Q1 2024 Sonoco Products Co Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Q1 2024 Sonoco Earnings Conference Call.

Okay.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Lisa Weeks, Vice President of Investor Relations. Please go ahead.

Speaker Change: Good day and thank you for standing by welcome to the Q1 2020 for Sonoco earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising that you were handed.

Speaker Change: Raced 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 Lisa weeks, Vice President of Investor Relations. Please go ahead.

Lisa K. Weeks: Thank you, Operator, and thanks to everyone for joining us today for Sonoco's first quarter earnings call. Last evening, we issued a news release highlighting our financial performance for the first quarter, and we prepared a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of our website at sonoco.com.

Lisa K. Weeks: Thank you operator, and thanks to everyone for joining us today for Sonoco as first quarter earnings call last evening, we issued a news release, highlighting our financial performance for the first quarter and we prepared a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of our web.

Speaker Change: Site at Sunoco Dot com.

Lisa K. Weeks: 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.

As a reminder, during today's call we will discuss a number of forward looking statements based on current expectations estimates and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore actual results may differ materially. Please take a moment to review the forward looking statements on slide.

Lisa K. Weeks: Please take a moment to review the forward-looking statements on slide two of the presentation. Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provide 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. Joining me this morning are Howard Coker, President and CEO; Rob Dillard, Chief Financial Officer; and Rodger Fuller, Chief Operating Officer.

Speaker Change: Two of the presentation.

Speaker Change: 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 up further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations to GAAP measures.

Speaker Change: Yours is available under the Investor Relations section of our website.

Speaker Change: Joining me. This morning are Howard Coker, President and CEO, Rob Dillard, Chief Financial Officer, and Rodger Fuller Chief operating officer for today's call. We will have a prepared remarks section followed by a discussion of our results for the quarter and outlook for the second quarter, followed by a Q&A if you will.

Lisa K. Weeks: For today's call, we will have a prepared remarks section, followed by a discussion of the results for the quarter and outlook for the second quarter, followed by a Q&A. Now, if you will turn to slide 5 in our presentation, I will now turn the call over to our CEO, Howard Coker, for business updates.

Speaker Change: Turning to slide five in our presentation I will now turn the call over to our CEO Howard Coker for business update.

Howard Coker: Thank you, Lisa, and thank all of you for joining us today. Let me kick off the discussion this morning with an update on our first quarter 2024 overall financial performance. We executed well and delivered solid results in the quarter, which were in line with our expectations. Sales were $1.6 billion, Justin Abadal was $245 million, and his Abadal margin was 15%.

Howard Coker: Thank you Lisa and thank all of you for joining US today, let me kick off the discussion this morning with an update on our first quarter 2024 overall financial performance.

Howard Coker: We executed well and delivered solid results in the quarter, which were in line with our expectations sales were $1 6 billion.

Howard Coker: Adjusted EBITDA was 245, ne and an EBITDA margin of <unk>.

Howard Coker: 15%.

Howard Coker: Our adjusted earnings per share were $1.12, which was above the midpoint of our guidance, and operating cash flow was $166 million. Productivity in the first quarter came in strong as well, at $51 million, which is just an outstanding result from our team's focused execution and the Operating Desk. Our productivity results are from value-adding capital investments across our plant network, including automation, process improvements, and energy cost reduction, all of which is underpinned by our portfolio simplification activity. [inaudible] So I do want to say thank you to our team for your hard work and commitment to our results this quarter.

Howard Coker: Our adjusted earnings per share were $1 12, which was above the midpoint of our guidance and operating cash flow was $166 million.

Howard Coker: From working capital management.

Howard Coker: Productivity in the first quarter came in strong as well at $51 million, which is just an outstanding result from our team's focused execution and operating discipline.

Howard Coker: Our productivity results are from the value added capital investments across our plant network, including automation and process improvements in energy cost reductions all of which is underpinned by our portfolio simplification activities.

Howard Coker: Our strong expense management.

Speaker Change: But I do want to say, thank you to our team for your hard work and commitment for our results this quarter.

Howard Coker: If you'll turn to slide six, this past February, we were happy to host our Investor Day 2024 in New York and share our strategy updates and what's next for Sonoco. Since I took over the CAO role in 2020, we've been on a transformation journey to improve the performance of the company, and we are making progress. We've built a strong portfolio that delivers greater value, simplified the company, and unified our global operating model to improve financial results while maintaining our disciplined capital structure.

Speaker Change: If you'll turn to slide six this past February we were happy to host our Investor Day 2024 in New York sure our strategy updates and what's next for Sunoco.

Speaker Change: Since I took over the CFO role in 2020, we've been on a transformation journey to improve the performance of the company and we are making progress.

Speaker Change: We have built a strong portfolio that delivers greater by simplifying the company and unified our global operating model to improve financial results, while maintaining our disciplined capital structure.

Howard Coker: At Investor Day, we provided our outlook over the next five years, where we are targeting adjusted EBITDA of $1.5 billion with a high teens EBITDA margin, and we are expecting to generate inlets of operating cash flow of 4 to 5 billion dollars, all while we remain committed to growing Competitive did. Our next era that enterprise strategy is supported by our commitments to maintain a focused portfolio, align the appropriate capital to our businesses, and invest in our people and sustainability while we operate with this. If you turn to slide 7, we are committed to keeping you updated on our progress along the way on our near-term strategic priorities through 2025, which are centered on continued alignment of our portfolio and investment. We'll continue to focus on investing in streamlining operations for these core businesses Return to slide 8.

Speaker Change: At our Investor Day, we provided our outlook over the next five years, where we are targeting adjusted EBITDA of <unk>.

Speaker Change: $1 $5 billion with a high teens EBITDA margin.

Speaker Change: And we are expecting to generate cumulative operating cash flow.

Speaker Change: $4 million to $5 million, all while we remain committed to growing.

Speaker Change: Our competitive dividend.

Speaker Change: Our next era.

Speaker Change: <unk> strategy is supported by our commitment to maintain a focused portfolio allow.

Speaker Change: The appropriate capital to our businesses and invest in our people and sustainability, while we operate with discipline.

Speaker Change: If you turn to slide seven we committed to keeping you updated on our progress along the way on our near term strategic priorities through 2025, which are centered on continued alignment of our portfolio and investments in our four core businesses will continue to focus on investing in streamlining operations for these core businesses.

Speaker Change: Oh, here's all the all other group of businesses.

Speaker Change: If you turn to slide eight.

Howard Coker: We made an important step toward the all-other resolution with the completion of the Protective Solutions Divestiture on April 1. This was a great business for Sonoco for many years, but through our portfolio simplification and investment analysis, we deemed this business to be non-core and took the appropriate action to find the right owner. As we progress through additional portfolio activities, we'll keep you apprised of our progress, which is focused. I am for bye.

Speaker Change: We made an important step toward the all other resolution with the completion of the protective solutions divestiture on April one.

Speaker Change: This is a great business for Sunoco for many years, but through our portfolio simplification and investment analysis loans within this business to be noncore and took the appropriate action to find the right honor as.

Speaker Change: As we progressed through additional portfolio activities, we will keep you apprised of our progress which is focused on strategic sales.

Speaker Change: Time for value.

Howard Coker: In parallel, we announced that as of January 1, 2024, we have taken five businesses that will run independently and now merge them onto one later, an operating structure in our consumer segment called PFP. This new scaled platform is $1.3 billion. Based on last year's revenue, it is focused on niche markets where we believe we have the right to win and the right to grow. The integration of these businesses is well underway, and we expect to see operational and sales benefits. The spirit of innovation to drive sales growth in the business is alive and well.

Speaker Change: In parallel we announced that as of January one 2024, we have taken five businesses that will run independently and now March them under one later and operating structure and our consumer segment L. P T.

Speaker Change: No scaled platform, but one through $1 $3 billion.

Speaker Change: Just on last year's revenue is focused on niche markets, where we believe we have the right to win and the right to grow.

