Q2 2024 Sealed Air Corp Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Q2 2024 Sealed Air 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 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 first speaker today, Brian Sullivan, Investor Relations. Please go ahead.
Speaker Change: Good day, and thank you for standing by. Welcome to the Q2 2024 Sealed Air 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.
Speaker Change: 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 your hand is raised.
Speaker Change: So withdraw your questions, 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 first speaker today, Brian Sullivan, Investor Relations. Please go ahead.
Brian Sullivan: Thank you and good morning everyone. With me today are Sealed Air's Chairman of the Board, Henry Keizer, along with Patrick Kivits, CEO, and Dustin Semach, President and CFO. Before we begin our call, I'd like to note that we have provided a slide presentation to supplement the call. Please visit sealter.com, where today's webcast and presentation can be downloaded from our Investor Relations Day website, statements made during this call stating managers' outlook or estimates for future periods in forward-looking statements. These statements are based solely on the information that is now available to us.
Brian Sullivan: Thank you and good morning everyone. With me today are Sealed Air's Chairman of the Board, Henry Kaiser, along with Patrick Kivitz, CEO , and Dustin Semach, President and CFO .
Speaker Change: Before we begin our call, I would like to note that we have provided a slide presentation to supplement the call.
Speaker Change: Please visit SealedAir.com where today's webcast and presentation can be downloaded from our investor relations page.
Speaker Change: statements made during this call stating management's outlook or estimates for future periods are forward-looking statements
Speaker Change: These statements are based solely on the information that is now available to us.
Brian Sullivan: We encourage you to review the information in this section entitled Forward-Looking Statements and our earnings release and slide presentation, which applies to this call. Additionally, our future performance may differ due to a number of factors. Many of these factors are listed in our most recent annual report on Form 10K, as we're basing data on our quarterly reports on Form 10Q and current reports on Form 8K. We discussed financial measures that did not conform to U.S. Gap standards.
Speaker Change: We encourage you to review the information in this section entitled Forward-Looking Statements in our earnings release and slide presentation, which applies to this call.
Additionally, our future performance may differ due to a number of factors.
Speaker Change: Many of these factors are listed in our most recent annual report on Form 10-K , as revised and updated on our quarterly reports on Form 10-Q , and current reports on Form 8-K.
Speaker Change: We discuss financial measures that do not conform to U.S. GAAP.
Speaker Change: You will find important information on our use of these measures and the reconciliation to U.S. GAAP in our earnings release.
Brian Sullivan: You will find important information on our use of these measures and the reconciliation to U.S. GAAP in our earnings release. Including the epimics of today's presentation, you'll find the U.S. gap, the natural results that correspond to the non-U.S. gap measures we reference throughout the presentation. I'll now turn the call over to Henry, Patrick, and Dustin. Operator, please turn to slide three.
Speaker Change: Including the appendix of today's presentation, you'll find US GAAP financial results that correspond to the non-US GAAP measures we referenced throughout the presentation.
Speaker Change: I'll now turn the call over to Henry, Patrick, and Dustin. Operator, please turn to slide 3. Henry?
Henry Keizer: And thank you for joining us on our second quarter earnings call. Before we dive into today's earnings discussion, I would like to take a moment to discuss how we are further strengthening our leadership team with the hiring of Patrick Kivits as Sealed Air's CEO. First, I want to thank both Dustin and Emile for their leadership over the last eight months. They have navigated the company through a period of volatility and have corrected our long-term trajectory.
Henry: Thank you, Brian .
Henry: And thank you for joining our second quarter earnings call.
Henry Keizer: The biggest challenge facing the company is the ability to consistently deliver volume growth. Patrick has a strong commercial background in a space that is relevant to ours, and a track record of demonstrating the ability to drive growth and transform businesses. Amir will continue to be the backbone of our operation. Dustin, who has been a catalyst for change, has been promoted to president and CFO, reflecting the broad impact he has had on the organization well beyond his CFO responsibilities, with several other hires made over the past couple of months, and the remaining searches nearing conclusion.
Speaker Change: Before we dive into today's earnings discussion, I would like to take a moment to discuss how we are further strengthening our leadership team with the hiring of Patrick Kivitz as Sealed Air's CEO .
Patrick Kivitz: First, I want to thank both Dustin and Emile for their leadership over the last eight months.
Patrick Kivitz: They navigated the company through a period of volatility and course-corrected our long-term trajectory.
Speaker Change: The biggest challenge facing the company is the ability to consistently deliver volume growth.
Speaker Change: Patrick has a strong commercial background in a space that is relevant to ours and a track record of demonstrating the ability to drive growth and transform businesses.
Speaker Change: Emile will continue to be the backbone of our operations.
Dustin: Dustin, who has been a catalyst for change.
Dustin: has been promoted to President and CFO .
Speaker Change: reflecting the broad impact he has had on the organization well beyond his CFO responsibilities.
Dustin: with several other hires made over the past couple of months.
Henry Keizer: We're on the verge of completing our entire management team. Patrick is ramping up quickly and is expected to accelerate the ongoing transformation to restore underlying business fundamentals and drive long-term profitable growth across our two market-leading packaging businesses. Food and Protect, I am confident in our future and look forward to seeing the transformation this team will drive to accelerate Sealed Air's evolution into a world-class provider of packaging solutions, delivering substantial long-term value to our shareholders. With that, I'll turn it over to Patrick.
Speaker Change: and the remaining searches nearing conclusion we are on the verge of completing our entire management team
Speaker Change: Patrick is ramping up quickly and is expected to accelerate the ongoing transformation to restore underlying business fundamentals and drive long-term profitable growth across our two market-leading packaging businesses.
Speaker Change: Food and Protective.
Speaker Change: I am confident in our future and look forward to seeing the transformation this team will drive to accelerate Sealed Air's evolution into a world-class provider of packaging solutions
Speaker Change: delivering substantial long-term value to our shareholders.
Speaker Change: With that, I'll turn it over to Patrick.
Patrick Kivits: First, I am thrilled to join the company at this pivotal point in its journey. Sealed Air has great people, great products, and great customers. I have known Sealed Air for many years and have always respected both packaging businesses, each with an incredible history and strong brand equity. They have both set the gold standard within their respective markets.
Patrick Kivitz: Thank you, Henry.
Patrick Kivitz: First, I am thrilled to join the company at this pivotal point in its journey.
Patrick Kivitz: Sealed Air has great people, great products, and great customers.
Patrick Kivitz: I have known Sealed Air for many years and have always respected both packaging businesses, each with an incredible history and strong brand equity.
Patrick Kivitz: They have both set the gold standard within their respective markets.
Patrick Kivits: Although I've only been with the company for a month, I'm even more excited about the opportunities ahead of us. While the markets we operate in remain challenging, we see this as an opportunity to accelerate the transformation initiated eight months ago. Over the coming months, my focus will be on finalizing the management team and accelerating our commercial transformation. Additionally, we are adjusting our cost optimization programs initiated last year to address the persisting market challenges in this lower for longer environment within Protector.
Speaker Change: Although I've only been with the company for a month, I'm even more excited about the opportunities ahead of us.
Speaker Change: While the markets we operate in remain challenging, we see this as an opportunity to accelerate the transformation initiated eight months ago.
Speaker Change: Over the coming months, my focus will be on finalizing the management team and accelerating our commercial transformation.
Speaker Change: Separately, we are adjusting our cost optimization programs initiated last year to address the persisting market challenges in this lower-for-longer environment within Protective.
Patrick Kivits: In the near term, I'm quickly coming up to speed on the business. I am meeting with our top customers and channel partners as well as visiting our global facilities to gain insights into our manufacturing technology. I am looking to better understand our customers' challenges and how our value proposition resonates.
Speaker Change: In the near term, I'm quickly coming up to speed on the business.
Speaker Change: I am meeting with our top customers and channel partners, as well as visiting our global facilities to gain insights into our manufacturing technologies.
Speaker Change: I am looking to better understand our customers' challenges and how our value proposition resonates with them.
Patrick Kivits: This will guide future enhancements to our commercial, innovation, and operational strategies, including our investments in both digital and automation. Additionally, we are continuing to advance portfolio optimization initiatives. I am actively involved in strategic efforts concerning our protective business, focusing on analyzing market trends over the medium to long term, developing a comprehensive pivot strategy, and determining the future of portfolios that do not align with our core strategy. Lastly, Dustin and I plan to travel in the coming weeks to meet with investors, gather their perspectives, and update them on our ongoing progress. I look forward to quickly getting up to speed and sharing updates on our progress in a month.
Speaker Change: This will guide future enhancements to our commercial, innovation, and operational strategies, including our investments in both digital and automation.
Speaker Change: Additionally, we are continuing to advance portfolio optimization initiatives.
Speaker Change: I am actively involved in strategic efforts concerning our protective business, focusing on analyzing market trends over the medium to long term, developing a comprehensive private strategy, and determining the future of portfolios that do not align with our core strategy.
Speaker Change: Lastly, Dustin and I plan to travel in the coming weeks to meet with investors, gather their perspectives, and update them on our ongoing progress.
Speaker Change: i look forward to quickly getting off the speed and sharing updates on our progress in a month ahead
Patrick Kivits: With that, let's turn to Sealed Air's second quarter performance. We close the quarter with its sales of 1.35 billion and adjusted EBITDA of 285. Delivering strong results despite the continued challenging market dynamics in the protectors. Our second quarter results reflected a step up in performance in food, with mid-single-digit volume growth across all regions, continued weakness in protective packaging, and strong execution related to our CTO-to-Grow initiative. Through the focused efforts of our teams around the world, we delivered positive cash flow of $207 million as of second quarter year today. This is well above the $45 million free cash flow generated in the SIM period a year ago.
Speaker Change: With that, let's turn to Sealed Air's second quarter's performance.
Speaker Change: we close the quarterof it sales of one point three five billion and adjusted ebitda of two hundred and eighty five delivering strong results despite the contined challenging market dynamics in a protective segment
Speaker Change: our second quarter results reflected a step up in performance in food with mid-single digit volume growth across allour regions continued weakness in protective and strong execution related to our cpro to grow initiatives
Speaker Change: Through the focused efforts of our teams around the world, we delivered positive free cash flow of $207 million as of second quarter year to date. This is well above the $45 million free cash flow generated in the SIM period a year ago.
Patrick Kivits: Dustin will provide a more comprehensive overview of our financial performance shortly. On the sustainability front, I am pleased to share that Sealed Air Australia has won the coveted Gold Sustainability Award at the 2024 Worldstar Packaging Awards for Sustainable Innovations within our food business, where we are extending the shelf life of lamb while simultaneously reducing the packaging material. This is another example, like our composable tray, where we are developing and introducing solutions that help our customers and stakeholders in achieving their sustainability goals, meeting regulatory requirements, and advancing circularity initiatives.
Speaker Change: Dustin will provide a more comprehensive overview of our financial performance shortly.
