Q4 2024 Sonoco Products Co Earnings Call
Thank you for standing by and welcome to the Sunoco fourth quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press star 1. Thank you. I'd now like to turn the call over to Roger Shrum, Interim Head of Investor Relations and Communications. You may begin.
Roger Shrum: Thank you, Rob, and good morning, everyone. Yesterday evening, we issued a news release and posted an investor presentation that reviews Sunoco's fourth quarter and full year results, along with our 2025 guidance.
Speaker Change: Both are posted on the investor relations sections of our website at sunoco.com.
Speaker Change: A replay of today's conference call will be available on our website, and we'll post a transcript later this week.
Speaker Change: If you would turn to slide 2, I would remind you that during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates, and projections.
Therefore, actual results may differ materially.
Speaker Change: Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations.
Speaker Change: Further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations to GAAP measures, is available under the Investor Relations section of our website.
Speaker Change: Finally, references to certain financial metrics, along with corresponding year-over-year comparable results.
Speaker Change: made on this call are on a full company basis except when specifically referred to for continuing operations or for discontinued operations.
Speaker Change: Joining me this morning are Howard Coker, President and CEO, Roger Fuller, Chief Operating Officer,
and Jerry Cheatham, Interim Chief Financial Officer.
Speaker Change: For today's call, we will have a prepared remarks followed by Q&A.
Speaker Change: If you will turn to slide four in our presentation, I will now turn the call over to Howard.
Thank you, Roger, and welcome back.
Speaker Change: 2024 was a milestone year for Sunoco as we created global leadership in sustainable metal packaging following the December 4th acquisition of EVOsys.
Europe's leading food cans is enclosure manufactured.
Speaker Change: Slide five shows we jump-started the integration process with day one celebrations with large groups of employees at several EViosis facilities.
Speaker Change: Our teams are now deep in the process of integrating into Sunoco Metal Packaging EMEA and achieving our two-year $100 million synergy target.
Speaker Change: Also, on December 18th, we further transformed our portfolio through the announced divestiture of our thermoform and flexible packaging business to Topan Holdings for approximately $1.8 billion.
Speaker Change: We're on track to complete the sale during the second quarter, having now received approval from regulators in the US, Brazil, and the UK.
Speaker Change: We're continuing a strategic review of our remaining coal chain temperature-assured packaging business to further focus on our metal and paper packaging.
Consumer, and Industrial Businesses.
Speaker Change: Moving to slide six, you see the key results for the fourth quarter.
Speaker Change: Despite persistent price-cost headwinds and the impact of two hurricanes earlier in the quarter, our team stayed focused on driving solid operating results.
Speaker Change: Sherry will provide the details and drivers for the quarter, but adjusted earnings per share, excluding EVOs, which we did not project in our guidance, are within our expectations.
Speaker Change: While aviosis recorded a loss in December, it was primarily due to interest expense that was incurred when operations were experiencing the normal year-end holiday season slowdown.
Speaker Change: Rest assured, EBIOSIS is a highly profitable, top quality asset, and results so far in 2025 are certainly meeting our expectations.
Speaker Change: Overall in the fourth quarter, Sunoco produced 5% improvement and adjusted EBITDA.
Speaker Change: and adjusted EBITDA margin expanded to nearly 15% driven primarily by strong productivity.
Speaker Change: For all of 2024, we achieved approximately $183 million in productivity savings, equally split between our consumer and industrial segments.
Speaker Change: including our largest thermal plumbing facility in Florida, which had the roof destroyed by Hurricane Milton.
Speaker Change: Our employees went above and beyond to minimize downtime caused by the storms, while at the same time taking time to volunteer in their communities to help with cleanup and recovery efforts.
Speaker Change: Finally, Sunoco generated a better-than-expected $834 million in operating cash flow and $456 million in free cash flow.
Speaker Change: This was the second largest operating cash flow year by Sunoco.
Speaker Change: And we invested a record $378 million on capital projects focused on growth and productivity.
Speaker Change: The results of our multi-year invest-in-ourselves strategy are demonstrated through our improved productivity.
Today's investments are more weighted towards growth.
Speaker Change: If you look at slide 7, you'll see where we're continuing to invest across our businesses, including expanding Greenfield paper can production in Thailand.
