Sonoco Products Company

Let me make sure we're there. Again, good morning, everyone, and thanks for joining us at today's Sunoco's 2026 Investor Day. I'm Roger Shrum. I'm head of investor relations for the company. And it's been my honor to work for Sunoco for 20 years, although I did have a couple of years off for good behavior. This morning, Howard Coker, our president and CEO, and Paul Jo Hemcheck, our chief financial officer, will start with a brief review of our fourth quarter and full year results. Sunoco issued a news release and posted a presentation on our website at sunoco.com yesterday evening, which provided detailed information on our financial results. We also will post today's presentation on our website after we conclude prepared remarks. Once we finish with our review of 2025 results, Howard will come back on the stage and do our strategic review and follow that with our presentations from our three business unit presidents on our industrial and consumer businesses. We're then going to take a short break, and Paul will come back up and provide further financial review and present our targets for 2026 through 2028. Howard will close our formal presentation, and then we'll take your questions. For those of you that are listening virtually, we do have an option for sending us questions as well. After we conclude Q&A, we'll be hosting a short modeling session across the hall over here in Hubbard Room 1 to answer any of your detailed questions you may have. With that in mind, we hope that you'll limit your financial modeling questions during the Q&A. We'll take care of them over there. But before we get started, let me remind you that during today's presentation, we will discuss a number of forward-looking statements based on current expectations, estimates, and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. The company undertakes no obligation to revise any forward-looking statements. Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operation. Further information about the company's use of non-GAAP financial measures, including definitions and reconciliations to GAAP measures, is available in the investor relations section of our website. Now with that, let me turn it over to Howard.

Okay, well good morning and thank you, Roger. It's really great to see so many of you who I've come to know over so many years and I certainly Look forward to getting to know those that I don't know through the course of this conversation and others. Before Paul and I review fourth quarter and full year 2025 financial results and present our 26 guidance, let me open with a few comments about what you will hear today. First, our portfolio transformation is complete. In fact, what differentiates us from so many in our industry today is that the most difficult part of our transformation journey is behind us, and we're poised to create greater value for our customers and shareholders going forward. Second, there was purpose behind our portfolio changes, and we have built global market-leading franchises in both metal and paper, consumer and industrial packaging. And while our portfolio is set, we have plans to further improve profitability and cash flow generation. Finally, we believe we are in the best position to deliver consistent earnings growth going forward. Our Sunoco team executed well in the fourth quarter, despite a difficult macroeconomic environment, delivering strong operating results we reduced net debt by approximately 40% year over year and lowering the company's net leverage ratio to approximately three times. And we concluded our portfolio transformation following the successful divestiture of ThermoSafe and further simplified our consumer packaging segment by consolidating our global metal packaging and rigid paper containers business into a single integrated structure driven geographically, which we believe enhances our go-to-market strategy and will drive additional synergies across global channels. I'll let Paul go through the numbers in detail, but we improved revenue, operating profit, adjusted EBITDA, and adjusted EBS above consensus and our own expectations. We achieved this improvement despite the defestiture of ThermoSafe earlier in the quarter. Providing some context for the quarter, October was a strong month for all of our businesses, while November was a bit weaker than we had expected. December is always a difficult month to predict due to our customers' inventory management practices and consumer demand at year end. But overall, the month was better than we had planned. Productivity, favorable price-cost environment, and structural cost savings drove the quarter improvement, meaning we were effective in controlling the controllables. Demand was about what we expected with volume mix overall down just under 2%. Metal packaging U.S. had a record quarter and a record year. U.S. food can units were up 10% in the quarter and 9% for the full year, exceeding reported industry averages. Results from metal packaging in EMEA exceeded our expectation, although food can units were down about 3%, as some of our customers managed inventories below what they had done historically. Rigid paper containers were down in North America on soft construction, stack chips, and other food categories, while unit volumes in Europe were flat. Industrial had another solid quarter on top of a record year, and margins expanded for the ninth consecutive quarter. As mentioned, we completed the sale of ThermoSafe, our temperature-assured packaging business, in early November and received $656 million in cash which equates to a valuation of approximately 13 times. We used net proceeds and free cash flow in the fourth quarter to reduce debt by $966 million. Year over year, we reduced net debt by approximately $2.7 billion, if you include the proceeds from our TFP divestiture and free cash flow. This debt reduction effort lowered our net leverage ratio from 6.4 times starting the year to approximately three times at year end. As you recall, we had targeted to reduce our leverage to 3.3 times to three times by the end of 2026. So we are tracking ahead of our expectations. Net-net, it was a good end to the year, an excellent setup for 2026. Now, I'm going to turn the podium over to Paul to go over the numbers in more detail and review our 2026 guidance. Paul?