Speaker Change: On the sustainability front, I am pleased to share that Seal Dare Australia has won the coveted Gold Sustainability Award at the 2024 Worldstar Packaging Awards for Sustainable Innovations within our food business, where we are extending the shelf life of lamb while simultaneously reducing the packaging materials.
Speaker Change: This is another example, like our compostable tray, where we are developing and introducing solutions that help our customers and stakeholders in achieving their sustainability goals, meeting regulatory requirements, and advancing circularity initiatives.
Patrick Kivits: Now let's move on to a market and business update. The food segment continued its strong momentum from the first quarter and delivered approximately 5% year-on-year volume growth during the quarter. The growth was driven by increased consumer demand in both the proteins and fluid markets across all regions, combined with competitive winds. All portfolios achieved mid- to high-single-digit volume growth, except for equipment, where customers' capital constraints continue to put pressure on bookings and sales.
Speaker Change: Now let's move on to a market and business update.
Speaker Change: Our food segment continued the strong momentum from the first quarter, delivering approximately 5% year-over-year volume growth during the quarter. The growth was driven by increased consumer demand in both the proteins and fluid markets across all regions, combined with competitive wins.
Speaker Change: All portfolios achieve mid to high single-digit volume growth, except for equipment, where customers' capital constraints continue to put pressure on bookings and sales.
Patrick Kivits: In the second quarter, beef production was better than anticipated, with U.S. slaughter rates nearly flat, while the South American and Australian cycles continue at their peak. Protein producers increased packaging inventory and anticipated the oncoming peak. In the fluids and liquids sector, food service demand remains strong, further boosted by the early start of the U.S. tomato crisis.
Speaker Change: In the second quarter, beef production was better than anticipated, with U.S. slaughter rate nearly flat, while the South American and Australian cycles continue at their peaks.
Speaker Change: protein producces increased packaging inventory and anticipated the oncoming peak season
Speaker Change: In the fluids and liquids sector, food service demand remains strong, further boosted by the early start of the U.S. tomato season.
Dustin Semach: With the U.S. cattle cycle weakening in the second half and considering the pull-forward benefits mentioned earlier, we anticipate a lighter seasonal pattern for the rest of the year. Transitioning to Protective, sales performance in the second quarter was in line with expectations. Industrial portfolios remained weak as manufacturing PMI registered below or around 50 for the Eurozone and the U.S., respectively, in the quarter. Voyment fulfillment portfolios declined by high single digits driven by a slowdown in equipment automation and increasing pressure with avoid field product lines, but partially offset by a strong recovery in our APF.
Speaker Change: With the U.S. cattle cycle weakening in the second half and considering the pull-forward benefits mentioned earlier, we anticipate a lighter seasonal pattern for the rest of the year.
Speaker Change: transitioning to protective sales performance in the second quarter was in line with expectations
Speaker Change: industrial portfolios remained weak as manufacturing pmi registered below or around fifty for the eurozone and the u s respectively in the quarter
Speaker Change: Volume and fulfillment portfolios declined by high single digits, driven by a slowdown in equipment automation and increasing pressure within void-filled product lines, but partially offset by a strong recovery in our APS business.
Dustin Semach: In the Americas, volume declined by mid-single digits during the quarter, impacted by the difficult comp of box right-sizing automation in the prior year, a deteriorating void fill sector, and ongoing weakness in the industry. EMEA continues to decline. Though at a slower pace than in the first quarter, as the de-stocking within our APS product line reached complete, Server-related electronic businesses showed improvement in Asia, and we continue to help customers navigate the shift to other Asian countries outside of China.
Speaker Change: In the Americas, volume declined by mid-single digits during the quarter, impacted by the difficult comp of box price sizing automation in the prior year, a deteriorating void fill sector, and ongoing weakness in industrials.
Speaker Change: right
Speaker Change: EMEA continues to decline.
Speaker Change: Though at slower pace than in the first quarter, as the destocking within our APS product line reached completion.
Speaker Change: Server-related electronic businesses showed improvement in Asia, and we continue to help customers navigate the shift to other Asian countries outside of China.
Dustin Semach: Given the sustained soft demand across all regions, we do not see volumes in protective inflecting in 2024 and expect the weakness to persist into 2024. With our renewed focus on protective and food through our recently established operating units, we are continuing to ramp up our transformation efforts. While our primary focus in both businesses is to accelerate volume growth, we are also increasing our cost optimization strategies in Protective, where we have limited visibility into volume recovery.
Speaker Change: Given the sustained soft demand across all regions, we do not see volumes in protective inflecting in 2024 and expect the weakness to persist into 2025.
Speaker Change: With our renewed focus on protective and food through our recently established operating units, we are continuing to ramp our transformation efforts.
Speaker Change: While our primary focus in both businesses is to accelerate volume growth, we are also increasing our cost optimization strategies in Protective, where we have limited visibility to volume recovery.
Dustin Semach: We are making solid progress with the four site closures discussed in previous calls following the three plant shutdowns completed last year. With the measures implemented thus far, we have achieved an annual savings run rate of over $100 million and are confident to achieve approximately $90 million in year-over-year cost savings in 2020. Now, I would like to turn it over to Dustin to review our financial results.
Speaker Change: we are making solid progress with the foreresside closures discussed in previous callals following the three plants shutdowns completed last year
Speaker Change: With the measures implemented thus far, we have achieved an annual savings run rate over $100 million and are confident to achieve approximately $90 million in year-over-year cost savings in 2024.
Speaker Change: Now I would like to turn it over to Dustin to review our financial results. Dustin?
Dustin: Thank you, Patrick, and good morning, everyone.
Dustin: Moving to second quarter results. Let's turn to slide four.
Dustin: Net sales were $1.35 billion in the quarter, down 2% on a constant currency basis.
Dustin: Just as EBITDA on the quarter was $285 million, up 2% compared to the last year.
Speaker Change: Logins were up 1% year-over-year for the quarter, with growth in the food segment across all regions offset by declines in protective, primarily in the Americas and EMEA.
Dustin Semach: As reported, adjusted earnings per share in the quarter of 83 cents were up 4% compared to a year ago. Our adjusted tax rate was 25.5% compared to 26.9% in the same period last year. Decreasing the tax rate year over year was driven by the jurisdictional mix of income and non-recurring discrete items in the prior year. Our weighted average deluded chair is outstanding in the second quarter of 2024 was 146 million. Turning to slide five.
Dustin: As reported, adjusted earnings per share in the quarter of 83 cents were up 4% compared to a year ago.
Speaker Change: our adjusted tax rate was twenty-five point five percent compared to twenty-six point nine percent in the same period last year
Speaker Change: Decreasing the tax rate year-over-year was driven by the jurisdictional mix of income and non-recurring discrete items in the prior year.
Speaker Change: Our weighted average diluted shares outstanding in the second quarter of 2024 was $146 million.
Dustin Semach: In the second quarter, we saw 3% lower year-over-year pricing across both the food and protective segments, primarily in the Americas and EMEA regions, reflecting the carryover pricing actions following input cost production in 2023. Volume however returned to 1% growth as the strong momentum in proteins and fluid sectors more than offset the slowdown of equipment automation and the continued weakness in protection. Second quarter adjusted EBITDA of $285 million increased $5 million or approximately 2% compared to last year, with margins of 21.2%, up 90 basis points. This performance was mainly driven by volume growth in the food segment, productivity efficiencies, including savings from our CTO to grow program, partially offset by unfavorable net price realization and protective volume decline. Moving to slide six.
Speaker Change: Turning to slide 5.
Speaker Change: In the second quarter, we saw 3% lower year-over-year pricing across both the food and protective segments, primarily in the Americas and EMEA regions, reflecting the carryover pricing actions following input cost productions in 2023.
Speaker Change: volume return to one percent growth as the strong momentum in proteins fluid sectors more than offset the slowdown of equipment automation and the continued weakness and protective
Speaker Change: Second quarter adjusted EBITDA of $285 million, increased $5 million or approximately 2% compared to last year with margins of 21.2% up 90 basis points.
Speaker Change: This performance was mainly driven by volume growth in the food segment, productivity efficiencies, including savings from our CTO to Grow program, partially offset by unfavorable net price realization, and protective volume declines.
Dustin Semach: In the second quarter, food net sales of $894 million were up 2% on an organic basis. Lower resident cost-related pricing was more than offset by strong volume growth in all regions, driven by both strength and end market demand and share gains within our case ready solution. Second quarter volume growth partially benefited from protein processors restocking for the peak season and the pull-forward effect of the U.S. tomato season. But just EBITDA of $205 million in the second quarter was up 7%, with margins at 22.9%, up 120 basis points compared to last year.
Speaker Change: moving to slide six
Speaker Change: in the second quter of food net cells of eight hundred andnety four million were up two percent on a organic basis
Speaker Change: Lower resident cost related pricing was more than offset by strong volume growth in all regions, driven by both strength in end market demand and share gains within our case ready solutions.
Speaker Change: Second quarter volume growth partially benefited from the protein processors restocking for the peak season and the pull-forward effect of the U.S. tomato season.
Speaker Change: Who'd adjust the EBITDA of $205 million in the second quarter was up 7%, with margins at 22.9%, up 120 basis points compared to last year.
Speaker Change: The increase in adjusted EBITDA was mainly driven by volume growth, cost takeout actions, and productivity improvements, partially offset by higher operating costs, including the restoration of incentive plans.
Dustin Semach: The increase in adjusted EBITDA was mainly driven by volume growth, cost takeout actions, and productivity improvements, partially offset by higher operating costs, including the restoration of incentive plans. Protective second quarter net sales of $451 million, we're down 9% organically, driven by lower pricing, mainly in America's NMEA.
Speaker Change: Protective second quarter net sales of $451 million were down 9% organically.
Dustin Semach: Volume declines across all regions, primarily due to the slowdown in automation sales, sustainability pressures on void fill product lines, and continued weakness in the industrial portfolio. Protective Adjusted EBITDA of approximately $82 million was down 15% in the second quarter, with margins at 18.1%, down 110 basis points. A decrease in adjusted EBITDA was driven by lower volume and an unfavorable net price realization of approximately 11 million, partially offset by CTO to growth safety. On slide seven, we review our second quarter net sales by region.
Speaker Change: Driven by lower pricing, mainly in America's NMEA.
Speaker Change: Volume declines across all regions, primarily due to the slowdown in automation sales, sustainability pressures on void-filled product lines, and continued weakness in industrial portfolios.
Speaker Change: Protective Adjusted EBITDA of approximately $82 million was down 15% in the second quarter, with margins at 18.1%, down 110 basis points.
Speaker Change: The decrease in adjusted EBITDA was driven by lower volume, unfavorable net price realization of approximately $11 million, partially offset by CTO to growth savings.
Speaker Change: on slide seventh we review our second quarter net sales by region
Dustin Semach: On an organic basis, Americas was down 2% primarily due to lower prices, but volumes were up 1% as strong volumes in proteins and fluid spaces more than offset automation slowdowns and continued soft demand and protectionism. EMEA declined 4% organically on lower prices.
