Q1 2026 Sonoco Products Co Earnings Call

Operator: After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by 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 Schrum, Head of Investor Relations and Global Marketing Communications. You may begin.

Speaker #1: Background noise. After the speaker's remarks, 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.

Speaker #1: If you'd like to withdraw your question, again, press star 1. Thank you. I'd now like to turn the call over to Roger Schrum, Head of Investor Relations and Global Marketing Communications.

Speaker #1: You may begin.

Speaker #2: Thank you, Rob, and good morning, everyone. Last evening, we issued a news release and posted an investor presentation that reviews Sonoco's first quarter 2026 financial results.

Roger Schrum: Thank you, Rob. Good morning, everyone. Last evening, we issued a news release and posted an investor presentation that reviews Sonoco's Q1 2026 financial results. Both are posted on the Investor Relations section of our website at sonoco.com. A replay of today's conference call will be available on our website later today, and we'll post a transcript later this week. If you would turn to slide 2, I would remind you that during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates, and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. 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 operation.

Speaker #2: Both are posted on the investor relations section of our website, at sonoco.com. A replay of today's conference call will be available on our website, later today, and we'll post a transcript later this week.

Speaker #2: If you would turn to slide 2, I would remind you that during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates, and projections.

Speaker #2: These statements are not guarantees of future performance and are subject to certain risk and uncertainties. Therefore, actual results may differ materially. 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 operation.

Speaker #2: 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.

Roger Schrum: 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 today are Howard Coker, President and CEO, and Paul Joachimczyk, Chief Financial Officer. For today's call, we will provide prepared remarks followed by your questions. If you'll turn to slide 4 in our presentation, I'll now turn the call over to Howard.

Speaker #2: Joining me today are Howard Coker, President and CEO, and Paul Joachimczyk, Chief Financial Officer. For today's call, we will provide prepared marks followed by your questions.

Speaker #2: If you'll turn to slide 4 in our presentation, I'll now turn the call over to Howard.

Speaker #3: Thanks, Roger, and good morning, everyone. During our February investor day, we set out the framework for our focus strategy over the next three years, which is linked to our three priorities of sustainable growth, margin improvement, driven by our profitability, performance plan, and efficient capital allocation.

Howard Coker: Thanks, Roger. Good morning, everyone. During our February Investor Day, we set out the framework for our focus strategy over the next 3 years, which is linked to our three priorities of sustainable growth, margin improvement, driven by our profitability performance plan, and efficient capital allocation, which is focused on investing in ourselves, debt reduction, and returning value to our shareholders. We made strides in each of these priorities in Q1 while achieving a solid start to the year despite some significant headwinds. Paul will go through the numbers in more detail. As shown on slide 5, our adjusted earnings for Q1 of $1.20 met our and consensus estimates. This performance was primarily driven by strong productivity savings, favorable price cost environment, and a successful start to our profitability performance plan despite lower volume mix.

Speaker #3: Which is focused on investing in ourselves, debt reduction, and returning value to our shareholders. We made strides in each of these priorities in the first quarter while achieving a solid start to the year, despite some significant headwinds.

Speaker #3: Paul will go through the numbers in more detail, but he's shown on slide 5 our adjusted earnings for the first quarter of $1.20 met our and consensus estimates.

Speaker #3: This performance was primarily driven by a strong productivity savings, favorable price-cost environment, and a successful start to our profitability performance plan, despite lower volume mix.

Speaker #3: I was really proud of our change performance in the first quarter, despite severe winter weather, which temporarily closed some of our customers and our operations so far that destroyed our recycling facility in Greenville, South Carolina.

Howard Coker: I was really proud of our team's performance in Q1, despite severe winter weather which temporarily closed some of our customers and our operations, a fire that destroyed our recycling facility in Greenville, South Carolina, and the effects of rapidly changing macroeconomic conditions stemming from the Middle East conflict. Our Consumer Packaging segment exceeded our expectations during the quarter, while our Industrial Paper Packaging segment managed well through both operational and demand challenges. As I mentioned, severe winter weather disrupted several of our US operations in late January, as well as some of our large consumer customers who faced power outages, some lasting over a week. February was a much better month from a volume perspective, with the onset of the Middle East conflict, we began experiencing rapid input cost inflation in March and as I mentioned, an unfortunate fire in our Greenville facility on 24 March.

Speaker #3: And the effects of rapidly changing macroeconomic conditions stemming from the Middle East conflict. Our consumer packaging segment exceeded our expectations during the quarter, where our industrial paper packaging segment managed well through both operational and demand challenges.

Speaker #3: As I mentioned, severe winter weather disrupted several of our US operations in late January, as well as some of our large consumer customers who faced power outages some lasting over a week.

Speaker #3: February was a much better month from a volume perspective, but with the onset of the Middle East conflict, we began experiencing rapid input cost inflation in March.

Speaker #3: And as I mentioned, an unfortunate fire in our Greenville facility on March 24th. Thankfully, no one was hurt, but it did lead to a one-time cost of $2,000,000 within the quarter.

Howard Coker: Thankfully, no one was hurt, but it did lead to a one-time cost of $2 million within the quarter. As you would expect, we're not standing still in the face of these macroeconomic challenges. If you turn to slide 6, I'll talk further about the steps we're taking to mitigate rising costs and ensure supply for our customers in this challenging inflationary environment. Energy and freight and other petrochemical-related input costs, such as resins, coatings, and other chemicals represent approximately 10% of our annual sales. While the impact on Q1 was under a few million dollars. Based on current estimates, we believe this inflation could add between $8 million to $10 million in additional costs in Q2. We are leveraging our global sourcing and supply assurance team to do all we can to help offset these rising costs.

Speaker #3: As you would expect, we're not standing still in the face of these macroeconomic challenges. If you turn to slide 6, I'll talk further about the steps we're taking to mitigate rising costs and ensure supply for our customers in this challenging inflationary environment.

Speaker #3: Energy and freight and other petrochemical-related input costs, such as resins, coatings, and other chemicals, represent approximately 10% of our annual sales. While the impact on the first quarter was under a few million dollars, based on current estimates, we believe this inflation could add between 8 to 10 million dollars in additional costs in the second quarter.

Speaker #3: We are leveraging our global sourcing and supply assurance team to do all we can to help offset these rising costs. That said, we must recover this inflation and have implemented a number of necessary price increases, including a $70 per ton uncoated recycled paperboard increase in the US and an 80 euro per ton increase in Europe, along with other pricing actions.

Howard Coker: That said, we must recover this inflation and have implemented a number of necessary price increases, including $70 per ton uncoated recycled paperboard increase in the US, and a EUR 80 per ton increase in Europe, along with other pricing actions. These actions are showing traction in the market. Fastmarkets reported last Friday an initial $60 per ton increase in US URB prices. Given our current backlogs and solid mill utilization rates entering April, we feel confident about the sustainability of our actions. As shown on slide 7, we have purposefully shifted our mix to more resilient consumer-focused businesses, where today 2/3 of our sales are generated by our leadership positions in paper and metal cans.

Speaker #3: These actions are showing traction in the market. Fast markets reported last Friday an initial $60 per ton increase in US URB prices. Given our current backlogs and solid mill utilization rates entering April, we feel confident about the sustainability of our actions.

Speaker #3: As shown on slide 7, we have purposefully shifted our mix to more resilient consumer-focused businesses where today, two-thirds of our sales are generated by our leadership positions in paper and metal cans.

Speaker #3: We're focused on affordable, center-of-the-store, faithful food categories, which have historically remained resilient during periods of economic stress. I'm happy that our recent portfolio work has substantially reduced our exposure to resin-based packaging.

Howard Coker: We're focused on affordable, center-of-the-store, staple food categories, which have historically remained resilient during periods of economic stress. I'm happy that our recent portfolio work has substantially reduced our exposure to resin-based packaging. In 2023, we used approximately 240 million pounds of petroleum-based resins, while today we use only about 75 million pounds, primarily in our industrial plastics business and our plastic cartridges for adhesives and sealants, where we do have recovery mechanisms in place. As it relates to our growth pillar, we recently opened a new paper can plant in Nong Yai, Thailand. As shown on slide 8, Paul and I had the opportunity to participate in the grand opening with our team in Asia in March.

Speaker #3: In 2023, we used approximately 240 million pounds of petroleum-based resins while today, we use only about 75 million pounds, primarily in our plastics industrial plastics business and our plastic cartridges for adhesives and sealants.

Speaker #3: Where we do have recovery mechanisms in place. As it relates to our growth pillar, we recently opened a new paper can plant in Nongyea, Thailand, as shown on slide 8, Paul and I had the opportunity to participate in the grand opening with our team in Asia in March.

Howard Coker: This highly automated operation is expected to annually produce approximately 200 million units for the growing stack chip markets in Asia, and is one of the reasons we saw a 6% lift in paper can volume in the region in Q1. This plant was built to accommodate future capacity expansion, and we believe it could eventually become one of the largest global paper can operations over the next several years. In our industrial business, we are investing $20 million to add a new automated nailed wood reel production line at our Hartselle, Alabama facility.

Speaker #3: This highly automated operation is expected to annually produce approximately 200 million units for the growing stack chip markets in Asia, and is one of the reasons we saw a 6% lift in paper can volume in the region in the first quarter.

Speaker #3: This plant was built to accommodate future capacity expansion, and we believe it could eventually become one of the largest global paper can operations over the next several years.

Speaker #3: In our industrial business, we are investing $20 million to add a new automated nailed wood reel production line at a hard cell Alabama facility.

Speaker #3: As shown on slide 9, when this new line opens at the end of the second quarter, we expect it will increase our capacity by 15% and able us to meet the needs of the fast-growing wire and cable industry, as it supplies the booming power infrastructure demand for AI-centered growth.

Howard Coker: As shown on slide 9, when this new line opens at the end of Q2, we expect it will increase our capacity by 15%, enable us to meet the needs of the fast-growing wire and cable industry as it supplies the booming power infrastructure demand for AI center building. I'll add that sales in our reels businesses were up 13% in the quarter. In addition to funding our growth, our disciplined capital allocation strategy remains focused on reducing debt and returning capital to shareholders. As shown on slide 10, last week, our board of directors authorized the 43rd consecutive annual increase of dividends to shareholders, raising the payout to $2.16 per share, which provides an annual yield of about 3.8%.

Speaker #3: I'll add that sales in our reels business were up 13% in the quarter. In addition to funding our growth, our disciplined capital allocation strategy remains focused on reducing debt and returning capital to shareholders.

Speaker #3: As shown on slide 10, last week, our board of directors authorized the 43rd consecutive annual increase of dividends to shareholders. Raising the payout to $2.16 per share.

Speaker #3: Which provides an annual yield of about 3.8%. Sonoco is one of only a few public companies that has paid dividends consecutively for more than 100 years.

Howard Coker: Sonoco is one of only a few public companies that has paid dividends consecutively for more than 100 years. In summary, we had a good start to the year despite challenges, we remain confident in our portfolio, our strategy, and ability to execute through economic cycles. With that, I'll turn it over to Paul.

Speaker #3: In summary, we had a good start to the year, despite challenges, and we remain confident in our portfolio, our strategy, and ability to execute through economic cycles.

Speaker #3: With that, I'll turn it over to Paul.

Speaker #2: Thank you, Howard. I'll walk you through our first quarter financial performance, starting on slide 11. With our portfolio transformation complete, we're entering the next phase, defined by sustainable growth, margin improvement driven by our profitability performance plan, and efficient capital allocation.

Paul Joachimczyk: Thank you, Howard. I'll walk you through our Q1 financial performance starting on slide 11. With our portfolio transformation complete, we're entering the next phase defined by sustainable growth, margin improvement driven by our profitability performance plan, and efficient capital allocation, which is focused on investing in ourselves, debt reduction, and returning value to our shareholders. Today, I'll cover our Q1 results and our early progress against the profitability performance plan we laid out at Investor Day in February. Before I review the quarter, a quick note on comparability and some nuances related to the accounting treatment for our divestitures in 2025. TFP was divested on 1 April 2025, and is reported as discontinued operations in last year's Q1. ThermoSafe was divested on 3 November 2025, and was included in continuing operations in that same period.

