Good day, and thank you for standing by. Welcome to the First Quarter 2024 Sealed Air Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Sullivan. Please go ahead.

Thank you, and good morning, everyone. With me today are Emile Chammas, interim co-CEO and COO; and Dustin Semach, interim co-CEO and CFO. Before we begin our call, I would like to note that we have provided a slide presentation to supplement the call. Please visit sealedair.com, where today's webcast and presentation can be downloaded from our Investor Relations page. Statements made during this call stating management's outlook or estimates for future periods are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the information in the section entitled Forward-Looking Statements in our earnings release and slide presentation, which applies to this call. Additionally, our future performance may differ due to a number of factors. Many of these factors are listed in our most recent annual report on Form 10-K as revised and updated on our quarterly reports on Form 10-Q and current reports on Form 8-K. We discuss financial measures that do not conform to U.S. GAAP. You will find important information on our use of these measures and the reconciliation to U.S. GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial results that correspond to the non-U.S. GAAP measures we reference throughout the presentation. I will now turn the call over to Emile and Dustin. Operator, please turn to Slide 3. Emile?

Thank you, Brian, and thank you for joining our first quarter earnings call. Today, Dustin and I will review SEE's financial performance, provide updates on the markets we serve, discuss relevant trends and highlight the significant progress made on the transformational actions discussed on our previous calls. Lastly, we will conclude with our 2024 outlook before opening the call for questions. We closed the quarter with sales of $1.33 billion and adjusted EBITDA of $278 million, delivering strong results despite the continued challenging market dynamics in the Protective segment. Our first quarter results reflected for the first time since quarter 4 2021 year-over-year volume growth across all regions of our Food business, continued volume stabilization in Protective and strong execution related to our CTO2Grow initiatives. Through the focused efforts of our teams around the world, we delivered positive free cash flow of $78 million in the first quarter compared with a negative $13 million in the same period a year ago. Dustin will provide a more comprehensive overview of our financial performance shortly. Now let us move on to our market and business update. During the first quarter, our Food segment delivered low single-digit volume growth across all regions, primarily driven by our shrink bag business, which benefited from the carryover momentum of enhanced holiday demand and new customer wins from the fourth quarter. In the U.S., beef production was down low single digits year-over-year for the first quarter. For the rest of 2024, U.S. slaughter rates are expected to decline at a more rapid pace in the outlining quarters. In South America and Australia, cattle cycles are at their peaks, driven by robust domestic consumption and heightened export activities. Against a flat global proteins market in the first quarter, we drove volume growth, gained share and delivered double-digit growth in automation. Following its successful launch last quarter, our new compostable tray continues to gain traction in the market. Additionally, we are actively engaged in the development and introduction of more sustainable packaging solutions, such as recycle-ready barrier display films, poultry bags and post-consumer-recycled trays to address evolving market needs and support food processors and retailers in meeting their sustainability goals and regulatory requirements. The regulatory landscape concerning plastics continues to evolve rapidly with recent legislative attention directed towards polyvinylidene chloride or PVdC due to its chemical similarity to PVC. PVdC is used as a very thin barrier layer in multilayer films within our protein shrink bags. Our shrink bag business that contains PVdC is approximately one-third of our Food segment. This barrier material plays a vital role in preserving the quality of fresh proteins, extending shelf life, enabling global distribution and minimizing food waste and its environmental impact on greenhouse gas emissions. Currently, there is no alternative to PVdC that matches its performance level. Through close collaboration with our suppliers, customers, industry associations and government agencies, we actively advocate for the essential role packaging plays in mitigating food waste and ensuring safe, affordable food on a global scale. For decades, we've been assisting our customers in adapting to the changing regulatory environment and safeguarding their food supply chains. We already provide alternative barrier layers to PVdC, such as EVOH among others, particularly for applications with lower performance requirements. As the market leader in shrink bags, we continue to be best positioned to help food processors navigate the evolving regulatory landscape and deliver market-leading solutions that combine world-class material science, equipment and technical services. Transitioning to Protective, revenue performance in the first quarter was in line with expectations. Industrial portfolios continued to be under pressure across all regions, contributing to a low to mid-single-digit year-over-year volume decline for the segment. As discussed on our last quarter's call, the pricing environment remains pressured as we compete in a low volume, low visibility environment. In the Americas, volume growth was less than 1% as growth in box rightsizing solutions and recovery in retailer fulfillment sectors were offset by industrial weakness. EMEA experienced continued double-digit volume decline, primarily driven by intensified sustainability pressures across all portfolios and destocking from our APS product line. The electronics sector in Asia is improving from last year. However, uncertainties around China's economic recovery continue to temper short-term regional growth expectations. Consistent with our previous discussions, we still anticipate an L-shaped recovery across the Protective segment. The organizational changes implemented in February, which established dedicated commercial teams for both Food and Protective, are beginning to gain traction. The renewed focus on our Protective channel and direct customers has created positive momentum internally and has been well received by our customers.