Speaker Change: on an organic basis americas was down two percent primarily due to lower pricing
Speaker Change: Volumes were up 1% as strong volume in proteins and fluid spaces more than offset automation slowdowns and continued soft demand and protective.
Dustin Semach: Strengths in Food Consumer Demand Offset Persisting Market Softness in the Protective Segment. APAC was up 1% organically as tailwinds from the Australian cattle cycle more than offset continued weakness in industrial markets and lower prices. Now let's turn to pre-cash flow and leverage on slide 8. As of the second quarter of the year to date, we have generated a strong free cash flow of $207 million, compared to $45 million a year ago when excluding the $175 million deposit resolution of certain U.S. tax matters.
Speaker Change: EMEA declined 4% organically on lower pricing.
Speaker Change: strengths and food consumer demand offset persisting market softness in the protective segment
Speaker Change: apac was up one percent organically as tentch from australian cattle cycle more than offset continued weakness in industrial markets and lower pricing
Speaker Change: Now let's turn to free cash flow and leverage on slide 8.
Speaker Change: As of the second quarter of the year to date, we have generated a strong free cash flow of $207 million, compared to $45 million a year ago when excluding the $175 million deposit for resolution of certain U.S. tax matters.
Dustin Semach: This improvement was primarily driven by higher earnings, reduced incentive compensation payments, and enhanced working capital management, partially offset by higher interest costs. Since the second quarter of 2023, we have remained focused on deleveraging the balance sheet, reducing our total debt by approximately $355 million, ending the quarter with a net leverage ratio of 3.8 times. Our total liquidity position was $1.4 billion, including $389 million in cash and the remaining amount in committed and fully withdrawn revolvers.
Speaker Change: This improvement was primarily driven by higher earnings, reduced incentive compensation payments, and enhanced working capital management, partially offset by higher interest costs.
Speaker Change: Since the second quarter of 2023, we have remained focused on deleveraging the balance sheet, reducing our total debt by approximately $355 million, ending the quarter with a net leverage ratio of 3.8 times.
Speaker Change: our total liquidity position was one point four billion including three hundred and eighty-nine million in cash and the remaining amount and committed and fully draw revolver
Dustin Semach: We remain on track to drive net debt to adjust EBITDA to below three and a half times by the end of 2025. Now, let's turn to slide nine to review our 2024 outlook. While we are pleased with the strong finish of the second quarter and the momentum building in our food business, we do not see an inflection in volumes in our protective business due to end market weakness and continued challenges. We now expect these market conditions to persist throughout 2024 into 2025. The weakness in our protective volumes is fully offsetting the strength of our food bits.
Speaker Change: we remain on track to drive net debt toadjust ebitda to blow three and a half times by the end of two thousand and twenty-five
Speaker Change: let's turn to slide nine to review our two thousandand twenty four outlook
Speaker Change: While we are pleased with the strong finish of the second quarter and the momentum building in our food business, we do not see an inflection in volumes in our protective business due to end market weakness and continued challenges.
Speaker Change: we now expect these marketting conditions to persist through two twenty four into two thousand and twenty-five
Speaker Change: The weakness in our protective volumes is fully offsetting the strength in our food business.
Dustin Semach: We are accelerating our transformation within Protective to address underlying fundamentals. Our reorganization back in February is taking hold. We are beginning to execute better within our market, and we continue to work on closing sustainability-related gaps in our portfolio, primarily on fiber mailers, so we can drive higher participation and higher growth in market segments and mitigate churn. Lastly, we continue to operate in a limited visibility environment and see pressure within our fulfillment in industrial and retail markets, in line with our channel partners' observations.
Speaker Change: We are accelerating our transformation within Protective to address underlying fundamentals.
Speaker Change: our reorganization back in february is taking hold and we are beginning to execute better within our markets
Speaker Change: We continue to work on closing sustainability-related gaps in our portfolio, primarily on fiber mailers.
Speaker Change: so we can drive higher participation in higher growth and market segments in mitigate terurn lastly we continue to operate an limited visibility environment and see pressure with our fulfillment and industrial end markets in line with our channel partners' observations
Dustin Semach: We are staying close to our channel partners and large customers to better understand the impact of the weakening consumer and macroeconomic trends and their impact on the upcoming holiday season and our volume outlook. Additionally, based on ongoing working capital improvements and resulting free cash flow performance in the first half, we are outpacing our original expectations for free cash flow generation and are well positioned to close the year on a strong note.
Speaker Change: We are staying close to our channel partners and large customers to better understand the impact of the weakening consumer and macroeconomic trends and their impact on the upcoming holiday season and our volume outlook.
Speaker Change: Separately, based on ongoing working capital improvements and resulting free cash flow performance in the first half, we are outpacing our original expectations on free cash flow generation and are well positioned to close the year on a strong note.
Dustin Semach: Also, we continue to focus on minimizing our interest expense through cash management initiatives despite the rising rate environment impact on our refinancing activities and floating interest rate debt. We are on track to have lower net interest expense in 2024 versus the prior year, and this positions us well to achieve our adjusted EPS outlook. Turning to slide 10, we remain committed to restoring underlying fundamentals by progressing our transformation, driving growth by executing in the market, delivering our CTO to growth savings, and deleveraging the balance. With that, Patrick and I look forward to your questions. Operator, we would like to begin the Q&A session. Thank you, and at this time,
Speaker Change: Also, we continue to focus on minimizing our interest expense through cash management initiatives despite the rising rate environment impact on our refinancing activities and floating interest rate debt.
Speaker Change: we are on track to have lower net interesting expspse in two and y four vers the prior year and this positions us well to achieve our adjusted eps outlook
Speaker Change: Turning to slide 10, we remain committed to restoring underlying fundamentals by progressing our transformation, driving growth by executing in the market, delivering our CTO to growth savings, and deleveraging the balance sheet.
Speaker Change: With that, Patrick and I look forward to your questions. Operator, we would like to begin the Q&A session.
Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We kindly ask that you please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ghansham Panjabi of Baird. Your line is now open.
Speaker Change: thank you at this time we will conduct the question-and-answer session as a reminder to ask the questions please press start one one on your telephone and wait for your name to be announced
Speaker Change: to withdraw your question please press start one one again we kindly ask that you please limit yourself to one question please stand by while we compileed the q roster
Patrick Kivits: Well, thank you, Ghansham, for the question. And thank you for the kind wishes.
gunten panjabi: our first question comes from the line of gunten panjabi a beared your line is now open
gunten panjabi: Hey guys, good morning. Patrick, congrats on your new role. I look forward to working with you.
gunten panjabi: And maybe I'll start with a question for you as it relates to what's going to be different at Sealed Air under your leadership, you know, versus all the strategic oscillations over the past decade. And maybe you could also touch on your management style. And if Henry's still on the call,
Speaker Change: You know, what's the board going to do differently going forward relative to the past decade also? Thanks.
Patrick Kivits: So let me just start by saying that, you know, Emile and Dustin have done a really good job of turning the business around before I joined the company. And as I mentioned, I have seen a lot of things going in the right direction. And we're doubling down on that in my first couple of months. So one of the things we're doing first is really completing the senior leadership team. As you know, we've had some gaps in our team, and I'm confident that over the next couple of months, we'll be able to fill the voices in that team and then have a, you know, good, solid team of eight players going forward.
Speaker Change: Well, thank you, Ghansham, for the question, and thank you for the kind wishes. So let me just first start by saying that, you know, Emile and Dustin have done a really good job.
Speaker Change: to turn the business around before I joined the company. And I've seen a lot of things going the right direction and we're doubling down on that in my first time.
Speaker Change: A couple of months. So one of the things we're doing first is really completing the senior leadership team. As you know, we've had some some gaps in our team and I'm confident that over the next couple of months we'll be able to fill the voice in that team and then have a, you know, good, solid team of A players going forward. And as far as the priorities are concerned, I think,
Operator: And as far as the priorities are concerned, I think, you know, it's really about dealing with some of the commercial challenges we have. We obviously have the protection challenges in this space that we're doubling down on and trying to understand what our portfolio is all about. We have a broad offering of products in this market, and how are we going to turn on the commercial engine and make sure that there's a cleaner light of sight with organization, accountability to the sales force, and driving this in the right direction?
gunten panjabi: you know
gunten panjabi: It's really about dealing with some of the commercial challenges we have, we obviously have the protective challenges in this space that we're doubling down on and trying to understand what is our portfolio all about.
Dustin Semach: Thank you, Patrick, and good morning everyone. Moving on to the second quarter results. Let's turn to slide four. Net sales were $1.35 billion in the quarter, down 2% on a constant currency basis. Just as Eveodon, the Quarter was 285 million, up 2% compared to the last year. Volumes were up 1% year-over-year for the quarter, with growth in the food segment across all regions, offset by declines in protective clothing, primarily in the Americas and EMEA.
gunten panjabi: We have a broad offering of products in this market, and how are we going to turn on the commercial engine and making sure that there's a cleaner light of sight, better organization, accountability to the sales force in driving this in the right direction.
Operator: So in terms of management style, what's important to me is really transparency in the organization, driving empowerment, pushing decisions far down in the organization, and we have a very clear line of sight in terms of what our customers really need. And we listen to the voice of our customers because there are some areas where I think we have a big opportunity. And then drive that accountability; that is so important. Also, more focus and specialization in the areas where it really matters.
Speaker Change: So in terms of management style?
Speaker Change: What's important to me is really the transparency in the organization, driving empowerment, pushing decisions far down in the organization, and we have a very clear...
Speaker Change: Line of sight in terms of what our customers really need. And listen to the voice of our customers because they're some of the areas where I think we have a big opportunity. And then drive that accountability, that is so important. Also more focus and specialization in the areas where it really matters.
Speaker Change: One moment for our next question.
Operator: One moment for our next question. Our next question comes from the line of Adam Samuelson of Goldman Sachs. Your line is now open.
Speaker Change: my next question comes from the line of adam sammilton of goldman sax the line is now open
Patrick Kivits: Yes, thank you. Good morning, everyone, and Patrick, welcome.
adam sammilton: yes thank you good morning everyone and patrick welcome
Speaker Change: So my question is really around the Outlook for the second half.
Speaker Change: The pieces of guidance haven't changed. It seems like the underlying mix of business has. So I'd love to just hear a bit more about the updated volume expectations for both food and protective and how those have shifted relative to three or six months ago.
Patrick Kivits: So my question is really around the outlook for the second half, and while the pieces of guidance haven't changed, it seems like the underlying mix of business has. So I'd love to just hear a bit more about the updated volume expectations for both food and protective and how those have shifted relative to three or six months ago. And within that, maybe some of the contrasting kinds of share opportunities that are presenting themselves on the food side, maybe quantify some of the growth that you're seeing from the new case ready offerings that you've got in place and contrast that with, on the protective side, what would seem like some market Thank you.
