Q4 2023 Sonoco Products Company Earnings Call
Yeah.
Good day and thank you for standing by welcome to the fourth quarter 2023, Sonoco earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
I ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advisory. Your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your Speaker today, Lisa weeks, Vice President of Investor Relations. Please go ahead.
Thank you operator, and thanks to everyone for joining us today for Sonoco fourth quarter and full year 2023 earnings call. Joining me. This morning are Howard Coker, President and CEO, Rob Dillard, Chief Financial Officer, and Rodger Fuller, Chief operating Officer Leigh.
Last evening, we issued a news release, highlighting our financial performance for the fourth quarter and full year and we prepared a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of our website.
As a reminder, during today's call we will discuss a number of forward looking statements based on current expectations estimates and projections.
These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore actual results may differ materially. Please take a moment to review the forward looking statements I'm page two of the presentation.
Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations to.
GAAP measures is available under the Investor Relations section of our website.
For today's call, we will have prepared remarks regarding our results for the quarter and 2023 and an outlook for the first quarter and full year of 24, followed by a Q&A session. If you will turn to slide four in our presentation I will now turn the call over to our CEO Howard Coker.
In 2023, we continue to make progress on strategic initiatives and delivered solid results in what was a pretty difficult year from a volume perspective.
Despite these lower volumes, we delivered strong EBITDA margins of 15, 7%.
Which is somewhat similar to last year are strong.
Margins were the result of record performances in our consumer Richard paper cans, the flexible businesses only.
The industrial side, despite volume levels similar to 2008, our team delivered record profit margins through diligent cost management.
The paper ecosystem.
Our adjusted earnings of 526 were within our guidance range for the year.
And whats intentional focus on working capital, we generated record operating cash flow of $893 million.
And free cash flow of $600 million for the year.
Also return capital to shareholders and increased our annual dividend for the 14th straight year.
We completed acquisitions and divestitures according to plans and our teams did not skip a beat I'm executing initiatives to further strengthen our foundation.
Or close to 2023 about banking this incredible team of Sunoco for their resiliency and dedication throughout the year certainly the global economic economic and external factors did not make this an easy year at all but we did not stand still and we do.
Delivered the second best annual financial performance and the company's honored.
Five year history.
I'm grateful to work alongside these great people of Sunoco as well as our customers and supplier partners and we continue to look to the future with optimism.
And with that I'm going to turn the call over to Rob to cover our financial results and outlook.
Rob.
Rob: Thanks, Howard I am pleased to present, the fourth quarter and full year 2023 financial results starting on page six of this presentation.
Please note that our results on an adjusted basis and all growth metrics on a year over year basis, unless otherwise stated.
GAAP to non-GAAP EPS reconciliation is in the appendix of this presentation as well as in the press release.
Howard said 2023 was a record year for Sonoco and 2023, we achieved the second best financial results in the company's 125 year history in key metrics, such as net sales adjusted EBITDA and adjusted EPS.
By many measures. This was our best year ever we achieved record operating cash flow record free cash flow record productivity and we invested a record amount to drive future growth and profitability. We built a foundation for continued strong financial performance building on our enduring operating model strong market positions.
Investment grade balance sheet, and our differentiated dividend.
Excited about the future and feel good that 2023, what's the year to solidify our improvements since 2021 full year 2023, net sales decreased to 6.78 billion due to the volumes of Collins from Destocking in consumer and in an elongated cycle in industrial.
Rob: While these factors impacted year over year results. We grew net sales at a 10% compounded annual growth rate since 2021, due to strategic pricing new product wins and acquisitions.
Adjusted EBIDTA grew $297 million from $770 million in 2021 to 1.067 billion in 2023.
$150 million of this increase was organic improvement due to strategic pricing and productivity.
<unk> EBITDA margin was 15, 7% in 2023, a 190 basis point increase from 2021.
We achieved strong product profit.
Profitability due to price cost in 2022 and retained its profitability in 2023 due to record productivity of $109 million, we are operating with agility and continue to match cost controls with productivity investments.
2023, GAAP EPS was $4 80, and adjusted EPS was $5 26 homes, which was within our guidance range of $5 25 to $5 47.
