Q3 2025 Sealed Air Corp Earnings Call
Speaker #1: Good day, and thank you for standing by. Welcome to the Q3 2025 Sealed Air earnings conference call. At this time, all participants are in a listen-only mode.
Speaker #1: After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone.
Speaker #1: And you will then hear an automated message advising your hand is raised. And to withdraw your question, please press star one and one again.
Speaker #1: We would kindly ask for just one question per participant. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Mark Stone.
Speaker #1: Please go ahead.
Speaker #2: Thank you, and good morning, everyone. This is Mark Stone, SEALED AIR's Vice President, Investor Relations. With me today are Dustin Semach, our President and CEO, and Kristin, Actis Grande, whom I'm pleased to welcome as our new Chief Financial Officer.
Speaker #2: Before we begin our call, I would like to note that we have provided a slide presentation to supplement today's discussion. This presentation, along with a third-quarter earnings release, is available to download from our Investor Relations page on our website at SEALEDAIR.com.
Speaker #2: I would like to remind everyone that during today's call, we make forward-looking statements, including our outlook or estimates for future periods. These statements are based solely on information that is currently available to us.
Speaker #2: Please review the information in the forward-looking statement section of our earnings release and slide presentation. These sections also apply to this call. Our future performance may differ due to a number of factors.
Speaker #2: Many of these factors are listed in our most recent filings with the SEC. Additionally, we will discuss financial measures that do not conform to U.S.
Speaker #2: GAAP. Information on these measures in the reconciliation to U.S. GAAP can be found in our earnings release or the appendix of our slide presentation.
Speaker #2: I will now turn the call over to Dustin and Kristin. Operator, please turn to slide three.
Speaker #3: Thank you, Mark, and good morning, everyone. Thank you for joining SEALED AIR's third-quarter 2025 earnings call. Let me begin by welcoming Kristin Actis Grande to SEALED AIR.
Speaker #3: Kristin joined in late August and brings a proven track record of driving transformation, optimizing complex manufacturing and distribution networks, and instilling operational rigor. She's already hit the ground running, and I'm looking forward to partnering with her and the rest of the team to further accelerate our ongoing transformation.
Speaker #3: In a few minutes, Kristin will give color on our third-quarter results and set expectations for how we anticipate closing the year. But first, I will provide an update on the progress both businesses are making to navigate the macro environment.
Speaker #3: The macroeconomic trends from the second quarter continued throughout the third quarter. These trends include softer global growth outlooks, muted industrial production, and a consumer that, while still resilient, has decreasing purchasing power, particularly in North America within the lower to middle-income households.
Speaker #3: These factors, combined with lower consumer sentiment, persistent inflation, and ticking up unemployment numbers, are contributing to increasing uncertainty around the consumer, particularly in the U.S.
Speaker #3: Considering that backdrop, our team executed well in the quarter, continuing to focus on controlling the controllables, by putting our customers first, executing with discipline, driving productivity, and reducing costs across the business.
Speaker #3: In this market environment, we are focused on leveraging our core competitive strengths to find new sources of growth across both businesses. We are accelerating productivity initiatives to offset potential further market weakness while our transformation continues to take hold across the business.
Speaker #3: I will share more on those opportunities for each business, starting with protecting. Our protective turnaround remains on track. Our performance in the third quarter continues to demonstrate improving fundamentals, despite market indicators—whether it's overall box shipments or industrial output—pointing to a subdued demand environment and a cautious consumer.
Speaker #3: Sales sequentially improved with material volumes inflecting the growth for the first time since 2021. While we remain cautious on the consumer and the macro environment, we are expecting materials to continue to stabilize in the fourth quarter.
Speaker #3: Offset by a weaker outlook for equipment driven by timing and continued market pressures. The North American business has stabilized further and is performing relatively in line with the market.
Speaker #3: In the early stages of the transformation, we focused on minimizing churn and rebuilding our overall go-to-market strategy. We increased the number of sellers and improved customer and distribution partner engagement.
This dynamic, in our retail, in markets results, in trade-offs to private label, different path, formats and away from higher price fresh counter items into pre-packaged Solutions. These are all trends of our portfolio of service, that changes the mix of products.
As an example, they're in the third quarter, we saw consumers here in the US. Continue to move from the Fresh sliced, deli counter a shrimp back application into pre-sliced deli meats.
Down. It's a roll stock type application with a lower margin profile.
Within Food Service markets. The US was flat as many Quick Service restaurants and fast. Casual operators are leaning in to Value offerings and new products or promotions that helped spur traffic.
The rest of our International Food Service markets, continue to be resilient.
Despite the US market headwind our focus on service quality and driving growth in Dairy within little box, resulted in the fluids and liquids portfolio, growing volume of expectations.
retail and Food Service continued represent key growth areas for the food business, given higher growth rates and overall opportunity to take share
as we expand further into those in markets, we will smooth out the volatility that comes from our exposure to supply side Dynamics with an industrial food processing and markets.
On the supply side USB Harvest rates were lower than anticipated in the quarter.
Down approximately 10 and a half percent compared to the prior year.
Following a mid single digit decline in the second quarter.
during the third quarter, the number of days that cattle spent on feed Lots, remained above historical averages
The steeper than anticipated decline. In beef production is pressuring our industrial exposed volumes.
The US category building is expected to persist into 2026, the relatively flat-ish in 2027 and returned to growth in 20128.
We now expect this year's beef slaughter to be worse than 2024, by mid-single digits.
Outside of the US, beef production remains strong in Australia while other regions saw temper grapes.
We are more intentionally making a rotation into retail and food service in markets, by finding the transformation Playbook we developed and protected to our food business.
Like Protective, we are initially focused on our North American business due to its size and current market pressure.
We are in the process of rewiring the organization, to connect our in markets and Retail and food service.
