Q2 2025 Sonoco Products Co Earnings Call
Thank you for standing by and welcome to the Soco second quarter, 2025 earnings conference call all lines have been placed on mute to prevent.
Speaker Change: Any background noise after the speakers are marked, there will be a question and answer session. If you'd 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 shrump interim, head of investor relations and Communications. You may begin
Thank you, Rob, and good morning everyone yesterday evening, we issued a news release and posted an investor presentation. That reviews, soko's, second quarter, 2025 Financial results.
Speaker Change: Both are posted on the investor relations section of our website at sogo.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 had turned the slide to, I will remind you that. During today's call, we will discuss a number of forward-looking statements based on current expectations estimates and projections.
Speaker Change: These statements are not guarantees of future performance. And are subject to certain risks and uncertainties. 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.
Joining me. Uh, this morning are Howard, Coker president and CEO. Roger Fuller. Chief Operating Officer and interim. CEO of sonoko metal. Packaging Amia.
Speaker Change: Jerry tetum interim, Chief Financial Officer and Paul joyme, check our new Chief Financial Officer.
Speaker Change: For today's call, we will be. We have prepared remarks, followed by Q&A. If you turn to slide 4 in our presentation, I will now turn the call over to Howard
Speaker Change: Thank you, Roger and good morning everyone.
Speaker Change: Our second quarter results. Reflected the growing strength of the new sonoko as we produce strong Topline and bottom line for along with margin expansion.
however, we were impacted by global macroeconomic pressures which affected consumer and Industrial demand, and by the delay of the European impact packing season, compared the last year,
Speaker Change: 5 5 shows net sales, grew 49% and adjusted even though I was up 25%.
Speaker Change: While adjusted, Eva dime margin. Expanded by 100 basis points to 17.2%. Due primarily to improving margins from our industrial business.
Speaker Change: Total adjusted earnings grew 7% and were impacted by higher than expected interest expense.
Speaker Change: The 115% growth in adjusted Ava and the consumer packaging segment, reflects 10%, gains and volume, mix and our metal us business. And the addition of EVO to acquisition which, we have rebranded as sonoko metal, packaging, smpp anima.
Speaker Change: The segment also generated.
Solid productivity, savings.
Speaker Change: Our industrial segment through adjusted Ava by 16% due to a favorable price cost environment.
And productivity.
Speaker Change: Industrial segment. Eva, Don margins. Expanded to 19%.
Speaker Change: Which was a seventh consecutive quarter of margin Improvement.
Speaker Change: This performance is attribute to our industrial team's efforts to drive value based pricing and focus on productivity saving.
Here, we'll go through all the numbers and business drivers for the quarter in a few minutes.
Paul Joe: But I also want to formally introduce Paul Joe and check.
Speaker Change: To join us as Chief Financial Officer at the end of June.
We're really excited to have Paul join us and he will discuss our guidance before we take your questions.
Speaker Change: Over the past 5 years, we've been progressing, a transformation journey to create a more focused Enterprise, providing value, added metal, and fiber packages.
Speaker Change: Slide 6 illustrates our strategy and particular What markets we will participate in and how we expect to win in these markets.
Speaker Change: We're focused on businesses where we can drive a competitive advantage to Advanced Material Science and Technology.
Speaker Change: Expertise for our products possess High functionality and where we can best leverage continuous process improvements to drive productivity.
Speaker Change: We now have a portfolio of businesses with a mix of large growing Global consumers to Value the competitive Advantage. We provide
As always sonoko wins through Superior customer service, strong, operational execution, Innovation, and a culture that is built on our guiding principle of people build businesses by doing the right thing.
Speaker Change: Illustrated on slide 7. We believe we have now focused our portfolio along the competitive strengths that will allow us to win in the marketplace.
Speaker Change: Our core businesses include metal. Packaging, rigid paper containers and Industrial Paper packages.
And each of these businesses, we check the box on our key strategic processes, including focusing on markets where we have Market leadership.
Speaker Change: The slab also illustrates why we decided to the best thermoform and flexible Packaging.
Speaker Change: And while we plan to sell thermosafe, our temperature assured distance.
Speaker Change: Both have developed into meaningful profitable and attractive businesses.
Speaker Change: However, we felt they lacked certain aspects that would allow us to best deploy. Our operating model to our advantage.
So, we believe monetizing these assets to redeploy Capital back into our core was the right Capital, allocation decision.
Speaker Change: Now, turning to slide 8, we continue to progress our transformation journey in the second quarter with the successful deer of of pfp.
Speaker Change: And the utilization of proceeds and cash to reduce our net leverage ratio to below 3.8 times.
Speaker Change: We're preparing thermostat for a second half sale process, but the expectation that proceeds will be used to further reduce net. Leverage for our Target of 3 to 3.3 times, by the end of 2026.
Speaker Change: as a result of our portfolio changes, when the process of further optimizing our operating footprint,
Speaker Change: And reducing.
Speaker Change: Support functions to align them with the needs of our fewer bigger businesses.
Speaker Change: Is actioned approximately 20 million dollars in annual savings from spending costs left by the the vested businesses?
Speaker Change: but also, we're now positioned to better leverage shared services strategies for some of our Global administrative functions to better serve our business
Speaker Change: Our customers and to reduce costs.
Our successful integration of SNP, mmaa continues.
Speaker Change: For the team is now projecting between 40 and 50 to 50 million dollars in run rate synergies by the end of this year.
Speaker Change: we also have line of sight to achieve greater than 100 million,
And cost savings through 2026.
Speaker Change: At the end of June, we were saddened by the news that Thomas Lopez CEO of S&P and the had died in his hometown of M, Mia, Spain.
Speaker Change: Lopez was a legend in the European can making industry dating back to his leadership in the developing the Visa and to the largest food Camp producer in the Iberian Peninsula and Morocco.
Speaker Change: When we acquire the business last December.
Speaker Change: Roger Fuller our chief operating officer and who has been leading the integration of S&P. I mean,
Speaker Change: Was named interim, CEO.
Speaker Change: Most of you are familiar with Roger's 40 Years of leadership experience at sonoka. He has been deeply engaged since day, 1 of the acquisition and worked alongside Tomas to build, strong customer employee and supplier relationship.