Speaker Change: The integration of this business is well underway and we expect to see operational and sales benefit in the future.

Speaker Change: The spirit of innovation to drive sales growth in the business is alive and well two of our most recent products were recognized with a global awards for 2024.

Howard Coker: Two of our most recent products were recognized with PACT Global Awards for 2024. Our Environment Sense Paper Blister Award won Best in Show. Sustainable Packaging, and our EnviroPaper can, but the paper bottom also won Best in Class Award for Sustainable Packaging and Award for Distinction for Design Innovation. We're delighted to be recognized for our proprietary designs to help our customers achieve their sustainability packaging goals. In support of our environmental commitments, we were pleased to announce that we entered into a 15-year virtual purchase power agreement with Engie's Wind Project. Starting in 2025, we will contract 140 megawatts of electricity through Engie, which is almost half of our U.S. electrical needs.

Speaker Change: Our environment.

Speaker Change: Blister Award won the best in show for sustainable packaging and our Embolic paper can with a paper bottom also won best in Class Award for sustainable packaging and award for distinction for design and innovation.

Speaker Change: We're delighted to be recognized for our proprietary designs to help our customers achieve their sustainability packaging goals.

Speaker Change: In support of our environmental commitments, we were pleased to announce that we entered into a 15 year virtual purchase power agreement.

Speaker Change: The <unk> wind project starting in 2025, we will contract 140 megawatts of electricity through LNG, which is almost half of our U S launch.

Howard Coker: Projects like this help us progress towards our mission targets by consuming clean, reliable power in the communities where we are. If you'll turn to slide nine, our sustainability efforts are highlighted in our 2023 Corporate Sustainability Report, update, which we published just last week. Similar to last year's report, our materials were prepared in reference to GRI, TDFC, and FASB standards, and detailed progress to our 2023 targets is in line with the science-based targets set this year.

Speaker Change: Trickle needs.

Speaker Change: Projects like this help on our progress towards our emission targets by consuming clean reliable power and the communities where we operate.

Speaker Change: If you'll turn to slide nine our sustainability efforts are highlighted in our 2023 corporate.

Speaker Change: Excuse me its corporate sustainability report.

Speaker Change: <unk>, which we published just last week.

Speaker Change: Similar to last year's report our materials, we're prepared in reference to <unk> T. Dfc in FASB standards and detailed progress through our 2023 targets are in line with our science based targets initiatives.

Howard Coker: On the social side, we've updated our workplace diversity hiring progress, provided updates on our supplier diversity program, as well as our community investors for the Sonoco Foundation. We're grateful for the recognition we received for these efforts, and we were most recently named by Newsweek as one of America's most trustworthy companies, which is fully aligned to the mission and values of Sonoco. And with that update, I'm going to turn the call over to Rob to give us more details on our results and second quarter outload.

Speaker Change: On the social side, we have updated our workplace diversity hiring progress provided updates on our supplier diversity programs as well as our community investments through the Sunoco Foundation.

Speaker Change: We're grateful for the recognition we received for these efforts and we are most recently named by Newsweek as one of America's most trustworthy companies, which is fully aligned to the mission and values of Sunoco.

Speaker Change: And with that I'm going to turn the call over to Rob to take us through more details on our results and second quarter outlook.

Robert R. Dillard: Thanks, Howard. I'm pleased to present the first quarter 2024 financial results starting on page 11 of this presentation. Please note that all results are on an adjusted basis, and all growth metrics are on a year-over-year basis, unless otherwise noted. The Gap to Non-Gap EPS Reconciliation is in the appendix of this presentation, as well as in the press.

Speaker Change: Bob.

Robert R. Dillard: Thanks, Howard I am pleased to present, the first quarter 2024 financial results starting on page 11 of this presentation.

Robert R. Dillard: Please note that our results on an adjusted basis and all growth metrics on a year over year basis, unless otherwise stated the GAAP to non-GAAP EPS reconciliation is in the appendix of this presentation as well as in the press release.

Robert R. Dillard: As Howard said, we've built a solid foundation for continued resilient financial performance, building on our enduring operating model and strong market. Our strategy is to deliver shareholder value by growing these, Disciplined and Targeted Investment, while also maintaining our investment grade balance sheet and our differentiating dividends. First quarter results again represent the resilience of our teams and our ability to deliver strong earnings despite a low volume environment. Adjusted EPS was $1.12, which exceeded the midpoint of our guidance range of $1.05 to $1.15.

Robert R. Dillard: Howard said, we've built a solid foundation for continued resilient financial performance building on our enduring operating model and strong market position our strategy is to deliver shareholder value by growing these positions through disciplined and targeted investment.

Robert R. Dillard: Maintaining our investment grade balance sheet, and our differentiating dividend.

Robert R. Dillard: First quarter results again represent the resilience of our teams and our ability to deliver strong earnings despite a low volume environment.

Robert R. Dillard: Adjusted EPS was $1 12.

Robert R. Dillard: Which exceeded the midpoint of our guidance range of $1 <unk> to.

Robert R. Dillard: The $1 15 songs.

Robert R. Dillard: This result was driven by positive productivity of $0.39 per share, all set by negative price cost of $0.51 per share and negative volume X of $0.12 per share. For the quarter, net sales decreased 5% to $1.64 billion due to index-based price, Volume X was flat due to low single-digit volume declines in consumer, high single-digit volume increases in industrial, and double-digit volume declines in all others. These metrics include acquisition.

Robert R. Dillard: Oh, it was driven by positive productivity of 39 cents per share offset by negative price cost of 51 per share and negative volume mix of <unk> 12 per share for.

Robert R. Dillard: For the quarter net sales decreased 5% to $1 64 billion due to index based price pressure.

Robert R. Dillard: Volume mix was flat due to low single digit volume declines in consumer high single digit volume increases in industrial and double digit volume declines in all other.

Robert R. Dillard: These metrics include acquisitions organic volume mix was negative mid single digits due to lower organic volumes in consumer and flat organic volumes in industrial.

Robert R. Dillard: Organic volume X was negative mid single digits due to lower organic volumes in consumer and flat organic volumes in industrial. Index-based price pressure impacted sales negatively by $0.57. This result was expected as paper, metal, and some resin indexes have declined from their peak. Adjusted operating profit was $176 million, a sequential increase due to positive sequential volume X, as well as improved sequential productivity. Adjusted EBITDA was $245.

Robert R. Dillard: Index based price pressure impacted sales negative $57 million.

Robert R. Dillard: This result was expected as paper metal and some resin indexes have declined from their peaks adjusted operating profit was $176 million a sequential increase due to positive sequential volume mix as well as improved sequential productivity.

Robert R. Dillard: Adjusted EBITDA was $245 million, we maintain this historically strong profitability to incredibly strong operating performance productivity was positive $51 million.

Robert R. Dillard: We maintain this historically strong profitability due to incredibly strong operating. Productivity was positive 51. We achieve positive manufacturing productivity due to our lean programs, and we achieve positive fixed cost productivity due to continued efforts to reduce our plant footprint and optimize our supply chain. From an EBITDA perspective, volume mix was negative $16 million. As the consumer continues to be impacted by inflationary pricing at retail, and industrial begins to improve, acquisitions were positive $10 million as the Inapel, RTS, and Chattanooga acquisitions are all ahead of, price cost was negative 67 million as industrial price cost was negative 56 million and metal price overlap was negative 16. The price cost of metal was only negative $4 million due to pricing issues. Adjusted EBITDA margin was 14.9. We expect EBITDA margins to improve throughout 2024 as we anticipate price costs and volume mix to improve in both segments. Page 12 has our consumer segment.

Robert R. Dillard: We achieved positive manufacturing productivity due to our lean programs and we achieved positive fixed cost productivity due to continued efforts to reduce our plant footprint and optimize our supply chain from.

Robert R. Dillard: From an EBITDA perspective volume mix was negative $16 million as consumer continues to be impacted by inflationary pricing at retail and industrial begins to improve acquisitions were positive $10 million as the NFL Rts in Chatham New acquisitions are all ahead of plan.

