Sealed Air(US:SEE)2024-02-27 22:01Financial Data and Key Metrics Changes - For the full year, the company reported sales of $5.5 billion and adjusted EBITDA of $1.1 billion, slightly above the midpoint of guidance [4] - The adjusted tax rate was 18%, down from 26.1% in the same period last year, due to a one-time benefit from the reversal of uncertain tax liabilities [11] - Adjusted earnings per share for the year was $3.18, down 22% primarily due to lower adjusted EBITDA and higher interest expense [11] Business Line Data and Key Metrics Changes - In Q4, Food net sales were $893 million, down 3% on an organic basis, primarily due to volume declines from lower automation sales and weak retail demand [12] - Protective segment net sales in Q4 were $485 million, down 10% organically, driven by lower pricing and volume declines in the Americas and EMEA [12] - Liquibox contributed approximately $70 million to total company sales in Q4, but overall performance was impacted by lower pricing and volume in both segments [31] Market Data and Key Metrics Changes - By region, Asia Pacific grew 5% organically, driven by a strong Australian cattle cycle, while the Americas declined 6% due to lower automation sales and a weak U.S. cattle cycle [13] - EMEA experienced an 11% decline, reflecting ongoing market pressures [13] - The company expects a gradual recovery in end markets throughout 2024, with volume lift anticipated towards the end of the year [9] Company Strategy and Development Direction - The company is reorganizing its commercial teams to improve customer centricity and commercial execution, reestablishing food and protective operating units within each region [5] - Sustainability pressures are driving innovation, with the introduction of a bio-based compostable tray for protein packaging, targeting a $5 billion market [6] - Cost reduction initiatives are progressing, with an annual run rate savings target of $90 million for 2024 [7] Management's Comments on Operating Environment and Future Outlook - Management anticipates an L-shaped recovery through 2024 and into 2025, with net sales expected to range from $5.2 billion to $5.6 billion [15] - Full year adjusted EBITDA is projected to be between $1.05 billion and $1.15 billion, reflecting lower volume expectations [16] - Management remains focused on driving necessary cost actions to offset further volume weakness and is optimistic about a modest recovery in the second half of 2024 [17] Other Important Information - The company closed the year with a net leverage ratio of 3.9x, down from 4.1x in the third quarter, and total liquidity of $1.3 billion [34] - Free cash flow for 2024 is expected to be in the range of $325 million to $425 million, with a conversion rate of 90% of adjusted net earnings [57] Q&A Session Summary Question: Can you provide details on volume trends throughout the quarter? - Management noted that January volumes were slightly ahead of expectations, with February in line with guidance, indicating a positive start to 2024 [21] Question: What is driving the expected decline in Q1 EBITDA? - The decline is attributed to lower volumes and pricing pressures, but management expects sequential improvement throughout the year [39] Question: Can you quantify the impact of lower net pricing on EBITDA for 2024? - The expected impact from lower net pricing is around $60 million, with cost takeout benefits of $90 million offsetting this decline [72] Question: How is the Industrial Packaging business performing? - The Industrial Packaging business is showing signs of stabilization, with modest growth expected in 2024, particularly in the second half [68] Question: What competitive advantages does the company have in the protein market? - The company emphasizes its differentiated material science and the ability to provide complete packaging solutions, including automation and service [86]