Sealed Air Corporation Price & Performance (SEE)

And good morning, everyone.

Before I begin our prepared remarks, would like to introduce myself. I am Mark Stone, Cielo Aire's new Vice President of Investor Relations. Brian Sullivan now serves as our company's Treasurer. I'm glad to be here this morning and look forward to engaging with our investor community. With me today are Dustin Cymak, our newly appointed President and CEO and Ronnie Johnson, our recently named Interim CFO. Before we begin our call, I would like to note that we have provided a slide presentation to supplement the call. Please visit sealederic.com, where today's webcast and presentation can be downloaded from our Investor Relations Page. Statements made during this call stating management's outlook or estimates for future periods are forward looking statements. These statements are based solely on information that is now available to us. We encourage you to review the information in the section entitled Forward Looking Statements in our earnings release and slide presentation which applies to this call. Additionally, our future performance may differ due to a number of factors, Many of these factors are listed in our most recent annual report on Form 10 ks as revised and updated on our quarterly reports on Form 10 Q and current reports on Form eight ks.

We discuss financial measures that do not conform to U. S. GAAP. You will find important information on our use of these measures and their reconciliation to U. S. GAAP in our earnings release. Included in the appendix of today's presentation you will find U. S. GAAP financial results that correspond to the non U. S. GAAP measures we reference throughout the presentation. I will now turn the call over to Dustin and Ronnie. Operator, please turn to Slide three. [indiscernible] Thank you, Mark.

And thank you for joining us for our fourth quarter earnings call. Before we begin, I'd like to address the recent CEO transition. Let me start by saying I am very grateful for the opportunity and privilege to be Soledair's CEO. I couldn't be more excited about our future. I recognize that quick change at the CEO level can raise concerns for all of our stakeholders. Let me assure you, our strategy has not changed. We continue to execute against the plans developed under my leadership as Co CEO and President and those initiatives are already taking hold. Over the past few years, we have stabilized our business performance, rebuilt our leadership team, strengthened our balance sheet and transform back into two market focused business segments Food and Protective. While we have made significant progress, there is much work ahead of us to improve outcomes for our customers and shareholders and we plan to accelerate the pace of execution from here. I am partnering with our Board, segment presence and the rest of the Sealed Air team to meet these challenges head on with urgency as we continue our transformation journey. With that, I'm excited to give an update on how we closed out 2024 and provide insight into our ongoing transformation in 2025.

We exceeded our expectations in the fourth quarter, including coming in higher than our guided midpoint across adjusted EBITDA, adjusted EPS and free cash flow, and driving constant currency sales growth. We have now consistently delivered against expectations for six straight quarters. Reflecting improved discipline and fundamentals and better commercial execution. The strength of our food business more than offset the challenges in protective throughout 2024. Excluding the restoration of our incentive compensation pools, we drove mid single digit adjusted EBITDA growth despite a sales decrease of 2%. During the fourth quarter, we accelerated the operationalization of our food and protective businesses, We have now fully integrated our commercial, innovation and supply chain teams into each respective segment. As we completed the full reorganization, we continue to streamline our cost structure to improve organizational agility and our cost positions. We are getting closer to the markets we serve and our customers by reducing silos, complexity and bureaucracy while building a culture of accountability and ownership. Ronnie will give more detail our fourth quarter performance in a few minutes, But first, let me shift to 2025. Our focus this year is to further unlock underlying potential in each business based on the respective end markets and portfolios.

Both businesses end markets support consistent low single digit volume growth. With the leverage across our footprint, our strategy is to drive mid single digit earnings growth and deliver high cash flow conversion on an organic basis over the long term. Over the next two years, we are targeting deleverage the balance sheet to three times. Once that is accomplished, we will be able to return to a more balanced approach to capital allocation, including As we are now organized by segment, we have more visibility into cost structures of each business. The resources devoted to each portfolio and the impact of capital allocation giving us more levers to help each business achieve their potential.

More importantly, we are instilling an end market and customer focus throughout each business which will guide our allocation of resources, innovation and capital towards the portfolios that drive the most long term customer value. While the shift in investment strategy will take time to yield results, we are in parallel actively improving commercial execution and service levels across the business. Shifting our culture to become high performing engaged, empowered and accountable at the center of our transformation within the company. We continue to strengthen the end market leadership teams and in parallel push decision making further down in the organization to empower our field and supply chain teams to own their customer outcomes. While we made progress over the last year, especially in food, we will continue to adjust as we have the right talent in our most critical positions and fully make the shift in our culture. We've been operating in a dynamic macro environment where we have increased volatility due to uncertainty around global trade and its potential impact on our customers' demand patterns and supply chains. Input costs foreign exchange movements. On the potential tariff impacts, while most of our business is domestic production for domestic consumption, we do have trade with countries which could be impacted by the tariff discussions.

This time, we plan on mitigating tariff impacts through changes in our supply chain and by passing through additional cost to our customers, if necessary. More importantly, we are partnering with our customers and helping them navigate the potential impacts to their business. Which is much more difficult to predict at this stage. Our outlook only contemplates tariffs that are currently in effect. I will now dive into each businesses outlook in 2025. Food is coming off a strong 2024 where we are able to grow volumes mid single digits and gain share. Over the past year, we refocused on the core values that made Cryovac into the brand it is today. Servicing our customers day in and day out and keeping them up and running with the best packaging solutions. Our world class engineering and manufacturing capabilities enable us to create unmatched packaging solutions that improve our customer outcomes by improving their processing yields and throughput while extending shelf life ensuring safety enhancing brand image of their products. While industrial fresh red meat end markets ended 2024 in a better position than we originally anticipated, we see compression in the North American beef cycle increasing as we progress through the year, which will put pressure on our shrink back volumes.