Robert R. Dillard: Price cost was negative $67 million as industrial price cost was negative $56 million and metal price overlap was negative $16 million. So price cost of metal was only negative $4 million due to pricing actions.

Robert R. Dillard: Adjusted EBITDA margin was 14, 9%, we expect EBITDA margins to improve throughout 2024, as we anticipate price cost and volume mix to improve in both segments.

Robert R. Dillard: Page 12 has our consumer segment results.

Robert R. Dillard: Consumer Net Sales decreased 5% to $911 million, and Consumer Volume X decreased low single digits due to continued inflationary pricing at retail. Many consumer customers are beginning to return to historical pricing practices, including discounting. However, with list prices at elevated levels, volume has been slow to return to historical levels. Despite the year-over-year decline, consumer volumes remain on trend and increased 5% sequentially.

Robert R. Dillard: Consumer net sales decreased 5% to $911 million consumer volume mix decreased low single digits due to continued inflationary pricing at retail.

Robert R. Dillard: Many consumer customers are beginning to return to historical pricing practices, including discounting however, with list prices at elevated levels volume have been slow to return to historical patterns.

Robert R. Dillard: Despite the year over year declines consumer volumes remain on trend and increased 5% sequentially as a comparable Q1 2023 was unusually strong due the end of Destocking in most consumer markets.

Robert R. Dillard: As a comparable, Q1 2023 was unusually strong due to the end of de-stocking in most consumer markets. RPC sales declined by high single digits due to high single digit volume mix declines with particular weakness in North America relative to last year's strong comparable. TFP sales were flat as weakness in core flexible segments and cookies and confections and thermoforming food was offset by acquisition. Metal packaging sales declined by mid single digits as negative index based price actions offset a low single digit volume gain. Aerosol volumes were positive, and food volumes were slightly negative.

Robert R. Dillard: RPC sales declined high single digits due to high single digit volume mix declines with particular weakness in North America relative to last year's strong comparable <unk>.

Robert R. Dillard: <unk> sales were flat as weakness in core flexible segments in cookies, and confection and thermoform food was offset by acquisition.

Robert R. Dillard: Metal packaging sales declined mid single digits as negative index based price actions offset low single digit volume gains aerosol volumes were positive and food volumes were slightly negative.

Robert R. Dillard: Consumer EBITDA was flat at $129, as $16 million of productivity and $8 million of benefit from restructuring and non-operating benefits were offset by $9 million of price costs. On 15 million of volume, Consumer Eats Dollar Margin increased 60 basis points to 14.1%. We anticipate that EBITDA margins will increase in Q2, due to an improved mix in RPC and an increased mix of thermoforming and TFP. On Page 13, our industrial sales decreased 4% to $590. The reclassification of recycling reduced sales by 33 million, or 5%, as we now account for recycling as a procurement, with recycling sales margins reflected only in the cost of sale.

Robert R. Dillard: Consumer EBITDA was flat at $129 million of $16 million of productivity and $8 million of benefit from restructuring of nonoperating benefits was offset by $9 million of price costs and $15 million of volume mix consumer EBITA margin increased 60 basis points to 14, 1%.

Robert R. Dillard: We anticipate that EBITDA margins will increase in Q2.

Robert R. Dillard: Due to improved mix and RPC and increased mix of derma, forming and TFP.

Robert R. Dillard: Page 13 is our industrial segment results.

Robert R. Dillard: Industrial sales decreased 4% to $593 million, the reclassification of a cycling reduced sales by $33 million or 5% as we now account for recycling is a procurement function with recycling sales margins reflected only in cost of sales this accounting better aligns with our strategy of conducting research.

Robert R. Dillard: This accounting better aligns with our strategy of conducting recycling activities to ensure a low cost and available supply of recycled materials, and 2023 Recycling contributed $100 million in sales. Adjusted for the impact of recycling reclassification, industrial sales would have increased. Industrial volume mix was positive high single digits due to acquisitions and a mid-single digit recovery in Europe. North American volume mix was positive mid-teens due to acquisitions. Organic Volume Mix in North America with Supply.

Robert R. Dillard: Clark activities to ensure low cost and available supply of recycled materials.

Robert R. Dillard: And 2023 recycling contributed $100 million in sales.

Robert R. Dillard: Adjusted for the impact of recycling reclassification industrial sales would have increased 2%.

Robert R. Dillard: Industrial volume mix was positive high single digits due to acquisitions and a mid single digit recovery in Europe, North American volume mix was positive mid teens due to acquisitions organic volume mix in North America was flat industrial.

Robert R. Dillard: Industrial volumes are improving, but the recovery is uneven across our markets in a way that is unique relative to historical recovery. We expect industrial volumes to improve as we are experiencing improved order rates and higher utilization, especially in North America paper. Industrial prices decreased by mid single digits to the index-based price. We've achieved the majority of our announced market price increases and acted to offset higher OCC and other inflationary inputs. However, paper indexes have not met the market.

Robert R. Dillard: Industrial volumes are improving but the recovery is uneven across our markets in a way that is unique relative to historical recoveries, we expect industrial volumes to improve as we are experiencing improved order rates and higher utilization, especially in the North America paper markets industrial price decreased mid single digits due to index based pricing.

Robert R. Dillard: <unk>.

Robert R. Dillard: We achieved the majority of our announced market price increases enacted to offset higher OCC and other inflationary inputs. However paper index have not met the market. We anticipate paper indexes will correct in the second quarter and industrial prices will more accurately reflect the inflationary environment and the improving market.

Robert R. Dillard: We anticipate paper indexes will correct in the second quarter and industrial prices will more accurately reflect the inflationary environment and the improving market conditions. Industrial EBITDA decreased to $95 million due to $56 million of negative price costs offsetting $28 million of productivity. The Industrial EBITDA margin was 16.1%. We believe this is our new low cycle profitability level, and margins will improve with volume recovery and future pricing. We believe we have changed the fundamental profitability of the business through a series of restructuring activities in the last four years. We have shut down six older, smaller paper machines and replaced their volume with larger and more efficient machines.

Robert R. Dillard: Yeah.

Robert R. Dillard: Industrial EBITDA decreased to $95 million due to $56 million of negative price costs offsetting $28 million of productivity industrial EBITDA margin was 16, 1%. We believe this is our new low cycle profitability levels and margins will improve with volume recovery and future pricing actions.

Robert R. Dillard: We believe we have changed the fundamental profitability of the business through a series of restructuring activities in the last four years, we have shuttered six older smaller paper machines and replace their volume with larger and more efficient machines.

Robert R. Dillard: We believe that this, along with restructuring our converting network and increased automation, has driven lasting profitability, and Page 14 has our results for all other bills. All other sales decreased $14. 134 million due to volume at the constant protective solutions and the thermo safe cold chain business. All other EBITDA decreased to $21 million due to lower volume mix and negative price costs, offsetting $7 million of productivity. We completed the sale of protective solutions on April 1st.

Robert R. Dillard: We believe that this along with restructuring our converting network and increased automation have driven lasting profitability improvement.

Robert R. Dillard: Page 14 has our results for the all other businesses.

Robert R. Dillard: All other sales decreased 14% to $134 million due to volume mix to constant protective solutions and the thermostat cold chain business.

Robert R. Dillard: All other EBITDA decreased to $21 million due to lower volume mix and negative price cost offsetting $7 million of productivity.

Robert R. Dillard: We completed the sale of protective solutions on April one this business underperformed in the quarter by <unk> <unk> of adjusted EPS and will now have a negative 10 pro forma impact on the year.

Robert R. Dillard: This business underperformed in the quarter by three cents of adjusted EPS and will now have a negative 10 cents per form impact on the year. We continue to evaluate strategic alternatives for the remaining all other businesses. We're being disciplined with our approach to divestitures and our intent to maximize value over the long term. Moving to page 15.

