The paragraph is an introduction to the Q3 2024 Sealed Air Earnings Conference Call. The operator welcomes participants and notes the call is in a listen-only mode until the Q&A session. Brian Sullivan, from Investor Relations, introduces the speakers: Patrick Kivits, CEO, and Dustin Semach, President and CFO. He mentions that a slide presentation is available on the company's Investor Relations webpage. Brian cautions that the call includes forward-looking statements, advises reviewing related disclosures, and notes that financial measures discussed may not conform to US GAAP, with reconciliations available in the appendix of the presentation. The floor is then turned over to Patrick and Dustin.

In the third quarter earnings call, Patrick Kivits highlights the company's recent initiatives, which include engaging with customers, distribution partners, and investors to enhance customer experience and shareholder value. A key development is the reorganization into two verticals, Food and Protective, to cater to distinct markets and needs. The company aims to return to its core strengths in material science and automation to provide top-tier packaging solutions. Kivits emphasizes the importance of having the right team to drive progress and notes the hiring of Byron Racki to lead the Protective vertical, bringing his extensive industry experience to the role.

The paragraph discusses the recent leadership changes and strategic initiatives at the company to drive growth and transformation. Steve Flannery is appointed as Head of the Food vertical to leverage his 25 years of experience at Avery Dennison. Emile Chammas remains Chief Operating Officer to optimize supply chains for both Food and Protective sectors. Belinda Hyde is the new Chief People Officer focusing on enhancing employee experience and leadership capabilities. President and CFO Dustin Semach is working on a long-term plan for shareholder value and product transformation. The Board has appointed Tony Allott as a new Director, bringing his extensive packaging sector experience. These changes aim to align operating units and enhance functions such as innovation and customer service within each vertical.

The paragraph discusses the company's ongoing transformation efforts, focusing on adapting to market trends, enhancing customer focus, and achieving sustainable growth across its business verticals. The Food business is experiencing above-market growth due to commercial excellence and new product launches, while the Protective segment is gaining market traction with sustainable packaging solutions. A notable partnership with Best Buy involves offering high recycled content packaging and recycling initiatives. The company aims to further align its offerings with customer sustainability needs while addressing packaging challenges and plans to enhance operationalization, improve execution, and bolster talent in the immediate future.

The paragraph outlines Sealed Air's focus on growing beyond its shrink bags business by enhancing case-ready, fluid, and liquid solutions, while navigating sustainable packaging transitions and improving pricing. The company is implementing cost reduction initiatives to enhance profitability amid volume and price performance challenges. The paragraph also highlights the impact of Hurricane Helene on their operations in the Carolinas, affecting over 1,500 employees, but applauds the team's efforts to maintain operations and safety. Dustin Semach reports a 3% decline in third-quarter sales and adjusted EBITDA compared to the previous year, with adjusted earnings per share up by 3% and a tax rate of 24%.

The paragraph discusses the company's financial performance in the third quarter of 2024. The tax rate decrease was influenced by the jurisdictional income mix and non-recurring items from the previous year. The company had 146 million diluted shares outstanding. Organic sales fell by 2% due to lower pricing in both the Food and Protective segments, although this was less negative compared to prior quarters as 2023 pricing actions waned. Food segment volumes grew globally, offsetting declines in the Protective segment in the Americas and EMEA. Adjusted EBITDA decreased by $9 million to $276 million, with margins slightly down at 20.5%. Lower volumes and unfavorable pricing in the Protective segment were partly balanced by higher volumes, favorable pricing in the Food segment, and productivity-driven cost reductions. Food net sales increased by 1% to $898 million due to volume growth, particularly in protein markets, despite lower pricing in the Americas and EMEA. Strong demand in protein end markets and specific regions compensated for decreases in poultry production.

In the third quarter, the company's case rate solutions saw growth due to recovery in the Roll-Stock business and increased market share in retail, although protein sales declined. The Food segment's adjusted EBITDA increased by 6% to $206 million, driven by volume growth and price realization. Conversely, the Protective segment's net sales dropped by 8%, impacted by weak industrial portfolios and reduced automation in fulfillment. APAC region volumes grew slightly, but America's performance declined due to lower pricing. Protective adjusted EBITDA fell by 21% due to lower volume and unfavorable pricing, despite cost-saving measures.

