of the
As a result, we have begun implementing comprehensive plan to improve <unk> top line performance.
Growing on proprietary consumer insights and extensive experience aligning with our retail partners on pack sizes and promotions that hit key retail price points.
There are some other highlights of those plants.
Speaker 2: We've increased advertising, and hefty party cuts in disposable plates to bring in lapsed and a lot of users. Reminding them, we'll do the dishes. In addition to showcasing party cuts used for crafting another non-fund occasion.
<unk> advertising, a hefty party costs and disposable plates to bring lapsed and lost users reminding them. We'll do the dishes. In addition to showcasing the party comps used for crafting and other non food occasions.
Speaker 2: with modifying features in the splints, based on very encouraging results from a new feature we recently trialled. We are adjusting counts while still providing consumers the value they seek from large tax sizes.
We're modifying features and displays based on very encouraging results from our new feature. We recently trial, we are adjusting counts, while still providing consumers the value they seek from large pack sizes.
Speaker 2: In disposable plates, for example, we can make smaller doctions to pack counts and plate size, allowing for reductions in everyday retail price.
And disposable plates. For example, we can make small reductions to pack counts and plate size, allowing for reductions in everyday retail pricing.
Speaker 2: And we are adjusting key pack sizes promoted price point.
And we are adjusting key pack sizes promoted price points.
Speaker 2: It'll take time to realize an impairment to disposable tableware volume.
It will take time to realize an improvement in disposable tableware volume trends.
Speaker 2: We have a high level of confidence and that improvement based on the advantages of our brand and store brand model. Our experience managing our categories together with our retail partners. And our previous implementation of proven plants and dried products.
We have a high level of confidence in that improvement based on the advantages of our brand and store brand model our experience managing our categories together with our retail partners and our previous implementation approved plans to drive product growth.
Speaker 2: We began in 2023, committed to driving our categories, expanding margins and increasing cash flow in a challenging macroeconomic environment, and we've been very successful doing.
We began in 2023 committed to driving our categories, expanding margins and increasing cash flow and a challenging macroeconomic environment and we've been very successful doing that we recover margins across our CP and anticipate further margin expansion we're.
Speaker 2: We recovered margins across our CP and anticipate for a large and of
Speaker 2: We're paying down debt faster than initially expected. We are increasing share in the vast majority of our business. And we're implementing proven plans to improve trends in disposable tables.
We're paying down debt faster than initially expected.
We are increasing share in the vast majority of our business and we are implementing proven plans to improve trends in disposable tableware.
Speaker 2: All this adds up to being very well positioned for further deleveraging and for sustain and volume and earnings growth beyond 2023.
All of this adds up to being very well positioned for further deleveraging and for sustained volume and earnings growth beyond 2023.
Speaker 2: Now before I end the call over to Michael, I would like to remind you that Michael will remain in an advisory role to the company after Scott becomes CFO and until Michael's retirement early next year.
Now before I hand, the call over to Michael I would like to remind you that Michael will remain in an advisory role to the company after Scott becomes CFO and until Michaels retirement early next year.
Speaker 2: I'd also like to trust my gratitude, Michael, for as many years of service to the company.
I'd also like to express my gratitude to Michael for his many years of service to the company.
Speaker 2: We've accomplished a lot together, including the growth of the grant-owned consumer product.
We've accomplished a lot together, including growth of Reynolds consumer products.
Speaker 2: Introduction and expansion of our Revolution Program of Business Transformation Initiative.
Production and expansion of our Revolution program.
Business transformation initiatives with.
Speaker 2: successful listening as a publicly traded company and steady financial management through a period of unprecedented macroeconomic volatility.
The successful listing as a publicly traded company and steady financial management through a period of unprecedented macroeconomic volatility.
Michael.
Speaker 2: We're trusted friends. And I know that I speak for all of us at RCP when I tell you that you will be missed as our business partner.
We're a trusted friend.
And I know that I speak for all of us at RCP, what I'd tell you that you will be missed as our business partner.
Over to you.
Speaker 2: Thank you, Lance. I really appreciate the kind words and good morning, everyone. I'll start by reviewing third quarter results and then turn to our guide. Net revenues were the, at the upper end of our guide, reflecting on 1% the increase in pricing and volume consistent with our expectations. Execution and consistency were strong as each business generated over 500 basis points of EBITDA margin.
Thank you Lance I really appreciate the kind words and good morning, everyone I'll start by reviewing third quarter results and then turn to our guidance.
Net revenues were at the upper end of our guidance, reflecting a 1% increase in pricing and volume consistent with our expectations execution and consistency were strong as each business generated over 500 basis points of EBITDA margin.