Throughout our commercial, there are indeed supply chain teams.
This alignment will support a mix of go to market changes.
New innovations and network acid optimization.
We will continue to upgrade talent to ensure over your building a team that's growth oriented externally focused, highly accountable. And operating with urgency and bass,
This is where I have been focusing my energy and effort and we have made progress over the past couple of months.
We are planning to make all the necessary foundational changes by the end of this year, so we can hit the ground running in 2026.
When you pull everything together, we continue to focus on controlling the controllables by extending the protective transformation across other geographies and down into R&D and supply chain, as well as executing a growth transformation. When there are food business opportunities, that will leverage an existing Playbook allowing us to move more quickly, starting in North America.
In parallel.
we are advancing our productivity initiatives across the areas previously, discussed as well as procurement and continued back office improvements to further streamline, our posture and position as well for stronger profitable growth, when market conditions, improve
As we progressed in the fourth quarter, we will have more visibility around where the consumer is headed. The resulting impact on next year's demand environment and more clarity on the timing of the benefits from our transformation initiatives.
The combination of these factors will shape our outlook for 2026.
I'm now going to turn it over to Kristen to give an update on our business performance and our updated outlook for 2025.
Over to you.
Thank you, Justin, and thank you to the sealed care team for the warm, welcome and support over my first 2 months.
This is an exciting time to join, given where we are in our transformation journey.
The transformation opportunity along with the strength of the underlying brands in food and protective are a large part of what drew me here.
I look forward to partnering with Dustin and the team to accelerate our efforts.
now, let's turn to slide 4 to review sealed Air's, third quarter performance,
Despite persisting Market headwinds our teams executed above expectations, delivering sales of 1.35 billion up half a percent as reported for down 1% on a constant currency basis.
Adjusted Ava in the quarter was 287 million up 4% as reported for 3% on a constant currency basis.
Adjusted earnings per, share was 87, cents up 10% as reported for 9% on a constant currency basis.
Driven by higher adjusted ibaas and lower interest expense.
Our adjusted tax rate was 23.9%.
Which was relatively flat compared to the prior year.
Our weighted average diluted shares outstanding in the third quarter.
The 148 million.
During the third quarter volumes were down less than 1% with food and protective performing above expectations.
Food volume was relatively flat in the quarter as the decline in our strength bag. Business was offset by growth in our food service portfolio, which outperformed the market across all regions with volume up 4% year-over-year.
As our industrial portfolio, showed modest growth year-over-year and the Fulfillment portfolio continued to improve.
Led by strength and autobag solutions and Specialty foam.
We reached another key milestone in our transformation in the third quarter, as protective materials grew for the first time since 2021, 1% year-over-year.
By lower equipment volumes.
Price was essentially flat in the third quarter on relatively stable, resin markets, and a tariff landscape that didn't change meaningfully within the quarter.
Although these are 2 areas, we continue to watch heading into 2026.
Foods pricing with 20 basis points better than the prior year.
While protective decline 1%.
Third quarter, adjusted IBA do of 287 million increased 11 million or 4%.
With a margin of 21.3% of 80 basis points year-over-year.
Performance was primarily driven by lower operating costs?
Including favorable, productivity savings and cost control actions.
Partially offset by slightly lower volumes and negative net price realization.
Which was mostly driven by inflation on labor and non-direct material costs.
Moving to segment performance on slide 6 and the third quarter food, net sales of 910 million were consistent with last year on a constant currency basis with both volume and pricing relatively flat.
We are seeing continued consumer softness in North America, resulting in trade, downs and trade outs.
On the supply side, beef, production declined at a faster Pace than was previously anticipated.
The market, headwinds were partially offset by positive volume and our fluids and liquids portfolio.
From a regional perspective volumes were up and all regions outside of the US with low to mid single digit growth in Amia Latin America and APAC.
Food. Adjusted ibida of 215 million increased 9 million or 3% in constant currency compared with the prior year.
Adjusted even down. Margin was 23.6%, a year-over-year Improvement of 70 base points.
The increase in adjusted Ava on a constant currency basis was primarily driven by productivity and cost down savings. Partially offset by negative, net price realization.
Protective sales were 442 million in the third quarter.
Down 12 million or 3% on a constant currency basis.
Volumes were down less than 2%, demonstrating once again continued improvements sequentially. The disciplined execution of our go-to-market strategy continues to yield iterative progress.
protective adjusted ibida of 78 million and the third quarter increased approximately 3 million or 3% has reported
And 1 and a half percent, and constant currency compared with the prior year.
This represents our first year-over-year adjusted EBA growth in this segment since the first quarter of 2024.
Adjusted IBA margin in protective was 17.7%.
Of 80 basis, points year-over-year.
Improvement was driven by productivity gains, which were partially offset by negative net price realization and lower volume.
Starting to slide 7 through the first 9 months of the year. Free cash flow was a source of 2011 million compared to a source of 323 million for the same time period a year ago.
We generated 120 million in free cash flow during the third quarter.
Up 4% from the same quarter last year.
At the end of the quarter, our total liquidity position was 1.3 billion.
Including 282 million in cash and the remaining amount in committed availability under our revolver.
Those on the refinancing of our 5-year, revolving credit facility. And as a part of the facility Incorporated, a new delayed draw Term Loan.
The committed delayed draw structure will act as a back stop to refinance. Our 1.573% senior secured notes maturing in October of 2026 which allows us to continue to take advantage of the low coupon of the 15 notes until maturity.
Our net leverage ratio was 3 and a half times and we remain on track to reaching a net debt to adjusted IBA. Leverage ratio. But, approximately 3 times by the end of 2026,
Shifting gears to the update of our full year, outlook on, slide 8.
We see Market, pressures accelerating in the fourth quarter resulting, in volumes lower than anticipated, particularly in North America food, along with further competitive pricing pressure in both businesses.