The situation is dynamic as the cost of fee stock has increased significantly over the last couple of quarters. Putting pressure on our customers' businesses. However, with the breadth of our portfolio, we are focusing on higher growth businesses such as Case Ready and Fluids whose end markets are less volatile and represent a growth opportunity this year and beyond. The share gains made in these portfolios in 2024 will continue to ramp this year giving us positive momentum right out the gate. Foods growth will be further supported by new innovations in automation and sustainable offerings. Leverage across the footprint combined with our recently streamlined structure will drive the business to projected mid single digit earnings growth in 2025. While we expect foods and markets to be more dynamic this year, I'm confident this business is on the right trajectory and we are well positioned to fully achieve its underlying long term potential. I'm now going to shift to our Protective segment. While we made progress last year of repositioning this business by refocusing on our customers into markets there is more work ahead of us to stabilize the business and drive an inflection point in volumes. We have completed several transformation programs initiated last year restore customer focus.

First, we reorganized our North American go to market team to simplify our coverage and minimize customer touch points internally. As part of the reorganization, we strengthened our relationships with our distribution by aligning our field to theirs. To ensure we are going to market together. Lastly, we implemented many commercial excellence initiatives including streamlining our pricing approach to improve time to quote, and implementing a more simplified growth oriented incentive program for our field among many others. The combination of these market oriented actions has laid the foundation to give us more flexibility and control over the mix of products we sell into the market. We will focus on shifting our portfolio over time to the solutions that deliver the most customer value like AutoBag and Instapack. Beyond the focus on the go to market approach, we continue to shape the solution portfolio by becoming more subsidiary agnostic in the portfolios that are sold into consumer facing end markets, like e commerce. Our media focus is on commercializing the fiber mailer offerings we have previously discussed bringing to market our hybrid auto bag offerings. While we have made progress on our mailer development with the second iteration of our fiber mailer, now called the Jiffy and BOSS Mailer, we have been slow to fully industrialize and bring to market.

We plan to accelerate the expansion by moving into multiple markets within The U. S. Giving us the ability to serve local well as national accounts. Market traction with customers and distribution partners has been strong following the product launch at PAC Expo last November. Total mailers market represents more than $3,000,000,000 with fiber offerings outpacing their flexibles and hybrid counterparts. [indiscernible] As we scale up our offerings in our mailers and auto bagging, we will be able to fully participate in the underlying growth in e commerce where we have been losing the most share over the past few years.

Our current outlook is targeting a second half inflection in volumes in Protective. We believe we are taking the right actions to stabilize the business and ensure we are participating fully in the markets we serve. So it's not a matter of if, but a matter of when we inflect our performance. While it's difficult to predict the exact timing, we are focused month to month on improving our win rates reducing customer churn, and improving service levels as well as taking a more proactive approach to our cost structure. As we continue to see the actions we are taking make an impact on our performance, our confidence on timing will improve. We will continue to give you updates throughout the year as we make progress. Finally, as I mentioned earlier, the reorganization by segment has provided us more clarity on Protective's support structure, giving us the ability to set the right level of resourcing tailored to each segment. We are leveraging this visibility to ensure we are maximizing productivity in the field within our production facilities. As a part of our ongoing cost takeout efforts, we will close two plants by the end of the year further optimize our footprint.

When you pull all of this together, we are returning to top line growth on a constant currency basis with continued momentum in food, partially offset by challenges in our protective business. You combine the cost actions at the end of last year, with ongoing productivity initiatives throughout 2025, we are targeting mid single digit EBITDA growth at constant currency. We will continue to drive strong free cash flow conversion strengthen our balance sheet through debt pay down.

With uncertainties around tariffs, impact on our customers' business and unfavorable FX movements we are staying focused on controlling the controllables. Ensuring we are taking care of our customers taking a proactive approach to our cost structure and increasing the pace of execution. I'm excited about where we are taking this business and the benefits we will drive over time for all stakeholders.

Before I turn it over to Ronnie to give a more detailed update on our fourth quarter and full year 2024 results, and 2025 outlook, I want to first welcome her in her new position as our interim Chief Financial Officer. Ronnie? Over to you.

Thank you, Dustin, and good morning, everyone. It's a privilege to step into this Interim CFO role and I look forward to engaging with you all.

Let's turn to Slide four to review Sealed Air's fourth quarter performance. Net sales were $1,400,000,000 in the quarter, up 1% on a constant currency basis and were $5,400,000,000 for the full year down 1% at constant currency. Adjusted EBITDA in the quarter was $271,000,000 down 1% compared to last year as reported. For the full year, adjusted EBITDA was $1,110,000,000 relatively flat with prior year.

As reported, adjusted EPS in the quarter of $0.75 was down 15% compared to a year ago. Our adjusted tax rate was 28% in the quarter compared to 18% in the same period last year which benefited from the reversal of liabilities related to uncertain tax [indiscernible] We did not repurchase any shares in the quarter.

