Sealed Air (SEE) Q2 2025 Earnings Call Transcript

Image source: The Motley Fool. DATETuesday, Aug. 5, 2025, at 2 p.m. ETCALL PARTICIPANTSPresident & Chief Executive Officer — Dustin SimakInterim Chief Financial Officer — Ronnie JohnsonVice President, Investor Relations — Mark StoneNeed a quote from a Motley Fool analyst? Email [email protected]RISKSNorth American beef market volumes declined by 7% in Q2 2025, exceeding previous expectations and contributing to lower second-half food segment forecasts.Year-to-date free cash flow fell to $81 million for the first six months of 2025, compared to $207 million in the same period of 2024, primarily due to higher incentive compensation and tax payments.Protective segment net sales decreased by 3% as reported in Q2 2025; adjusted EBITDA in this segment dropped 5%, with continued negative net price realization offset only partially by cost savings.Management noted ongoing “low visibility and more volatile environment” for both food and protective segments, raising caution regarding forward volume and pricing assumptions.TAKEAWAYSNet Sales-- $1.34 billion in net sales for Q2 2025, down 1% on a constant currency basis.Adjusted EBITDA-- Adjusted EBITDA was $293 million for Q2 2025, up 3% on a constant currency basis, driven by productivity, cost takeout, and a one-time $7 million lease buyout benefit.Adjusted EPS-- $0.89 adjusted earnings per share for Q2 2025, up 7% as reported, and up 10% on a constant currency basis.Adjusted Tax Rate-- Adjusted tax rate was 24.4%, down from 25.5% in the same period last year for Q2 2025.Total Liquidity-- $1.2 billion in total liquidity at Q2 2025 quarter-end, with $354 million in cash, and $830 million of revolver availability.Net Leverage Ratio-- 3.6x with a stated goal to reach net debt to adjusted EBITDA of approximately 3.0x by 2026.Free Cash Flow-- $81 million in free cash flow generated during the first six months; management reaffirmed full-year free cash flow guidance at the $400 million midpoint for 2025.Protective Segment Volumes-- Down 2% for Q2 2025, the lowest quarterly decline in volume for the Protective segment since 2021; sales in the Protective segment were up 4% sequentially, and adjusted EBITDA increased 6% sequentially.Food Segment Net Sales-- Food net sales were $890 million for Q2 2025, flat due to favorable pricing and contract pass-through offset by volume softness, especially in North America.Food Segment Adjusted EBITDA-- $210 million in adjusted EBITDA for Q2 2025, Food adjusted EBITDA of $210 million was up 3%, with a margin of 23.4% (up 50 basis points year over year) for adjusted EBITDA, driven by productivity and net price gains, partially offset by lower volume.Guidance-- Management reiterated total sales guidance of $5.1-$5.5 billion for 2025 and adjusted EBITDA of $1.075-$1.175 billion (non-GAAP) for 2025, with adjusted EPS now expected slightly above the midpoint of $2.90-$3.30 for fiscal 2025 (period ending Dec. 31, 2025).Q3 Outlook-- Expected net sales of $1.3 billion for Q3 2025, adjusted EBITDA of $270 million for Q3 2025, and adjusted earnings per share (non-GAAP) around $0.68 for Q3 2025.Cost Takeout & Productivity-- Management said it remains on track to deliver approximately $90 million in cost savings for the full year 2025, mainly through network optimization, G&A streamlining, and commercial realignment.Beef Market Headwinds-- The CEO disclosed, “slaughter rates decreasing 7%, worse than our previous expectations of down 1% for Q2 2025.”Capital Intensity-- Management stated that capital expenditures will finish near $200 million for the full year 2025, a reduction from previous expectations.Leadership Change-- Dustin Simak announced, “Kristen Actis Grande will be Sealed Air's new Chief Financial Officer,” joining later in August.SUMMARYSealed Air Corp. (SEE 4.04%) delivered sequential improvement in Protective segment sales and adjusted EBITDA in Q2 2025, signaling initial progress in its turnaround, even as volumes declined 2% in the second quarter. Management reaffirmed its annual net sales and earnings guidance but issued a cautious near-term outlook, attributing this stance to unexpected 7% declines in US beef market volumes and continued macroeconomic volatility. Foreign currency tailwinds were acknowledged as partially offsetting domestic volume softness, while cost-savings initiatives contributed materially to margins and offset headwinds from negative net price realization in Protective.Simak described a “volatility in the beef markets” coinciding with fifty-year lows in the US cattle cycle, forecasting 3%-4% annual declines in the related product line for 2025 and 2026 before a recovery.The CEO said, “We are below $4 billion of net debt for the first time since 2022 as of Q2 2025,” emphasizing the ongoing emphasis on debt reduction over M&A activity.Management characterized the current environment as “low visibility and more volatile” with price and raw material trends in Protective heavily influenced by tariff-driven resin deflation.Johnson confirmed, “food's EMEA and Asia businesses showed strength with volumes up low single digits in both regions.”Johnson noted that adjusted EBITDA margin of 22% was up 70 basis points, reflecting productivity gains and network optimization.INDUSTRY GLOSSARYShrink Bag: High-barrier packaging used to protect and extend shelf life of fresh meat products.Fulfillment Portfolio: Product lines within Protective segment focused on packaging for e-commerce delivery and distribution centers.APS (Auto Bagging Solutions): Automated packaging systems that optimize packaging efficiency for industrial and consumer goods.Full Conference Call TranscriptMark 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 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 statements section of our earnings release and slide presentation. These sections also apply to this call. 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.Dustin Simak: 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 that after a thorough search process, Kristen Actis Grande will be Sealed Air's new Chief Financial Officer. We are excited to have Kristen come on board later this month to leverage her experience driving transformations across complex manufacturing and distribution businesses to accelerate the transformation we are driving here at Sealed Air.She has a proven track record of creating shareholder value, and I'm looking forward to the impact she'll make across both of our businesses, food and protective. 