The paragraph discusses financial performance and future outlook for a company. EMEA experienced a 6% organic decline due to lower pricing and decreased volumes in Protective, while APAC grew by 3% organically due to Australian cattle cycle benefits and fulfillment automation gains. The company achieved strong free cash flow of $323 million, significantly higher than $183 million the previous year, thanks to improved working capital management. The net leverage ratio was reduced to 3.7 times, with a liquidity position of $1.4 billion. The company aims for a net debt to adjusted EBITDA ratio below 3.5 by end of 2025. Despite soft Protective volumes due to portfolio issues, Food business momentum is promising. Q4 sales are projected at $1.3 billion, with a slight year-over-year volume increase.

The paragraph discusses a financial outlook update from a company, noting expectations for adjusted EBITDA to stay at the midpoint of the guidance range due to cost control measures. It mentions raising the guidance midpoint for adjusted EPS due to decreased interest expenses and better capital discipline. Free cash flow guidance is also raised to $400 million due to improved working capital. The company plans to work with a new management team to develop growth and transformation plans, influencing outlooks for 2025 and beyond. Immediate focus includes accelerating cost reduction and operational excellence initiatives. The company reorganized into Food and Protective verticals, expected to enhance long-term growth. The paragraph ends with a transition to a Q&A session, where George Staphos from Bank of America Securities questions the weaker than expected performance of the Protective segment in the fourth quarter.

In the article paragraph, Dustin Semach discusses expectations for the Food and Protective segments' performance in the fourth quarter. Both segments are expected to increase sequentially in volume. Food is projected to rise from $898 million in Q3 to approximately $920 million in Q4, while Protective is expected to grow from $447 million to about $460 million, though it will remain down year-over-year. The uptick in Protective is attributed to seasonality, especially the strong holiday season in the US. Fiber is performing better than poly within the Protective segment but only constitutes 15% of the business, limiting its impact on offsetting broader declines. Different portfolios within Protective are experiencing varied behaviors.

The paragraph discusses the business performance and future expectations in specific segments of the APS (Automated Packaging Systems) business, particularly relating to mailers, auto bagging, inflatables, and void-fill. The company's mailers and auto bagging, whether fiber or poly, have performed well, as have inflatables. However, there is pressure in other areas like void-fill. Anthony Pettinari from Citi asks for an update on the expected volume performance in Protective, particularly regarding void-fill and automation. Patrick Kivits responds by noting that void fill and mailers, primarily involving fiber transitions, form about 10% of their Protective business. He mentions visiting the Pack Expo in Chicago, where he observed an extensive range of paper offerings, highlighting their focus on e-commerce and transitioning towards more paper-based solutions.

The paragraph discusses the company's recent success with integrating fiber-based offerings, highlighted by a significant win with Best Buy, despite being late to market. They anticipate further growth in this area but are still evaluating its impact on their mailer space, with more insights expected by February. The company's transformation strategy includes market understanding and growth strategies, set to be clearer by February, with a focus on gaining insights for Protective up to 2025 and beyond. The void-fill market is expected to improve next year after a major customer loss earlier impacted guidance. Investment and automation have faced challenges due to capital deployment issues, but market conditions are now becoming more favorable. The company's book-to-bill ratio for both Food and Protective has remained stable at 1:1 throughout the year.

The paragraph discusses a shift in the company's operating structure back to a vertical organization model, similar to one it had before 2018. This change is not merely about reorganizing; it represents a new approach to market strategy, value proposition, and portfolio. The goal is to focus on growth within specific areas, with leaders motivated to drive development in their respective verticals, emphasizing commonalities and enhancing their growth strategy.

The paragraph discusses a shift in the company's go-to-market strategy after realizing that a focus on visionary initiatives had masked underlying issues, particularly a decline in the Protective sector. The company is addressing concerns from distribution partners who felt competition from online channels by reaffirming their importance in the strategy. They are working on gaining traction through collaboration between internal and partner sales teams. Additionally, the company is transitioning its portfolio from plastic-based to fiber-based offerings and aiming for growth in underpenetrated areas, particularly on the Food side. Innovation and customer service are being reorganized to improve customer proximity and enhance service.