Speaker Change: in Mexico and in the U.S. All of these projects are sponsored.
Speaker Change: My customers and will increase organic sales over the next several years and I should add Thailand facility is expected to become one of the world's largest paper can production sites when fully completed over the next
A few years.
Speaker Change: Also, we're recapitalizing caulk tube production for adhesives and sealants for our customers who experience strong demand as contractors and homeowners repair their homes and businesses from unprecedented storms.
and fire-related damages.
Speaker Change: In metal packaging, we're adding capabilities to meeting rising demand for aerosol cans in the U.S. and wet pet food cans in both the U.S. and Europe, along with customer-specific caps and closures projects.
and finally our industrial paper products businesses.
Speaker Change: are continuing to capture targeted growth opportunities and productivity projects in the U.S. and Europe.
But we continue to focus on right sizing.
Select markets.
Speaker Change: Now with that brief introduction, let me turn the call over to Jerry Cheatham who took over the interim CFO role in January.
Speaker Change: and frankly is doing a great job. I won't go over Jerry's impressive resume, but I've worked with Jerry for most of my career.
including when I headed Sunoco's industrial segment.
Jerry, welcome and please take us through the numbers.
Thanks, Howard.
Speaker Change: I'm pleased to present the fourth quarter financial results, starting on page 9 of the presentation.
Speaker Change: Please note that the results are on an adjusted basis and all growth metrics are on a year-over-year basis unless otherwise stated.
Speaker Change: The gap-to-non-gap EPS reconciliation is in the appendix of the presentation, as well as in the press release.
As Howard said, 2024 was a milestone year for Sunoco.
Speaker Change: We made significant progress on our strategy of fewer, bigger businesses.
Speaker Change: that will enable more focused investments to drive value creation through earnings growth and margin improvement.
We are confident and excited about the future.
Speaker Change: and expect the leading global market positions of our two core businesses to drive greater efficiency and improve customer support.
We grew adjusted EPS, excluding ebiosis, to $1.17.
which was within the lower end of our guidance range.
Speaker Change: The negative 17 cents related to EBIOSIS consisted primarily of interest expense on the related transaction financing for the time period we owned the business in 2024.
The 14.7% EPS improvement year-over-year was driven by strong performance
by Strong Operational Performance and Fixed Cost Reduction Initiatives.
Speaker Change: Productivity was positive 41 million and marked the eighth consecutive quarter of year-over-year productivity improvement.
Speaker Change: This was further aided by low single-digit volume growth in the consumer and industrial segments.
Speaker Change: and partially offset by the negative impact of price costs and lower volumes in all other businesses.
Speaker Change: This favorable change was driven by low single-digit volume gains and the impact of December sales from the EVO's acquisition that was completed on December the 4th.
Speaker Change: This was partially offset by reclassifying the recycling business as a procurement function
Speaker Change: Lower selling prices and reduced volumes from actions to exit or divest non-strategic positions.
Speaker Change: Page 10 has our consumer segment results on a continuing operations basis.
Speaker Change: Consumer sales were up 18% due to the eviosis acquisition and favorable volume mix.
This was partially offset by lower selling prices.
Speaker Change: Eviosis contributed 27 days of sales in December that reflected their normal sales pattern of lower sales during the holiday period.
Speaker Change: Our Global Rigid Containers and Domestic Metal Packaging business both experience low single-digit organic volume growth.
Consumer Adjusted EBITDA Margins
Speaker Change: consumer-adjusted EBITDA from continuing operations grew 9% year-over-year due to productivity and fixed cost reductions.
that was partially offset by negative price costs.
Page 11 has our industrial segment results.
Industrial sales decreased 4% to $571 million.
These results include the reclassification of recycling.
which reduced sales by $24 million during the quarter.
Speaker Change: We also completed the exit of our industrial operations in China during the war.
Organic volumes increased by low single digits.
Speaker Change: Sales were also benefited by low single-digit improvements in selling prices due to index-based price resets.
Speaker Change: Adjusted EBITDA margins improved sequentially through the year and were up 250 basis points year-over-year in the fourth quarter driven by strong productivity.
Speaker Change: Adjusted EBITDA increased by $11 million to $102 million, representing a 12% increase.
Page 12 has the results of our all-of-the-business survey.