Speaker Change: And within that, maybe some of the contrasting kind of share.
Speaker Change: Share opportunities that are presenting themselves on the food side, maybe quantify some of the growth that you're seeing from the new case ready offerings.
Speaker Change: that you've got in place, and contrast that with, on the protective side, what would seem like some market share losses in void fill, as you've seen an acceleration and shift of fiber, certainly in the U.S. Thank you.
Patrick Kivits: Yeah, thank you for the question. I'll start answering at a high level and then pass over to Dustin to give you more, provide you with more detail on the various markets and regions. So I will say on the food side, I think, you know, we've had quite strong growth in the last quarter, which is fueled by some of the, you know, the cattle cycle that is going to slow down a little bit. So there was some forward movement towards this quarter this year, which we saw, which we addressed in the opening remarks.
Speaker Change: Yeah, thank you for the question. I'll start answering the high level and then pass it over to Dustin to give you more, provide you more detail on the various markets and regions.
Speaker Change: So I will say on the food side, I think, you know, we've had quite strong growth in the last quarter.
Dustin: They're just fueled by some of the...
Dustin: the cattle cycle that is going to slow down a little bit so it was some forward
Dustin: movement towards this quarter this year this year which we saw which we adjust in the opening remarks
Speaker Change: but there's also been some shear gangs that we had in certain areas by having that strong focus on line assight that i talked about earer inust can can elleorate don't that a little bit
Patrick Kivits: But there's also been some share gains that we have had in certain areas by having that stronger focus and line of sight that I talked about earlier. And Dustin can elaborate on that a little bit. As far as the protective market goes, obviously, there are some challenges there in terms of headwinds from a sustainability point of view. But we have a very broad portfolio. We just need to make sure that we review our portfolio and drive success across those areas of the portfolio that have over proportional growth, as opposed to others that maybe are more depressed in terms of market. You pass it over to Dustin to give a little bit more color.
Speaker Change: As far as the protective...
Speaker Change: Market goes obviously there are some challenges there in terms of headwinds from a from a sustainability point of view We have a very broad portfolio. We just need to make sure that we review our portfolio and drive
Speaker Change: Success across those areas of the portfolio that have over-proportional growth as opposed to others that maybe are more depressed in terms of market.
Dustin Semach: So a couple of comments I would make, if you think about the food business overall for the full year, going back about three months ago, we were up about 3% in volume, and we're going to be in the 4% range for the full year. And really, what it's reflecting is going back to some of the comments Patrick made that, if you go back even six months, every quarter progressing through this year, food has demonstrated more and more strength.
Speaker Change: pessadogo to just to give a little bit more colllan to hey dust in there so a couple of comments that would make if think about the food business overall for the full year going back about three months ago we were up about three percent umewe're going to be a fourpercent range forthefull year
Patrick Kivitz: and really what's it's reflecting is going back to some of the comments Patrick made is that if you go back even six months, every quarter progressing through this year, food has demonstrated more and more strength and you see that kind of acceleration from Q1 to Q2 and it's really across the board, but I'll give you some color commentary in terms of where we're seeing it. One is we talked about the North American market. The market itself has gotten better over time, right, which has benefited this year. We went into this year thinking the cattle cycle is going to be down mid-single digits. It's coming down and at this point we're expecting somewhere between 3% and 4% for the full year.
Dustin Semach: And you see that kind of acceleration from Q1 to Q2, and it's really across the board, but I'll give you some color commentary in terms of where we're seeing it. One is, we talked about the North American market, and the market itself has gotten better over time, right, which has benefited this year. We went into this year knowing the cattle cycle was going to be down, mid single digits were coming down, and at this point, we're expecting somewhere between 3% and 4% for the full year. If you look at Latin America, we've had a number of competitive wins.
Dustin Semach: We've talked about this before, but the acceleration of that business continues. EMEA, there's a lot of strength in that business overall. And we talked about the fact that, in the past, we've had some protein trade downs.
Speaker Change: If you look at Latin America, we've had a number of competitive wins. We've talked about this beforehand, but the acceleration of that business continues.
Dustin Semach: We've seen the consumer be stronger in EMEA. As we mentioned, if you go back a year or two ago, the consumer much more felt like a recessionary environment where that seemed to be somewhat alleviated. And then, on top of that, there was the competitive win.
Amia: Amia, there's a lot of strength in that business overall. And we talked about the fact that in the past, we've had some, you know, protein trade downs. We've seen the consumer be stronger in Amia. As we mentioned, if you go back a year or two ago, you know, the consumer much more felt like a recessionary environment where that seemed to be somewhat alleviated. And then on top of that, the competitive wins.
Dustin Semach: If you look at the protected business, it's the inverse of that, right? So if I think about the story of Holistically and Q2 as well as from the second half, it's that food continues to overperform, and our protected business is getting weaker. If you go back to the full year numbers, we were down roughly, you know, think of it as roughly 2% kind of for the full year relative to volume expectations and compounded by price.
Speaker Change: If you look at the protective business, it's the inverse of that, right? So if I think about the story of Holistically and Q2 as well from the second half, it's that food continues to overperform and our protective business is getting weaker. And if you go back to the full year numbers, we were down roughly
Speaker Change: You know think of it as roughly four
Speaker Change: 2% kind of for the full year relative to volume expectations and compounded by price.
Dustin Semach: And now we're down roughly, you know, 4% for the full year. That's really reflecting the back half because our original expectations were that you would see some stabilization and volume inflection in the fourth quarter. And we're seeing that now to be down to low single digits. And then if we look into next year, the expectations that some of these challenges are going to persist and protect and go into the three factors we talked about, whether it was driven by, one, the market that we continue to be concerned about, but two, also the sustainability pieces that we mentioned relative to the gaps that we're going to work on closing, right? And then the third is just our continued focus on commercials.
Speaker Change: and now we're down r oughly you know four percent for the full year that's really reflecting the back half because originalexpectations that you would see some stabilization involume the flection in the four quarter and we're seeing that now to be down down losing digits and then we look at next year that's like ictations that some of these challes going to pers tective and go into the three factor we talked about whether it was driven by one the market that we continue to be concerned about but two also the sustability pieces that we mentioned relative tothe gapsthat 're goingto work on closing everyone morning and ry patrick t brian speak all again thanks for the details
Speaker Change: I guess my question will be kind of a hybrid of the ones that have already been asked. So I guess...
Operator: One moment for our next question. Our next question comes from the line of George Staphos of Bank of America Securities. Your line is now open.
Speaker Change: When you think about CDO2Grow,
Speaker Change: Part of its effort was to drive the resources to reinvest in the areas that you wanted to grow.
Operator: Thanks. Hi, everyone. Good morning. Henry, Patrick, Dustin, Bryan, nice to speak to you all again.
Patrick Kivits: Thanks for all the details. I guess my question would be kind of a hybrid of the ones that have already been asked, so I'll guess. When you think about CDO2Grow, part of the effort was to drive the resources, to reinvest in the areas that you wanted to grow, and with protection not yet getting that inflection point, is it causing you to maybe rethink the effectiveness of CDO2Grow or what you need to do differently within that effort?
Speaker Change: and with protective not yet getting that inflection point.
Speaker Change: Is it causing you to maybe rethink the effectiveness of CDO2GRO or what you need to do differently within that effort? And, you know, relatedly,
Patrick Kivitz: Why are we not seeing the traction yet and protective that you had expected? Related point, Patrick, you know, what from your experiences at Westrock with MPS within consumer?
Speaker Change: Do you think will be helpful in ultimately turning around protective and, you know, along with Dustin and the team, you know, making Fielder a much more predictable return and creating company? Thanks guys. Good luck in the quarter.
Patrick Kivits: And, you know, relatedly, why are we not seeing the traction yet and the protection that you had expected? Related point, Patrick, what do you think from your experiences at Westrock with MPS within consumer? Do you think that will be helpful in ultimately turning around protection and, you know, along with Dustin and the team, making Sealed Air a much more predictable return or creating company? Thanks, guys. Good luck in the quarter.
Patrick Kivitz: Thank you George and great question. Let me start with the second question and then Dustin can give you some color on the on the first one, CTO to grow.
Speaker Change: As far as, you know, the experiences that I had in prior roles, it's really, you know, a part of CTO to grow has only just started. So we dealt with the most important areas, and yes, there's some recalibration and some refocus. But if I say, if you say, use the words,
Patrick Kivits: Thank you, George, and a great question. Let me start with the second question, and Dustin can give you some color on the first one, the CTO degree. As far as, you know, the experiences that I had in prior roles, it's really, you know, a part of CTO growth has only just started. So we deal with the most important areas, and yes, there's some recalibration and some focus, but if I say, or you say it, use the words, become more pointed in terms of where do we invest our resources?
Speaker Change: becoming more pointed in terms of where do we invest our resources. These are the things that we're looking into now. So the sales force effectiveness as opposed to as you called it the CTO to grow effectiveness is going to be critically important and we're just in the starting phases of that.
Speaker Change: And that bridges the question nicely to, you know, my prior experience where we had to do some of that. So recalibration sells for us.
Dustin: You know, looking at sales compensation and other areas where you actually pay for performance and making sure that we have stronger accountability that is so important in this space. And I think you will see more of that as we go forward in the next quarter. So that will be my prime focus. And then Dustin can give you some color on CTO to go over these stages. Yeah, sure. Hey, George. You got Dustin here. A couple of comments, you know, I'll go back to one is we're obviously on track with and executing against our targets in the, you know, from 23 coming into 24, and we're actually looking at a higher run rate going into 25. And that's helped with, you know, protecting the profitability, you need to look at the second quarter, you look at the rest of the guy for the year, despite some of the weakness we see in protective.
Dustin Semach: Yeah, sure. Hey, George, you've got Dustin here.
Speaker Change: To be clear, you know, our investment, we're investing in that commercial area, and if you go back to the prior commentary around the recently established operating units,
Speaker Change: It was all about creating these specific opportunities, focused on protective, driving that accountability.
Dustin Semach: So a couple of comments, you know; I'll go back to one. We're obviously on track with executing against our targets in the, you know, from 23 coming into 24, and we're actually at a higher run rate going into 25. And that's helped with, you know, protecting some of the profitability. You need to look at the second quarter, and you need to look at the rest of the guide for the year, despite some of the weakness we see in protective.
Speaker Change: And so the, we're still working on investing, going back to Patrick's point, there's still many areas that we're gonna work on. That's really just one area that commercial execution piece for protective. There's still the portfolio gaps that we need to close.
Dustin Semach: To be clear, you know, our investment; we're investing in that commercial area. And if you go back to the prior commentary around the recently established operating units, it was all about creating these specific operating units focused on protecting and driving that accountability. And so we're still working on investing; going back to Patrick's point, there are still many areas that we're going to work on. That's really just one area, that commercial execution piece for protective.