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 the 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 was 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 until the third quarter. However, there are pockets of the business, particularly certain specialty resins that are procured from countries being impacted by increased tariffs and limited pricing actions.Let's now move to the economic outlook and discuss each of our market-focused business segments. 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 in our results. Our second quarter volumes were down 2%, with the Protective's 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. And 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. Our turnarounds are typically nonlinear, but 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 Protective's EMEA and Asia footprint. We continue to work on addressing fiber portfolio gaps in our Protective business. Our previously announced Jiffy embossed paper mailer is gaining traction in the market, and our hybrid auto vac 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 Protective'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 volume in the first half against expectations and expect our turnaround in Protective to continue to deliver iterative progress, we are being prudent on expectations for the second half. Reflecting the market uncertainty ahead of us amid global trade policies that have lower growth expectations across many markets but primarily in the US.Transitioning to food. Our food business remains resilient and continues to perform throughout 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 foodservice. Our international business, while tempered from a market perspective, continues to perform well where we have continued to take share in the market throughout 2025, building on momentum coming out of 2024. The pressures on the North American market 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 US. 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 and 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-size packaging formats, reducing the packaging volume per protein weight sold. Overall, changes in consumer spending are resulting in lower with a mix 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 foodservice 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, the US 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 is at fifty-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 US beef production and a softer second half is now resulting in lower full-year volume 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 Dollar is 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, 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, and 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 2022. We are on track for the full-year 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?Ronnie Johnson: Thank you, Dustin, and good morning, everyone. Let's turn to Slide four to review Sealed Air's second quarter performance. As Dustin mentioned, we executed well in the quarter and came in ahead of expectations. Net sales were $1.34 billion in the quarter, down 1% on a constant currency basis. Adjusted EBITDA in the quarter was $293 million, up 3% on a constant currency basis. Adjusted earnings per share in the quarter of $0.89 was up 7% as reported, and 10% on a constant currency basis. Our adjusted tax rate was 24.4% compared to 25.5% in the same period last year. Our weighted average diluted shares outstanding in the quarter was 147 million.Turning to Slide five. During the second quarter, volumes were down 2% across both businesses. Food volume weakness was primarily due to softer-than-anticipated volumes for industrial food processing predominantly in North America. Protected volumes were down 2% in the second quarter, our lowest volume reduction since 2021. The fulfillment portion of the portfolio, which represents about 40% of the Protective business, was down mid-single digits as we lapped the tail end of material customer churn. The fulfillment declines were partially offset by volume increases within the industrial portfolio. Price was up 50 basis points primarily on formula contract pricing in food, which was partially offset by pricing declines in protective of about 2%.Second quarter adjusted EBITDA of $293 million increased 3% on a constant currency basis. Margin of 22% was up 70 basis points. This performance was mainly driven by cost takeout productivity efficiencies, and a one-time benefit of $7 million from a lease buyout related to G&A network optimization, partly offset by unfavorable net price realization.Moving to slide six. In the second quarter, food net sales of $890 million were flat as favorable pricing and formula pass-throughs were offset by softer volumes. As Dustin mentioned, protein markets decelerated more rapidly than we initially anticipated entering the quarter. The global protein markets we serve were down approximately 1%, the largest of which was the US beef cycle, which was down 7%. Despite these market headwinds, our case-ready retail solutions benefited from prior share gains with volume up slightly. From a regional standpoint, food's EMEA and Asia businesses showed strength with volumes up low single digits in both regions. Food adjusted EBITDA of $210 million in the second quarter was up 3%.Adjusted EBITDA margin remained strong at 23.4%, up 50 basis points compared to last year. The increase in adjusted EBITDA was primarily driven by productivity and cost takeout savings, combined with favorable net price realization. These were partially offset by lower volume. Protected second quarter net sales of $439 million were down 3% as reported and 4% in constant currency. While volumes declined 2% overall, declines in our fulfillment portfolio were partially offset with slight growth within our industrial portfolio. Protected adjusted EBITDA of $78 million was down 5% in the second quarter as reported. Adjusted EBITDA margin of 17.8% was up 20 basis points from the first quarter.On a year-over-year basis, cost takeout and productivity savings partially offset negative net price realization.Now let's turn to free cash flow and leverage on Slide seven. During the six months, we generated $81 million in free cash flow, as compared to $207 million in the first six months of 2024. The primary driver of this anticipated reduction was an increase in incentive compensation payments and the timing of tax payments, partially offset by lower interest payments and capital expenditures. At the end of the quarter, our total liquidity position was $1.2 billion, including $354 million in cash, and approximately $830 million available under our revolver. Our net leverage ratio was 3.6 times. We remain on track to drive net debt to adjusted