Sealed Air(SEE) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net sales of $1.33 billion for Q1 2024, down 1% on a constant currency basis compared to the previous year [68] - Adjusted EBITDA for the quarter was$ 278 million, an increase of 4% year-over-year, with margins at 20.9%, up 110 basis points [70] - Adjusted earnings per share were $0.78, reflecting a 5% increase compared to the same period last year [40] Business Line Data and Key Metrics Changes - The Food segment achieved low single-digit volume growth across all regions, primarily driven by the shrink bag business [25] - Protective segment net sales were$ 461 million, down 7% organically, primarily due to lower pricing and volume declines in EMEA [43] - Food adjusted EBITDA was $190 million, down 3% with margins at 21.8%, while Protective adjusted EBITDA was approximately$ 90 million, up 11% with margins at 19.4% [71][72] Market Data and Key Metrics Changes - In the Americas, volume growth was less than 1%, with growth in box rightsizing solutions offset by industrial weakness [27] - EMEA experienced a double-digit volume decline, driven by sustainability pressures and destocking [27] - Asia Pacific volumes were flat, with tailwinds from the Australian cattle cycle offset by continued industrial market weakness [73] Company Strategy and Development Direction - The company is focused on enhancing its rollstock portfolio and expanding its fiber-based offerings, particularly in response to e-commerce trends [4][5] - There is a commitment to sustainability, with ongoing development of compostable and recyclable packaging solutions [34][35] - The company aims to achieve approximately $90 million in year-over-year cost savings in 2024 through cost control initiatives [39] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the future, noting improvements in customer profitability and the potential for cyclicality to return [15] - The company anticipates a slight sequential decline in sales for Q2, reflecting a low visibility environment and subsiding holiday demand [75] - Management reaffirmed full-year 2024 guidance, emphasizing the need for continued focus on transformation and cost management [46][47] Other Important Information - The company generated positive free cash flow of$ 78 million in Q1 2024, compared to a negative $13 million in the same period last year [33] - Total liquidity position was reported at$ 1.4 billion, including $353 million in cash [74] Q&A Session Summary Question: What drove the upside specific to Food in the first quarter? - Management noted strength in Latin America and Australia, driven by holiday demand carryover and new customer wins [50][51] Question: What factors allowed the company to fall behind in fiber-based solutions? - Management acknowledged the need to enhance focus on fiber-based offerings and emphasized ongoing efforts to complete the portfolio [81] Question: Can you quantify the holiday carryover impact on Q1 results? - Management indicated that the holiday demand contributed positively to Q1 results, but expected a decline in Q2 due to normalization [56] Question: What are the risks associated with PVdC and regulatory changes? - Management confirmed that PVdC is critical for food preservation and is actively engaging with regulators to advocate for its continued use [87][88] Question: What keeps management awake at night regarding future opportunities and risks? - Management highlighted the importance of addressing cost structure and sustainability challenges while maximizing opportunities in the market [97]