These Dynamics will be partially offset by further, Tailwind from a weakening US dollar.
In addition to the macro factors discussed earlier we are monitoring the near-term implications of the US government shutdown, specifically as it relates to funding the supplemental nutrition assistance program or snap.
we don't yet know the impact of delay in funding, the program will have on our us business, but anticipate it to be transitory
in the short term, the shutdown, they continue to exacerbate the trade downs, we are seeing a lower income households with stretch their dollars even further.
At this time, we continue to Target the 5.3 billion midpoint of our tightened full year sales range.
We are raising the adjusted eida expected range to 1.12 to 1.14 billion.
Up to 5 million from the prior midpoint.
Implying 274 million in the fourth quarter.
Our Q4 adjusted, EBA Outlook reflects continued operating discipline and ramping productivity initiatives. That will be partially offset by lower volume and unfavorable net price realization.
Given the strong year-to-date performance on adjusted eps.
We now expect the full year to be between $3.25 and $3.35 per share.
This assumes full-year shares outstanding of approximately 147 million and an updated full-year tax rate of 26%.
Finally, we are reaffirming our full year free cash flow to be approximately 400 million.
As a reminder, we seasonally ramped down inventories and fourth quarter, which drives stronger cash, generation toward the end of the year.
We have lowered our full year capital expenditure projection to 175 million.
Reflecting increased rigor around Capital deployment and refocused priorities, Guided by our transformation efforts.
As we progress through the remainder of the year, we will better understand where the consumer is headed, particularly in the US, and its impact on next year's demand environment.
We will also gain greater Clarity on the timing of our transformation and productivity initiatives. And how the combination of these factors will shape our outlook for 2026, which we look forward to sharing with you in February.
With that Dustin and I welcome your questions operator. We would like to begin the Q&A session.
Thank you.
If you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced and to withdraw your question. Please press star 1 and 1 again as a reminder we would. Please ask callers to limit themselves to 1 question per person.
Thank you. We will now begin with the first question.
This is from George steros from Bank of America Securities. Please go ahead.
Thanks so much. Uh, appreciate all the details. Everyone. Uh Kristen welcome. Um and thank you for taking my question. I guess my question is really around food. Um,
26 or 27, kind of what informs your view and what should we be mindful of related point and this may be just a punt to 26 and we understand given the productivity initiatives that you have underway in food. Do you expect that at least directionally IA should be up next year for food, you know, as you put all of the, the pluses and minuses together and obviously, we'll get more detail next quarter. Thank you.
Hey George and uh again appreciate the commentary and the question. So a couple things I talked about the US beef cycle. Um, as you kind of noted at the beginning of this year, we actually started the year off on a stronger note. The first quarter of 2025, and as we've gone throughout the year, the cattle cycle is really steeped. And we talked about the supply side Dynamics. But really this, it's an interplay between the demand side right, where you don't have a consumer there that can really continue to purchase high-end beef. And that's why I think you're seeing this precipitous change where you're beginning to see higher heper retention in a steeper decline which was steeper obviously in the third quarter. And uh, and then we're actually guiding it down the fourth quarter until you see that steepening. But just as a reminder to everybody, it's a combination of where the consumer is at and then also need to supply side Dynamics. So how we see it playing out as today, kind of, based on the latest forecasts that happened in uh, the change in Q3 and our expectation for Q4 as you would expect 25. Now, down kind of in the 5% range overall holistically, but keep in mind this with a stronger q1 and then you would expect to
Similar Dynamic, George which is in line with industry expectation, around that same 5 to 6% going into 2026 and then the point is, is that you're seeing it really steep in right now, in Q3, and then steepen further, in Q4, you'll see that shallowing out in q1 and Q2 of next year and you would see it. Come back out of it, which actually, leads 27, to be flattish right now. Based on current indication in 28, you actually revert back to positive growth.
And so that's the dynamic we see playing out, which is also why you see our commentary around how we're really focused on rotating into retail as well as food service. Those areas provide an offset, which is actually what you would have seen in our Q3 results. As we talked about, the strength of our overall food service portfolio.
And then going back to your question on 26. You know, right now is is Chris and I both commented in the script. It's really a combination of those factors that we're looking through, because a lot will determine how 26 shapes up based on where the consumer is at and the overall US economy. And as we mentioned right now, you know, uncertainty is increasing. We've seen some of those macroeconomic Trends weaken uh in the third quarter and intimating right now going into the fourth. And so we don't want to, you know, kind of comment right now on exactly where our land because it's that combination of where the market's at which I would say is the biggest area of uncertainty and combination, what we're doing on the transformation side and its really relates to food. Specifically, what benefits are we going to get from our initiatives and retails, as well as food service and then the combination of productivity? But those are all the variables that we're managing right now and we'll give you a more wholesome update and fed.
Where we come back.
Thank you.
We'll now take our next question.
This is from Gann Punjabi from bed. Please go ahead.
Yeah. Hey guys. Good morning Kristen. Um, I welcome also um I guess just following up on George's question. You know, on the food segment. Uh, if we could just kind of switch to the Mia segment, a portion of that segment, um, can you just touch on the operating environment? There is it any different than the US Baseline? And then I think you cited share gains in the in the region. Uh, give us a bit more Colour as to what drove that which specific, uh, businesses, Etc. That'd be helpful. Thank you.
Thank you, gotcha. I mean the question as it relates to our Mia regions or european region in the food business. Um those Dynamics are still playing out. Gotcha, the Region's been the strongest performer within the overall food segment holistically. Uh, the offering environment is still very strong there and the share gains that we really started in the back of 2024. It kind of rolled through 25 and that businesses continue to perform very well from an overall margin expansion as well as you know, share gains. Um, it's really across the entire portfolio. So you know there, um, obviously in our Mia region, you actually have less, uh, less shrink bag penetration, as you do relative to Industrial markets, and you have a bigger focus on retail, just due to the dynamic in the European region, holistically just as a region relative to our other regions. So it's less cycle driven than, you know, if you think about Australia Latin America as well as the US. And so that Dynamic is continuing to play out.