EBITDA to approximately 3.0 times by 2026.Let's turn to slide eight to review our outlook. We continue to operate in a low-visibility and more volatile environment within both our food and protective businesses. As a result, the strong first half performance and improved foreign currency assumptions will be offset by softer volume expectations primarily in food, in the second half and slightly lower pricing across both segments due to deflationary raw materials driven by the global trade impact. Foreign currency impacts are now expected to be approximately 1% better than in We are maintaining our previous sales guidance range of $5.1 to $5.5 billion and adjusted EBITDA guidance range of $1.075 billion to $1.175 billion.We regularly monitor legislative changes to In early July, the One Big Beautiful Bill Act was signed. We are currently evaluating the impact of these provisions and their impact on our effective tax rate and cash tax payments. For now, we still expect our adjusted tax rate to be ranged between 26-27% for the year. Based on our outperformance in 2025, we now expect adjusted earnings per share for the year to be slightly above the midpoint of our previous guidance range of $2.9 to $3.3 per share. Lastly, regarding free cash flow, we are maintaining the midpoint of our previous guide of $400 million.We continue to improve our discipline around capital deployment, reducing our outlays while improving our return. As a result, we expect capital expenditures to come in lower than our original expectations, though slightly offset by higher working capital. While our cash generation was more linear in 2024, typically generate more cash in the second half of the year mainly due to the seasonality of the business. Looking ahead to the third quarter, we remain prudent given the uncertainty around consumer spending primarily in North America, combined with a faster-than-anticipated deceleration in the US Beef market. As a result, we expect net sales of approximately $1.3 billion, adjusted EBITDA of $270 million, and adjusted earnings per share around $0.68.With that, Dustin and I welcome your questions. Operator, we would like to begin the Q and A session.Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q and A roster. Our first question comes from Matt Roberts of Raymond James. Your line is now open.Matt Roberts: Hey. Good morning, everybody. Thank you for taking the questions. Dustin, you gave a lot of good color on the beef headwinds. It seems pretty well documented, certainly appreciate that. What does that translate into volume impact for the second half or any annualized impact we should expect in food? Maybe just broadly, any additional color on protective volume expectations for the second half, either by product line or end market? Sounds like you're seeing good wins there. So maybe any incremental color on new customers or products and the lift contribution? And just probably how you're thinking about volumes for that segment 3Q and second half? Thank you for taking the question.Dustin Simak: Yeah. Of course, Matt. And appreciate the question. So starting with food and the cattle cycle. As we kind of made a comment in the call itself, just keep in mind that the main area that we're focused on is really where the consumer's at. So I'll get into the supply side in a second. But just in general, what we talked a lot about is really more on the demand side relative to where consumer spending is. As we mentioned, it's relatively stable, but where it's going into retail, especially because you're seeing parts of food service and parts of industrial processing shift into that end market. And we're just making sure that we're positioned to capture that demand.Still very optimistic about where we're at, what we're doing to get after it. And so but I'll go back to the supply side, and I'll give you more color on that. So on the cattle cycle itself, just as a reminder, you know, think about the business it's impacting, it's really about $400 million out of our $3.5 billion, right? This is, you know, shrink bags that go into the beef end market. Right now for the year, we're expecting, you know, three to 4% for '25, you know, down three to four for '26. Flat in '27, and then '28 is sort of return back to growth. Now keep in mind, it's volatile.As we mentioned, you're seeing the acceleration in herd rebuilding right now. But it's still slow relative to heifer retention. So you're seeing a little bit more elongation, but a little bit shallow now than our original expectations. But I'll just reiterate that it's more volatile as we go forward. But the way to contextualize that, if you think about the roughly $400 million and you take the three to 4% off that, that's kind of the year-to-year headwind.Think about it in the context of a $3.5 billion business, you know, we're still very optimistic that while it's a headwind and it's worth calling out, it's, you know, it's not something that we can't overcome as an organization, and that's what we're focused on. Going back to the end markets that we're targeting, really trying to rotate more into retail and to food service. If you think about volume expectations in the second half, particularly for the food business, what we're looking at is roughly, you know, down two points relative to where we were.You're looking at the volume mix in the second half being around down, you know, three points in Q3 and Q4 from a volume perspective. And, you know, I'll say two points down relative to where we were back in May, and that's kind of the shift overall the business. But most of that's related to where we see, again, going back to the consumer, and it's still too early to talk about 2026 as we'll have a lot more clarity as we progress throughout Q3 and Q4.So when we shift to protective, obviously, pleased with our performance in the second quarter. While we're still down, it is a mark in progress. Our industrial portfolio took a step up. Fulfillment, as Ronnie mentioned in her commentary, is down mid-single digits. We think about the second half, so you had to roughly think of this a couple points ahead of our own expectations in the second quarter. And what we've done as we think about Q3 and Q4 is really maintained outlook for the second half despite the overperformance in February. And that's really just around what Ronnie mentioned during the prepared remarks around us being prudent around the second half. As we closely watch our end markets.Now talked about the industrial portfolio, just to give you some color where some of that opportunity was. Our core view business performed really well. Shrink business is performing well. Our