Title

Presentation

Sealed Air Corporation beats earnings expectations. Reported EPS is $0.81, expectations were $0.67.

Operator: Good day and thank you for standing by. Welcome to the Sealed Air Q1 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference call is being recorded. I would now like to hand the conference over to your first speaker today, Mark Stone.

Mark Stone: Thank you, and good morning, everyone. This is Mark Stone, Sealed Air’s Vice President, Investor Relations. With me today are Dustin Semach, our President and CEO; and Roni Johnson, our Interim CFO. Before we begin our call, I would like to note that we have provided a slide presentation to supplement today’s discussion. This presentation, along with our first quarter earnings release, is available to download from our Investor Relations page on our website at sealedair.com. I would like to remind everyone that during today’s call, we may 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 Statement section of our earnings release and slide presentation. These sections also apply to this call. Our 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 U.S. GAAP. Information on these measures and their reconciliation to U.S. GAAP can be found in our earnings release or the appendix of our slide presentation. I will now turn the call over to Dustin and Roni. Operator, please turn to Slide 3. Dustin?

Dustin Semach: Thank you, Mark, and thank you all for joining us for our first quarter earnings call. Today, I will discuss the progress we are making on our transformation, give an update on current market conditions, including our response to the recent trade policies and walk through how we will navigate the second half. Over the last year, we have been fixing the foundation of the business by reorganizing back into two market-focused businesses, Food and Protective. We recently completed the last major step by integrating our supply chains, including our planning and production, back into each business. This now aligns all our commercial, innovation and supply chain teams all the way down to the respective end markets, putting us in a better position to serve our customers.

This is especially important in periods of volatility. Now, each business is better positioned to adapt quickly to their unique market dynamics and customer needs. With clear accountability and incentive alignment, we continue to see improvements and fundamentals throughout each business. In parallel, we continue to enhance leadership across the organization with a strong orientation towards growth and ownership mindsets. I am confident the actions we are taking continue to better position each business for long-term sustainable growth and will help us successfully navigate the uncertainty ahead of us. Before I give updates on each segment, I would like to address the dynamic macro environment we continue to operate in, focusing on the changing global trade landscape and subsequent tariff impacts.

Since our discussion in February, the landscape has continued to evolve, with our focus first on potential tariffs in Canada and Mexico, then on broader reciprocal tariffs, including China. As a reminder, we are largely domestic production for domestic consumption, which positions us well against direct tariffs. In addition, most of our products are exempt under USMCA, which has put us in better position on direct impacts since February, as the U.S. has shifted its focus to the rest of the world. Since November, we have been actively reviewing our supply chain and optimizing production and procurement to mitigate potential tariffs and minimize inflation. Where we have exposure that cannot be mitigated, we are actively taking pricing actions, largely in Food.

At this point, based on current policy, the net tariff impact to our bottomline is minimal and reflected in our outlook. More importantly, we are assessing the downstream impact on our customers’ businesses driven by a potentially weakening demand environment. In Protective, we are closely monitoring consumer and industrial sentiment and the potential knock-on effects in our fulfillment and industrial end markets. Food is a more resilient business in any economic cycle. With that said, we are continuing to monitor for protein trade-outs and trade-outs if the consumer comes under more pressure, to ensure we are adapting to our customer needs and mitigating mixed impact. We are working closely with our top customers and distribution partners to better understand the impacts on their businesses and how we can help them navigate the volatility in the market.

While there is some indication of softness in the market to come, the trade policies are still not settled and it’s too early to be definitive on the second half. Lastly, as the trade policies continue to evolve, we are assessing areas where our global footprint across both businesses could put us at an advantage relative to our competitor’s footprint, creating opportunities to win further share. For now, we are contemplating tariffs that are in effect and some modest volume softness in both businesses driven by our customers’ cautiousness in this environment. This is offset by an improved FX outlook due to a weakening U.S. dollar. We are taking further cost control and productivity actions in the second half to help offset potential further volume softness and/or drive increased operational leverage.

As a result, we are being prudent and reconfirming our full year guidance, which continues to contemplate tariffs in effect and our mitigation efforts related to them. As we progress through the second quarter, we expect to gain more visibility into trade policies and market demand and the impact of our mitigation actions. We will now move to each of our market-focused business segments. During the first quarter, our Food segment delivered modest volume growth against a strong first quarter last year that benefited from carryover demand. As part of our go-to-market strategy within Food, we are focused on taking market share in our retail end markets. Our case rate solutions grew low single digits in the first quarter compared to prior year.

Our strategy in accelerating growth in retail allows us to capitalize on market trends where consumers are looking to replace dining out and on-demand food delivery service with grocery store spend, creating a balanced opportunity between away versus at-home consumption. Further, end-user shifts from processed and frozen foods towards fresh foods benefit the retail market. Putting this together, this portion of the business is expected to continue to perform throughout the back half of the year, benefiting from evolving consumer preferences and the strength of our product offerings. Industrial food processing markets were relatively flat in the first quarter compared to last year. The South American cattle cycle remains strong. In Australia, the cycle remains near peak levels, which is now expected to last through 2027, given favorable weather patterns and growing export demand.