Our weighted average diluted shares outstanding was 146,000,000 For the year, adjusted EPS of $3.14 primarily driven by higher tax expense partially offset by lower net interest. Turning to Slide five. Reported sales were flat in the quarter as volume growth was On a constant currency basis, sales were up 1% on higher volumes, partially offset by continued declines in protective. Fourth quarter adjusted EBITDA of $271,000,000 decreased $3,000,000 or 1% compared to last year with a margin of 19.7%. Down 20 basis points. Adjusted EBITDA performance reflects positive volume and productivity benefits including cost takeout actions offset by the restoration of our incentive compensation pools and unfavorable net price realization. Moving to Slide six. [indiscernible] Food sales of $923,000,000 for the quarter were up 5% on an organic basis primarily due to volume growth in all regions, driven by strength in our shrink bag business and continued share gain in Case Ready solutions.

In the fourth quarter, the industrial food processing end market outperformed our expectations coupled with volume growth within our fluids business. Food adjusted EBITDA of $2.00 $8,000,000 in the fourth quarter was up 7% with a margin of 22.5% up 70 basis points. Productivity benefits and volume growth more than offset the impact of higher incentive compensation and unfavorable FX. Transitioning to the Protective business, fourth quarter net sales were $450,000,000 down 7% from the prior year and up slightly on a sequential basis. Protected sales continue to be impacted by weakness in certain industrial portfolios Protective adjusted EBITDA of $67,000,000 was down 26% in the fourth quarter The decrease in adjusted EBITDA was mainly driven by lower volumes and unfavorable net price realization. On Slide seven, we review our fourth quarter net sales by segment and region. On a constant dollar basis, Americas was up 1% driven by strength in food, partially offset by continued softness in protective portfolios. Constant dollar growth of 1% in EMEA, was driven by solid volume performance in food. Constant dollar growth of 1% in APAC, was driven by strong Australian cattle and lamb cycles offset by continued weakness in Asia protected applications. With the reorganization behind us, starting in Q1 twenty twenty five, we will no longer report sales by region, focusing only on our segments to better reflect how we manage the business.

Let's turn to free cash flow and leverage on Slide eight. We consistently generated free cash flow throughout the year which totaled $454,000,000 compared to $467,000,000 a year ago when adjusted for the impact of the resolution of certain prior years tax matters in both years. This was particularly strong cash flow conversion considering our restructuring and associated payments increased to $58,000,000 from $19,000,000 a year ago as we accelerated our cost takeout actions.

We maintained our capital allocation discipline through a focus on deleveraging the balance sheet and ended 2024 with a net leverage ratio of 3.6 times compared to a peak of 4.1 times the second quarter of twenty twenty three.

Of 3.5 times net debt to adjusted EBITDA by the end of twenty twenty five.

Our total liquidity position was $1,400,000,000 including $372,000,000 in cash and the remaining amount in a committed and fully undrawn revolver. We are now committed to bringing down net debt to adjusted EBITDA to approximately three times by the end of twenty twenty six. Let's turn to Slide nine to review our 2020 As Dustin mentioned, several internal initiatives are underway to drive low single digit top line growth.

As a result, we expect net sales to be in the range of $5,100,000,000 to $5,500,000,000 which assumes 1% growth at the midpoint excluding the impact of FX which we expect to represent a 2% headwind for the year. Within food, we expect constant dollar sales growth of 2% primarily from price. Within Protected, we project full year sales to be down 3% year over year.

We expect challenges in the first half to continue and are targeting an inflection in volumes in the second half which will result in a full year decline of approximately 2%.

We expect pricing pressures to persist further reducing top line by 1%. We expect full year adjusted EBITDA to be in the range of $1 to 1,175,000,000.000 representing approximately 1% year over year growth at the midpoint, which assumes a margin of approximately 21%.

FX is expected to be 2% approximately 25,000,000 unfavorable on adjusted EBITDA. On a constant currency basis, the midpoint of our guidance assumes year over year growth of approximately 3.5%. The midpoint of our adjusted EBITDA guidance includes $90,000,000 year over year cost savings more than offsetting negative net price realization and FX headwinds. Full year adjusted EPS is expected to be in the range of $2.9 to $3.3 per share with the midpoint representing constant currency growth of 2%.

Adjusted EPS guide assumes an adjusted tax rate of approximately 27% and relatively consistent year over year net interest expense. We expect full year 2025 free cash flow to be approximately 400,000,000 reflecting continued strong cash generation while absorbing higher restructuring payments associated with our cost takeout actions. Our capital expenditures are expected to be approximately $220,000,000 For the first quarter twenty twenty five, we expect net sales and adjusted EBITDA to be ranged around $1,260,000,000 and $260,000,000 and adjusted EPS between $0.65 and $0.7 per share. Our Q1 expectations reflect FX headwinds of approximately 3%, on the top and bottom line, continued volume pressures in protective and downward pressure in the North American beef market impact Our ranges and outlook reflect the dynamic environment we continue to operate in. As we gain more visibility throughout the year, we will adjust and update Turning to Slide 10. We closed out the year ahead of our expectations and have built a strong foundation for further growth in 2025. While uncertainty and limited visibility remain, we are executing well within food and we are accelerating our efforts to stabilize our protective business. This year represents an important milestone as we return back to sales and adjusted EBITDA growth with a longer term focus on outperforming the markets we serve.