Robert R. Dillard: We continue to evaluate strategic alternatives for the remaining all other businesses were being disciplined.

Robert R. Dillard: With our approach to divestitures and our intent on maximizing value over the long term.

Robert R. Dillard: Moving to page 15.

Robert R. Dillard: Our capital allocation framework aligns with our business strategy to drive value creation through earnings growth and margin improvement. The four pillars of our capital allocation model are capital investments to drive growth and improve profitability, dividend increases to reward shareholders, programmatic M&A to implement the portfolio strategy, and sharer purchases to return capital and maximize shareholder value. We are intent on driving shareholder value by maximizing cash flows and investing or returning cash in the most efficient way.

Robert R. Dillard: Our capital allocation framework aligns with our business strategy to drive value creation through earnings growth and margin improvement. The four pillars of our capital allocation model, our capital investments to drive growth and improve profitability dividend increases towards shareholders programmatic M&A to action the portfolio strategy and share repurchases.

Robert R. Dillard: To return capital and maximize shareholder value.

Robert R. Dillard: <unk> 10 on driving shareholder value by maximizing cash flows and investing our returning cash in the most efficient manner.

Robert R. Dillard: Currently, we're focused on investing in our RPC growth strategy and M&A with a focus on metal packaging and TFP. We are being disciplined in the disrupted M&A market and will execute the right acquisitions at the right time for us. On page 16, we have our cash flow performance for the quarter. In the first quarter, we generated an operating cash flow of $166,000. This was a meaningful improvement from a year ago due to strong work in capital management and increased focus on other cash calls. Capital expenditures were $86 million for the quarter. We're on track with all major initiatives and anticipate investing approximately $350 million in capital expenditures in 2024. Turning to page 17.

Robert R. Dillard: Currently we're focused on investing in our RPC growth strategy and in M&A with the focus on metal packaging and TSP, we're being disciplined in those dropped at M&A market and we will execute the right acquisitions at the right time for us.

Robert R. Dillard: On page 16, we have our cash flow performance for the quarter and the first quarter, we generated operating cash flow of $166 million. This was a meaningful improvement from a year ago due to strong working capital management and increased focus on other cash costs.

Robert R. Dillard: Capital expenditures was 86 million for the quarter were on track with all major initiatives and anticipate investing approximately $350 million of capital expenditures in 2024, turning to page 17.

Robert R. Dillard: The foundation of our value creation strategy is disciplined management of our investment grade balance. Our balance sheet is in excellent condition. We have over $1.1 billion of liquidity, we have a weighted average maturity of 6.9 years, and we have a weighted average cost of debt of 3.8%. We have developed this position through continued focus on debt reduction and management of our leverage levels. We were paid $22 million of debt in the first quarter of 2024 and reduced net to adjusted EBITDA by 2.8 times. Furthermore, we used proceeds from the protective solutions divestiture to repay $75 million of debt subsequent to the end of the first quarter.

Robert R. Dillard: The foundation of our value creation strategy is disciplined management of our investment grade balance sheet. Our balance sheet is in excellent condition. We have over $1 1 billion of liquidity, we have a weighted average maturity of six nine years and we have a weighted average cost of debt of three 8%. We developed this position through continued focus on that.

Robert R. Dillard: <unk> and management of our leverage levels, we repaid $22 million of debt in the first quarter of 2024 and reduced net to adjusted EBITDA at two eight times. Furthermore, we used proceeds from the protective solutions divestiture to repay $75 million of debt subsequent to the end of the first quarter since.

Robert R. Dillard: Since the Ball Metal Pack acquisition in 2022, we have now repaid gross debt of $375 million. Page 18 illustrates our history of increasing our dividends. We're excited to increase the quarterly dividend to 52 cents per share. We've now paid a dividend for 99 consecutive years and have increased the dividend on an annual basis for the last 41 years. We're committed to increasing the dividend and place a priority on dividend increases when allocating capital.

Robert R. Dillard: Since the <unk> acquisition in 2022, we have now repaid gross debt of $375 million.

Robert R. Dillard: Page 18 illustrates our history of increasing our dividend we're excited to increase the quarterly dividend of <unk> 52 per share. We've now paid a dividend for 99 consecutive years and have increased the dividend on an annual basis for the last 41 years, we're committed to increasing the dividend in place a priority on dividend increases on allocating cash.

Robert R. Dillard: Page 19 has our guidance for Q2 2020. Guidance for Q2 2024 adjusted EPS is $1.25 to $1.35. We expect consumer volumes to remain on trend in Q2 and expect year-over-year volumes to increase due to acquisition. We expect industrial volumes to improve in Q2 as we are experiencing improved order rates and backlogs, especially in the North American paper market. Industrial price trends are expected to improve, and price costs are expected to improve sequentially.

Robert R. Dillard: Capital.

Robert R. Dillard: Page 19 has our guidance for Q2 2024.

Robert R. Dillard: Guidance for Q2, 'twenty four 'twenty four adjusted EPS was $1 25 to $1 35.

Robert R. Dillard: We expect consumer volumes to remain on trend in Q2, and expect year over year volumes to increase due to acquisitions.

Robert R. Dillard: We expect industrial volumes to improve in Q2, as we experienced improved order rates and backlogs, especially in the North American paper markets and.

Robert R. Dillard: Industrial price trends are expected to improve and price cost is expected to improve sequentially OCC.

Robert R. Dillard: OCC is expected to increase in the quarter and Tan bending chip is expected to reflect market increases.

Robert R. Dillard: OCC is expected to increase in the quarter, and the TAN Vending Chip is expected to reflect market increases. We're revising our guidance for full year 2024 adjusted EPS to $5 to $5.30. This guidance now includes the sale of protective solutions, which reduce results by approximately 10%.

Robert R. Dillard: We are revising our guidance for full year 2020 for adjusted EPS to $5 to $5 30.

Robert R. Dillard: This guidance now includes the sale of protective solutions, which reduced results by approximately 10.

Robert R. Dillard: Similarly, we are revising full year 2024 adjusted EBITDA guidance to $1.05 billion to $1.09 billion. Additionally, we are reaffirming our operating cash flow guidance to 650 million to 750 million. We're confident in this guidance, as we anticipate we can continue to outperform our working capital expectations for the year. Now Roger will further discuss the outlook for the business. Yeah, thanks, Rob. Please turn to slide 20 for our view of segment performance drivers.

Robert R. Dillard: Similarly, we are revising full year 2024, adjusted EBITDA guidance to one point of $5 billion to $1 9 billion. We are reaffirming our operating cash flow guidance of $650 million to $750 million. We're confident in that guidance as we anticipate we can continue to out perform our working capital expectation for the year now.

Robert R. Dillard: Roger will further discuss the outlook for the business, yes. Thanks, Rob please.

Rodger D. Fuller: Yeah, thanks, Rob. Please turn to slide 20 for a view of segment performance drivers in the second quarter of 2024. In the consumer segment, we expect volume to be up sequentially and essentially flat year-over-year. We believe that continued retail price inflation and a slower uptick from promotions are the primary drivers of volume. In rigid paper containers, we see sales decline sequentially and year over year in North America, primarily in snacks and other discretionary food.

Roger: Please turn to slide 25 year segment performance drivers in the second quarter of 2024.

Roger: In our consumer segment, we expect volume to be up sequentially and essentially flat year over year. We believe the continued retail price inflation and a slower uptick from promotions are the primary drivers of volume in the second quarter.

Roger: In rigid paper containers, we see sales declined sequentially and year over year in the second quarter in North America, primarily in snacks and other discretionary food products.

Rodger D. Fuller: Customer demand is lower than originally forecast, and we see limited impacts from promotion. Richard paper container net sales for the rest of the world are flat year over year, where new product launches are progressing against a backdrop of sluggish consumer demand for legacy products.

Roger: Customer demand is lower than originally forecast and we see limited impacts from promotions in the near term.