Speaker 2: We demonstrated strong balance sheet discipline, including reductions in working capital, primarily driven by strong inventory.
We demonstrated strong balance sheet discipline, including reductions in working capital, primarily driven by strong inventory management.
Speaker 2: As a result, we grew operating cash flow by nearly $200 million. By comparison to the third quarter of 2022 and improving luck.
As a result, we grew operating cash flow by nearly $200 million by comparison to the third quarter of 2022 and improved leverage.
Speaker 2: Met debt to twirling 12 months, adjusted even a decrease from 3.8 times at the end of 2022 to 3.1 times at the end of September .
Net debt to trailing 12 month adjusted EBITDA decreased from three eight times at the end of 2022 to three one times at the end of September.
Speaker 2: And we made an additional voluntary debt payment of $100 million subsequent to the quarter day.
And we made an additional voluntary debt payment of $100 million subsequent to the quarter and as a reminder, our term loans are floating rate facility.
Speaker 2: As a reminder, our town loans the floating rate to simple.
Speaker 2: We have heads to approximately 55% of the floating rate risk of pouring us flexibility to be covered without penalty while providing protection and predictability in this volatile interest rate and buy.
Have hedged approximately 55% of the floating rate risk affording us flexibility to delever without penalty, while providing protection and predictability in this volatile interest rate environment.
Speaker 2: Turning to our guide, we raise a familiar earnings expectations to the uprend of our previous earnings, reflecting better than expected third quarter results and unchanged earnings expectations for the fourth quarter. Our net revenue estimate for the year is now 2% lower than prior year net revenues, consisting of 2% higher pricing, which is unchanged and 4% lower by.
Turning to our guide we've raised our full year earnings expectations to the upper end of our previous range, reflecting better than expected third quarter results and unchanged earnings expectations for the fourth quarter.
Our net revenue estimate for the year is now 2% lower than prior year net revenues, consisting of 2% higher pricing, which is unchanged and 4% lower volume.
Speaker 2: Consolidated retail line for the years has estimated to be two percent below Consolidated retail line in the prior year.
Solid unit retail volume for the year is estimated to be 2% consolidated retail volume in the prior year.
Speaker 2: In the fourth quarter, we expect stable to grow in retail volume in a low-moon foil, waste bags and food bags, in lower disposable cable wear volume, resulting in a consolidated retail volume decline of 2 to 4%. Our fourth quarter earnings estimates are unchanged in spite of the lower fourth quarter revenue.
In the fourth quarter, we expect stable to growing retail volume in aluminum foil waste bags, and food bags and lower disposable tableware volume, resulting in a consolidated retail volume decline of 2% to 4%.
Our fourth quarter earnings estimates are unchanged in spite of the lower fourth quarter revenue estimates. This is due to our mix improvement and we are executing a movie identified revenue and cost savings and other considerations regarding our annual guy consist of the following commodity rates remained broadly consistent with our expectations. When we report.
Speaker 2: This is due to our mix improvement and we are executing a moving identify revelation call.
Speaker 2: Other considerations regarding our annual guide consists of the following. The Monday Rage remain broadly consistent with our expectations when reporting second quarter results.
Second quarter results.
Speaker 2: Revenue hall savings are now estimated to be slightly in access of our prior estimate of 200 basis points of incremental march.
Resolution cost savings are now estimated to be slightly in excess of our prior estimate of 200 basis points of incremental margin.
Speaker 2: Gross profit is expected to be approximately $935 million at the midpoint of our guide, representing a increase on our previous set.
Gross profit is expected to be approximately $935 million at the midpoint of our guidance representing an increase on our previous estimate.
Speaker 2: There are no significant changes to the annual depreciation and amy-reization, interest expense, effective tax rate, and capital spending estimates that we've provided in our last earnings.
There are no significant changes to the annual depreciation and amortization interest expense effective tax rate and capital spending estimates that we provided in our last earnings call.
Speaker 2: Time to our capital allocation. We are delivering faster than anticipated when we're being second corner results and expect net debt of $1.8 million at year end compared to range of $1.8 to $1.9 million for each year.
Turning to our capital allocation, we are deleveraging faster than anticipated when reporting second quarter results and expect net debt of $1 8 million.
At year end compared to a range of one eight to $1 9 billion.
Sure.
Speaker 2: is equated soon, estimated at 2.9 hours. And that, that to 12 months, adjusted due to the ratio representing an improvement in the Q3 and your end.
This equates to an estimated two nine times net debt to trailing 12 months adjusted EBITDA ratio retrofitting, adding.
And in Q3 and year end.