Our leadership, organizational structure and strategy are in place and we are now focused on executing in markets helping our customers navigate this dynamic environment and driving returns to our shareholders. With that, Dustin and I look forward to your questions. Operator, we would like to begin the Q and A session. Thank you. At this time, we will conduct the question and answer session. Our first question comes from Anthony Pettinari of Citi. Your line is now open.

Good morning. Dustin, assuming protective volumes remain negative in the first half, are there parts of that business that you expect to be maybe a significantly larger drag on volumes than kind of the segment average Or conversely, are there kind of parts of the business that are already seeing a volume inflection? Yes. So Anthony, again, thank you for the question. And a couple of comments on that. If you actually look at the past year, it's very similar trends that we talked about in 'twenty four as you're going into 'twenty five. If you think about in 2024, our industrial portfolio was largely down in the mid single digits perspective from a volume. And there were some bright spots in there largely our shrink films And then in fulfillment, it was down the high single digits and that was really the areas we've talked about historically around a poly void fill as well as our poly mailers. Being a pressure point on the fulfillment side. Being offset by our APS business, which again was positive volumes in 2024. When you think about 2025, we expect those similar trends to continue with one major difference which is part of what you're experiencing in the first half relative to having lighter volumes and we kind of see the first half being in that the first quarter being the high single digit and you're looking at the mid single digit range in the second quarter.

And then evening out in the second half. And what you're doing there is wrapping on some of large churn we had in the prior year And these are the items we discussed publicly around some of the fill air business, particularly as they converted into fully paper voice mail. Okay. That's very helpful. And then just switching gears, I think in your guidance you said that you're only contemplating tariffs that have been enacted. I guess there's all kinds of scenarios we could imagine. But can you talk about maybe just some of the sensitivities in terms of what regions are you moving product across border or maybe customers have specific sensitivities or when you look at Mexico, Canada, Europe, China, like where is the The potential impact to Sealed there?

Sure.

And so, Anthony, keep in mind, go back to some of the frame of the script, which is the comments we made around the tariffs are in fact, this is largely the new Chinese tariffs I was put into effect by about thirty days ago. Which we don't Sealed having any material impact on our business. This is a small portion of protected that we import into The U. S. As it relates to the broader comments I made, which is most of our business is domestic production for domestic consumption. Which really prevents that issue holistically. But in our North American business, we do do trade both with Mexico as well as Canada, which is where you would see the most pronounced potential impact for us I say potential because again, if you go back to the comments in the script, right now at this point in time, we're making shifts in supply chain to accommodate that as well. And then obviously, if we need to pass through costs to our customers, we will do that if necessary.

Okay. That's helpful. I'll turn it over. Thank you.

For our next question, We have Ghansham Panjabi of Baird. I want to reiterate, we will allow one question per participant.

Hey, everyone. Good morning. It's actually Josh Desley on for Ghansham. Thanks for taking my question and Dustin, congratulations on the new role. Maybe Dustin, and I know you gave some detail in the prepared remarks, or remarks, but if you could just from a high level standpoint, give us some additional color on what your initial priorities will be for the company's CEO, whether that might be potentially rightsizing any recent changes within the organization, maybe acceleration in cost outs, etcetera? Just any color there would be great. Hey, Josh, of course, and thank you for the question and congratulations. [indiscernible] a couple of comments I'll make and I go back to what we discussed earlier, which is really I break it down into three buckets.

The first being this acceleration around our customer focus.

And again, I go back to the comments we made, which is what's been great in the fourth quarter is we finally brought to market fully our food and protective business.

And operationalizing both those businesses in terms of fully integrating our commercial innovation supply chain. I think about the priorities going forward, it's about this relentless focus on the customer I've talked about some of the initiatives in protective that were already in place and for Protective, it's largely about executing against those initiatives now. That they're fully kind of implemented. Within food, specifically, we talked about the fact that we see some pressure in shrink bags largely due to our exposure to the industrial protein markets and our focus is really on case ready and fluid solutions because the retail end markets they serve represent higher growth for us. But to do that effectively, you have to rethink your go to market, you have to rethink innovation.

And that's in combination the work that we're doing with Steve We're working through that process now. We expect that yield results in 2025. So first acceleration is really making those two pivots, the higher growth areas for food, as well as protective continuing to stabilize that business.

The second piece as we mentioned in the script as well is really around your point around accelerating cost takeout.

And one of the really positives about going to this new operating model that gives us more visibility to the cost structures of each business And so we're more intentional now going forward.

But again, trying to be proactive, particularly in protective where you may see more volume weakness as we go and making sure that we're getting ahead of that. Going forward. In combination with the cost takeout that we took in the fourth quarter as well. So the third piece and the last comment I'll make is around again this piece around leadership Again really pleased where we're at from total company leadership as well as some of our in market teams. We're going to have to as we go forward throughout this year, we're going to continue to make those adjustments and make sure we have the right people in the right positions to ensure that we're successful going forward and largely thinking around having that kind of growth oriented mindset.

One moment for our next question. Our next question is for Phil Ng of Jefferies. Your line is now open.