Just really kind of broad-based strength across that portfolio and across that region.
Thank you.
And the next question is from Phil, from Jeffrey's. Please go ahead.
Hey guys, uh, congrats on a another strong quarter in a tough environment. I guess doesn't. Well, first of all, welcome Kristen really uh looking forward to working with you going forward. Um I guess quick quick question out of the gate I guess your implied, fourth quarter guide.
Implies uh, seasonal counter seasonality. Uh, certainly uh, you called out some headwinds on food in particular. So I guess number 1. Have you seen the correction in demand already? Whether it's to Consumer protective in terms of your order patterns weakening in the in the, in the fourth quarter. Um and then you called out some price degradation as well. Have you seen that kind of softened already uh going into the fourth quarter whether it's food or or protective.
yeah, I I'll start by jumping in and just give you some perspective, broadly On Cue
Um, protective and a couple of the other points you raised. Um, so let me start by just framing the big picture Q4 and and really what we are carrying in from Q3 we mentioned, then the prepared remarks, that the team is really executing well against the challenging backdrop and there's a lot of focus, um, here internally from the teams, I'm making sure we're controlling what we're able to control. So if you think about the progress that we're making, what's on the growth initiative,
The transformation initiatives, all the things that contributed to the Q3 performance. We absolutely expect all of that to continue, but what you're really hearing from us? Quite broadly is concerns around a softer, macro environment, sequentially moving into the fourth quarter. Um, and we touched on, you know, like industrial production index, uh, various points around consumer sentiment and uncertainty, uh, and all of that.
Broadly speaking again, total Enterprise in the top line is, uh, bringing us down in volume relative to the prior guy about 2 and a half points and a couple areas. I point out where that's concentrated, um, is in nam food, um, and that's specifically an industrial processing.
Um, as you mentioned, there's a little bit of negative price coming in in the fourth quarter and that's really have to do just with the challenging volume measuring environment that we're seeing. Um, but I will point out it's being offset by currency. Um, so it really doesn't add up to being a driven, a very volume driven story. Um but you know, the teams are going to continue to do all the things they did in Q3 to deliver against that. Um, and dust maybe you want to put a fire point in some of the, the questions are protected. Yeah, yeah, absolutely well. And Phil going back to the question, you had specifically as it relates to, to food, uh, what I would tell you is that in protective, in both cases, the order entry, uh, patterns are seeing the, uh, you know, where we are seeing that Dynamic play out particularly in industrial volumes, uh, you know, in terms of industrial processing within food. And so, that's the area that, uh, you know, we talked about the the downward pressure you saw in Q3 there was offsets there that helped offset in Q3, uh, but in q.
4 because the steepening even further, you're seeing that pressure and it's absolutely coming through and our, our order entry. Um, I'll be at the dynamic still yet to play out and so we're going to be cautious as we go through fourth quarter. But it's it's we're seeing it already.
Thank you.
Next question is from Matt Roberts of Raymond James. Please go ahead.
Mark, uh, good morning. Um, Justin. You spent a lot of time talking about that commercial Playbook. So maybe more specifically. What could you borrow from the protective Playbook? You've already executed on or maybe what needs to be done?
In terms of either customers R&D spend, or, or kpis you measure within the fort and within the sales force and how does the the shift to food impact, Capital, allocation, and coming years. And and to the point you just talked about as well. Despite those headwinds 3 can you still came in good as did the margin? I think an unfavorable mix of margin from those unmarked markets and and you discussed the price I went. But how are you able to preserve margin and food in 3 q? And could you expect to hold margins year-over-year and and force you to spite those incremental beef? Headwinds. Thanks for taking the question.
Check and give you an example in protective with that. Largely meant was simplifying the engagement model we have with our distribution partners and stepping up overall engagement. That same approach is coupled with self Performance Management. And, you know, again, what I would say is for, you know, leading indicators everything from managing activity at the field level, from how many calls per week business per week, uh, managing customer satisfaction managing pipeline. All those areas are applicable to our our food business, which is has been historically, been more exposed to Industrial volumes which has a different type of sales approach than you would see relative to um, retail and food service, right? So it's really tailoring that go to market and model working, from our and markets back focused on our strategy and connecting that through R&D and supply chain. But it starts in our biggest region, you know, North America and food being roughly, 50% overall holistically. And, uh, and then being able to, um,
Work North America First from a commercial perspective, but even more importantly, in food, that connection back how you connected into R&D, as well as supply chain matters, even more particularly as you want to rotate into these other other segments further as it relates to, um, the overall margin profile, that you discussed, you know. Yes. We feel really good about where we're at from how we executed in the quarter. As we've talked about beforehand in Q2 as well as in in uh in q1. You know, recognizing there may be some potential demand weakness in the year. Controlling the controllables, taking a more proactive approach. We really put a lot of energy and effort.
As a management team driving productivity across the business and you're seeing that come in and really Offset, you know, some of the the again, net price realization that we see taking up in the fourth quarter and then coming into offset that particular piece. And then as it relates to Capital, allocation changes, I'm going to turn to Kristen and get her an opportunity to comment on that part of your question. Yeah, thanks Stephanie. Appreciate it. So, broadly speaking, what we're really trying to focus on
Um, with our Capital expenditures is how we're uh, choosing to invest in things that are creative to our Roi, which is really been a focus um, of our since, the liquid box acquisition. Um, and if you think about deployment of capex, really, whether it's to food or to protective, um, it really links back to the transformation priorities. And those priorities are absolutely going to inform, um, what investments, we're making the timing of those Investments.