Within the U.S., the beef market was slightly better than expected and offset by weaker pork and turkey markets. Cattle herd sizes continue to hover around 50-year lows, though changing consumer sentiment and weakening spending may reduce demand for premium beef cuts and re-accelerate herd rebuilding. We continue to pursue growth opportunities within our fluids business as we move towards the summer season, when many of our fluids solutions are in peak demand. Dairy is a growing end market, particularly in Europe, Australia and New Zealand, which is creating opportunities in both cheese and milk packaging applications. Looking forward, we expect our Food end markets to be stable outside of China and the U.S., which are operating in a higher period of volatility due to the trade environment.

While some large industrial food processors in the U.S. are indicating potential trade-owns away from premium beef, based on our current volumes, we are not seeing trade-owns and trade-outs in our U.S. business at this point in time. However, if we do see mid-shift, CRYOVAC’s portfolio covers a wide range of fresh proteins across the trade-down spectrum, from ground beef, poultry and smoked and processed proteins, putting us in position to move with the consumer. I am confident our Food business continues to be well-positioned to fully achieve its underlying long-term potential. It is a longer-cycle business that has previously demonstrated strength and resilience amidst prior economic cycles. Transitioning to Protective, our first quarter performance was in line with our expectations.

Throughout the first quarter and into early weeks of the second quarter, we did not see significant shifts in order patterns or buying behaviors. Turning to market trends in Protective, as a reminder, approximately 60% of our product offerings largely serve the industrial end markets. Overall, industrials are proceeding with caution in the current low-visibility environment, with PMI hovering around 50 and trending down as we approach the end of the quarter. The remaining 40% of the Protective portfolio primarily serves fulfillment in markets where sentiment is weakening. Flocks shipments in the U.S., our largest market, were down most single digits in the first quarter, coupled with a declining consumer confidence throughout the quarter. As I mentioned in February, the Protective turnaround will take time to realize.

However, I am encouraged by the progress we are making on our transformation. The reorganized North American go-to-market team has now been in place for over a quarter, with our investment in field sales now fully ramped. By strengthening our customer distribution relationships, we are gaining better insights into their needs in the state of our end market. We remain confident that our revised go-to-market approach will continue to increase customer satisfaction, reduce churn and improve our right to win in the market. As a proof point, we minimized large customer churn throughout 2024 that now fully lapped key customer losses from the beginning of last year, improving our prior year comparisons for the second quarter of 2025 and beyond. While there may be headwinds on the horizon in our end market, based on our transformation initiatives, we see headroom in the markets we served win back share lost over the last couple of years, with early signs of traction building throughout the first quarter.

Following the success of the go-to-market reorganization in North America, we are now focused on enhancing our commercial organizations and market strategies in other key geographies. The reorganization has positioned the Protective team to better identify opportunities to drive efficiencies and effectiveness within the business, lowering our cost to serve, improving speed of decision making and increasing operational leverage. We are targeting to capitalize further on these opportunities in the second half of 2025. While the Protective business is short cycle and more sensitive to global trade dynamics versus Food, we are heads down focused on controlling the controllables and improving fundamentals in the business. I’m confident that the actions we are taking continue to better position the business in the market.

Before turning the call to Roni to review our first 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. Roni?

Roni Johnson: Thank you, Dustin, and good morning, everyone. Let’s turn to Slide 4 to review Sealed Air’s first quarter performance. The team executed well in the quarter and we came in ahead of expectations. Net sales were $1.27 billion in the quarter, down 2% on a constant currency basis. Adjusted EBIT in the quarter was $276 million, up 2% on a constant currency basis. Adjusted earnings per share in the quarter of $0.81 was up 4% as reported, and 9% on a constant currency basis compared to a year ago. Our adjusted tax rate was 25.7%, compared to 25.9% in the same period last year. Our weighted average diluted shares outstanding in the first quarter were $147 million. Turning to Slide 5. During the first quarter, volumes were down 2%, primarily on anticipated declines in Protective due to prior year business churn and continued softness in our fulfillment and industrial portfolios.

Protective weakness was partially offset by modest volume growth in Food of less than 1%. Price was flat for the quarter with Protective down 1%, fully offsetting marginal pricing gains in Food. First quarter adjusted EBITDA of $276 million, decreased $2 million or less than 1% as reported, and increased 2% on a constant currency basis compared to last year with margins of 21.7% up 80 basis points. This performance was mainly driven by cost takeout and productivity efficiencies, partially offset by unfavorable net price realization. Moving to Slide 6. In the first quarter, Food net sales of $852 million were up 1% on an organic basis, primarily driven by pricing actions and formula pass-throughs combined with marginal volume growth due to continued growth in our case-ready solutions.

The protein markets overall were flat from prior year and slightly worse than our initial expectations. While the U.S. beef slaughter was better than expected, this was more than offset by reductions in pork and poultry. From a regional perspective, volumes continue to grow in our EMEA, Latin American and Australian businesses, partially offset by sluggish volumes in North America and declines in Asia. Food adjusted EBITDA of $203 million in the first quarter was up 7% as reported or 10% in constant currency. Adjusted EBITDA margin was 23.8%, up 200 basis points compared to last year. The increase in adjusted EBITDA was mainly driven by productivity and cost takeout savings, partially offset by unfavorable net price realization. Protective first quarter net sales of $420 million were down 8% organically, driven primarily by volume declines of 6%, with growth in Asia and Latin America being more than offset by declines in other geographies, primarily North America.