Hey guys. Congratulations, Dustin, Ronnie and Mark in your new respective roles and good luck with that. My question is on protective. Dustin, I guess you're calling for a back half ramp up, volumes a little more pressure in the first half. Is the weakness in the first half largely the Amazon hangover or you're seeing more pressure in certain pockets? It just feels like demand has been a little choppier.

And then on the pricing side too, what are you seeing on that front? Are you seeing more heightened competition? And then lastly, you talked about scaling up auto bag and your fiber mailer. That process has been probably a little slower than I would have expected. How do you kind of see that ramping perhaps this year going into 2026? All right, Phil. I appreciate that. And I'll break down your question to three parts.

Laid out The first one is just kind of the first half in protective.

And it is it's a mix of continued, I would say, underperformance, but more but split between the underperformance in the business that we're experiencing kind of in Q4 as well as the hangover from Amazon, but also a couple other customer churns that we had in Q1.

And I think the really important point to leave you with there is that going into this year, we're in a better position from [indiscernible] than we have been in the prior two years.

Right. So on a positive note, particularly as it comes to more material customers, And so that's been a positive piece. And then the second piece is we talked about that change in the go to market model particularly in North America, some of the changes we're making, it does take time to work through that transition. So we expect some choppiness as we continue to work through that in the first quarter. And then you expect the benefits starting in the second quarter So you'll benefit from those initiatives kind of fully in motion. Coupled with the fact that you're kind of fully wrapped now on the churn that happened last year. As it relates to the fiber piece of it or excuse me, I'll go to the pricing piece first. So pricing overall as you know holistically from a resa perspective, you're seeing resins slightly inflate right now. Competition in protective, particularly in our fulfillment areas where competition is still think about the pressure you have on polyvoid fill, you're seeing more pressure there from competition, but everywhere else if you think about this kind of lower for longer volume environment for protective, you still feel that, but I wouldn't say it's a difference from 2024.

And with resins now beginning to slightly inflate, you're expecting the ability to potentially take more price in the market and it's reflected in our guidance in both food and protective. The second piece and the last part of your question is on the fiber mailer, I acknowledge the fact that we're we've been slower even ourselves. We're not happy with where we're at relative to the scale up. But on a positive note, the market is receiving the mailer very well. We talked about some of the wins in the fourth quarter and those were largely just demonstrating that we have those proof points now, not just from a local customers, but also large national accounts. So the focus when I go back to acceleration, the pace of execution, what you've seen in the script press release really what I'm talking about areas like this where we can increase that scale up.

We have the product, innovation portion of it's done.

It's really about implementing the lines and getting out in the market. And filling them up and that's what we're focused on.

Our next question comes from Edlain Rodriguez of Mizuho. Your line is now open. Good morning, everyone, and again congrats Dustin.

Think in the prepared remarks, you've talked about enhanced the profitability of each business. In your view, like what is the earnings power of each business in terms of volume, and margins as we look into 'twenty six and beyond.

Hey there. Again, appreciate the congratulations and I'll start here. So there's a couple of comments I would make.

One is we have not issued a longer term guidance for both individual segments, right? And that's something that as a leadership team, we're working in terms of how we see the business shaping up over the next two to three years. But what I will tell you and what we put in the script is is around the fact that in both businesses, the end markets that we currently serve are in the low single digit range. That is from a volume perspective. And if you think about pricing over time being somewhat linear, And what you would expect on that is the ability to drive low single digit and mid single digit kind of earnings power both based on where the rat stays from the markets they serve, the portfolios we have, as well as the footprint we have right now and the capacity within that footprint. Longer term, so if you think about the first phase and I think what we talked about in 2025 is really we need to fully realize that. We recognize if you look at our food business, it's very positive, the performance we had in 2024, expecting another strong year in that similar vein in 2025.

For our protected business, we're still obviously working through the turnaround trying to stabilize it. And get it back to a place where it's really achieving its underlying potential before we enhance it further with further capital deployment as well as innovation. And there'll be more to come on this topic as we progress throughout the year.

Our next question comes from Josh Speck Becker of UBS. Your line is now open.

Yes. Hi, good morning. I wanted to ask on the pricing within food. I think it you. Your comments earlier, you said 2% growth in most of that price. I'm just curious about the visibility of that either through contracts or pass throughs or if there's anything unique that's happening to drive price [indiscernible] And that seems about a point better than what I typically assume for that segment. So if you could unpack that a bit, that'd be helpful. Thank you.

Hey, Josh, this is Dustin speaking. So a couple of comments I would make on that is we are already benefiting [indiscernible] formula pricing heading into the year. So just keep in mind, we we've talked about this in the past, but a big portion of this is in our North American business. Where you have the pass throughs and really based on how resins and the indices have moved in the back half of '20 you'll see that benefit now heading into '25, right? And if you expect residents to continue inflate, there's a lag, but that lag will continue to drive. Beyond that, we have been able to take price in that business.

Again, it's very modest, but reflecting some of the underlying inputs we have. It really speaks to the value proposition of the portfolios But it's really a mix.

Mix of those two dynamics sitting within that business today.

That's driving that outcome. And I think that also the point I would leave you with is that for the first time heading into 2025, we're operating in a more stable environment where you kind of while you have some inflation of resins, it's more fully wrapped than you experienced all the volatility from kind of think of it as pre COVID all the way to 2024.