Instapack, while still slightly down, performed better than it has, you know, over the past of it as probably six, seven, eight quarters. And so we're really pleased. There's pockets of it. It's not perfect. You know, like I said, holistically at the portfolio level. And mixed around each individual region. But, again, really pleased with where we're at, and a lot of that benefit is coming from the work as we talked about in North America, we're now gonna be extending across the rest of the world.Because that's where we had the biggest, biggest pressure point. The other area as well, like, the last color commentary I'll give on it, is really around our electronics business and end markets that we see there. Very strong in the first half of the year. And while we're, you know, looking at it, trying to make sure it's not transitory related to, you know, being prebuying during tariffs, etcetera, it's, you know, what we're thinking about now is really, you know, where is it gonna be in the second half? And so far as we've gotten off to the start here in Q3, it's on track.We haven't really seen any shift in the end market dynamics at this point. But, again, staying close to it. And really excited about where we're headed and really positive about what we've been able to do in a relatively short period of time in terms of really, you know, beginning to turn the tide. Thank you.Operator: Our next question comes from Ghansham Panjabi. Your line is now open.Ghansham Panjabi: Hey, guys. Good morning. I guess, you know, Dustin, on the food business, I mean, you're pretty much at a high watermark for margins for that segment. You know, with your commentary on food and for the outlook through 2027, etcetera, you know, I have to assume that red meat is more profitable, especially North American beef. You have the tariff uncertainty as it relates to Brazil, etcetera. How do we think about the near-term outlook for margins specific to food? And then also, you know, as you think out to 2026-2027, the natural headwinds associated with this large profitable market being a headwind? Thanks.Dustin Simak: Hey, Ghansham. Good question. As it relates to kind of food margins where we're at now, you're right. I mean, we're really pleased with where we're at from an overall margin perspective. We've talked in the past around shrink bags in general, which is what's serving that market and the specialty properties around that particular performance of that application and the equipment offerings we bring with it. It is a high-margin business for us. What I would tell you is if I go back to it, you think about 2025 and 2026, you know, and 2027, you're talking about a $400 million business with a slight impact relative to three to 4%.So in the scheme of things, to our overall shrink bag business, which is about $1.4 billion in size, it's still relatively contained, particularly to North America. And while there is absolutely a margin impact relative to loss of volume associated with that, we still believe the, you know, the network optimization efforts and transformation efforts relative to productivity are gonna continue to buoy and balance out our margin as we have over the past and demonstrated over the past couple of years.So we feel still very confident that we're not gonna have a material mix impact relative to bags, relative to the rest of the business that would bring down margins and that still able to drive earnings power despite that headwind. But, again, we'll continue to monitor as we go forward throughout the second half of the year. And to understand, you know, does the outlook for 2026 become more acute or not, but as of right now, I'm down 3% to 4% in that $400 million business within North America. Feel it's relatively contained and something that we can overcome. And so we're not as concerned about it. Thank you.Operator: Thank you. Our next question comes from George Staphos of Bank of America Securities. Your line is now open.George Staphos: Hi, everyone. Thanks for the details. And, you know, congratulations on Kristen and Ronnie, congratulations to you on all you did in the interim role. And your work going forward. I guess, my question is twofold. One, Dustin, you said that you're maintaining guidance despite what's been an accelerated decline in food. Can you talk about the specific controllables that you're controlling? So the specific cost outs, things like that, that you expect for the second half, I guess, particularly within food, but wherever you want to talk about what will bolster your earnings in the second half relative to your guidance.Is there a way you can give us a bit of cadence Food versus Protective in the third quarter? And then the second part of the question, your release last night mentioned, and I'm paraphrasing, you know, that one of the reasons that Kristen was selected as CFO is that she has experience creating value with complex portfolios. How does that apply to Sealed Air? Where do you think that to be most applicable? Thank you, and good luck in the quarter.Dustin Simak: Yeah. Thank you, George. So a couple of pieces. So as we talked about earlier in the year, right, we really focused on cost takeout. We cited this roughly $90 million number that we're well on track to achieve for the full year. And as we look in the out years, you know, the hope was at that point that we could drive even further operating leverage in the business.And, obviously, as our outlook for volume has come down, keep in mind that, you know, that now a lot of that cost takeout effort is really balancing out earnings, you know, to get us to the $1.125 billion midpoint that we were calling out as a new part of our guidance. And, specifically, a lot of these initiatives, while we're continuing to kick off new things, network optimization, a couple of other areas that we think will be able to yield benefit in 2026 and 2027 and beyond. Right now, it's a lot of activities that have been in earnest over the past two years.Areas like that, you know, which we talked about in the past, which is our G&A optimization around our back office in Manila. That started from concept a year and a half ago as an idea, and now we're full swing. The office is open. We've already hit our 200 plus employee there. Same thing with Mexico City, which is staggered behind it. Now ramping that up. Those are two examples of it. There's a litany of them relative to the reorganization work we've done.That's been able to streamline the organization, delayer it, actually improve accountability, improve speed of decision making, while at the same time driving earnings power, in this case, even offsetting some of that