Speaker Change: All other sales were $88 million and adjusted EBITDA was $8 million.
the sales and adjusted EBITDA results.
were negatively affected by the divestiture of protective solutions.
Speaker Change: A customer's new product launch in 2023 that did not repeat in our industrial plastics business.
along with flowing sales from COVID vaccine distribution.
Turning to page 13.
We have our cash flow performance for the year.
Speaker Change: Strong operating performance drove operating cash flow generation of $834 million for the year.
Speaker Change: This was the second-best year on the heels of an $883 million record year performance in 2023.
Speaker Change: We invested $378 million for the year on capital projects to enable future growth and drive margin improvements.
Now, turning to page 14 and looking ahead to 2025.
A four-year guide considers a full year of ibiosis.
OCC is expected to average $100 for the year.
Speaker Change: We're expecting a stronger dollar in 2025 and an average effective tax rate of approximately 25%.
Speaker Change: The euro exchange rate is expected to average 1.055 for the year
Turning to the sales bridge on page 15.
Speaker Change: We're projecting sales to grow by 21.5% from $6.6 billion to approximately $8 billion, primarily due to the acquisition of Eviosis, net of the TFP divestiture.
and Organic Growth and our legacy businesses.
Speaker Change: In consumer, we expect low single-digit organic growth, partially offset by negative index base price reset.
Speaker Change: For the industrial segment, we also expect low single-digit organic volume growth and favorable price due to contractual resets with existing customers.
Speaker Change: volume and all other and I in the all other group of businesses is expected to be mixed
with organic growth varying from low single digits to mid-teens.
Speaker Change: Slide 16 provides a summary of our key drivers of our adjusted EPS guidance.
Speaker Change: We expect to deliver adjusted EPS growth in the range of 19 to 23 percent above the 2024 EPS of five dollars and six cents that excludes the 17 cents from uveosis in December.
Speaker Change: Earnings in our legacy businesses are expected to grow by approximately 10%.
driven by continued strong operating performance, productivity, organic growth
Speaker Change: partially offset by negative price costs due to higher fixed and other expenses.
The Eviosa's acquisition is expected to be 25% accretive.
Speaker Change: and the TFP divestiture is expected to be dilutive in the range to 7 to 9 percent.
Speaker Change: These projected impacts reflect the associated earnings in 2025, net of the interest expense impact from the related financing and expected debt repayment.
Speaker Change: Non-operational expenses are expected to lower EPS between $0.25 to $0.30.
Speaker Change: Due to a higher effective tax rate resulting from discrete items in 2024 that we do not expect to repeat.
FX Headwinds
and Higher Net Interest Expense.
Page 17 presents our cash flow guidance and key assumptions.
Speaker Change: We expect to have another strong year of operating cash flow performance in the range of $800 million to $900 million.
and free cash flow between $450 to $550 million.
Speaker Change: We are targeting capital expenditures of approximately $360 million to drive growth and margin expansion opportunities.
Speaker Change: The ratio of capital spending as a percent of net sales is expected to be slower compared to 2024 due to a higher emphasis on debt repayment.
Speaker Change: We expect volume growth to lead to a use of net working capital of approximately $25 million.
Speaker Change: Now, with that, I'll turn it back over to Howard for closing remarks.
Great. Thanks, Jerry. I'll now move to slide 18.
Speaker Change: You know, Sunoco today is the global leader of value-added sustainable metal and fiber consumer and industrial packaging.
Speaker Change: We've become a simpler, stronger, and more sustainable company with products, technology, and market presence that positions us to consistently
when in the marketplace.
Speaker Change: Since I was honored by our Board of Directors five years ago to become CEO, we've gone through a strategic transformation to remove complexity.
and Bill Fuhrberger Businesses.
Speaker Change: That process has led us to divest the low-margin display and packaging business and other smaller non-for assets.
Speaker Change: We moved away from resin-based businesses ranging from molded foam products for automobiles
Speaker Change: The plastic bottles and tray for food, beverage and medical packaging.
Speaker Change: We did so because we found we could not achieve the necessary scale.
to consistently win in the marketplace.
Speaker Change: And we've leaned into our growing aerosol and cans, along with caps and closures in the U.S. and MEA.
Speaker Change: For example, since purchasing Ball Metal Pack in January 2022, we've driven greater than 10% annual growth in adjusted EBITDA.
and continued to find opportunities for growth.