Speaker Change: And if you look at the difference in the market today, if you look at all the, going back to this point about void fill, and that is the deteriorating sector, everything in and around the box right now,
Speaker Change: is under pressure, right, relative to secondary packaging materials, and everything outside the box is doing much better, and this goes back into, you know, the fiber mailers and some of the gaps that we're looking to close.
Dustin Semach: There are still portfolio gaps that we need to close. And if you look at the difference in the market today, if you look at all the void fill, that is the deteriorating sector, everything in and around the box right now is under pressure, right, relative to secondary packaging materials, and everything outside of the box is doing much better. And this goes back to, you know, the fiber mailers and some of the gaps that we're looking to close. And then the third piece is just, in general, the market is continuing to be challenging, just broadly speaking. And I will go back to it.
Speaker Change: And then the third piece is just in general, the market is continuing to be challenging, just broadly speaking, and I go back to it. This is also being referenced with some of our largest direct customers and channel partners.
Patrick Kivitz: And so we're continuing to work through it and work through it as quickly as possible with Patrick's onboarding. We're looking to accelerate those efforts and get Protective into a different place. But at this point in time, to be clear, we see these challenges remaining throughout the rest of 2024 and into 2025.
Dustin Semach: This is also being discussed with some of our largest direct customers and channel partners. And so we're continuing to work through it and work through it as quickly as possible with Patrick's onboarding. We're looking to accelerate those efforts and get protective into a different place. But at this point in time, to be clear, we see these challenges remaining throughout the rest of 2024 and into 2025.
Patrick Kivitz: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Josh Spector of UBS. Your line is now open.
Josh Spector: Yeah, hi, good morning. I had a question on free cash flow. Just I mean, as you noted, your first half performance was really strong. You didn't change your guidance range. And if I look at the last few years,
Operator: One moment for our next question. Our next question comes from the line of Josh Spector of UBS. Your line is now open.
Speaker Change: On average, you've done about $300 to $400 million of free cash flow in the second half. So, I think if I add that to the $200 million, you'd be meaningfully above your guidance range. So, are we missing something that we need to consider in the bridge, or would you just characterize it as conservative?
Speaker Change: Yeah, great question, Josh, and I would characterize it as conservatism.
Josh Spector: You know, we feel really good about the first half. Keep in mind, there are some one-times in there that we call out relative to the rest, you know, the lack of incentive compensation payments that were paid out in terms of executive compensation pools that benefited the first half, which is unusual for us.
Josh Spector: But again, you know, but again, the numbers conservative overall, and if you look at the commentary, even the quote in the earnings release, it's really focused on the fact that we obviously feel really good about where we're at in the first half, really proud of the team's accomplishment, a lot of work across the board, from teams across all over, who really led to that result. But again, and we still expect the second half to be strong, and we're well ahead from pacing relative to our original guidance.
Dustin Semach: Yeah, great question, Josh. And I would characterize it as conservatism. You know, we feel really good about the first half. Keep in mind, there are some times in there that we call out relative to the rest, such as the lack of incentive compensation payments that were paid out in terms of executive compensation pools that benefited the first half, which is unusual for us. But again, you know, but again, the numbers are conservative overall.
Josh Spector: and more to come in this off-scene area of focus and we'll give you an update on it for the full year in the third quarter.
Dustin Semach: And if you look at the commentary, even the quote in the earnings release is really focused on the fact that we obviously feel really good about where we're at in the first half. Really proud of the team's accomplishment, a lot of work across the board from teams across all over who really led to that result. But again, we still expect the second half to be strong, and we're well ahead of pacing relative to our original guidance and more to come. And this is obviously an area of focus, and we'll give you an update on it for the full year in the third quarter.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Arun Viswanathan of RBC Capital Markets. Your line is now open.
Arun Viswanathan: great thankthings to take my question congrats patrick got the new role and mu ustin reats on the progress you ys have made as well
Operator: One moment for our next question. Our next question comes from the line of Arun Viswanathan of RBC Capital Markets. Your line is now open.
Arun Viswanathan: So, I guess my question is just thinking about where you guys are right now, looks like you've been outperforming in food, protective continues to lag.
Speaker Change: When you look into the back half of this year and then into next year, you guys were able to provide some
Operator: Great, thanks for taking my question. Congratulations Patrick on the new role and Emile and Dustin, congrats on the progress you guys have made as well. So I guess my question is just thinking about where you guys are right now. Looks like you've been outperforming in food, but protective continues to lag.
Arun Viswanathan: you know fairly straightforward buckets of ebitda growth
Arun Viswanathan: um
Speaker Change: I don't know if you could maybe update those for us at this point, is price still kind of a net 90?
Dustin Semach: When you look into the back half of this year and then into next year, you guys were able to provide some fairly straightforward buckets of EBITDA growth. I don't know if you could maybe update those for us at this point. Is price still kind of a net 90 million headwind? What are you guys thinking about volumes and how that impacts EBITDA as well as incentive comp and maybe anything else on C2O2 growth? Is that 90 million target potentially achievable? Does it have some upside now given some of the gains you've had, or was it just a pull forward really mainly? Thanks a lot.
Speaker Change: million headwind. What are you guys thinking about volumes?
Speaker Change: and how that impacts you, but as well as incentive comp and maybe anything else on CTO to grow. Is that 90 million target potentially, does it have some upside now given some of the gains you've had or was it full forward really mainly? Thanks a lot.
Dustin: Yeah, thank you, Arun. This is Dustin speaking, and it's a great question. So a couple comments I would make. If you think about net price realization, which is the number that you're quoting, if you think about last quarter, we were roughly around $80 million net down, and we're roughly now negative $70. And what you're seeing there, that's actually a pricing benefit that we're seeing within our protective business.
Dustin Semach: Yeah, thank you, Arun. This is Dustin speaking, and it's a great question.
Dustin: And so specifically, really everything else from our perspective, when you look at resin cost, labor, inflation, if you look at non-material inflation, is really in line with our original expectation, so it's all the exact same, right?
Dustin: And so if you think about everything else in terms of our bridge, it's intact.
Dustin: and really the impact that you see in terms of right now our guidance in the second half versus the first half is really those commentaries about some of the strength in the second quarter examples in food where some of those volumes related to the early start to the U.S. tomato season and some of those volumes also relate to some of our largest customers stocking up ahead of the the busy season coming up in Q3 and Q4.
Dustin Semach: So a couple of comments I would make. If you think about net price realization, which is the number that you're quoting, if you think about last quarter, we were roughly around $80 million net down, and we're roughly negative $70 now. And what you're seeing there, that's an actual pricing benefit that we're seeing within our protective And so specifically, really everything else from our perspective, when you look at resin costs, labor, inflation, if you look at non-material inflation, is really in line with our original expectations. So it's all the exact same, right?
Dustin Semach: And so, if you think about everything else in terms of our bridge, it's intact. And really, the impact that you see in terms of right now, our guidance for the second half versus the first half is really this commentary about some of the strength in the second quarter examples in food, where some of those volumes relate to the early start to the U.S. tomato season, and some of those volumes also relate to some of our largest customers stocking up ahead of the busy season coming up in Q3 and Q4.
Dustin: And so if you go back to that bridge in terms of big buckets for overall in the second half, you're looking at that down 70 and net price realization up about $20 million in volume, down 40 and this is the bonus restoration, and then plus 90 in the cost takeout to growth. So those are really still the big buckets.
Speaker Change: One moment for our next question.
Dustin Semach: And so if you go back to that bridge in terms of big buckets for overall in the second half, you're looking at that down 70 and net price realization, up about 20 million in volume, down 40, and this is the bonus restoration, and then plus 90 in the cost takeout to growth. So those are really still the big buckets.
michael rockland: our next question comes from the line of michael rockland of tru securities your line is now open
michael rockland: Yeah, thanks Henry, Patrick, Dustin and the IR team for taking my questions and Patrick, congrats on the role and I look forward to working with you.
Operator: One moment for our next question. Our next question comes from the line of Michael Roxland of Truist Securities. Your line is now open.
Speaker Change: Thank you.
Speaker Change: my my questions on food automation sality mentioned that it's last quarter a grew double digits seems to have slolowed now again in two q we love getting itional col you have what's happeningin
Operator: Yeah, thanks Henry, Patrick, Dustin, and the IR team for taking my questions, and Patrick, congratulations on the role, and I look forward to working with you. Thank you.
Speaker Change: and Food Automation. And then Patrick, you mentioned being actively involved in strategic efforts concerning protective. Can you provide more color on what some of those efforts are?
Patrick Kivits: My question is on food automation sales. You mentioned that last quarter it grew double digits, and it seems to have exploded now again in 2Q. We'd love to get any additional color you have on what's happening in food automation. And then Patrick, you mentioned being actively involved in strategic efforts concerning protectives. Can you provide more color on what some of those efforts are?
Speaker Change: Okay, so let's start with automation, and Dustin can give that a little bit more color in terms of the numbers. But I think, you know, looking at Sealed Air's automation portfolio, particularly in the food segment, is really, really strong.
Dustin: and has a very strong support, technically, by salespeople and servicepeople. So there's something that actually helps us to cement our business going forward because of the retention rates for customers, full support materials, there's a lot of positives related to that. Now, obviously, it has been a little bit more depressed with the interest rates being the way they are. Hopefully, during the second half of the year that will get better and then we can get more traction as people make.
Patrick Kivits: Okay, so let's start with automation, right? So Dustin can give that a little bit more color in terms of the numbers.
Patrick Kivits: But I think, you know, looking at Sealed Air's automation portfolio, particularly in the food segment, is really, really strong and has very strong support, technically, by salespeople and service people. So there's something that actually helps us to cement our business going forward, because of the retention rates for customers, full throughput materials, there's a lot of positives related to that. Now, obviously, it has been a little bit more depressed with the interest rates being the way they are. Hopefully, during the second half of the year, that will get better.
Dustin: Decisions to get more automation as they prepare for the upturn.
Dustin: So if you think about the protective...
Dustin: yeah
Speaker Change: Strategy priorities that we have, we really need to address a couple of things. So there's the void fill area and there is the area of paper mailers that we are looking into more deeply. So we're doing deep dives in all of those and trying to understand what our value proposition is, how our proposition is better than that of competition, and are there any deficiencies or gaps in our portfolio that we need to address.
Dustin Semach: And then we can get more traction as people make decisions to get more automation as they prepare for the future. So if you think about the protective strategy priorities that we have. We really need to address a couple of things. So, there's the void fill area, and there is the area of paper mailers that we are looking into more deeply, so we're doing deep dives into all of those and trying to understand what our value proposition is, how our proposition is better than that of the competition, and are there any deficiencies or gaps in our portfolio that we need to address to become more effective in those markets.
Speaker Change: and to becomemoreeffective in those markets and those things are critically important for us to reallyconto a localcoherening strategy on the proctive
Speaker Change: So Dustin, maybe some color on the equipment.