volume weakness that we have in the second half. So it's a lot of stuff we've had in motion, and we talked during May around there's other opportunity now to continue to do that going into 2026 and 2027. We'll continue to work on it as we progress throughout the second half of the year, we'll give you more color about what's to come and what does that mean for 2026 going back to even Ghansham's question.In terms of what we can do more to balance out where we see any pressures in the business. But we're, you know, it's now more than ever being really proactive about it and making sure that we have a pipeline of actions that we're taking that not only improve business outcomes, but at the same time, help balance out the earnings power.So when you think about the question on Kristen, you know, really, if you take a step back, she has a background obviously, you know, spent her entire career in industrials. And last, you know, lastly, the MSC with doing distribution works. There's a lot of inner background relative to managing. If you think about Ingersoll Rand, complex portfolio, international business, think about our protected business, complex portfolio, international business, you think about our food business, very similar. Right? So even within underneath the food and protective kind of segment, there's obviously a lot of complexity in the proliferation of solutions and applications we have.And most recently in MSC, she actually led a lot of the transformation work in that business. And so we think a lot of her direct experience is really applicable here to accelerate the work that we're already doing and also bring new ideas. If you go back even my own background where I don't have a natural background in manufacturing except for my time here at Sealed Air, she really is gonna come in and compliment that bring a different lens to what we're already working on and even bring a new perspective. So we're really excited about her coming on board.And I'll just take a moment with that said also, again, just to thank Ronnie for all she did. I appreciate your words there. Because she's done a tremendous job over the past six months.Operator: Thank you. Our next question comes from Phil Ng of Jefferies. Your line is now open.Phil Ng: So, Dustin, I think you guys kept your outlook for Protective unchanged in the back half despite, you know, progress. Which makes sense. But are you actually seeing any slowdown in bidding and or activity? Throughout 2Q and going into July? And then some of the uptick you're seeing on the industrial side of your portfolio, can you kind of size up, you know, how much of that is in initiatives versus the cycle turning in that would be helpful.Dustin Simak: Yeah. So, going down to your point about July, as I mentioned, I think it's early on maybe in the Q&A. We really haven't seen a change in order pattern. Right? And we're still on track, you know, kind of early here starting in Q3. And so I feel good about where that business is headed right now. And a lot of that is so order entry, activity in the market, but keep in mind, Phil, what we're trying to balance out is that a lot of that's being driven from the fact that we invest in sales. So if you think about and we've lost significant amount of volume since 2019. So going back to customers that we lost.We're going to existing customers to expand our business. So a lot of the work we've done in our go-to-market was giving us that confidence and our ability to take not just grow existing business, but take in the marketplace, particularly in areas where we've lost it in the past. If I contextualize that with industrial portfolios, what I would tell you is that, to me, that's not really a cycle turning. If anything, would say there's been more market pressure here recently.If you think about areas like the automotive industry, where our foam and plate solutions used widely, you know, we're obviously concerned about tariffs and what that could potentially mean for end markets, but we've continued to perform really well. I think that speaks to now that we have that go-to-market motion really beginning to really work, beyond the fact, keep in mind too, that we've also minimized churn, and that's not just a Q2/25. That's for the past six, seven quarters. It's really beginning to bear itself in the results. And so we're still cautious obviously about the second half. That's part of, you know, your commentary. We obviously had a beat expectations in 2Q.We held the second half relative to volume expectations. Which implies a slight uptick in volume in Q4. And so we're kind of heads down and really focused just focused on executing against those internal initiatives. But when I say internal, keep in mind, a lot of this is really just being back out in front of customers, back out in the field. Back out engaging with our distribution partners. So it's and I'm really excited about, you know, kind of cascading this across our European as well as our Asian footprint and getting further leverage out of that, particularly as we head into 2026.Operator: Thank you. Our next question comes from Jeff Zekauskas of JPMorgan. Your line is now open.Jeff Zekauskas: Your adjusted EBITDA range for 2025 is $100 million and you only have two quarters to go. And your EBITDA was, you know, roughly flat in the first half. Why is the range so wide? Is that because of conservatism, or is the uncertainty about second half EBITDA that large?Dustin Simak: Thank you, Jeff. Yeah. So just to answer it very directly, it's really just conservatism. As we think about the second half of the year, you know, again, we don't the volatility just relative to the end markets that serve and us being cautious around it, it really just being prudent with low visibility. And rather than touch the ranges at this point in time, our thought process was let's work through the third quarter once we have more visibility into the obviously, 3Q we can then, you know, not just touch the range as we indicated. Keep in mind in the guidance side of it that our EPS above we expect it to be slightly above the midpoint.We'll come out more fully and kind of give you a sense of where we're landing across all the dimensions of our guidance and do that at that point in time when we have a bit more certainty. And it really just speaks to the dynamic environment we're operating in, particularly as it relates to tariff impacts and think that, you know, as you obviously because we're all aware right here recently in August, a lot of these decisions were made, but it actually takes time. And I don't think people always fully appreciate that relative to is it gonna do to inflation, what's