And I do think that there's a lot of interesting things ahead of us, um, with respect to food transformation specifically, um, that we can do to continue to drive profitable growth in the business. Specifically what those are and/or how much we're going to spend on them, we'll come back to you in February, um, with more color on the Q4 guide and we'll elaborate a bit more on the capex side as well.
Thank you.
Next question is from Ed Lane, Rodriguez from mizuho. Please go ahead.
Uh, thank you. Uh, good morning everyone and and welcome Christian. Uh, in terms of protective Dustin again, you've seen an inflection in material volume in there. Like, what drove that and do you believe that sustainable going forward? And do you still expect to see the overhaul volume, uh, inflection in that segment as we go into 2026?
So, uh, great question. So again, I'll just start by saying look, we're really pleased in the third quarter, right? It's obviously a major milestone for us in the protective transformation to inflate the material volumes in in the third quarter. But what drove that as we talked about in the second quarter, our industrial portfolio flipped, uh positive and you see continued strength there. Um notable areas that perform better would be insta uh autobag but we also had many other areas like our core view which is our suspension films Inflatables. So you had more I would say parts of the portfolio That Grew this time than we've seen. Historically you saw continued Improvement in fulfillment and as we talked about some of the Winds, we had a national accounts. Those are largely in the Fulfillment space and so that area should be able to as those cells kick in and roll through. That's largely a benefit that you'll see, uh, rolling through 2026 as it relates to. Um, so I'll pause there to say yes, you know, very strong Q3 that we feel really excited about relative
Of the the journey that we've been on, you know, obviously inflecting since 2021. Uh, we already intimated in the script that we are going to see uh further stabilization in material volumes in the fourth quarter.
Transformation is really playing out in protective. So I'm really excited about uh where we're headed and I'll have more to update you on as we understand that market dynamic in combination with the the benefits and timing of our transformation initiatives and some of the wins, we've been able to knock down this year.
Thank you.
Next question is from Jeff Sakowski from JP Morgan. Please go ahead.
Uh, thanks very much. I was hoping that you would talk about your sgna costs.
In that they came down about 10 million, sequentially on higher sales. And so, I was wondering if there was anything unusual, uh, about your sgna number, this quarter, or is it sustainable?
your um,
I take it most of your restructuring has to do with your food business.
In that the food operating process, you know, kind of matches the change in sg&a is that true? And you know, for next year or is there another 50 million or 60 million in charges? Or are we done?
So uh a couple things Jeff, I appreciate the question. So look, we're really pleased as we've talked about over the past couple of years. We've really been very intentional about bringing down our overall sgna and keep in mind that as we've gone through what we call the CTO to grow program over the past couple years, since we initiated it back in 2023, we
We've been able to consistently drive down that number. There's nothing unusual about the third quarter, other than it's just a reflective of timing related to some of those overall initiatives and uh and as you see as you will see in our Q3 disclosure, we're kind of formally closing the CTO to grow program but we will have continued restructuring initiatives. Uh, cascading into next year, the the TBD relative to how much payments that we think will be there. We've already intimated, you know, again as we talked about in the prepared remarks that there's continued to back office restructuring and keep in mind that while we're in food and protective our overall sgna take the sales and marketing out to the side, but our GNA footprint, whether it's legal, whether it's Finance, whether it's HR, those are all corporate functions that really support both segments. So, as you continue to rationalize that GNA flow for through transformation and we've highlighted, some of those initiatives in the past like our office in Manila, that if you go back to the beginning of the year, but you know, we really had we just set up the site. And as we sit here today, we're over 300 employees strong, right? It's the second largest, uh, GNA facility. We have in our entire fleet. And so there's a lot of those
Vehicles continue to be sustainable relative to 2 things 1 streaming our back office operations but more importantly driving Better Business outcomes as we've seen in it and to give you perspective you know it where we've really modernized our overall infrastructure. We've also done that while at the same time bringing down our it cost you know, into the high double digits. So really pleased those outcomes. I think there's more opportunity ahead but we'll give you more clarity on the timing of the structure and payments. When we come back in uh, in 2026
Thank you.
Next question is from Anthony, pinari from City, please. Go ahead.
Good morning.
Um I'm wondering if it's possible to give the um maybe updated Bridge items for the full year. Ebit dog guide in terms of you know net price volumes FX uh cost saves and then apologies. If I missed this but you're you're reducing the capex.
For the full year but you're free. Cash flow estimate is unchanged. I don't know if you had any
Uh, comments there in terms of the offsets.
Yeah, yeah, I'm happy to take that and maybe I'll just I'll actually start a free pass. I'll work back into the full year. You've been to have Rich question. Um, so we we are guiding to a midpoint still of 400 million on free cash flow uh, to your point. We did bring the capex number down about 25 million. Um, then of course, we're bringing iPad up. So both of those have been detailed when for the free cash flow number.
Um 1 of the reasons that that's not flowing through and causing us to raise the midpoint is really around um reductions in accounts payable and that has to do with some of the mix of raw materials relative to what we were forecasting in the last guide.
Um and just to put a, a finer point on the fourth quarter, cash flow generation 2, just keep in mind um, that we're very Q4 weighted on cash generation and that has to do with inventory management at your end. Um, which we do historically, see uh and where laser focus of the teams on how we're um operationally creating that inventory, reduction for the fourth quarter. So that's a little bit of color. I'd give you um, on the, on the guide around cash flow and then going back to your first question. Um, which was on the updated Eva bridge on a year-over-year basis. I think you'd ask for that on a full year basis.
um,
Before you too so 4 buckets. I'll give you on the fourth quarter. Epita year-over-year Bridge. The first is volume, which we've talked quite a bit about largely Market driven again concentrated in North America food, industrial processing.