Speaker #2: Which is focused on investing in ourselves, debt reduction, and returning value to our shareholders. Today, I'll cover our first quarter results and our early progress against the profitability performance plan we laid out at Investor Day in February.

Speaker #2: Before I review the quarter, a quick note on comparability and some nuances related to the accounting treatment for our divestitures in 2025. TFP was divested on April 1st, 2025, and is reported as discontinued operations in last year's first quarter.

Speaker #2: ThermoSafe was divested on November 3rd, 2025, and was included in continuing operations in that same period. In 2026, neither TFP nor ThermoSafe is part of continuing operations.

Paul Joachimczyk: In 2026, neither TFP nor ThermoSafe is part of continuing operations. As a result, all year-over-year comparisons I discuss for continuing operations with ThermoSafe included in the 2025 figures, and I will highlight the differences where applicable. Net sales from continuing operations were $1.7 billion, down 2% year over year. Results reflect lower than expected volumes, weather impacts, as well as macroeconomic and geopolitical pressures weighed on both our supply chain and our customers. Those headwinds were partially offset by pricing actions and a foreign currency benefit, primarily from the euro. Also in the year-over-year comparison is ThermoSafe, which contributed $55 million of sales in Q1 2025. Excluding ThermoSafe, our sales increased by approximately 1% versus the prior year.

Speaker #2: As a result, all year-over-year comparisons I discuss for continuing operations with ThermoSafe included in the 2025 figures. And I'll highlight the differences where applicable.

Speaker #2: Net sales from continuing operations were 1.7 billion, down 2% year-over-year. Results reflect lower-than-expected volumes, weather impacts, as well as macroeconomic and geopolitical pressures weighed on both our supply chain and our customers.

Speaker #2: Those headwinds were partially offset by pricing actions and a foreign currency benefit, primarily from the euro. Also in the year-over-year comparison, is ThermoSafe, which contributed 55 million of sales in the first quarter of 2025.

Speaker #2: Excluding ThermoSafe, our sales increased by approximately 1% versus the prior year. Adjusted EBITDA was 277 million, down 4% year-over-year, and margin was down approximately 35 basis points.

Paul Joachimczyk: Adjusted EBITDA was $277 million, down 4% year over year, margin was down approximately 35 basis points. The decline was driven by lower volumes and the absence of operating profit from the divested ThermoSafe business. These impacts were partially offset by productivity initiatives, strong pricing realizations, early savings from our multi-year profitability programs, and favorable foreign exchange rates. Excluding ThermoSafe, adjusted EBITDA would have been flat, reflecting strong cost containment from our profitability programs despite softer volumes. Overall, we're encouraged by how our continuing operations performed following last year's reorganization. On a consistent comparison basis, our key metrics are up year over year, reinforcing that we're building a more agile and resilient organization to navigate challenges as they arise. Now moving to slide 12.

Speaker #2: The decline was driven by lower volumes and the absence of operating profit from the divested ThermoSafe business. These impacts were partially offset by productivity initiatives, strong pricing realizations, early savings from a multi-year profitability programs, and favorable foreign exchange rates.

Speaker #2: Excluding ThermoSafe, adjusted EBITDA would have been flat, reflecting a strong cost containment from our profitability programs despite softer volumes. Overall, we're encouraged by how our continuing operations perform following last year's reorganizations.

Speaker #2: On a consistent comparison basis, our key metrics are up year-over-year, reinforcing that we're building a more agile and resilient organization to navigate challenges as they arise.

Speaker #2: Now moving to slide 12. Adjusted EBITDA for the quarter was $1.20, flat year-over-year, after excluding the impact of discontinued operations. The year-over-year results reflect the balance of a softer volume and the impact of divestitures, offset by productivity gains, pricing, early profitability savings from our three-year program, a lower effective tax rate, and a favorable foreign currency.

Paul Joachimczyk: Adjusted EBITDA for the quarter was $1.20 flat year-over-year after excluding the impact of discontinued operations. The year-over-year results reflect the balance of a softer volume and the impact of divestitures offset by productivity gains, pricing, early profitability savings from our 3-year program, a lower effective tax rate, and a favorable foreign currency. If we go a little deeper into the bridge here, I'd like you to walk you through the components of each bar. We'll start with the discontinued operations adjustment, which is a net impact of $0.18, led by the TFP divestiture, partially offset by interest. The divestiture of ThermoSafe represents a $0.07 decrease. Operational changes are down $0.08 due to the pressures on the top line due to the macroeconomic and geopolitical factors within the quarter, partially offset by operational productivity.

Speaker #2: If we go a little deeper into the bridge here, I'd like to walk you through the components of each bar. We'll start with the discontinued operations adjustment, which is a net impact of 18 cents, led by the TFP divestiture, partially offset by interest.

Speaker #2: The divestiture of ThermoSafe represents a 7-cent decrease. Operational changes are down 8 cents due to the pressures on the top line due to the macroeconomic and geopolitical factors within the quarter, partially offset by operational productivity.

Speaker #2: Non-operational changes are up 9 cents, led by FX, especially the euro, reduction of our debt and tax benefits, which helped to offset several headwinds the business faced within the quarter.

Paul Joachimczyk: Non-operational changes are up $0.09, led by FX, especially the euro, reduction of our debt and tax benefits, which helped to offset several headwinds the business faced within the quarter. Profitability performance drove $0.06 of improvement. I want to underscore the importance of what we're doing to drive margins for the rest of the year by controlling the controllables. We're maintaining pricing discipline, accelerating productivity, advancing our Profitability Performance Plan, and tightly managing both our costs and our capital. While the macro environment remains uncertain, we remain committed to executing the long-term financial targets we shared at Investor Day. Turning to cash flow on slide 13. Operating cash flow in Q1 was a use of $368 million, consistent with normal seasonal patterns as we build inventories ahead of the canning season. Gross capital investment was $62 million, below our expectations.

Speaker #2: Profitability performance drove 6 cents of improvement. I want to underscore the importance of what we're doing to drive margins for the rest of the year.

Speaker #2: By controlling the controllables, we're maintaining pricing discipline, accelerating productivity, advancing our profitability performance plan, and tightening tightly managing both our costs and our capital.

Speaker #2: While the macroenvironment remains uncertain, we remain committed to executing the long-term financial targets we shared at Investor Day. Earnings cash flow on slide 13.

Speaker #2: Operating cash flow in the first quarter was a use of 368 million, consistent with normal seasonal patterns as we build inventories ahead of the canning season.

Speaker #2: Gross capital investment was 62 million, below our expectations. Given the current macroenvironment, we are actively monitoring capital spending to stay disciplined and meet our targets.

Paul Joachimczyk: Given the current macro environment, we are actively monitoring capital spending to stay disciplined and meet our targets. The year-over-year decline in cash flows was primarily driven by approximately $140 million of higher tax payments. That includes $103 million related to capital gains from prior period divestitures, which will not repeat. As discussed at Investor Day, we have a clear and disciplined approach to capital allocation. That includes prioritizing high return projects, continuing to optimize working capital, especially inventory and payables, and preserving balance sheet flexibility by paying down debt while still supporting the long-term growth initiatives. Turning to slide 14. Before I go deeper into the segment results, I want to share a brief disclosure related to our consumer segment and a footnote we've included for this discussion.

Speaker #2: The year-over-year decline in cash flows was primarily driven by approximately 140 million of higher tax payments. That includes 103 million related to capital gains from prior period divestitures, which will not repeat.

Speaker #2: As discussed at Investor Day, we have a clear and disciplined approach to capital allocation. That includes prioritizing high-return projects, continuing to optimize working capital, especially inventory and payables, and preserving balance sheet flexibility by paying down debt while still supporting the long-term growth initiatives.

Speaker #2: Turning to slide 14. Before I go deeper into the segment results, I want to share a brief disclosure related to our consumer segment and a footnote we've included for this discussion.

Speaker #2: In first quarter of 2025, consumer segment adjusted EBITDA did not include 18 million of unallocated corporate costs. You can find these details in the earning release table on page 20 of our press release dated April 21st, 2026.

Paul Joachimczyk: In Q1 2025, Consumer segment adjusted EBITDA did not include $18 million of unallocated corporate costs. You can find these details in the earnings release table on page 20 of our press release dated 21 April 2026. Now let's turn our attention to the 2 segments and overall results. Starting with Consumer. Sales increased 3% year-over-year to $1.1 billion, driven by pricing and favorable foreign currency exchange rates, partially offset by volume and mixed softness related to the macroeconomic conditions. Adjusted EBITDA from continuing operations declined 7%, reflecting lower volumes, partially offset by productivity initiatives, pricing actions, and early transformation savings. Adjusting for the 2025 unallocated corporate costs I just described, Consumer-adjusted EBITDA would have been up with margins flat.

Speaker #2: Now let's turn our attention to the two segments in overall results. Starting with consumer, sales increased 3% year-over-year to 1.1 billion. Driven by pricing and favorable foreign currency exchange rates, partially offset by volume and mixed softness related to the macroeconomic conditions.

Speaker #2: Adjusted EBITDA from continuing operations declined 7%, reflecting lower volumes, partially offset by productivity initiatives, pricing actions, and early transformation savings. Adjusting for the 2025 unallocated corporate costs I just described: consumer adjusted EBITDA would have been up, with margins flat.

Speaker #2: In consumer, the team can remain focused on price realization and mixed discipline across key geographies. While driving manufacturing and supply chain productivity, there are also leveraging accelerated transformation savings to improve their margins.

Paul Joachimczyk: In consumer, the team remains focused on price realization and mix discipline across key geographies while driving manufacturing and supply chain productivity. They are also leveraging accelerated transformation savings to improve their margins. Let's move on to our industrial segment. Sales were $579 million, down year-over-year by 1%, driven by softer volumes, partially offset by favorable pricing and index-based resets with foreign currency benefits. Adjusted EBITDA declined by $7 million to $100 million, a 7% decrease as lower volumes were partially mitigated by pricing resets and productivity improvements. EBITDA margin was lower year-over-year due to unfavorable volume and mix, along with losses attributed to a fire at a recycling facility in Greenville, South Carolina.

Speaker #2: Let's move on to our industrial segment. Sales were 579 million, down year-over-year by 1%, driven by softer volumes, partially offset by favorable pricing, and index-based resets, with foreign currency benefits.

Speaker #2: Adjusted EBITDA declined by 7 million to 100 million, a 7% decrease as lower volumes were partially mitigated by pricing resets and productivity improvements. EBITDA margin was lower year-over-year due to unfavorable volume and mix, along with losses attributed to a fire at a recycling facility in Greenville, South Carolina.

Speaker #2: The industrial segment is focused on fully uncapturing index-based pricing resets as they flow through. Executing it against cost and productivity initiatives already underway and preserving margin discipline while managing demand variability.

Paul Joachimczyk: The industrial segment is focused on fully on capturing index-based pricing resets as they flow through, executing it against cost and productivity initiatives already underway, and preserving margin discipline while managing demand variability. We've seen good progress throughout the current month, which supports our confidence as we move into Q2. Turning to slide 15. We are pleased with the early progress of our 3-year profitability performance plan outlined at Investor Day. In Q1, we delivered $8 million of savings, progressing towards our $150 to $200 million target. These savings were primarily driven by structural transformation initiatives, which contributed $6 million, along with $2 million from commercial excellence and operational improvement efforts. Importantly, these savings are already flowing through the P&L, reinforcing our confidence in the program's execution and durability. As they annualize, they represent approximately $32 million of recurring savings.

Speaker #2: We've seen good progress throughout the current month, which supports our confidence as we move into the second quarter. Turning to slide 15. We are pleased with the early progress of our three-year profitability performance plan outlined at Investor Day.