Thank you, Emile, and good morning, everyone. Moving to first quarter results, let's turn to Slide 4. Net sales were $1.3 billion in the quarter, down 1% on a constant currency basis. Adjusted EBITDA in the quarter was $278 million, up 4% compared to last year. Volumes were flat year-over-year for the quarter with growth in the Food segment across all regions offset by declines in Protective, primarily in EMEA. As reported, adjusted earnings per share in the quarter of $0.78 were up 5% compared to a year ago. Our adjusted tax rate was 25.9% compared to 24% in the same period last year. The increase in the tax rate year-over-year was driven by discrete impacts related to our share-based compensation. Our weighted average diluted shares outstanding in the first quarter of 2024 was 145.4 million. Turning to Slide 5. In Q1, inorganic growth from Liquibox contributed 2% to total company sales or approximately $23 million. As anticipated, we saw lower pricing across both the Food and Protective segments, primarily in the Americas and EMEA regions, following the reduction of resin costs from the post-COVID peak in 2022 to the middle of 2023. Year-over-year volume improved in the Food segment across all regions through carryover momentum from last year's holiday season and new customer wins. Protective volumes were down 4% year-over-year, driven by a rebound in Americas, more than offset by declines primarily in EMEA. First quarter adjusted EBITDA of $278 million, which included $4 million inorganic contribution from Liquibox, increased $11 million or approximately 4% compared to last year with margins of 20.9%, up 110 basis points. This performance was mainly driven by accelerated savings from our CTO2Grow and productivity efficiencies, partially offset by unfavorable net price realization. Moving to Slide 6. In the first quarter, Food net sales of $868 million were down 1% on an organic basis, primarily due to declines in price, partially offset by positive volumes led by carryover holiday benefits within our Food business, solid equipment performance, cattle cycle tailwinds in Asia Pac and Latin America, along with share gains of our case-ready solutions in the poultry market. Food adjusted EBITDA of $190 million in the first quarter was down 3% with margins at 21.8%, down 100 basis points compared to last year. The decrease in adjusted EBITDA was mainly driven by unfavorable net price realization of $10 million, partially offset by higher volumes. Protective first quarter net sales of $461 million were down 7% organically, driven by lower pricing in Americas and EMEA and volume declines primarily in EMEA, where both industrial and fulfillment end markets remain soft and sustainability pressures are accelerating. Americas volume rebounded with strong automation solutions offsetting continued industrial weakness. Protective adjusted EBITDA of approximately $90 million was up 11% in the first quarter with margins at 19.4%, up 320 basis points. The increase in adjusted EBITDA was driven by cost control actions, which included CTO2Grow savings, partially offset by unfavorable net price realization of approximately $10 million in lower volumes. On Slide 7, we review our first quarter net sales by region. On an organic basis, Americas was down 2% primarily due to lower pricing. Volume turned positive year-over-year for both segments for the first time since the end of 2021 with robust equipment placements in both businesses and strong volume within Food. EMEA declined 7% organically on lower pricing, persisting market softness and sustainability challenges in the Protective segment while Food volumes grew mid-single digit. Asia Pac was flat organically as tailwinds from the Australian cattle cycle and improving electronic performance were offset by continued weakness in the industrial markets. Now let's turn to free cash flow and leverage on Slide 8. Through the first quarter, we generated strong free cash flow of $78 million compared to $13 million used in cash in the same period a year ago. The primary driver of this improvement was higher earnings, lower incentive compensation payments and better working capital management, partially offset by higher interest costs. During the first quarter, we further reduced our total debt by $28 million, ending the quarter with a net leverage ratio of 3.9x, flat from the end of 2023. Our total liquidity position was $1.4 billion, including $353 million in cash and the remaining amount in committed and fully undrawn revolver. We continue to focus on driving net debt to adjusted EBITDA to below 3.5x by the end of 2025. Let's turn to Slide 9 to review our 2024 outlook. We are pleased with the strong finish to the first quarter and encouraged by the momentum that is building in parts of the business. The strength of the first quarter is giving us more confidence in our full year guidance. We continue to operate in a low visibility environment, especially in Protective, and we'll have better visibility into how this momentum translates into the second half during our next call. For now, we are reaffirming our full year 2024 outlook. Looking ahead to the second quarter, we anticipate a slight sequential decline in sales, reflecting the dynamic low visibility environment and subsiding holiday demand from last year. As a result, second quarter net sales, adjusted EBITDA and adjusted earnings per share are expected to range around $1.3 billion, $260 million and $0.64, respectively. Turning to Slide 10. We remain committed to restoring underlying fundamentals by executing in the market, progressing our transformation, delivering CTO2Grow savings and deleveraging the balance sheet. Lastly, I'd like to close by thanking the global SEE team, who are at the center of our transformation, for their efforts in solving our customers' most critical packaging challenges day in and day out. With that, Emile and I look forward to your questions. Operator, we would like to begin the Q&A session.