Speaker 2: and our capital allocation priorities are unchanged. Invest with discipline and automation, continue margin expansion and growth, return cash to our shareholders by maintaining our current dividend and further developing to a target two to two and a half times adjusted even up. And pursuing both on acquisitions, consistent with our marketplace position and work on.
And our capital allocation priorities are unchanged invest with discipline in automation continued margin expansion and growth.
Returning cash to our shareholders by maintaining our current dividend and further deleveraging.
Averaging to a target of two to two five times adjusted EBITDA and pursue bolt on acquisitions, consistent with our marketplace position and core competencies.
Speaker 2: The world is as strong and even stronger. A line is stable to blame in our three largest categories and we are implementing plans to improve top-line performance in our cable.
Overall, our business is strong and getting stronger volumes stable to growing in our three largest categories and we are implementing plans to improve top line performance and our tableware business.
Speaker 2: We have additional opportunities to expand margins and our cash flows are strong, giving us the opportunity to accelerate the leverage while investing in the future of our company.
We have additional opportunities opportunities to expand margins and our cash flows are strong, giving us the opportunity to accelerate deleverage while investing in the future of our company.
Speaker 2: before I turn the call back over to the operator. I would like to acknowledge that this will be my last earnings call.
Before I turn the call back over to the operator I want to I would like to acknowledge that this will be my last earnings call with you.
Speaker 2: It's true we've been a pleasure working with the incredible team here at Reynolds, because in the products, the missing product, the remarkable products we've achieved together over the years. In addition, a special thank you to the analyst and investor community for the trust and confidence you've shown through our team.
It's truly been a pleasure working with incredible team here at Reynolds consumer products.
<unk> proud of the remarkable remarkable progress we've achieved together over the years in addition.
Special Thank you to the analysts and Investor community for the trust and confidence you've shown to our team finding.
Speaker 2: Finally, I'm confident Scott and the entire RCP team will be very effective guiding Reynolds to the company's next phase of growth.
Finally, I am confident that Scott and the entire RCP team will be very effective guiding rentals to the company's next phase of growth.
Speaker 2: As we turn to our Q&A, we ask that you direct your questions to the landscape. And Scott remains in an advisory role to accompany. With that, operator, please open the call. Of course.
As we turn to Q&A, we ask that you direct your questions to Lansing Mi Scott remains in an advisory role to the company with that operator, please open the call questions.
Speaker 1: Thank you. At this time, we will be conducting a question answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question key.
Thank you at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
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You May press Star two if you would like to remove your question from the queue. We ask that you limit yourself to one question and a follow up so that others may have the opportunity to ask questions for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star one.
Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we...
One moment, please while we poll for questions.
Speaker 1: Our first question comes from Peter Gleum with UBS. Please proceed with your question.
Our first question comes from Peter Grom with UBS. Please proceed with your question.
Speaker 3: Thanks operator, good morning everyone. Hope you're doing well, Michael. Wish you the best of luck moving forward. And thank you for all the help over the years and Scott, congratulations and looking forward to working with you. So I wanted to ask about the 4Q revenue guidance, which was just a bit weaker than expected, especially on the retail volume front. I think last quarter, there's always an expectation for non-retail sales to have an impact in the fourth quarter.
Thanks, operator, and good morning, everyone Hope Youre doing well Michael wish you the best of luck moving forward in and thank you for all the help over the years and then Scott Congratulations and looking forward to working with you.
So I wanted to ask about the <unk> revenue guidance, which was typically a bit weaker than expected, especially on the retail volume front I think last quarter. There is always an expectation for non retail sales to have an impact in the fourth quarter.
Speaker 3: But I may be mistaken, but I think the expectation was for retail volume to return to growth. Can you maybe just...
I may be mistaken, but I think the expectation was for retail volume to return to growth can you maybe just.
Speaker 3: you know, talk about what's changed versus August and you know, while you know, I wouldn't expect any official commentarians 24 years now, but I do think it would be helpful to understand how you
Talk about what's changed versus August.
While I wouldn't expect any official commentary on 2004, it just now but I do think it would be helpful to understand how you see volume performance.
Speaker 3: volume performance evolving, you know, kind of given the weaker exit rate. Thanks.
<unk> evolving kind of given the weaker exit rate. Thanks.
Speaker 2: I'll start on up Michael. Add to my comments. The change in the revenue guide is primarily the tableware business.
I'll start and I'll, let Michael.
Add to my comments.
Change in the.
Our revenue guidance is primarily the tableware business.
And non retail.
Speaker 2: In the retail and the same word business, we are seeing volumes to clients. However, it's worth reminding everyone that we're seeing an 800 basis point increase in the IBA dot margins and that.
