Sealed Air(SEE) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q1 2025 were $1.27 billion, down 2% on a constant currency basis [22] - Adjusted EBITDA was $276 million, up 2% on a constant currency basis [22] - Adjusted earnings per share increased by 4% as reported and 9% on a constant currency basis, reaching $0.81 [22][24] - Adjusted EBITDA margin improved to 21.7%, up 80 basis points from the previous year [24] Business Line Data and Key Metrics Changes - Food segment net sales were $852 million, up 1% on an organic basis, driven by pricing actions and marginal volume growth [25] - Protective segment net sales were $420 million, down 8% organically, primarily due to volume declines of 6% [26] - Food adjusted EBITDA was $203 million, up 7% as reported and 10% in constant currency, with an adjusted EBITDA margin of 23.8%, up 200 basis points [25][26] Market Data and Key Metrics Changes - The industrial food processing markets were relatively flat compared to the previous year, with the South American cattle cycle remaining strong [14] - In North America, the beef market performed slightly better than expected, while pork and turkey markets were weaker [14] - Box shipments in the U.S. were down low single digits in Q1, reflecting declining consumer confidence [19] Company Strategy and Development Direction - The company is focused on transforming its operations by reorganizing into two market-focused businesses: Food and Protective [5][6] - There is an emphasis on enhancing leadership and aligning commercial, innovation, and supply chain teams to better serve customers [6] - The company is actively reviewing its supply chain to mitigate potential tariff impacts and minimize inflation [7][8] Management's Comments on Operating Environment and Future Outlook - Management noted a cautious approach due to a potentially weakening demand environment and ongoing trade policy uncertainties [10][11] - The company expects to gain more visibility into trade policies and market demand as the year progresses [12] - Management reaffirmed full-year guidance, anticipating modest volume softness but offset by improved foreign exchange outlook [30] Other Important Information - The company is targeting to drive net debt to adjusted EBITDA to approximately 3.0 times by the end of 2026 [28] - Cash flow was a use of $12 million in Q1, compared to a source of $78 million in the same period last year [28] Q&A Session Summary Question: What specific progress is being seen in the Protective segment? - Management indicated that volumes were down 6% in Q1 but noted that large customer churn has minimized since Q1 2024, leading to expected sequential improvement [35][36] Question: How is customer satisfaction being measured? - Management confirmed that customer satisfaction is being tracked through feedback and direct engagement with distribution partners, showing improvement but still needing work [44][46] Question: What is the outlook for pricing in the Protective segment? - Management noted that net price realization remains relatively unchanged, with competitive pressures affecting pricing dynamics in the Protective segment [54][56] Question: What are the volume assumptions for the second half of the year? - Management stated that they expect a modest volume decline of about 1% in the Protective segment for the second half [82] Question: How much of the equipment materials are sourced domestically? - Management indicated that most equipment materials are sourced domestically, with limited exposure to tariffs impacting equipment sales [86]