Speaker Change: While Tomas will be missed.
Speaker Change: Roger, providing leadership stability.
Speaker Change: Working with the team to continue our strategy of building.
Speaker Change: Global Leadership and metal Packaging.
Speaker Change: I'll now turn the call over to Roger to give us an update. Uh, a brief update on smpp Andia Roger. Yeah, thank you Howard. Good day everyone. Uh, if you turn the slide 10 I'll review some key points related to metal packaging and Mia's second quarter performance. Third quarter Outlook along with the previous some significant growth wins that will help us in 2026 and Beyond.
Speaker Change: Second quarter results for impacted by the delay and the startup of the European vegetable package packaging season as compared to last year.
Speaker Change: As we've explained approximately 40% of our Mia, sales are seasonal and dependent on the timing of the vegetable Harvest.
Speaker Change: Edition difficult, macroeconomic conditions, in Europe, have slowed consumer demand, and we've also seen a decline in sardine availability in Africa which is further reduced. Our volumes that said demand for pet food and certain premium food categories has remained resilient
Speaker Change: Looking at the third quarter, which is, by far, our strongest quarter, we're seeing the harvest season, ramp up our customers, and experts, predicting a solid vegetable Harvest that could extend through October. And we expect other food categories to be in line with our expectations.
Speaker Change: As Howard mentioned, the team is making tremendous progress to achieve Synergy Savings in the second half of 2025 along with generating opportunities for cost savings, that benefit our US, Metal packaging business.
Speaker Change: We recently integrated our us and Amia steel procurement teams into a single globally. Focused organization based in Europe and led by a veteran Soco steel. Procurement expert as we previously said, we expect significant procurement synergies in 2026 after they were delayed in 2025 due to the late closing of the acquisition.
Speaker Change: So let me close with some exciting New Growth projects that are Mia team signed in the second quarter.
Speaker Change: First is a multi-year contract with the pet food customer in Eastern Europe, where we'll provide up to 400 million incremental units annually. We expect to start providing cans for this customer from existing operations late in the fourth quarter and will be ramping up production in 2026.
Speaker Change: Also, we committed to developing a new satellite production facility in Eastern Europe, to help manage their large volume needs. Next is a thought, a new 5-year contract to provide unique shaped cans for a powdered nutrition product that will begin in the fourth quarter of 2026 and scale up in 27.
The emia team is targeting several additional new customer opportunities that should lead to further. Volume growth in 2026 and Beyond. I'm really excited to be working alongside such a strong International leader leadership team. As we build upon their past success and drive. Future growth with that. I'll turn it over to Jerry for the quarterly financial review.
Jerry: Thanks, Roger.
Jerry: I'm pleased to present the second quarter Financial results starting on page 12 of the presentation.
Jerry: On a year-over-year basis.
Jerry: Unless otherwise, stated.
Jerry: The gaap to non-gaap UPS reconciliation is in the appendix of this presentation as well as in the press release.
Jerry: Sales and adjusted ibaa bridges are also in the appendix.
Adjusted EPS was 1.37.
Jerry: Earnings per share increased 7% year-over-year.
By favorable price cost performance in our industrial visits is of 20 million and continues strong productivity of 15 million driven by our S&P us and Industrial businesses, and the net impact of acquisition and domestic jobs.
Jerry: This is partially.
Jerry: A favorable volume mix and our industrial business.
Jerry: And other and all other businesses and higher interest expense.
Jerry: Interest expenses were 7 cents higher than anticipated due to the pull forward of Amber station fees associated with the term loan paid off in April of this year and higher commercial paper. Balance.
Jerry: Second quarter, net sales for continued operations, increased 49% to 1.9 billion.
Jerry: This change was driven by the impact of the S&P and Mia acquisition.
Jerry: Strong volume in our S&P us business in favorable price.
Jerry: Adjusted ibaa 328 million was up by an impressive 25%.
And an adjusted ibaa margins improved by 101 basis points to 17.2%.
Jerry: primarily driven by items that affected sales growth in addition to productivity improvements,
Jerry: Page 13 has our consumer segment results on a continuing operation basis.
Jerry: Consumer sales were up by 110%.
Jerry: Due to the S&P Amir acquisition favorable volume and price.
Jerry: Our domestic metal packaging business, achieved double-digit growth reflecting solid demand and Commercial and continued commercial execution.
Jerry: Sales. For our Global rigid paper can businesses were essentially flat as favorable price was offset by mix and lower volume.
Consumer adjusted ibaa from continuing operations, through a remarkable 115% year-over-year.
Jerry: You're the impact of Acquisitions continued, productivity, gains, higher volume, and the favorable impact of foreign currency.
Jerry: Page 14 has our industrial segment results.
Industrial Sales decreased 2% to 588 million.
Jerry: Results were impacted by lower volumes and access to exit the China Market partially offset by better pricing.
Jerry: Adjusted ebida margins expanded by 290 basis points to your over a year and the second quarter primarily driven by favorable price cost, cost, Dynamics and productivity gains.
Jerry: These benefits were partially offset by negative volume mix.
Jerry: Adjusted EBA increase by 15 million, 15 million to 113. Million representing a 15% increase
Jerry: Page 15 as our results for the all other business.
Jerry: All other sales were 95 million and adjusted. EBA was 16 million.
Jerry: Sales were flat as higher volumes in the thermal safe for offset by weaknesses in our plastic industrial business.
Jerry: Adjusted ibaa declined, 8% as unfavorable mix and price costs for partial offset by favorable, productivity and other non-recurring items.
Jerry: Now, I'll hand it over to Paul to walk us through an update on our full year guidance.
Paul Joe: Thank you. Jerry first off let me say that I'm deeply honored to join the senko team at this exciting time for the company.
Paul Joe: With the recent acquisition investitures, it is time to reinforce the core values that have made Soco successful for more than 1205 years that are grounded in the culture of innovation collaboration and operating excellence.
Paul Joe: we are confident that our teams will drive, the targeted synergies from the smpp and Mia, acquisition and continue to build Upon Our Global metal packaging Foundation,
Paul Joe: My first weeks at sento, I have been impressed with the strong operational foundation of the company.