Our first question is from Ghansham Panjabi with Baird.

Emile, regarding your description of the Food segment in relation to the different trends across your regions as you consider the rest of the year, does that align with your initial perspective at the beginning of the year, particularly concerning the North American cattle cycle? Additionally, what contributed to the positive results specifically for Food in the first quarter? Many companies have mentioned the timing of Easter at the customer level. Do you think that had an impact as well?

Thank you, Ghansham. Thanks for your question. Overall, the underlying market trends are largely in line with our initial expectations. While the North American cattle cycle is down year-on-year, it is performing slightly better than we initially anticipated. We are seeing strength in Latin America and in Australia and New Zealand, where the market is experiencing double-digit growth. As mentioned in our prepared remarks, the strength in Q1 can be attributed to a couple of factors, including carryover from holiday demand and new customer acquisitions across several sectors. We are very encouraged by the momentum in that business.

And Ghansham, the only thing I would follow on there, too, it was a broad base, as Emile alluded to in terms of overall regions, but also across many of our portfolios, right, which was well received, obviously, for the first quarter and demonstrating some of the strength in not just our shrink bags business but across the board with rollstock as well.

And our next question is going to come from the line of Adam Samuelson with Goldman Sachs.

Adam, are you on mute?

We can move to our next question. And our next question is going to come from the line of George Staphos with Bank of America Securities.

Thanks for the details. I guess, my question centers around sustainability, the transition that you're trying to achieve, particularly within Protective. So I guess, the question is this: Sealed Air has always had fiber-based solutions in protective packaging. What factors, to the extent relevant in terms of the going-forward model, allowed you to, to some degree, maybe fall behind in terms of share and lose share in fiber-based? What's it going to cost to bring out these new programs and new SKUs? And what's the uptake been as you've been talking about this with your customers? Said differently, how much is it going to cost? And how much volume do you think you can regain as you bring out these new products? And are you seeing more demand for this from your larger or smaller customers in protective packaging?

George, this is Dustin. I appreciate the question. I'd like to start by addressing why we haven't been able to regain market share in fiber despite our strong portfolio. You're right that we have a solid foundation in fiber, and as Emile mentioned earlier, we intend to enhance and expand it further. For example, we're looking at the paper coiler and plan to diversify our fiber-based mailers in terms of sizes and other specifications. If we look back to around the end of last year, we discussed this a bit when we restructured our commercial organization. Several years ago, we consolidated our sales teams into regional groups, which caused us to lose some focus on our Protective business, which is about 35% of our total portfolio compared to Food. A key goal of the reorganization was to refocus on the Protective business as a whole. Our customers and internal teams are both enthusiastic about the dedicated marketing teams and the renewed focus on innovation and development. We're being more intentional about moving this business forward. Customers have also noticed this shift. Emile and I have met with several distributors and direct customers, and they see a difference in our focus. They're excited about our renewed commitment to enhancing our offerings and advancing the portfolio. Timing is crucial for us regarding when we introduce these new products to the market. As for costs, our current guidance for capital allocation, including CapEx, has been fully integrated into our overall financial outlook, covering both our top and bottom lines.