And the retail tableware business, we are seeing volumes declines. However, it's worth reminding everyone that we are seeing 800 basis point increase in the EBITDA margins in that business.
Speaker 2: Tab where's a more discretionary item than our other categories and we've taken the most pricing up in that category than we have other categories up over 3% on a four-year basis versus high teens in our other businesses.
Tim where the more discretionary item than our other categories and we've taken the most pricing up in that category and we have other categories up over 30% on a four year basis versus high teens in our other businesses.
Speaker 2: And we started and completed those increases later than we did in our other catapult.
And we started and completed those increases later than we did in our other categories.
Speaker 2: So we've now brought some key elasticity thresholds, knowing that we may have to address the volume impact.
So we've now crossed some some key elasticity thresholds knowing that we may have to address the volume impact.
Speaker 4: We're going to use the same playbook we've used with Front-O-Drap. Hit the right price points, get the promoted activity right, and drive the overall category growth.
And we're going to use the same playbook, we used with Reynolds wrap at the right price points and the promoted activity rate and drive.
The overall category.
Growth.
Speaker 4: And the last is going to take some time to see the full benefit of those actions as it is it did with Reynolds Reppelweep. We've gone through that.
Unless it's going to take some time to see the full benefit of those actions as it did with rentals rapidly.
On through that.
Okay.
Speaker 5: That's the primary change rate revenue. Go. And Peter, this is Mark. I'll just add to what Lance said to remind you that our non-retail business is a very low margin business. So while it's impacting the top line, it's not having any really very significant effect on our earnings expectations versus where we were a few months.
So that's the primary change rate revenue go.
And Peter this is mark I'll, just add to what Lance said to remind you that our non retail business is a very low margin business. So while it's impacting the top line.
It's not having any.
A very significant effect on our earnings expectations versus where we were a few months ago.
Speaker 3: That's really helpful. And then maybe just to follow up, I wanted to ask about hefty waste and storage. You touched on the innovation and share performance and it was nice to see the volume makes your turn to growth this quarter. But there's obviously been a lot of disruption in the category with your largest branded competitor. Did this impact your results at all in the quarter? And I just would be curious, how do you see this dynamic evolving? I'd be looking up to the fourth quarter.
No. That's really helpful. And then maybe just a follow up.
I wanted to ask about hefty waste in storage you touched on the innovation and share performance and it was nice to see.
So the volume mix returned to growth this quarter, but theres, obviously been a lot of disruption in the category.
Your largest branded competitor did this impact your results at all in the quarter and I just would be curious how do you kind of see this dynamic evolving as you look out to the fourth quarter.
Speaker 4: First, I want to start by saying I would never wish a cybersecurity incident on any company and particularly on a competitor It's very just pointed you know here at that happening to any business across our country
First I want to start by saying I would never wish the cyber security incident on any company and particularly on our competitor.
Very disappointing to hear that happening to any business across our country.
Speaker 4: After you as you mentioned was already driving volume and cheering waste bags prior to chloroxysphabiscuity incident. There was some benefit in the latter part of Q3 which is continuing in the Q4.
<unk> as you mentioned is already driving volume and share in waste bags. Prior to Clorox is cyber security incident.
Was some benefit in the latter part of Q3, which is continuing into Q4.
Speaker 4: that along with repress of our category expectations across all of our businesses, what's factored into our queue.
That along with a refresh of our category expectations across all of our businesses.
Was factored into our Q4 guide.
Thanks, So much I'll pass it on.
Speaker 1: Our next question comes from Mark Astrakhan with people. Please proceed with your question.
Our next question comes from Mark Astrachan with Stifel. Please proceed with your question.
Speaker 6: Yeah, hey, good morning, everybody. A couple of questions for me. One, just starting on M&A. Not trying to make too much out of it, but...
Yeah, Hey, good morning, everybody.
Couple of questions for me, one just starting on M&A not trying to make too much out of it but.
Speaker 6: and notable considering your history. And what are you trying to get out of the acquisition as a commercialization technology, RDD, no-al, et cetera, any?
And the notable.
Considering your history.
What are you trying to get out of.
The acquisition is it commercial or base in technology R&D Knowhow.
Et cetera.
Speaker 6: signaling on more willingness for M&A, or was it just opportunistic, and partly because of Michael's comments on the de-liverging faster than anticipated. That's question one. Thank you.
Signaling on more willingness for M&A or was it just opportunistic and partly because of Michael's comments on the deleveraging faster than anticipated that's question one.