I also want to thank Jerry for doing an excellent job as interim CFO and helping me transition into the organization.
Paul Joe: Looking at our outlook for the remainder of the year. As shown on slide 17, we are maintaining our Guidance with net sales in the range of 7.75 billion to 8 billion.
Some softening of the market conditions due to global macroeconomic pressures. We are expecting strong results in our metal packaging and North American industrial businesses.
Paul Joe: From an adjusted, EBA guidance, we remain confident in our range of 1.3 billion to 1.4 billion.
Again, we see continued strength from our North American Consumer and Industrial businesses being partially offset by softness in Europe and other International markets.
Paul Joe: Delays and recovering Rising input costs, as well as impacts tariff uncertainty is having on overall market conditions.
Paul Joe: For adjusted EPS, we are targeting the low end of our range of $6 to $6.20.
Paul Joe: This reflects our first half performance and the projected performance improvements in the second half.
Paul Joe: In addition, we are expecting favorability in FX and interest helping to mitigate some of the macroeconomic impacts mentioned earlier.
Paul Joe: Operating cash flows are still within our range of our previous guidance, but we are targeting the lower end due to higher than anticipated levels of networking Capital usage primarily from Material inflation.
Paul Joe: We are extremely focused on improving our overall metrics and we will continue to make the right strategic investments in the business to ensure we can hit our future strategic goals.
I'll now turn the call back over to Howard for closing comments.
Howard: Like all and again, welcome to Sokka.
Howard: 1 of the key, tenants of our strategy is the best in ourselves to drive possible growth and productivity.
Howard: For the first half of 20125, we've invested 188 million dollars in capital.
Howard: And expected to be in line with our estimate of 360 million, in total spending by year end.
Howard: Return to slide 18. I highlight a few new projects.
Howard: The first is a 30 million dollar investment. We're making to expand production capacity to serve the growing us adhesives and see looks Market.
This initiative will add a total of 100 million.
Howard: Additional units of annual capacity at 3 facilities in Florida, Kentucky and Ohio.
Howard: So, that's 1 of the largest producers of cartridges for adhesive seal Us in the US and we are currently sold out.
Howard: Its part of the capacity additions, we will be adding new state-of-the-art technology, including digital printing.
Recently, we expanded the robotic assembly of nailed would reels and the hardel Alabama, facility, the Steve production, increased capacity and lower unit costs.
Howard: Not because the leader of the production of wiring cable reels in the US. And this new automation project will allow us to keep up with our customers who are expanding the domestic energy and Communications infrastructure.
Overall, we're targeting 65 million dollars, in productivity, Savings of 2025.
Achieve that goal. We're upfitting several of our manufacturing operations Automation and improved efficiency and reduce costs.
Howard: Great example is an autonomous forklifts and robotic assemblers. We recently added to our Jackson Tennessee, rigid paper containers office.
Howard: New customers and product development is key to the consumer packaging business as as growth as Illustrated on slide, 19.
Howard: Our smt us business is projecting 12 and 15% growth in food and aerosol cans, respectively for the Year. This growth is coming from both new and existing customers.
Speaker Change: And as Roger mentioned, we have several new projects starting up in Europe in the fourth quarter and into 2026 and Beyond.
Speaker Change: In addition, our Global rigid paper, container business continues to launch new wallpaper and paper, bottom cans for customers, looking to substitute from less sustainable packaging substrate.
Speaker Change: As an example, we launched 2, new wallpaper cans for pet nutrition products in the second quarter in Europe.
Speaker Change: The sustainability of our metal and fiber-based. Packaging is also getting recognition as shown on slide. 20 sonoko, and our customers won 3 awards for sustainable packaging, business of the year.
Speaker Change: Sustainable brand and sustainable investment projects.
At the environmental packaging and or hosted a packaging news?
Speaker Change: By 21 and 222.
Speaker Change: For developed to better, explain the key, tenants of our investment thesis, and to illustrate the new Soco.
Our businesses, our markets, and our Geographic equipment.
In closing, we are encouraged by our trajectory as we enter the busiest quarter of the year.
Segment, with our S&P us operation, capitalizing on Commercial winds to organically grow. Well, above industry, growth rates.
And we continue the integration of our metal packaging Amia operations and expect to exceed our Synergy targets.
Speaker Change: And our Legacy Industrial Paper packaging, segment should have another strong quarter as it continues to benefit from improved market conditions. While focusing on driving margin expansion to operation and Commercial Excellence initiatives
Speaker Change: Finally, we remain mindful of external risks, which are leading to Global macroeconomic uncertainty and may affect our customers and consumers.
Speaker Change: We will remain flexible and focus on meeting the changing needs of our customers.
While consciously controlling cost capital and reducing Leverage.
Speaker Change: File for creating long-term value. For our shareholders.
Operator, we will now take uh, any questions.
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your questions, simply press star 1 again.
Speaker Change: Your first question comes from the line of George. Stefos from Bank of America Securities. Your line is open.
Speaker Change: Hi everyone. Good morning. Hope you're doing well. Uh, hope you can hear me. Okay?
Speaker Change: Yep, I wanted to. Hey Howard. So you mentioned you're pleased with the trajectory that you have going to the third quarter.
Howard: Can you talk about across your major businesses? What kind of run rate you're seeing on volume right now and related to that? If you can talk specifically about SMP emia, what kind of organic volume growth? Or its you sound like declines, did you see?
Howard: 2 Q versus 2, q. And what are you expecting in third quarter? And then I had a quick follow on, and I'll turn it over after that.
Howard: Sure. Let me kind of go around the world and I'll I'll pass on the, um, the I may have a question to to, uh, to Roger but, um, let me start with our paper can business.
Howard: Expectation is we're heading into our strongest, uh, strongest part of the year, really September end of all August September and early October. So, but we're not, we're not forecasting, uh, significant growth, uh, maybe 1 1 percentage, um, with uh, you know, if we look back backwards into the Q2, um,
Howard: You know, the business was slightly down.
Howard: Uh but um you know Europe played a part of that and we all know what's going on in the European uh Marketplace today um and surprisingly Asia for the first time in a long time.