gonna do to price, and it takes a time to work through the system.And so a lot of that's just reflecting that. But I would say, in general, it's not that we believe, you know, we're concerned about the outcomes of that those far ends of the range up or down. It's more around just, you know, conservatism and looking to get through 3Q and give you a more full update.Jeff Zekauskas: Okay. And then secondly, can you describe a little bit of your issue with procuring specialty resins and why things seem to be a little bit more difficult for you?Dustin Simak: Yeah. It's not difficult to procure them. This is just really speaking about our footprint and just giving you a little color where we're seeing more impacts on tariffs. Now keep in mind, I'll reiterate that no real impact in the second quarter. We don't see any real impact full year relative to our outlook at this point in time. We've really been shifting around. But there are certain resins, you know, as we've gone through this process with tariffs, production. We've been shifting around procurement, you know, in terms of being able to try to mitigate the impact as much as possible. It did happen on its own right.And not just ourselves, but most of the companies are going through this relative to how we're optimizing where we buy from. There are examples where we're not able just to mitigate it because certain specialty resins are only available in Europe, and you can't or shifted to another location. You have a large chemical manufacturer shifted to another. And this is just an example where we're having and we talked about limited pricing actions where we'll have to embed that in our cost structure and then price accordingly to mitigate it. And it just gives me some of that color. But no issue with procuring. We don't have an issue at this point in time of procuring anything.Operator: Thank you. Our next question comes from Anthony Pettinari of Citi. Your line is now open.Anthony Pettinari: Good morning. Just following up on Jeff's question on the full-year EBITDA bridge. I'm wondering if you can level of cost saves that you expect to achieve this year. And how that offsets net price? I think you said that was sort of unchanged. But if you can just go through the bridge items for sort of cost saves versus net price, falls and FX, that would be helpful.Dustin Simak: Sure. I'll just, Anthony, I'll just walk you down and give you a sense of kind of where there's some slight changes. The first thing I'm gonna talk about before because I'm gonna talk about net price realization and some of the embedded assumptions there. When you think about net price realization, really what's happened is prices come down, right? And that's being offset by the with Ronnie's commentary, deflationary aspects of our raw materials. And so it's remained relatively unchanged. Actually gotten a little bit worse by about $7 million for the full year. But it's the dynamics, and it actually changed pretty materially, which is price coming down and raw materials coming down offset it.So when you think about the volume bridge, you know, and excuse me. The EBITDA bridge starting with volume, your volume, you know, we're expecting it. You know, if you go back to the roughly $100 million we talked about holistically, that drops the bottom line about $44 million. Then you get a net price realization down sixty-five. The CTO is 90, and there's about another 16 of actions that we're taking on top of which brings you to a total of a 106. But think of this as not just structural savings. This is cost takeout across the business relative to just being also just physically disciplined. And then we've talked about the compensation programs.The roughly $14 million year-over-year. Relative to how they paid out last year versus where we're on track this year. That's roughly 20. And FX is a drag of about $3 million, and that bridges you down to.Operator: Thank you. Our next question comes from Edlain Rodriguez of Mizuho Securities. Your line is now open.Edlain Rodriguez: Thank you. Good morning, everyone. We just want a quick one on the price raw material gap, especially in protective. I mean, it's still negative. Like, can you have any success in raising prices there that could narrow that gap in the second half of the year? When, again, it's been, like, persistently negative. Like, will we ever see that gap now completely as we get into the second half and into next year?Dustin Simak: So to answer your question, I'll start with the second half. And so when you think about and I'll go to what we think about 2026. Keep in mind, the change coming into this year relative to expectations that we're all wrestling with is really what's going on in the resin environment. It's really kicked off with the announcements back in the March time frame around just tariffs in general, what that did to the polyethylene market. And when you think about that, what's happened is it's actually created, you know, a more deflationary environment across the board. So the pricing impact you're seeing protected, and this has really been an ongoing theme.Right, for the past two or three years kind of coming from resin highs going back into, I want to say, it's 2023 coming down to, you know, '22 to '23, '24, '25. Expected this year to be getting back into a slightly inflationary environment. Which is, I would say, positive for us, but positive for the industry and sector as a whole. And that obviously did not happen. So what you've seen is kind of seen a flat line, you know, kind of where it dropped in the March time frame and kind of cascade throughout the rest of the year, which is what's creating that deflationary pricing aspect. And that's a market impact.It's not an issue with our products. It's for a while there, there was the resins coming down, and we were also reducing our price gap relative to competition. We're really beyond that now, and this is to me a market dynamic. That's happening in the second half and what we've given for guidance, we fully expect from that perspective. If we have optimism, it's what we can potentially do on the volume side. It's really what happens to the underlying resin market that will help drive that, particularly in protective.Food's a little different for a variety of reasons, but when you think about the primary, you know, piece really being low-density, high-density polyethylene that goes into the protective business. You're really looking at what's where resin's gonna go. And at this point in time, we don't have a clear view of that in terms of 2026. As we progress through Q3 and Q4, we'll get a lot more clarity and be able to give you an