Speaker #2: In the first quarter, we delivered 8 million of savings, progressing towards our 150 to 200 million target. These savings were primarily driven by structural transformation initiatives, which contributed 6 million, along with 2 million from commercial excellence and operational improvement efforts.

Speaker #2: Importantly, these savings are already flowing through the P&L, reinforcing our confidence in the program's execution and durability. And as they annualize, they represent approximately 32 million of recurring savings.

Speaker #2: Turning to guidance on slide 16. We are maintaining our full-year outlook, while recognizing that continued macroeconomic and geopolitical uncertainty. Particularly late in our quarter, rates are dynamic operating environment.

Paul Joachimczyk: Turning to guidance on slide 16. We are maintaining our full-year outlook while recognizing that continued macroeconomic and geopolitical uncertainty, particularly late in our quarter, creates a dynamic operating environment. We will continue to monitor inflation and demand trends closely. With that, let me walk you through our full-year expectations. For the full year, we expect sales of $7.25 to $7.75 billion. Adjusted EBITDA of $1.25 to $1.35 billion. Adjusted EPS of $5.80 to $6.20, with results expected to trend towards the lower end of the range. While we are maintaining our adjusted EBITDA outlook, EPS will not track EBITDA 1 for 1 because of the tighter EPS range of only $0.40.

Speaker #2: We will continue to monitor inflation and demand trends closely. With that, let me walk you through our full-year expectations. For the full year, we expect sales of 7.25 to 7.75 billion.

Speaker #2: Adjusted EBITDA of 1.25 to 1.35 billion. Adjusted EBITDA of $5.80 to $6.20, which with results expected to trend towards the lower end of the range.

Speaker #2: While we are maintaining our adjusted EBITDA outlook, EPS will not track EBITDA one-for-one because of the tighter EPS range of only 40 cents. In the current environment, inflationary cost pressures and macro volatility will create a larger impact on EPS rather than EBITDA.

Paul Joachimczyk: In the current environment, inflationary cost pressures and macro volatility will create a larger impact on EPS rather than EBITDA. Operating cash flow of $700 to 800 million, inclusive of the $103 million of tax payments related to 2025 divestitures, which were paid in Q1. For the remainder of 2026, our mandate is clear: deliver on our three-year strategy of focus by executing the profitability performance plan, which is delivering $32 million of annualized savings in 2026. We have to offset volume pressures that we experienced in early 2026. We are protecting our margins through disciplined pricing and productivity, strengthening our cash flow through working capital and disciplined capital spending.

Speaker #2: Operating cash flow of 700 to 800 million, inclusive of the 103 million of tax payments related to 2025 divestitures, which were paid in the first quarter.

Speaker #2: For the remainder of 2026, our mandate is clear: deliver on our three-year strategy of focus by executing the profitability performance plan, which is delivering 32 million of annualized savings in 2026.

Speaker #2: We have to offset volume pressures that we experienced in the early 2026, and we are protecting our margins through disciplined pricing and productivity. Strengthening our cash flow through working capital and disciplined capital spending.

Speaker #2: We are more focused and have stronger execution levers than in recent years, building a higher quality earnings base and strengthening cash generation even in a challenging demand environment.

Paul Joachimczyk: We are more focused and have stronger execution levers than in recent years, building a higher quality earnings base and strengthening cash generation even in a challenging demand environment. Let me turn the call back over to Howard for some closing comments.

Speaker #2: Let me turn the call back over to Howard for some closing comments.

Speaker #1: Thanks, Paul. Let me close by, again, thanking our global team for successfully guiding us through these uncertain times during the first quarter of the year.

Howard Coker: Thanks, Paul. Let me close by again thanking our global team for successfully guiding us through these uncertain times during the first part of the year. The year started out fairly strong, but we were affected by winter weather in the Americas, losing 2 weeks of production from 2 of our major consumer customers in the Tennessee region. We also had mill and converting downtime by our and our customers throughout the region. We lost a facility to fire and other relatively one-off type issues and of course, the impact of the Middle East conflict. In spite of these, we stayed focused on controls and long-term productivity to deliver well within our expectations. I think it's also important to note, while uncertainty remains, there is concern how the rest of the year will unfold. However, April has shown thus far some encouraging signs.

Speaker #1: The year started out fairly strong, but we're affected by winter weather and the Americas losing two weeks of production from two of our major consumer customers in the Tennessee region.

Speaker #1: We also had mill and converting downtime by our and our customers throughout the region. We lost the facility to fire and other relatively one-off type issues, and of course, the impact of the Middle East conflict.

Speaker #1: In spite of these, we stayed focused on controls and long-term productivity to deliver well within our expectations. I think it's also important to note while uncertainty remains, there is concern how the rest of the year will unfold.

Speaker #1: However, April has shown thus far some encouraging signs. As we enter the pack season, consumer EMEA is seeing early positive signs in the south.

Howard Coker: As we enter the pack season, consumer EMEA is seeing early positive signs in the South. The tuna pack has been strong, and while we have not built expectation for a rebound in sardines, this market too is showing some promise for improvement. Salted snack volumes are increasing, which is typical in a World Cup year. We've seen necessary index-based price in North America in our industrial business, which will drive full benefit during Q3 with incremental help in Q2 and early but reasonable expectations for URB and converted products and announced prices in Europe. Our focus on our drive for $150 to 200 million over the next 3 years is on pace and will only build as we go deeper into the year. The reality is we are in uncertain times. Things are changing on a daily basis.

Speaker #1: The tuna pack has been strong, and while we have not built expectation for a rebound in sardines, this market too is showing some promise.

Speaker #1: For improvement, and salted snack volumes are increasing, which is typical in a World Cup year. We've seen necessary index-based price in North America and our industrial business, which will drive full benefit during Q3 with incremental help in Q2.

Speaker #1: And early but reasonable expectations for URB and converted products and announced prices in Europe. Our focus on our drive for 150 to 200 million over the next three years is on pace, and will only build as we go deeper into the year.

Speaker #1: But the reality is we are in uncertain times. Things are changing on a daily basis. We do have some catch-up to deal with from the quick hit of inflation as we entered into Q2, and thus the cautionary tone in our EPS forecast.

Howard Coker: We do have some catch-up to deal with from the quick hit of inflation as we entered into Q2, and thus the cautionary tone in our EPS forecast. Let me close by saying how pleased I am we have made over the past several years the changes you all have seen. If we had not made the portfolio shift, we'd be living in a vastly different world. Without our simplification efforts, we would not be driving the level of SG&A and other savings noted today, and we would be facing serious supply chain issues and a much larger degree of inflation impact and volume pressures. Again, thanks to our team as we continue to drive through this difficult operating environment, and certainly looking forward to any questions that you may have. I'll turn it back over to the operator.

Speaker #1: Let me close by saying how pleased I am we have made over the past several years the changes you all have seen. If we had not made the portfolio shift, we'd be living in a vastly different world.

Speaker #1: Without our simplification efforts, we would not be driving the level of SG&A and other savings noted today. And we would be facing serious supply chain issues in a much larger degree of inflation impact and volume pressures.

Speaker #1: So again, thanks to our team. As we continue to drive through this difficult operating environment and certainly looking forward to any questions that you may have.

Speaker #1: I'll turn it back over to the operator.

Operator: Thank you. We will now begin the question and answer session. Your first question today comes from the line of George Staphos from Bank of America Securities.

Speaker #2: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad.

Speaker #2: If you would like to withdraw your question, simply press star one again. Your first question today comes from a line of George Staphos from Bank of America Securities.

Speaker #2: Your line is open.

George Staphos: Hi, everyone. Good morning. Thanks for the presentation. I guess I had three questions. I'll ask them in sequence and turn it over. Howard, first of all, Paul, could you discuss what the effect of the storms was in the first quarter from a percentage of volume standpoint? In other words, if you did not have the storms, what would volumes have been? What kind of early run rate are you seeing on volumes in consumer and in industrial for the second quarter? Second point, we appreciate you calling out the inflation effect so far of $8 to 10 million in Q2. Is that a sequential impact from Q1 or year on year? If costs stay where they're at right now, would that be the effect in Q3, or would it be a lesser effect?

Speaker #3: Hi everyone. Good morning. Thanks for the presentation. I guess I had three questions. I'll ask them in sequence and turn it over. Howard, first of all, Paul, could you discuss what the effect of the storms was in the first quarter from a percentage of volume standpoint?

Speaker #3: In other words, if you did not have the storms, what would volumes have been? And what kind of early run rate are you seeing on volumes in consumer and in industrial for the second quarter?

Speaker #3: Second point, we appreciate you calling out the inflation effect so far of 8 to 10 million into Q. Is that a sequential impact from one Q or year on year?

Speaker #3: And if costs stay where they're at right now, would that be the effect in three Q or would it be a lesser effect? And then the last question I had for you is, can you talk to us about how you feel on your metal supply chain both aluminum and steel?

George Staphos: The last question I had for you is, can you talk to us about how you feel on your metal supply chain, both aluminum and steel? Are there any flashpoints we need to watch out against relative to the street, or do you feel like you're pretty well situated as far as you can see for the rest of the year? Thank you.

Speaker #3: Are there any flashpoints we need to watch out against relative to the straight, or do you feel like you're pretty well situated as far as you can see for the rest of the year?

Speaker #3: Thank you.

Howard Coker: Thanks, George. I'm gonna let Paul cover. I don't have the direct, and I don't know if Paul does either, the full numbers in terms of the impact of the storm. What I would say on the metal side, which I will handle, is we have no issues, no concerns, not only in terms of supply chain, but we have fixed pricing through the year. Obviously we've seen tariffs and other things that can impact. Based off of where we sit today, we're in good shape.

Speaker #1: Thanks, George. I'm going to let Paul cover. I don't have the direct I don't know if Paul does either the full numbers in terms of the impact of the storm.

Speaker #1: What I would say on the metal side, which I will handle, is we have no issues, no concerns. Not only in terms of supply chain, but we have fixed pricing through the year.

Speaker #1: Obviously, we've seen tariffs and other things that can impact, but based off of where we sit today, we're in good shape.

Paul Joachimczyk: George, on the first question that you had around the storm effect, we did experience more declines in our consumer business in the Americas, primarily due to the weather that was out there with some of our CPGs being down, you know, two of our largest customers being down for over a week. That did create a, I'll call it a larger impact disproportionately than our international businesses that are out there. I'll say the early run rates, though, that we're seeing is we're seeing some recovery back in the business, more so on our industrial businesses. We're seeing strengthening in those markets as mills are getting closer back to the 90% effective rates, run rates that are there. We're seeing some lift back in our consumer businesses, but still more focused in on the international side.

Speaker #3: And George, on the first question that you had around the storm effect, we did experience more declines in our consumer business in the Americas, primarily due to the weather that was out there, with some of our CPGs being down.

Speaker #3: Two of our largest customers being down for over a week. That did create a, I'll call it a larger impact disproportionately than our international businesses that are out there.

Speaker #3: I'll say the early run rate, though, that we're seeing is we're seeing some recovery back in the business, more so on our industrial businesses.

Speaker #3: We're seeing strengthening in those markets as mills are getting closer back to the 90% effective rates run rates that are there. We're seeing some lift back in our consumer businesses.

Speaker #3: But still more focused in on the international side. The Americas are still lagging behind. But it did impact the volume pressures there for sure.

Paul Joachimczyk: The Americas are still lagging behind, but it did impact the volume pressures there for sure. Moving on to your second-

George Staphos: Paul, let me just back you up there.

Speaker #3: Moving on to your second.

Paul Joachimczyk: Yeah, yeah.

Speaker #2: Back you up to there. Just so I know it's early, but what kind of volume are you seeing up, down? Can you put a percentage on it in your key consumer or industrial categories?

George Staphos: I know it's early, but what kind of volume are you seeing up, down? Can you put a percentage on it in your key consumer or industrial categories?