And our next question is going to come from the line of Matt Roberts with Raymond James.

I think last quarter, you previously expected EBITDA to sequentially improve throughout the year, I believe. Now I know 1Q impressively came in higher partially due to some holiday carryover. Could you quantify that holiday carryover or any of the cost takeout acceleration? And the decline now expected again in 2Q, is that more volume-related? Or have any of the price flow-through expectations changed? And any put and takes there would be helpful.

Yes, Matt, this is Dustin. I'll respond to that. I want to highlight a couple of points. First, we are actively advancing our CTO2Grow program, and we’re thrilled about the enhancements we’ve implemented. We've mentioned the $78 million run rate we've achieved, which gives us confidence as we near the end of Q1 and aim to reach the full $90 million. Honestly, we aren’t stopping there. Generally, embedding a cost-conscious culture within the organization is benefiting our bottom line, and you can see some of that reflected. A lot of this momentum is expected to continue, which is included in our forward-looking guidance. However, looking ahead to Q2, there are two main factors affecting us. One is foreign exchange fluctuations, with the U.S. dollar strengthening, which accounts for approximately $10 million of the decline. Additionally, there’s a slight sequential pressure on pricing, estimated at around $5 million. Lastly, in terms of volume, we're seeing about $15 million, mostly due to the decline in holiday demand following a stronger-than-anticipated Q1. However, the gains we experienced, especially in poultry, also contribute to our positive momentum moving forward. As we progress beyond Q2 into Q3 and Q4, we expect the Food segment to continue to grow, maintaining a low single-digit volume increase, while pricing is anticipated to stabilize as the year progresses.

And our next question comes from the line of Jeff Zekauskas with JPMorgan.

You were talking earlier in the call about the risks connected with PVdC. Is the issue the bill in California that's being weighed? Or is it a European issue? Have your competitors already changed over to a different material, that is, do you feel like you're lagging behind in technology? Are there particular dates that it may be good to be aware of in terms of when this packaging may or may not be used?

Thank you for your question, Jeff. I will do my best to provide a comprehensive response. Regarding PVdC, I want to point out that it represents about one-third of our overall business in Food, and another third comes from EVOH. To answer your question directly, we are not lagging behind at all. The purpose of this discussion is to highlight that our offerings in PVdC, especially in our shrink bag business, rely on three key components: the strength of the material science, which includes both PVdC and EVOH that we currently offer, our technical service capability, and our automation. This combination is what has established us as the market leader in this segment, and we plan to maintain that position. We are actively navigating this landscape to ensure our manufacturing footprint and other aspects allow us to adapt effectively. Regarding your specific question about California, there are no specific dates at this time. Earlier this year, California announced AB 2761, a toxins bill that addresses both PFAS— which we have already eliminated from our food packaging— and PVdC. We are continuing to advocate with relevant agencies and our coalition to emphasize how PVdC plays a crucial role in reducing food waste globally, and the bill is not yet enacted.

And maybe I'll just jump in to add a couple of pieces. So one is, ultimately, we offer our customers what they would like. And in many cases, we help them in terms of coming up with different solutions to address any potential regulation. So we approach it multi-front, right, one, in terms of working with industry associations to make sure the legislators understand the benefits of the different packaging. PVdC, in this example, is the best barrier layer out there. Two is within our portfolio, we are offering multiple solutions both on the food and the non-food side. We talked earlier about the fiber part of the portfolio. And then finally, in some cases, customers are reaching out to us to solve problems that were not in our portfolio. And we gave the example of the compostable fiber tray that we launched last quarter. So again, this was in response to specific customer coming to us and asking us to help them solve that problem with the EPS challenge, so really approaching it from end-to-end and tackling those issues.

And our next question is going to come from the line of Michael Roxland with Truist Securities.

You mentioned some momentum building in the business, particularly with new customer wins in the poultry sector. Are there any other developments you can share that are improving? Additionally, Emile, you referred to a shift in your digital and automation strategies and indicated you would provide more details later regarding future quarters. Could you offer some insight into what you're reevaluating and share any information on your strategy concerning digital and automation?

