The speaker welcomes participants to the First Quarter 2024 Sealed Air Earnings Conference Call and introduces the company's Interim Co-CEOs and CFO. He mentions that a slide presentation is available for download and reminds listeners that statements made during the call are forward-looking and subject to various factors. He also mentions the use of non-U.S. GAAP financial measures and provides information on where to find corresponding U.S. GAAP results. The call is then turned over to the Interim Co-CEOs.

In the second paragraph, Emile Chammas thanks Brian for joining the first quarter earnings call and discusses SEE's financial performance. He mentions the company's sales and adjusted EBITDA, as well as their positive free cash flow. He then moves on to provide updates on the markets they serve, highlighting volume growth in the Food segment and stabilization in the Protective segment. He also discusses the company's progress on their CTO2Grow initiatives and their positive performance in the first quarter, with low single-digit volume growth and double-digit growth in automation. He concludes by discussing the outlook for the rest of 2024, with expected declines in beef production and strong cattle cycles in South America and Australia.

The company has successfully launched a compostable tray and is working on developing more sustainable packaging solutions. They are also addressing regulatory concerns regarding PVdC in their shrink bags and advocating for the essential role of packaging in mitigating food waste. The company is actively collaborating with suppliers, customers, industry associations, and government agencies to provide alternative barrier layers to PVdC. As the market leader in shrink bags, the company is well-positioned to help food processors navigate regulatory changes and offer market-leading solutions.

The first quarter revenue performance was as expected, with a decline in industrial portfolios globally. The Americas saw minimal growth while EMEA experienced a double-digit decline due to sustainability pressures and destocking. The electronics sector in Asia is improving, but uncertainties in China's economic recovery are impacting growth expectations. The company's organizational changes have led to positive momentum in the Protective segment, with a focus on sustainability and adding more fiber solutions to their portfolio. They are expanding their paper mailer offerings to match the versatility of plastic and hybrid mailers.

SEE has made significant developments in their sustainable fishing solutions, including more resilient paper coilers and fiber alternatives. They are also focused on improving their business fundamentals and accelerating cost savings initiatives. In the first quarter, they achieved a 1% decrease in net sales but a 4% increase in adjusted EBITDA.

In the first quarter, company volumes were flat compared to the previous year, with growth in the Food segment and declines in the Protective segment. Adjusted earnings per share increased by 5%, and the adjusted tax rate was higher due to impacts related to share-based compensation. Inorganic growth from Liquibox contributed 2% to total company sales. Lower pricing was seen in the Food and Protective segments, but volume improved in the Food segment due to carryover momentum and new customer wins. Adjusted EBITDA increased by 4% with margins improving by 110 basis points, driven by savings and productivity efficiencies. Food net sales were down 1% on an organic basis, mainly due to price declines but partially offset by positive volumes and market share gains in the poultry market.

In the first quarter, the company saw a 3% decrease in food adjusted EBITDA, mainly due to unfavorable net price realization. Protective first quarter net sales were down 7% organically, driven by lower pricing and volume declines in EMEA. However, Americas volume rebounded with strong automation solutions. Protective adjusted EBITDA was up 11%, driven by cost control actions. In terms of net sales by region, Americas was down 2%, EMEA declined 7%, and Asia Pac was flat. The company generated strong free cash flow of $78 million in the first quarter.

In the first quarter, the company saw improvements in earnings, reduced debt, and increased liquidity. They are focused on further reducing debt and reaffirming their full year outlook. They anticipate a slight decline in sales for the second quarter but remain committed to restoring fundamentals and deleveraging the balance sheet. The company thanks their team for their efforts in solving packaging challenges and opens the floor for questions.

The operator introduces Ghansham Panjabi from Baird as the first questioner. Ghansham asks Emile Chammas about the Food segment's performance and trends across different geographies. He also asks about the upside in the first quarter and whether Easter played a role. Emile responds, stating that the market trends are in line with initial expectations, with some regions performing better than expected. He also mentions new customer wins as a factor in the first quarter's strength. Dustin Semach adds that the strength was broad-based across regions and portfolios. The operator then introduces Adam Samuelson from Goldman Sachs, but there is no response.

The speaker, Dustin Semach, responds to a question about Sealed Air's transition towards sustainability and their efforts to regain lost share in the fiber-based protective packaging market. He explains that their portfolio already includes strong fiber-based solutions, but they are working to round it out and make it more comprehensive. He also mentions the company's commercial reorganization from a few years ago, which may have contributed to the loss of focus on the protective business.

The company has recently undergone a reorganization to focus more on its Protective business. This has led to increased excitement from both customers and internal teams, as well as positive feedback from distributors and direct customers. The company's guidance and financials already take into account the changes made through the reorganization. In terms of financial performance, the company saw improved EBITDA in the first quarter due to holiday carryover and cost takeout acceleration. However, the second quarter is expected to see a decline, possibly due to volume-related factors. The company is continuing to accelerate its CTO2Grow program.

The speaker discussed the potential risks associated with PVdC, mentioning a bill in California and a potential issue in Europe. They also mentioned a decline in volume and pricing for the company's products in the upcoming quarters, but noted that gains in the poultry market would continue to drive profits. A question was then asked by a participant from JPMorgan.

The speaker responds to a question about whether their company is lagging behind in technology due to competitors switching to a different material. They mention that PVdC and EVOH make up about 1/3 of their business and that they are not lagging behind because they offer both materials and have strong technical services and automation. The speaker also mentions that there are no specific dates for when PVdC may be restricted in California, but they are working to comply with any regulations.