As a reminder, all of our large customer churn came from North America last year and will have fully wrapped in the second quarter. North America was where much of our transformation effort was initially focused and we expect results in this region to improve throughout the year. EMEA continued to show signs of stabilization, having its best quarter since 2021, with volumes down just 1%. Protective adjusted EBITDA of $74 million was down 18% in the first quarter as reported or 16% on a constant currency basis. The adjusted EBITDA margin was 17.6%, down 180 basis points from the prior year. The year-over-year decrease in adjusted EBITDA was primarily attributable to lower volumes and unfavorable net price realization, partially offset by productivity and cost takeout savings.

On a sequential basis, margin improved 280 basis points compared to the fourth quarter, driven by continued productivity and cost takeout initiatives. Now let’s turn to free cash flow and leverage on Slide 7. Through the first quarter, free cash flow was a use of $12 million, compared to a source of $78 million in the same period a year ago. The primary driver of the anticipated use of cash was an increase in incentive compensation and tax payments, partially offset by lower interest payments. At the end of the quarter, our total liquidity position was $1.3 billion, including $335 million in cash and the remaining amount in a committed and fully undrawn revolver. Our net debt leverage ratio was 3.7 times, down from 3.9 times a year ago. We remain on track to drive net debt to adjusted EBITDA to approximately 3.0 times by the end of 2026.

Let’s turn to Slide 8 to review our 2025 outlook. During the first quarter, we generated strong earnings against sales that were slightly ahead of our expectations as we navigated a shifting landscape, executed business fundamentals and continued our ongoing efforts to turn around Protective. We continue to operate in a low visibility environment, especially in Protective and anticipate we will have better visibility into how tariffs are impacting our end markets and the translation into second half performance during our next call. As Dustin mentioned, we are reaffirming our full year 2025 outlook ranges across sales, earnings and free cash flow. We see a softer volume outlook offsetting improved foreign currency in both Food and Protective, reflecting a slight shift in industrial and consumer sentiment.

Foreign currency headwinds are now expected to be approximately 1% better than previously anticipated in our February outlook. Our net price realization assumptions across the total company remain relatively the same for the full year. Looking ahead to the second quarter, we anticipate a sequential increase in sales in both segments, reflecting an improving trend within the Protective portfolio and more favorable turkey and pork outlooks than in the first quarter in Food. As a result, we expect second quarter net earnings and net sales of approximately $1.3 billion, adjusted EBITDA of $270 million and adjusted earnings per share around $0.71. We remain committed to restoring underlying fundamentals by executing in the market, progressing our transformation, navigating the changing trade policy and deleveraging the balance sheet.

With that, Dustin and I look forward to your questions. Operator, we would like to begin the Q&A session.

Operator: Thank you very much. [Operator Instructions] Our first call comes from the line of Ghansham Panjabi. Your line is open.

Ghansham Panjabi: Thank you, Operator. Good morning, everybody. I guess first off on the comments, Dustin, on Protective volumes, as it relates to progress that you’re seeing over the past year, if we kind of zoom out, that segment had seen volumes down on a yearly basis since the first quarter of 2022. So I’d love to hear some color as to what specific progress you’re referring to as it relates to other businesses unfolding. And if you gave this, I missed it, but what were the volumes by vertical, industrial versus fulfillment?

Dustin Semach: Sure. Hey, Ghansham, and pleasure for the question and to talk you today. So a couple of ways I’ll qualify that. One is we talked about volume being down roughly think of it as 6% kind of in Q1 and some pricing impact on top of that. And if you go back to the prepared remarks, both in Roni’s and my section, and what we refer to is really around the wrapping effect of that churn. And just for context, the large customer churn kind of fully ran out. Think of this as a piece of this we would have talked about, which is like the fill air business with Amazon. That happened in Q1 of 2024 with the last quarter. And so we’ve really minimized churn along the way. So no major customer churn since the first quarter of 2024.

And you’ve seen that wraparound effect now starting in Q2, which you’ll see a sequential improvement of roughly 2 points relative year-over-year. So we’re down, think of it as 6% volume, we’ll be down 4%. Also, if you go back to the commentary, if you look at, if you go back to even 2021, 2022, every region was down, pretty much every product line was down. Now you’re talking about Asia showing growth. You’re talking about EMEA stabilizing being down roughly 1 point. And again, and you have LatAm growing as well. So really what we’ve narrowed it down to is really North America, which is where we’ve been spending our time. The piece around the positivity is around that minimization of churn. And a lot of the initiatives that we’re doing, when it goes back to the go-to-market reorganization.

Again, it’s too early to call the ball, but the feedback we’re getting relative to our distribution partners, our major customers, directly as I’m spending time with them, it’s been overwhelmingly positive in terms of our approach and going back to this whole, getting closer to the customer, improving our service levels, improving business fundamentals, really tackling, kind of blocking and tackling and doing it better and it’s working. And that’s what we’re seeing. And you’re going to see it in the Q2 guide right now relative to Protective. Going back to your question around fulfillment industrials, industrials have continued to — our industrial portfolio has continued to outperform our fulfillment portfolio. And it has done so as well in Q1.

But keep in mind, the churn that I’m referring to that’s fully lapping, to give you an idea, if you go to Q1, the net 6% number is down 4% in industrial, down 9% in fulfillment. But all that large churn that we talked about in North America is in fulfillment, going back to the Sealed Air business in Amazon. And so as you go forward, fulfillment gets a lot more positive, begins to perform similar to our industrials, and our industrials have been performing along the way and continue to improve. And so hopefully that answers the question. But we’re quite positive about the progress we’re making and that hopefully gives you some insight into how we’re driving it.