Thank you. I will address the first part of the question, and then Emile will handle the second part. Overall, our business, particularly in the Food sector, is performing well, especially in the bags segment. Despite challenges in the protein cycle, particularly with beef, our bags business, including poultry overwrap and rollstock, is thriving across all three regions. There is strong retail demand and increased export activity as major food processors seek to supply the highest demand areas. This is the primary area of momentum for us. Regarding the Protective segment, we saw good performance in Q1, especially with our APS offerings. While there's still some destocking in EMEA, we are witnessing strength in the Americas and Asia Pacific, with APS contributing positively. Our box rightsizing solutions are also performing well, alongside some emerging positive trends in shrink foams and inflatables, which are starting to show improved volumes. We remain cautiously optimistic, expecting volume growth for Protective to improve in the coming quarters, with Q2 mirroring Q1, followed by an anticipated uptick in Q3 and Q4. In the Food sector, we anticipate a flat volume in Q2 due to earlier discussed reasons, but expect to see low single-digit volume growth in Q3 and Q4, supported by our ongoing wins and the positive momentum in our overall business.

Regarding digital automation, we will elaborate further in future calls, but I want to highlight a few key points we've previously addressed. First, our strength lies in providing superior materials and technology along with robust automation solutions and service. This has been a significant driver for us. As mentioned in the last call, we have identified some gaps in our portfolio. For example, on the Protective side, we've established partnerships for the 3D right box solution, and we're beginning to see positive outcomes from that collaboration. We've also partnered for trays and overwrap in our rollstock portfolio, and we are working on additional partnerships to enhance this offering. On the fluid side, Liquibox automation sales currently make up a small portion of our overall portfolio. We're exploring a few partnerships that we aim to announce in the coming quarters to provide comprehensive automation solutions. Our market strategy focuses on superior materials supported by automation and service. Additionally, we will discuss two areas related to digital in future calls. One area is digital commerce, where approximately 22% of our sales are currently processed. We have shifted our investments towards enhancing our capabilities to drive success on both the top and bottom line. The second area is our digital printing technology, which we will introduce in the latter half of the year, featuring the first commercial-scale digital printing capabilities for flexible shrinkable materials using water-based inks. More details will follow, but these are essential components of our growth strategy.

Our next question is going to come from the line of Edlain Rodriguez with Mizuho Securities.

So Dustin and Emile, so I'm just kind of looking ahead like the next 2, 3 years, just wanted to get a sense of what keeps you awake at night? Like what do you see that has like the most opportunities and what concerns you the most? Like when you're thinking about the business portfolios, what keeps you awake at night? Or do you sleep like a baby?

I appreciate the question. There are a few points I would like to discuss. What we are focusing on in today's call ties closely to our overall transformation efforts, aimed at maximizing our opportunities while minimizing the risks we face. If we examine this on different levels, we realize coming off the volume losses in 2022 and 2023, we needed to improve our cost structure, and we believe we are making progress on that front. We're moving from $78 million to $90 million. Another important aspect is the commercial reorganization, as we recognized we had lost some focus on our Protective business. We completed that reorganization in February of this year and are truly enthusiastic about the progress we're making. However, we know that this effort will continue as we strive for better commercial execution and excellence. It is still early to determine the intangible benefits related to overall growth, but we are quite optimistic as we approach April, just a few months post-reorganization.

And our next question is going to come from the line of Gabe Hajde with Wells Fargo.

I have one confirming question for those of us who are not material scientists on the call. To clarify, the discussion about PVdC refers to a middle layer in a multilayer 9- or 11-layer film that does not have direct food contact. More importantly, it prevents contamination and food waste. Additionally, you can modify the formulation at your customer's request, although this may affect some of the extended shelf life qualities.

Yes. So thanks for that question. The answer is yes. It's a thin barrier level that manages oxygen transmission rate within our multilayer films. To be clarifying, we already offer both today, right? And it's really based on customer preference, market need. And so at any point, if something changes from a regulatory environment, we'll be well positioned to manage that transition. But it's already offered today. It is that there's no food contact associated with it. It is obviously fully FDA-compliant.

And our next question comes from the line of Adam Samuelson with Goldman Sachs.

I would like to get an update on pricing and costs. There continues to be pricing pressure in both the Protective and Food segments. However, looking at the business for the quarter, the impact of price and cost appears to be a much smaller detriment to the business compared to last year than was previously expected. In other words, could you help us understand the year-on-year margin expansion in the Protective business and clarify how you achieved such leverage and EBITDA growth despite still having negative volume changes?