Paul Joachimczyk: Yeah. I would say internationally, you know, say low single digits that were up there. Industrial in the same ballpark too. As you know, March was impacted primarily because of all the uncertainties that are out there. We're starting to see the recovery of those flows coming in early part of the month. I'll say it's, you know, right now, if that trend continues, it'll be a nice quarter for us in Q2.

Speaker #3: Yeah, I would say internationally, say low single digits that were up there. Industrial in the same ballpark too is March was impacted. Primarily because of all the uncertainties that are out there, we're starting to see the recovery of those flows coming in early.

Speaker #3: Part of the month. And I'll say it's right now, if that trend continues, it'll be a nice quarter for us in Q2.

George Staphos: Okay.

Speaker #2: Okay.

Paul Joachimczyk: If I move on to your second question around the inflation impact, the $8 to 10 million is what we have line of sight to for Q2. With our recovery mechanisms that we have in place, there is a little bit of a lag. I'd say right now our exposure for Q2 is the 8 to 10. Obviously, if there's more macroeconomic effects, if there's something that happens with pricing pressures on our input costs, those could change to be greater in Q3 and Q4. We do think our recovery mechanisms will help cover and offset those in those future quarters that are there. We don't have full line of sight to what's gonna happen in the macro world that's out there. Today we feel confident in our exposure for what Q2 is gonna bear.

Speaker #3: If I move on to your second question around the inflation impact, the 8 to 10 million is what we have lying aside too for Q2.

Speaker #3: And with our recovery mechanism that we have in place, there is a little bit of a lag. So I'd say right now our exposure for Q2 is the 8 to 10.

Speaker #3: Obviously, if there's more macroeconomic effects, if there's something that happens with pricing pressures on our input costs, those could change to be greater in Q3 and Q4.

Speaker #3: But we do think our recovery mechanisms will help cover and offset those in those future quarters that are there. But we don't have full line of sight to what's going to happen in the macro world that's out there.

Speaker #3: But today we feel confident in our exposure for what Q2 is going to bear. Say if everything holds steady, those would not recur and we could recover that by Q3 and Q4.

Paul Joachimczyk: Say, you know, if everything holds steady, those would not recur, and we could recover that by Q3 and Q4.

George Staphos: Thank you very much.

Speaker #2: Thank you very much. Your next question comes from a line of John Dunigan from Jefferies. Your line is open.

Operator: Your next question comes from the line of John Dunnigan from Jefferies. Your line is open.

John Dunnigan: Thank you, Howard. Thank you, Paul. Really appreciate all the details. I wanted to start back on the cost inflation with the $8 to 10 million. Can you walk us through some of those key buckets and in particular nat gas, electricity across US and Europe, and how much of that you have hedged across your businesses? Then if we're thinking about the freight surcharges that you called out, is there any kind of lag to putting those through contractually? Maybe you can help us quantify how much of your contracts currently have those freight charge surcharge mechanisms contained in them. Thanks.

Speaker #4: Thank you, Howard. Thank you, Paul. Really appreciate all the details. I wanted to start back on the cost inflation. With the 8 to 10 million, can you walk us through some of those key buckets and in particular net gas, electricity across US and Europe, and how much of that you have hedged across your businesses?

Speaker #4: And then if we're thinking about the freight surcharges that you called out, is there any kind of lag to putting those through contractually and maybe you can help us quantify how much of your contracts currently have those freight charge mechanisms, surcharge mechanisms contained in them?

Speaker #4: Thanks.

Paul Joachimczyk: Yeah. John, I'll take the first part of that. The cost inflation, you know, the breakdown of it, you go through your freight as your primary driver of that. That was the one that we experienced almost immediately. You saw rising fuel prices, primarily in the diesel aspect, come through. We do have recovery places and mechanisms out there. There is a lag related to those, call it roughly 3 weeks, 4 weeks of a time period that's out there to get that recovery back. You're exposed, let's just say a month, to be simplistic out there. As far as all the other inputs that are out there, whether it's the resins, the energy and things like that, I'd say we do have some coverage on our hedging. We haven't gone out with exactly what that coverage is from a hedging. The 8 to 9 is inclusive.

Speaker #3: Yeah, John, I'll take the first part of that. So the cost inflation, the breakdown of it, you go through your freight as your primary driver of that.

Speaker #3: That was the one that we experienced almost immediately. You saw a rising fuel prices, primarily in the diesel aspect, come through. We do have recovery places and mechanisms out there there is a lag related to those.

Speaker #3: Call it roughly three weeks, four weeks of a time period that's out there to get that recovery back. So you're exposed, let's just say a month to be simplistic out there.

Speaker #3: As far as all the other inputs that are out there, whether it's the resins, the energy, and things like that, I'd say we do have some coverage on our hedging.

Speaker #3: We haven't gone out with exactly what that coverage is from a hedging. The 8 to 9 is inclusive. It's net of that. So that is an impact of us from already factoring into what we already have hedged and placed into programs.

Paul Joachimczyk: It's net of that. That is an impact of us from already factoring into what we already have hedged and placed into programs. That's the impact that we'll experience in our P&L. Freight is primarily the largest impact for us.

Speaker #3: So that's the impact that we'll experience in our P&L. But freight is primarily the largest impact for us.

John Dunnigan: Great. That's very helpful. Just on my follow-up, I just want to jump over to the cost savings. You called out the $8 million from the initiatives towards the $150 to 200 million. Productivity in the quarter was pretty impressive. It was up $33 million year over year. Can you just walk us through the difference between those two figures and how we should think of the cadence through the rest of the year? That'd be helpful.

Speaker #4: Great. That's very helpful. And then just on my follow-up, I just want to jump over to the cost savings. You called out the 8 million from the initiatives towards the 150 to 200.

Speaker #4: But productivity in the quarter was pretty impressive. It was up 33 million year over year. Can you just walk us through the difference between those two figures and how we should think of the cadence through the rest of the year?

Speaker #4: That'd be helpful.

Paul Joachimczyk: Yeah. John, that's a great question. Really what we're trying to do is we're trying to delineate productivity, which really is covering our inflationary impacts, things of that nature, versus the Profitability Performance Plan. The Profitability Performance Plan, as we think about it, this is costs that are going to fall right to the bottom line, and they are going to be there every quarter on a go-forward basis. That's why we did the delineation this quarter more so, and we will continue that going forward. We want to assure you that what we are delivering in those savings and that program of the $150 to 200 million, that is something that you can bank on for us that is going to be there quarter after quarter after quarter, and it is going to be recurring.

Speaker #3: Yeah. And John, that's a great question. And really what we're trying to do is we're trying to delineate productivity, which really is covering our inflationary impacts, things of that nature, versus the profitability performance plan.

Speaker #3: The profitability performance plan, as we think about it, this is costs that are going to fall right to the bottom line and they're going to be there every quarter on a give-forward basis.

Speaker #3: So that's why we did the delineation this quarter more so and will continue that going forward. But we want to assure you that what we are delivering in those savings on that program of the 150 to 200 million, that is something that you can bank on for us that's going to be there quarter after quarter after quarter.

Speaker #3: And it's going to be recurring.

John Dunnigan: Got it. Thank you very much, Paul.

Speaker #4: Got it. Thank you very much, Paul.

Operator: Your next question comes from a line of Michael Roxland from Truist Securities. Your line is open.

Speaker #2: Your next question comes from a line of Michael Roxland from Truist Securities. Your line is open.

Nico Buccioni: Hi, guys. Thanks for taking my questions. This is Nico Buccioni on for Michael Roxland. Just to clarify on the inflationary impacts, does your current guide assume that $8 to 10 million is the limit of the impact? Do you assume current conditions basically persist through the rest of the year rather than improve? Secondly, what do you think your customers and consumers' ability is to absorb price? How much do you think you can push before demand destruction might occur?

Speaker #5: Hi guys. Thanks for taking my questions. This is Nico Pacini on for Mike Roxland. Just to clarify on the inflationary impacts, does your current guide assume that 8 to 10 million is the limit of the impact, or do you assume current conditions basically persist through the rest of the year rather than kind of improve?

Speaker #5: And then secondly, what do you think your customers and consumers' ability is to absorb price? How much do you think you can push before demand destruction might occur?

Howard Coker: I would say that's what we have visibility of at this point in time. You know, I went to extra effort to point out that, you know, with the new portfolio, particularly, you know, our key raw materials, being steel, on the consumer side, they're basically flat, contractually protected through the year. We do have the resin exposure I spoke to in my opening comments. That too has recovery mechanisms in it, and it varies from within the month to within the quarter. Will we see more? It is hard to say. Depends on what happened while we were talking during this call. Virtually just seems to be changing on an immediate basis.

Speaker #3: Yeah, I would say that's what we have visibility of at this point in time. I went to extra effort to point out that with the new portfolio, particularly our key raw materials, being steel, on the consumer side, that basically is flat.

Speaker #3: Contractually protected through the year. And so we do have the resin exposure I spoke to and my opening comments. That too has recovery mechanisms in it.

Speaker #3: And it's varies from within the month to within the quarter. But what we see more it's hard to say. Depends on what happened while we were talking during this call virtually.

Speaker #3: It just seems to be changing on an immediate basis. But the point here is that from a key raw materials perspective, we feel really good in terms of the position that we're in at this point in time.

Howard Coker: The point here is that from a key raw materials perspective, we feel really good in terms of the position that we're in at this point in time. The customer impact, it's hard to say. You know, being a staple food, all I can say is what we've seen historically from when, you know, obviously the inflation being felt at retail is also showing up in QSR and other outlets as well. When wallets get tight, we historically have seen in our consumer business that volumes are not affected, and in fact, in some cases have improved as people shop in the grocery store, cook at home, as opposed to going out. Hard to predict how that's gonna go.

Speaker #3: And the customer impact, it's hard to say. We're being in staple food, all I can say is what we've seen historically. When obviously the inflation being felt at retail has also shown up in QSR and other outlets as well.

Speaker #3: While it's get tight, we historically have seen in our consumer business that volumes are not affected and in fact, in some cases, have improved as people shop in the grocery store, cook at home, as opposed to going out.

Speaker #3: So hard to predict how that's going to go. But certainly would think that while we're talking about the packaging side of things, that there's pressures on all raw materials associated with all food items.

Howard Coker: Certainly would think that, while we're talking about the packaging side of things, that there's pressures on all raw materials associated with all food items, really on all items going forward. Ultimately we'll see how that fares through the consumer.

Speaker #3: Really on all items, going forward. And ultimately, we'll see how that fares through the consumer.

Nico Buccioni: Got it. Understood. Just quick follow-up. You know, I think you mentioned a little softer URB volumes in Q1, but a pickup more recently in April. What do you attribute that pickup to, and can you share where backlogs stand right now?

Speaker #5: Got it. Understood. Just quick follow-up. I think you mentioned a little softer URB volumes in one Q, but a pickup more recently in April.

Speaker #5: What do you attribute that pickup to, and can you share where backlogs stand right now?

Howard Coker: Yeah, you know, we don't really track backlogs in URB, but what we're seeing is that Paul had noted a roughly 90% to 91% operating rate here, which is our largest market in URB in North America. Frankly, there's a couple of things going on. The main is that we talked in Investor Day about new products and new markets that we're entering with URB that traditionally have been served by other grades of paper, some of which has been taken out of the market through mill closures. We've been successful in converting saturating kraft.

Speaker #3: Yeah. I don't know. We don't really track backlogs in URB, but what we're seeing is, as Paul a 90, 91 percent operating rate here, which is our largest market in URB in North America.

Speaker #3: And frankly, there's a couple of things going on. The main is that we talked to an investor today about new products and new markets that we're entering.

Speaker #3: With URB, that traditionally have been served by other grades of paper. That have been some of which has been taken out of the market through mill closures.

Speaker #3: We've been successful in converting saturated craft. So we've got our first customer in a line of customers in the funnel right now. That is really helping us to, as we look out into the quarter, go from the low 90s well, still low 90s, but from 90 to 92, 93 type operating rates as that volume starts flowing through the mill network.