And then the second, uh, year-over-year changes, uh continued uh, negative net. Growth realization, which is largely stable to what we've seen through the first. Um, 3 quarters of the year. Uh, and then productivity. Um, we continue to generate, uh, high levels of productivity, the fourth quarter benefit, there is, uh, a little bit under 30 million and then the rest of the uh, the rest of the change is really 2 things. It's improved FX.
Um, and it is lower incentive. Compensation payments in Q4. And then, uh, thank you. You had to step in and give you some color just on the full year numbers, you know, you're talking about approximately 20 million dollars a year, a year in terms of benefit from an EBA dot perspective, that's true. That's a negative 51 or 50 relative to volume negative -75 on that press, and that price realization, which is a 10 million dollar step up that we alluded to earlier, which is concentrated in the fourth quarter, that's a change from our third quarter guide and then you see roughly 100, you know, 15 million dollars. So I would say, you know, restructuring combined with cost control and Cost Containment. That's obviously a step up, as we mentioned to come in and offset some of that price impact in the fourth quarter and the rest of it being associated with other incentive comp payments.
Thank you.
Next question is from anoa from UBS. Please go ahead.
Hi everyone. Good morning.
Um I just wanted to go back to that comment that you made on network optimization and evaluating your footprint. Do we get a little more detail on that and also does that relate to both segments or just 1? Thank you.
It's a great question. Uh, so Network optimization, if you go back over the past 3 years is has been a continued Focus, right? So, if you look at it, we've talked a couple times around, uh, areas where we either Consolidated, uh, sites or and other examples like our Lakeland facility and the protective segment where we opened a new site, uh, you know, there's obviously benefiting even in 20205.
What I would tell you is um that comment relates to both segments. I want to go 4 bases but the primary point of it is we are taking a holistic approach right now and looking at the entire footprint, where historically we've been opportunistic relative? Uh, I would say incrementally rationalizing, the portfolio. We're not at a point in time where we want to talk about, uh, specifics. Um, but but as we continue to progress our planning efforts and we'll come back out and and talk about that into, uh, in the beginning of 2026, and as we progress throughout 2026 because that as you can imagine. Um, and this isn't necessarily leaning towards just pure sight consolidation. This is really a mix as we talked about and that holistic approach around was, you know, Logistics optimization or Freight optimization as well as acid optimization.
Going back to some of the questions around Capitol employment, uh, which were being very intentional on particularly on the growth Capital side and uh, then obviously the sites themselves, but as we progress, it is on in both areas. So the common and the script was primarily focused on protective but it's both areas and we'll give you more clarity once we get into February.
Thank you.
Next question is from Chris Parkinson. From Wolfe research, please go ahead.
Great. Thank you so much for uh, taking my question. Uh Dustin. Now that things you know currently are beginning to stabilize and deflect and you're clearly making substantial progress on the cost front is now the right time to further assess the portfolio. I know there's been a kind of this willingness to see kind of, you know, where you want to be ultimately in the future, especially in the food side of it. Um, but as far as protection is concerned given the, the progress there is, is there any reason to believe that that now is, you know, the right time to further assess that or is it still really too early? Thank you.
Yeah. Yeah, Chris great to hear your voice. Thank you for the question. A couple of comments I would make to that is as we mentioned before in the past. You know, we're always looking for opportunities to maximize shareholder value. Uh, right now we're heads down in our transformation of really focused on making the impacts. We need in each segment, we'll be focused on is really, uh, bringing both business back to long-term sustainable profitable growth. Uh, while we're really pleased with the progress, we made in both segments. Um, you know, we still think there's a lot of opportunity right now to optimize and, uh, and
Drive us to a place where we're achieving that long-term goal. And so that's what we're really focused on right now. But with that said, we're always looking for opportunities to maximize shareholder value.
Thank you.
Next question is from Mike roxland from truist Securities. Please go ahead.
Thank you. Um,
A protective Dustin you mentioned, the reset, in terms of the large account strategy, you said you recently landed a few uh, 7 figure wins. It sounds like they mostly came in the filming. Can if you know, can you confirm that? And can you also comment on maybe the even the impact You're Expecting from those wins in 2026 and for Kristen, um, you know, you've been in the sea for about 3 months now, you know, giving your background driving Transformations. Excuse me, across complex manufacturing distribution businesses. What do you think? Sealed air is doing right? And where do you see incremental opportunities at sealed there for to affect further change? Thank you.
Hey Mike, again, great question. Uh, yes, we referenced uh, you know, kind of winning some, uh, some large 7 figure accounts, which are are big actual deals for our protective segment because, you know, typically relative to food you have, you know, smaller kind of order size per customer. And, uh, and it is largely fulfillment. If you think about national accounts, you're thinking about distribution networks and so you're largely helping them facilitate their distribution and the margin right now. It's, it's really a mix. It depends on the really. If you drive margin within these particular businesses, it's really on the mix of different products that you're selling into each 1 and 1 of the benefits that we have. Uh, in terms of where we sit as a market leader. In the protective segment is really the breadth and depth of our portfolio is the strength of that portfolio is given us the opportunity as well as that that strength of our distribution relationships. It's giving us those opportunities to get in there and win again. Uh so really excited about it. We're not at this point in time.
Quantifying what that impact is in the next year. Uh, because we're still going to be working through the ramping of those, uh, new winds. And what does that mean? Um, but again, I would tell you it's really about the mix of products, which across the board is a different set for each individual account because they're, they're not know, 2 deals are kind of alike.