Adam, great question. And I'll start with just kind of giving you a bridge holistically around net price realization, so appreciate the question. And just to start there, we expect net price realization to be in the order of magnitude of around $80 million negative year-over-year, right? That's about $140 million of price offset by a benefit in direct materials of about $100 million and then offset by some of that inflationary, albeit much smaller than prior years, around think of it as labor and non-material costs as well, so it's about negative $40 million. That gets you to that negative $80 million. That's actually about $15 million worse than we had originally anticipated. And a lot of that's coming from a little bit of, let's say, increased price pressure that we see overall. And that's being offset by the productivity benefits more broadly in the business. Now just keep in mind, while we're driving our CTO2Grow program, which is restructuring the holistic business, we're always continuously driving productivity in the underlying business. And a lot of what you're seeing in Protective, if you go back to that cost takeout program and you go back to Q1, which, keep in mind, was a very low quarter in 2023 for Q1, specifically for Protective, that a lot of the actions that we've been taking in terms of cost control, productivity, footprint rationalization, SG&A optimization have all really been targeted in that Protective business. And that's why you're seeing some of the benefits you're seeing today.

Our next question is going to come from the line of Christopher Parkinson with Wolfe Research.

Can you just take a step back and just looking at some of the businesses that you're referencing, the movement in Food and improvements? Can you just take a step back and talk about a little bit more how you are thinking about your product portfolio, what you're seeing by geography? Obviously, there's been a lot of noise across protein markets the last few years. It seems like things are turning generally for the positive. But I'd love to hear your perspective on how confident you are to fully benefit from these improvements, or at least stabilization, let's say, for the balance of '24.

Thank you, Chris. I will begin by discussing Food and then move on to Protective. We feel very confident about our Food business overall. We remain the market leader in our bags segment, continuing to gain market share despite fluctuations in the global protein market, especially concerning fresh red meat, particularly beef. This year represents a downturn in the cattle cycle, which will take a couple of years to resolve. However, we are optimistic about our positioning and portfolio. Our strength comes from a combination of material science, automation, and technical service. As we highlighted in our Q4 earnings call, we are focused on expanding our roll stock portfolio, which presents a significant growth opportunity. While we are not currently the market leader in this area, it is a larger and more fragmented market that we aim to penetrate further. We are specifically targeting certain applications, such as enhancing our poultry business and extending it into other areas. Another significant opportunity lies in trays, particularly with trends towards sustainability and the upcoming bans on EPS. We have launched a compostable tray and are working on several other formats in this category, which we see as a potential source of new growth over the next few years, extending beyond 2024 into 2025 and 2026. Shifting to Protective, our focus is on completing our fiber-based portfolio and enhancing our automation capabilities. We have a notable opportunity in paper mailers, especially with the e-commerce trend moving towards mailers instead of boxes. We are currently seeing sales from our 3D rightsizing solutions, which will contribute in the second half of the year. These areas inspire confidence in our outlook.

The area that we're still looking at and cautiously optimistic about is the rest of that broader portfolio. Think of it as utility, this is classically BUBBLE WRAP, foam, et cetera, where you still see kind of weakness in Q1. And a lot of the channel checks we're doing in talking to our distributors kind of as you think about the rest of the back half of the year, they continue to be no different than we talked about in Q4, optimistic about the second half. But no one at this point in time has true line of sight, right? So that's the area that we're continuing to work and gain momentum. And I'm going to turn it to Emile. Yes, just going to add one area that we haven't talked a lot about the last months, but it's on the fluids segment as well. We continue to be excited about the fluids segment and the growth there, be it through some of our innovations around FlexPrep for the foodservice area. But also, if you think about it holistically with all the sustainability and recycling pressures out there, there's going to be more and more pressure for people who are in rigids business, be it plastic or nonplastic, to go towards flexibles. So we're well positioned in terms of not only driving growth through our own innovations, but also how do we take advantage of those sustainability trends to penetrate further in terms of rigids to flexibles conversion.

And our next question is going to come from the line of Anthony Pettinari with Citi.