update. But our general view is right now where we're at. You know, as long as we get to kind of a stable inflationary environment, our pricing will go along with it.And you'll begin to narrow that net price realization and be able to bring it back to positive. And, you know, TBD of '26 will be that year. Thank you. We're gonna have the next question.Operator: Thank you. Our next question comes from Nico Pasini of Truist. Your line is now open.Nico Pasini: Hi, guys. I'm sending in for Mike Roxland today. Thanks for all the color so far. I just had two quick ones. One is how's the cattle cycle faring right now? And South America and Australia? And then, you know, previously, I think you had mentioned targeting growth in fluids. Is there just any update on that area?Dustin Simak: Yeah. So on the cattle cycle itself, I'd say there's still, you know, kind of in both, Latin America as well as Australia. And we still expect very strong, you know, I would say, less strong relative to underlying cycle, but still strong years on a relative basis and going into next year in both of those regions. In the US, which I mentioned beforehand, obviously, accelerated this year, which was making 2025 really the first year of those three years where we went into this year thinking it may be, like, '24. And then I it may be elongated. And so you're down three to 4% similar outlook for '26.And then flat in '27 back to growth in '28, and that cycle will obviously go, you know, generally for the next seven years. On fluids performance, that business continues to perform well. So you think about fluids again to break it down. It's really this combination of our Cryovac fluids and liquid solutions as well as our, you know, the Liquibox acquisition that we closed back in February 2023. And so again, we've talked about the Cryovac side of it, which has continued to perform well. We expect to perform well this year and continue to be a growth driver for the business overall.Look at Box, we obviously went through, our own kind of destocking and down cycle in that business in '23. We've stabilized since then. It's not performing to where we would like it to be, which we talked about historically. That end market being able to generate single digits, which is what our fluids business has done historically. If you look at the CAGR of that business, it's mid-single to high single digits. And so we're still working on getting a little box there, but we feel really good about the progress we've made on continuing to stabilize that business and are now beginning to work out of, what I would say, some of the operational challenges we went through.And getting back towards just focus solely on growth. So still more to come, and we'll give a lot more dialogue around this as we progress throughout the second half. And we fully expect it to be a growth driver in 2026.Operator: Thank you. Our next question comes from Gabe Hajde from Wells Fargo. Your line is now open.Gabe Hajde: Dustin, good morning. Ronnie, thanks for all your help. Wanted to revisit a comment you made in your prepared remarks, Dustin, about utilizing some external partners? And I think it was Protective. You mentioned speed to market. And maybe intimated a reduction in capital intensity. If maybe you can elaborate on the concept a little bit don't know if it's a function of maybe customers being a little bit more dynamic in their own strategies and decision making or what's driving it. And then maybe quantify for us I'm assuming CapEx, but maybe op cost as well. What I could save you?Dustin Simak: Sure, Gabe. So a couple things. So keep in mind that our, you know, for the past if you go back three, maybe ten years ago, a majority of our new solutions were actually developed with external partners. And I mean, people coming in to actually help us design and build. You know, think of it as leveraging outsourcing some of your R&D on equipment design, outsourcing R&D on even material. In a lot of ways, it's around applications. And so, you know, for the past ten years, we've really taken an approach of vertical integration relative to doing internal development, and not just development, new applications, materials, equipment, also developing our own internal manufacturing technology.And so we've really begun to rethink that broadly speaking. It goes back to the situation we've been in with our balance sheet over the past couple of years. And what I mean by that is, you know, for there's a period of time in our mailer strategy where we are leveraging our existing lines. Now we're looking at, to be very specific, now we're leveraging other manufacturing technology to still produce our application, our product, but in a new form, and in a much more cost-effective way. And it speeds the time to actually get the lines up right. Speeds we need is able, you know, gives us the ability to scale up much faster in the market.Relative to, you know, where you place those lines. That's an example where it's not just the application itself. It's but it's also thinking rethinking manufacturing technology. In our food business, you know, we've talked, you know, at length about our industrial food processing in the strength of our kind of that three-legged stool around material science equipment, and our service capabilities. But as you think about that broadly for retail, that's what we're thinking about. Is it really our equipment or do we leverage external partners? So we talked about this a little bit in the past, but we're being a lot more intentional now about how we go after it.And it's really about leveraging people that are good at what they're doing is their core competency. Getting us time to market versus trying to be everything, you know, being graded everything effectively. And so that is bringing down some of our capital intensity. If you look at this year for our outlook, we brought it down to roughly it's embedded in Ronnie's numbers, roughly $200 million for the full year. And if you go back to 2023, we were, at that point, talking about doing $280 million beginning of the year. We brought it down to $240 million. $220 million last year, $200 million this year, and this is all while increasing our returns.Know, I think addressing some of our performance issues. So I think that, you know, this approach that we're doing is not that we're actually underinvesting the business. To me, we're investing more now than we ever have before. We're just doing it in the right areas. They're gonna yield, you know, yield better results for us longer term. So hopefully, that gives you some color.Operator: Thank you. Our next question comes from Brian Dong of RBC. Your line is