Was down. So, uh, not forecasting. A lot of heavy recovery, but, um, just slight going into the busy season on the metal can side here in the US.
Howard: Um, we we as I noted in, in my commentary we saw about a 10% volume mix uh type Improvement uh in Q2 if you look at that on a, on a unit base container base, it's you know, 15% up in food cans, 25% up in aerosol.
Howard: Uh we expect uh pretty close to that uh little bit difficult more, a little bit more of a difficult comp in Q3 particularly on aerosol. Uh but the Pack season is uh strong and the winds um um sustain themselves uh through the, through the remainder of the year, on the industrial side. Um,
Howard: Just slightly uh slightly up in the in the third quarter in total around the world. Uh almost I'd call it flat.
Howard: Uh, in our biggest Market here, in in, in North America, other than or the Americas and what we really see happening there.
Is um, well particularly in North America, operating rates strong. Um, we see we see that continuing
Howard: Uh going forward with uh with a pretty good lift from a price cost uh perspective. Um and Roger if you want to talk about, uh, yeah, yeah, thanks. All right, good morning George. Yeah, thanks for the question, first. Let me just say,
Howard: Uh, as expected, it's clear to me. Now, you know, we remain really excited about the set of the S&P and media business into Soco.
Howard: Reasons number 1, the Sardine catch.
Howard: Uh, we talked about, but if you look at the balance of the fish segment, uh, has been on expectations for the first half. It's on expectations for the second half.
Howard: And, and the sardines that they're relatively small sub segments of that overall, uh, segment a small part of the overall second, the vegetable Harvest. We talked about uh, we're getting a late start. It looks like it's about 3 weeks behind. So if you think about the fact that 40% of our volume is seasonal to the vegetable market, you push that 3 weeks out into the third quarter and and potentially into October as well. You can do that math and see what kind of growth that we expect coming in the third quarter versus the first half of the Year July is off to a good start. Um,
Howard: For our expectations, we're not building any any kind of starting recovery into our re forecast in the second half? You know, based on what we see now, we could, it could be mid to Upper single digit uh, increases year-over-year in the third quarter. And so far, uh, in July, it's leading, you know, it looks like we're heading towards that that level for those reasons that I've already talked about, there's been no Material off of share in the business for any reason. So, pretty upbeat on the third quarter versus last year, okay? At this point,
Speaker Change: Hey Roger. So let me maybe try to put a point on that and the last question I'll turn it over. So was SMP emia, you know, round numbers organically down, 5% into, you know, if you want to give us a range there and then 1 thing, I noticed incremental, margin and consumer, were relatively light. From my vantage point, I think we're up, only like, there were 12 and a half percent. Any reason why? Thanks, and good luck in a quarter.
Speaker Change: No, I don't think so George. I mean, uh, the business performing well, even with the volume shortfall in the first half versus our expectations, uh, the business produced positive productivity,
Speaker Change: So the business is executing well as I said no no share law.
Speaker Change: uh, so for me uh, could be
Speaker Change: Go ahead. So were you happy with 12 and a half percent? Incremental margin because that would be normally relatively light and with all the productivity so I was just trying to get a sense there.
Speaker Change: Mixed yeah the mix the seasonal mix uh did impact margins to some degree in the first half for S&P and Mia George. That's probably what you're seeing okay.
Speaker Change: And George, can you read the volume and S&P? Go ahead. Repeat that your second. I think you were getting ready to do it again. So can you repeat that second?
Speaker Change: So, like mix of the factor and ink rental margin and just wondering what was S&P as volume year on year into Q on an organic basis down, 5 down, 10 down 3. Just a rough. Thank you guys.
Speaker Change: Your, your final.
Speaker Change: The 12 and a half percent.
12 and a half.
Speaker Change: No no no no volume was not down 12 and a half set. We we'll give you a range but it's probably in that mid single digit. Yes. Yeah. Very similar to the price on this 1. Sorry.
Speaker Change: Perfect. Thank you guys. Good luck in the quarter.
Speaker Change: Bye.
Speaker Change: Sure, our next question comes from a line of John Dunnigan from Jeffrey's. Your line is open.
Hey guys, appreciate all the details. Um, I just wanted to, to touch on uh, first. It seemed like you guys had some stranded costs, stranded, corporate costs, uh, that were coming through in the quarter. Um, we hadn't really factored that in is that something that would, uh, improve moving forward, or maybe you can give us just some, some thoughts around that. And then the, the interest expense stepping up in 2q here. Is that, is that something that we should see as more 1 time in nature? Or, um, let's step up kind of moving forward. Um, as as uh, you know, he had a decent amount of of debt a down as well. So, maybe just interest expense for the full year as well.
Speaker Change: Yes, yes, thanks John. Let me let me take the interest expense question. First on on the interest expense? Yes we do expect to see some improvement on that in in the second half. Really in line with what we previously assumed uh for the second half of this year. Uh and also in the second quarter we had we were impacted by
Speaker Change: You know about 3 cents, a share of a pull forward on some uh loan uh, amortization fees. Uh, that will not happen in the uh in in the second half of the year.
Speaker Change: On on the stranded costs front. Uh, yeah, we do expect to see, uh, some improvement on that. Oh, over over the back half of the year, uh, and heading into, uh, into 2026. Yeah, let me just add to that. I'm trying to cross. Uh, we are, uh, um, laser focused on
Speaker Change: Obtained and has been working um, literally since uh um, late last summer knowing that we were going to be turning over or selling the tsp business.
Speaker Change: uh, so we have a roadmap, um, that will benefit us
Speaker Change: as we enter into, uh, next year and but it'll take time. Some of these costs are, uh, are pretty sticky, uh, but we, uh, absolutely have a roadmap to full elimination.
Speaker Change: Uh going forward the second half of this, which is not part of stranded costs is comments. Uh, that I alluded to in my opening that as a much simpler company where we're managing and my my words to basically to 2 big businesses that the a large can business model metal and paper. And uh a large industrial integrated converted business.