One moment for our next question. Stefan Diaz of Morgan Stanley. Your line is open. Hi, Justin, Rania and Mark.

Thanks for taking my question and congrats on the new roles.

Maybe Dustin, can you let us know how much automation revenue you had in 2024?

And then maybe what your expectations are for this part of the business in 2025?

For example, are you seeing any green shoots or any conversation changes with customers? Given the increased focus on near shoring? And then maybe longer term, are you still thinking about this part of the business as a material growth vector for Sealed Air going forward?

Thanks. Hey there. I appreciate the comments and the questions.

So I'm going to start with kind of your second question first to frame it up.

Look, automation continues has been historically and continues to be an incredibly important part of the business. But it's a one again I go back to it, One of the three legs of that total stool between offering itself. So really that combination that creates the strength of the value proposition to our customers for our packaging solutions. So it's continued to be that way. And I know in the past, there's been maybe a focus on potentially on that particular piece, but the way we see it is really it's an enabler of again pulling through material sales. We've talked about over the past couple of years where the parts and services business have continued to perform really well, but the equipment sales have declined Historically, that's been driven by some of the capital constraints of our customers in terms of where we're at in terms of the investment cycle.

And what I would tell you is going forward, we're actually optimistic, breaking down because really talking about it together, it really is more meaningful as you think about it between food and protective. You think about protective overall holistically, you're looking at a business that is we're really expecting to drive equipment growth going into '25 and that's really coming off the back of our renewed focus on our auto bagging equipment. We talked about in the script a little bit about the new hybrid auto baggers, which are really substrate agnostic. Allowing you to run poly as well as fiber and with really limited changeovers.

Same thing on the food side where I would say we still see some pressure in that business. But again, it's more reflective of the dynamics of the industry than less about the strength of our portfolio. And in both of them, we're really focused on net new placement. So, right, as you think about each, it's more around new customers, new placements, drive new material Sealed. Rather than think of it as replacing older equipment. So that's kind of our focus right now. But again, all in the spirit of driving more material longer term.

Our next question comes from Michael Rock of Truist Securities. Your line is now open.

Yes. Thank you, Dustin. Roni and Mark for taking my questions and congrats on your new role.

In terms of Dustin, you mentioned shifting the culture to become high performing and engaged and accountable and you want to put push decision making down into the organization, The comment that you ended it with is that you made progress last year especially in Fluent.

So it sounds like progress in Protective was more muted. So just wondering, did anything occur that hinged in more noble progress in protective that you're trying to address currently?

Great question, Michael. And it's a couple of comments I would make as part of this. One is this is really important and I want to leave you with that over the past few years, we've been on a journey in this area and every step that we've taken relative to leadership, structure, strategy, at the center of that is really making sure that we're enabling this culture because longer term we really need all 16,000 plus of us to really be rolling in the right direction. The comment I made specifically in food is it was not intentional in the sense of the way it kind of came to be.

But we really got to the structure in food much more quickly than we have yet in protective. And it's really also a statement about the complexity of Protective as a business. We've talked [indiscernible] 30%, 40% of the overall business, it is a much very complex business with multiple portfolios operating across many geographies. It's more of a statement about the complexity of the business and how you navigate that.

And as we think about the structure of the company at the very top, there's a lot more work as you kind of work it down all the way down to the Sealed. And again, really positive stuff. I would say the North American go to market transformation that was put into place at the beginning of the year is material. We've gotten really positive feedback from our end customers about our distribution partners.

It's moving in the right direction. There's just more work ahead of us to tackle not just to make sure that piece of it's actually working and you're seeing in the results, but the rest of it is actually in a similar place.

Our next question comes from Zas Zekauskas of JPMorgan.

Your line is now open.

Thanks very much.

In Can you talk about the protective segment in 2024? That is what the growth rate was on the industrial side and what the growth rate was on the e commerce side?

Maybe what the split is now between those two businesses? And then for Ronnie, Cost of goods sold was down about $80,000,000 year over year.

Can you talk about what was behind that?

Was that raw materials or cost reduction or how do you analyze that?

Okay. So Jeff, great question. Thank you for that. If I go back to some of the earlier questions around this particular piece of it, If you looked at the split between the two is roughly 60% industrial, 40% fulfillment. That's within the protect segment right now relative to 2024. And as I mentioned earlier, our industrial portfolio was down from a volume perspective and kind of that low single digit kind of mid single digit range And then on the fulfillment side, it was a step higher on the other side of it, which was [indiscernible] mid single digit to high single digit range depending on the portfolio. Now in both areas there were bright spots.

And that could give you an idea in a couple of areas, you had shrink film as an example, we Sealed out, we've talked about our inflatables, and we've also talked about our auto bagging equipment. And material Sealed, which were all very positive.

Yes. From a cost of goods sold perspective, as a percentage of sales, we do see correlation in the reduction of cost of sales aligning with the overall sales reduction. However, that is combined with a little bit of favorability on the raw material Yes. And then Jeff, just a compliment, keep in mind too that we talked about the cost takeout actions that we took last year We started out the year talking about roughly $90,000,000 We ended the year at $89,000,000 A significant portion of the cost takeout as well as other productivity is also hitting the cost of goods sold Thank you. Our next question comes from Arun Viswanathan of RBC. Capital Markets. Your line is now open.

