Sealed Air Corporation

Good day, and thank you for standing by. Welcome to the second quarter 2025 Sealed Air 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 your session, you will need to press star 11 on your telephone. You will then hear an automated message advising that 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, Vice President, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. This is Mark Stone, CODAIR's Vice President, Investor Relations. With me today are Dustin C. Mack, our President and CEO, and Ronnie Johnson, our Interim CFO. Before we begin our call, I would like to note we have provided a slide presentation to supplement today's discussion. This presentation, along with our second quarter earnings release, is available to download from our investor relations page on our website at sealedair.com. I'd like to remind everyone that during today's call, we make forward-looking statements, including our outlook or estimates 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 presentation. 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. Operator, please turn to slide three.

Thank you, Mark. Good morning, everyone, and thank you for joining our second quarter earnings call. Today, I will give an update on our leadership team, the impacts of shifting global trade policies on the markets we serve, and our ongoing transformation. Later, Ronnie will provide an update on our financial results and details on our outlook. Yesterday, we announced after a thorough search process Kristen Actis Grande will be Sildare's new Chief Financial Officer. We are excited to have Kristen come on board later this month and leverage her experience driving transformations across complex manufacturing and distribution businesses to accelerate the transformation we are driving here at Sildare. She has a proven track record of creating shareholder value, and I'm looking forward to the impact she will make across both of our businesses, food and protectors. I want to personally thank Ronnie for all her contributions during this interim period. Ronnie has been a trusted business partner since I joined the company, and I'm deeply grateful for her willingness to step up and support me through my transition to CEO, all while continuing to advance our finance strategy and drive outcomes across the business. She will continue to be an integral part of our leadership team. My sincerest thank you to you, Ronnie. Moving on to trade policies. Since our discussion in May, we continue to monitor the changing global trade landscape. As a reminder, we are largely domestic production for domestic consumption, and most of our products remain exempt under USMCA, both of which position us well against direct tariffs. The net impact of tariffs is not material to our second quarter results. While the situation remains dynamic, the second quarter was more stable than expected with a pause on broader tariff decisions into the third quarter. However, there are pockets of the business, particularly certain specialty residents that are procured from partners in countries being impacted by increased tariffs. We continue to focus on mitigating the impact of tariffs through production and procurement optimization and limited pricing actions. The net tariff impact included in our second half outlook is minimal, and we will continue to provide updates as the longer-term impact becomes more clear. Let's now move to economic outlook and discuss each of our market-focused business segments. Globally, we are closely watching our end markets to understand the extent of demand impacts due to lower economic growth outlooks, shifting industrial production, and changes in consumer spending patterns on the back half of this year and on a go-forward basis. Beginning with our protective segment. We continue to be in full swing in our turnaround and are seeing early signs of progress. As a reminder, last year most of our efforts were focused on our new go-to-market strategy with a strong emphasis on getting closer to our customers and executing well against the basics. We stepped up our field engagement, invested in frontline sales, refreshed our commercial excellence programs, and reorganized our teams. We are beginning to see the impact of our actions and our results. Our second quarter volumes were down 2%. The protectives industrial portfolio up slightly, marking the most stable year-on-year quarterly volume results we've delivered since 2021. Additionally, Sales were up 4% sequentially, and adjusted EBITDA was up 6% sequentially, marking the second quarter in a row with sequential adjusted EBITDA growth. In the first time in two years, we have seen sequential growth in sales and adjusted EBITDA. We remain focused on getting closer to and reestablishing trust with our distribution partners and customers. As a part of that effort, I continue to spend time in the field. More importantly, they are also recognizing the step change in field alignment and engagement. We will continue to build on this momentum as we progress throughout the second half. While turnarounds are typically nonlinear, this is a step in the right direction, and we plan on continuing to control the controllables by improving business fundamentals irrespective of market conditions. We are expanding our go-to-market strategies more fully across protectives than MIA and Asia footprint, and we'll share more on the rest of the world go-to-market strategy as we make further progress. We continue to work on addressing fiber portfolio gaps in our protective business as we advance towards a substrate agnostic solution set. Our previously announced Jiffy embossed paper mailer is gaining traction in the market and