Speaker Change: The amount of resources that it should take to manage those 2 businesses versus our prior portfolio. Dating back, uh,
Speaker Change: Um, not too many years ago uh we should be able to simplify what we're doing in terms of how we support that business. So right sizing that is a second work strain that we'll be talking about uh in more detail later in this year, early next year.
Yeah, I appreciate the details.
Speaker Change: Yeah, and John just be a little more helpful on the, uh, on the insurance expense side. You know, we're expecting that number, uh, to be around, you know, 50 million dollars each a quarter, you know, for the, for the second half of the year.
Speaker Change: Great. That's that's very helpful and then just to move over to uh to evosys for for uh second question here. Um coming into the year, you guys had expected about 10% Improvement on ebita for for the full business. Obviously a little weaker here in 2q uh seems like standard deck capture should be a bit better this year. Um are are you it's still expecting to be up?
Speaker Change: Year-over-year in in that evosys business. And then, uh, just kind of adding on to that the
Speaker Change: Project that were called out, you know, 400 million of incremental units, in 1 project and and adding some of these other new projects that are going to be flowing through. You know, it sounds more like a a 2026 type of of flow through. How much, how much is that actually add to volumes for for the total business? Uh, thank you appreciate the details again.
Speaker Change: Yeah. John to answer your first question. Yes. We expect uh ibida to be up year-over-year versus what the business experienced in 2024. So the answer to that question is yes,
Speaker Change: You know, if you think about total volumes for the business, you know, 400 million and you know let's add another 100 million to that of incremental.
Speaker Change: Business.
Speaker Change: Um you know is significant. You know, I'm not going to get into to the exact numbers for that. Um, but you know, we produce, you know, we put these numbers out, what 8 billion is uh cans a year so you can do you can do the math. I think what? What I am
Speaker Change: Very optimistic about is not only those 2 wins but what I'm seeing in the business about other potential new business that we can bring in, I mean, it's clear to me. Now, we are the service Quality Technical Support leader in the market. Uh, you know, we inherited a strong and deep leadership team.
Speaker Change: And you combine this with the strong business team, we have in the US, you know, I am convinced, we will build the global leader, and metal packaging. So uh, none of that's changed. And then being directly involved with the business. I have any more confidence at this point that uh, we will do as we said we would do
Speaker Change: Very helpful. Thank you guys.
Speaker Change: Your next question comes from the line of Anthony panteri from City. Your line is open.
Anthony Panteri: Uh, good morning.
Anthony Panteri: Um, I'm wondering, I'm wondering if you could talk a little bit more about any potential tariff impacts, you know, whether you're seeing them.
Anthony Panteri: Directly, you know, maybe in terms of steel, or how your customers are positioning the food can or maybe indirectly, in terms of consumer Behavior. Or, you know, just any, uh, any impact that you're seeing directly or indirectly on any of your businesses.
Anthony Panteri: Yeah, thanks Anthony. Um, you know, of course, uh, I don't think there's many people that like, tariffs, we certainly don't, we're doing all we can to mitigate those. Um,
Anthony Panteri: And I, we've said this, uh, multiple times, so we, but unfortunately they're happening and we have efficient ways to push those through. Uh, I've suggested to you that our customers are saying that um, um,
Anthony Panteri: Account and Retail. Um,
Anthony Panteri: You know, when you when you start looking at the numbers it doesn't doesn't sound material when you do it by volume. It is material. Uh so more more to to to learn in terms of how that impacts uh the consumer ultimately our expectation is if there's a Slowdown and it's not going to be just in in our categories it's going to be throughout retail throughout grocery. Um,
Anthony Panteri: but we say, if they're slow down, that drives consumers to to, to the center of the store, and that's been something, you know, historical within our paper can business, and our closure business and, um,
Anthony Panteri: Probably see more upside down the downside if you will, in that regard and Jerry may want to talk about what we're seeing in terms of the financial perspective. Uh, just what is the magnitude of the numbers, Etc. Yeah I would just just say we've been able to to mitigate the impact that's far on our from from a, from an EPS standpoint and from a, from a margin standpoint and that's that's our expectation going. Going forward that we would uh you know, anticipate fully recovering that uh on on the p&l side and we are seeing some impact of that on on the balance sheet. As we talked about earlier, just the impact of, you know, higher carrying levels of network Capital balances.
Speaker Change: Got it, got it, that's helpful. Um, and then maybe Switching gears on the industrial business. Maybe just 2 very quick questions. Pton paper week uh recognized I think most of a herb price increase and wondering if you can remind us on kind of the flow through or timing around that. And then, um, you called out, uh, strength in in reels, which, I don't think you've necessarily called out before in the slides. I'm just wondering what's driving that and, you know, maybe how big of a business that is for you on the industrial side. Thanks.
Speaker Change: Thanks Anthony, uh, on the uh, on the herb pricing. We're we're going to start seeing uh benefits uh healthy benefit in the third quarter growing into the fourth quarter.
Speaker Change: um, so the timing of those increases coupled with the open market increase, which was was uh,
Speaker Change: um, fairly fairly um,
Speaker Change: Um successful in terms of getting through to the market. Um is is going to both both cases be favorable again building uh through the course of the, of the end of the year and then the next year reels it was a point out. Uh, it's not not necessarily a very large business for us. Uh,
Speaker Change: Um, but it's just a highlight, it's very profitable business. We're number 1 and and we don't talk about it a lot. It's been embedded in our industrial, uh, converting um, business for a long time. Um, but because of the growth that we're seeing with fiber, uh I I'm not a technical guy. So fiber optics. And um,
Speaker Change: And um, just overall energy shortages, that that are throughout North America. We're seeing heavy demand. We're out of capacity. And it's important for us to note to our, to our stakeholders that we are putting significant Capital, uh, to maintain our our, our large market share in, uh, in that business, the relationship to it, uh, within our industrial, as we take the, uh,
Speaker Change: Uh, the scrap and use it to make core plugs for our human Core Business. We sell into it with paper tubes for barrels. Um, so it's um it is definitely a a great fit within the within our industrial business. Uh and and again because of the capital and and and the improvements we see there, just wanted to to point that out.
Speaker Change: Okay, that that's very helpful. I'll turn it over.