The paragraph discusses the performance and strategy updates of a company, focusing on its Food and Protective business segments. The Food segment is already showing improvements and market share gains across regions and product lines due to an operating model shift. For the Protective segment, a transformation plan will be further detailed by February. Dustin Semach addresses a question from Stefan Diaz about the company's CTO2Grow initiative, confirming that they are on track to achieve $90 million in cost savings, with the original target being $140 million to $160 million, through measures like network optimization and reducing general and administrative expenses. This initiative was initiated in mid to late 2023, and about $50 million in savings is expected next year.

The paragraph discusses the company's focus on addressing a drop in volume within its Protective segment in Q3 and Q4, with plans to increase efforts in the upcoming year. They intend to finalize these plans over the next two to three months and incorporate them into the 2025 outlook. Currently, they've identified at least $50 million in actions for next year, with an unspecified additional amount under consideration. The main goal is to drive profitability, emphasizing a stronger focus on Protective over Food due to their respective performances. The company's new business model promises better understanding of cost structures for each vertical. Josh Spector from UBS asks about potential strategic changes, such as divestment opportunities, within these segments.

The paragraph discusses a company's focus on operationalizing recent changes and receiving positive feedback from distribution partners about their go-to-market strategy. The company is confident about the direction of their fiber offering and has been addressing issues related to accountability and verticalization. They see opportunities for business improvement and are open to rationalizing their footprint in less successful areas. Overall, they feel comfortable with their current changes and aim to drive further change within their organizations. After this, the operator introduces a question from Mike Roxland of Truist Securities, who asks about the shift to verticals and whether the separation of business units, specifically Protective, could occur with minimal dis-synergies. He also inquires about food margins, mentioning past guidance and current performance, and seeks insights on margin progression. Patrick Kivits answers by reaffirming the purpose of verticalization is for organizational effectiveness, and leaves the food margin question to Dustin.

The paragraph discusses a strategic approach to improving operational effectiveness by creating clear responsibilities and accountability through verticalization and P&L structures, helping prevent market traction loss and fostering innovation driven by customer demand. It highlights a reorganization aimed at reassessing and optimizing cost structures to support growth expectations and enhance long-term sustainable growth across different business units. The focus is on maximizing individual business value and achieving higher utilization through volume growth in various regions and product lines.

In the paragraph, an analyst named Andrew, substituting for Chris Parkinson from Wolfe Research, inquires about Food volume trends, specifically regarding protein substrate and new product success, for the current quarter and into the fourth quarter of 2025. Dustin Semach responds, noting that Food volumes grew by 2.4% with an underlying strength of 4% in the third quarter, with strong performance expected in the fourth quarter as well. He highlights that the U.S. beef cycle performed better than anticipated this year, which was initially seen as a market headwind. However, this may present more challenges in the fourth quarter and into 2025, particularly affecting volume in bags.

The paragraph discusses the company's performance and outlook, focusing on its success in the Latin American beef market and competitive wins in EMEA. The company expects this momentum to continue into the fourth quarter and 2025, although it is still evaluating market dynamics in the protein sector. U.S. beef stock is performing better this year, potentially impacting timelines. Uncertainty remains, and the company will provide more clarity in February. An unidentified analyst is unable to ask a question, so the operator moves to Edlain Rodriguez from Mizuho, who asks about the firm's guidance and uncertainty since the company has exceeded expectations for three consecutive quarters. Patrick Kivits responds, acknowledging the valid question.

In the paragraph, the speaker discusses the company's financial performance and expectations, specifically commenting on the Protective and Food businesses. In Q3, they observed expected performance in these segments, with the Protective business not meeting initial volume expectations while the Food business showed strength despite some challenges. The Food business has improved throughout the year, contrasting with the underperformance in the Protective segment due to portfolio challenges. As they enter Q4, the company's guidance reflects these mixed results, where strong performance in Food is offset by weaknesses in Protective. The outlook has shifted from initial expectations of an L-shaped recovery in Protective, affecting overall guidance.