Congrats on the new role as as well, Dustin and Ronnie and Mark.

So I guess just wanted to understand the guidance ranges a little bit more. So So it looks like you're up about 3.5% for EBITDA at the midpoint, 2.5% for EPS.

And what would really drive you to the up end of your range? Was that is that kind of very macro dependent Is it maybe continued outperformance in food and maybe the stoppage of underperformance in protective or how should we think about attaining that range? Or is the midpoint really more of what you have line of sight towards?

Thanks.

Hey Arun, it's Dustin speaking. I will tell you, I'll break it down into three individual components. So the first in our food business as we kind of alluded to, to go back to last year, we entered the year thinking that the North American beef cycle will be a headwind to the business. And we're down probably in the 4% range at least at the beginning of the year and we ended up being flat even benefited the fourth quarter. As we think about next year, we're in a similar position. Right, where the herd hasn't been rebuilt.

And so what you're hearing, at least initial thinking is that you're down 3% to 4% again going into full year. One of your point about macro dependent, I think one of the areas that gets you to higher in the range is if the food business, if you see that actually become much better for the full year, which is always a possibility. Again, well, I'll just caveat being that we're in a dynamic environment. The second piece on protective is to your point, is the acceleration of independent on when can we inflect volumes. As I mentioned in the script, the timing is difficult to predict.

And as part of the reason you're calling a second half inflection point, but we do believe that we're taking the right actions in the business to make that happen is just at what rate and pace of speed do you actually see that improvement right? And then the third piece is, as we alluded to in the script, we're still thinking through while we're already committing to roughly $90,000,000 of cost savings in 2025, We're really now taking a look at both businesses and making sure that their cost structures are fit for purpose. Which could obviously yield going back to the EBITDA line, not necessarily on the sales side, that gives you potential further looks. As we think about the back half 2020, Thank you. Our next question comes from Matt Roberts of Raymond James. Your line is now open.

Hey, Dustin, Ronnie, Mark. Good morning. I'll echo everyone. [indiscernible] Justin, on the you know that there were two plants closing, I believe, by year end. Are there specific product lines that you're reducing the contribution mix from in those closures? And maybe when you think about that portfolio rebalance or the complexity in the protected segment that you just [indiscernible] When you look at the facility footprint, is there major overlap in terms of assets or sales functions or even resins from underperforming lines versus areas that are not structurally challenged.

Basically, when you think of facilities in relation to the total portfolio, how do you weigh trade offs in either maintaining the underperforming assets versus investing in areas of innovation that you discussed.

It's been wondering if there are potentially more closures coming with cost takeout or how you weigh the trade off there? You for taking the question.

Matt, great question. And that was a very complex one.

And I appreciate you asking because it's a very it's very thoughtful. And what I would tell you is that as it relates to the two specific ones, this is around specifically network optimization. We've put it in reference largely to protective and it's largely consolidation. It's not reducing contribution from an individual product line. It's all about improving your cost position relative to those particular products. Which is what largely most of our network optimization has been done. As it relates to thus far, we're down about, I want to say, five kind of mid single digits in terms of facilities over the past two years. And so as it relates to your question around, as you said about going forward and how you weigh these options, Largely and specifically as it relates to protective, we feel good about keep in mind, I'll go back to that domestic production for domestic assumption. If you really take it protected, the metropolitan market. And so what's important as we evaluate those things is largely which geographic market you want to go into and then which metropolitan markets you want to serve within the countries that we operate in today, which is obviously sprawling and broadly international.

And so we feel good about the footprint we have. And in terms of where we're at today, there's always potential for more network optimization in we're very thoughtful about how we evaluate that. Those are very big decisions that we spend a lot of time really thinking through. And as part of the reason today, we're not announcing that. And again, I go back to it's not just from a lens of cost takeout for cost takeout sake, it's got to create longer value. So So again, when you think about a protected market, the last thing you want to do is exclude yourself from a metropolitan market that you think may have longer term growth. Because you have short term challenges. So as I've mentioned beforehand, we feel really good about the portfolio we have in protective. And it's largely right now focusing on commercial execution as we move forward. And making sure that we obviously put volume back into our plants. So we can benefit from other side of this and the incremental is going on the way up versus the deleveraging. We've experienced. And so that's that's where our heads at today.

Thank you. Our next question comes from Chris Parkinson of Wolfe Research. Your line is now open.

Can you just talk a little bit more about global protein markets and kind of what you expect in 2025? What's embedded in your guidance? Given some of the noise on the Red Meat side as well as potential headwinds to poultry, just any dynamics that you think are worth noting would be very helpful. Sure, Chris. So a great question. And And again, kind of piggyback off in the comments that I made earlier. If you think about particularly I would say our Latin American, Australian cycles are kind of they're around the peaks. And then if you think about our North American cycle, that's the area that last year we thought was going to be 3% to 4% down in then now it ended up being flat and now we're kind of looking at and this year it's 3% to 4% kind of was baked into our current current outlook. The flip side is that when you go back to last year, if you look at most of the markets, whether it was dairy, smoked and processed food service, even poultry, they were slightly down for us globally. Now in mind, I'm beyond North America now. And as we go into next year, those areas have slight upsides.

