Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sealed Air Corp (SEE, Financial) has reorganized into two verticals, Food and Protective, to enhance customer experience and maximize shareholder value.
- The Food segment is delivering above-market growth driven by commercial excellence, new product launches, and competitive wins.
- Sealed Air Corp (SEE) has strengthened its management team with experienced leaders to drive growth in both verticals.
- The company has announced a partnership with Best Buy to provide sustainable packaging solutions, showcasing its commitment to sustainability.
- Sealed Air Corp (SEE) has achieved strong free cash flow of $323 million year-to-date, reflecting improvements in working capital management.
Negative Points
- Sales and adjusted EBITDA for the third quarter were down 3% compared to last year, indicating challenges in overall performance.
- The Protective segment continues to face volume declines and unfavorable net price realization, impacting profitability.
- Organic sales were down 2% due to lower pricing across both Food and Protective segments.
- The company is experiencing ongoing weakness in the industrial sector and lower automation sales, affecting the Protective segment.
- Sealed Air Corp (SEE) is accelerating cost takeout initiatives due to challenges in volume and price performance, indicating pressure on profitability.
Q & A Highlights
Q: Can you explain the expected performance of the Protective segment in the fourth quarter, given its traditional seasonal strength?
A: Dustin Semach, President & CFO, explained that both Food and Protective segments are expected to step up sequentially in Q4. Protective is anticipated to improve due to seasonality associated with the holiday season, particularly in the US. However, the segment will still be down year-over-year, with fiber performing better than poly, but not enough to offset declines in other portfolios.
Q: When might you expect to see flattish year-over-year volumes in Protective, and how are void fill and automation expected to perform?
A: Patrick Kivits, CEO, noted that void fill and mailers, where fiber transitions occur, are about 10% of Protective. The company is focusing on fiber-based offerings and expects improvements in void fill comps next year due to past customer losses. Automation is expected to benefit from improved market dynamics and a strong book-to-bill ratio.
Q: How does the shift to two distinct verticals impact the company's strategy and potential divestment opportunities?
A: Patrick Kivits stated that the reorganization into verticals is not just a structural change but a strategic shift to enhance growth focus and operational effectiveness. The company is concentrating on improving business performance and is open to footprint rationalization but is currently focused on executing the new strategy.
Q: What are the expectations for price/mix dynamics in 2025 for both Food and Protective segments?
A: Dustin Semach indicated that pricing dynamics are expected to be more favorable in 2025 than in 2024. While there are still pressures in Food, particularly with large industrial processors, the overall pricing environment is improving. Protective pricing is stabilizing, with competitive pressures in certain areas, but the outlook is more positive.
Q: What are the challenges and opportunities in transitioning to fiber-based products in the Protective segment?
A: Patrick Kivits highlighted that the transition to fiber-based products is driven by consumer preferences, especially for products touching consumers. Instapak remains important for industrial applications. The company aims to offer substrate-agnostic solutions, allowing customers to choose between poly and fiber, with fiber generally being more expensive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