Thank you, Howard, and thanks, everybody, for being here today. I'll walk through our fourth quarter and full year 2025 financial performance. All of the results are presented on an adjusted basis with growth on a year-over-year basis unless otherwise noted. The gap to non-gap EPS reconciliation is included in the appendix and in our press release. As Howard noted, 2025 was a pivotal year for Sunoco. With our portfolio transformation complete, we now have global market-leading positions across two focused segments, positioning the company for more consistent execution and sustainable long-term performance. Turning to the fourth quarter, results reflected strong execution across the businesses despite a mixed demand environment. From a revenue perspective, fourth quarter net sales for continued operations increased 30% to 1.8 billion, driven by the metal packaging EMEA acquisition, strong pricing, and favorable FX. This was partially offset by volume and mix, which declined approximately 2%. Adjusted EBITDA increased 10% to 272 million, with margin expansion of 51 basis points. reflecting strong operational discipline despite softer volumes. Adjusted EPS was $1.05, up 5% year over year, driven primarily by favorable price cost, largely in our consumer segment. Continued productivity gains were evenly split between consumer and industrial. FX tailwinds and lower SG&A also contributed to that. These benefits were partially offset by softer volume and mix, slightly higher interest expense, and lost net earnings from our divestitures. Operating cash flow was $413 million for the quarter. While that includes a one-time tax payment from divestitures, it also demonstrates the strong seasonal cash generation of our metal can businesses. Turning to the full year results, Full-year net sales for continued operations increased 42% to $7.5 billion, driven by the metal packaging EMEA acquisition, favorable FX pricing, which was partially offset by volume MX. Adjusted EBITDA of $1.3 billion increased 28%, with margin expanding 120 basis points to 16.9%. This improvement was driven by the metal packaging and MIA acquisition, strong price-cost execution, continued productivity, lower fixed costs, and favorable FX, partially offset by volume softness, primarily in our converting and consumer business. We also had lost earnings from our divested businesses within the year. Adjusted EPS was $5.71, representing a 17% increase year over year. This improvement was driven by metal packaging and MIA acquisition, favorable price cost, productivity gains, and FX, partially offset by divested businesses, unfavorable volume, a higher tax rate, and interest expense. Operating cash flow was $690 million, including $216 million of one-time items, primarily $196 million in taxes paid on capital gains from our divestiture. On a normalized basis, full-year operating cash flow was $906 million, underscoring the strong cash generating capability of the portfolio. Looking ahead to 2026, we expect continued earnings growth supported by improving volume and mix, disciplined pricing, strong productivity, and lower interest expense. We are projecting sales of 7.25 to 7.75 billion. Adjusted EBITDA of 1.25 to 1.35 billion. and adjusted EPS of $5.80 to $6.20, operating cash flows of $700 to $800 million. This includes approximately $100 million of taxes related to our capital gains from the businesses divested in 2025. Before reviewing the 2025 to 2026 bridges, let me clarify our definition of pro forma. It reflects our 2025 reporter results, adjusted to exclude divested businesses, and represents the comparable asset base for growth in 2026. Relative to the 2025 pro forma sales of $7.3 billion, we expect low to mid single-digit sales growth, driven by favorable volume mix, pricing, and FX. We are also projecting EPS growth of approximately 20% versus our 2025 pro forma, EPS of $4.97, driven by our operational improvements, favorable volume mix, lower year-over-year interest expense, and FX. This growth will be partially offset by 150 to 200 basis point increase in our effective tax rate. In summary, 2025 was a year of disciplined execution and strategic processes. We entered 2026 with a stronger portfolio, improved margins, and enhanced cash flow generation, positioning Sunoco well for durable earnings growth. This concludes our recap of 2025 and our outlook for 2026. At this time, we invite you to watch a short video transitioning into our investor day, where we will focus on 2026 and beyond.