In the paragraph, Gabe Hajde from Wells Fargo Securities asks about potential impacts on the company's financials, particularly related to weather events and working capital variability. Dustin Semach clarifies that there are no material discrete impacts from Hurricane Helene on their fourth-quarter guidance, attributing this resilience to their team's efforts. He also acknowledges that the variability in cash flow, which is broader than the EBITDA range, is likely related to working capital. Once the desired working capital level is reached, it should stabilize and move with company growth, though there could be some unwinding in the future. Patrick Kivits adds agreement to Dustin's comments.

The paragraph discusses the company's financial performance and outlook following a recent hurricane, with the impact on costs being minimal. Dustin Semach highlights the company's success in managing working capital and free cash flow, emphasizing a high conversion rate from adjusted net income to free cash flow. There is a one-time benefit from restoring compensation pools, increasing compensation expenses by $30 million. While working capital is mostly normalized, improvements in inventory are anticipated for the next year. The company expects a strong free cash flow performance next year, aligned with profit projections to be detailed in February.

In the given paragraph, Phil Ng from Jefferies asks about the potential for positive price/mix developments in the company's Food and Protective businesses looking towards 2025, considering the strong demand observed. He also inquires about the stability of pricing and the competition landscape. Dustin Semach responds by acknowledging the relevance of the question and notes that going into the next financial year, pricing appears more favorable due to a flattish price spread and stable resin input costs. He also highlights the stable input costs and reduced volatility, which contribute positively to pricing dynamics. However, he mentions ongoing pressures in the Food business, particularly with large industrial processors.

The paragraph discusses the expected pricing dynamics for the upcoming year compared to 2024. It suggests that there will be an improved pricing and cost scenario, although they are still working through specifics for the Food sector. In the Protective sector, there has been a narrowing of price reductions due to supply chain factors and competitive dynamics, with a 1% price reduction expected in Q4 impacting next year. The competitive landscape is affecting pricing due to volume losses in areas like poly and void fill. Despite challenges, there is optimism for better performance next year compared to 2024, with the potential for improvement on their negative $60 million net price revenue (NPR) this year. The conversation ends with an acknowledgment of a question from Philip Ng and greetings from Matt Roberts of Raymond James.

In the paragraph, Patrick Kivits discusses the company's efforts to improve their fiber-based mailer products, which are meant to replace traditional plastic mailers. Although their product is theoretically as protective as competitors', it suffers from a perception issue. The company is working on enhancing both perception and actual protection of its mailers, with new prototypes being launched to boost sales. As for void fillers, the focus remains on mailers due to pressure in the void filler market, where customers are trying to minimize void usage. Despite this, there is still significant growth potential if the right protective applications are developed.

The paragraph is from a discussion on the role of automation and capital investment in paper mill operations, emphasizing the faster implementation due to refined offerings and lower capital intensity compared to other sectors like Food. It also highlights the integration of automation with paper usage in void filling, which will take longer for portfolio changes to be effective. George Staphos from Bank of America Securities queries about the importance of Instapak in the portfolio, the emphasis on sustainability preferences between fiber and poly depending on company size, and the potential impact on price competitiveness and variability as the business transitions to fiber. Patrick Kivits acknowledges the question, highlighting its significance.

The paragraph discusses the distinction between consumer-facing and industrial products, emphasizing that the major shifts occur where products interact with consumers. Instapak, which serves the industrial market, is noted for its importance due to its effective protection of heavier, higher-value products, despite the trend towards fiber-based alternatives, which lack the same level of protection and are more costly. The industrial segment is more price-sensitive and less influenced by consumer preferences compared to the consumer market. Additionally, differences in recycling opportunities between consumer and industrial markets are highlighted. The development of fiber-based alternatives aims to offer customers options between traditional poly and new materials, despite the higher cost associated with fiber-based products.

In the paragraph, Patrick Kivits emphasizes that customers now have the option to choose fiber-based products without needing to look elsewhere, highlighting price predictability and convenience. He expresses gratitude for the opportunity to discuss Sealed Air's ongoing transformation and acknowledges the efforts of the global team in addressing packaging challenges. The conference concludes with thanks from both Patrick Kivits and the operator.

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