Sealed Air Corporation

Good day, and thank you for standing by. Welcome to the Sealed Air Q1 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Mark Stone.

Thank you, and good morning, everyone. This is Mark Stone, Sealed Air's Vice President, Investor Relations. With me today are Dustin Simak, our President and CEO, and Ronnie Johnson, our Interim CFO. Before we begin our call, I would like to note that we have provided a slide presentation to supplement today's discussion. This presentation, along with our first quarter earnings release, is available to download from our investor relations page on our website at sealedair.com. I would like to remind everyone that during today's call, we may make forward-looking statements, including our outlook or estimate for future periods. These statements are based solely on information that is currently available to us. Please review the information in the forward-looking statement section of our earnings release and slide presentations. These sections also apply to this call. Our future performance may differ due to a number of factors. Many of these factors are listed in our most recent filings with the SEC. Additionally, we will discuss financial measures that do not conform to US GAAP. Information on these measures and their reconciliation to US GAAP can be found in our earnings release or the appendix of our slide presentation. I will now turn the call over to Dustin and Ronnie. Operator, please turn to slide three Dustin?

Thank you, Mark, and thank you all for joining us for our first quarter earnings call. Today, I will discuss the progress we are making on our transformation, give an update on current market conditions, including our response to the recent trade policies, and walk through how we will navigate the second half. Over the last year, we have been fixing the foundation of the business by reorganizing back into two market-focused businesses, food and protective. We recently completed the last major step by integrating our supply chains, including our planning and production, back into each business. This now aligns all our commercial, innovation, and supply chain teams all the way down to the respective end markets, putting us in a better position to serve our customers. This is especially important in periods of volatility. Now each business is better positioned to adapt quickly to their unique market dynamics and customer needs. With clear accountability and incentive alignment, we continue to see improvements and fundamentals throughout each business. In parallel, we continue to enhance leadership across the organization with a strong orientation towards growth and ownership mindsets. I'm confident the actions we are taking continue to better position each business for long-term sustainable growth and will help us successfully navigate the uncertainty ahead of us. Before I give updates on each segment, I would like to address the dynamic macro environment we continue to operate in, focusing on the changing global trade landscape and subsequent tariff impacts. Since our discussion in February, the landscape has continued to evolve, with our focus first on potential tariffs in Canada and Mexico, then on broader reciprocal tariffs, including China. As a reminder, we are largely domestic production for domestic consumption, which positions us well against direct tariffs. In addition, most of our products are exempt under USMCA, which has put us in better position on direct impacts since February, as the US has shifted its focus to the rest of the world. Since November, we have been actively reviewing our supply chain and optimizing production and procurement to mitigate potential tariffs and minimize inflation. Where we have exposure that cannot be mitigated, we are actively taking pricing actions, largely in food. At this point, based on current policy, the net tariff impact to our bottom line is minimal and reflected in our outlook. More importantly, we are assessing the downstream impact on our customers' businesses driven by a potentially weakening demand environment. In protective, we are closely monitoring consumer and industrial sentiment and the potential knock-on effects in our fulfillment and industrial end markets. Food is a more resilient business in any economic cycle. With that said, we are continuing to monitor for protein trade-downs and trade-outs if the consumer comes under more pressure to ensure we are adapting to our customer needs and mitigating mix impact. We are working closely with our top customers and distribution partners to better understand the impacts on their businesses and how we can help them navigate the volatility in the market. While there is some indication of softness in the market to come, the trade policies are still not settled and it's too early to be definitive on the second half. Lastly, as the trade policies continue to evolve, we are assessing areas where our global footprint across both businesses could put us at an advantage relative to our competitors' footprints, creating opportunities to win further share. For now, we are contemplating tariffs that are in effect and some modest volume softness in both businesses, driven by our customers' cautiousness in this environment. This is offset by an improved FX outlook due to a weakening U.S. dollar. We are taking further cost control and productivity actions in the second half to help offset potential further volume softness and or drive increased operational leverage. As a result, we are being prudent in reconfirming our full year guidance, which continues to contemplate tariffs in effect and our mitigation efforts related to them. As we progress through the second quarter, we expect to gain more visibility into trade policies and market demand and the impact of our mitigation actions. we will now move to each of our market-focused business