Speaker Change: We believe we can achieve similar results with ebiosis and are projecting approximately 10% improvement in adjusted EBITDA for 2025.
Speaker Change: As mentioned earlier, another key tenet of our strategy is to invest in ourselves.
Speaker Change: As an example, over the past five years, we've made investments in our global paper can franchise that have resulted in sales growing by nearly 25 percent, particularly in emerging markets.
Speaker Change: and with all new, paper cans that offer more market differentiation.
The continued investment and pruning of certain lower-profit businesses
Speaker Change: and Markets, we have grown EBITDA in North America by approximately 40 percent.
It's 2020.
Speaker Change: And finally, the new Sunoco has become a cash-generating engine, producing approximately $1.7 billion in operating cash flow.
Speaker Change: and $1 billion in free cash over the past two years.
Speaker Change: After investing in ourselves, our capital allocation strategy is focused on reducing leverage.
Speaker Change: to between three times to 3.3 times net debt to adjust the dividend by the end of 2026, utilizing proceeds from divestitures.
Asset Sales, and our strong free cash flow.
Speaker Change: And finally, we expect to achieve an extraordinary 100 consecutive years of returning cash to our shareholders.
and the Forum of Sector-Leading Dividends.
Speaker Change: Slide 19 is a graphic representation of what the new Sunoco is expected to achieve in 2025 along with our businesses and served markets.
We project sales will grow approximately 20%.
between $7.75 billion and $8 billion.
Speaker Change: Adjusted EBITDA is expected to grow approximately 30% to between $1.3 to $1.4 billion.
Speaker Change: The cash flow from operations will remain strong between $800 and $900 million.
Speaker Change: Finally, our mix of business is further shifting to more consumer markets, and our geographic reach will become more balanced around the world with more than half of our sales still occurring in the United States.
Speaker Change: Looking forward, we believe our transformed portfolio of world-class consumer industrial packaging businesses are well positioned to serve the challenging, changing needs of our diverse global customers.
Speaker Change: We're off to a solid start to 2025, and I believe our prospects for continued growth, margin improvement, and strong cash flow generation will continue to allow us to return greater value to our shareholders.
And with that, operator, we're ready to take any questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Speaker Change: Your first question comes from a line of George Staffos from Bank of America. Your line is open.
Speaker Change: Thanks, good morning everyone. Thanks for the details. Jerry, welcome. Roger, great to hear your voice again. Hope everybody's well. I guess, can you talk a little bit about the exit rates?
Speaker Change: or early 1Q rates, depending on your perspective, that you're seeing across your most important businesses.
Speaker Change: Relatedly, can you talk about how Eviosis is doing relative to the original, I want to say, $430 million of EBITDA guidance on an annualized basis?
Speaker Change: And, lastly, can you talk about how much you're expecting from TSP in the first quarter? Thanks. I might have a quick follow-on.
This is Robert Dillard Georgia
Speaker Change: On the exit rates, you know, actually, the adjusted run rate for ebiosis.
Speaker Change: 10% increase in that number, and that's what we've got built into our guidance. And so far, we're seeing that type of run rate, obviously early with a month and a half behind us.
Speaker Change: We're very bullish about about to go forward there. And then on the remainder of businesses, yeah, we've been seeing sequential improvement, particularly on the.
the metal can business here in North America.
Slight improvements to FLAT. FLAT is coming out of
Speaker Change: December on the paper can business, and we've seen consecutive improvements, particularly in North America on the industrial business for quarter over quarter over the last three quarters. So, as we enter the new year, Phil uniquely.
Speaker Change: positive about how we're starting things out. There's a lot of uncertainty with what's going on in the macro perspective, but we control what we can control.
How are you doing? Good. Oh, hey Jerry.
Speaker Change: Yeah, just as it relates to expectations for TFP in the first quarter, we expect their first quarter 2024 performance to be similar to what we saw in Q4 2024.
Speaker Change: Okay, so that would be roughly 20 million-ish, 25 million if I remember correctly from the slides, and then just maybe last question.
Speaker Change: Industrial, I recognize you're saying sequential improvement. Was the business on plan with where you're expecting for the fourth quarter?
Speaker Change: somewhat below our forecast, which is neither here nor there, but just want to see, you know, if there were any things in 4Q that, you know, were either positive or negative relative to your guidance. Thank you, and I'll turn it over.
