The speaker, Brian Sullivan, introduces the Q2 2024 Sealed Air Earnings Conference Call and introduces the participants. He also mentions that the call will be recorded and directs listeners to the company's website for a slide presentation. He also mentions that statements made during the call are forward-looking and encourages listeners to review the company's financial information. The call will include non-US GAAP financial measures, which will be reconciled to US GAAP. Sullivan then hands the call over to Henry Keizer, Patrick Kivits, and Dustin Semach.

In the second quarter earnings call, Sealed Air's CEO Henry Keizer announces the hiring of Patrick Kivits as the new CEO and praises the leadership of Dustin and Emile. Kivits is expected to drive growth and transform the company, with support from the rest of the management team. Kivits expresses excitement to join the company and acknowledges its strengths.

The writer has a long-standing respect for Sealed Air and is excited about the opportunities ahead for the company. They are focused on finalizing the management team, accelerating commercial transformation, and adjusting cost optimization programs. The writer is also meeting with customers and visiting facilities to gain insights and understand challenges. They are actively involved in strategic efforts for the Protective business and plan to update investors on progress. The writer looks forward to sharing updates on the company's progress in the future.

The company had a successful second quarter with strong sales and adjusted EBITDA, despite challenges in the Protective segment. There was mid-single-digit volume growth in the Food segment, with positive cash flow and a sustainability award for innovative packaging solutions. The company's Food business saw growth in both the proteins and fluid markets, except for equipment due to customer capital constraints. Beef production was better than expected in the US, while South American and Australian cycles remained at their peaks.

In the second quarter, protein production led to increased inventory and anticipated a busy season. Foodservice demand remained strong, especially with the early start of the US tomato season. The US cattle cycle is expected to weaken in the second half, leading to a lighter seasonal pattern for the rest of the year. Sales performance met expectations, with weak industrial portfolios and declining volume and fulfillment portfolios. The Americas and EMEA regions experienced declines in volume, but server-related electronic businesses showed improvement in Asia. The company does not expect volume to improve in the Protective sector until 2025 and is focusing on cost optimization strategies in the meantime.

In the second quarter, net sales were down 2%, but adjusted EBITDA increased by 2% to $285 million. Volumes were up 1%, with growth in the Food segment and declines in Protective. Adjusted earnings per share were $0.83, up 4% from last year. The adjusted tax rate was 25.5%, lower than the previous year. Pricing was down 3%, but volume returned to 1% growth. Adjusted EBITDA margins were 21.2%, up 90 basis points.

In the second quarter, the company's performance was driven by volume growth in the Food segment, productivity efficiencies, and cost-saving initiatives. However, this was partially offset by unfavorable net price realization and protective volume declines. Food net sales were up 2%, while Protective net sales were down 9% organically. Food adjusted EBITDA increased by 7% and Protective adjusted EBITDA decreased by 15%. The Americas region saw a 2% decline in net sales, while EMEA declined by 4% due to lower pricing.

Despite market softness in the Protective segment, strong consumer demand for food has helped offset the weakness in the APAC region. The company has generated strong free cash flow and is focused on reducing debt. However, they do not expect a turnaround in the Protective business in the near future and are working on transforming and improving their performance in that segment. They are also addressing sustainability concerns in their portfolio to drive growth and mitigate churn.

In the paragraph, the speaker discusses their company's current operations and challenges, including limited visibility, pressure in end markets, and weakening consumer and macroeconomic trends. They mention staying close to channel partners and customers to understand the impact on the upcoming holiday season and their volume outlook. They also mention outpacing expectations on free cash flow and minimizing interest expense. The speaker then moves on to discuss their commitment to restoring underlying fundamentals and driving growth through transformation, market execution, and cost savings. They conclude by mentioning the Q&A session and a question from an analyst about changes under the new leadership and the Board's plans.

Patrick Kivits has recently joined the company and is focusing on completing the senior leadership team and addressing commercial challenges. He values transparency and empowerment in the organization and plans to listen to the voice of customers. He also emphasizes accountability and specialization in key areas.

Adam Samuelson asks about the outlook for the second half and how volume expectations have changed for Food and Protective. Patrick Kivits explains that there has been strong growth in the Food sector due to forward movement and share gains, while Dustin Semach adds that there are challenges in the Protective market due to sustainability concerns and the need to review and focus on areas with higher growth potential.

The Food business has shown strong performance over the past year, with a 4% increase in volume expected for the full year. This is due to improvements in the North American market, competitive wins in Latin America, and consumer strength in EMEA. However, the Protective business has seen a decline in performance. Overall, Food continues to outperform while Protective is weakening.

George asks about the effectiveness of the CTO2Grow initiative in light of Protective not meeting expectations and what Patrick's experience at WestRock will bring to Sealed Air.

The CTO2Grow division is still in its early stages and is currently focused on sales force effectiveness. The company is also investing in commercial areas to drive accountability and is on track to meet its targets for 2023 and 2024. The recently established operating units are also focused on driving accountability and improving commercial execution for Protective.

The company is facing challenges in closing portfolio gaps and the market is tough, particularly in the deteriorating sector. They are working to address these issues with new leadership but expect the challenges to continue throughout 2024 and 2025. When asked about free cash flow, they did not change their guidance range but believe their performance in the first half has been strong and they are being conservative in their estimates.