Speaker Change: Hey, good morning everyone, thanks for the time here. Um, how are you just discuss some of the uh the timing of the herb price but um and I know you also gave you know, you all talked to the bridge earlier. But could you quantify maybe how the guidance Bridge had changed versus last quarter? You know, how how much incremental from that you are the price or or lower OCC cost? And then um additionally maybe maybe how FX Has Changed and and I think productivity stays similar at 65 million unless I'm wrong there.
But great, I'll let let let uh Jerry handle on. You're you're right on on productivity.
Jerry: Equates to about, you know, 6 million dollars, annualized benefit to us, uh, from from that herb movement, uh, and we've modeled that to start happening in the, in, in, in, in the third quarter. So we do expect to see that flow through that, you know, forty Dollar Tan movement that happened, you know, to start kicking in.
Jerry: Yeah yeah each ten dollars represents about 6 million dollars of annualized. Benefits is what we've shared previously on on the FX front. Uh you know we're we're looking at that number going forward somewhere, you know, call it
Jerry: you know, on the Euro to the US dollar somewhere between the dollar 17 and and, and a dollar or 18 and we ended the uh, third quarter at uh, uh, at at 1:13
Jerry: Okay, thanks Jerry. Appreciate that. Um,
Speaker Change: I guess uh thermosafe, um, sound like volumes were positive and Too Cute. Could you quantify what that was and what type of volumes you all are expecting in second half there. I believe there were some exciting growth opportunities in inform my products, in that business and um, maybe maybe versus, uh, you know, 2024 investor day. And I know a lot has changed, but, you know how conversations, uh, you know, potential Shooters of that business. Whether that have have have those change whether that be by our appetite or, or just general business performance for thermosafe overall. And, um, might be a little early,
Speaker Change: But not sure if you can cater throughout the central gold, post on, on what a pro for a leverage, could be factoring in a sale there. Thanks again for taking the questions.
Speaker Change: Yeah. Um,
Speaker Change: You're correct. We've had some good wins and uh we're we're on boarding those right now. Um, I really don't have the details exactly which which products and markets. Uh, I believe it has has to do again with uh, continuation of the expanse of glp1. And um and and how they are now starting to uh, to to ship that has added. Uh,
Speaker Change: Um, nice nice growth. Uh, and um, the profitability is going to continue to improve as we on board that uh, that that business.
Speaker Change: Uh, as far as the process goes, uh, as I said, we're we're, we're, we're, we're getting ready to go. The expectation is, uh, that we intend to, uh, to have something signed by the, uh, by the end of this year.
Speaker Change: Um, and really at this point I I I I'd be guessing and not sure to really talk about what what type of yield would get off of that and and what how that impacts our overall average.
Certainly in a positive way.
Speaker Change: Fair enough. Appreciate it. Howard figure. Worth a try nonetheless. Thank you.
Speaker Change: Yep. Thanks.
Speaker Change: You're our next question. Comes from a line of Mike roxan from truist Securities. Your line is open.
Mike roxan: Uh, yes. Thanks everyone for, for taking my questions. Uh, I congrats on the new role. Paul and look forward to working with you.
Paul Joe: Um, thank you, Mike.
Paul Joe: 1 quick question. Just uh following up on on John's question regarding uh SM S&P and Mia. Um and the image on generation you expect this year. I I think when you, you know, when you announced the deal, I mean I think Roger you mentioned, you get there, there's going to be up year over year and I think a couple quarters ago you mentioned that the business itself was booted, could achieve, give it to a 430 million after 390 million of you without last year. So I think you mentioned it was it's, you're still expected to be up, but do you expect it to achieve that 430 million that you laid out a couple of years ago?
Paul Joe: Yeah, Mike as you know we don't we don't share business specific profitability. What I will say is that certainly um, I will be up third quarter year-over-year as as expected and as in the uh, the forecast
Paul Joe: You know, you have the bridge, uh, you got the profitability bridge that we put out with the, with the announcement and I was just repeat, we're, we're pleased with Where We Are.
Paul Joe: Volume of software, and expecting the first half, we expect the nice recovery in the second half.
Paul Joe: And uh, confident that we'll get to the to the levels and return on that business that that, that we expected, you know, 1 half doesn't make a year and doesn't make a, it doesn't tell the story of an acquisition. So there's nothing that at this point, that I would say, when lead us to believe that we're not going to get a return, a good return on that acquisition as expected, and deliver the value to the shareholders.
Lower end of your previous guide. It seems like interest expense should be favorable in the second half. So how do you can you help us walk us through?
Paul Joe: How you're going to wind up with that lower end of your EPS guy, while maintaining the and you have better interest expense. Thank you.
Paul Joe: Yeah Mike this is Paul. So want to reiterate to really confident in our guide around our revenue and even uh so we have really strong sales and our performance and our North America and consumer businesses and Industrial businesses that are there, but we did experience some softness and some weakness in international markets that were out there in the S&P and so that factored into our first half performance,
Speaker Change: Performance, you combine that with the Tariff impacts as well, really led to a macroeconomic uncertainty. So if you think about, from a revenue perspective, and even a perspective really confident, now EPS let me shift gears to that, this is not brought down primarily due to the interest expense that we experienced in the first half of the year. So Jerry talked about in his script is about 7 cents higher in the first half of the year that was more than what we anticipated that will pull through and it does bring down our overall EPS guide for the full year. That's their
Speaker Change: But we are going to have benefit in the back half of the year as Howard and Roger, both said, our Q3 is our strongest quarter, that's out there to really our confident. Once again, back in that EBA, and that the revenue perspective, but EPS is really impacted by the interest expense, that's out there.
And then operating cash flows. We did lower that guy down as well to the low end of that range. Mainly due to the usage of the networking Capital primarily. As a result of the material inflation that Jerry had talked about in his results.
Speaker Change: All right. Thank you.
Speaker Change: Your next question comes from the line of Gan. Punjabi from beard, your line is open.