Uh, yeah, and thanks for the question too. I think I just crossed like the 60-day mark last week, so it's been a really great 60 days and enjoying it so far. Uh, it's a great business. Um, I think we we commented, yeah, we commented this the prepared, Mark, but it's really the transformation opportunity. That was 1 of the big things that Drew me here and what I would say of, um, first of all, what I've observed so far about the transformation is, it's really 1 of the, um, most well-built out Transformations that I've seen, um, given where, um, we are in our sort of stage of maturity around transformation. Um, it's it's really better than I even expected to be once I got in the door. Um, and and what I mean by that is sort of the breadth and depth of the transformation opportunity, but also, um, the specificity of it. Um, the amount of initiatives that are laid out in a very data driven and actionable way. And that gives me a lot of confidence um both in being able to continue to deliver on what's In Motion right now, but also on delivering the road map. You know, we looked at 1 2, 3 years so that's been really positive. I I think where I can help.
Where we have opportunity to um to continue to mature. The transformation opportunity. Um is really in some of the management systems. You've heard Dustin talk about um and and and the background that I come from we refer to them as the operating system and we don't really have a very mature operating system here. Um, if you think about how we uh sort of uh structure um accountability through the business. Um, how we coach our people, how we think about executing initiatives through leading indicators, um, really like holistic, continuous Improvement efforts. Those are all areas where I think we can make a lot of improvements and we've, you know, we've put some things in motion already since I've been here but that's a really big opportunity for us.
Uh, and then, you know, broadly speaking too. I think we're always looking to make sure um, that as we're going through this major change and this major transformation that we have the right talent and all parts of the organization to support that it is a big change. We are evolving a lot of things in the company, including the culture. Uh, and that really requires us to make sure that we have the right leaders on board to drive that change, you know, over the next several years.
Well said,
thank you.
Next question is from Stefan, Diaz from Morgan Stanley. Please go ahead.
Hi, Dustin and Mark, and, uh, welcome Kristen. Uh, thanks. Thanks for taking my question. Um, so Food Service volumes. I think you said in your prepared remarks were, um, you know, plus 4% this quarter, which is very nice to see, um, especially given the pressure consumer in the US. Can you just speak to some of the strengths there? And if you expect to continue to gain, share in the Quick Service space? And, you know, maybe some of the things that are driving that strength thanks.
Our segment and we continue and and the whole thesis their combined with little boxes, this displacement or this conversion from a pack, type from a rigids into flexibles. And so we continue to see that opportunity in that space. And if you think about it it's really the same value proposition that if you go back to our industrial side, relative to the, the combination of equipment, Material, Science and Technical service. And really what that does is increase the throughput and maintain uptime for our customers industrial segments. That same thesis supplies really into the food of food service segment. We're really what you're doing is optimizing around labor. As you know, in Food Service. Labor is very challenging and has continued to be at least ever since postco, uh, qsr is under more pressure now than ever. So this gives the ability to maximize yield in the products. So think of it, this is like sauces condiments and areas like that. There are newer segments for us but also within local box, we've had a rotation where, you know, we've already we've serviced qsrs but we've made an intentional rotation into Dairy and uh, we're seeing it to see a lot of uptick and uplift their and so in both those areas we're continuing to see opportunities
Need to grow. We're obviously very pleased with the result we had in Q3 and we see the opportunity continuing ahead of us. I'll be in right now a smaller segments for the overall business because you're talking about roughly half a billion dollars in size.
Thank you.
And the next question is from Gabe. Haiti from Wells Fargo, please go ahead.
Uh, Dr. Kristen, good morning, Kristen look forward to working with you.
2 unrelated questions. Thus, and I I hate to revisit it, but um, I'm looking in, I guess the filing. It shows 102 facilities, 15 of which are kind of co-located or serving, both segments. Um, you've done a lot of work to what I'll say, disentangle the the support and the commercial approach over the past 18 months. Um, if we see you next year, taking moves to kind of continue to disentangle those operations, would that enable you to kind of, then evaluate other avenues for maximizing, shareholder value, and meaning outside of simply just improving the financial and operational performance
And the second question completely unrelated, I apologize, um, 75 million of of price non-direct material, headwinds in 2025.
Again, you guys have made a lot of changes on the commercial approach. Um, does this cause you? I mean, our view and we spend a lot of time thinking about this um, maybe a paradigm shift and and sort of
These tangential or frictional costs as I call, call them inflating every year.
Um, maybe revisiting pass-through mechanisms to capture some of these other, you know?
Costs that you incur. Thank you.