Roger Shrum: Yeah, George, this is Roger. Yeah, as far as industrial North America, we were very pleased with the fourth quarter. As Howard's already said, we've seen
Speaker Change: Nice growth in our tubing core converting operations in North America With a team doing a really nice job from a service and quality standpoint and winning some shares, especially in the paper mill core area
Speaker Change: Paper volumes, URB volumes in North America were basically flat, maybe up just slightly.
Speaker Change: We did see weakness outside of North America, and I think that's what you're seeing in the numbers, George. Europe continued to be very soft.
Speaker Change: We've got work to do there, frankly, from a paper standpoint, from a capacity standpoint. We're working hard on that. As we talked about last quarter, we took a small paper machine out of Greece.
Speaker Change: over the past two quarters that we're looking hard at the European paper platform and pricing in Europe continues to be difficult from a competitive situation and in Asia across the board and our industrial
and businesses in Asia, very soft volume.
We exited China.
Speaker Change: So you're seeing some of that in the numbers. We've taken a small paper machine out of Indonesia.
Speaker Change: So, frankly, the weaknesses coming from outside North America, we're optimistic about North America. Price costs turned positive in North America in the fourth quarter, which was a very good sign. We see that continuing into the first quarter. So it's outside North America. We're working hard to get costs right.
Speaker Change: And we'll see sequential improvement, but it'll take a little time as we run through 2025.
Okay.
Thanks very much. I'll turn it over.
Speaker Change: Just curious what that maybe implies, specifically for consumer, you know, we'd maybe consider that to be a little bit above peers or a little bit above maybe some of the blue chip customers, so just curious what's driving that.
All right, yeah, Brian, you know, if I just...
Speaker Change: Look at my charts here. Really, we're seeing it in the two main businesses left in consumer, the metals business in North America. We saw an aggregate solid, but low single-digit type growth.
Speaker Change: over the last year, quarter to quarter to quarter, actually strong in the low single digits for the full year.
Speaker Change: A lot of those projects, the new plants in Thailand, Mexico, new lines in the U.S. Some are in the early stages of start-up. Others will be starting up over a period of time. We're not...
Speaker Change: As we said, low single-type digits. We're not forecasting any great recovery. But that's where it's being driven from.
Speaker Change: Got it. Got it. Thanks for that detail. And then maybe just within your metal businesses,
Speaker Change: You know, are you expecting maybe a better pack season in 2025? I think the
Speaker Change: The North American pack was pretty weak last year. I'm curious if you think maybe you have a full recovery or a partial recovery. I know you just said you're not forecasting anything major, but just specifically kind of thinking about North American metal. Thank you, and I'll turn it over.
Speaker Change: Yeah, I'd say we're not. Slightly better. I mean, beans were impacted. There were a few markets that were impacted, but as you noted, we're kind of holding things in that low single digit up. So we're not, we're not,
Speaker Change: forecasting any great type recovery, but certainly we feel like where we are from a share position, particularly on aerosols,
Speaker Change: We do have visibility of exactly where that growth's coming from. I think if we have a great pack season, that's just upside.
Speaker Change: Your next question comes from a line of Matt Roberts from Raymond James. Your line is open.
Hey, good morning, gentlemen. Thank you for taking the questions.
Speaker Change: It's like a first follow-up on George's question earlier, I understand there's certainly a lot of moving parts. Typically, you do guide one quarter ahead as well.
Speaker Change: So recognizing there are a lot of moving pieces, wondering if you could help frame EPS for 1Q a little bit better in terms of what you're expecting in terms of volume or any other bridge items there, such as FX impacts or productivity and price costs.
Thanks.
Yeah, Matt.
Speaker Change: You named it right from the very beginning. There are a lot of moving pieces. I think there will be quite a few follow-up calls to help.
Speaker Change: Clean up some of the questions you guys may have, but we opted because of that with all the moving pieces going on right now, disco ops, et cetera, associated with the TFP, et cetera.
Speaker Change: We've just decided that we would go with an annual forecast, and we'll certainly update you on a quarter-by-quarter basis as we move through the year.
That pretty much covers it.