On page seven we have our results for Q4 2023.
Rob: Net sales decreased 2% to one.
<unk> six 4 billion volumes will go or three 4% due to low single digit volume declines in both consumer and industrial and price was negative two 3% due to negative index based pricing adjusted operating profit decreased to $167 million adjusted EBITDA decreased to $236 million.
The adjusted EBITDA margin was 14, 4%, a 20 basis point decrease from 2022.
Q4 was an incredibly strong quarter operationally, we manage variable demand and generated record productivity of $49 million. This translated into a 180 basis point increase in gross profit margin.
These operating profit results were offset by SG&A items that we consider infrequent and their magnitude, including higher employee expenses healthcare and accounts receivable reserves GAAP EPS was <unk> 82, and adjusted EPS was $1 <unk>.
Our guidance range of $1, one to $1 16.
Tax was a 6% drag on the quarter as a tax rate increased to 25, 7% due to accidents to repatriate cash.
It's notable that without the specific higher SG&A items and tax items, we would have achieved at least the midpoint of guidance.
Rob: Hey, Jay as our sales and operating profit bridges for the quarter.
Net sales declined to $1 six 4 billion due to negative volume mix and negative price volume mix was negative $20 million in the quarter as consumer continues to be impacted by inflationary pricing at retail and industrial continues to reach a cyclical low price was negative $39 million. We continued to achieve strong results from our strategic.
Rising program negative price was a result of deflation and index based prices and RASM metal and paper based businesses.
Next on this page we have the adjusted operating profit bridge adjusted operating profit was driven by negative volume mix and negative price cost with strong productivity benefiting results volume mix was negative $10 million price cost was negative $14 million as positive price cost and consumer and all other was offset by negative price cost in <unk>.
Australia.
Activity was positive $49 million as we achieved positive manufacturing productivity due to our lean programs and positive fixed cost productivity due to continued efforts to reduce our plant footprint and optimize supply chain.
There was negative $42 million due to employee expenses healthcare and accounts receivable reserves. These expenses are not expected to repeat in this magnitude.
Page nine has our segment results for the quarter.
<unk> sales decreased 3% to $856 million consumer volumes decreased low single digits due to customer inventory management and the impact of inflationary pricing. Many consumer customers are beginning to return to historical pricing practices, including discounting. However volumes have been slow to return to typical patterns.
Rigid paper container sales declined low single digits due to mid single digit volume declines offsetting positive price.
Rob: Flexible sales.
We're flat as new customer gains offset wells legacy customer volumes metal packaging sales decreased mid single digits due to low single digit volume declines and negative index based price actions demand from our core customers in metal packaging has strengthened but overall demand decline due to anticipated tin plate based price reductions in 2024.
Rob: Consumer operating profit decreased to $83 million is $23 million of productivity and $17 million of price cost was offset by volume mix and SG&A, a meaningful component of which we do not expect to repeat in this magnitude.
<unk> operating profit margin was flat at nine 7%.
Industrial sales decreased less than 1% to $593 million industrial volumes decreased low single digits due to lower demand in most key markets and geographies industrial prices decreased mid single digits due to index based pricing actions.
We continue to achieve strategic pricing, but were impacted by declining paper indices and increasing OCC.
<unk> increased to $92 per ton from $38 per ton in 2022, industrial operating profit decreased to $62 million due to $36 million of negative price cost offsetting $20 million of productivity industrial operating profit margin remained at a historically strong 10, 4% for protecting margin switch to it.
Rob: T J pricing and with cost actions to reduce fixed costs. The business is well positioned to benefit from a return to normalized volumes.
Rob: All other sales decreased 7% to $187 million due to broad volume declines, although their operating profit increased to $22 million due to strong productivity and positive price cost moving to page 10.
Our capital allocation framework aligns with our business strategy to drive value creation through earnings growth and improved margins in the fourth quarter, we generated operating cash flow of $267 million, we invested $108 million of this cash and capital expenditures to fund our growth initiatives and improved margins results from there.
These investments are translating into improved productivity and growth with new customers and new products.
We remain focused on increasing the dividend, which at present is 51 per share on a quarterly basis or a three 5% annualized yield based on our current share price next.
