Reynolds Consumer Products Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Reynolds Consumer Products second quarter 2023 earnings call. At this time, all participants are in listen-only mode. After the speaker presentation, there'll be a question and answer session. If anyone should require operator assistance, please press star zero on your telephone keypad. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker today, Mark Sportsberg. Thank you, and please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us on Reynolds Consumer Products' second quarter 2023 earnings conference call. Please note that this call is being recorded and webcast on the investor relations section of our corporate website at ReynoldsConsumerProducts.com. Our earnings press release and accompanying presentation slides are also available on the site. With me on the call today are Lance Mitchell, our President and Chief Executive Officer, and Michael Graham, our Chief Financial Officer. For our call, Lance will focus his remarks on our second quarter performance, progress on the Reynolds cooking and baking recovery plan, and what we are doing to drive results across our business. Mike will review our second quarter financials and our outlook for the third quarter and the full year. Following prepared remarks, we will open the call for questions. Before we begin, I would like to provide a few reminders. First, this morning's discussion may contain forward-looking statements based on current expectations and beliefs. These statements are subject to risk, uncertainties and changes in circumstances that could cause actual results and outcomes to differ materially from those described today. Please refer to our risk factors section in our SEC filings, including in our annual report on Form 10-K and our quarterly report on Form 10-Q. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after the call. Second, during today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these GAAP to non-GAAP financial measures are available in our earnings press release, investor presentation deck, and 410Q, copies of which can be found on the investor relations section of our site. Now I'd like to turn the call over to Lance.

Thank you, Mark, and good morning, everyone. As we enter the second half of our fiscal year, I'm exceptionally pleased with our second quarter results. We are well positioned to deliver significantly improved earnings in fiscal year 2023, and continued future growth. We began 2023 with profitability restored in three of our four businesses, as well as a comprehensive plan to recover the profitability in our Reynolds cooking and baking business by the end of the second quarter. We were very effective executing each business' plans in the first quarter, and again in the second quarter, including Reynolds Cooking and Baking's ongoing operational improvement initiatives. We also gained share in household oil and other categories. As a result, we have returned earnings to historical levels in all four of our businesses and expect strong earnings growth and cash flow to continue over the balance of 2023. Before turning to our plans to drive continued earnings improvement across RCP, I'd like to give you an update on the Reynolds cooking and baking business. As I mentioned, we executed extensive planned initiatives to stabilize manufacturing and improve operational efficiencies in the quarter. Performance against those initiatives progressed as we had planned. As a result, we continue to achieve the operational and gross margin objectives we set at the start of the fiscal year. In addition, we have done the work required to ensure operational stability and equipment reliability extends well beyond 2023. For example, we completed the largest combined scope of planned maintenance downtime and new equipment installation in the history of the Reynolds Cooking and Baking Unit manufacturing operations, including replacement and rebuilds of key equipment, multiple upgrades to electronics, installation of condition-based monitoring systems, and installation of new automation equipment to our spooling production. We also advanced ongoing work to standardize manufacturing and maintenance processes. In summary, we are successfully executing the Reynolds cooking and baking recovery plan, and I am confident in our ability to increase earnings in this business. Now, Let's turn to how we're performing at retail and what we're doing to drive growth with our retail partners and consumers. Our integrated brand and store brand model continues to be a competitive advantage. That was proven again in the second quarter. Reynolds Wrap gained more than five points of brand share in the foil category, gaining even more share than in the first quarter. Reynolds Wrap is responding to an improvement in retail price points and price gaps versus store brands. A return to holiday trade promotions, which were very well received by retailers and consumers over Memorial Day and leading into the 4th of July. Increased advertising across major media platforms, resulting in strong double-digit increase in media impressions versus the second quarter of 2022. AND INCREASED RELIANCE UPON INFLUENCERS AND RELEVANT MEDIA CHANNELS CONTRIBUTING TO INCREASES IN HOUSEHOLD PENETRATION AMONG GEN Z AND MILLENNIALS. IN WASTEBAGS, HEFTY ENTERED 2023 WITH WASTEBAG SHARE MULTIPLE POINTS ABOVE 2019. THE BRAND IS HOLDING SHARE AND THE COMPANY INCREASES SHARE OF STORE BRAND WASTEBAGS. IN FOOD BAGS, Hefty gained share of slider bags and the company's share of store brand press to close food bags increased. And in tableware, Hefty held share of disposable tableware while also benefiting from the consumer migration to store brands. We implemented previously communicated increases in advertising and trade investment in the second quarter and the first half of 2023 and plan for continued investments over the balance of the year. I mentioned Reynolds RAP, pronounced pickup in media impressions, and its penetration of young adult households. In fact, Reynolds RAP has increased household penetration in all major demographics, and we're seeing favorable household penetration trends for HEFTI as well. As planned, we've also increased trade investment by implementing proven promotional programs. Going forward, we plan to execute promotions around retailer key events and major seasonal periods, including back to school and the holiday season. And in terms of innovation, since the launch of our hefty Fabuloso lavender waste bags over two years ago and the more recent launch of our Fabuloso lemon waste bags, the entire Fabuloso product line has grown exceptionally well. reaching $140 million in retail sales during the second quarter and attaining a 73% ACB. We expect this growth to continue as we earn more distribution of our Lemon Scented Fabuloso bags. Other newer products that provide differentiation for our customers and consumers include Presto's Stand and Fill Store brand Presto closed food bags, Reynolds Kitchen Stay Flat Parchment with Smart Grid Technology, and Reynolds Kitchen Air Fryer Liners, all of which are gaining increased distribution. Environmentally friendly products are becoming more and more relevant among consumers, which provides us the opportunity to introduce more innovative, sustainable products. These include hefty, ultra-strong waste bags made with 50% recovered materials, hefty and store-brand waste bags made with post-consumer recycled materials, and store-brand food bags incorporating land and ocean materials. Also in the area of sustainability, we recently announced a grant to The New Norm, a startup out of Johns Hopkins University that has developed an exciting technology transforming materials from party cuts into sustainable yarns and fabrics. As the number one party cup manufacturer, we are excited to assist the new norm with their research and development efforts. And we continue to operate in an economy with mixed growth signals, including shifting consumer confidence. To ensure success in any economic environment, we're focused on providing consumers with the right combination of value, product performance, and convenience. Our first half category share gains demonstrate our effectiveness in accomplishing that goal. In closing, we are very well positioned for the second half of 2023. We have restored profitability across RCP. Our integrated brand and store brand model remains a competitive advantage, and we're making the investments and innovating to drive added growth for Reynolds, Hefty, and our store brands. As a result, We expect strong earnings growth and cash flows to continue over the balance of the year. With that, over to you, Michael.