now open.Brian Dong: Hey. This is Brian Dong on for Arun Viswanathan. Thanks for taking my question. Can you walk us through your CTO to grow savings? What are the different buckets to that? And are you still targeting $90 million of savings for the end of the year?Dustin Simak: Yeah. So good question. So the really, the buckets have remained unchanged. If you really think about three broader areas that we've been going after, one is on the go-to-market side, how do we reorganize, you know, this goes back to how do we reorganize back into food and protective? How do we reorganize PNLs back into the regional PNLs underneath it.What do we do with our on the go-to-market side relative to marketing, sales, you know, R&D, that's that first bucket that we did, which is really in the frontline, which is really about while it generates cost savings, it's much more around how do we get to the market closer to our customers, delayer the business, and drive growth. And just, again, the outcome of that was also being able to drive further productivity in the business. Another big piece in supply chain. Right? And so, again, I'm not quantifying each bucket because these are shifting all the time where we find better opportunities. So you kind of see a play between all three of the buckets.Network optimization, you know, we're down about five plants holistically right now. Just over the past two years. And we talked about on the call, we're beginning to outline broader plans there as we think about '26, '27, '28. And so there'll be more to come on that topic. And then the last bucket's around G&A optimization. I used some examples in the Q&A earlier around our Manila facility, and it's really about leveraging, you know, a global footprint relative to where we need to be. And to give you an idea, it's roughly, you know, when you break down the numbers, it's, you know, it's really between sixty-five and thirty-five between CTO and productivity.And so just to give you a sense.Operator: Thank you. Our next question comes from Josh Spector of UBS. Your line is now open.Josh Spector: Yeah. Hi. Good morning. Thanks for all the details around food and the assumption assumptions there, but I kind of want to ask about the non-red meat assumptions as you look at the second half. I guess, you know, really rough numbers. You talked about $400 million in sales, down high single digits. You roll that through to food, that's kind of a point headwind or so, I think. So then the other 90% is down a couple points. Can you maybe unpack that and some of the assumptions between, I guess, the retail market versus maybe some of the processed foods and meats, which I think would be somewhat of an offset for what you're seeing there.But more detail there would be helpful. Thank you.Dustin Simak: Yeah. Appreciate the question, Josh. And so again, when you think about overall, I think you could like to prepare commentary and Ronnie's comments, we talked about the overall business, protein, global protein production being down about a point this year. Right? And so keep in mind, that's what's weighing on some of the broader volumes in. I go back to even the consumer itself. The consumer spending where you're seeing that shift out of industrial food processing into retail and food service. Of the markets, if you really look across every area, whether it's dairy, whether it's poultry, smoked and processed, they've all come down slightly, which is why you see that broader impact across the business.And, again, we don't see that as a, you know, I say, longer-term headwind for 2026 and '27. We see it as a condition right now of just the market we're operating in really more on demand side. And so but I'll leave you with that. And that's really what's driving that broader impact.Operator: Thank you. Our last question comes from Stefan Diaz from Morgan Stanley. Thank you. Your line is now open.Stefan Diaz: Hi, Dustin. Hi, Ronnie. Thanks for taking my question. So you noted industrial strength, which is nice to see, just, you know, considering some, you know, mixed macro indicators on the industrial side. I was just wondering if any of that industrial end market strength was due to your automation business. Then maybe how are you just, you know, thinking about your industrial portfolio the second half and into 2026? And maybe how are you thinking about your automation business as well? Thanks.Dustin Simak: It's a good question. So just keep in mind, don't we don't think of it as an automation business. Well, the way we think about it is we're bringing a solution to the market that's really combining where we are the strongest. Right? And I think in and if you go back to an example for Protective is our APS business, or our auto backing solutions. Right? It's an example where you're bringing the piece of equipment, you're bringing out the hybrid one. Now you can bring the great materials, whether it's fiber or poly. You're bringing great technical service.And it's really all about, you know, throughput, yield, the ability to protect that, you know, that particular item, etcetera, and packaging. And then food business is very similar. So keep in mind that think it is less. I know it was talked about a lot going back three, four, five years ago. Around automation for automation's sake. We're much more around that solution sell and bringing solutions to market that combine that creates a lot of value for our customers. Again, on the industrial side, if you really look at our business, if you think about Instapack, right? Same thing. Great equipment. Great material science, great service. You think about APS, very similar. Right?And so as you look across the different solutions that we have in protective and food, in general, that's where we drive. They're generally higher margin businesses, that, you know, deliver more customer value. And I think across the board, our approach doing that and going back to what made us great solution sell is really making a difference in the market and is absolutely contributing to some of the industrial performance you see in the numbers. And then I talked about Instapac as an example, which has performed a lot better than it has historically.Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to the President and CEO, Dustin Simak, for closing remarks.Dustin Simak: Thank you for joining us this morning. Meet the market challenges ahead of us, head on. Finally, thank you to the 16,000 plus Sealed Air employees and our customers who are at the center of our transformation. Thank you.Operator: Thank you for participation in today's conference. This does conclude the program. You may now disconnect.