Operator: Thank you very much. One moment for our next question. Our next question comes from the line of George Staphos from Bank of America Securities. Your line is open.

George Staphos: Hi. Thanks, everyone. Good morning. Thanks for the details. Dustin, I just want to talk to you a bit on how you’re measuring your customer improvement and whether you’re doing Net Promoter Scores or anything to that effect. And how you’re managing that and how you’re trying to improve your scoring with customers for all the right reasons, while at the same time, you’re taking out costs, which is kind of a difficult balancing act, right? You’re taking out in some ways people while also trying to improve your position with your customers. So how is that going? And then broadly, if you could give us a view relative to where you sit today versus say when you were talking about fourth quarter, would it be fair to say that Protective is maybe trending a bit better than you would have expected relative to Food or vice versa? How would you have us think about that as we think about momentum in the second half? Thank you. Good luck in the quarter.

Dustin Semach: Yeah. Yeah. Thank you, George. And I appreciate the question. I’ll give it to you in the three parts, right? So the first one is, yes, to customer satisfaction. If you think about going back even a year and a half ago, two years ago, that was really the starting point to really go out there and get our customers’ feedback, which is something that had been lost along the way. And since then, we’ve repeatedly gone back and checked it. And beyond that, it’s also just being out there in front of our distribution partners personally and with our customers and having our executive team be out in the field a lot more than they have been historically. And so the combination of those three things are what we think about customer scoring.

That’s absolutely, there’s the analytical side of it and then there’s the softer side of it of just actually being out in the field. And in both cases, that’s how we’re getting the feedback today to make sure that we’re certain that things are improving. And the answer would be so far, the answer is, yes, it is improving. It’s not where it needs to be. So I don’t want to leave you with that. There’s still a lot more work for us to do to continue to do that and that will continue to happen through the efforts that we’re talking about. On the balancing acts, if you go back to the prepared remarks, because it’s a great question, this balance between how do you continue to drive effectiveness in the business and efficiencies while at the same time maximizing growth.

And it really comes from the starting point. Do you think you’re organized effectively, structured effectively? Are your processes effective? And so where are we focused? And if you go back to the prepared remarks, we’ve actually been investing back into Protective sales, right? So we’ve been putting more feet on the street, particularly in North America over the past, I would say, 90 days. This really started as part of our planning effort in Q4 and then we’ve executed across Q1 and this is really a restoration. If I go back to prior cycles, there was areas where we touched, I go back, think of it as four years or five years ago where feet on the street were touched as part of some of these restructuring processes. That’s not been the case this time around and it’s really about trying to find efficiencies in other areas of the business.

A perfect example of that is we shifted a significant portion of our back office operations to Manila. And as a result of that, we’re able to take some of those savings and put it back into the field and still drive net leverage in the business. And so I still think there’s plenty of opportunities across the business for us to become more effective and efficient. So it’s not just about cost takeout for cost sake, but how do we actually drive that in a way that brings about organizational agility, speed of decision-making, reducing spans and layers, getting us closer to the customer, so it doesn’t have to be perceived as a negative or impaired growth. And then your question on the last and the third part around is Protective trending better than I’d originally thought or it’s relative to Food.

And I would say right now, both businesses are kind of performing in line with our expectations kind of coming into the year. We talk about the backdrop in the second half, but these transformational efforts of Protective have been ongoing for the past year and they’ve been in waves of implementation and execution. And from that perspective, I feel good about where that’s at and keep in mind over the past couple months, we’ve actually accelerated a number of those initiatives, but the benefits of that acceleration will happen more in the second half. So I feel good about, we go back to some of the language we’ve used around urgency and pace and how do we drive those improvements. So I do feel that stepping up, but the strategy has been the same and it’s just about how quickly we can pull-forward those results and that’s what we’re focused on.

Operator: Thank you. Our next call comes from Matt Roberts of Raymond James. Your line is open.

Matt Roberts: Hey. Good morning, Dustin, Roni, and Mark. Thanks for taking the question. On the price side, you noted that net price was relatively unchanged, but maybe in each segment, Protective or are you seeing any changes in the competitive landscape or how do you think about price through the year, particularly now that the areas where you saw churn are out of the portfolio. Similarly, on Food, any changes or impacts from underlying resins and it seems like everybody I listen to seems to be gaining share in Food. So any changes in the competitive environment, how that impacts price through the rest of the year? Thanks for taking the question.

Dustin Semach: Hey, Matt. It’s been a great question and I’ll work through it step-by-step. So what we mean relatively unchanged, it really is like to give you an idea, we were down in our prior guidance down roughly $63 [ph]. Now we’re down roughly negative $57 [ph]. So it’s improved slightly, but really not material on the full year. And the composition actually by segment is pretty comparable as well. As if you remember going back to February, what we talked about is that a majority of the negative price realization is in Protective for the reasons we’ve discussed in the past, just due to a lower for longer volumes environment in that business and just the competitive pressure, particularly in some of the areas like fill air, et cetera, where when Amazon decided to leave that business, it created a lot of supply on the market and put pricing pressure in that business.

And so that’s, and all of us, whether you’re IPG or store pack, we’re all feeling the effects of that decision. And so going back to — so those dynamics really haven’t shifted and they’re kind of in line with expectation. There’s no been real shift in direct material inflation, non-direct material inflation. And if you get back to resins specifically, what I would say is that, and this maybe dives a little bit into that tariff conversation in terms of the questions around that, is that right now, particularly with the recent change in China, where they made an exemption for polyethylene, to be able to freely trade without being tariffed. It really kind of, PE is kind of settled out right now. And you’re seeing maybe even some flattish kind of sequential movement right now, but it’s still inflationary for the full year, which is baked into our formula pricing.