Roger: Rigid paper container net sales for the rest of world are flat year over year for new product launches are progressing against the backdrop of sluggish consumer demand for legacy products in Europe.

Rodger D. Fuller: In our newly merged thermophorin and flexible packaging business, we anticipate sales to be up sequentially in the second quarter from seasonal volume improvements of both flexibles and thermophiles. The Thermoforming and Flexible Packaging team is making excellent progress in the integration of the leadership team and plant structure, and we'll see near-term cost benefits from the integration. Our focus now will be on driving growth through these resin bases, and our metal packaging businesses' sales are expected to be up sequentially in both aerosol and food aerosol demand improvement is offsetting lower volumes of food care. We expect total year-over-year volumes to be up mid-single digits in the second quarter.

Roger: Our newly merged thermoform in flexible packaging business, we anticipate sales.

Roger: It may be up sequentially.

Roger: In the second quarter from seasonal volume improvements in both flexible and thermal forming.

Roger: The thermal forming and flexible packaging team is making excellent progress on the integration of the leadership team and plant structure and we'll see a near term cost benefits from the integration our focus now will be on driving growth through these resin based businesses.

Roger: And our metal packaging businesses sales are expected to be up sequentially about aerosol and food cans.

Roger: Aerosol demand improvement is offsetting lower volumes in <unk>, and we expect total year over year volumes to be up mid single digits in the second quarter.

Rodger D. Fuller: The first quarter was impacted by metal price overlap, which extended into the second quarter last year. So this will be a net positive for the quarter. It's worth noting that we're carefully monitoring tightening templates still available. Domestic supply constraints as well as uncertainties around import tariffs have created a tight supply market.

Roger: The first quarter was impacted by metal price overlap, which extended into the second quarter last year. So this will be a net positive for the quarter.

Roger: It's worth noting that we are carefully monitoring tightening tin plate still availability.

Roger: <unk> supply constraints as well as uncertainties around import tariffs have created type supply market. Our teams are doing a great job of managing this issue, but it bears watching in the near term.

Rodger D. Fuller: Our teams are doing a great job of managing this issue, but it bears watching in the near future, across all of our consumer businesses. We expect strong productivity. In Industrial, we expect sales to be up low single digits year over year. Our North American paper businesses volumes and support of tissue and tile consumers in markets remain strong. And we've seen improvement in sales to the construction industry versus the lows we saw at the end of last year. Capacity utilization of our North American paper operations will remain strong in the second quarter. The same is true for our North American converting businesses, where volumes are projected to be up organically, year-over-year, and sequentially in the low 70s.

Roger: Cross all of our consumer businesses.

Roger: We expect strong productivity in the second quarter.

Roger: In industrial we expect sales to be up low single digits year over year in our North American paper business volumes in support of tissue and towel consumer end markets remained strong and we've seen improvement in sales to the construction industry versus the oil the lows we saw at the end of last year.

Roger: Capacity utilization of our North American paper operations will make will remain strong in the second quarter.

Roger: The same is true for our north American converting businesses, where volumes are projected to be up organically year over year and sequentially in the low single digits similar.

Rodger D. Fuller: Similar to Q1, we experienced negative price costs in the second quarter as higher input costs, such as OCC and wage inflation, have not yet been recovered through pricing increases. We believe this, as Rob said, to be a timing issue as price increases have not been fully reflected in index prices.

Roger: Similar to Q1, we experienced negative price cost for the second quarter as higher input costs, such as OCC and wage inflation.

Roger: <unk> had not yet been recovered through pricing increases. We believe this is Rob said to be a timing issue as price increases have not been fully reflected index index pricing that are open market increase in North America has been fully implemented.

Rodger D. Fuller: Our open market increase in North America has been fully realized. While overall international sales and industrial will continue to be sluggish, we are seeing some signs of improving volume, and all other we expect lower than expected sales at volume demand remains soft in our temperature assured packaging business due to product transition delays in various shipping products. However, effective price costs if all setting some impacts from these lower volumes; the remaining businesses and all others are also benefiting from positive productivity.

Roger: While overall international sales in industrial will continue to be sluggish we are seeing some signs of improving volumes in Europe.

Roger: In all other we expect lower than expected sales at volume demand remains soft and our temperature assured packaging business due to product transition delays and various shipping products. However, effective price cost is offsetting some impacts from these lower volumes there.

Roger: The remaining business and then all other also benefiting benefiting from positive productivity.

Rodger D. Fuller: Our teams are doing a great job on the productivity front across all businesses, and we expect continued strong productivity results in the second quarter. Supported by Footprint Racialization, Ongoing Expense Activities, and Continuous Improvement Programs. We are a very well positioned operation, rebuyment. Howard, I'll turn it back to you.

Roger: Our teams are doing a great job on the productivity front across all businesses and we expect continued strong productivity results in the second quarter.

Roger: <unk> footprint rationalization ongoing expense activity activities and continuous improvement programs, we are very well positioned operationally for volume improvement, but with that Howard I'll turn it back to you.

Unknown Speaker: created tremendous value over the last several years with the foundation. Unknown Speaker

Roger: It created tremendous value over the last several years.

Howard Coker: On base.

Howard Coker: We look forward.

Operator: Ladies and gentlemen, please stand by. Again, ladies and gentlemen, please stand by.

Speaker Change: Ladies and gentlemen, please standby, ladies and gentlemen, please standby.

Howard Coker: Okay.

Operator: Yeah, I'm sorry, we had a little technical difficulty. Yes, operator. Let's handle any questions. Certainly, as a reminder, to ask a question, please

Speaker Change: Yes, Im sorry, we had a little technical law issue here.

Howard Coker: Yes, operator, the satellite questions that you may have certainly as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again and one moment for your first question.

Operator: Certainly. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. And one moment for our first question. And our first question will be from Ghansham Panjabi of Baird. Your line is open.

Speaker Change: And our first question will be coming from.

Howard Coker: Ghansham Panjabi of Baird. Your line is open.

Ghansham Panjabi: Hey guys, good morning. I hope I didn't miss too much on the call. But I guess first off on consumer electronics, you know, if we kind of look at that segment, is it fair to say that at this point, you know, coming out of 1Q, that destocking is behind you for the most part, and now you're just kind of mirroring, you know, what the major end markets are doing? Is that how you see things unfolding here?

Ghansham Panjabi: Hey, guys good morning.

Ghansham Panjabi: Hope I didn't miss too much with the call.

Ghansham Panjabi: But I guess first off on consumer.

Ghansham Panjabi: If we kind of look at that segment is it fair to say that at this point coming out of <unk> that Destocking is behind you for the most part and now you're just kind of Marin.

Ghansham Panjabi: But the major end markets are doing is that how you see things unfolding here.

Howard Coker: Yeah guys, Mr. Howard, yes, we feel like, you know... We're fairly well through the de-stocking, and it is, it is market conditions at this point in time.

Speaker Change: Yeah, guys Ms Howard, Yes, we.

Speaker Change: We feel like.

Ghansham Panjabi: Yes.

Ghansham Panjabi: We're fairly well through either the Destocking and it is.

Ghansham Panjabi: It is market conditions at this point in time.

Howard Coker: Okay, and then in terms of aerosol, does your performance seem a little bit better than the market? What do you attribute that to?

Ghansham Panjabi: Okay, and then in terms of aerosol is that.

Ghansham Panjabi: Your performance seems a little bit better than the market.

Ghansham Panjabi: What do you attribute that towards.

Howard Coker: You know, the only thing I can say is that it's the mix of customers that we have. I don't know where I can really answer that. It's certainly, I don't think, I don't see any share movements as much as the customers that we have in our portfolio are doing better than they did, obviously, last year.

Ghansham Panjabi: And on.

Ghansham Panjabi: The facts are that as the mix of customers that we have.

Ghansham Panjabi: Now not only on the lack of really answer that.

Ghansham Panjabi: I don't think I don't see any share move.

Ghansham Panjabi: Movements as much as.