Dustin, on the last call, you talked through the net pricing outlook for '24. And I'm just wondering if there's any update on those items. I think you talked about $60 million negative net price and with some moving pieces from raw material prices and the bonus pool restoration. So I'm just wondering if there's any material changes there. And then the $20 million EBITDA drag from net price in 1Q, was that in line with your estimates, better or worse? Any thoughts there?

Yes, great question. I mentioned this earlier, and I'll break down where we are today. We're approximately $15 million to $20 million worse year-over-year. Our net price realization has primarily contributed to increased pressure on pricing. We're facing about a negative $140 million in price, offset by $100 million in benefits from direct material costs. This is further impacted by inflationary pressure in non-material and non-labor costs, as well as labor costs. This brings us to a net figure of about $80 million for the full year. Q1 was significantly influenced by net price realization, and we feel optimistic about this trend continuing throughout the year as we manage through it. We're focusing heavily on cost control right now. In Q1, the benefit largely came from our volume performance, which drives business leverage. As volumes improve, particularly in Food in Q1 and somewhat in Protective, the ability to leverage operating efficiencies is evident. This is also aided by our continued emphasis on cost-conscious initiatives and broader productivity enhancements. You saw this reflect in Q1, and regarding bonus restoration, we're aligned for the full year. The impact we've discussed is already embedded in our guidance.

And our next question comes from the line of Arun Viswanathan with RBC Capital Markets.

I guess, I just wanted to come back to a similar line of questioning around the bridge. So my understanding was you're expecting about plus $90 million from CTO2Grow. And it sounds like you're now expecting minus $80 million for net price/cost. So that's a plus $10 million net. And then you have the minus $60 million for incentive comp. And so that's a minus $70 million net. And so when you think about volume, it looks like if you think about flat volume, really it would be kind of negative volume that would get you to that kind of flattish EBITDA year-on-year outlook. So could you just update on how you guys think volume should progress from here? I know Food outperformed a little bit, but Protective is still down. It looks like it's down about 22% on a 2-year stack. So does that kind of flatten out as you move forward? Or how do you think about volume and relate that to the bridge?

Sure, I'll return to the bridge as a final point. Regarding volume progression for the year, at the company level, we recorded approximately 0.5 points of growth in Q1. Looking ahead to Q2, we're expecting a decline of about 1.5 points. For the latter half of the year, we anticipate growth around 2% to 2.5% per quarter, which would result in roughly 1 point of volume growth for the full year, predominantly driven by Food. Specifically, Food volume is projected at 3%, reflecting the strength we discussed earlier. For Q2, we expect it to remain flat for the reasons already mentioned. In broader terms, we foresee low single-digit growth, leading to a full-year estimate of 2% to 3%. In the Protective segment, Q2 results are expected to mirror the previous quarter, improving year-over-year. We'll go from a 5% decline to a 4% decline, which we expect to maintain in Q2. As we progress into the second half of the year, we anticipate an improvement, particularly around Q4. To summarize for the full year, we have a net price realization of about negative $80 million, plus $90 million, along with a negative $40 million associated with bonus restoration and a positive $20 million from volume. These figures are approximate.

Our next question is going to come from the line of Phil Ng with Jefferies.

Congrats on a strong quarter in a choppy environment. I guess, my question is on Protective. It looks like volumes have stabilized. But you did call out perhaps EMEA is a little weaker. You're seeing some destocking and sustainability pressure. Is that a material risk in how to think about your demand profile this year? Appreciating comments around being refocused on the commercial team on Protective and kind of driving fiber on the Protective side, how does that margin profile look, an aspiration when we think about 2025? Give us some perspective as how big this could be. And when we look at the recovery next year, are some of these headwinds that you've called out limiting your ability to grow? Or we should see a typical cyclical recovery in that business like we've seen in past cycles?