Speaker Change: Thanks Howard, and certainly understandable there. Maybe on ThermoSafe, I think it was recently in November, you're expected to sign something there in early half of 2025 and close out in the middle of the year. Have there been any changes in the thinking or timing there?
Speaker Change: I believe you noted volumes in the other, all other segment were negative exiting the year. We've heard some destocking has lingered in pharma and markets. So, maybe what are you seeing in terms of volumes in that business?
Speaker Change: And while ThermoSafe is included in a 2025 guide, are there any assumptions from ThermoSafe in the leverage target? It seems like that changed a bit from the less than 3x that you were thinking previously 24 months after ibiosis. Thank you again for taking the questions.
Speaker Change: Hey Matt, it's Roger. Quickly on ThermaSafe, as you mentioned, volumes were a little soft and
in the fourth quarter, and really that's it.
Speaker Change: An industry issue, as you said, the pharma sales have slowed some. We're optimistic about 2025, however, if you look at a number of key areas that we're focused on. GLP-1 drugs is one of those. You know, last year the supply of those drugs was so tight.
Doctors' Offices for Samples.
Speaker Change: And as you've seen, with one of the largest producers of that, they're now shipping direct to consumer.
and that will positively impact our thermo-safe business.
Speaker Change: A lot going on in vaccines. As you know, COVID vaccines have slowed tremendously. We all understand that.
Speaker Change: But if you look at flu vaccines with the flu season we've had this year, we expect flu vaccines to be very strong in 2025 and there are new products coming out there like MIST for flu vaccines.
Speaker Change: We're still optimistic on ThermaSafe. We've not changed what our expectations are there. We expect the divestiture process to be completed by the end of the year. So that's not changed.
Speaker Change: As you've already said, that's built into our deleveraging plan, so we're still optimistic there. The slowdown is an industry issue, but we've got some very specific areas that we're optimistic about in 2025.
Roger Howard, thank you all again.
Speaker Change: Your next question comes from a line of Mark Weintraub from Seaport Research Partners. Your line is open.
Thank you.
Two clarifications, maybe. One...
Speaker Change: Robert Dillard, Howard Coker, Robert Dillard, Lisa Weeks, Robert Dillard, Robert Dillard,
Speaker Change: Yeah, I think probably what you're seeing there on the, first of all, in our cash flow guidance, it is reflecting kind of a normal working capital profile.
Speaker Change: And you're probably seeing the impact of some higher interest expense and a higher effective tax rate sort of pulling that down a little bit. So those would be the two items that may be giving you a little bit of trouble in reconciling that.
Speaker Change: No, Mark, there really isn't pretty much a flattish from a global perspective, so nothing material there to talk about.
Speaker Change: Okay, great. And then lastly, on Eviosis, thanks for the specifics in terms of like what you're expecting. The numbers you were using, does that include synergies for 2025, or is that 10% increase on the 390, or is that X synergies?
Speaker Change: Yeah, I'm glad you asked, Mark. Synergy-wise, we had anticipated that we would achieve a fairly significant percentage of synergies in year one. As you'll recall,
Speaker Change: We announced the deal mid-summer. We did not expect that the UK authorities, CMA, would take a deep, semi-deep dive into this, so we did not, we were not able to close.
Speaker Change: until the first week of December, which really put us on our heels in terms of negotiating annual contracts with our major suppliers. In fact, it turned more into ensuring that we had the necessary raw materials to run the global business.
Speaker Change: So, rather than the majority of the synergies coming in year one, we're estimating about a third.
of those synergies coming through.
Speaker Change: with the remainder really flowing into 2026. So not a lot of synergies there, at least in terms of the context of what we had anticipated. But certainly, we are extremely bullish, not only on the procurement side, but the deeper we get into the...
Speaker Change: and URB and converted products, the opportunity to drive even further productivity through SG&A is pretty exciting over the coming years.
I'll just say I marked those synergies, though.
Mark Weintraub: Hey Mark, sorry, those synergies don't necessarily all fall within that idiosyncrasy.
Speaker Change: result as well. Let's spread between the other industrial, the other businesses in Europe and some of the metal business in the U.S. Those synergies are really corporate line.
Speaker Change: Okay, that's super helpful. Maybe, and I apologize, I know I'm going a little long here, but just the shortfall last year in eviosis relative to what you might have been originally anticipating, anything specific you can point to?