Speaker Change: Yeah, hey everybody. Good morning. And uh, Paul my congrats to you as well. Um, look forward to working with you, um,
Speaker Change: I guess, you know, if you look at the consumer segment, kind of zooming out on the Legacy basis. So you know, setting aside evosys for a minute, um, you know, volumes are off to the best start and you know, several years. Um, and and I'm just curious as to your thoughts as relates to the sustainability of that and context of, you know, big food obviously reporting, very weak, well volumes, uh, the consumer being impacted by affordability and maybe some glp-1 Etc. So, how are you thinking about the sustainability of that? Um, you know, obviously this year has been led by uh the metal food can business but just share your thoughts on that.
Speaker Change: Yeah, so uh I got some thanks uh you're right. Um year to date 2 1/2 maintenance stuff at the end of the year and and practically is slowing in the next year. Uh, and you're right again, as it relates to the strength that we've seen in our, um, and our S&P us business.
Speaker Change: um, we've talked over and over again uh, in terms of uh, how much investment that we've got going on right now on the remaining part effectively of our consumer side, which is our paper can does as we've got, uh,
Speaker Change: Uh um a new plant starting up in Mexico right now that's just in our in our terms starting to pull paper, just starting up with similarly in Thailand. Um, we have assets that are going in place uh,
Speaker Change: Literally around the world Brazil. Um, the United States, it's all incremental and it's going to take time uh as in any any um, Capital deployment uh to to get these up and and and and and running on the foundation of the business. Uh,
Speaker Change: You know, again bullish, uh, you're seeing new products in the marketplace today. Um, what we're going to talk to them about, don't don't want to talk to the customers. But, uh,
Speaker Change: um,
Speaker Change: um, the expectation is and and we're not forecasting, you know, you know, um,
Speaker Change: Major or big, double digit type, growth rates. It's going to be incremental and it's going to take us time as these assets. Come on board, and as these products continue to the loss, uh, to launch them from a glp perspective. I don't think we've seen anything there.
Speaker Change: Uh, I can't say that definitively. I think most of if there's any any type of uh softness
Speaker Change: uh, it's a balance between new winds growth and just
Speaker Change: Some of the uh, Legacy products dating back for for decades that uh has been in slow decline but we don't see that changing. So what we do see is that the growth will uh, will overtake that um, and the and the growing orders in in years.
Speaker Change: Got it. Thank you for that Howard. Uh and then you know, as it relates to evosys, I mean obviously the first half uh you know, it's played out slightly differently from a volume perspective, you know, you can't control with us.
And the fish catch Etc. But can you just give us a specifics of where you are on the synergies relative to plan? You know, what's been done so far and and just you know, having another quarter of the business under your belt. Um, you know, how are you thinking about the 100 billion of synergies? And, you know, maybe some upside to uh to that relative to your initial forecast for 2026.
Speaker Change: Yeah gosh, Mr. Rodger, uh, feel really good about it. I think we we mentioned that a couple of times in our opening comments, we've raised the Run rate for 2025 to that 40 to 50 million dollar level. And just a reminder, you know, we closed the deal late in December. So we, we were not able to negotiate. A lot of the raw material, uh, synergies that we were looking for in 2025 and those will hit in 2026. So I would say we're ahead of the game, you know, it was encouraging about that and a lot of those are non raw material synergies that we're seeing in that 40 to 50 million dollars.
Speaker Change: So at this point, we think there's upside to the hundred million dollars. You know, we're get starting. So we have those discussions now about 2026 from a raw material standpoint. So at this point I see no reason why we would not hit and or exceed that hundred million dollar level, you know, the team is, is is executing extremely well as I said before, a really focused and looking at a number of other non- raw material opportunities. But those that have exceeded our expectations to this point.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Alina Mark. Winrow from Seaport research Partners. Your line is open.
Alina Mark: Thank you. Uh, first of all, thanks, by the way for uh reinstating, the sales and adjusted ebit diverges at the end. Those are very helpful, um, on the, on the slide 17, uh, the full year Financial outlook on the left side, you've got upside downside risk, and then you have the 6 variables, uh, but it seems that those are sort of the drivers of what created the adjustment in the uh in your kind of guidance. So I'm just trying to understand. Are those to be seen as the drivers that have created change in what you're now telling us or are those things that you think could impact?
Alina Mark: The numbers that you are, you are the updated numbers. A little unclear to me on that.
Alina Mark: Yeah. So Mark, great question. So go back into and I'll start kind of at the bottom of the operating cash flow. So if we look at our usage of networking Capital, that is a true update to the guidance that's out there. We did have more usage of our networking Capital related to material price, inflation that are out there. So that is a true change for us. And if you think about the interest expense that is out there too, that is a driver of why we lower the EPS range that's down there. So those are the drivers that are there. Now, if we go into it and we look at the upside of that too, is we'll say, is we do have some things around our fixed cost controls, we will control our controllables and softening markets and things like that.
Demand. So those are things that we can do to help enhance the the Outlook that's out there. But right now say those largest 2 items around the interest expense and networking capital is what did bring the guy down on EPs and the networking capital or operating cash flows. Gotcha. So the then the other thing is obviously, we've had a big move in the dollar. Um, and so, 2, 2 questions on that just, uh, so what's the sensitivity? Uh, so for every 1 cent move in the dollar euro exchange rate, I mean we know ebit uh at uh at at the form of this, you know, order magnitude 400 million. So you might say, just on conversion, that's $4 million. Um, and so we've had like a, you know, a pretty significant move there. Um, and then are there offsets because I do know you have some financial instruments, Etc, um, uh which which maybe create offsets so so 2 questions, 1, how should we think about the sensitivity to dollar euro moves running through? Uh, your
Alina Mark: Your financial statements and 2. What, what do you have embedded?
Yeah. Mark this this is Jerry, you know, on the sensitivity, you know, uh,
Alina Mark: It's on the euro to, to the US dollar, uh, every penny equates to about, you know, 2 and a half cents of movement on on EPS, on on, on an annualized basis. Uh, and, you know, as I mentioned earlier, what we model going forward for the, for the second half of the year, is that Euro between a dollar 17, and in, in, in in, in, in dollar in, in a dollar in a dollar 18.
Okay? And because I believe at the start of the year, you you were thinking like a dollar 5 and and and now we have, you know, that's so that that would suggest that we got like 10 or 15 cents.