Dustin: Sure. So, there's a couple of comments I would make on the question. So, you're absolutely right. First quarter was still high. We're still burning down some backlog from the prior year, right? We talked about the strength of our bookings over the 21 and 22 period that kind of went through 23 and into 24. You're seeing, you know, slowdown. And we've seen that slowdown in bookings back in, you know, back in the second half of 2023. And you're seeing that capital constraint still, I mean, kind of restrict some of our largest customers from investing in their current infrastructure. But on the positive side is that this is largely deferred maintenance. So, you'll see this change over time and our expectations is at some point, this is really just further and further pent-up demand that we'll be able to monetize. And to give you a sense right now today, we have a book to build approximately one.
Dustin Semach: And those things are critically important for us to really come to a more coherent strategy on protection. So, Dustin, maybe some color on the equipment. Sure. So there's a couple of comments I would make.
Dustin Semach: There are a couple of comments I would make on the question. So you're absolutely right, the first quarter was still high. We're still burning down some backlog from the prior year, right? We talked about the strength of our bookings over the 21 and 22 periods that kind of went through 23 and into 24. You're seeing a slowdown. We saw that slowdown in bookings back in the second half of 2023. And you're seeing that capital constraints still kind of restrict some of our largest customers from investing in their current infrastructure.
Patrick Kivitz: So it's kind of in line and flattish, so it's a forward-looking indicator to say, right now, sales for food automation is going to be flat right now in the short term until we get through that. And the second piece with Patrick coming on board as well, we're looking at our portfolio, also thinking about new commercial offerings that we have in the marketplace beyond the new piece of equipment that we put in there to really help our customers in this period of time and kind of put energy back into the sales effort in that business. But I agree and concur with Patrick in the sense that we're really excited about it. It continues to be very strong, we're continuing to be very well-placed relative to any competition in the markets that we play in, specifically in food.
Dustin Semach: On the positive side is that this is largely deferred maintenance. So you'll see this change over time, and our expectations are that at some point, this is really just further and further pent up demand that we'll be able to monetize. And to give you a sense of right now, where we have a book to build, approximately one. So it's kind of in line and flattish.
Dustin Semach: So it's a forward-looking indicator to say, right now, sales for food automation are gonna be flat right now in the short term until we get through that. And the second piece, with Patrick coming on board as well, where you're looking at our portfolio, also thinking about new commercial offerings that we have in the marketplace beyond the new piece of equipment that we put in there to really help our customers in this period of time and kind of put energy back into the sales effort in that business.
Speaker Change: Thank you. One moment for our next question.
Dustin Semach: But I agree and concur with Patrick in the sense that we're really excited about it. It continues to be very strong, and we're continuing to be very well-placed relative to any competition in the markets that we play in, specifically in food.
Speaker Change: Our next question comes from the line of Anthony Pettinari of Citi. Your line is now open.
Brian Bergmayer: This is actually Brian Bergmayer on for Anthony. Thank you for taking the question. Maybe just following up on Arun's question on net price, you know, so your full year outlook, I guess, improved a little bit from minus 80 to minus 70.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Anthony Pettinari of Citi. Your line is now open.
Speaker Change: you what drove that improvement are you seeing lower costs is about receiving better value for your products and then is it possible to say if if net price headwinds are accelerating slowing into your end
Operator: Hi, this is actually Bryan Burgmeier on behalf of Anthony. Thank you for taking the question. Maybe just following up on Arun's question on net price, you know. So your full year outlook, I guess, improved a little bit from minus 80 to minus 70. What drove that improvement? Are you seeing lower costs? Is it about receiving better value for your products? And then, is it possible to say if net price headwinds are accelerating or slowing into year-end, any kind of color you can put on sort of how those negotiations are going with customers right now? Thanks.
Speaker Change: Any kind of a color you can put on sort of how those negotiations are going with customers right now. Thanks.
Speaker Change: It just may be a third.
Brian Sullivan: Broad statement. Brian , I think it's important to remember that most of the material deflationary effects came at the end of last year. So most of those are behind us, right? And as we go forward, it's still uncertain what's going to happen in the next six months with more material inflation or deflation. But overall, the majority of that is behind us, and Dustin can give you more color on the differences.
Patrick Kivits: Just maybe as a broad statement, Brian, I think it's important to remember that, you know, most of the material deflationary effects came at the end of last year, so most of those are behind us, right? And as we go forward, it's still uncertain what's going to happen in the next six months with more material inflation or deflation, but overall, the majority of that is behind us, and Dustin can give you more color on the differences. Yeah, so going back to Arun's...
Dustin: Yeah, so going back to Arun's point and you know, if you look at net price realization, it was roughly down negative 80
Dustin: As a net number, you know, in the prior call, you know, and as we've rolled forward, what we've been able to do is specifically in protective, where we've held pricing and pricing is held up better in the marketplace right now across all of our products. You know, there's obviously issues within
Dustin Semach: Yeah, so going back to Arun's point, and you know, if you look at net price realization, it was roughly down negative 80 as a net number in the prior call, you know, and as we've rolled forward, what we've been able to do is specifically in Protective, where we've held pricing, and pricing is held up better in the marketplace right now across all of our products. There are obviously issues within, within, And net price realization is, you know, negative 40 in the second half; that's really a factor of how labor inflation kind of rolls through the P&L throughout the fiscal year as a narrowing concept, in other words, from the resin point and being the largest input cost, that one, as Patrick mentioned, came down very hard in the second half of 23.
Dustin: Within, you know, in terms of the void fill sector where there's excess capacity in the market right now, but holistically for protective, we've done a nice job in terms of being able to maintain price.
Speaker Change: And net price realization is negative 40 in the second half. That's really a factor of how labor inflation kind of rolls through the P&L throughout the fiscal year. As a narrowing concept, in other words, from the resin point and being the largest input cost, that one, as Patrick mentioned, came down very hard in the second half of 23. So as you get into the second half of 24, you have a much more narrowing between kind of resin input pricing deflation. And an expectation right now is that to this point, whether it deflates or inflates from here, we don't see it materially changing at this point in time, barring some broader shift in the market.
Speaker Change: One moment for our next question.
Dustin Semach: So as you get into the second half of 24, you have a much narrower gap between the kind of resin input pricing deflation, and the expectation right now is that, whether it deflates or inflates from here, we don't see it materially changing at this point in time, barring some, you know, you know, broader shift in the market.
Speaker Change: Our next question comes from the line of Christopher Parkinson of Wolf Research. Your line is now open.
Speaker Change: i good more everyone is actually under on for chris you know main question is can you talk about the liquids franchise the performance of a liqu box and that integration and then kind of going off of that what you're seeing from you know the food service business and and and fastfood restaurants q s rs al likeke
Operator: One moment for our next question. Our next question comes from the line of Christopher Parkinson of Wolf Research. Your line is now open.
Patrick Kivits: Well, thank you for your question. So, you know, it's still early days for me, trying to understand the full portfolio, including the liquid box portfolio. What I will tell you though is that the market for that bag in box space is actually a growing market. So, this is an area that should give us some upside in the long run. And I do believe that we need to think about how actively manage our portfolio here, how do we enforce a traditional more sealed air like equipment, manufacturing equipment offerings that we have there. So, we're looking at a lot of things right now to make sure that we have that portfolio while taking care of it, and Dustin can give you a little bit of my call on the back.
Dustin Semach: The background of that. Yeah, so a couple comments there just to follow up on, you know, keep in mind on the integration side, we're really looking at this business now as fluids and liquids in total, right? So this is a reminder, we already had an existing cryovac fluids business, it's been performing quite well. We talked about originally, we looked at that market overall, and we saw that as a mid single-digit grower.
Speaker Change: As a reminder, we already had a preexisting cryo back fluids business has been performing quite well and we talked about originally when we looked at that market overall, but we saw that the mid single digit grower. If you think about those businesses today. They are still in that range relative to growth. When you look them on a combined basis.
Dustin Semach: If you think about those businesses today, they're still in that range relative to growth. If you look at them on a combined basis, they are behind, and that's largely due to the integration efforts. We're in a much better place than we were in 2023. We've talked openly about some of the integration issues and product issues that we've had that we largely feel are behind us at this point, and now it's just about market execution.
Speaker Change: Behind and Thats largely due to the integration efforts, we're in a much better place than we were in 2023, we've talked openly about some integration issues and product issues that we've had that we largely fill are behind us at this point analysis about market execution going back to the market itself on foodservice, which is primarily the space I would say that.
Dustin Semach: Going back to the market itself for food service, which is primarily the space I would say that, you know, or one of the spaces that Localbox really gave us an entry point into beyond our pre-existing business, that marketplace has weakened a little bit since we last were on the call about, you know, last quarter. But even Localbox for the first half of the year has performed well, and we look forward to giving you more updates as we move forward, as we think about that business holistically together. And just as a last point, I want to remind everybody that it's about $500,000, $600,000 on the full combined.
Speaker Change: One of the spaces that local box really gave us an entry point into beyond our preexisting business that marketplace is.
Speaker Change: Weakened a little bit since we last were on the call about last last quarter, but even local box and then for the first half of the year has performed well and we look forward to kind of give you more update as we move forward as we think about that business holistically together and just as the last one I'll remind everybody it's about $560 million on a combined basis.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Phil Ng of Jeffreys. Your line is now open.
Phil <unk>: Our next question comes from the line of Phil <unk> of Jefferies. Your line is now open.
Operator: Hey guys, Patrick, welcome.
Phil: Hey, guys.
Phil: <unk> welcome looking forward to working with you.
Phil: Henry's prepared remarks in your commentary you want to take a different commercial approach and you reaccelerate volumes right. So I guess, how are you guys going to tackle that differently that innovation KPN.
Patrick Kivits: I am looking forward to working with you. I think in Henry's prepared remarks and your commentary, you want to take a different commercial approach and re-accelerate volumes, right? So I guess, how are you guys going to tackle that differently? Is it innovation, KPIs on the sales force? Just give us a little more perspective on that, and then, just given your background in paper packaging, certainly Protective had seen share losses accelerate. How do you plan to go after this market? What are some of the things that you want to do to kind of accelerate growth?
Speaker Change: Kpis on the sales force just give us a little more perspective on that and then just given your background in paper packaging certainly protective had seen share loss accelerate how do you plan to go. After this market what are some of the things that you wanted to do to kind of accelerate growth and do you think you have the right to win and on the paper side of things for protective packaging.
Patrick Kivits: And do you think you have the right to win on the paper side of things for Protective?
Patrick Kivits: Yes, so a great question, Phil. So let's start with the, you know, the commercial excellence, if you will. I think we have an opportunity. We have great technical salespeople in this organization that have been supporting this market for a long time. I think, as we get a broader proliferation of our offering, it's really important that we monetize the opportunity to actually focus a little bit more. I think there's been a challenge that people have to sell different cycles, different products, and become an expert on almost everything.
Speaker Change: Yes.
Speaker Change: Great question, Phil So let's start with the.