Next we paid off $172 million of debt in the quarter and reduced our net debt to adjusted EBITDA to two eight times, we will continue to be disciplined and improve our liquidity and access to capital.
This is key to our strategy as we continue to have a proactive M&A strategy focused on executing the right deals based on strategic fit scalability financial profile and cultural fit we are being disciplined in a disrupted M&A market and we'll do the right acquisitions and divestitures at the right time for us.
Page 11 has our guidance for Q1 and full year 2024.
Guidance for 2024, adjusted EPS is $5 10 to $5 40.
This guidance is based on low single digit volume growth.
Volumes are expected to grow low single digits, while industrial volumes are expected to experience only limited recovery price cost is expected to be meaningfully negative due to contractual resets in consumer and the impact of timing and price in lives on industrial another meaningful input to guidance of $32 million increase in depreciation.
We expect to grow adjusted EBITDA in 2024 and are guiding to a range of 1.15 billion to $1 1 billion.
Operating cash flow guidance is $650 million to $750 million working capital is expected to be a $100 million to $150 million use of funds as we invest in inventory and receivables to assess supply chains and enabled volume growth guidance.
Guidance for our capital expenditures is $350 million, we would increase the proportion of capital expenditures focused on long term growth and profitability projects.
Rob: This investment is expected to drive record productivity in 2024 and beyond.
Guidance for Q1, 2024, adjusted EPS was $1.05 to $1 15.
Rob: We're expecting modestly negative volume in consumer as our customers remain cautious consumer price cost is expected to be negative due to contract pricing resets industrial volumes are not expected to improve in Q1 industrial price trends are improving price cost is expected to be meaningfully negative on a year over year basis due to.
Last year's low OCC, comparative and last year's higher Tan bending chip comparative now Roger will further discuss the outlook for the business.
Hey, Thanks, Rob if you please turn to slide 12 for our view of segment performance drivers in 2024, let.
Let me start with our first quarter outlook in our consumer segment, we expect volumes to be up sequentially over the fourth quarter, but basically flat year over year from continued slower consumer spending due to retail price inflation and.
In rigid paper containers. So we see volume is slightly down in North America versus a strong start last year flat in Europe, and some nice year on year over year sales growth in the rest of the world for new product launches and our expanded capacity in South America and Asia organic.
Organic flexible volumes are projected to be flat to down slightly due to continued softness in our base soft baked goods and confections business that aided in the first quarter from the benefit of the NFL acquisition in Brazil and.
And our metal pack business, we did see recovery of our steel aerosol business in the fourth quarter offset by some softness in food in the first quarter of 'twenty three we expect low to mid single digit increases in both food and aerosol metal cans.
Rob: In the industrial segment volumes are up sequentially from last quarter, the download single digits year over year with weakness primarily in Europe and Asia as many of our end markets are tied to consumer staple and.
<unk> spending and inflationary factors that have slowed spending we do expect higher paper mill utilization in the first quarter and our global paper system, driven primarily in North America during.
Rob: During the first quarter there'll be an outsized impact from negative price cost as input costs continue to rise and the timing of pricing updates lag.
Expect the impact of negative price cost to improve over Q1 levels as we move throughout the year productivity remains strong as our teams effectively managing costs throughout our mill and converting systems.
And the all other segment volumes continue to remain soft with price cost offsetting some impact of the lower volumes.
Now turning to the full year 2024 guidance, we expect consumer volumes to be up low single digits and productivity remained strong we're anticipating relatively stable material prices pricing and supply chain performance.
Do expect consumer price cost for the year to be negative from contractual pricing resets somewhat offset by productivity.
Rob: In industrial we're not projecting volume recovery in the first half of the year. We also.
Price cost remained negative from index index based pricing and higher input costs, which will be weighted to the first half of the year. As you know we've announced price increases in North America on both our ERP paper and converted products effective February one and these increases are progressing well.
<unk> team continues to do an excellent job of expense management, and we expect productivity and manufacturing efficiencies will offset negative volume impacts and.
And lastly in all other we anticipate fairly stable demand across the businesses and good productivity to continue throughout the year.
So overall, we remain I believe appropriately conservative on volume recovery across the segments with good productivity and cost control in place until we see volume recovery.