Howard Coker: We've got our first customer and a line of customers in the funnel right now, that is really helping us to, as we look out into the quarter, go from the low 90s, while still low 90s, but from 90 to 92, 93 type operating rates as that volume starts flowing through the mill network.

Nico Buccioni: Got it. Thank you very much. I'll turn it over.

Speaker #5: Got it. Thank you very much. I'll turn it over.

Howard Coker: Thanks.

Speaker #3: Thanks.

Operator: Your next question comes from the line of Hillary Cacanando from Deutsche Bank. Your line is open.

Speaker #2: Your next question comes from a line of Hillary Cacanando from Deutsche Bank. Your line is open.

Hillary Cacanando: Hi. Thank you for taking my question. Just regarding the softer volumes and inflationary pressures in Q1, could you just elaborate on which specific end markets or geographies underperformed expectations or outperformed expectations? Most notably, I know you talked a little bit about tuna pack and sardines, but if you could give more a little more detail on other end markets.

Speaker #6: Hi. Thank you for taking my question. Just regarding the softer volumes and inflationary pressures in the first quarter, could you just elaborate on which specific end markets or geographies on the performed expectations or outperformed expectations most notably?

Speaker #6: I know you talked a little bit about tuna pack and sardines, but if you could give more a little more detail. On other end markets.

Howard Coker: What I'd say, I'm really just talking to geography. It was, if you go around the world, Paul already noted that Consumer EMEA was a very low, well, low single digits off from a volume year-over-year. It was a bigger impact here in North America. I don't think I wanna get into, just from a confidentiality with customers, but our two largest customers on our paper can business lost 7, 8 days during the winter storm. We talked about that in February, and what would typically happen is we'd see them rush to make up that time, and enough time was, would be held in the quarter.

Speaker #3: Yeah. Yeah. What I'd say, I'm really just talking to geography. It was, if you go around the world, Paul already noted that consumer EMEA was very low well, low single digits off from a volume year over year.

Speaker #3: It was a bigger impact here in North America. And I don't think I want to get into just from a confidentiality with customers, but our two largest customers on our paper can business lost 7, 8 days during the winter storm.

Speaker #3: Now, we talked about that in February, and what would typically happen is if we'd see them rush to make up that time. And enough time would be held in the quarter.

Howard Coker: Of course, 5, 7 days after our Investor Day, you wake up and find out on 27 February we bombed Iran. We think they took the opportunity to bring inventories down, and we're starting to see now a bit of a pickup, and the expectation is the magnitude of what we saw in Q1 will not repeat itself. In fact, they should be looking to make some of that up through the year.

Speaker #3: Then, of course, 5, 7, 7 days after our yesterday, you wake up and find out on February 27th, we bombed Iran. So we think they took the opportunity to bring inventories down, and we're starting to see now a bit of a pickup and the expectation is the magnitude of what we saw in the first quarter will not repeat itself, in fact, they should be looking to make some of that up through the year.

Hillary Cacanando: Got it. Got it. Great. Thank you. Just to follow up, you know, as we're, you know, 3 weeks into Q2, I know you said April picked up, but are you seeing any, you know, real discernible change in customer ordering patterns or, you know, conversations? Like, has anything, like, really changed? I know you're forecasting, you know, weaker volumes, but just wanted to see if any discernible, you know, change in patterns.

Speaker #6: Got it. Got it. Great. Thank you. And then just to follow up, as we're three weeks into the second quarter, I know you said April picked up, but are you seeing any real discernible change in customer ordering patterns or conversations?

Speaker #6: Has anything really changed? I know you were forecasting weaker volumes, but just wanted to see if any pattern any discernible change in patterns.

Paul Joachimczyk: Yeah, Hilary, this is Paul. Really no discernible patterns that are out there. We're seeing a slight uptick in the volume that's given us a little bit more confidence in our guide that's out there, but really nothing that's, I'd say, could lead to anything to other than just a recovery from Q1.

Speaker #3: Yeah. Hillary, this is Paul. So really no discernible patterns that are out there. We're seeing a slight uptick in the volume that's given us a little bit more confidence in our guide that's out there.

Speaker #3: But really nothing that's I'd say you could lead anything to other than just a recovery from Q1.

Hillary Cacanando: Got it. Great. Thank you very much.

Speaker #6: Got it. Great. Thank you very much.

Operator: Your next question comes from the line of Anthony Pettinari from Citi. Your line is open.

Speaker #2: Your next question comes from a line of Anthony Pettinari from Citi. Your line is open.

Brad Bergmeyer: Good morning. Thanks for taking the question. This is actually Brad Bergmeyer on for Anthony. Maybe just focusing on consumer a little bit, you know, volumes were down against a pretty tough comp from last year. Do you think we start to see some improvement in year-on-year volume growth in Q2 and as we start to get into the back half, maybe from, you know, easy comps or, you know, ramping investments? Just any detail on maybe how that volume trend could develop through 2026 in consumer. Thanks.

Speaker #7: Good morning. Thanks for taking the question. This is actually Brad Bergmeyer on for Anthony. Maybe just focusing on consumer a little bit, volumes were down against a pretty tough comp from last year.

Speaker #7: Do you think we start to see some improvement in year-on-year volume growth in two Q? And as we start to get into the back half, maybe from easy comps or ramping investments, just any detail and maybe how that volume '26 in consumer?

Howard Coker: Yeah. Pretty hard to really nail it with the amount of uncertainty we have out there. What I would say is probably on our aerosol business here in North America, pretty tough comps coming up here in the summertime and somewhat of a discretionary spend you can do without. On the other side of that, you know, that would be reflective of a consumer that more of an economic downturn situation. You could see that being a tougher comp, but at the same time, as I said earlier, you would expect that the food side of the business, the center of the store, the drive to the supermarket is conditioned stuff and that it would balance that, if not actually exceed that.

Speaker #7: Thanks.

Speaker #3: Yeah. Pretty hard to really nail it with the amount of uncertainty we have out there. What I would say is probably on our aerosol business here in North America, pretty tough comps coming up here in the summertime.

Speaker #3: And somewhat of a discretionary spend. You can do without. But on the other side of that, that would be reflective of a consumer that more of an economic downturn situation.

Speaker #3: So you could see that being a tougher comp, but at the same time, as I said earlier, you would expect that the food side of the business, the center of the store, the drive to the supermarket is conditioned stuff.

Speaker #3: And it would balance that. If not, actually exceed that. So tough to say. I mentioned earlier in Europe, the World Cup, that's kind of the normal thing for us to see that volumes start to tick up around that particular event.

Howard Coker: Tough to say. You know, I mentioned earlier in Europe, you know, the World Cup, that's kind of the normal thing for us to see that volumes start to pick up around that particular event. Kind of a wait and see. I don't know if the consumer is fully felt it to the point. It does appear we're heading in that direction. That could be favorable, frankly for the most part of the consumer side of the business.

Speaker #3: But kind of a wait and see. I don't know if the consumer is fully, fully, fully felt it to the point. It does appear we're heading in that direction.

Speaker #3: That could be favorable, frankly, for the most part of the consumer side of the business.

Brad Bergmeyer: Got it. Got it. Thanks for that detail. Maybe just on working capital. I am not sure if there is any, you know, maybe sensitivity to raw material inputs that we should be mindful of just as the year goes on, trying to be mindful of, you know, higher metal prices and then pet chems. I am not sure if, yeah, like an earning sensitivity or just any detail you would want to put on maybe working capital or free cash flow as we think about higher metal. Thank you. I will turn it over.

Speaker #7: Got it. Got it. Thanks for that detail. And then maybe just on working capital, I'm not sure if there's any maybe sensitivity to raw material inputs that we should be mindful of, just as the year goes on, trying to be mindful of higher metal prices and then pet chems.

Speaker #7: Not sure if, yeah, like an earnings sensitivity or just any detail you would want to put on maybe working capital or free cash flow as we think about higher metal.

Speaker #7: Thank you. I'll turn it over.

Paul Joachimczyk: Yeah. Really from a working capital perspective, no real concerns there. I'd say one thing to highlight though, we are being very disciplined about our spend on capital for the remainder of the year. We wanna make sure that we're hitting our guide and our targets that we've committed to the street. There will be some projects that we'll postpone, but we're not cutting back any of our growth or our value, you know, adding capital products that are out there. Feel really confident that with our supply chain team and our efforts that they've done to secure a really strong supply chain, both around metal pack and all the other inputs that are there. Really no concerns from this perspective right now. That's with our current environment, as we said.

Speaker #3: Yeah. So really from a working capital perspective, no real concerns there. I'd say one thing that to highlight that we are being very disciplined about our spend on capital for the remainder of the year.

Speaker #3: We want to make sure that we're hitting our guide and our targets that we've committed to the street. So there will be some projects that we'll postpone but we're not cutting back any of our growth or our value adding capital products that are out there.

Speaker #3: But feel really confident that with our supply chain team and our efforts that they've done to secure a really strong supply chain both around metal pack and all the other inputs that are there.

Speaker #3: So really no concerns from this perspective right now. That's what our current environment says, we said.

Operator: Your next question comes from the line of Ghansham Panjabi from Baird. Your line is open.

Speaker #2: Your next question comes from a line of Ghansham Panjabi from Baird. Your line is open.

Ghansham Panjabi: Thank you. Good morning. You know, just kind of picking up on some of the last few questions. Obviously Q1 was impacted from a volume standpoint for all the reasons you kind of went through. Q2, you gave some parameters as it relates to raw material cost inflation, et cetera, and we know what your full year guidance is. Specific to Q2, do you expect earnings to grow year over year, or will it be comparable to sort of Q1, just given what you called out as it relates to the price cost headwinds?

Speaker #7: Thank you. Good morning. Just kind of picking up on some of the last few questions. So obviously, one Q was impacted from a volume standpoint for all the reasons you kind of went through.

Speaker #7: Two Q, you gave some parameters as it relates to raw material cost inflation, etc. And we know what your full year guidance is. Q, do you expect earnings to grow year over year, or will it be comparable to sort of one Q just given what you called out as it relates to the price-cost headwinds?

Paul Joachimczyk: Yeah, Ghansham. We do expect earnings to grow in Q2. I will say though, there is that inflationary impact for the raw materials that we talked about with freight and everything else that's there. That'll create a little bit of a margin drag for us and some of the pressures that are there, but we definitely expect earnings to grow.

Speaker #3: Yeah. Gotcha. We do expect earnings to grow in Q2. I will say, though, there is that inflationary impact for the raw materials that we talked about with freight and everything else that's there.

Speaker #3: So that'll create a little bit of a margin drag for us in some of the pressures that are there. But we definitely expect earnings to grow.

Ghansham Panjabi: On a year-over-year basis, just to clarify.

Speaker #7: On a year-over-year basis, just to clarify.

Paul Joachimczyk: Yes.

Ghansham Panjabi: Okay.

Paul Joachimczyk: Yep.

Ghansham Panjabi: Thank you for that.

Speaker #3: Yes. Yep. Yeah. And I do want to reiterate that I know we talked about it over and over, but in the salt volume environment, the team really did deliver on the bottom line expectations for the most part.

Howard Coker: Yeah. No, Ghansham, I do wanna reiterate that, you know, I know we talked about it over and over, but, you know, in the soft volume environment, you know, the team really did deliver on the bottom line expectations, for the most part. That is not changing, as we see seasonal volumes increase in terms of the levels of productivity and savings, and the programs that we've got in place. I just wanna say again, hats off to our team in a soft volume environment, still being able to drop down, within our expectations.

Speaker #3: And that is not changing as we see seasonal volumes increase in terms of the levels of productivity and savings and the programs that we've got in place.

Speaker #3: So I just want to say again, hats off to our team in the salt volume environment, still being able to drop down within our expectations.