Speaker Change: There were quite a few items, you know, obviously they had some issues with, I'll say obviously, but they did have some volume issues earlier in the year, surprise cost issues.
Speaker Change: You know, things that happen, I would say that general transaction-related disruptions
Speaker Change: We're a part of it. At the end of the day, as we noted, that we're highly confident in the go-forward outlook of the business.
Thank you
Speaker Change: Thanks very much for taking the questions and congrats on all the progress.
Speaker Change: highly investing in our lowest cost, our best mills, and frankly just taking out high cost capacity and really just optimizing the network from, you know, from the paper mill side of the business. And that's really the work I was talking about in Europe. As I said, we took the mill out of Greece.
Speaker Change: In my opinion, we just need a more hard focus on really making the difficult decisions around where should we be providing.
Speaker Change: URB in Europe, how can we be more competitive and accelerating our push to invest in our best mills and we've got some fantastic mills in Europe. As I said we've made moves in Greece, we've made a move in Ireland to get some
Speaker Change: Thank you. Is that something that we should expect will be largely done this year as well, so that when you look at 2026 this is going to be, this will be in hindsight?
Speaker Change: You'll see improvements this year in Europe year over year. That's in the guidance and we're confident around that.
Robert Coker: Robert Coker, Howard Coker, Robert Dillard, Lisa Weeks, Robert Dillard, Robert Dillard,
Robert Coker: Robert Dillard, Howard Coker, Robert Dillard, Lisa Weeks, Robert Dillard, Robert Dillard,
Speaker Change: Hey Mike, it's Roger again. Yeah, I think the integration is going great, frankly. You know, as we expected, you know, we inherited a very strong leadership team. You know, our cultures are a perfect fit.
Robert Coker: We're well down the path of sharing best practices across all critical areas of the business.
Robert Coker: And we think there's good opportunity to leverage those relationships. And there are some large CPGs that one region serves and the others don't. So we see really good opportunity there.
Robert Coker: So we're really, the extreme focus is on serving our customers and finding new ways to add value, you know, across that metal platform.
Robert Coker: From a supplier standpoint, you know, the purchasing of direct materials, tin plate, coatings, compounds.
Robert Coker: is a clear arrow we're focusing on. Howard's already mentioned, you know, we could not even go to market together until January, but we're putting together a strategy as we speak to buy those direct materials globally. From an indirect material standpoint, logistics, those types of things.
pallets, packaging supplies.
Robert Coker: You know, we're looking across our large European platform, as you know, we've got a large industrial business there, paper can business there, and now with metal.
Robert Coker: We're looking at indirect transport cost logistics leveraging across that European platform. So we're very confident in the $100 million Synergy Target to get to that $100 million run rate by the end of 2026.
Robert Coker: And, you know, there's also a significant opportunity to leverage S&A across Europe.
Robert Coker: So again, shared services is a tremendous opportunity for us across those three businesses.
Robert Coker: and SNA from an HR and IT and finance standpoint serving our industrial and European businesses in battle.
Robert Coker: industrial and paper cans. So as I started, I think the integration is going great. We're really pleased with where we are. We're confident in the synergies. We've got a late start, but we've got firm plans in place to catch up.
Robert Coker: And I just think the support from our new family members from EVIOSA and their entire Sunoka team has been fantastic. So I feel really optimistic about the integration and EVIOSA's business coming into Sunoka.
Thanks very much, Roger, and good luck in 25.
Speaker Change: And again, if you would like to ask a question, please press star 1 on your telephone keypad. Your next question comes from a line of George Staffos from Bank of America. Your line is open.
Hi, thanks for taking my follow-on question.
Speaker Change: Folks, if we could talk about productivity X synergy, and if you'd mentioned it earlier in the remarks, forgive me for missing it, but what do you expect for 2025 and how would the mix look across industrial and consumer?
Speaker Change: Secondly, if we think about, you know, the supply chain and, Roger, you were talking earlier about, you know, how you're trying to work both direct and indirect now and, you know, and the work's progressing.
Speaker Change: Any issues to be concerned about, you know, relative to trade, to tariffs and the like, how do you feel about your supply of metal?
Speaker Change: Can you give us a bit more color on where you're seeing...
Speaker Change: strength in aerosol? Is it coming, you know, more from construction markets? Is it coming elsewhere? And, you know, within food, what are you doing to sort of diversify the customer base that you've had traditionally or that that business has had traditionally? Thank you.