With that that EU Howard alright, thanks Roger.
As I stated in my opening remarks, we're not standing still as we progress our robust set of plans and initiatives across the enterprise.
Thought I'd just share a few of those.
Howard: With you first on the divestiture and closure front, we continue to execute our portfolio transition and footprint optimization activities last week, we announced the closure of our Sumner, Washington, <unk> paper mill.
This was the oldest smell and Sunoco as North American network.
And the cost to recapitalize was just simply not feasible.
We're moving tons to lower cost mills in our network.
We've owned <unk> for over 40 years and extremely grateful for the support of this team through these years.
Howard: We also announced the expected sale of our protective solutions business from our all other category or segment, which should close in the first half of 2024. This has been a great business for Sunoco with great leadership team, we know their knowledge and skills.
Howard: We will serve them well into the future as.
As we continue our portfolio resolution, we will remain laser focused on simplification and the alignment and fit to what businesses remain in our core.
Secondly, we're pleased to announce that.
Howard: We were recognized by <unk> for designing manufacturing and commercializing a paper bottom end for our rigid paper cans, the triangles to achieve sustainable and recyclable initiatives in Europe.
As a multi year and a true partnership effort for.
We're pleased with the acceptance of our innovative pack.
Howard: Package design in the marketplace and we look forward to sharing more about this next week at our Investor day.
In December we were also pleased to announce the acquisition of <unk>, one of the leading flexible packaging companies based in Brazil.
This is a strategic move to expand capacity for growing demand that we are failing and Brazil, where sunoco is now the number two.
In this market.
And we welcome the NFL team and know that our aligned culture values and technical capabilities make this a winning combination.
Also taking the steps this year to further align our flexible and thermal forming businesses into one larger scaled platform we.
We'll be providing more details on this next step in our portfolio next week.
Howard: In summary, I would just like to leave you at Sonoco continues steady performance across our businesses.
We wish volumes were better, but we are well positioned and ready to take advantage of incremental demand upticks across the portfolio.
Now if you'll turn to slide 15, I will wrap things up by saying we are looking forward to our Investor day.
One week from today in New York on February and February.
Or what is the date.
Of the Investor day.
February 20 <unk>.
So next week during this meeting we will provide updates on our transformation operations, our business unit plans and share thoughts on our longer term financial outlook, we look forward to host senior live or virtually next week.
Speaker Change: So at this time I'm more than happy we're more than happy to answer any questions that you may have I'll turn it back over to the operator.
Speaker Change: Okay.
As a reminder to ask a question. Please press star one 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.
Speaker Change: One moment please for our next question.
And our first question comes from George Staphos with Bank of America Securities. Your line is open.
Alright, thanks very much.
Good morning, everybody. Thanks for the details.
I'll ask three questions first question related to guidance.
Can you talk through what is baked in for price cost for the year recognizing there are no guarantees in life and how much of the EUR b and converted product increases in industrial are.
Are baked into that guidance.
Our related what is the effect of the divestiture of protective solutions within all other relative to your guidance.
And then.
Last from me Howard one I know you're going to talk more about it next week.
Why the integration of flexible with thermo forming.
Recognizing their plastic based.
Speaker Change: They are somewhat different.
Business processes, and what should we have baked in for productivity from that and broadly for the year. Thank you.
Alright, Thanks George.
I'll turn it over the more financial related too.
So Rob Yes, we will talk in more detail next week about the.
Rob: Combination and I think you'll see the.
The rationale and why we view this as an obvious.
Combine the two.
You just set a very high level I can just say that synergistically.
It makes a lot of sense and then if you look at the markets that we serve and our customers really share.
Rob: And theres more beyond that.
Is that where it is and we'll get into the <unk>, Rob you want to talk about price cost.
Rob: Yes, George that's a good question because price cost is going to be a meaningful driver for profitability and are a meaningful factor for profitability in 2024.
Rob: I'd say in Q1, we're anticipating that number to be.
Rob: Between 50, and 55 cents of drag.
Said previously that industrial was going to have $35 million of price cost in Q1 than we were expecting to see that.
To your point on U R B.
The price recovery there.