The speaker discusses the company's performance in the first half of the year, which was impacted by lower incentive compensation payments. They remain optimistic about the second half and expect strong results. The speaker also mentions the progress made in the Food division compared to the Protective division. They provide some updates on EBITDA growth and mention potential headwinds such as price and volumes. They also discuss the potential for upside in their CTO2Grow target.

The speaker comments on the net price realization and explains that the pricing benefit is due to strength in the Protective business. The rest of the factors, such as resin cost and labor inflation, are in line with expectations. The guidance for the second half of the year is affected by the early start of the US tomato season and stocking up by large customers. The speaker summarizes the big buckets for the second half, including a net price realization of $70 million, volume increase of $20 million, bonus restoration decrease of $40 million, and $90 million in cost take-out to grow. The next question is about food automation sales, which grew double digits last quarter but slowed in 2Q.

Patrick Kivits and Dustin Semach discuss Sealed Air's automation portfolio and strategic efforts concerning Protected. Kivits highlights the strength of Sealed Air's automation portfolio in the food segment and its positive impact on business. However, the interest rates have caused some depression in this area. In terms of Protected, Sealed Air is focusing on void fill and paper mailers, conducting deep dives to understand their value proposition and address any gaps in their portfolio. Dustin Semach adds that the first quarter still had high backlog from the previous year.

The company discussed the strength of their bookings for the next few years, but acknowledged a slowdown in bookings for the second half of 2023 due to capital constraints for some of their biggest customers. They believe this is deferred maintenance and expect to see pent up demand in the future. Currently, their book-to-bill ratio is approximately 1 and they are focused on new commercial offerings and sales efforts in the Food automation business. The next question from an analyst was about the company's improved outlook for net price, which went from a projected decrease of $80 million to $70 million. The company did not provide specific reasons for this improvement.

Patrick Kivits and Dustin Semach discuss net price headwinds and negotiations with customers. Kivits notes that most of the deflationary effects from last year are behind them, and there is uncertainty about future raw material inflation or deflation. Semach adds that pricing has held up well in the Protective sector, but there is excess capacity in the void-fill sector. He also mentions that labor inflation costs have impacted net price realization, but this should narrow in the second half of the year. They do not expect any major changes in resin input pricing at this time.

An analyst asks about the performance of Sealed Air's liquids franchise, specifically the integration of Liquibox. The company believes that this market is growing and they are actively managing their portfolio to take advantage of this. They also mention the successful integration of their preexisting CRYOVAC fluids business and expect mid-single-digit growth overall. The integration efforts have improved and any issues are now behind them, with a focus on market execution.

The speaker discusses the company's entry into the foodservice market through the acquisition of Liquibox, which has performed well in the first half of the year. They plan to take a different commercial approach to reaccelerate volumes, potentially through innovation and improving KPIs for the sales force. The speaker, who has a background in paper packaging, also plans to go after the market for Protective packaging and believes the company has the potential to win in this area.

The company is facing a challenge in selling different products and becoming experts in various areas. Management is working to identify core products and focus on areas where they have an advantage. The company is particularly focused on the fiber transition, which is stronger in the void filling and paper mailer segments. Sustainability is also an important aspect of the company's portfolio, not just in terms of replacing plastic with paper, but also in terms of food safety and shelf life. The company is working to address gaps and improve the performance of certain products in the market. This will be a focus in the coming quarters.

The speaker, Patrick Kivits, responds to a question about the challenges facing the Protective business within Sealed Air. He discusses the market trends of dematerialization and cyclicality, and how these factors are affecting the business. He also mentions the importance of strong execution in order to overcome these challenges.

The speaker discusses the company's plans to improve its commercial execution and control costs in order to address challenges in the Protective segment. They mention the need to review the core of this segment and make decisions on it in the next few quarters. Despite current pressures, the company sees potential for growth and synergy in its portfolio. The speaker also addresses concerns about volume and price in the Protective segment, noting that they expect continued pressures in 2025 but anticipate improvements in the second half of the year. They mention potential factors such as competition and resin timing that could impact these metrics.

The speaker explains that they are not seeing a positive volume trend for 2025 due to challenges in closing sustainability gaps and gaining a fair share in higher-growth markets. They are working on improving commercial execution and focusing on cost optimization. The speaker also mentions that resin pricing is currently in line with pre-pandemic levels and does not foresee significant volatility unless there is an unexpected event.

The speaker discusses the importance of managing price and cost dynamics in the Case Ready business. They mention that they have seen significant volatility in input costs over the past few years, but expect it to ease out in 2024 and normalize in 2025. They also mention that they have gained share in the Case Ready market, particularly in North America, and plan to hold an Analyst Day in the future to discuss their longer-term goals for EBITDA, cash flow, and stock price.

The speaker discusses how the company is focused on rounding out their automation solutions in the poultry industry, particularly with overwrap film. They mention a partnership with Austin and their three-pronged approach to offering leading-edge materials science, technical and field service, and equipment. The company also discusses their efforts to win back share losses from a previous resin crisis and their success with strength bags in Latin America.

The speaker discusses the company's recent success in Latin America and EMEA, as well as their ongoing efforts to address challenges and maximize opportunities. They also mention the recent addition of a new CEO and their plans for future updates on the company's progress. The speaker concludes by thanking the company's team for their contributions.

The program has ended and the participants are instructed to disconnect.

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