Yes, that's a great question. I'll begin by addressing the situation in EMEA. Indeed, we noted a significant decline in Q1, which stems from trends that began in 2023. If we look back to 2022, we saw a drop in volume, and EMEA was somewhat delayed in that cycle regarding actual volume decline. Essentially, you can view it as being last in and last out of this trend. As we progress, we anticipate a substantial improvement in Q1 as we move into Q2, Q3, and Q4. While sustainability pressures persist, we’ve remarked on the acceleration towards fiber, which is occurring more rapidly in the EMEA region compared to our Asia Pacific, U.S., North American, or Latin American markets. Currently, we don't observe similar shifts there. It's worth noting that our EMEA Protective business represents roughly 20% of our total Protective business. The initiatives we're implementing across our portfolio will better position us to engage in the growth stemming from this transition, which should help mitigate some of the sustainability challenges we discussed. More broadly, we believe the EMEA business is poised for a cyclical rebound. We are still expecting an L-shaped recovery throughout this year, largely depending on our performance in the second half. As we indicated in our prepared remarks, we look forward to discussing this further in August to provide more clarity since we are currently navigating a low-visibility environment. From our perspective, we see no barriers to participating in the underlying market growth trends associated with a rebound, although in EMEA, this may occur at a slightly slower rate until our portfolio is fully aligned with the market needs.

And our next question is a follow-up question from George Staphos with Bank of America Securities.

I want to revisit my earlier question regarding what your customers are particularly asking in both segments concerning your product offerings. It might be a broad question, but within Protective, do you notice any difference in what your smaller distributor customers are requesting from Sealed Air compared to the larger ones? For instance, are the larger distributors more focused on fiber while the smaller ones prioritize pricing or service? Can you differentiate between these demands and, while I know it's part of your guidance, what is it costing you? Additionally, once that issue is resolved, as Phil mentioned, what kind of uplift can we expect? What does that mean for revenue and earnings?

Thank you, George. Regarding Protective, it's important to consider our distribution network. Larger distributors typically provide a comprehensive range of our portfolio, whereas regional distributors may offer more limited selections. This can influence their specific needs based on the parts of our portfolio they sell. Generally, there’s a clear demand for a broader fiber portfolio, driven by customer feedback that prompts us to rethink how we shape our offerings, focusing on areas where we currently lack presence. Addressing your question about service differences, it really hinges on the types of portfolios being sold. For example, if a distributor sells more automation products, they'll likely have enhanced technical services related to those machines. Thus, our goal is to achieve the right product mix for each distributor, which will lead to improved outcomes. Our technical services have consistently set us apart from competitors, and this is recognized by both our distribution partners and direct customers. In terms of our Food business, we definitely offer a variety of options based on customer preferences. Specifically, regarding our shrink bag offerings, we feel well-equipped to provide any type of materials that our customers might need. We're frequently in discussions with both our distribution network and our largest direct customers to better understand their requirements and the impact of sustainability on their supply chains. These dialogues often prioritize performance over sustainability, which remains our focus. As for our rollstock products, we aim to enhance our efforts in that area. We're also excited about our fluids and liquids business and its potential to replace rigid applications. In addressing your question about costs, any pressures we've experienced are already factored into our plans. This is not a new situation for us, but rather part of our ongoing strategy. The necessary adjustments are built into our capital projections for 2024 and align with our overall approach as we work towards our deleveraging goals for 2025.

Our next question is a follow-up question from Gabe Hajde with Wells Fargo.

We didn't spend much time discussing automation. Emile, you mentioned that you'll provide updates in the second half regarding strategy or resources in that area. Was this a challenge during the first half? We’ve seen reports about delayed CapEx projects from industrial companies, general uncertainty, increasing costs, and financing issues. How has the book-to-bill ratio been trending? If conditions improve in 2025, particularly in the Food segment, do you think your customers will be more motivated to use your equipment, providing an additional boost for you in 2025?

Yes, thanks for that question. So actually, we did say in our prepared remarks, actually in the first quarter, we saw in the Food business, our automation sales is up double digits. But for the year, we're still in line in terms of where we guided. It is going to be flattish, driven by all those factors that you highlighted. In terms of book-to-bill ratio, we're at 1, right? So some of that is burning through some of the backlog. So again, there are hesitations out there in terms of triggering investments from our customers. But if you look at our customers' profitability profile, that is significantly improving. So we are still optimistic about the future. But this business, as you can imagine, is lumpy in terms of when exactly it comes, when you install, when you can recognize the revenue. So again, our outlook on automation for this year has not changed. We're off to a good start. And we do believe that cyclicality will come back and we're going to be ready to take advantage of that.

Thank you. I would now like to hand the conference back to Emile Chammas for closing remarks.

I'd like to thank everyone for their time today. And just to reiterate, we are pleased with the first quarter results, and we're excited about the momentum building in the business and the progress we are making in our transformation. And we look forward to speaking to all of you again in August. Thank you.

Yes, thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.