Which is really playing in well to the strategy. Go back to we had very strong gains in our portfolios outside bags But going into next year, those markets, which in many cases actually lend themselves more to retail end markets versus industrial food processing kind of end markets, there presents more opportunity and we see those being positive even poultry because largely what most people are referring to in poultry, there's concerns around largely Turkey where we have less exposure and that's really tied to the varying flu. And so I think that for us, we still see poultry consumption moving up It plays well into our strategies around case ready and we see that as a long term source of growth not just in the short term 'twenty five, but in 'twenty six and beyond.

Thank you. Our final question comes from Gabe Hajt of Wells Fargo. Your line is now open.

Good morning. I will echo the congratulations from everyone.

Two hopefully quick ones, Dustin. First, the large player in ecom made an investment one of your pure play kind of fiber based competitors. I think this move is pretty unique at least relative to what we've observed historically. So two questions. Does this change your view at all on how to maximize value out of maybe the protective segment?

And are you seeing increased activity in the M and A world in either the SUIER protective segments And second, you called out $89,000,000 I think of cost out in 2024.

Think, Ronnie mentioned $90,000,000 was embedded in the outlook.

I don't know if you're specifically ascribing all call it 180 the cost out to grow, but I think you were initially targeting $150,000,000 Where is the upside coming from? And then maybe if you're willing to quantify what that runway looks like?

Thank you, Gabe. It's a great question. Question. So I'm going to start with talking about and specifically Rampac, which I believe is what you're referring to and then And then I'll turn it to Ronnie to not only walk you through the cost out to give you clarity there, but walk you through the EBITDA bridge for the year. And then talk you through a little bit about net price realization that plays into that EBITDA bridge as well. So when you think about I go back to the comment around ramp specifically in Amazon, While it's unusual for Amazon to operate this way I would say with their industrial partners on the retail side, it's actually quite common on how they operate this on their AWS or cloud services or cloud infrastructure business and with their services partners. So it's very similar. And if you go back to it, really what we see from this is that it's one is continuity of supply, but also from ramp up specifically and this goes back to the business they won last year on the paper side, which is paper void filled, but a much more simplified version of that in terms of how they're offering it [indiscernible] As you determine our natural reaction to it, keep in mind that paper void fill today is a relatively small part of our overall portfolio.

Where we see growth from a fiber perspective and particularly in fulfillment is less around the box and what's in and how you solve for VoIP fill in the box. It's more around the actual packaging formats, particularly on the mailers. Which is the reason why we talked about doubling down the fiber discrete mailer itself well as our auto bagging equipment, which is in itself a form of a mailer. Right, which is we've already had a lot of success with. And so we see it we don't see it as unusual what they're doing. Now what it does do for us is potentially create an opportunity relative because just kind of publicly doubling down and strengthening their relationship which gives us an opportunity for others that may not respond well to it. But it doesn't change our strategy. Doesn't change our thinking about how the opportunity we see in that business We believe in what we're doing. We believe it will will yield results. And then going back to your question around the cost out, I think I'll clarify one point that 89% versus 90% in 2024 was talking about where we set out in the beginning of the year where we landed.

I'm going to turn it over to Ryan to talk about EBITDA bridge for the full year because it's similar. I think that may create some of the confusion and then talk about net price utilization.

Yes. Thanks, Dustin. Thanks, Gabe, for the question. From an EBITDA bridge perspective, as you are aware, we are facing FX headwinds of roughly $25,000,000 combined with that, we are seeing unfavorable net price realization of roughly 65,000,000 This is in cost of $105,000,000 due to inflation offset by price increases of roughly 40,000,000 The combination of FX and net price realization are effectively offset by the $90,000,000 of savings that we referenced in the script. The $90,000,000 in savings can be split between $65,000,000 of cost takeout actions and $25,000,000 of productivity efficiencies.

When we think about the CTO program, we set out to achieve the $140,000,000 to $160,000,000 of savings As you had mentioned, through 2024, we did realize million dollars of CTO savings [indiscernible] $65,000,000 will bring us to the high end of that range. When it comes to the productivity savings, Dustin talked a little bit about plant optimization, etcetera. The $25,000,000 is largely driven by that.

From a comparative perspective, it's generally difficult to guide on.

Because it's heavily contingent on what we do within the plant.

So, Gabe, just to follow on to that point. So if you think about holistically, what she's referring to is really the productivity that we're driving within our plants. On that particular piece of it. But broadly speaking, it's the same categories we've been going after the past two years. It's just now with the new structure in place, we have a lot visibility each cost structure. So it's given us more tailored opportunity to make adjustments you go back historically, some of the comments we've talked about, which is whether it's further back office optimization, which we continue to go after, And then also areas around further automation within most of our functions and other G and A type productivity enhancements. And so what I'll leave you with on this particular piece is that we're staying flexible as we go throughout the year to make sure that we're proactive. So while this is a starting point or outlook for the we'll be taking another hard look at the protective cost structure, particularly as we progress throughout the year. If we're not seeing our initiatives take hold as quickly as we would have planned. And so I would say on this particular topic, stay tuned.

I'm showing no further questions at this time. I would now like to turn it back to Dust I'd like to thank everyone for their time today. And I look forward to updating you throughout 2025 as we Lastly, I'd like to close by reiterating my appreciation for all the Sealed Air team members for their tireless efforts in solving our customers' most critical challenges and their continued commitment to our transformation. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. [indiscernible]