segments. During the first quarter, our food segment delivered modest volume growth against a strong first quarter last year that benefited from carryover demand. As part of our go-to-market strategy within food, we are focused on taking market share in our retail and markets. Our case rate solutions grew low single digits in the first quarter compared to prior year. Our strategy in accelerating growth in retail allows us to capitalize on market trends where consumers are looking to replace dining out and on-demand food delivery service for the grocery store spend, creating a balanced opportunity between away versus at-home consumption. Further, end-user shifts from processed and frozen foods towards fresh foods benefits the retail market. Putting this together, this portion of the business is expected to continue to perform throughout the back half of the year, benefiting from evolving consumer preferences and the strength of our product offerings. Industrial food processing markets were relatively flat in the first quarter compared to last year. The South American cattle cycle remains strong, and in Australia, the cycle remains near peak levels, which is now expected to last through 2027, given favorable weather patterns and growing export demand. Within the U.S., the beef market was slightly better than expected and offset by weaker pork and turkey markets. Cattle herd sizes continue to hover around 50-year lows, though changing consumer sentiment and weakening spending may reduce demand for premium beef cuts and reaccelerate herd rebuilding. We continue to pursue growth opportunities within our fluids business as we move towards the summer season when many of our fluid solutions are in peak demand. Dairy is a growing end market, particularly in Europe, Australia, and New Zealand, which is creating opportunities in both cheese and milk packaging applications. Looking forward, we expect our food end markets to be stable outside of China and the U.S., which are operating in a higher period of volatility due to the trade environment. While some large industrial food processors in the U.S. are indicating potential trade downs away from premium beef, Based on our current volumes, we are not seeing trade-downs and trade-offs in our U.S. business at this point in time. However, if we do see mix shift, Cryovac's portfolio covers a wide range of fresh proteins across the trade-down spectrum from ground beef, poultry, and smoked and processed proteins, putting us in position to move with the consumer. I'm confident our food business continues to be well-positioned to fully achieve its underlying long-term potential. It is a longer cycle business that has previously demonstrated strength and resilience amidst prior economic cycles. Transitioning to protective, our first quarter performance was in line with our expectations. Throughout the first quarter and into early weeks of the second quarter, we did not see significant shifts in order patterns or buying behaviors. Turning to market trends in protective, as a reminder, approximately 60% of our product offerings largely served industrial and markets. Overall, industrials are proceeding with caution in the current low visibility environment, with PMI hovering around 50 and trending down as we approach the end of the quarter. The remaining 40% of the protective portfolio primarily serves fulfillment in markets where sentiment is weakening. Box shipments in the U.S. are our largest market. We're down low single digits in the first quarter, coupled with declining consumer confidence throughout the quarter. As I mentioned in February, the protective turnaround will take time to realize. However, I'm encouraged by the progress we are making on our transformation. The reorganized North American go-to-market team has now been in place for over a quarter with our investment and field sales now fully ramped. By strengthening our customer distribution relationships, we are gaining better insights into their needs in the state of our end markets. We remain confident that our revised go-to-market approach will continue to increase customer satisfaction, reduce churn, and improve our right to win in the market. As a proof point, we minimized large customer churn throughout 2024 that now fully lapped key customer losses from the beginning of last year, improving our prior year comparisons for the second quarter of 2025 and beyond. While there may be headwinds on the horizon in our end markets, based on our transformation initiatives, we see headroom in the markets we served win-back share lost over the last couple of years, with early signs of traction building throughout the first quarter. Following the success of the go-to-market reorganization in North America, we are now focused on enhancing our commercial organizations and market strategies in other key geographies. The reorganization has positioned the protective team to better identify opportunities to drive efficiencies and effectiveness within the business. lowering our cost to serve, improving the speed of decision-making, and increasing operational leverage. We are targeting to capitalize further on these opportunities in the second half of 2025. While the protected business is short-cycle and more sensitive to global trade dynamics versus food, we are heads-down focused on controlling the controllables and improving fundamentals in the business. I'm confident that the actions we are taking continue to better position the business in the market. Before turning the call to Ronnie to review our first quarter financial results, I'd like to reiterate my confidence that as an organization, we are on the right path. Our priorities are unchanged and remain keeping the customer front and center, operating with urgency, driving further productivity, and transforming the business to deliver long-term sustainable growth. Ronnie?