Speaker Change: So, George, let me see if I got all of those. Productivity.
for 2025.
Speaker Change: Robert Dillard, Howard Coker, Robert Dillard, Lisa Weeks, Robert Dillard, Robert Dillard,
Speaker Change: in 2023. This year we're taking a more conservative view. Again, year over year around $60 to $65 million in the base business.
Hopefully, we'll stay on the same kind of track.
Speaker Change: that we've been on. Yeah, just keep in mind, George, that those flexibles and plastics is out of that. So they've been a strong contributor to the productivity and productivity is built into the eevee-osis.
Speaker Change: Yep, and on the tariffs, we'll see how they ultimately end up. You know, we don't like them. Certainly it's an impact here on our U.S. business.
Speaker Change: Fuller, Robert Dillard, Robert Coker, Robert Dillard, Robert Dillard, Robert Coker, Robert
Speaker Change: And we have mechanisms to pass through without issue, but we're going to do all we can to minimize the impact of that.
that we can, and frankly,
Speaker Change: You know, the diversity of the supply chain that we now have gives us more opportunities than otherwise we would have.
Speaker Change: I would say that if you look at it for the remainder outside of the U.S. to keep in mind that in total roughly 60% of our businesses is non-U.S.
The impact, to your point, really is on
Speaker Change: On the metal side, the paper side of the business is less of an impact. Again, a little bit going on between Canada and Mexico, but we'll be able to navigate through that without any type of material issue.
Speaker Change: In terms of strengths, you know, on the aerosol side, yeah, you know, we've just seen, you know, the
Speaker Change: The demand on the paint side of the business has increased considerably.
Speaker Change: So yeah, and then on, you know, on the base business, really focusing on the customers that we have and
Speaker Change: the previous strategic owner had that got deteriorated and we just are working harder in order to satisfy
Speaker Change: Provide the service quality expected of those customers, and we're seeing that rewarded in increased, slight increases in share.
Thanks very much. Good luck in the quarter.
Thanks, George.
Speaker Change: Your next question comes from a line of Richard Carlson from Wells Fargo. Your line is open.
Speaker Change: Robert Dillard, Howard Coker, Robert Dillard, Robert Dillard, Robert Dillard, Robert Dillard,
Speaker Change: And then on CapEx, there's a good chart you had on slide seven. Should we think about that, kind of a continued trend, either towards a maintenance level, or are you focused more on a percentage of sales basis? Thank you.
Speaker Change: Yeah, I'll let Jerry talk about the leverage, but Richard, yeah, the
CapEx is actually more weighted towards value-added, I think.
Speaker Change: get the call somewhere around 60% of the capital that we're forecasting for this coming year.
Speaker Change: We've seen that flip over the last three or four years, and I've already talked through a number of major capital initiatives. We've got sponsored greenfield plants going up around the world.
Speaker Change: Pretty bullish about that. Understanding that, you know, as we invest, it costs, and we'll see the benefit of these plants as they start ramping up, 26, 27, 28.
We'll talk about the
Speaker Change: Yeah, yeah, as we said earlier on the call, you know, we're targeting to get to three to three and a half, three to 3.3 times leverage towards the end of 2026. You know, obviously, we're moving forward with the
Speaker Change: Strategic Alternatives for Thermal Safe, which will, you know, those proceeds would help accelerate that, but we also believe that strong operating cash flow and strong free cash flow generation will give us confidence that we can get there.
Speaker Change: to that 3 to 3.3 times by the end of 2026.
Speaker Change: And on your question on capital, you know, we are trying to tilt more of our capital towards a growth and value generating standpoint. And we do expect to continue to invest in our businesses in that, you know,
Great. Thanks, guys. Best of luck in the quarter.
Speaker Change: And that concludes our question and answer session. I will now turn the call back over to Roger Shrum for closing remarks.
Roger Shrum: I certainly want to thank everybody for joining us today and we look forward to further discussions with you. We do have some upcoming meetings with investors and conferences that are posted on our website so
Roger Shrum: Stay tuned for other other updates and presentations that we have. Again, thank you for your participation and you can disconnect.
Roger Shrum: This concludes today's conference call. Thank you for joining. You may now disconnect.