We've continued to see OTC increase.
Tan bending chip has kind of held constant we're feeling really good about how that price is translating through the market.
But that's something that actually takes a fair amount of time to really translate through to the P&L. So theres a bit of a drag there.
Rob: Overall, we do think that industrial price cost will continue to be negative going into the second quarter.
Rob: We're hopeful for some opportunity in the second half of the year.
Speaker Change: Okay, and then just on Pacific.
Speaker Change: <unk>.
Yes, Im protector, yes, so protect zick.
Speaker Change: We haven't closed the deal we're expecting to close we have a great counterparty there we feel really good about that trend that transaction on a on a gross basis.
Speaker Change: That that divestiture would be 10 two.
Speaker Change: Dilutive to EPS on a year on a full year basis. So.
So we are expecting to close that by the end of Q1.
And have some visibility of that and it's not in the $5 25 of guidance okay.
Okay, and the productivity for the year.
Speaker Change: Productivity of the year, we had a great year. This year, obviously, we continue to invest behind it we see we've got a better path forward. This year than we did last year I would say so we're expecting to have another record year.
Speaker Change: Thank you very much.
Our next question comes from the line of Anthony Pettinari with Citi. Your line is open.
Anthony Pettinari: Hi, good morning.
Anna.
Good morning, Youre expecting consumer volume growth and I think the mid single digit to high single digit range quarter over quarter Q1and Im just wondering is it possible to maybe parse that out between and does that just reflect sort of typical seasonality or is there some end market demand improvement.
Or deterioration or any destocking or anything.
Anthony Pettinari: Just wondering if you can kind of parse that out.
Between those drivers.
No Anthony it's Roger.
Consumer for the first quarter is basically flat year over year.
<unk> got slightly down in rigid paper containers versus a strong start last year in North America.
Basically flat or slightly negative and flexible and again thats, our base business cookies confectionery being soft, but offset by some of the Brazil acquisition.
Metal cans is actually projected to be up.
Low to mid single digits, and we started in that in that.
Wei and in plastics up slightly so you put it all together Anthony is basically a flat volume for the first quarter for the year, we do see that mitt that low single digits.
Growth for the year and ask this recovery in some of our base business with some some share that we've gained and flexible so new products and flexible.
And a good result were very helpful. On this combination for being flexible and pharma, forming so first quarter flat mid.
Mid single digit mid to low single digits for the year with some recovery in our base business.
We're also cautiously optimistic.
Anthony Pettinari: We see our customers starting to.
Market more sand more discounting actions.
So the expectation is that the <unk>.
Most of the year, we will start seeing some improvements as Roger just said.
Speaker Change: Okay, that's very helpful.
And then in metal pack I am sorry, if I missed this but would you expect full year volumes to be flattish or maybe slightly up or slightly down and then I'm. Just curious on aerosol. Another packager has discussed aerosol potentially being under some pressure due to cost to sort of ESG concerns I'm wondering if you are seeing.
Anything similar.
Similar to that and then just broadly if I think about the composition of metal pack between food cans aerosols maybe closures.
How that business has changed or if you've kind of shifted the mix around since you acquired it.
Speaker Change: Yes.
Of course, net long shelf life.
Stocking is carried a little bit further than that.
Emily would expect against our portfolio.
Speaker Change: What we're seeing right now, we're expecting and what we're hearing from our customers and how the year started we are actually looking at a net being up.
Year over year.
Speaker Change: Call it low to mid single digits.
Speaker Change: Aerosol in particular has accelerated on the favorable side of that.
Speaker Change: If you look at the fourth quarter alone.
Speaker Change: Over year aerosols were actually up.
Speaker Change: Yes mid to low single digits and third was slightly down so.
I'm pretty pleased with.
Speaker Change: With what we're seeing in terms of recovery from a volume perspective, but a pretty weak very weak start to last year, but.
Speaker Change: Very understandable.
Speaker Change: Again, considering the long shelf life associated with.
With these products so pretty bullish about.
Volume recoveries as we got to start the year as we finished January and as we look into next year and as we finished last year.
Speaker Change: In the fourth quarter.
Okay. That's very helpful I'll turn it over.