Speaker 4: I mark thanks yet. No, our capital allocation strategy has not changed. We saw a very unique opportunity with this acquisition. This company creates unique and novel raw materials that enhance performance and...
Hi, Mark Thanks, yet no our capital allocation strategy has not changed we saw a very unique opportunity with with this acquisition.
This company creates unique and novel raw materials that enhanced performance and.
Speaker 4: and post-ability, they manufacture reusable plant-based products and develop technologies and partnerships in a circular economy which aligns with our FD Renewable Cycling Program and our Sustainable Product Development. So we saw this as a unique opportunity to enhance our research and development opportunities in sustainable products.
And post ability the manufacturer reusable plant based products and develop technologies and partnerships in a circular economy, which aligns with our FTE renew recycling program and our sustainable product development. So we saw this as a unique opportunity to enhance our research and.
<unk> opportunities and sustainable products.
Speaker 4: And as I said, but that doesn't change our primary focuses on the left.
And.
As I said, but that doesn't change our primary focus is on delevering.
Speaker 6: Got it and maybe just a related question to that and then the second question. So is there any change in your thinking about?
Got it and maybe just a related question to that and then the second question. So.
Is there any change in your thinking about.
How to think about that specific.
Speaker 6: Avenue, you know, the sustainability of what you're selling, you know, or is it just a part of the course sort of thing? And then the second real question is just how to think about the balance between where it's margin expansion, obviously very good in the quarter probably continues to be good. Reinvestment, which was increased and and flow through to adjust the deep dot. Thank you.
Avenue the sustainability.
Of what you are selling or is it just par for the course sort of thing and then the second real question is just how to think about the balance between gross margin expansion, obviously very good in the quarter probably continues to be good.
Reinvestment, which was increased in.
The flow through to adjusted EBITDA. Thank you.
Speaker 4: I'll answer the first part of the question. I'll ask you to repeat the second one. So Michael can answer.
I'll answer the first part of the question I'll ask you to repeat the second one so Michael can answer it.
Speaker 4: But our focus has always been on, if you look at our ESG scorecard on having sustainable product solutions across our product portfolio.
But our focus has always been on that if you look at our ESG scorecard on having sustainable product solutions.
Our product portfolio, we have a goal.
Speaker 4: We have a goal to ensure that consumers have a choice of a sustainable product across all of our categories.
Sure that consumers have a choice of a sustainable product across all of our categories.
Speaker 4: by 2025, so we're well on our way to achieving that.
By 2025, and we're well on our way to achieving that goal.
Speaker 4: So this is part of developing those sustainable product options for consumers. And could you repeat the-
This is part of developing those sustainable product options for consumers.
And could you repeat the second part of your question for Michael.
Speaker 6: Yeah, it was basically just that thinking about the balance between gross margin expansion, reinvestment and the adjusted EP.
Yeah. It was basically just about thinking about the balance between gross margin expansion and reinvestment and adjusted EBITDA growth.
Speaker 2: Yeah, so when you think about our gross margin expansion, we are expecting continued improvement into the future. We do expect additional gross margin expansion driven by the full year of cooking, baking improvements, additional mix and revolution cost savings. So that is our expectation going forward. So you should look to see continuation of.
Okay.
Yes, so when you think about our gross margin expansion, we are expecting continued improvement into the future.
We do expect the additional gross margin expansion driven by the full year of cooking baking improvements additional mix and revolution cost savings.
So that is our expectation going forward. So you know you should look to see continuation of our expansion.
Stan.
Speaker 2: And then the second part of that question will relate specifically to what again can you
And again in the second part of your question was related specifically to what again.
Speaker 6: Yeah, I just, what do you do with that incremental growth profit? You know, how do you think about reinvestment? How do you think about flow 30 EBITDA?
Yes, what do you do with that incremental gross profit how do you think about reinvestment how do you think about flow through to EBITDA.
Speaker 2: Well, you know, our priority continues to be, you know, de-lover and pay down debt. You know, you know, anything beyond that would be dealt with on an opportunistic basis, but, you know, and will continue to invest in this business, but our priority is to pay down debt and de-lover as we indicated previously.
Well aren't you know our priority continues to be de lever and pay down debt.
Anything beyond that would be dealt with on an opportunistic basis, but we.
We will continue to invest in this business, but our priority is to pay down debt and Delever as we indicated previously.
Okay. Thanks.
Speaker 1: Our next question comes from Lauren Lieberman with Barclays. Is perceived with your question.
Our next question comes from Lauren Lieberman with Barclays. Please proceed with your question.
Speaker 1: Great, thanks, good morning. One question I had on table where you walk through the plans for kind of resuscitating the business and using that existing playbook that's worked. I was wondering if there's an opportunity.