Ghansham Panjabi: Yeah, for sure. A lot going on. As it relates to the, you know, the volume impact of this particular, you know, inflation cycle and, you know, obviously your customers know that price increases are coming and so on and so forth, have you seen any sort of pre-ordering or just some sort of order pattern distortions that may be amplifying some of the volume that you're seeing early part of Q2 in terms of the recovery you called out?

Speaker #7: Yeah. For sure. Like going on. So as it relates to the volume impact of this particular inflation cycle and obviously customers know that price increases are coming and so on and so forth, have you seen any sort of pre-ordering or just some sort of order pattern distortions that may be amplifying some of the volume that you're seeing early part of Q2 in terms of the recovery you called out?

Howard Coker: No. In fact, you know, it's again, based off the portfolio, the type of inflation that we're seeing is not really about product inflation, it's how we deliver it. It's freight, obviously some energy, but not your typical, Hey, you've got a 5% or 10% price increase coming in the next quarter. I need to load it up. No.

Speaker #3: No. In fact, it's, again, based off the portfolio the type of inflation that we're seeing is not really about product inflation. It's how we deliver it.

Speaker #3: It's freight. Obviously, some energy. But not your typical, "Hey, you've got a 5 or 10 percent price increase coming." In the next quarter, I need to load up.

Speaker #3: So not.

Ghansham Panjabi: Okay. You haven't seen any change in the macro backdrop, just broadly speaking for your industrial business either, right?

Speaker #7: Okay. And you haven't seen any change in the macro backdrop just broadly speaking for your industrial business either, right?

Howard Coker: No, in fact, you know, little bit of concern about, you know, yes, we had the weather impacts in Q1, but we've seen some green shoots here. A lot of it is self-help, you know, entering new markets that we've never participated in before. As I mentioned earlier with saturating kraft using the, I guess, the furniture industry. Right now things are You got to put that into the model to say, Hey, we've got new business coming on, that we never participated in before. But our operating rates, as I said, we've said a couple of times are in pretty good shape.

Speaker #3: No. In fact, a little bit of concern about yes, we had the weather impacts in the first quarter. But we've seen some green shoots here.

Speaker #3: A lot of it is self-help. Entering new markets that we've never participated in before. As I mentioned earlier, with saturated craft using the, I guess, the furniture industry.

Speaker #3: So right now, things are you got to put that into the model to say, "Hey, we've got new business coming on that we never participated in before." So that our operating rates as I said, we've set a couple of times where and pretty good shape.

Paul Joachimczyk: Ganchan, we have a reels business too that is doing really well in performance for us in Q1, and we expect that to continue into Q2 as well.

Speaker #7: And Ghansham, we have a real business too that is doing really well in performance for us in Q1. And we expect that to continue into Q2 as well.

Ghansham Panjabi: Okay, perfect. Thank you so much.

Speaker #7: Okay. Perfect. Thank you so much.

Operator: Your next question comes from the line of Anojja Shah from UBS. Your line is open.

Speaker #2: Your next question comes from the line of Anojja Shah from UBS. Your line is open.

Anojja Shah: Hi, everyone. Good morning.

Speaker #8: Hi everyone. Good morning.

Howard Coker: Morning.

Anojja Shah: Hi. Sorry. First, I just want to confirm that $8 to 10 million in inflation that you call out in Q2, based on the lags in your pass-through, you're confident that that should get recovered in H2?

Speaker #3: Morning.

Speaker #8: Hi. Sorry. So first, I just want to confirm that 8 to 10 million of inflation that you call out in two Q, based on the lags in your pass-through, your confident that that should get recovered in the second half?

Paul Joachimczyk: Yes.

Anojja Shah: I-

Paul Joachimczyk: It would get recovered.

Speaker #3: Yes. It would get recovered. Yep.

Anojja Shah: And so

Paul Joachimczyk: Yep.

Anojja Shah: Okay. Assuming, though, if there is additional inflation, then it's about a quarter lag, you said. Is that right?

Speaker #8: Okay. Assuming no. And if there is additional inflation, then it's about a quarter lag, you said. Is that right?

Paul Joachimczyk: Correct. Yep.

Anojja Shah: Okay. Perfect. Also you announced a new term loan at the end of March, and in the bridges you gave last quarter, you had a $0.20 to $0.40 non-operational contribution on EPS. Is the interest on that new term loan sort of a headwind to that $0.20 to $0.40, and is that part of why the EPS guidance is now on the lower end? How is that filtering through your 2020 guidance?

Speaker #3: Correct. Yep.

Speaker #8: Okay. Perfect. And then also, you announced a new term loan at the end of March. And in the bridges, you gave us quarter, you had a 20 to 40 cent non-operational contribution on EPS.

Speaker #8: So is the interest on that new term loan sort of a headwind to that 20 to 40? And is that part of why the EPS guidance is now on the lower end?

Speaker #8: How is that filtering through your 20% guidance?

Paul Joachimczyk: The term loan that we announced is really it's a delayed draw term loan to effectively retire our loan that would be due in September later this year. That really does not have a significant impact to our EPS strain that's out there. It's more of these inflationary impacts in the short term that is driving our EPS down more than anything else.

Speaker #3: Yeah. So the term loan that we announced is really it's a delayed draw term loan to effectively retire our loan that would be due in September later this year.

Speaker #3: That really does not have it's a meaningful or call it it's not a significant impact to our EPS strain that's out there. It's more of this inflationary impacts in the short term that is driving our EPS down more than anything else.

Anojja Shah: Okay. Because of the tight range on EPS, that's why it's impacting EPS and not as much.

Speaker #8: Okay. And because of the tight range on EPS, that's why it's impacting EPS. And not as much on the job. Is that correct? Okay.

Paul Joachimczyk: You got it.

Anojja Shah: Is that correct? Okay, great.

Paul Joachimczyk: Yeah. If you think about EBIT-- Oh, go ahead.

Speaker #3: Yeah. Yeah. If you think about oh, go ahead. Yeah. I was going to say for the EBITDA range, if you think about it, it's really 100 million dollars that's out there.

Speaker #8: Great.

Anojja Shah: Go ahead. Go ahead.

Paul Joachimczyk: I was gonna say for the EBIT range, if you think about it's really $100 million that's out there. If you take the taxes out of that, it really becomes a $133 million range, and your EPS is only $0.40. The two are disaggregated and disproportionate, almost a 3-to-1 ratio. It's your EBIT impacts. You can have a $10 million impact in your EBIT, but it'll drive a much larger impact on your EPS change that's out there.

Speaker #3: If you take the taxes out of that, it really becomes 133 million dollar range. And your EPS is only 40 cents. So the two are disaggregated and disproportionate, almost a three-to-one ratio.

Speaker #3: So it's your EBIT impacts. You can have a $10 million impact in your EBITDA, but it'll drive your much larger impact on your EPS change that's out there.

Anojja Shah: Right. Right. Got it. Then finally, how are you feeling about your geographic footprint now with your current split between US and Europe? I only ask because some of your peers are reconsidering the benefits that they thought they would get by adding on a European business, and they're sort of saying that the large global customers tend to source more regionally. Do you believe that your global platform gives you significant economies of scale that maybe outweigh some of the complexity drawbacks?

Speaker #8: Right. Right. Got it. And then finally, how are you feeling about your geographic footprint now with your current split between US and Europe? I only ask because some of your peers are reconsidering the benefits that they thought they would get by adding on a European business.

Speaker #8: And they're sort of saying that the large global customers tend to source more regionally. Do you believe that your global platform gives you significant economies of scale that maybe outweigh some of the complexity drawbacks?

Howard Coker: Yeah, we do certainly economies of scale. You know, we like the way we're situated right now. We're over half North America. I think it's about 40% in total company, both consumer and industrial, in Europe. We've seen that, you know, flip back and forth over the last decade or so, more in favor of, stronger in favor of North America. It just depends on the market, the opportunity. It's not a conscious type situation, but we, you know, we're happy with the portfolio. We're happy with the geographies that we participate in. Southeast Asia has, on the, particularly on the consumer side, is becoming even more material, and frankly, as we noted earlier, continues to grow at a nice pace.

Speaker #3: Yeah. We do certainly economies of scale. We like what the way we're situated right now. We're over half North America. I think it's about 40% in total company, both consumer and industrial.

Speaker #3: In Europe. And we've seen that flip back and forth over the last decade or so. More in favor of stronger in favor of North America.

Speaker #3: It just depends on the market, the opportunity, it's not a conscious type situation. But we're happy with the portfolio. We're happy with the geographies that we participate in.

Speaker #3: Southeast Asia has on a particularly on the consumer side is becoming even more material and frankly, as we noted earlier, continues to grow at a nice pace.

Howard Coker: We are where we are today, and we do not plan on any future portfolio or inorganic moves, but it wouldn't surprise me if we weren't talking years down the road and there's a different ratio there.

Speaker #3: So we are where we are today. And we do not plan on any future portfolios or inorganic moves. But it wouldn't surprise me if we weren't talking years down the road and there's a different ratio there.

Anojja Shah: All right. Thank you very much. I'll turn it over.

Speaker #8: All right. Thank you very much. I'll turn it over.

Operator: Your next question comes from the line of Mark Weintraub from Seaport Research Partners. Your line is open.

Speaker #2: Your next question comes from a line of Mark Weintraub from Seaport Research Partners. Your line is open.

Mark Weintraub: Great. Thank you. I got disconnected, apologies if there's any repetition in the question here. Was hoping to focus a little bit more on the volume side, two things. One, maybe a little bit more color possible on some of the growth, on some of the either potential business wins and some of the expansions. If you could perhaps scale the size of opportunity and what you've seen so far. For instance, with the new paper can facility in Thailand, how much revenue or opportunity might that provide? In Europe, you had been talking about at one point the possibility of converting some customers who were doing their own canning. If there's any update there on progress there. You mentioned on the saturating kraft. That was helpful. Thank you.

Speaker #7: Great. Thank you. I got disconnected. So apologies if there's any repetition in the question here. But was something to focus a little bit more on the volume side.

Speaker #7: And two things. One, maybe a little bit more color possible on some of the growth on some of the potential business wins and some of the expansions.

Speaker #7: If you could perhaps scale the size of opportunity and what you've seen so far so for instance, with the new paper can facility in Thailand, how much revenue or opportunity might that provide?

Speaker #7: And then in Europe, you had been talking about at one point the possibility of converting some customers who were doing their own canning if there's any update there on progress there.

Speaker #7: You mentioned on the saturating crafts that was helpful. Thank you. And then just on the flip side of it, where volume has been disappointing and certainly there's the macroeconomic barriers, the weather, etc.

Mark Weintraub: Just on the flip side of it, where volume has been disappointing, and certainly there's the macroeconomic, there's the weather, et cetera. You know, there's also kind of the GLP-1 issue, and, hopefully it's not as big a deal for you as for some others, but maybe just update us on your thoughts relative to that.

Speaker #7: But there's also kind of the GLP-1 issue. And hopefully, it's not as big a deal for you as for some others. But maybe just update us on your thoughts relative to that.

Howard Coker: Yeah, Mark, a good question. I, and this fall has it, I do not have a total. We're not gonna give out specific plant level type details. I can't really answer that question. What you did answer in your own question was, you know, where are we seeing opportunities? Certainly Thailand is reportedly going to be possibly even the third-largest paper can plant that, well, that we operate globally. It's in its infancy. We're doing about somewhere around 200 million units right now during its startup phase. Saturated kraft is really turning out to be quite an interesting market. We're in with our first customer.

Speaker #3: Yeah. Mark, good question. And this fall has it. I do not have a total up of we're not going to give out specific plant-level type details.

Speaker #3: But I can't really answer that question. What you did answer in your own question was where we're seeing opportunities. Certainly, Thailand is reportedly going to be possibly even the third largest paper can plant that well, that we operate globally.

Speaker #3: So it's in its infancy in terms of and we're doing about somewhere around 200 million units right now during its startup phase. Saturated craft is really turning out to be quite an interesting market.