Speaker Change: Our next question comes from the line of.
Ghansham Panjabi with Baird. Your line is open.
Hey, Thanks, good morning, everybody.
I guess going back to the industrial segment looking at the margins in the fourth quarter.
Ghansham Panjabi: This was the first quarter of year over year margin decline since the first quarter 'twenty one.
Just your thoughts on the evolution from here.
Ghansham Panjabi: I know, there's a lot going on with OCC and just the index based pricing pass through et cetera.
Love to hear your thoughts as it relates to 2024.
So as Roger as we look at the margins for the first quarter industrial it's basically flat to the fourth quarter.
Ghansham Panjabi: We are seeing as we've already said this will be our <unk>.
Ghansham Panjabi: Largest impact negative impact on price costs, but we're also seeing recovery in our in our paper mill system, primarily in North America, Our global ERP system ran about 87% capacity in Q4, but our north American.
Ghansham Panjabi: BRB capacity was close to 92% in Q4, and we expect that to move up into the mid nineties and Q1 with increased demand as well as the move we made on the Sumner mill.
Ghansham Panjabi: So we expect yes negative price cost, but we also expect better productivity.
Ghansham Panjabi: Through kept capacity utilization in our biggest part of our ERP system, which is which is north of <unk>.
I would add that I think the acceptance of the <unk>.
The price increase effective mid quarter.
Ghansham Panjabi: Mid first quarter has been.
Positive.
Speaker Change: Yes, I think as you know, we're about 60% weighted to the risky Tan bending index about 20% related to OCC and 20% open market. So obviously, we are going after the open market now, but as Rob mentioned that.
Speaker Change: 60% weighted to Tad bidding tab.
And Tan bending chip will impact more of the second quarter than the first.
Okay. That's helpful and then back to the consumer business just the.
Volume weakness being persistent over the last several quarters, it's not just you it's.
Speaker Change: Yes, the peer group in terms of Destocking et cetera, that's impacted.
The supply chain.
Can you just sort of characterize the competitive backdrop as we kind of progress through this lower for longer sort of volume weakness paradigm and you have a bunch of different businesses within consumer and.
Just would love to hear your thoughts as it relates to just the.
Competitive backdrop in context of an industry, that's typically by competitive anyway.
Speaker Change: Yes, I mean, we feel really good.
From a share position perspective.
I'm not aware of any material Cheryl also on Fox I, probably got a longer list of share gains.
Speaker Change: Theyre just not overcoming.
Speaker Change: The overall segment consumer segment situation in demand profile.
And frankly, if we talk about volumes and it's across all our businesses through the year and then you flip over and look at the productivity performance and I've thought about this before we've met we've invested extremely heavily in all of our businesses in the core.
Speaker Change: And are continuing to see our productivity increase.
As.
Speaker Change: Volumes do recovery and leverage starts really materializing.
Normalizing within our facilities and pretty bullish about how we can <unk>.
<unk> that into even higher productivity than we have been seeing thus far.
But no from a share position we're in good shape from a share position as far as I'm concerned.
Okay clear thank you.
Our next question comes from the line of Gabe <unk> with Wells Fargo. Your line is open.
Gabe: Howard Rob Roger Good morning.
Gabe: I wanted to revisit the integration.
Gabe: That George initially asked about flexible with thermo forming.
Gabe: And just bigger picture context around.
You guys I think I've talked about trying to build a franchise position.
Gabe: In rigid metal packaging.
And I'm curious if this moves changes that perspective, you guys have talked about the sustainability attributes of original metal packaging and then maybe if anything changes from your perspective.
And is there further risk.
Gabe: Your outlook, especially in the tin plate business given the announcement this morning from cliffs.
Gabe: Idaho facility here in North America.
Gabe: Yeah.
Gabe: We will get into some more detail on I think it will be a lot more obvious to all of you next week.
Why it makes sense to combine these under under one leadership team.
And as we look at.
Gabe: Hello.
We do think it's going to open up the aperture in terms of.
Gabe: The acquisition opportunities within that side of the business, but it doesn't take away from any of the <unk> businesses at all.
It.
This makes and Youll say that next week mix, Mexico solid.