our hybrid AutoVac solution that can run either fiber or poly materials is being brought to market now. The process of bringing these innovations to market has led us to further transform our research and development strategy to increase our use of external partners and suppliers. This will reduce time to market and ensure we are addressing our customers' most pressing challenges faster. This is especially important during a period where we are focused on paying down debt and are not actively leveraging M&A to bolt on new solutions. Lastly, we continue to optimize Protected's network to improve customer service and quality. We recently opened the Lakeland, Florida manufacturing facility to better serve our customers in the southeast of the U.S. We are assessing the entire manufacturing footprint to identify additional opportunities to enhance service and quality while improving our cost positions. Our network optimization efforts will be outlined in more detail over the coming quarters. While we over-delivered in the volume in the first half against expectations and expect our turnaround and protected to continue to deliver iterative progress, we are being prudent on expectations for the second half, reflecting the market uncertainty ahead of us in the global trade policies that have lower growth expectations across many markets, but primarily in the U.S. Transitioning to food. Our food business remains resilient and continues to perform throughout the first half of 2025, despite market pressures accelerating in the second quarter. As a reminder, our food business is focused on serving fresh protein markets across industrial food processing, retail, and food service. Our international business, while tempered from a market perspective, continues to perform well, and we expect full-year volume growth outside the U.S. as we capitalize on opportunities. Our EMEA region is a standout, where we have continued to take share in the market throughout the first half of 2025, building on momentum coming out of 2024. The pressures on the North American market that we outlined at the beginning of the year accelerated in the second quarter, putting even more pressure on the second half. I'll start by focusing on the demand side before shifting to the supply side dynamics. Despite choppy consumer sentiment, consumer spending continues to be relatively stable in the U.S. What is shifting, however, is where consumers are placing their dollars, especially as inflation continues to escalate across all food categories. The overarching theme is the shift into value grocery, which is affecting each of our end markets. These changes are particularly pronounced in lower and middle income households. Within industrial food processing, the shifting spend landscape is resulting in pressure on premium beef cuts. Consumers are trading down to lower-end cuts in ground beef. While this shift is compressing our shrink bag volumes, it's being partially offset by a pickup in our retail solutions. Within retail, the shift is away from high-end consumer packaging good brands into private label, away from the deli counter to prepackaged goods, and from smaller portions into more economical bulk and family-sized packaging formats, reducing the packaging volume per protein weight sold. Overall, changes in consumer spending are resulting in lower outlooks for food service, with a mixed shift from fast casual and quick service restaurants into retail, where we have a broad solution set and increasing focus, but lower market share than our industrial and food service portfolios. We continue to bring new solutions that include new packaging formats, expanded printing capabilities, and enhanced equipment offerings to capture more demand. While we are making progress, this strategy will take time to fully capture the market opportunity ahead of us. Shifting to the supply side, the U.S. beef slaughter rates are declining at an accelerated pace, leading to volatility in the beef markets. While we've been closely watching the North American beef cycle, which are at 50-year lows, this quarter we saw an inflection point in the market, with slaughter rates decreasing 7%, worse than our previous expectations of down 1% for the quarter. This second quarter of USB production and its softer second half is now resulting in lower full-year volume assumptions compared to what we anticipated at the start of the year. While herd rebuilding has begun, it's only the first step in a lengthy return to a more normalized and predictable part of the cattle cycle. As a reminder, the time between heifer retention and the resulting cattle going to market is approximately three years. an improved FX outlook on the weaker US dollars helping to offset the top line softness in North America. And as a result, we are reiterating our sales guidance. As we mentioned during the last call, with the anticipated slowdown in the US market and the visibility we have into the structures that support each business, we continue to further streamline each business to make them fit for purpose for their respective long-term strategies. The overarching themes remain simplifying our organization, moving closer to the markets we serve, becoming easier to do business with, which will result in long-term sustainable growth in earnings. Shifting gears. I continue to be pleased with our disciplined approach to capital allocation. We are below $4 billion of net debt for the first time since the fourth quarter of 2022. We are on track for the full year of free cash flow guidance and will continue to solely focus on debt pay down. Before turning the call to Ronnie to review our second 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?