The company is advocating for the use of PVdC to reduce food waste and is offering multiple solutions to address potential regulations. They are also seeing momentum building in their business, particularly in the food sector with new customer wins. Emile Chammas mentions that they are pivoting their digital and automation strategies, but will provide more details in future quarters.

In paragraph 15, Dustin Semach discusses the performance of the company's business segments. He mentions that the bags business, specifically in the poultry sector, is performing well across all regions due to strong retail demand and increased exporting activity. In the Protective segment, there are pockets of growth in areas such as APS offerings, box rightsizing solutions, and shrink foams and inflatables. Overall, the company remains cautiously optimistic about the future performance of the Protective segment.

In the upcoming quarters, Q2 will be similar to Q1, with flat volume in the Food segment due to previous discussed reasons. However, Q3 and Q4 are expected to show strong growth, driven by recent wins and overall business momentum. The company is also focused on expanding its automation solutions in certain areas where it currently lacks offerings, such as in the Protective and Fluid segments. Additionally, the company is exploring partnerships to enhance its digital commerce capabilities.

The company has seen a 22% increase in sales through their channel and has invested in capabilities to drive success. They are also introducing digital printing technology in the second half of the year. The executives are focused on maximizing opportunities and minimizing risks, including addressing cost structure and completing a commercial reorganization. They are confident in their strategies to overcome volume losses and are actively working to improve the business.

The speaker is excited about the progress their company has made in terms of commercial execution and portfolio development. They are optimistic about the intangible benefits that will come from these efforts. They are also focused on managing the transition to more sustainable options, such as using PVdC in food packaging. This layer is not in direct contact with food and can be changed at the customer's request, although it may affect the extended shelf-life properties.

The paragraph discusses the company's net price realization and how it impacted their business in the quarter. The net price realization was negative, with a $80 million decrease in revenue due to pricing pressure in the Protective and Food segments. However, this was partially offset by a $100 million benefit in direct materials and a smaller inflationary impact. Overall, the net price realization was $15 million worse than expected.

The company is experiencing increased price pressure but is offsetting it with productivity benefits. They are continuously driving productivity and have been targeting cost control, productivity, and optimization in their Protective business. They feel confident about their Food business, where they are the market leader and gaining share. They are optimistic about improvements and stabilization in the protein market.

The company is confident about their placement in the market, despite fluctuations in global proteins. They are focused on expanding their rollstock portfolio and targeting specific applications, such as extending their poultry business. They also see potential for growth in the tray market, particularly with sustainable alternatives to EPS. This growth is expected to continue beyond 2024.

The company is shifting its focus to completing its fiber-based portfolio and expanding automation capabilities in the Protective segment. The paper mailers market is a promising opportunity due to e-commerce trends. The rest of the portfolio, including utility products like BUBBLE WRAP and foam, showed weakness in Q1 but there is optimism for the second half of the year. The company also sees potential growth in the fluids segment, particularly in the foodservice industry and with increasing pressure for sustainability and recycling.

The company is well positioned to take advantage of sustainability trends and drive growth through its own innovations. There has been a negative impact on net pricing due to inflationary pressure, but the company is focused on managing costs and maintaining net price realization for the rest of the year. The first quarter saw positive volume performance and leverage for the business.

The company has seen increased operating leverage as volume has been restored in the Food and Protective businesses. This has been driven by cost-consciousness and productivity improvements. The impact of this is already included in the company's guidance. In terms of the bridge, the company is expecting a plus $10 million net from CTO2Grow and a minus $70 million net from incentive comp and net price/cost. Flat volume would result in a flattish EBITDA year-on-year outlook, but it is unclear how volume will progress from here. Food outperformed while Protective is still down, but it is uncertain if this trend will continue.

The company expects volume growth of about 1% for the full year, driven by strength in the Food business. Protective business is expected to improve in the second half of the year, with a decline of 4% in Q2 and potential inflection in Q4. Net price realization is expected to be negative $80 million, offset by a positive $90 million and a negative $40 million related to bonus restoration. EMEA may be weaker for Protective.

The speaker addresses concerns about the impact of destocking and sustainability on demand and the company's margin profile. They mention a decline in the EMEA business in Q1 but expect improvement in the following quarters. The shift to fiber is accelerating in EMEA, but the company is prepared to participate in this growth and offset any sustainability pressures.

The speaker discusses the cyclical rebound of business and the company's anticipation of an L-shaped recovery. They mention low visibility in the current environment and how they expect to participate in the rebound. The next question asks about customer demand for the company's product offerings in the Protective and Food segments, and how this may affect revenue and earnings.

The speaker states that their company is able to offer a variety of products to their customers and is not constrained by their supply chain. They are focused on expanding their fiber footprint based on customer demand. The level of service provided depends on the portfolio sold by each distributor. The company's technical service is a competitive advantage.

The company's distribution and direct customers recognize the value of their products. The company offers both types of materials and bags based on what their customers want. They are constantly in dialogue with their customers to understand their needs and how sustainability is impacting their supply chain. The company is well positioned to continue offering different types of materials and bags. They are also working on improving their rollstock and are excited about their fluids and liquids business. The cost of sustainability is already embedded in their current capital outlay and future plans.

Gabrial Hajde asks about automation and its impact on the company's performance in the first half of the year. Emile Chammas responds by saying that while automation sales were up in the first quarter, they are expected to be flat for the year due to various factors such as delayed CapEx projects and hesitations from customers. The book-to-bill ratio is at one, indicating that they are burning through backlog. However, the company remains optimistic about the future and believes that cyclicality will come back. Chammas concludes by thanking everyone for their time.

The speaker is pleased with the first quarter results and optimistic about the momentum and progress in the business's transformation. They look forward to speaking again in August and the conference call is now over.

This summary was generated with AI and may contain some inaccuracies.