Alina Mark: yeah, that that's embedded in in our guide and and yes, we did begin the year with uh, with that URL at a dollar, a dollar, 1.055 call calling the dollar 6
Alina Mark: Okay, thank you so much.
Alina Mark: Your next question comes from a line of Gabe hot from Wells. Fargo, your line is open.
Speaker Change: Uh, Paul look forward to working with you. Uh, Howard and the team good morning.
Alina Mark: um,
Speaker Change: there's been a lot of moving Parts in the organization. I don't think anyone would debate that and I think, um, shareholders,
Alina Mark: Today, um, are worried about what's going to happen, maybe in a go forward basis.
Alina Mark: I'm just curious if you're willing to comment at all on some of the big moving Parts in the 26th and you alluded to some business wins in smpp Anda. Obviously the North American Metal food and aerosol business is performing well. So um, some our vantage point, a couple things that are obvious
Alina Mark: You talk about run rate, synergies of 40 to 50 and escalating to close to 100 by the end of next year. So call it incremental 40 to 50 next year.
Alina Mark: If I flow through the, the herb hike call it 10 million bucks positive.
Alina Mark: You're working really hard on productivity, you're doing 65 million this year. Maybe there's
Alina Mark: 50 to 60 million dollars of productivity. Yes I know there's the inflation treadmill.
Alina Mark: Um, and maybe we can get a little bit of volume growth in the, um, composite container business. Um, once that big customer
Alina Mark: Transitions. So I'm just curious if there's other things that we should be thinking about, and again I appreciate you guys can't control FX. You can't control the macro but maybe we can be out of the industrial winter as well. So just anything you can help us through in ebta terms.
Alina Mark: Bridge 25 to 26. Thank you.
Speaker Change: Okay, I thought you did a great job of kind of covering uh the the moving piece that's going forward and into the second half of the year.
Um, you know, if you really talk about that. Yes, but I mean there has been a lot of activity over the last not just orders but Years, and we're, we're kind of we're at the point of now ending and a normalizing, uh, the portfolio.
Speaker Change: uh, with a focus on a lot of things, but 1 of which is leverage and uh,
Speaker Change: Uh we we uh I think we've made really nice movement here in the early part of this year and I've talked about thermostats that too is going to uh to be another benefit on the go forward base.
Speaker Change: um,
But in terms of uh, of just from an even die perspective and and the puts and takes for the quarter, I can't tell you how bullish I am. Um, if you just uh, look at the first half.
Speaker Change: Who would have thought that Sokka is going to be running at north of the 17th percent. AA Don margin the, the metrics, uh, and the execution across the, uh, the core of the business is, is exceptional and, um, as as we've noted, there's been, um, spot issues in terms of volume ups and downs, uh, but our team continues to deliver. Uh, I'm even more bullish, particularly as we get into the second half of this year with the, um,
Speaker Change: Uh, uh, the traditional seasonal upticks, that that that we that we see. And I we're going to be able to leverage that I think Jerry. And, and, and Paul have done a nice job of talking about, uh,
You know, below the operating profit line in terms of interest and the improvements that we expect to see we noted.
Speaker Change: uh, um, the um
Speaker Change: um, the um, the FX implications, um, but
Speaker Change: But uh, I guess I'm here to just say that I'm proud of the team and all of what they've done and continue to do. And we're sitting in a better position than this company ever has been and a very difficult uh, operating environment and with a lot of change. And um I'm going to repeat myself but um the culture of the company is alive and well and
Speaker Change: Uh, even though we've been through this much change. Um, but the future looks looks extremely promising. Yeah, and Gabe. I I would just add cost, right? I mean, we've talked about getting the standard stranded cost out. We're we're on that, but with the new 3, Global segments, the simplification of the business, a lot of efficiency opportunities around.
Speaker Change: A real focus on cost, it should also impact 2026.
Speaker Change: Right? Well, I I think you called out 20 million of of annualized savings there. Um, okay. And and then maybe 1 last 1 as it relates to taxes. Um, obviously you talked about a net number and you've already redeployed those proceeds to the pay down debt from from tfp. But any other tax items that we should be mindful of um particularly given the the passage of of tax legislation here. Um if it if anything changes for you on on the cash tax side.
Speaker Change: Uh, you know from uh gay from from a tax standpoint. We expect the full year right to really come in at approximately 25% that that we, you know, that we modeled in at at at the start of the year uh and you know the the tax legislation, the impact of the uh you know, um, you know, beautiful, Bill. Uh, you know, we don't see that having a significant impact on us in in 2025.
Speaker Change: Got it. Perfect. Thank you.
Speaker Change: Your final question comes from the line of and Noah Shaw from UBS. Your line is open.
Noah Shaw: Uh, hello. Can you hear me? Hello motion. Hi, hi. Um, just a quick clarification. I don't know if I caught it but you do have a lot of expect, a lot of capex projects going on.
Noah Shaw: Did you give some sense of how much your capex is expected to step up in 2026?
Noah Shaw: Did I miss that?
Noah Shaw: Did a little early to talk about that? Um,
Noah Shaw: uh, I don't see it stepping up materially, um, you know, we, uh,
Noah Shaw: if you go back a number of years ago, we we were running in the 1001, 170 to 190 and
Noah Shaw: Uh, we we we ended up around 360 last year and that's our forecast for this year. Um, the beautiful thing is we've got, uh, a lot of growth customer assigned Capital. We'll see how that looks. Uh, going into 26, uh, any major win could mean we're we're moving. We may need to pop up to support some.
Noah Shaw: Some some uh, serious growth so uh, we'll just see how that plays out. So
Noah Shaw: uh, but
Noah Shaw: This year was is right on top of last year your modeling. I would I would go there. Um,
Noah Shaw: um, but really too too soon to say,
Speaker Change: okay, thanks very much. I'll turn it over.
Speaker Change: And that concludes our question and answer session. I will now turn the call back over to Roger. Shum for closing remarks.
Roger Shum: Want to thank you everybody for your participation today. And as always, if you have any further questions, don't hesitate to give us a call. Thank you.
Roger Shum: This concludes today's conference call. Thank you for your participation. You may now disconnect