The Cleveland Theres, not really a big surprise as related to the mill.
Not a material impact to us all from our supply position.
And Thats really all I can say that we don't we don't view that as is.
As an impact to us in NOI this year or in future years going forward dependent on how long they do intend to keep that mill down.
Okay, and then the recovery in consumer we're reading about.
Cocoa hitting.
Gabe: New highs in terms of commodity costs.
Have the recent dialogue.
Along with your customers in terms of of expectations there.
Gabe: Reading articles about smaller chocolate bars, and things like that and just curious if that's baked into your outlook.
Okay, I think as we said in my opening comments I think we're being fairly conservative rationale volume our customers are planning to react to the new weight loss drugs, they're playing forward so far they've side I see no impact on that.
Really as it goes in my view it goes back to the pricing on the shelf and Howard mentioned it earlier, there's a lot of there's a lot of pressure from the big retailers now and our customers to start to bring your prices down youre starting to see more promotions.
A lot of these baked goods snacks confection or discretionary items and they had a price point, where it's really impacted their volume. So what we're hearing from our customers that they're going to be more aggressive on promotions and more aggressive on regaining some of the volume thats been lost over the last year. So that's what we're depending on along with the goods.
Our team does on new products and like the paper bottom for for the premium scan for gallon, Nova and the global expansion on those packages have been fantastic.
While we are more confident about a recovery in consumer volumes as we go throughout the year.
Yes.
Okay. Thank you and one last one I apologize for posterity sake.
The divestiture that you all announced.
Speaker Change: I heard you correctly, assuming it closes at the end of Q1.
It's maybe a 7% <unk> <unk> drag to the midpoint of your guidance is that what I'm hearing and then.
Speaker Change: <unk>.
<unk> and downstream related products price increases.
Are you assuming or embedding in your outlook today.
The 20% of the open market.
Speaker Change: There is price realization there in the mall way to see this Friday whats recognize that receive maybe specifically, what's what's embedded in the Q1 outlook our H one outlook. Thank you.
Gabe Yeah. So we are we.
We expect the sale of protect to close at the end of Q1 and that.
That'll be a 7% drag on the year, we anticipate.
For industrial pricing.
Gabe: And we're seeing that flow through certainly the trade market sales Howard and Rodger have said.
It's flowing through well.
Gabe: A component of our current guide.
Speaker Change: Thank you.
Speaker Change: Thanks.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one one on your phone.
And our next question comes from Mark Weintraub with Seaport Research Partners. Your line is open.
Mark Wilde: Maybe kind of parse that more housekeeping.
Mark Wilde: What did that metal overload.
And you've got embedded for 2024.
We lost you for a second there mark, but I'm, assuming you're asking about metal price overall for the year.
It'll be slightly less than what it was last year. So it's actually a slight positive on a year over year basis in Q1, because of the timing, it's going to be net neutral.
Speaker Change: Okay, Great hopefully you can hear me now do you.
Speaker Change: What did it end up being in 2023.
Oh, yes, so last year, it was $41 million negative.
This year, we anticipate the Q1 component of that to repeat.
Okay and can you quantify.
Quantify that for us.
Speaker Change: Sure. It was about it was between 20 and $25 million.
Okay Super and then.
<unk> I think you mentioned that you expect to be in that mid 90 post the actions you've been taking in North America.
Speaker Change: And.
Demand getting a little bit better.
Speaker Change: Where are you now in terms of integration in Europe, and North America, maybe start with that.
Are you talking about integrated integrated volume, where in the or about 50, 556% integrated volume now mark with the Rts acquisition.
And as a reminder, if you would like to ask a question. Please press star one one on your phone.
And that is star one one.
One moment please.
Thank you all for joining US today, if you have any follow ups will be around after the call to answer your questions or contact me to schedule a follow up.
<unk> stated, we look forward to hosting you at our Investor and Analyst Day in New York next week on February 22nd this will be an in person event and a webcast will also be available registration details are on our website.
Speaker Change: Also look forward to seeing you on the road at our planned conferences and events in the coming months and we will talk to you again in May when we report our first quarter results. Thanks to everyone and have a great day.
And this concludes today's conference call. Thank you all for participating you may now disconnect.
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