Great. Thanks, good morning.
One question I had on table, where you walk through the plans for any kind.
Kind of recessive, taking the business and using that existing playbook that part, but I was wondering if there is an opportunity.
Speaker 7: to reset profitability or business, or actually product mix within tableware as you're doing it. So there are segments of that business that are more profitable than others. Sort of is there like a broader kind of, reset opportunity within that business as well as you're putting in this cessitation?
To reset profitability of our business.
Mix within tableware as Youre doing that so there are segments of that business that are more profitable than others.
Sort of is there like a broker kind of reset opportunity.
Within that business as well as you're putting in this specification plan.
Speaker 4: Yeah, without getting into specific details beyond what I said in the prepared remarks, the answer to that question is yes, we have restored profitability across all of the products, which gives us the flexibility to invest in all those actions I talked about, which is features and displays, adjusting counts, and increasing advertising and promotional.
Yes, without getting into specific details beyond what I said in the prepared remarks.
The answer that question is yes, we have restored.
Profitability across all of the products, which gives us the flexibility to invest in all of those actions I talked about which is features and displays adjusting counts and increasing advertising and promotional activity.
Speaker 7: And then if I shift to the hefty food bag.
Okay.
And then if I shift to the.
The hefty food bag.
Speaker 7: launch and I apologize, I don't know if you covered this too great extent in the prepared remarks, I'm sorry if you did because I was on another call. But I was just curious about, you know, just early reads from retailers on shelf space there. If it's incremental, if this is a, you know, replaced slider bags with pressed-to-close, but just how that kind of fits into the product line up and the decision to, you know, add this to the portfolio.
And I apologize if you covered this to great extent in the prepared remarks I'm sorry, if you did because I was on another call.
But I was just curious about just early reads from retailers on shelf space. There is it incremental if this is a.
Replace flatter bags with press to close, but just how that kind of fits into the the product lineup.
And the decision to add to that to the portfolio.
Speaker 4: It is to add another brand to the crust of those categories. At the point in time, there's only one brand in the category and much like we've successfully been in the food bag category with both brands of store brands. There's three brands in the slider category.
Got it.
It is to add another brand to the press.
Agree at this point in time, there is only one brand in the category in which links.
Successfully been into food bag category with both brands and store brands Theres three brands in the slider category.
Speaker 4: So we saw an opportunity through our category management teams and sites and development to add a brand to the PrestoClose category.
So we saw an opportunity through our category management teams insights and <unk>.
Development to add a brand to the press to close category.
Speaker 4: We just launched it recently, and it's too early to get a read on the revenue success. At least project will have that when we put our 2024 plan together.
We just launched it recently.
And.
It's too early to get a read on the.
Revenue success that we project, we will have that when we put our 2024 player together.
Okay, and then final thing sorry with just.
Speaker 7: And then final thing, sorry, was just, you know, at our conference, you had spoken to 2024 volumes, kind of slatish as a good starting point for expectations. Now that we know about the pressure from in tableware, and I guess continued on the non-retail side of things, just curious how much of that.
At our conference you had spoken to 2024 volumes kind of flattish is a good starting point for expectations now that we know about the pressure from and tableware.
And I guess continue on the non retail side of things just curious how much of that driving that thought process on flattish volumes like should we think about <unk>.
Speaker 7: driving that thought precedent to lattice volumes. Like should we think about hefty and Reynolds cooking and baking as having like sort of some growth and then they're baking an offset from tableware and non-retail?
Hefty and Reynolds cooking and baking is having like say sort of from growth and then there'll be an offset from tableware and non retail.
Speaker 4: While we are in the middle of our planning process for next year and we'll have more share in our volume expectations when that's complete, we're certainly, we're operating in a very dynamic macroeconomic environment. And I'm pleased with our performance and our largest categories. As you heard my prepared remarks, our retail volume is stable growing and household foil, waste bags and food bags.
While we are in the middle of our planning process for next year, and we'll have more to share on our volume expectations. When that's complete.
Certainly we are operating in a very dynamic macroeconomic environment and I am pleased with our performance in our largest categories. As you heard in my prepared remarks, our retail volume is stable to growing household foil waste bags food bags.
Speaker 4: And that's better than many CPGs in their largest categories, driven by many factors, including our innovation, you know, our left-
And thats better than many CPG and their largest categories driven by many factors, including our innovation.
Our leverage of our.
Speaker 4: and its door brand business model and successful category management with our retail partners.
And in store brand business model and successful category management with our retail partners.