So that’s not really changed much. It hasn’t been material impact. And with that change, you see the PE market kind of settled out because there was a period there where we were concerned there may be oversupply in the U.S. market. Because just as a reminder for polyethylenes, most of those are produced kind of domestic production for domestic consumption. The area where we are seeing some pressure is in specialties and a lot of those right now today are sourced outside of the U.S. And obviously with that could have some inflationary, kind of indirect inflationary pressure relative to tariffs. But so far we have not really experienced that. We don’t see an impact at least in Q2 at this point, this material. And so those are the areas that and that’s why net price realization right now is relatively the same.

Operator: Thank you very much. Our next call comes from Anthony Pettinari of Citigroup. Your line is open. Anthony, your line is open. Standby for our next call. Our next question comes from Jeff Zekauskas of JPMorgan. Jeff, your line is open.

Jeff Zekauskas: Thanks very much. Your sales were down year-over-year, but your gross margins expanded nicely. Why is that?

Dustin Semach: Hey, Jeff. A pleasure and a good question. So there’s a couple of things is, if we go back to relate to the prior year, we’ve continued to drive productivity initiatives into the business and cost takeout, right? So if you go over the prior year, we were kind of on track to obviously exceed the $150 million, $160 million we talked about as our cost takeout program. We’re on track this year for $90 million. And what you’ve seen is that a lot of that goes into cost of goods sold, right? In terms of focusing on improving our cost positions in the business, in both businesses and so that’s been really the effort. So we’ve kind of talked about it over the past three or four quarters and we’re continuing to focus on it.

What we’re doing now as we think about the second half is actually looking at and saying, okay, is there more opportunity in the business beyond the $90 million that we really have baked into our outlook at this point in time and that’s where we’re focused. And that’s what’s been able to drive our improvements. And if you get into specifically, why is that the case? It’s optimizing production, optimizing scheduling, being able to try to minimize impact for the supply base in terms of negotiation with suppliers and repricing standpoint. It’s everything from network optimization. I mean, it’s a whole swath of activity that we’ve been undergoing over the past year to really drive that outcome. But it’s a great point and we’ve been really pleased with the outcomes.

So thank you for the question.

Operator: Thank you. The next question comes from Phil Ng from Jefferies. Phil, your line’s open.

Phil Ng: Hey, guys. Congrats on a solid quarter in a choppy environment. So, Dustin, I guess to kind of kick things off, can you give us a little more color on order patterns in April and May for Food and Protective? It sounded pretty steady, which is pretty encouraging, particularly on Protective. Appreciating it’s a shorter cycle business. How much line of sight do you have? And then certainly you sell an element of that business through distribution. So that adds to element of visibility. But what are your channel partners saying as well?

Dustin Semach: Yeah. So it’s a great question. I would tell you that for the most part, whether you’re in Food or Protective and you’re talking to our end customers, their Q1s were in line with expectations in terms of their understanding. And most people are focused on what does that mean for the second half? So we actually haven’t seen, going back to the prepared remarks, it was intentional in there, and Phil, around the — our Q1 was really in line with expectations. We were ahead in a couple areas. And then if you go to April and May, I mean, May is obviously very early at this point, but April has been largely on track. I would say, the Food business is where we’re closely watching potential trade downs, and that beef area is a real close watch out and we’ve seen some of the large industrial processors begin to hone in on that in the U.S. But it’s really a U.S. specific commentary that I’m making that comment around.

But so far Protective for April is in line with our expectations. And obviously May, it’s too early to call right now at this point, but we’re quite pleased with where we’re at. Now, that doesn’t mean that we’re not being cautious or being thoughtful about the second half. And going back to your question about distribution partners, the feedback I’ve gotten so far is that their Q1s were also kind of in line and on track. And April is kind of trending in line where they think it needs to be. But again, I go back to it. They’re also cautious about the second half. Trying to figure out which industries may be affected. And what does that mean to overall demand? And what does it mean by geographical composition? And those are the areas that we’re going to be focused on the second half beyond what can we do to mitigate?

And so if you think about it over the next couple of months, I think a lot of this will play out and we’ll get a lot more visibility across the entire ecosystem, whether it’s our distribution partners or ourselves directly or our direct customers.

Operator: Thank you. Our next question comes from Michael Roxland of Truist Securities. Your line is open.

Michael Roxland: Yeah. Thank you, Dustin, Roni and Mark, taking my questions and I’d like to echo the congrats on a good quarter despite the backdrop. Like, Dustin, you mentioned that the Protective turnaround is going to take some time to realize and you’ve been working on it actually, it sounds like the last year or so. But in your transition to CEO, the Board stressed that there’s a sense of urgency around timing. So given that you’ve been working on the Protective turnaround for about a year, can you help us frame what the timing looks like on a go-forward basis? Is it nine months, 12 months, 18 months? And realizing it’s a delicate balance between expediency and ensuring that the changes you’re making are the right ones, but just to try to get a sense of, help us frame how we should think about the Protective changes and the timing for those changes to occur?