Speaker #3: And we're in with our first customer and I could keep going in terms of investments that we've made across the portfolio. But let's put that down as a homework assignment to aggregate that for you and the rest of the group.

Howard Coker: I could keep going in terms of, you know, investments that we've made across the portfolio. Let's put that down as a homework assignment to aggregate that for you and the rest of the group. No, we're not gonna talk about any one individual opportunity, but I think it's a fair question from an aggregate perspective. You're right on the GLP side. We feel better about our situation today. You know, if you go back just over a year ago, it just feels good not to be in the type of markets, confectionery, cookies, crackers, and things like that we weren't pretty heavy in. The portfolio shift, I think, is more favorable in this, in this context.

Speaker #3: But no, we're not going to talk about individual opportunity. But I think it's a fair question from an aggregate perspective. You're right on the GLP side.

Speaker #3: We feel better about our situation today. If you go back just over a year ago, it just feels good not to be in the type of markets confectionery cookies, crackers, and things like that that we weren't pretty heavy in.

Speaker #3: So the portfolio shift I think is more favorable in this context. And would say, but yes, we do participate with salted snacks. But what we're seeing there is we just spoke to in a bit was that that growth seems to be it is really materializing internationally.

Howard Coker: Would say that, yes, we do participate with salted snacks, but what we're seeing there, as we just spoke to in a bit, was that that growth it is really materializing internationally, where GLP-1s are just not at the same level as they are here in the United States, particularly in Southeast Asia, but Eastern Europe, and even South America, where we've got expansions going on. Feel much better about our situation today from a portfolio perspective to drive through, you know, where GLP-1s will finally settle out on that.

Speaker #3: Where it's GLPs are just not at the same level as they are here in the United States. Particularly in Southeast Asia. But Eastern Europe and even South America where we've got expansions going on.

Speaker #3: So feel much better about our situation today from a portfolio perspective to drive through where GLPs will finally settle down at.

Paul Joachimczyk: Yeah. Mark, just to give you a little bit more context on the Thailand plant and referring back to a comment that Howard made in his opening statement too, is that plant will lead to 200 million units on an annual basis for us. It did contribute, you know, a 6% lift in our paper can volume in that region. It is going to be a significant asset for us and, you know, contribution to our overall growth and the strategy for that region.

Speaker #7: Yeah. And Mark, just to give you a little bit more context than the Thailand plant and refer back to a comment that Howard made in his opening statement too is that plant will lead to 200 million units on an annual basis for us.

Speaker #7: And it did contribute a 6% lift in our paper can volume in that region. So it is going to be a significant asset for us.

Speaker #7: And contribution to our overall growth and the strategy for that region.

Howard Coker: With a reminder that that's the startup phase of the plant.

Speaker #3: With a reminder that that's the startup phase of the plant.

Paul Joachimczyk: You got it.

Speaker #7: You got it.

Mark Weintraub: Right. The point being it's a startup, A, there's more to come. B, are there also extra costs that you incur during the startup phase that presumably fade away?

Speaker #3: startup A, there's more to come. B, are there also extra costs that you incur during the startup phase that presumably fade away?

Howard Coker: Yeah, always when you're starting a new operation, yes, you've got a ramp-up curve. You know, I tell you though, we have a heck of a good team. We do a lot of cans in Southeast Asia, and you never have a vertical, but you're right. We did see some costs, including a grand opening that you saw the picture in the slides. It was well done by the team.

Speaker #7: Yeah. Always when you're starting a new operation, yes, you've got to wrap up curve. But I'll tell you though, we have a heck of a good team we do a lot of cans in Southeast Asia.

Speaker #7: And it's not you never have a vertical, costs including a grand opening that you saw the picture and the slides was well done by the team.

Speaker #7: But. Great. And maybe this is getting a little too detailed. And if so, either take it offline or whatever. But is it possible sort of to walk us up a little bit to the 8 to 10 million?

Mark Weintraub: Great. Maybe this is getting a little too detailed, and if so, either take it offline or whatever. Is it possible sort of to walk us up a little bit to the, you know, the $8 to 10 million, and if we annualize it, you know, $32 to 40 million, you've got seven and a half billion of sales. You know, we're talking about 4% or 5%, you know, 40 to 50 basis points of increase, which seems kind of low if freight and those other variables are about, I think you had said about 10% of revenue. It would seem like not too big an increase.

Speaker #7: And if we annualize it, 32 to 40 million, you've got 7 and a half billion of sales. So we're talking about 4 or 5 percent 40 to 50 basis points of increase, which seems kind of low if freight and those other variables are about I think you had said about 10% of revenue.

Speaker #7: So it would seem like not too big an increase. I don't know if you can quickly, easily walk us up sort of the big drivers.

Mark Weintraub: I don't know if you can quickly, easily walk us up sort of the big drivers, you know, basically, how much is freight up on a percentage basis, if that's the biggest driver?

Speaker #7: Basically, how much is freight up on a percentage basis? If that's the biggest driver.

Paul Joachimczyk: Yeah. Mark, we did probably when you were disconnected, we did cover this, but freight is the largest component of that, really where the, I'll call it, is our recovery to go after that is gonna be lagged and delayed. The $8 to 10 million is net of all of our recovery efforts that are out there.

Speaker #3: Yeah. And Mark, we did probably when you were disconnected, we did cover this. But freight is the largest component of that. And really, we're the I'll call it as a recovery to go after that is going to be lag and delay.

Speaker #3: So the 8 to 10 million dollars is net of all of our recovery efforts set out there. So I'd say it does seem small.

Mark Weintraub: Gotcha.

Paul Joachimczyk: That's, I'd say is so it does seem small, and the reason it is small is because we did put the net number out there, not a gross number.

Speaker #3: And the reason it is small is because we did put the net number out there, not a gross number.

Mark Weintraub: Okay. Thank you.

Speaker #7: Okay. Thank you.

Operator: Your next question comes from a line of Gabrial Hajde from Wells Fargo Securities. Your line is open.

Speaker #2: Your next question comes from a line of Gabe Hut from Wells Fargo Securities. Your line is open.

Gabrial Hajde: Hey, good morning, Howard, Paul, Roger. I'm struggling a little bit with maybe just the commentary in the second quarter, and I appreciate there's a lot of uncertainty out there. Specifically even to growing earnings in Q2, are we talking in EBITDA terms or EPS? I think just the reduction in interest expense should get you something like $0.15 or so of EPS growth. Just a little bit of clarity there, please.

Speaker #8: Hey. Good morning, Howard, Paul, Roger. I'm struggling a little bit with maybe just the commentary in the second quarter. And I appreciate there's a lot of uncertainty out there.

Speaker #8: But specifically, even to growing earnings in Q2, are we talking an EBITDA terms or EPS? Because I think just the reduction in interest expense should get you something like 15 cents or so of EPS growth.

Speaker #8: So just a little bit of clarity there. Please.

Paul Joachimczyk: Yeah. Gabe, it will be both, you know, EBITDA and EPS. EPS does receive the benefit of interest favorability year-over-year as well too. That is part of it.

Speaker #7: Yeah. So Gabe, it will be both an EBITDA and EPS. EPS does receive the benefit of the interest variability year over year as well too.

Speaker #7: So that is part of it.

Gabrial Hajde: Okay. Then maybe going, looking backwards and thinking about even Q2, I know there's a lot of moving parts, and I apologize if I missed it. If we think about North America food, European food cans, and then I guess maybe global composite cans. You talked about, I think, Europe food being up low single digits in Q1, which would imply maybe down high single digits, 8% or so in North America food or aerosol, and I guess composite can. Then half of that was, you know, off because of weather. Just help us maybe on Q1 volume trends in the 3 different geographies or 3 different businesses as you think about it.

Speaker #8: Okay. And then maybe going looking backwards and thinking about even the second quarter, I know there's a lot of moving parts. And I apologize if I missed it.

Speaker #8: But if we think about North America food, European food cans, and then I guess maybe global composite cans, you talked about, I think, Europe food being up Q1, which would imply maybe down by single digits, 8% or so in North America food or aerosol and I guess composite can.

Speaker #8: And then half of that was off because of weather. Just help us maybe on Q1 volume trends in the three different geographies or three different businesses as you think about it.

Howard Coker: Yeah, you're pretty close in your math, in terms of, you know, low single digits in EMEA, and the correlation to how that would have impact the Americas. I really don't have that full what does it mean available to us at this point. Maybe it can be a follow-up that we can get to you.

Speaker #7: Yeah. You're pretty close in your math. In terms of low single digits in EMEA, and your correlation to how that would have impacted the Americas.

Speaker #7: I really don't have that full what did it mean available to us at this point. Maybe it can be a follow-up that we can get the.

Gabrial Hajde: Okay. Then I guess, Paul, when I think about tax rate, you gave us 26% at the beginning of the year. Maybe interest tracking around $150 million, and D&A was a little light in Q1, $125 million. I think we were kinda thinking about $135 or so. Is the $125 a good run rate going forward? I'm just thinking about, again, the translation between EBITDA and EPS. If I take the low end of EPS, call it $5.85 or so, I'm coming up to, like, $12.65 implied EBITDA. Anything that we should be mindful of there?

Speaker #8: Okay. And then I guess, Paul, when I think about tax rate you gave us, 26% at the beginning of the year, maybe interest tracking around 150 million and DNA was a little light in Q1, 125 million.

Speaker #8: I think we were kind of thinking about 135 or so. Is the 125 a good run rate going forward? And I'm just thinking about again, the translation between EBITDA and EPS.

Speaker #8: If I take the low end of EPS, call it 585 or so, I'm coming up like 1265 implied EBITDA. So anything that we should be mindful of there?

Paul Joachimczyk: No. I'd say your depreciation will probably tick up a little bit as some of our products come online later this year. You'll see a little bit of an increase, but your ranges, you're right in the same ballpark there.

Speaker #7: No. I'd say your depreciation will probably tick up a little bit as some of our products come online later this year. So you'll see a little bit of an increase.

Speaker #7: But your range is you're right in the same ballpark there.

Gabrial Hajde: Okay. Last one for me, and I apologize if it's repetitive. Getting at Mark's question, our math on transport as for paper businesses, about $20 a ton of inflation flowing through the system. I think you have 1 million forward tons in North America, maybe 1 million tons in Europe. That would imply, I don't know, something $100 million just in inflation there. Maybe I'm overestimating things. Then the 75 million pounds of polyethylene or resin buy that you were talking about, I think that was on a quarterly basis. It's up $0.30, give or take, just between April and March. That would be implied just to lag on that, would be maybe the $10 million.

Speaker #8: Okay. And last one for me. And I apologize if it's repetitive. But getting in Mark's question, our math on transport as per paper businesses about $20 a ton of inflation flowing through the system.

Speaker #8: I think you have a million four tons in North America, maybe a million tons in Europe. So that would imply I don't know, something 100 million dollars just in inflation there.

Speaker #8: Maybe I'm overestimating things. And then the 75 million pounds of polyethylene or resin buy that you were talking about, I think that was on a quarterly basis.

Speaker #8: It's up 30 cents give or take. Just between April and March. So that would imply just a lag on that would be maybe the 10 million bucks.

Gabrial Hajde: Again, I'm having a hard time reconciling kind of. I believe you, right? $8 to 10 million of inflation versus sort of the math that we've come up with independently. Maybe we're over or underestimating.

Speaker #8: Again, I'm trying to I'm having a hard time reconciling kind of and I believe you, right? 8 to 10 million dollars of inflation versus sort of the math that we've come up with independently.

Speaker #8: So maybe we're over or underestimating.

Paul Joachimczyk: Yeah, Gabe, I'd say, I'm gonna give hats off to our supply chain teams. They have done a phenomenal job negotiating things. We do have in our contracts too some delays in the way that pricing gets passed. You know, those surcharges and things that you're talking about for freight can hit quicker. Also, you think about how we optimize our transportation. We keep our plants close to our customer bases and things like that as well too. They've done a phenomenal job and, you know, we feel fairly confident in our numbers around the 8 to 10 as being a net number in exposure. The gross number, you know, you're probably absolutely spot on. It's definitely in that range. The teams have done a phenomenal job of mitigating it.