Speaker 4: As commodities have cost of stabilize or tableware business has achieved levels of profitability that I mentioned a moment ago on key items that gives us the flexibility to adjust retail prices and price packs.
As commodities have cost a stabilized our tableware business has achieved levels of profitability as I mentioned, a moment ago and key items that gives us the flexibility to adjust retail prices.
And price packs.
Speaker 4: together with our retail partners. And those actions will require time to, you know, drive improvement. And I'm confident they will. And that'll be factored in our 2024 planning.
Together with our retail partners.
Those actions will require time to drive improvement I'm confident they will and that will be factored into our 2020 for planning.
Okay, great. Thanks, so much.
Speaker 1: As a reminder, if you would like to ask a question, please press star one on your telephone
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker 1: Our next question comes from Jason English with Goldman Sachs. Please proceed with your question. Hey, Gw-
Our next question comes from Jason English with Goldman Sachs. Please proceed with your question.
Hey, good morning folks thanks for squeezing me in.
Speaker 8: And I have to apologies in advance, like Lauren, I'm stretched in multiple directions. So I may ask questions that you've already addressed if that's the case. Well, my apologies. It's great to see the robust margarine recovery on Reynolds cooking baking. You however are still a well below kind of a 20% level, ebidol level that you were hovering at plus minus for quite a few years there. Is that a reasonable number to get back to or just because the numerator denominator affected how much price you put in the system should we be looking to level off at a lower margin than that. And if so.
And I have two.
Apologies in advance like Lauren stretched in multiple directions. So I may ask questions that you've already addressed and if thats the case well my apologies.
It's great to see the robust margin recovery on Reynolds cooking and baking.
However were still are well below kind of the 20% level EBITDA level that you were operating at plus minus for quite a few years there.
Is that a reasonable number to get back to or just because the numerator denominator effect how much price you put in the system should should we be looking to level off.
At a lower margin than that and if so what is that right margin and when do you think you'd be able to get there.
Speaker 8: What is that right margin and when do you think you'll be able to get there?
Speaker 2: Yeah, Jason, it's a great question. We're still in the midst of work if you are a piano man. So I think we're going to pause and give you an answer by all of that and a lot more detail on James.
Yes, Jason Great question.
Student amid some work to do our Atlanta, I mean, so I think moving pause and give you answered the one item and not in more detail in January.
Speaker 5: And, and morning, Jason, Mark here, and what I would add to it, Michael said is that as you've seen, and really it's been a story all year in 2023, you've seen margin expansion in each of our businesses. And as Lance just mentioned, we're pleased with what we've achieved, as you know, our earnings expectations for the year have come up as moved through the year. So we think we're going into the planning cycle in a very good place to be starting that exercise.
Good morning, Jason Mark here, and what I would add to what Michael said is that as you've seen and really it's been a story all year in 2023, you've seen margin expansion in each of our businesses and.
Lance just mentioned, we're pleased with what we've achieved as you know our earnings expectations for the year has come up as move through the year. So we think we are going into the planning cycle in a very good place to be starting that exercise.
Speaker 8: I would absolutely agree with from the perspective and outside of looking at him. Turning to the waste and storage business, I think it was Mr. Astrakin earlier who asked a question around Clark's disruption and the benefit that's occurring to you mentioned. You saw some benefit late in the third quarter.
I would absolutely agree with from the perspective of an outside of looking at it.
Turning to the waste storage business I think it was Mr. Astrogate earlier, who asked the question around.
Clorox is disruption.
And the benefit that's occurring to you mentioned you saw some benefit late in the third quarter.
Speaker 8: How long should we expect these benefits to continue? Instead, differently, I imagine some of that disruption is giving you an opportunity to secure some, maybe a higher share of promotion, or merchandising programming than you otherwise would have had. Is that the case and how far out have you been able to secure the higher share?
How long should we expect these benefits to continue and said differently I imagine some of that disruption is giving you an opportunity to secure some.
Maybe a higher share of promotional and merchandising programming than you otherwise would have had.
Is that the case.
How far out have you been able to secure the higher share.
Speaker 4: I think it would be premature for us to comment on that. We're developing our 2024 plan, how sticky these gains have been on a state basis. We'll wait to see and we'll plan accordingly.
I think it would be premature for us to comment on that we are developing our 2024 plan out how sticky these gains have been on a sustained basis.
I'll wait to see and we will plan accordingly.
Understood. Thank you I'll pass it on.
Speaker 1: Our next question comes from Andrea Tixera with JP Morgan. Please proceed with your question.
Our next question comes from Andrea Teixeira with Jpmorgan. Please proceed with your question.