And then one last, one quick one, just realizing the Protective has multiple portfolios across many geographies, is it possible to separate some of those portfolios that you determined maybe are not core without negatively impacting the remainder of the business? Thank you.

Dustin Semach: Hey, Mike. It’s a great question. So a couple of things, because I’m going to contextualize it in two ways, because you talked about the urgency and then you’re balancing the commentary and the script around taking time to realize. So, and then you’re juxtaposing that also, what does that mean in terms of translating to results? So you got to park for the side of the second on the macro backdrop of some of those areas. So what’s happened, the question is really, you go back to the transition to CEO, and what have we been doing differently? We’ve really been focused on accelerating the transformation programs that we’ve had within that business. We talked about it in the script and we hit on a couple of different areas, but one of them is, again, we talked about the North American go-to-market transition.

The focus now is translating some of that benefit into our other geographic regions, right? That’s an acceleration that’s happened over the past, say, 70 days. And then if you go into this kind of idea of having a fit-for-purpose cost model to continue to drive effectiveness and efficiencies in the business, also given this ability to reinvest in growth and continue to maintain operational leverage as we work through the deleveraging the business from a volume perspective, that’s also relatively new and also being accelerated as part of this effort. And then beyond that, just, we’ve talked about it briefly, but some of the enhancements in our leadership, that piece of it continues to be underway and I think that we’ll be in a much better position, think of it over the next 90 days to six months.

On the last piece, which we didn’t really touch on the script because a lot of that work is still ongoing and we’ve highlighted it in the past, is really around, and I’ll touch on your point about portfolio optimization. But when you think about this idea around the fiber side, how we’re approaching mailers, how we’re approaching our paper systems, how are we thinking about our APS business, particularly in our hybrid AUTOBAG, which we’re bringing into market now over the summer, we feel really good about those areas and that portfolio relative to fulfillment and making sure that we’re more substrate agnostic, that we’re making progress in that area and that’s an area of acceleration. So when you put those things together, and you think about the business overall holistically, we’re already demonstrating that, if you look at our procession of quarters that we have currently in our guide, you’re already talking about being down roughly 6%, being down 4%, and that progression will continue throughout the second half.

And we’re still targeting that, take outside the macro backdrop for a second if there’s something, cyclical impact associated with that. But right now, and you’re seeing that, and that’s what I’ll go back to as a proof point, is that you’re seeing some of these outcomes already being driven. And another highlight, just to reiterate the commentary, which is on EMEA being the best quarter we’ve had since 2021. And while it’s down 1 point, it’s a significant improvement over the past, say two years in our Asia businesses is growing. It’s really North America that we’re really focused on improving that bottom line. So to answer your last question around specifically the portfolio optimization, at this point in time, and just as a reminder, we have — we’re still the largest Protective Packaging business in the world by a factor of almost two.

And it’s the breadth of our portfolio that drives the strength of our relationships and distribution and we — it’s an area that at least at this point in time, outside of the smaller things that we pruned, if you think about Kibo Thermal [ph] business, if you think about TempGuard, you think about a couple of these areas that were smaller, we’ve already called out. We don’t see large portfolio shifts at this point in time. We’re really trying to optimize the business that we have, particularly in this current M&A environment.

Operator: Thank you very much. Our next question comes from the line of Josh Spector at UBS. Your line is open.

Josh Spector: Yeah. Hi. Good morning. I have just a couple of follow-ups on Protective. First, can you say explicitly what your volume assumption is for the second half? I’m not entirely clear if you’ve updated that or you’re saying you’re going to update that next quarter relative to the 4% decline you’re assuming in second quarter. And then somewhat related, I guess, with tariff. So I was just curious on the equipment side, how domestically sourced are those materials and parts or I guess more explicitly, how much of that comes directly from China? Is that a risk on cost and delaying or pushing out some deployments for you guys?

Dustin Semach: Hey, Josh. This is Dustin. The equipment question, just to be specific, are you talking about Food and Protective or Protective or both?

Josh Spector: I was asking more about Protective, but if it’s easy to answer for both, go ahead.

Dustin Semach: No. It’s okay.

Josh Spector: …either.

Dustin Semach: Yeah. So to be explicit about the second half, we’re down about a 1 point in volume in Protective. And so going back to the question on equipment, so again, on the tariff piece of it, for the most part with the USMCA exemptions, that’s largely significantly reduced our exposure to any potential direct tariff impacts. There are some in equipment, but right now we see them as relatively immaterial and that we’re able to manage through sourcing and changes that we can put in our supply chain. So at this point in time, we don’t see a material impact in terms of being able to place or drive equipment sales outside the demand environment. And our equipment business, just to answer the question directly, right now is still in line with our expectations.

And just as a reminder for everyone, holistically, it rounds to about $0.5 billion, 50-50 between equipment sales and parts and service and split 50-50 between both businesses. And so, and right now the first quarter, to give you a sense, in both businesses, our book-to-bill is above 1, kind of indicating some of the strength in the order intake. And so hopefully that answers the question. So quite positive about that look there.

Operator: Thank you very much. Our next question comes from the line of Gabe Hajde of Wells Fargo. Your line is open.

Gabe Hajde: Dustin, Roni, good morning. I wanted to ask…

Dustin Semach: Hey, Gabe.