Ghansham Panjabi: As the customers that we have in our portfolio.

Ghansham Panjabi: Better than than they did obviously last year.

Howard Coker: Okay, that's a fair answer. And then last question is on the consumer segment and the RPC component. You know, just give us a little bit more color in terms of what drove the extent of that decline. And the evolution, you know, in terms of getting back towards flight, is that just a function of easier comparisons as the year unfolds? Yeah, I'd say.

Speaker Change: Okay. That's a fair answer and then last question is on.

Speaker Change: The consumer segment in the RPC component.

Speaker Change: Give us a little bit more color in terms of what drove the extent of the decline and the evolution in terms of getting back towards flat is that just a function of easier comparisons as the year unfolds.

Howard Coker: Yeah, I'd say, you know, for the quarter, really impressed if you look at internationally with high, I don't even know how to say that, high teens, growth in Asia, South America, relatively lower numbers in Europe. And then we, you know, North America, really, really had a difficult quarter, really around a few discrete customers, and it's not unique to Sonoco, but in North America, the price versus volume equation, and our customers, on the RPC side and on the flexible side as well, are telling us that they're starting to feel the pain of deleveraging and are planning to start increasing their promotion and marketing activities. So as we go into the remainder of the year, we feel like we should see some benefit from that. But it was really a North American story. And our

Speaker Change: Yes.

Speaker Change: For the quarter and are really impressed that you look internationally with high.

Speaker Change: And I will say the high teens.

Speaker Change: Growth in Asia, South America.

Speaker Change: Relatively.

Speaker Change: Lower numbers in Europe, and then.

Speaker Change: With America.

Speaker Change: Really had a difficult quarter.

Speaker Change: Around a few discrete customers.

Speaker Change: And it's it's back to <unk>.

Speaker Change: Not unique to Sunoco, but.

Speaker Change: In North America, the price versus volume equation in our customers.

Speaker Change: On the RPC side and on the flexible side as well.

Speaker Change: <unk> are telling us that they.

Speaker Change: They are starting to feel the pain of deleveraging and are planning to start increasing our promotion and marketing activities.

Speaker Change: We go into the remainder of the year we.

Speaker Change: We feel like we should see some benefit from that but it really was a north American storage and RPC.

Speaker Change: Got you. Thank you so much.

Operator: And one moment for our next question, and our next question will be coming from George Staphos of Bank of America Securities. Your line is open.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question will be coming from George Staphos.

George Leon Staphos: With Bank of America Securities. Your line is open.

George Leon Staphos: Hi everyone. Good morning.

George Leon Staphos: Hi, everyone. Good morning, Thanks for the details I guess first question I had.

Operator: Thanks for the details. I guess the first question I had was you generated $51 million of productivity, Howard or Roger, on the back of not a lot of volume. And so on the one hand, you know, kudos to everyone on the Sonoco team in that regard. But how much longer can you continue to drive productivity? If the volumes don't materialize, can you remind us what your budgets are for productivity for this year and, you know how volume dependent they might be?

George Leon Staphos: You generated.

George Leon Staphos: I think you said $51 million of productivity.

George Leon Staphos: Roger.

Speaker Change: On the back of not a lot of volume and so on the one hand.

Speaker Change: Kudos to everyone on the Sunoco team in that regard, but how much longer can you continue to drive productivity. If the volumes don't materialize can you remind us.

Speaker Change: What your budgets are for productivity for this year and.

Speaker Change: How volume dependent.

Speaker Change: Might be.

Rodger D. Fuller: Hey, yeah, George, this is Roger. I think we said last quarter that our productivity guide for the year is over $100 million. If you remember last year, we had a record year in productivity of over $100 million last year. Certainly, we're tracking to do better than that this year. As I said, in my comments for the second quarter, we should see continued strong productivity. You know, it's volume sensitive to some degree, but the work that the capital investments we've weighed the footprint work we've done, and that continues this year.

Roger: Yeah, George this Roger.

George Leon Staphos: I think we said last quarter, our productivity guide for the year is is over $100 million. If you remember last year, we did had a record year in productivity over $100 million last year, certainly we're tracking to do better than that this year as I said in my comments second quarter, we should see continued strong productivity.

George Leon Staphos: It's volume sensitive to some degree, but the work that the capital investments you've weighed the footprint work, we've done and that continues this year.

Rodger D. Fuller: You know, we're confident we can have another record year and productivity this year. We don't really guide quarter to quarter, as you know. But based on what we see for the year from a volume standpoint, and the plans we have in place around productivity, we expect stronger productivity this year than last year. So hopefully, that

George Leon Staphos: We're confident we can have another record year in productivity. This year, we don't really guide quarter to quarter as you know.

George Leon Staphos: Based on what we see for the year from a volume standpoint. The plans we have in place around productivity, we expect a stronger productivity this year than last year. So hopefully that helps yes, George I'd say youre right.

George Leon Staphos: Volume equals leverage and we're looking forward to the volume returning to really start driving the invested at the plant level.

Rodger D. Fuller: [inaudible], Improvements that we've made, and we'll talk about this, I'm sure, but really encouraged by what we're seeing from a loading of our North American paper business. Yeah, I think it's the first time we've seen the amounts of backlogs that we have in place since we've made some really material capital investments, rationalization, and so on.

George Leon Staphos: And progress that we've made and we'll talk about this I'm sure, but really encouraged with what we're seeing from a loading of our north American paper business, yes.

George Leon Staphos: Yes.

George Leon Staphos: The first time, we've seen the amount of backlogs that we have in place since we've made some really material capital investments rationalizations.

George Leon Staphos: And.

Speaker Change: So I would say this.

George Leon Staphos: Upside as we go forward.

George Leon Staphos: understood and not to push too hard on this one. But let's say, hopefully, not you know, we're here in October, and we're talking about this persistent issue, consumers haven't come back, there's still this lingering destocking, if that would even be possible. You know, and let's say volumes are trending, especially in consumer, with low single-digit declines. Does that put at risk your productivity target for the year? Just trying to get a sense of what it is all about. It does.

Speaker Change: Understood and not to push too hard on this one but let's say hopefully not we're here in October and we're talking about this persistent.

Speaker Change: Issue consumer Hasnt come back there is still this lingering destocking if that would even be possible.

Speaker Change: And let's say volumes are trending, especially in consumer kind of low single digit declines does that put at risk your productivity target for the year, just trying to get a sense there.

Rodger D. Fuller: No, no, it does not put at risk the target we laid out for the year of over $100 million. Okay, thanks for your thoughts and your patience on that one. So if we talk about consumers a bit more, I guess the overarching question would be, what are your customers? Especially in paper, seeing as it sounds like an answer to Ghansham's question.

Speaker Change: No. It does not put at risk the target we laid out for the year of over $100 million.

Speaker Change: Okay.

Speaker Change: Thanks for your your thoughts here on your patience on that one so if we talk about consumer a bit more.

Speaker Change: I guess the overarching question would be what are your customers, especially in paper, saying it sounded like in answering <unk> question a lot of it is just inflation and the effect on the consumer.

George Leon Staphos: A lot of it is just inflation and the effect on the consumer and their discretionary spending. If I miss that, please relay what you think is happening. And if overall, consumer volumes are flat in the quarter coming up, and I think you said metal overall would be up mid-single digits. It would suggest that everything is down, but can you give us a size order? What of the other large consumer segments is down the most and why? Thanks, guys, and I'll turn it over.

Speaker Change: And there are discretionary spending if I if I missed that please relay what you think is happening and if overall.

Speaker Change: <unk> volumes are flat in the quarter coming up.

Speaker Change: And I think you said metal overall will be up mid single digits.

Speaker Change: It would suggest that everything is down but can you give us.

Speaker Change: Her size order what of the other large consumer segments are down the most and why thanks, guys I'll turn it over from here.