Speaker 9: Thank you, and Michael, I would like to congratulate you in the next chapter of your life, and thank you for all the patience along the way. And Scott, welcome and looking forward to working with you. My question is on the balance between your...
Thank you and Michael I would like to congratulate you and the next chapter of your life and thank you for all the patients along the way and Scott welcome and I'm looking forward to working with you.
My question is on the balance between branded and private label offerings and I understand that you have and correct me if I'm wrong, you had alluded to that I think in the second quarter that you had a contract to them.
Speaker 9: Brandon and private label offerings and I understand that you have and go at me for wrong you had alluded to that I think in the second quarter that you had a contract to price reduction
Speaker 9: in trash bags in the Q4 because of just the rising price flowing through. So one, the number one is that's correct. And number two, if you're looking to do any adjustments to the price of hefty trash bags given that.
This reduction.
Trash bags in the Q4.
Because of just the rising price flowing through.
So I wonder number one if that's correct and number two.
If youre looking to do any adjustments to the price of hefty trash bags given that.
Speaker 9: Given that the price gap will likely widen and what your experience with tableware has been in terms of price elasticity, or conversely because you probably got more velocity given your competitors issues. Is that anything we should be thinking of? And again, thinking of how you've been able to recover your, it was impressive. 800, I think, basis point improvement in gross margin. If you wanted to, we've asked a little bit more on promo, or that's the level that you view is appropriate in terms of price points and price gaps. Thank you.
Given that the price gap will likely widened and what's your experience with tableware has been in terms of price elasticity, but conversely, because you've probably got more velocity given your competitors.
Issues is there anything we should be thinking oven and again thinking of.
How you've been able to recover your it was impressive.
Todd I think basis points improvement in gross margin.
If you wanted to reinvest a little bit more on promo.
Does that allow for that to heal.
<unk> is appropriate in terms of price price points and price gaps. Thank you.
Speaker 4: To your first point about the private label pricing in waste bags, it's been stable and has not changed. We didn't make any changes in private label pricing in waste bags. And resin has stabilized, but we haven't seen, in order we expect.
To your first point about the private label price in waste bags.
Been stable and has not changed we didn't make any changes in private label pricing on those bags and resin has stabilized but we.
We haven't seen nor do we expect.
Speaker 4: significant decreases there. So our pricing strategy remains as it has been. We restore the margins to a level that we were satisfied with. We believe that we can continue to grow from this point forward.
Significant decreases there so our pricing strategy remains.
As it has been we've restored the margins to a level that we were.
We're satisfied with we believe that we can continue to grow from this point forward.
Thank you.
Uh-huh go ahead.
Speaker 6: I was going to say I think one of your questions was there about our path to continue to grow smart and expand. I did speak on this earlier, but we do expect to see continue to grow smart and expansion as we get the benefit of the full year benefits from the rentals cooking and banking improvement.
I was going to say I think one of your questions was there about our path to continued gross margin expansion I did speak on this earlier, but we do expect to see continued gross margin expansion as we get the benefit of the full year benefits from the Reynolds cooking and baking improvements.
Speaker 10: And in addition, we do see mix, pink, favorable, and obviously we have revolution cost savings that we're still working through. But we've demonstrated in the past that we managed revolution projects pretty well, and you should expect to see that going forward.
And an additional you know, we do see mix being favorable and obviously, we have resolution cost savings that we're still working through but you know.
We've demonstrated in the past it.
Managed revenue should project is pretty well and you should expect to see that going forward.
Thank you, both and I'll pass it on.
Speaker 1: There are no further questions at this time. I would now like to turn the floor back over to Lance Mitchell for close.
There are no further questions at this time I would now like to turn the floor back over to Lance Mitchell for closing comments.
Speaker 4: Thank you, operator, and thank you, everyone, for your questions and your interest in our business.
Thank you operator, and thank you everyone for your questions and your interest in our business I'd.
Speaker 4: I'd also like to just say thank you again to Michael Graham for his contributions to our company. We're gonna miss his business partnership.
I'd also like to just say, thank you again to Michael Graham for his contributions to our company, we're going to we're going to Miss his business partnership.
Speaker 4: I also want to really extend a sincere thank you to everyone on the RCP team. They're the reason that we're doing.
I also want to really extend a sincere. Thank you to everyone on the <unk> team.
They are the reason that we're doing in performing so well.
Speaker 4: And finally, I'd like you to all mark your calendars for Wednesday, March 20th, 2024. We will be in the New York City on that day for an investor day.
And finally I would like you all Mark your calendars for Wednesday March 20th 2024, we will be in New York City on that day for an Investor day.
See you all then thank you.
Speaker 1: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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