Speaker Change: The commercial excellence, if you will I think we have an opportunity we have great technical salespeople in this organization that have been supporting this market for a long time I think as we go to a broader proliferation of our offering.
Speaker Change: It's really important and do we monetize the opportunity to actually focus a little bit more I think there has been a challenge.
Speaker Change: We have to sell different cycles different products and be become the expert of almost everything in making sure that from a management down.
Patrick Kivits: And now, making sure that from management down, we have that very clear accountability in the various product segments that we have identified the ones that are actually more core to us, as opposed to the ones that are less core, where we have to maybe de-emphasize a little bit and drive the growth in those areas where we have the right to do so. There's a lot of that in the organization, and I do think by refocusing and rebalancing that opportunity area, we will be more successful.
Speaker Change: That's very clear accountability in the various product segments that b.
Speaker Change: Have identified the ones that are actually more core to us as opposed to the ones that are less core where we have to maybe deemphasize a little bit and driving the growth in those areas, where we have to divide to win.
Speaker Change: There's a lot of that in your organization and I do think by.
Speaker Change: By refocusing and rebalancing that.
Speaker Change: Opportunity area, we will be more successful and then going to the background, obviously with the fiber backgrounds.
Patrick Kivits: And then going through the background, obviously, with the fiber background, this is one of the things that I'm looking at hard. It's like, as I said earlier in one of the other questions, particularly around void filling and paper mailers. Those are the two areas where I actually think that the fiber transition is a little bit stronger than in some of the other areas. I will say this, though.
Speaker Change: One of the things that I'm looking at higher at the cycle as I said earlier in one of the other questions.
Speaker Change: Particularly around avoid feeling and paper Mayo associated to areas, where I actually think that the fiber transition is a little bit stronger than in some of the other areas I will say this though you have to remember that in our broad portfolio sustainability isn't just about plastic being replaced by paper and there is a large if you look at more holistically for fluids.
Patrick Kivits: You have to remember that in our broad portfolio, sustainability isn't just about plastic being replaced by paper. There is a large, if you look at it more holistically, market for food safety, food protection, shelf life issues, and all of those kind of things play into sustainability in certain aspects even more than just the material that the products are packaged in. If you can increase the shelf life, you can avoid a lot of food waste.
Speaker Change: Ft food protection shelf life issues, and all of those kind of things play into sustainability in certain aspects, even more than just a material delta products of Pakistan. If you can increase the shelf life and you can avoid a lot of fluid way. So that is an important area that we really driving hard in this space as we are re developing our portfolio.
Patrick Kivits: So that is an important area that we're really driving hard in this space as we are redeveloping our portfolio strategies and looking into what are the areas we need to grow and addressing those gaps. Why do certain products work better or worse than some of our peers? And the market, and these are the areas that we will focus on in the next couple of quarters to drive more success. P.O.C.A.
Speaker Change: Strategies and looking into what are the areas, we need to grow and addressing those gaps why do certain products were better or worse than some of our peers in the market and these are the areas that we will focus on in the next couple of quarters to drive more success in those spaces.
Speaker Change: Okay I appreciate the color.
Speaker Change: One moment for our next question.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Edlain Rodriguez of Mizzou. Your line is now open.
Speaker Change: Our next question comes from the line of Ed Lane Rodriguez of Mizuho. Your line is now open.
Operator: Thank you and good morning everyone and welcome, Patrick. A quick one on protective gear. When you look at all the issues going on in there, the challenges, like how much of it you think is secular in nature and how much of it is just like cyclical, and then you can gain that volume back. And also, at the end of the day, you know, looking at the portfolio as a whole, how core is protective to sealed air? In the sense that, you know, not a lot of synergies with food care, a lot of challenges in protecting. Yeah, like how core is protecting?
Speaker Change: Thank you and good morning, everyone and welcome Patrick.
Speaker Change: Quick one on protective when you look at all the issues going on and the challenges like how much of it you think is secular in nature and how much of it is just like cyclical and then so you can.
Speaker Change: And again that volume back and also at the end of the day.
Speaker Change: The.
Speaker Change: Looking at the portfolio as a whole.
Speaker Change: Core is protective to seal in the sense that not a lot of synergies with food care.
Speaker Change: A lot of challenges.
Speaker Change: Protective yes, like how core is protective.
Speaker Change: Yes.
Patrick Kivits: Well, thank you for the question. Let me just start with the secular versus cyclical.
Speaker Change: Well. Thank you for your question, let me just start with the.
Speaker Change: The secular versus cyclical.
Speaker Change: Look at the execution of things so I think the protective business. So there's a couple of elements that play a role and in my experience over the last more than 25 years in packaging there.
Speaker Change: Always is this phenomenon of demerge realization going on meaning people want to do more with less whether that'd be in adhesives, and the labels, but it would be in.
Speaker Change: Paper packaging there is always going to be this challenge that people want to have less packaging materials as they go forward and we are not immune to that so that is part of the generic market trend.
Patrick Kivits: Let's look at the execution of things, right, in the protective business. So there are a couple of elements that play a role. And in my experience over the last more than 25 years in packaging, there is always this phenomenon of dematerialization going on, meaning people want to do more with less, whether that be in adhesives, on labels, whether that be in paper packaging. There's always going to be this challenge that people want to have fewer packaging materials.
Patrick Kivits: As they go forward, and we are not immune to that. So that is part of a generic market trend that is across the entire industry, but every single industry has found solutions to actually grow despite all of those challenges. And I think we're in a good position to have that too.
Speaker Change: It is.
Speaker Change: Across the entire industry, but every single industry has found solutions to actually grow despite all of those challenges and I think we're in a good position to have that to some of that is more like the situation. We're in with this.
Patrick Kivits: Some of that is more like the situation we're in with the cyclicality of the market. If you look at other packaging materials, it's not like some of those volumes are all of a sudden, well above the area, and growth that we have been demonstrating, right? So it's more like something that has been more depressed over the years will come back eventually.
Speaker Change: The cyclicality of the market. If you look at other packaging materials is not like some of those volumes are all of a sudden well above the area to growth that we have been demonstrating its more like it has been more depressed over the years that will come back eventually and then the third element, which we just suggesting.
Patrick Kivits: And then the third element, which we just addressed in a previous question, is all about the execution of it commercially. So how much of that is down to how do we execute commercially going forward? And we definitely will get that on the ground.
Speaker Change: <unk> is all about the execution of its commercially so how much of that is down too.
Speaker Change: How do we execute commercially going forward and we definitely will get that under control.
Patrick Kivits: So at the end of your question about this protective core to see, what is important here is that we have a great portfolio across the board. The way you see the synergies may not necessarily be obvious on the outside, but it is really on the automation side, the way we sell. Yes, from a customer point of view, there may be a little bit of overlap, but not that much. But definitely from that point of view, we are going to have to review over the next couple of quarters how core certain parts of that protective segment are or are, and maybe make some decisions on that as we go forward. But in general terms, there's a very nice combination of having both in a portfolio. We just need to be sharpening our pencils on the portfolio, in general.
Speaker Change: So then to your question about is protected <unk>.
Sealed air: Sealed air.
Speaker Change: What is important here is that we have a great portfolio across the board, where you see the synergies.
Speaker Change: May not be necessarily obvious from the outside but it is really on the automation side the way we sell.
Speaker Change: Yes from a customer point of view it it may be a little bit overlap, but not that much but definitely from that point of view, we are going to have to review over the next couple of quarters, how core certain parts of the protective segment is our and and maybe make some decisions on that as we go forward, but in general terms. There is a very nice combination of having both.
Speaker Change: But in the portfolio, we just need to be sharpening the pencil on the portfolio in general.
Operator: One moment for our next question. Our next question comes from the line of Matt Roberts of Raymond James. Your line is now open.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Matt Roberts of Raymond James Your line is now open.
Operator: Hey, good morning, everybody. I'm Patrick.
Matt Roberts: Hey, good morning, everybody.
Matt Roberts: Hatrick ill echo the others and say welcome and congratulations on the role thank.
Matt Roberts: Thank you Mike.
Speaker Change: You asked about protective volume and price.
Speaker Change: Noted the pressures are expected to continue in 2025 into that year.
Speaker Change: When should we expect that to inflect positive and should we expect volume growth in 2025, partially as a function of math.
Speaker Change: And on the price side of that business.
Speaker Change: Still seeing pressures. It also seems like it didn't have any worse in <unk> on a sequential basis getting easier comps here in second half. So should we expect sequential improvements or has something changed there whether it be incremental competitive pressures or the resin timing in investment I think you might've hit on that resin timing earlier, so my apologies.
Speaker Change: <unk>, if I missed it.
Speaker Change: Yes, so Matt I appreciate the question really good one a couple of comments I would make to you is right now at this point in time, we don't see positive volume inflection in 2025.
Operator: I'll echo the others and say welcome and congratulations on the role. Thank you. I'd like to ask about protective volume and price. I know you noted that pressures are expected to continue in 2025 or into that year. When should we expect that to inflect a positive?
Dustin Semach: And should we expect volume and growth in 2025, partially as a function of math? And on the price side of that business, while still seeing pressures, it also seems like it didn't really worsen in 2Q on a sequential basis and is getting easier comps here in the second half. So should we expect sequential improvements or something to change there, whether it be incremental competitive pressures or the resin timing. Dustin, I think you might have hit on that resin timing earlier. So my apologies if I missed it. Yeah,
Patrick Kivitz: So if you think about some of the challenges, we're facing and Patrick laid them out well relative to some of the sustainability gaps that we need to close and you mentioned the avoid filling in fiber mailers. So our participation in some of the higher growth end markets and protected today. Despite the market overall being tepid, we're not getting our fair share right and Thats, where some of the churn that we've had some of the share loss.
Speaker Change: So we've had those specific areas. That's why we're so intent on working on them. The commercial execution piece will take time, we see that improvement already happening going back to the beginning of the reorganization that happened in February but again from a volume perspective, we see that weakness into into next year and then we're going to continue to focus on our overall kind of is it going.
George: Back to the comment George made around general focus on gas CTO to grow any further cost optimizations and Patrick alluded to that in his earlier remarks going back to pricing and going back to resin.
Speaker Change: Talked about it happening if you look at some of the indices, particularly around low density polyethylene.
Speaker Change: In the first in 2023, it came down sharply in the middle of the year. So think of it as at the end of June 30, and 2023 came down do you have a wrap over effect in the first half of 'twenty, four and Thats really narrowing into in the second half now the differences. If you look at overall kind of resin pricing in general I would say, it's more in line with pre pandemic.
Speaker Change: Mick kind of pricing so barring some exogenous event that we can't see at this point in time, it could inflate and deflate, but I don't see it at the same level of volatility I think this is probably one of the most important things I'm going to leave with everyone is that as we think about that price cost mix, which we've had a challenge managing over the past three or four years due to so many different input costs, having volatility in pricing as a subsequent result.