Gabe Hajde: … about margins and you guys kind of came in 100 bps above our model on a consolidated basis, maybe drilling in a little bit on Food. That was where some of the outperformance was. And I appreciate that things can move around based on timing of resin recovery and raw material movements, et cetera. But just higher level, Dustin, as you look at the business and the value-add that you bring to your customers, are you performing in line with where you would expect in that business? Was there anything peculiar in the first half of 2025 that would kind of prevent you from being in that range on a go-forward basis? Thank you.

Dustin Semach: It’s a great question, Gabe. And again, what I would tell you goes back to some of the prior commentary. If you look at our guidance right now, I mean, we’re expecting to be in the, for the Food business overall holistically in that, think of it as 23 points of margin range, which is obviously, kind of in line with how we performed in 2025 and we demonstrated again in Q1. So I don’t see really anything peculiar in either year that’s, that would not lead that to be long-term sustainable margin growth. There is a or in terms of that 23-percentage-point range, we get the question oftentimes about how much more leverage you’re trying to drive in that business and right now our focus has been really on growth.

And so as you think about stepping that margin up that we don’t really see it from here in terms of having like this long growth ramp relative to margin expansion, unlike Protective where there’s more room to run. And so right now we’re focused on how do we find areas to step up our growth kind of above market, which is where we’ve been performing kind of here recently in terms of market growth rates. Think of it as pre-2024 and 2025. And that’s our focus right now. The question is, how have we been able to drive that? It goes back to some of the prior commentary. A lot of that is really just putting, driving productivity in both the businesses and cost takeout. And there’s nothing, at least at this point in time, that would indicate we’re not able to do it.

On a positive note as well, if you look at this year, our net price realization, while it’s not positive or zero yet, it’s still relatively low compared to prior years. So you’re even seeing that gap begin to narrow, which obviously makes it a lot easier kind of managing the business going forward where pricing can kind of help offset a lot of that inflationary impact.

Operator: Thank you very much. Our next question comes from the line of Stefan Diaz of Morgan Stanley. Your line is open.

Stefan Diaz: Hi, Dustin, Roni, Mark. Thanks for taking my question. So you originally, and I guess still do, sort of expect a second half recovery in Protective volumes as you fully lap some of the customer churn that you mentioned earlier. But your original guide, I guess was given before Liberation Day and before the escalation of the U.S.-China tensions. Maybe if you could just give us your thinking about sort of holding that guide and maybe to the extent you have visibility in your Protective business, how much of your international Protective exposure is for importation into the U.S.? Thanks.

Dustin Semach: Hey, Stefan. All great questions. There’s a couple things that I will comment on this particular one. Keep in mind that when we talked about the outlook for the year, we are seeing some volume pressure in Protective. We’ve called that out and the numbers I quoted already reflect that. So while the guide overall is intact, what you’re really seeing is some modest volume softness based on what we can see already today and think of how that’s going to cascade and proceed throughout the year. And then that’s being offset by a benefit in FX. And it’s a moderated FX outlook. It’s similar to others where we don’t think the euro and some of these other currencies will remain at the levels they’re at today in terms of devaluation or in terms of the U.S. dollar weakening against them.

And so that’s kind of how the guide is constructed. And so you see some slight volume loss and kind of reductions in Food and you see it’s some in Protective, kind of reflecting that uncertainty in the marketplace being offset by an improved FX outlook. So in terms of international exposure, peering through this lens and really understanding, Protective packaging materials, what’s coming in for import export, how that eventually make it to the end user and what’s being affected by, as an example, the reduction in potential Chinese imports into the U.S. That area is an area where we have limited visibility, other than to say this, which is, if you think about our business, a majority of it is obviously in industrials, which is going to have far less exposure from that particular perspective.

And keep in mind that most of our business outside of the import export is domestic production for domestic consumption. So it is hedged to some degree geographically from the tariff impacts themselves and the demand localized to those economies. And so right now, at this point in time, we haven’t seen a change in buying patterns, change in order of behavior, no moving cautiousness relative to saying, hey, we could, let’s destock for a bit and wait and see what happens before we restock. We haven’t seen any form of that, at least at this point in time. And then going back to the prior commentary, because it’s an excellent question, this is an area that we’re going to continue to pressure test over the next two months to three months to really understand if there’s backup.

Because going back to the prepared remarks, there is limited visibility in Protective. It’s not just for us, for our distribution partners. And to some degree, it’s just diversification of the business geographically, product-wise, and then just, diversity relative to customer base.

Operator: Thank you very much. Our next question comes from the line of Christopher Parkinson of Wolfe Research. Your line is open.

Christopher Parkinson: Great. Thank you so much for taking my question. Can you sit on a little bit on the trends that you’re seeing in red meat markets? If you could just parse out international trends versus the U.S. and how that flows in, not only to your second half assumptions, but also just intermediate to long-term in terms of your competitive positioning? Thank you so much.

Dustin Semach: Hey, Chris. All great questions. And so going back to, literally some of the prepared commentary, I would say in general, market expectations have largely been the same if you go back to February to today across the protein markets, with the exception of really in the U.S. And so in the U.S. is where, the question has been around the U.S. beef cycle. In Q1, we had some, a little bit of a flip where beef was better than we’d anticipated. Similar to last year, where it kind of every quarter industrial food processors were still taking advantage of market pricing, continuing to keep the herd low, but effectively slaughtering everything they could along the way, where you’ve seen that dynamic kind of play out in Q1.