Rodger D. Fuller: Yeah, George, Roger, again, RPC Global, we're expecting to be down a little over 1% in the second quarter, which is an improvement, obviously, from the first quarter. And that's driven by Howard, who has already mentioned, some really nice international growth with softness and continuing in North America. And it's exactly what you said. Our customers are telling us it's the price on the shelf. They are advertising, but we've seen limited impact from that. Hopefully, that will show up over time.

Speaker Change: Yes, George Roger again occupancy global we're expecting to be down.

Speaker Change: Little over 1% in the second quarter, which is an improvement of zero in the first quarter.

Unknown Attendee: And that's driven by Howard already mentioned, some really nice international growth with its what softness and continuing in North America and is exactly what you said our customers are telling us.

Roger Fuller: It's the price on the shelf.

Speaker Change: They are promoting but we've seen limited impact from that hopefully that shows up over time slightly positive and flexible in the second quarter from a year over year standpoint.

Rodger D. Fuller: Slightly positive inflexibles in the second quarter from a year over year standpoint, and then slightly negative in thermal forming versus a strong second quarter last year, and then not all as you set up mid single digits. So that's why we're calling, excuse me, consumer flat for the year. Thanks so much.

Speaker Change: And then slightly negative in thermal forming versus a strong second quarter last year, and then metal as you set up mid single digits. So that's why we're calling.

Speaker Change: Joining me consumer flat for that for the second quarter.

Speaker Change: Thanks, so much.

Speaker Change: And one moment for our next question.

Operator: And one moment for our next question. Our next question will be coming from Mark Weintraub of CCC. Your line is open, Mark.

Rodger D. Fuller: Our next question will be coming from Mark Weintraub of Seaport. Your line is open Mark.

Mark Adam Weintraub: Thank you. If we look at page 27 or slide 27, the number that really jumps out was that negative $56 million price cost in industrial. As you said, you announced a price increase for February, and that didn't get reflected by pulp and paper week in February, March, or April, but you are seeing it in your open market transactions. And so I guess the question is, What do you do if pulp and paper week doesn't reflect it? How dependent is your ability to get prices on the converted product, et cetera, for it to be reflected in pulp and paper? What options do you have to make sure it happens? Maybe I'll start there.

Rob: Thank you I am saying, if we look at page 27 of our slide 27, the number that really jumps out was that negative $56 million price cost in industrial.

Mark Adam Weintraub: As you said you announced the price increase for February.

Mark Adam Weintraub: And that didn't get reflected by pulp and paper week in February March or April.

Mark Adam Weintraub: But you're you are seeing it in Europe market transactions.

Speaker Change: And so I guess the question is.

Mark Adam Weintraub: What do you do with pulp and paper week doesn't reflect how dependent are.

Mark Adam Weintraub: Is your ability to get prices on the converted product et cetera for it to be reflected in pulp and paper what will what options do you have to make sure it happens.

Speaker Change: Maybe I'll start there.

Mark Adam Weintraub: Mark, I'd say. Just directly to your question, we have contractual obligations that are aligned to certain indices, and we're going to have to live by those. I think maybe where you're going is a longer-term question, and that's something that we're taking in consideration. But What do you do?

Robert R. Dillard: Mark I would say.

Mark Adam Weintraub: Just direct to your question, we have contractual obligations that are aligned to certain indices. Then we're going to have a little <unk> I think maybe where you're going is a longer term question and thats something that.

Mark Adam Weintraub: We're taking in consideration.

Mark Adam Weintraub: But.

Howard Coker: If it doesn't happen, we we pull the contingency plans that we've got in place to make up for the difference. But you you noted exactly right that the uptake from our open market was highly successful. We're running here in North America with backlogs, as I just noted a minute ago, that we haven't seen in literally in years. And that is as far as we can see out, let's just say in the third quarter, so I would be shocked if, Any index didn't reflect those type of market conditions. But I think maybe you're asking a longer-term question, and that's one that we're certainly considering at this point here as well. That's very, very helpful. And maybe not

Mark Adam Weintraub: What do you do it.

Howard Coker: It doesn't happen we pull the contingency plans that we've got in place to make up for the difference but.

Howard Coker: You noted.

Howard Coker: Exactly right that the uptake from our open market was highly successful.

Howard Coker: We're running here in North America with backlogs as I, just noted a minute ago that we haven't seen in literally in years.

Howard Coker: And that is as far as we can see out let's just say in reverse order. So.

Speaker Change: I would be shocked if any index didn't reflect those type of market conditions.

Speaker Change: But I think maybe you're asking a longer term question and that's one that we're certainly.

Howard Coker: Considering at this point here as well.

Mark Adam Weintraub: That's very helpful. And maybe now that the RTS transaction is done as well, could you remind us the sensitivities for every $10 per ton change, let's just say, in the index, how it impacts the North American market, and how it would flow through to EBITDA?

Mark Adam Weintraub: That's very very helpful and maybe now with the Rts transaction, Don as well could you remind us sensitivities.

Mark Adam Weintraub: For every $10 per ton change that should say in the in the index has it how it impacts the north American market.

George Leon Staphos: How it would flow through to EBITDA.

Robert R. Dillard: Yeah, each $10 move in the TAMP ending chip is about $5 million a year, up or down.

Speaker Change: Yeah. It's.

Robert R. Dillard: <unk> $10 move in Tan bending chip is about $5 million a year.

Robert R. Dillard: Up or down.

Robert R. Dillard:

Mark Adam Weintraub: I'm sorry, I don't I maybe I'm asking the wrong question. I don't you have north of 1 million tons of

Speaker Change: I'm sorry.

Mark Adam Weintraub: Maybe I'm asking the wrong question I don't you have north of 1 million tons of.

Robert R. Dillard: Yes, we have 1.2 million tons in North America. (Inaudible) Almost 40% of that does not move off the index. Got it. It's either the open market or some OCC movement. Okay.

Mark Adam Weintraub: Yes, we have 1.1 point 2 million tons in North America.

Robert R. Dillard: But remember.

Robert R. Dillard: Almost 40% of that does not move off the index got it is it <unk>.

Robert R. Dillard: Either open market and some OCC movement.

Mark Adam Weintraub: Okay, super. That is helpful. And just maybe real quick too, you noted that OCC you thought would be higher 2Q than 1Q, I believe, yet it had shown signs of moderating in April. Is that just a carryover from 1Q having been rising as it progressed, or is that that you're expecting OCC to start ticking higher again?

Mark Adam Weintraub: Okay Super that that is helpful and just maybe real quickly too.

Mark Adam Weintraub: Noted that OCC, you felt would be higher <unk> than one Q I believe.

Mark Adam Weintraub: Yet it had shown signs of moderating in April is that just a carryover from <unk> having been rising.

Mark Adam Weintraub: It progressed or is that that you're expecting OCC to start ticking higher again.

Robert R. Dillard: Some carryover, and we have projected another $5 move in the quarter as you get to the end of the quarter. Super. Thanks for the call.

Mark Adam Weintraub: Some carryover than we have projected another five dollar moves and.

Robert R. Dillard: In the quarter as you get to the end of the quarter.

Robert R. Dillard: Super Thanks for the color.

Operator: Thank you. One moment for our next question, and our next question will come in from Gabe Hajde of Wells Fargo. Your line's open, Gabe.

Speaker Change: One moment for our next question.

Operator: Sure.

Operator: Okay.

Gabrial Shane Hajde: And our next question will coming from Gabe <unk> of Wells Fargo. Your line is open Gabe.

Gabrial Shane Hajde: Good morning. Thanks for taking the time to answer the question. I wanted to ask you about the food can business. We're reading more reports about imported full cans of vegetables and fruits hitting shelves, maybe to circumvent tariffs, steel, tariffs, and otherwise. I think that's roughly 40% of your food can mix. I'm curious, based on conversations with customers, and I know they have to kind of plan for this stuff in terms of plantings, what the expectation is for the upcoming, you know, pack season that's embedded in the food can business.

Gabrial Shane Hajde: Good morning, Thanks for taking the question.

Gabrial Shane Hajde: I wanted to ask you about the food can business.