Speaker Change: Having significant volatility we see that kind of really easing out now in 2024 as we get into 2025, we will see that as a more kind of year over year comps will be much more normal relative to those kind of price cost dynamics with resin being the largest input costs.
Speaker Change: Hopefully I answered your voice.
Dustin Semach: Yeah, so Matt, I appreciate the question. A really good one.
Speaker Change: Thank you very much gentlemen.
Speaker Change: One moment for our next question.
Dustin Semach: A couple of comments I would make to you is that right now, at this point in time, we don't see positive volume inflection in 2025. Right, so if you think about some of the challenges that we're facing, and Patrick laid them out well relative to some of the sustainability gaps that we need to close, and he mentioned the void filling and fiber mailers, so our participation in some of the higher growth markets in Protective Today, despite the market overall being tepid, we're not getting our fair share, right?
Speaker Change: Our next question comes from the line of George Staphos with Bank of America Securities. Your line is now open.
Dustin Semach: And that's where some of the churn that we've had, some of the share loss that we've had, those are the specific areas; that's why we're so intent on working on them. The commercial execution piece will take time.
George Staphos: Hi, Thanks for taking the follow on.
George Staphos: So I was hoping we could get a bit more color on where the share gains are coming within case ready recognizing some of this is competitive.
Speaker Change: And to the extent that you've been able to study it and Patrick.
Patrick Kivitz: Case, it's a bit ironic Greg case ready was it was a business that <unk> invented.
Speaker Change: And now to some degree year on par at parity with others, So where did.
Greg: The share loss, if you agree with that premise come from.
Speaker Change: And then totally total side different question.
Speaker Change: When do you think youll be in a position to have a.
Speaker Change: An analyst day, or an event, where we get the longer term bigger picture for sealed air it's been I think since 2015.
Speaker Change: That we've not had an analyst day and you have any sort of initial goals gentlemen in terms of what the longer term EBITDA cash flow stock price.
Speaker Change: Might look like for sealed air for investors, who are in the stock right now. Thank you guys. Good luck in the quarter.
Dustin Semach: We see that improvement already happening, going back to the beginning of the reorganization, that happened in February, but again, you know, from a volume perspective, we see that weakness into next year, and we're going to continue to focus on our overall, you know, kind of going back to the comment George made around general focus on, you know, kind of CTO to grow and any further cost optimizations, and Patrick alluded to that in his earlier remarks. Going back to pricing and going back to resin, we talked about it happening, if you look at some of the indices, particularly around low-density polyethylene in the first, in 2023, it came down sharply in the middle of the year, so think of it as at the end, think of June 30th in 2023, it came down, so you have a wrap-over effect in the first half of 24, and it's really narrowing in the second half.
Dustin Semach: Now, the difference is, if you look at overall, you know, kind of resin pricing in general, I would say it's more in line with pre-pandemic kind of pricing, so barring some, you know, exogenous event that we can't see at this point in time, it could inflate and deflate, but I don't see it at the same level of volatility, and I think this is probably one of the most important things I'm going to leave with everyone is that, as we think about that price-cost mix, which we've had a challenge managing over the past three or four years due to so many different input costs having volatility and pricing as a subsequent result having significant volatility, we see that kind of really easing out now in 2024. As we get into 2025, we'll see that as a more, you know, kind of year-over-year comps be much more normal relative to those kind of price-cost dynamics with resin being the largest input cost.
Speaker Change: Thank you George I'm going to take that take that one first so a couple of comments, we talked about some of the poultry gains that we've had that was largely in North America and that's in that case ready solution, but specifically within poultry. In this example, we're talking largely about think of it as over wrap film that goes around the trade in general and I agree with your the comments you made relative to.
Operator: Yeah, thank you very much. One moment for
Speaker Change: Your perspective on prior back in over time, but what I would tell you as we've talked about beforehand. One of the areas that we're really focused on is making sure that we're rounding out our automation solutions in that space, we have a much bigger proliferation of equipment manufacturers and then we talked about the partnership that we lead with Austin in terms of bringing that to market and we're really excited about kind of.
Operator: One moment for our next question. Our next question comes from the line of George Staphos of Bank of America Securities. Your line is now open.
Dustin Semach: Hi, thanks for taking the follow-on. So I was hoping we could get a bit more color on where the share gains are coming within CaseReady, recognizing, you know, some of this is competitive. And to the extent that you've been able to study it, Dustin and Patrick, you know, Case, it's a bit ironic, right? CaseReady was it was a business that Cryovac invented. And now, to some degree, you're on par at parity with others.
Speaker Change: Going forward they are continuing to build out partners in that space and really building that kind of three legs of the stool around that offering kind of in line with what we do in shrink bags today, so going back to leading edge materials science, which we already have great Technical service field service, which we already have and we're really complete that third leg of the stool on the equipment piece of it I'll go back to share loss.
Dustin Semach: So where did the share loss, if you agree with that premise, come from? And then, total aside, different question. When do you think you'll be in a position to have an analyst day or an event where we get the longer-term, bigger picture for sealed air? It's been, I think, since 2015 that we haven't had an analyst day. And do you have any sort of initial goals, gentlemen, in terms of what the longer-term EBITDA, cash flow, and stock price should be?
Speaker Change: We talked about this openly going back to roughly the 2022 timeframe, where we had a specialty resin prices that negatively impacted our roll stock business created share loss insurance just as a result of the simple issue that we could supply back then in 'twenty, two and so a lot of the wins, there's a focus there in terms of winning back going back to wanting to come back to <unk> and recognizing some of that.
Dustin Semach: Yeah, thank you, George. I'm going to take that, take that one first.
Dustin Semach: So a couple of comments, you know, we talked about some of the poultry gains that we've had that were largely in North America, and that's in that case-ready solution, but specifically within poultry. In this example, we're talking mainly about, think of it as over-wrapped film that goes around the tray. In general, and I agree with the comments you made relative to your perspective on cryovac and over time, but what I would tell you is, as we discussed beforehand, one of the areas that we're really focused on is making sure that we're rounding out automation solutions in that space where you have a much bigger proliferation of equipment manufacturers.
Dustin Semach: And then we talked about the partnership that we led with Austin in terms of bringing that to market, and we're really excited about kind of going forward there and continuing to build out partners in that space and really building that kind of three legs of the stool around that offering, kind of in line with what we do in shrink bags today. So going back to leading-edge material science, which we already have, you know, great technical service, field service, which we already have, and we're really completing that third leg of the stool on the equipment piece of it.
Dustin Semach: Going back to share losses, you know, we talked about this openly going back to roughly the 2022 timeframe where we had a specialty resin crisis that negatively impacted our whole stock business and created share losses, in turn, just as a result of this simple issue that we couldn't supply back then in 22.
Speaker Change: Other elements, we talked about in terms of our value.
Speaker Change: Value proposition relative to the competition.
Dustin Semach: And so a lot of the wins, there's a focus there just in terms of winning back, going back to wanting to come back, to cry back, and recognizing some of those other elements we talked about in terms of our value proposition relative to competition. And so the last piece in terms of other areas of competitive wins, largely shrink bags. So when we talk about Latin America, it's largely shrink bags.
Speaker Change: So the last piece in terms of other areas of competitive wins largely shrink bags, we talk about Latin America is largely shrink bags, where you're seeing a significant number of wins and obviously the cattle cycle is performing very well, but very pleased there and it's actually some of the large companies, but we've also picked up a lot of smaller customers there as well and feel really good about our.
Dustin Semach: We've seen a significant number of wins, and obviously, the cattle cycle is performing very well, but we're very pleased there. And it's actually some of the large companies, but we've also picked up a lot of smaller customers there as well, and feel really good about our position in Latin America. And then in EMEA, we talked about that there were a number of competitive wins in that space that we've really benefited from.
Speaker Change: <unk> in Latin America, and then on EMEA, we talked about that there is a number of competitive wins in that space. That's really that we've really benefited from in and those obviously are the three big blocks, we've talked already about the Australian cycle, which is at a peak we continue to do well there, but thats not really new this more <unk>.
Dustin Semach: And those over here, the three big blocks, we've talked about the Australian cycle, which is at a peak. We continue to do well there, but that's not really new. That's more it has been performing for quite some time at this point.
Speaker Change: Been performing for quite some time at this point and then the last point on the analyst day and I'll say this on behalf of Patrick which is it's early days right. I mean, he's been here just a little bit over a month and we're still working obviously closely in terms of next steps and some of the challenges we've talked about today that we're working to address and maximizing some of the opportunities we talked about but we recognize your point about 2015.
Dustin Semach: And then the last point on analyst day, and I'll say this on behalf of Patrick, which is that it's early days, right? I mean, he's been here just a little bit over a month, and we're still working closely in terms of next steps and some of the challenges we talked about today that we're working to address and maximizing some of the opportunities we talked about. But we recognize your point about 2015 and recognize the need to do so.
Dustin Semach: But in fairness, we need some time to really take a step back, understand how 2025 is going to shape up and then factor that in over the longer term. And we're working through some of the strategic pieces today, as Patrick alluded to in his earlier comments on the
Patrick Kivitz: <unk> and recognize the need to do that but in fairness, we need some time to really take a step back understand how <unk> is going to shape up and then factor that in longer term and we're working through some of the strategic thesis today as Patrick alluded to in his earlier comments on the script.
Operator: Thanks so much. I appreciate the thought. Of course. Thank you, George.
Speaker Change: Thanks, so much.
Speaker Change: Of course, thank you Georgia.
Patrick Kivits: This concludes the question-and-answer session. I would now like to turn it back to Patrick for closing remarks.
Speaker Change: This concludes the question and answer session I would now like to turn it back to Patrick for closing remarks.
Operator: Thank you, operator. I'd like to thank everyone for their time today, and I'm looking forward to updating you over the coming quarters on the progress we're making to transform Sealed Air. And lastly, I'd like to close by thanking the global Sealed Air team, who are at the center of a transformation for their efforts in solving our customers' most critical packaging challenges every day. Thank you very much.
Patrick Kivitz: Thank you operator, I'd like to thank everyone for their time today and I'm looking forward to updating you over the coming quarters on the progress we are making to transform sealed air and lastly, I'd like to close by thanking the global deal their team at the center of our transformation efforts in solving our customers' most critical packaging challenges every day. Thank you very much.
Unknown Executive: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Speaker Change: Thank you for your participation in today's conference. This concludes the program you may now disconnect.
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Patrick Kivits: These are the things that we're looking into now. So this Salesforce effectiveness, as opposed to, as you call, the CTO to grow effectiveness, is going to be critically important. And we're just in the starting phases of that. And that bridges the question nicely to, you know, my prior experience where we have to do some of that. So recalibrating Salesforce, you know, looking at sales compensation and other areas where you actually pay for performance and making sure that we have stronger accountability that is so important in this space.
Patrick Kivits: And I think you will see more of that as we go forward in the next quarter. So that will be my prime Focus, and Dustin can give you some color on CTO to grow those stages. Yeah, sure. Hey, George, you got Dustin here.