Speaker #7: Yeah, Gabe. I'd say I'm going to give hats off to our supply chain teams. They have done a phenomenal job negotiating things. We do have in our contracts too some delays in the way the pricing gets passed.

Speaker #7: Those surcharges and things that you're talking about for freight and hit quicker. Also, you think about how we optimize our transportation? We keep our plants close to our customer bases and things like that as well too.

Speaker #7: So they've done a phenomenal job. And we feel fairly confident in our numbers around the 8 to 10 as being a net number and exposure.

Speaker #7: So the gross number, you're probably absolutely spot on. It's definitely in that range. But the teams have done a phenomenal job of mitigating it.

Paul Joachimczyk: You know, like I said, I'm very happy with the progress that they've done.

Speaker #7: So like I said, I'm very happy with their progress that they've done.

Howard Coker: On the resin side of it's variable in terms of contracts, some of which are monthly, extending out to quarterly. That's the balance there. You've got to look at the anticipation of what was coming and the inventories that we were able to build. All of the above points to exactly what Paul said. Hats off to our procurement organization and how they've managed through this.

Speaker #8: And the resin side of it, it's variable in terms of contracts. Some of which are monthly extending out to quarterly. So that's a balance there.

Speaker #8: And you've got to look at the anticipation of what was coming and the inventories that we were able to build. And so all of the above points to exactly what Paul said.

Speaker #8: Hats off to our procurement organization and how they've managed through this. Understood. All right, guys. Good luck. I know it's a little out there.

Gabrial Hajde: Understood. All right, guys. Good luck. I know it's a lot out there.

Operator: Your next question comes from the line of Matthew Roberts from Raymond James. Your line is open.

Speaker #1: Your next question comes from a line of Matt Roberts from Raymond James. Your line is open.

Matthew Roberts: Thank you. A couple questions. They're all on RPC, so I'll just fire them off one by one here. First, what was RPC volume performance in 1Q? I believe that used to be in the slide deck. On April.

Speaker #7: A couple of questions there. All on RPC. So I'll just fire them off one by one here. First, what was RPC volume performance in one Q?

Speaker #7: I believe that used to be in the slide deck. On April.

Howard Coker: Uh, I don't-

Paul Joachimczyk: I'm not sure.

Howard Coker: Yeah, I don't have.

Speaker #8: Yeah. I don't have visibility of that level.

Paul Joachimczyk: Yeah

Howard Coker: visibility at that level.

Paul Joachimczyk: Matt, you know, when we did the reorganization to the two segments, we're really talking about consumer and total now. We're not gonna break out, you know, RPC cans. We're not gonna break out metal pack cans. We'll talk to any major events that happen within the quarter, but we're gonna keep that at more of the consumer total level.

Speaker #7: So Matt, what we're when we did the reorganization to the two segments, we're really talking about consumer and total now. We're not going to break out RPC cans.

Speaker #7: We're not going to break out metal pack cans. We'll talk to any major events that happen within the quarter, but we're going to keep that more at a consumer total level.

Matthew Roberts: Last couple of quarters. That'll be a couple more lines. I'm all good there. If I may, on the April promotional trends, I mean, last year within there was a customer on hold for working capital. Promotional environment changes from that customer now that the deal has closed, or has there been a broader promotional environment given how your customers are seeing cost inflation as well?

Speaker #7: Last couple of quarters. So that'll be a couple more lines. So all good there. And then if I may, on the April promotional trends, I mean, last year, within because there was a customer on hold for working capital.

Speaker #7: Promotional environment changes from that customer now that the deal has closed? Or has there been a broader promotional environment given your customers are seeing cost inflation as well?

Howard Coker: You were kind of breaking up, Matt, I think I understand your question. We're seeing it's slowly happening. It's one quarter post new owner of that particular brand. Seeing probably more activity on an international perspective than we have seen here in North America. Things are improving. The relationship is rock solid. Again, it does appear if you look over in Europe and Asia, that's really the starting point of focus then when the expectation is then we'll start seeing more activity here in North America over time.

Speaker #7: You were kind of breaking out, Matt, but I think I understand your question. We're seeing it's slowly happening. It's one quarter post new owner of that particular brand.

Speaker #7: And probably more activity on an international perspective. Then we have seen here in North America. But things are improving. The relationship is rock solid.

Speaker #7: And again, it does appear if you look over in Europe and Asia, that's really the starting point of focus. And when the expectation is then we'll start seeing more activity here in North America, over time.

Matthew Roberts: Last one, if I may, on RPC. In 2025, how big was frozen juice in that category? Any material headwinds in 2026 you could call out? Thank you.

Speaker #7: Question. And then last one, if I may, on RPC, in 2025, how big was frozen juice in that category? And any material headwinds in 2026?

Speaker #7: You could call out. Thank you. Oh, concentrate. Gosh, it's been a long time since anybody asked about that. There was still in production. Here probably more it is more related to the spirit side of things and mixers.

Howard Coker: Concentrate. Oh, gosh, it's been a long time since anybody asked about that. There was.

Matthew Roberts: My mistake.

Howard Coker: It's still in production here, it is more related to the spirit side of things and mixers. I guess I can say it's public. Minute Maid has discontinued relatively immaterial to us and that the volume had reached such low levels. It's just really not material at this point or prior to.

Speaker #7: But I guess I can say it. It's public minute made. It has discontinued relatively immaterial to us in that the volume had reached such low levels.

Speaker #7: So just really not material at this point. Or prior to.

Operator: Your next question comes from the line of George Staphos from Bank of America Securities. Your line is open.

Speaker #1: Your next question comes from a line of George Staphos from Bank of America Securities. Your line is open.

George Staphos: Hi, everybody. Some odds and ends just finishing up here. Can you talk about or give us some clarity on the size of the reels business within the portfolio? Remind us, you know, how big that might be for you. Secondly, related to some of the activity that didn't necessarily happen last year on the consumer side with some of your customers, are there any new products that are now being considered that you may actually get some business on for this year? If you were in a position, could you size any of that for us in terms of the revenue opportunity later in the year? Lastly, Howard, kinda longer term, you know, looking at slide 10, where you've got the dividend, and you do have a very good track record at Sonoco over the years.

Speaker #7: Hi, everybody. So odds and ends just finishing up here. Can you talk about or give us some clarity on the size of the real business within the portfolio?

Speaker #7: Remind us how big that might be for you. Secondly, related to some of the activity that didn't necessarily happen last year, on the consumer side with some of your customers, are there any new products that are now being considered that you may actually get some business on for this year?

Speaker #7: And if you were in a position, could you size any of that for us in terms of the revenue opportunity later in the year?

Speaker #7: And then lastly, Howard, kind of longer term, looking at slide 10 where you've got the dividend, and you do have a very good track record at Sunoco over the years.

George Staphos: Certainly, that dividend has been growing more quickly than the organic volume growth rate for the company. You're obviously doing a very, very good job with productivity and mix and all the things that has made Sonoco successful over the years. How long do you think you can keep growing the dividend at that rate if volume isn't growing at that rate? When do you think that we will get to a positive on volume in the businesses consumer and industrial? Is it Q3, Q4 2027? Any thoughts here would be great. Thank you, guys. Good luck in the quarter.

Speaker #7: Certainly, that dividend has been growing more quickly than the organic volume growth rate for the company. You're obviously doing a very, very good job with productivity and mix and all the things that has made Sunoco successful over the years.

Speaker #7: But how long do you think you can keep growing the dividend at that rate if volume isn't growing at that rate? And when do you think that we will get to a positive on volume in the businesses consumer and industrial?

Speaker #7: Is it third quarter, fourth quarter 2027? Any thoughts that would be great? Thank you, guys. Good luck in the quarter.

Howard Coker: Sure. George, yes. There's more than a few new products that'll be launched through H2 of the year. I can't tell you what the, you know, success rate's going to be and what type of volumes that's ultimately gonna materialize in. You know, pretty excited about some of what we see in the funnel. It's here in North America. It's also on the consumer side. On the real side of the business, it's doubled in the last multiple years, and it's probably about 10% of our industrial segment at this point in time. Again, continues to grow, and we certainly continue to support with capital. I guess that ties into your comment about dividend.

Speaker #8: Sure. George, yes. There's more than a few new products that will be launched through the second half of the year. I can't tell you what the success rate is going to be.

Speaker #8: And what type of volumes that's ultimately going to materialize in. But pretty excited about some of what we see in the funnel. It's here in North America.

Speaker #8: It's also on the consumer side. On the real side of the business, it's doubled in the last multiple years. And it's probably about 10% of our industrial segment at this point in time.

Speaker #8: But again, continues to grow, and we certainly continue to support with capital. I guess that ties into your comment about dividend. Yeah. I mean, the good news, if you look at the dividend payout ratio of where we are today as we've continued to grow it, it continues to go down.

Howard Coker: Yeah, I mean, the good news, if you look at the dividend payout ratio of where we are today, as we've continued to grow it continues to go down, as opposed to where we were not too many years ago, 6, 7 years ago. You're right. Productivities and other benefits to the P&L have certainly helped to support that dividend and the lowering of the payout ratio. When do we get back to growing? We've got some really exciting things in the funnel. If you'll recall, in February, we said, Look, we got a lot ahead of us over the next 2 to 3 years in terms of improving the bottom line for the company with the portfolio that we have today. There's incremental growth.

Speaker #8: As opposed to where we were not too many years ago, six, seven years ago. But you're right. Productivity and other benefits to the P&L have certainly helped to support that dividend.

Speaker #8: And the lowering of the payout ratio when do we get back to growing? We've got some really exciting things in the funnel that if you recall, in February, we said, "Look, we got a lot ahead of us over the next two to three years in terms of improving the bottom line for the company with the portfolio that we have today." There's incremental growth.

Howard Coker: We just talked to some of that. I'm also very excited about some fairly large innovations from a capital perspective, from a market perspective that are in the funnel that kind of overlap as we, over the next couple of years, continue to drive the SG&A and other savings within the simplified organization that will be starting to kick in with some new products that are indeed material in existing markets that we're excited about. Can't give you timing, can't give you amounts. Yeah, we like the trajectory of the dividend. We also like the trajectory of the payout ratio.

Speaker #8: We just talked to some of that. But I'm also very excited about some fairly large innovations from a capital perspective from a market perspective that are in the funnel.

Speaker #8: That kind of overlap as we over the next couple of years continue to drive the SG&A and other savings within the simplified organization. That we'll be starting to kick in with some new products that are indeed material in existing markets that we're excited about.

Speaker #8: So can't give you timing. Can't give you amounts. But yeah, we'd like the trajectory of the dividend. We also like the trajectory of the payout ratios.

Howard Coker: You know, we're gonna continue to do what we need to do to improve the bottom line while we work on, again, some pretty exciting things that are to come in the future.

Speaker #8: And we're going to continue to do what we need to do to improve the bottom line. While we work on, again, some pretty exciting things that are to come in the future.

George Staphos: Thanks, Howard. Good luck in the quarter.

Speaker #1: Thank you, Howard. Good luck in the quarter.

Howard Coker: Thanks.

Speaker #8: Thanks.

Operator: That concludes our question and answer session. I will now turn the call back over to Roger Schrum for closing remarks.

Speaker #1: And that concludes our question and answer session. I will now turn the call back over to Roger Schrum for closing remarks.

Roger Schrum: Again, thank you for your time this morning. As always, if you have any further questions, please don't hesitate to give us a call. Thank you. You can disconnect. </edited_transcript

Speaker #2: Again, thank you for your time this morning. And as always, if you have any further questions, please don't hesitate to give us a call.

Speaker #2: Thank you. And you can disconnect.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.