But there was an offset this time relative to turkey and to pork. We’re going to see that reverse going back to the remainder of the year, where we do believe that to come back and help offset some of that weakness that we do perceive to be in beef. And what we’ve talked about going by the commentary, and you’ve seen this in some of the other industrial food processors, where there is a perspective that with the impact we’re having potentially on the consumer, it may apply pressure on premium beef purchases. And you start working your way down trade downs and trade outs and working your way down that spectrum. We’re well positioned to make sure to take share across those product lines. So, today we have great share across most of those areas.

So it’s not that we’re not in position, but there is a potential mixed impact that we would need to mitigate throughout the second half that those trade downs do occur. But again, it’s a U.S. market. You go to the international markets, the Australian beef cycle, Latin American beef cycle continue to be very strong. We are seeing some shifts in exporting. So if you think about as an example, in the U.S., you’re seeing lower exports, obviously, to China. And you’re seeing that demand being picked up by Australia, by Brazil and other geographies. But again, we’re well positioned in all these geographies to pick up that demand. It’s just the big area that we’re focused on is North America. And really looking at how this market plays out and because it does, still being roughly 65% of the Food business.

It’s hard for the other markets to offset it. But you go back to the commentary, those markets outside the U.S. continue to perform incredibly well.

Operator: Thank you very much. Our next call comes from the line of Arun Viswanathan of RBC Capital Markets. Your line is open.

Arun Viswanathan: Thanks for taking my question and [inaudible]. Congrats on the Q1 there. I’m just curious on the guidance. So it’s not like, you guys kept guidance as soon as understanding there is a lot of uncertainty out there. But I guess, have you seen any slowdown in momentum maybe in Food volumes you can outperform there? And maybe if I ask another way, in keeping the guidance as is, are you saying that there’s maybe some pull-forward or is it mainly just on that kind of 9% swing in volumes that you’ve kind of maintained your guide and just building in some conservatism?

Dustin Semach: Yeah. All great questions. And so a couple of things I would say. One is going back to the question around kind of the first quarter and then what we’re seeing in the month of April and the question around pull-forwards. There was, I would say in Q1, very minimal pull-forward, particularly in our Canadian business, where you saw some customers being concerned around the current tariffs that were intact. But this is really de minimis relative to the overall kind of performance for the company. And so in terms of slowdown overall, we haven’t really seen a slowdown in the business other than I would say the concern around premium beef and those cuts. And that’s more of a recent phenomenon that we’re looking out for.

But in general, we haven’t seen any material change. The concern on is really what’s to come, right, relative to the economic outlook in the second half and what can we do to mitigate it if those outcomes do play out the way they may. And that’s where we’re focused right now. But this is the challenging part of where we sit today is just that the business itself for the first quarter, as well as kind of heading into April, has been performing really in line with expectations.

Operator: Thank you very much. Our next question comes from the line of Edlain Rodriguez of Mizuho Securities. Your line is open.

Edlain Rodriguez: Okay. Thank you. Good morning, everyone. I mean, Dustin, a quick one for me. If we see supply chain and other costs increasing because of tariffs, do you believe like you position well to raise prices to pass through those costs or do you think you need like stronger volume to be able to do that? And also, which segments will have like an easier or harder time to pass through those costs?

Dustin Semach: Again, I was waiting for the tariff question, so I’m glad I got it here. And so a couple of things I would tell you around the tariff specifically is that, in general, with the change with USMCA being exempt, that really minimized our exposure across both businesses. There’s more exposure and Protective, excuse me, in Food than Protective. But in general right now, keep in mind our Food business, contractually in many cases, we can push through the price if necessary. But we see it relatively minimal. I mean, I don’t want to overplay the exposure we have in each business. Right now, it’s relatively minimal in both Food and Protective. And as we mentioned in the script, we at this point in time believe we can mitigate whatever we need to through pricing actions and or supply chain actions.

And that’s the supply chain we’ve had in motion really since November. And we’ve really continued to focus on that over the past four or five months. The other area I’ll leave you with is that the one that’s kind of TBD to play out, I think we got the question earlier, which is around how will residents play out for the full year? So we’re highly focused there and managing that with our suppliers and seeing as the example opportunities where we may be getting a particular specialty from another country, but they have assets in another country where can we get it produced there to help mitigate it as an example. Same thing for our equipment business. While there may be some impacts with this question came up earlier, we’re looking at ways to source the different parts and components from other areas.

And right now at this point in time, we see a path in many of these cases to be able to do that. It’s a question of when, timing, et cetera. And also keep in mind that the trade policies themselves have evolved quite a bit already. And we expect that evolution to continue throughout the second half. So to some degree, it’s not your — it’s not quite stable yet. But anyways, I’ll leave you with that. We feel really good about in both cases. And to your question around, do we need the volume? The answer is no. In most cases, we’re in a similar position relative to our competitors. And so if one has to price, we’ll probably most likely see the market price.

Operator: Thank you very much. At this time, I am showing no further questions. I would now like to turn it back to Dustin Semach for closing remarks.

Dustin Semach: I’d like to thank everyone for joining us this morning. I look forward to updating you over the coming quarters on our ongoing transformation and how we will continue to successfully navigate the environment. We have weathered similar challenges before and learn lessons that made us more resilient and prepared from navigating past economic cycles to the turbulence of COVID-19, our business has demonstrated strength, resilience and adaptivity. This challenge is no different. And I’m confident that we will navigate the landscape accordingly. I’d like to close by thanking the global Sealed Air team. You continue to focus on what’s important, delivering outcomes for our customers’ day in and day out and each other. Thank you.

Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.