Gabrial Shane Hajde: We're reading more reports about imported for Kansas of vegetables, and fruits hitting shelves, maybe to circumvent templates steel tariffs and otherwise.

Gabrial Shane Hajde: I think that's roughly 40% of your food can mix I'm curious.

Gabrial Shane Hajde: Based on conversations with customers and I know they have to kind of plan for the stops in terms of plantings what.

Gabrial Shane Hajde: What the expectation is for the upcoming tax season, that's embedded in the food can business.

Howard Coker: Okay, I don't have that level of detail heard the same thing in terms of imports. I don't think we're hearing that as a direct impact on our customers. And you know, as we said earlier, we expect to see a slight improvement in the second quarter. And that's because of feedback from our customers. So at this point in time, I really can't speak to any type of material influence that we are aware of within our customer base related to https://www.ghanshampanjabi.com

Speaker Change: Yes, I'll, let I'll have that level of detail hard same thing in terms of imports.

Howard Coker: I don't think we're hearing that as a direct impact to two <unk>.

Howard Coker: Our customers and as we said earlier, we expect to stadiums the slight improvement in the second quarter.

Howard Coker: And thats that feedback from our customers. So at this point in time, I really can't speak to.

Howard Coker: Any type of material influence that we are aware of within our customer base related to Apple.

Howard Coker: Materials certainly is out there.

Speaker Change: Okay. Thank you.

Operator: And as a reminder, to ask a question, please press star 11 on your telephone. To withdraw your question, please press star 11 again. And our next question will be from Gregory. Mr. Andreopoulos of Citi, your line is open. Hi, good morning.

Speaker Change: That was it for me.

Gregory Andreopoulos: And as a reminder to ask a question. Please press star one on your telephone.

Gregory Andreopoulos: To withdraw your question. Please press star one again.

Gregory Andreopoulos: And our next question will be coming from Gregory.

Gregory Andreopoulos: Andrea <unk> of Citi. Your line is open.

Gregory Andreopoulos: Hi, good morning. I have just a few quick questions for you on consumer price costs. So, you know, you mentioned CPGs are kind of stepping up promotions, or that could be happening, you know, in the near term. So I'm wondering how you think about your or the dynamic of CPGs stepping up promotions versus your ability to capture positive pricing and consumer, or even positive price costs, depending on how you want to address it. And then I had one follow-up after that.

Gregory Andreopoulos: Hi, good morning.

Gregory Andreopoulos: A few quick questions from me on consumer price cost. So you mentioned CPG is our kind of stepping up promotions or that could be happening on the near term. So I'm wondering how you think about your or the dynamic of CPG stepping up promotions.

Gregory Andreopoulos: Versus your ability to capture positive pricing in consumer.

Gregory Andreopoulos: Even positive price cost depending on how you want to how you want to address it and then I had one follow up after that.

Gregory Andreopoulos: Yes.

Unknown Executive: Yeah, I think that we definitely have seen, you know, pricing dynamics at the consumer level. We think that customers, our customers, are being really dynamic in their response to kind of higher prices on the shelf and are, you know, acting appropriately to drive the right volume for them. You know, in terms of our price, you know, how we see that, you know, there are a number of index-based prices that affect that. I think, overall, we've got kind of a little bit of price pressure.

Speaker Change: Yes, I mean, I think that we definitely have seen.

Unknown Executive: Pricing dynamics at the consumer level, we think that a customer our customers are being really dynamic in their response to kind of higher prices on the shelf and are.

Unknown Executive: Acting appropriately to drive the right volume for them.

Unknown Executive: In terms of our price how we see that.

Unknown Executive: There are a number of index based prices that affect that I think overall, we've got kind of a <unk>.

Unknown Executive: Little bit of price pressure, so I would say low single digit price pressure going into the second quarter.

Unknown Executive: So I would say low single-digit price pressure going into the second quarter. And I think that, you know, some of that is going to be metal, probably a little bit more offset. But overall, you know, modest price pressure going into the second quarter from a sequential basis and then also on a year over year basis.

Unknown Executive: And I think that some of that is going to be met all probably a little bit more offset but overall.

Unknown Executive: Modest pricing pressure going into the second quarter from a sequential basis and then also on a year over year basis.

Unknown Executive: That's fair. And I mean, the price cost didn't seem as bad as it could have been in one queue at down nine. You know, and I think you mentioned last quarter that you had some contracts resetting lower. So I'm wondering if you could kind of, you know, address what kind of kept price calls relatively close to neutral. And then, if you could, if you could remind us what the implied for the full year guide in terms of consumer price costs for the balance of the year. Thank you. And I'll turn it over after that.

Speaker Change: Okay. That's.

Speaker Change: That's fair.

Unknown Executive: Price cost didn't seem as bad as it could have been written <unk>, but down nine.

Unknown Executive: And I think you mentioned last quarter that you had some contracts resetting lower so I'm wondering if you could kind of.

Unknown Executive: The address what what kind of kept price costs relatively close to neutral and then if you could if you could remind us what was what's implied for the full year guide in terms of consumer price cost for the balance of the year. Thank you and I'll turn it over after that.

Unknown Executive: Yeah, price.

Unknown Executive: Yeah, price cost was, we had really strong performance in the businesses. I think they're doing everything they can to kind of manage prices with their customers.

Speaker Change: Price cost was we had really strong performance in the businesses I think they're doing everything they can to kind of manage private.

Unknown Executive: Most of these are index-based prices that are causing a little bit of declines. And that was across the board, across consumers. So it was pretty evenly spread.

Unknown Executive: With their customers.

Unknown Executive: Most of these are index based prices that are causing a little bit of decline and that was across the board across consumer so it was pretty evenly spread.

Unknown Executive: You know, and Q1 is when we experienced metal price overlap, which was $16 million this year. So a little bit down because we've been managing the inventory at the end of the year. And they did a really good job kind of managing the timing and the activation around that. So that was only four of the nine or 10 million that we had in price, negative price cost in Q1. We think that'll ease somewhat in Q2, and actually, we'll get some positive price costs in metal, which will get us to, you know, a modest positive price costs for consumers in the second quarter. And we expect that to continue through the balance. Great, thank you.

Unknown Executive: Q1 is when we experienced metal price overlap, which was $16 million. This year, so a little bit down because we've been managing that inventory at the end of the year and they did a really good job kind of managing the timing and the.

Unknown Executive: Activation around that so that that was only four of the nine or $10 million that we had in price negative price cost in Q1, we think that will relieve somewhat in Q2 and actually we will get some positive price cost in the metal, which will which will give us get us to.

Unknown Executive: A modest positive in price cost for.

Unknown Executive: For consumer in the second quarter, and we expect that to continue through the balance of the year.

Speaker Change: Great. Thank you.

Operator: Again, as a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Again, as a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. I'm showing no further questions. I will now like to hand the call back to Lisa Weeks for her closing remarks.

Unknown Executive: Again 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.

Operator: Okay.

Operator: Okay.

Lisa K. Weeks: Again as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Operator: Okay.

Operator: I'm showing no further questions I will now like to hand, the call back to Lisa weeks for closing remarks.

Lisa K. Weeks: Thank you again for joining us today. If you have any follow-up questions, we'll be around after the call. And please feel free to contact me if you'd like to schedule a follow-up meeting. We look forward to seeing you all on the road at our planned conferences and events in the coming weeks, and we look forward to reporting our second quarter results in early August. That, please have a great day.

Lisa K. Weeks: Thank you again for joining US today do you have any follow up questions, we'll be around after the call and please feel free to contact me if you'd like to schedule a follow up meeting we look forward to seeing you all on the road at our planned conferences and events in the coming weeks and we look forward to reporting.

Lisa K. Weeks: Our second quarter results in early August.

Lisa K. Weeks: With that please have a great day.

Speaker Change: Thank you.

Operator: And this concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: And this concludes today's conference call. Thank you for participating you may now disconnect.

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