So Gabe, I'm going to start with uh, your first question and then come back to that point. So just just keep in mind that this year as you think about overall, uh, net price realization, right? Um, a lot of that cost is uh, if you look at where we see the inflation, the primary input costs in that negative. 75 is really labor inflation. And uh, the opposite to that, to give you an idea in the, in, in that price, realization negative -75 about 60 of his labor inflation, which has been moderated since you, you know, as if you go back, uh, you know, go back to 3 years ago or so when you're up into the 90s range, so you're seeing labor inflation continue to moderate, which is 1 of a positive. The second thing is, uh, historically, we've been able to demonstrate that we drive productivity, every individual year, you know, within then this is not associated with, you know, restructuring per se. But just general productivity within our business that offsets that inflation, that's how we target that every individual year. And so we don't see that as a structural difference, I'll be it. I would, you know, sit at state that you're probably seeing lower inflation in those areas. Um,
Kind of going forward that we've seen historically because you've seen it continue to moderate. Um, is TBD a little bit on the non-direct material side, particularly as it relates to tariffs because the Tariff impact as as everyone knows relative dog is first, you know, you're going to see a lot of that be capitalized on balance sheets and those pricing Dynamics play out in 2026. So we're still kind of again working through what is that outlook look like next year in combination with the resin markets, overall holistically. Um, so but as it relates to your comment around so that that's the cost base. I would put in that category as it relates to pricing. Um, again, you know, our business has a mix. We've talked about this in the past where, you know, in our food business. Um, a big portion, you know, roughly half of it is largely been on formula pricing and that's predominantly in North America. Um and and it does capture those formulas capture, a wide range of different kind of input measures uh relative to how you price in the marketplace Beyond just raw materials. And the second piece that I would say to that is if you look over the past 5 years and you look at net price realization holistically across both businesses, they've really been able to demonstrate
Um, I, you know, if you think about going forward for pricing environments, when we came into 2025, we really expected the overall polyethylene markets to be kind of slightly inflationary, which is we discussed in the past is, is would be a more ideal kind of environment for flexible packaging, manufacturers, operate within. And so it's TBD. I mean, right now, if you look at commodity resins holistically, they're kind of they're right now sitting on the floor. And, uh, so it's TBD where that heads into 2026. But that would be, you know, to me the Catalyst if you if you see any type of repricing and and overall segment from a market market standpoint,
Going back to your original question. Uh you know around the overall segments Etc. Look, I mean the the reason we went down the road of putting the businesses back into food and protective is we've talked about before. Is they have very different in markets, very different routes, to market, in terms of whether it's distribution or direct sales, different products applications, Etc. And this was really to get each business, the ability to drive towards a long-term strategy, that's tailored to that specific business and that's what we're focused on as it relates to, you know, shared facilities. You know, a lot of what you're talking about. There are specifically as it relates to uh shrink films and stretch over route films. Those are the same asset base that produce, both of those, uh, product categories. And that's really a legacy coming back from the days. We acquired prior back. Back in 1998, uh, where that asset base was acquired, there's our street films in the market even though we sell them in the protective segment because they're a protective application. They're originally a cryovac technology and those assets actually produce both and so
Right now we're really focused on. Um, as I mentioned beforehand, continuing to effectuate the strategies for each of those segments and uh and we're still as as Kristen said, while we've made a lot of progress over the past, you know, 3 years and keep in mind, we've been in this new structure for about a year. Now, we're really kind of wrapping this is actually around the same time last year that we went back into food and protected. And we still think there's Runway here to continue to to Really optimize each individual segment and their overall Outlook and, uh, is particularly as we head into 2026 and Beyond
Thank you.
And the last question today is from Aaron viswanathan from RBC, please go ahead.
Great. Thanks for taking my question. I hope you guys are well uh congrats on the strong results and uh welcome Christian look looking forward to working with you as well.
So I guess my question is just on the volume side. Um uh an organic growth side. Um I guess I think you mentioned that um your your outlook now embeds maybe 2 and a half points lower of volume growth uh in Q4 um is that just you know maybe relative to what you saw in the last month or so. Um when did when did you start to see that kind of weakness materialize and um do you expect that to you know kind of last through the the first half of next year as well. Um and maybe you can just break that down how that?
How that looks in in both segments, thanks.
Yeah, so a couple of comments. Uh, so yes, if you look at our our fourth quarter guide, what it embeds is a lower outlook for volume about 2.4 points, but in total that brings the volume to down 4% in the quarter, that's primarily in food and more concentrated within North American foods. We've talked about the rest of the world performing relatively strong and uh, and so and it relates primarily to the dynamic, we're seeing with this rotation from the consumer into value grocery, right? And so that rotation and eval grocery is bringing down volumes holistically. And then you, it's compounded by, like I said, this interplay between consumer Dynamics and that driving the beef site. You know, beef cycle itself that steepening of the beef cycle is, is Christine allude to earlier was, you know, we did not anticipate to be as steep as it has become and that's really again driven by that overall, you know, weakness within the consumer and the uncertainty surrounding it. So as you think about that cycle and how it plays out, going back to 1 of the comments of questions that we had earlier in the session today, uh that really what you would expect is that to to continue to deepen in the fourth quarter.
You would expect, uh, that weakness to persist, at a minimum, through the first half of 2026. Now, as to what degree and to what extent, that's what we're working through. But you would expect that to continue to Cascade through and then uh, you know, it's kind of right now TBD on the second half of 26 and some of that's also just in terms of what's within our control relative to the initials, we can drive. So what I'm really speaking to is overall market dynamics,
Would obviously have a knock-on effect in our volumes. And so we're really looking at the fourth quarter to understand, you know, we're still forecasting, some seasonal strength in that number and so relative to the prior year and looking to see how the quarter plays out to begin to rethink and then the combination of the wins that we've made uh to really understand how it's going to shape our alloc in 2026. But what I would leave you with is we are, you know, as we made in the comments, the prepared remarks, we are seeing, you know, some uncertainty continue to increase uh Dynamics play out relative to the market in terms of lower market demand. And that really goes back to some of those upfront comments around. Industrial production is still very muted. Uh, really ever. Since you've seen kind of growth outlooks across the globe lower since, you know, the Tariff announcements back in March. Um and then you've seen really where you see the consumer begin to weaken as in that lower, you know kind of middle income households in the middle income households actually relatively new in terms of a dynamic that's played out over the past quarter uh where before that you would have seen that the lower levels.
In areas like Snap, which we believe to be transitory, you know, to what degree that plays out. Because obviously, I have an impact. So you know what, we're trying to trying to signal is that we're very cautious about how we're going into the fourth quarter and cautious about 2026, and we'll have a lot more clarity. No. Different than we did over the past 90 days as we progress into February. And at that point in time, we'll go ahead and give you a better, a better update on how 2026 will shape when the combination of the 3 factors we outlined earlier,
Thank you. And I will now turn the call back over to Dustin for closing. Thank you.
Thank you for joining us this morning. Chris, and I look forward to coming back in February to discuss how we finish the year and our expectations for 2026. More importantly, I want to reiterate that. As a company, we are focused on maximizing shareholder value and are leaving. No stone unturned.
The sincere. Thank you to all of our customers for channel partners and our employees who are the center of what we do in our driving, our transformation here, at sair,
Thank you.
Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect