Good day, and thank you for standing by. Welcome to the Second Quarter 2025 Sealed Air Earnings Conference Call. 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, Vice President, Investor Relations. Please go ahead.

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 we have provided a slide presentation to supplement today's discussion. This presentation, along with our second quarter earnings release, is available to download from our Investor Relations page on our website at sealedair.com. I'd like to remind everyone that during today's call, we make forward-looking statements, including our outlook or estimates for future periods. These statements are based solely on information that is currently available to us. Please review the information in the forward-looking statements section of our earnings release and slide presentation. These sections also apply to this call. 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 the 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. Operator, please turn to Slide 3.

Thank you, Mark. Good morning, everyone, and thank you for joining our second quarter earnings call. Today, I will give an update on our leadership team, the impact of shifting global trade policies on the markets we serve and our ongoing transformation. Later, Roni will provide an update on our financial results and details on our outlook. Yesterday, we announced after a thorough search process, Kristen Actis-Grande will be Sealed Air's new Chief Financial Officer. We are excited to have Kristen come on board later this month and leverage her experience driving transformations across complex manufacturing and distribution businesses to accelerate the transformation we are driving here at Sealed Air. She has a proven track record of creating shareholder value, and I'm looking forward to the impact she will make across both of our businesses, Food and Protective. I want to personally thank Roni for all her contributions during this interim period. Roni has been a trusted business partner since I joined the company, and I'm deeply grateful for her willingness to step up and support me through my transition as CEO, all while continuing to advance our finance strategy and drive outcomes across the business. She will continue to be an integral part of our leadership team. My sincere thank you to you, Roni. Moving on to trade policies. Since our discussion in May, we continue to monitor the changing global trade landscape. As a reminder, we are largely domestic production for domestic consumption, and most of our products remain exempt under USMCA, both of which position us well against direct tariffs. The net impact of tariffs was not material to our second quarter results. While the situation remains dynamic, the second quarter was more stable than expected with a pause on broader tariff decisions into the third quarter. However, there are pockets of the business, particularly certain specialty resins that are procured for partners in countries being impacted by increased tariffs. We continue to focus on mitigating the impact of tariffs through production or procurement optimization and limited pricing actions. The net tariff impact included in our second half outlook is minimal, and we will continue to provide updates as the longer-term impact becomes more clear. Let's now move to economic outlook and discuss each of our market-focused business segments. Globally, we are closely watching our end markets to understand the extent of demand impacts due to lower economic growth outlooks, shifting industrial production, and changes in consumer spending patterns on the back half of this year and on a go-forward basis. Beginning with our Protective segment. We continue to be in full swing in our turnaround and are seeing early signs of progress. As a reminder, last year, most of our efforts were focused on our new go-to-market strategy with a strong emphasis on getting closer to our customers and executing well against the basics. We stepped up our field engagement, invested in frontline sales, refreshed our commercial excellence programs and reorganized our teams. We are beginning to see the impact of our actions on our results. Our second quarter volumes were down 2%. The Protective industrial portfolio was up slightly, marking the most stable year-on-year quarterly volume results we've delivered since 2021. Additionally, sales were up 4% sequentially and adjusted EBITDA was up 6% sequentially, marking the second quarter in a row with sequential adjusted EBITDA growth, the first time in 2 years we have seen sequential growth in sales and adjusted EBITDA. We remain focused on getting closer to and reestablishing trust with our distribution partners and customers. As a part of that effort, I continue to spend time in the field. More importantly, they are also recognizing the step change in field alignment and engagement. We will continue to build on this momentum as we progress throughout the second half. While turnarounds are typically nonlinear, this is a step in the right direction, and we plan on continuing to control the controllables by improving business fundamentals irrespective of market conditions. We are expanding our go-to-market strategies more fully across Protective's EMEA and Asia footprint, and we'll share more on the rest of the world go-to-market strategy as we make further progress. We continue to work on addressing fiber portfolio gaps in our Protective business as we advance towards a substrate agnostic solution set. Our previously announced Jiffy and Boss Paper Mailer is gaining traction in the market and our hybrid Autobag solution that can run either fiber or poly materials is being brought to market now. The process of bringing these innovations to market has led us to further transform our research and development strategy to increase our use of external partners and suppliers. This will reduce time to market and ensure we are addressing our customers' most pressing challenges faster. This is especially important during a period where we are focused on paying down debt and are not actively leveraging M&A to bolt on new solutions. Lastly, we continue to optimize Protective's network to improve customer service and quality. We recently opened the Lakeland, Florida manufacturing facility to better serve our customers in the Southeast of the U.S. We are assessing the entire manufacturing footprint to identify additional opportunities to enhance service and quality while improving our cost positions. Our network optimization efforts will be outlined in more detail over the coming quarters. While we over-delivered in the volume in the first half against expectations and expect our turnaround in Protective to continue to deliver iterative progress, we are being prudent on expectations for the second half, reflecting the market uncertainty ahead of us in the global trade policies that lower growth expectations across many markets, but primarily in the U.S. Transitioning to Food. Our Food business remains resilient and continues to perform throughout the first half of 2025 despite market pressures accelerating in the second quarter. As a reminder, our Food business is focused on serving fresh protein markets across industrial food processing, retail, and foodservice. Our international business, while tempered from a market perspective, continues to perform well, and we expect full-year volume growth outside the U.S. to capitalize on opportunities. Our EMEA region is a standout, where we have continued to take share in the market throughout the first half of 2025, building on momentum coming out of 2024. The pressures on the North American market that we outlined at the beginning of the year accelerated in the second quarter, putting even more pressure on the second half. I'll start by focusing on the demand side before shifting to the supply side dynamics. Despite choppy consumer sentiment, consumer spending continues to be relatively stable in the U.S. What is shifting, however, is where consumers are placing their dollars, especially as inflation continues to escalate across all food categories. The overarching theme is the shift into value grocery, which is affecting each of our end markets. These changes are particularly pronounced in lower and middle-income households. Within industrial food processing, the shifting spend landscape is resulting in pressure on premium beef cuts. Consumers are trading down to lower-end costs and ground beef. While this shift is compressing our shrink back volumes, it's being partially offset by a pickup in our retail solutions. Within retail, the shift is away from high-end consumer packaged good brands into private label away from the deli counter to prepackaged goods, and from smaller portions into more economical bulk and family-sized packaging formats, reducing the packaging volume for protein weight sold. Overall, changes in consumer spending are resulting in lower outlook for foodservice with a mix shift from fast casual and quick service restaurants into retail, where we have a broad solution set and increasing focus, but lower market share in our industrial and foodservice portfolios. We continue to bring new solutions that include new packaging formats, expanded printing capabilities, and enhanced equipment offerings to capture more demand. While we are making progress, this strategy will take time to fully capture the market opportunity ahead of us. Shifting to the supply side. The U.S. beef slaughter rates are declining at an accelerated pace leading to volatility in the beef markets. While we've been closely watching the North American beef cycle, which is at 50-year lows, this quarter, we saw an inflection point in the market with slaughter rates decreasing 7%, worse than our previous expectations of down 1% for the quarter. This second quarter U.S. beef production and a softer second half is now resulting in lower full-year volume assumptions compared to what we anticipated at the start of the year. While herd rebuilding has begun, it's only the first step in a lengthy return to a more normalized and predictable part of the cattle cycle. As a reminder, the time between cattle retention and the resulting cattle going to market is approximately 3 years. An improved FX outlook on the weaker U.S. dollar is helping to offset the top-line softness in North America. As a result, we are reiterating our sales guidance. As we mentioned during the last call, with the anticipated slowdown in the U.S. market and the visibility we have into the structures to support each business, we continue to further streamline each business to make them fit for purpose for their respective long-term strategies. The overarching themes remain simplifying our organization, moving closer to the markets we serve, and becoming easier to do business with, which will result in long-term sustainable growth in earnings. Shifting gears, I continue to be pleased with our disciplined approach to capital allocation. We are below $4 billion of net debt for the first time since the fourth quarter of 2022. We are on track for the full-year free cash flow guidance, but we'll continue to solely focus on debt paydown. Before turning the call to Roni to review our second quarter financial results, I'd like to reiterate my confidence that as an organization, we are on the right path. Our priorities are unchanged and remain keeping the customer front and center, operating with urgency, driving further productivity, and transforming the business to deliver long-term sustainable growth. Roni?

Thank you, Dustin, and good morning, everyone. Let's turn to Slide 4 to review Sealed Air's second quarter performance. As Dustin mentioned, we executed well in the quarter and came in ahead of expectations. Net sales were $1.34 billion in the quarter, down 1% on a constant currency basis. Adjusted EBITDA in the quarter was $293 million, up 3% on a constant currency basis. Adjusted earnings per share in the quarter of $0.89 was up 7% as reported and 10% on a constant currency basis. Our adjusted tax rate was 24.4% compared to 25.5% in the same period last year. Our weighted average diluted shares outstanding in the quarter was 147 million. Turning to Slide 5. During the second quarter, volumes were down 2% across both businesses. Food volume weakness was primarily due to softer-than-anticipated volumes for industrial food processing predominantly in North America. Protective volumes were down 2% in the second quarter, our lowest volume reduction since the end of 2021. The fulfillment portion of the portfolio, which represents about 40% of the Protective business, was down mid-single digits as we lapped the tail end of material customer churn. The fulfillment declines were partially offset by volume increases within the industrial portfolio. Price was up 50 basis points, primarily on formula contract pricing in food, which was partially offset by pricing declines in Protective of about 2%. Second quarter adjusted EBITDA of $293 million increased 3% on a constant currency basis. Margin of 22% was up 70 basis points. This performance was mainly driven by cost takeout, productivity efficiencies, and a one-time benefit of $7 million from a lease buyout related to G&A network optimization, partly offset by unfavorable net price realization. Moving to Slide 6. In the second quarter, Food net sales of $896 million were flat as favorable pricing and formula pass-throughs were offset by softer volumes. As Dustin mentioned, protein markets decelerated more rapidly than we initially anticipated entering the quarter. The global protein markets we serve were down approximately 1%, the largest of which was the U.S. beef cycle, which was down 7%. Despite these market headwinds, our Case Ready Retail Solutions benefited from prior share gains, with volume up slightly. From a regional standpoint, Food EMEA and Asia businesses showed strength with volumes up low-single-digits in both regions. Food adjusted EBITDA of $210 million in the second quarter was up 3%. Adjusted EBITDA margin remained strong at 23.4%, up 50 basis points compared to last year. The increase in adjusted EBITDA was primarily driven by productivity and cost takeout savings combined with favorable net price realization. These were partially offset by lower volumes. Protective second quarter net sales of $439 million were down 3% as reported and 4% in constant currency. While volumes declined 2%, overall declines in our fulfillment portfolio were partially offset with slight growth within our industrial portfolio. Protective adjusted EBITDA of $78 million was down 5% in the second quarter as reported. Adjusted EBITDA margin of 17.8% was up 20 basis points from the first quarter. On a year-over-year basis, cost takeout and productivity savings partially offset negative net price realization. Now let's turn to free cash flow and leverage on Slide 7. During the six months, we generated $81 million in free cash flow as compared to $207 million in the first six months of 2024. The primary driver of this anticipated reduction was an increase in incentive compensation payments and the timing of tax payments, partially offset by lower interest payments and capital expenditures. At the end of the quarter, our total liquidity position was $1.2 billion, including $354 million in cash and approximately $830 million available under our revolver. Our net leverage ratio was 3.6x. We remain on track to drive net debt to adjusted EBITDA to approximately 3.0x by the end of 2026. Let's turn to Slide 8 to review our outlook. We continue to operate in a low visibility and more volatile environment within both our Food and Protective businesses. As a result, the strong first half performance and improved foreign currency assumptions will be offset by softer volume expectations, primarily in food in the second half and slightly lower pricing across both segments due to deflationary raw materials driven by the global trade impacts. Foreign currency impacts are now expected to be approximately 1% better than anticipated in our previous outlook. We are maintaining our previous sales guidance range of $5.1 billion to $5.5 billion and adjusted EBITDA guidance range of $1.075 billion to $1.175 billion. Our net price realization assumptions across the total company remain relatively consistent for the full year. We regularly monitor our legislative changes to determine the impact on the company's performance. In early July, the One Big Beautiful Bill Act was signed. We are currently evaluating the impact of these provisions on our effective tax rate and cash tax payments. For now, we still expect our adjusted tax rate to be ranged between 26% and 27% for the year. Based on our outperformance in the first half of 2025, we now expect adjusted earnings per share for the year to be slightly above the midpoint of our previous guidance range of $2.90 to $3.30 per share. Lastly, regarding free cash flow, we are maintaining the midpoint of our previous guidance of $400 million. We continue to improve our discipline around capital deployment, reducing our outlays while improving our returns. As a result, we expect capital expenditures to come in lower than our original expectations, though slightly offset by higher working capital. While our cash generation was more linear in 2024, we typically generate more cash in the second half of the year, mainly due to the seasonality of the business. Looking ahead to the third quarter, we remain prudent given the uncertainty around consumer spending primarily in North America, combined with factors such as the anticipated deceleration in the U.S. beef market. As a result, we expect net sales of approximately $1.3 billion, adjusted EBITDA of $270 million, and adjusted earnings per share around $0.68. With that, Dustin and I welcome your questions.

Our first question comes from Matt Roberts of Raymond James.

Dustin, you gave a lot of good color on the beef headwinds, it seems pretty well documented, but certainly appreciate that. What does that translate into a volume impact for the second half or any annualized impact we should expect in Food? And maybe just broadly, any additional color on Protective volume expectations for the second half either by product line or end markets? It sounds like you're seeing good wins there. So maybe any incremental color on new customers or products and the lift contribution and just broaden how you're thinking about volumes for that segment in 3Q and the second half?

Certainly, Matt. Thank you for your question. To start with Food in the cattle cycle, our primary focus is on consumer trends. While I will address the supply side shortly, we have largely concentrated on demand, particularly consumer spending, which remains relatively stable. We are observing shifts in food service and industrial processing toward the retail sector, and we're positioning ourselves to meet that demand. We are optimistic about our progress. Now, regarding the cattle cycle, keep in mind that the business impacted is about $400 million out of our $3.5 billion total. This refers to shrink bags for the beef market. For this year, we anticipate a decline of 3% to 4% in 2025, another 3% to 4% drop in 2026, followed by a flat year in 2027, with growth expected to resume in 2028. While it’s volatile, we are seeing an acceleration in herd rebuilding, albeit at a slower pace than initially expected, leading to a longer process with slightly less severity than we had projected. The volatility will increase going forward. To put it into perspective, the $400 million figure translates into a year-to-year headwind when applying the 3% to 4% forecast. Considering our $3.5 billion business, while this headwind is notable, we remain confident that we can navigate it successfully. Our focus is on the end markets and increasing our presence in retail and foodservice. In terms of volume expectations for the second half, particularly in the food segment, we anticipate a decline of about 2 percentage points compared to previous levels, with a volume mix down approximately 3 points in both Q3 and Q4 from a volume perspective. This represents a shift in our business, largely attributable to consumer patterns. As for 2026, it’s premature to draw conclusions, and we expect more clarity as we move through Q3 and Q4. Regarding Protective, I’m pleased with our second-quarter performance. Although we are still down, we are making progress. Our industrial portfolio showed improvement. Fulfillment, as Roni noted, is down in the mid-single digits. As we approach the second half, we are maintaining our outlook despite the better-than-expected second-quarter results. This conservative approach is in line with Roni’s comments about monitoring our end markets closely. Focusing on the industrial portfolio, our core view business has performed well, and our shrink business is also doing well. While our Instapak business is still slightly down, it has improved compared to recent quarters. Overall, there are positive developments, though it's not perfect across the entire portfolio or each region. We are particularly pleased with our advancements in North America, which we plan to expand globally due to the significant pressure we faced there. Lastly, regarding our electronics business, we had a strong first half of the year. We're cautious about whether this growth is sustainable or if it's a result of pre-buying due to tariffs. As we look ahead, we don't see any major shifts in market dynamics as we start Q3, and we are excited about the progress we've made in a relatively short time to begin turning the performance around.

I guess, Dustin, on the food business, I mean, you're pretty much at a high watermark for margins for that segment. What's your commentary on food and for the outlook through 2027, etc., I have to assume that red meat is more profitable, especially North American beef. You have the tariff uncertainty as it relates to Brazil, etc. How should we think about the near-term outlook for margin specific to food? And then also, as you think out to '26, '27, the natural headwinds associated with this large profitable market being a headwind?

Ghansham, good question. So as it relates to kind of Food margins where we're at now, you're right. I mean, we're really pleased with where we're at from an overall margin perspective. We've talked in the past around shrink bags in general, which is what's serving that market and the specialty properties around that particular performance of that application and the equipment offers we bring with it is a high-margin business for us. What I would tell you is if I go back to it, when you think about '25 and '26 in '27, you're talking about a $400 million business with a slight impact relative to 3% to 4%. So in the scheme of things relative to our overall shrink bag business, which is about $1.4 billion in size, it's still relatively contained, particularly to North America. And while there is absolutely a margin impact relative to the loss of volume associated with that, we still believe the network optimization efforts, our transformation efforts relative to productivity are going to continue to buoy and balance out our margins, as we have over the past and demonstrated over the past couple of years. So we feel still very confident that we're not going to have a material mix impact relative to bags relative to the rest of the business that would bring down margins and that we're still able to drive earnings power despite that headwind. But again, we'll continue to monitor as we go forward throughout the second half of the year and to understand, does the outlook for '26 become more acute or not. But as of right now, down 3% to 4% in that $400 million business within North America, we feel it's relatively contained and something that we can overcome. And so we're not as concerned about it.

And congratulations on Kristin and Roni, congratulations to you on all you did in the interim role and your work going forward. I guess my question is two-fold. One, Dustin, you said that you're maintaining guidance despite what's been an accelerated decline in food. Can you talk about the specific controllables that you're controlling? So the specific cost outs, things like that you expect for the second half, I guess particularly within food but wherever you want to talk about what will bolster your earnings in the second half relative to your guidance? Is there a way you can give us a bit of cadence food versus Protective in the third quarter? And then the second part of the question, your release last night mentioned and I'm paraphrasing that one of the reasons that Kristen was selected as CFO is that she has experience creating value with complex portfolios. How does that apply to Sealed Air, where do you think that to be most applicable?

Thank you, George. We focused on cost reduction earlier this year, aiming for approximately $90 million, which we are on track to meet by year-end. Our expectations were that these savings could enhance operating leverage for our business in the long term. However, as our outlook and volume have declined, much of our cost-cutting efforts are now aimed at aligning earnings with our guidance midpoint of 11.25. We are still launching new initiatives, such as network optimization and others we believe will benefit us in 2026 and 2027. Currently, our focus is on activities we have pursued earnestly over the past two years, like optimizing our general and administrative functions in Manila. What began as an idea 1.5 years ago is now fully operational with over 200 employees. We are also ramping up operations in Mexico City. These are just two examples among many related to our reorganization efforts that have streamlined our operations, improved accountability, and accelerated decision-making, all while enhancing our earnings capacity to offset some volume weaknesses we anticipate in the second half. We are actively exploring additional opportunities as we move into 2026 and 2027 and will provide more information on this as we progress through the latter part of the year. We aim to maintain a proactive approach with a variety of actions designed to improve business outcomes while balancing our earnings. Regarding Kristen, she has a robust background in the industrial sector, especially in managing complex portfolios, which aligns well with our needs at Sealed Air. Her experience in leading transformation efforts in MSC will be invaluable as we continue our work and develop new ideas. My background doesn’t primarily include manufacturing, but I believe Kristen will bring a complementary perspective to our ongoing initiatives. We are genuinely excited to have her join us, and I also want to take a moment to express my gratitude to Roni for her exceptional contributions over the past six months.

Congratulations on a strong quarter in a dynamic environment. Dustin, it seems you have maintained your outlook for Protective in the second half despite progress, which makes sense. Are you noticing any slowdown in bidding and order activity during the second quarter and into July? Additionally, regarding the increase you're observing in the industrial side of your portfolio, could you clarify how much of that is due to internal initiatives versus the cycle shifting? That information would be helpful.

Yes. In response to your question about July, we haven't observed any significant changes in our order patterns, particularly in our fabrication business. Overall, there hasn't been a substantial shift, and we're still optimistic about the direction of that business as we begin Q3. Much of our activity is tied to market order entries, driven by our investment in sales. We have been working hard to regain volumes lost since 2019 by reaching out to both former and existing customers to expand our business. Our efforts in refining our market strategy have bolstered our confidence not just in growing existing accounts but also in capturing market share, especially in areas where we've previously lost ground. Regarding our industrial portfolios, I don't see this as a cyclical change. Instead, there seems to be increased market pressure lately, especially in industries like automotive, where our foam and place solutions are prevalent. We are mindful of tariffs that could affect end markets, yet we've continued to perform well. This success reflects our effective go-to-market strategy, which, coupled with reduced customer churn over the past several quarters, is starting to show positive results. We're remaining cautious about the second half of the year, as highlighted in your comments. We exceeded expectations in Q2 and have steady volume expectations heading into the second half, indicating a slight increase in volume in Q4. Our focus remains on executing our internal initiatives, which primarily involve enhancing our engagement with customers and distribution partners. I'm particularly enthusiastic about expanding this approach across our European and Asian markets as we move toward 2026.

Your adjusted EBITDA range for 2025 is $100 million, and you only have 2 quarters to go and your EBITDA was roughly flat in the first half. Why is the range so wide? Is that because of conservatism? Or is the uncertainty about second half EBITDA that large?

Thank you, Jeff. To answer your question directly, it comes down to conservatism. As we consider the second half of the year, we are cautious about the volatility in the end markets we serve, opting to be prudent given the low visibility. Instead of adjusting our ranges right now, we prefer to focus on navigating the third quarter. Once we have more clarity on Q3, we can then provide more detailed guidance. We anticipate our EPS will be slightly above the midpoint of our previous expectations, and we'll share a more comprehensive breakdown of our guidance dimensions once we have greater certainty. This approach reflects the dynamic environment we are working in, especially concerning recent tariff impacts. Many decisions were made recently in August, but the effects take time to manifest. It's essential to understand how these changes relate to inflation and pricing, which requires time to work through the system. Overall, we are not particularly worried about the outcomes at the extremes of our range; our focus is on being cautious and getting through Q3 before providing an updated perspective. Yes, it's not difficult to obtain the materials. This is mainly about our operations and providing insight into where we are experiencing more effects from tariffs. I want to stress that there was no significant impact in the second quarter, and we do not foresee any substantial impact for the full year based on our current outlook. However, there are specific resins that have prompted us to adjust our production and procurement strategies to minimize the effects as much as possible. This situation is not unique to us; many companies are optimizing their sourcing. There are instances where we cannot mitigate the impact because certain specialty resins are exclusively available in Europe, and large chemical manufacturers cannot easily shift them to different assets or locations. This is an example of where we are implementing limited price adjustments that need to be integrated into our cost structure and priced accordingly to address the situation. But we are not facing any issues with procurement at this time; we're able to secure everything we need.

Just following up on Jeff's question on the full-year EBITDA bridge. I'm wondering, if you can put a finer point on maybe the technical level of cost saves that you expect to achieve this year and how that offsets net price, which I think you said that, that will sort of unchanged. But if you can just go through the bridge items for sort of cost saves versus net price falls and FX, that would be helpful.

Sure, Anthony. Let me outline the recent changes for you. First, I'll discuss net price realization and the assumptions involved. Essentially, prices have decreased, but this has been balanced by the deflation in our raw materials, keeping the overall impact fairly stable. For the full year, this situation has slightly worsened by about $7 million. The dynamics are significant, with both prices and raw material costs decreasing in tandem. Regarding the EBITDA bridge, starting with volume, we had previously mentioned an overall drop of about $100 million, which impacts the bottom line by approximately $44 million. Net price realization brings it down by $65 million, and taking into account the CTO of $90 million, along with an additional $16 million in actions we are implementing, the total brings us to $106 million. This reflects not only structural savings but also cost reductions throughout the business, along with maintaining fiscal discipline. We’ve also noted how our compensation programs are aligned with last year’s payouts compared to this year's trajectory, which contributes to a foreign exchange impact of about $3 million. This results in a year-over-year change of roughly $14 million.

Just one quick one on the price raw material gap especially in Protective. I mean, it's still negative. Can you have any success in raising prices there that could narrow that gap in the second half of the year? I mean, again, it's been that persistently negative. Like will we able to see that gap narrow now completely as we get into the second half and into next year?

To answer your question, I'll start with the second half. When you consider what we expect for 2026, the changes we've faced this year, particularly related to the resin market, have stemmed from earlier announcements about tariffs that affected the polyethylene market. This has resulted in a more deflationary environment overall. The pricing impact seen in Protective has been a consistent trend for the last couple of years, with resin prices peaking around 2023 and then dropping significantly. We had anticipated a return to a slightly inflationary environment this year, which would have been beneficial for us and the industry, but that hasn't occurred. Instead, we've observed a plateau since the March timeframe, contributing to a deflationary pricing situation. This is due to market conditions, not issues with our products. For some time, as resin prices declined, we were also closing the price gap with competitors, but we're past that phase now. This is a market dynamic affecting us in the second half, and our guidance reflects our optimism regarding potential volume growth. Looking ahead to 2026, the future of the resin markets will be crucial for our Protective and Foods segments, albeit for different reasons. Specifically, the trajectory of low density and high-density polyethylene is vital for our Protective business, but currently, we lack vision for 2026. As we move through Q3 and Q4, we expect to gain more clarity and will update accordingly. Our general stance is that once we reach a stable inflationary environment, our pricing will adjust accordingly, allowing us to narrow the net price realization and return to positive figures. The status for 2026 still remains to be determined.

I'm sitting in for Mike Roxland today. I just had 2 quick ones. 1 is, how is the cattle cycle faring right now in South America and Australia? And then previously, I think you had mentioned targeting growth in Fluids. Is there just any update in that area?

Yes. Regarding the cattle cycle, I would say it's still somewhat at its peak in both Latin America and Australia. We anticipate strong performance in these regions going into next year, although it may be slightly less robust compared to the underlying cycle. In the U.S., which I mentioned earlier, growth has accelerated this year, making 2025 the first year of three years where we initially thought growth might resemble '24 and potentially be prolonged. We're seeing a 3% to 4% decline, with a similar outlook for '26, flat in '27, and then a return to growth in '28. That cycle is expected to continue for about the next seven years. As for fluids performance, that segment is doing well. To elaborate, it involves our Cryovac fluids and liquid solutions, along with the Liquibox acquisition completed in February 2023. The Cryovac side has been performing well, and we expect it to continue driving growth for our overall business this year. Liquibox experienced a destocking phase and downturn in 2023, but we have stabilized since then. It's not performing at our desired level, which we have noted historically reflects the Zindu end market’s ability to achieve mid-single digits growth, a benchmark our fluids business has met historically. The compound annual growth rate for that segment is mid-single to high-single digits. We are optimistic about the progress we've made in stabilizing that business and addressing some of the operational challenges we faced. We're now refocusing solely on growth. More updates will be provided as we move through the second half of the year, and we fully expect it to be a growth driver in 2026.

Dustin. Roni, thanks for all your help. I wanted to revisit a comment you made in your prepared remarks, Dustin, about utilizing some external partners. And I think it was Protective you mentioned speed to market and maybe intimated a reduction in capital intensity. If you maybe can elaborate on the concept a little bit. I don't know if it's a function of maybe customers being a little bit more dynamic in their own strategies and decision-making or what's driving it? And then maybe quantify for us, I'm assuming CapEx, but maybe op costs as well, what I could save you?

Sure, Gabe. There are a couple of points to consider. Looking back about ten years, most of our new solutions were developed with external partners who helped design and build our products. This was a way to outsource some of our research and development in equipment design and material. For the last decade, we've shifted towards vertical integration with a focus on internal development. This includes not just creating new applications, materials, and equipment, but also developing our own manufacturing technology. We've been rethinking this strategy, especially in light of our balance sheet's condition over the past couple of years. Previously, we were utilizing our existing lines, but now we're being very specific about how we leverage manufacturing technology to create our products in a more cost-effective manner. This change speeds up our production lines to meet our required speeds and allows us to scale much quicker than the market demands. This approach encompasses not only the applications but also a reconsideration of manufacturing technology. In our Food business, we've discussed the strengths of our material science, equipment, and service capabilities. As we consider retail, we are focusing on whether to use our equipment or partner externally. We've touched on this before, but we are now more intentional about our strategies. It’s about relying on experts in their field to enhance our time to market instead of trying to do everything ourselves. This strategy does not indicate under-investment in the business; in fact, we are currently investing more than ever, but we are concentrating on the right areas that will yield better long-term results. I hope that provides some clarity.

This is Brian Dong on for Arun Viswanathan. Can you walk us through your CTO to grow cost savings? What are the different buckets to that? Are you still targeting $90 million of savings for the end of the year?

Yes, that's a great question. The categories we are focusing on have not changed. We are targeting three main areas. The first is our go-to-market strategy, which involves reorganizing into Food and Protective sectors and restructuring our P&Ls into regional divisions. We are also assessing our marketing, sales, and R&D efforts. This initial focus on the front line is primarily about generating cost savings, but it's more important for getting closer to our customers, simplifying our operations, and promoting growth. This has also helped us improve overall business productivity. The second focus is on supply chain improvements. I'm not specifying exact figures for each category as they are constantly evolving based on new opportunities. There is a connection among all three areas. For network optimization, we have reduced our number of plants by about five over the past two years, and we are starting to develop broader plans for the years 2026, 2027, and 2028. More details will follow on that. Finally, the last area is G&A optimization. I mentioned our Manila facility earlier as an example. It's about taking advantage of our global presence to position ourselves effectively. To give you some perspective, the split between CTO and productivity is approximately 65% to 35%.

Thanks for all the details around food and the assumptions there. I kind of want to ask about the non-red meat assumptions as you look at the second half. I guess really rough numbers. You talked about $400 million in sales, down high-single digits. You roll that through to Food. That's kind of a point headwind or so, I think. So then the other 90% is down a couple of points. Can you maybe unpack that and some of the assumptions between, I guess, the retail market versus maybe some of the processed foods and meats, which I think would be somewhat of an offset for what you're seeing there. But more detail there would be helpful.

Thank you for your question, Josh. Overall, as mentioned in the prepared remarks and Roni's comments, we're seeing a decrease of about 1 percent in global protein production this year, which is affecting broader volumes. If you look at consumer spending, there's a noticeable shift from industrial food processing to retail and foodservice. Across various markets, such as dairy, poultry, and smoked and processed foods, we have observed slight declines, contributing to the overall impact on the business. However, we do not anticipate this as a long-term challenge for 2026 and 2027; it reflects current market conditions, particularly on the demand side. That's the key factor behind the broader impact.

So you noted industrial strength, which is nice to see, just considering some mix macro indicators on the industrial side. I was just wondering if any of that industrial end market strength was due to your automation business? And then maybe how are you just thinking about your industrial portfolio for the second half and into 2026? And maybe how are you thinking about your automation business as well.

It's a good question. Just keep in mind, we don't see it as solely an automation business. We believe we are offering a solution to the market that combines our strengths. For instance, with our Protective APS business, which involves our Auto Packing Solutions, we provide quality equipment alongside hybrid options, excellent materials like fiber or poly, and top-notch technical service. Our focus is on achieving throughput and yield while protecting items through effective packaging. The Food business operates similarly. We don't focus on automation for its own sake, which has been emphasized in discussions over the past few years. Instead, we prioritize solution sales that create significant value for our customers. On the industrial side, take Instapak as an example; it involves excellent equipment, advanced material science, and great service. Our various solutions in Protective and Food are where we achieve higher margins and deliver more value to customers. Overall, our approach, which harkens back to what made us successful, is positively impacting the market and contributing to the industrial performance reflected in our numbers. I mentioned earlier that it's performing significantly better than it has in the past. Thank you for joining us this morning. I look forward to updating you in November on our ongoing turnaround and Protective and the growth transformation we are driving in Food to meet the market challenges ahead of us head-on. Finally, thank you to the 16,000-plus Sealed Air employees and our customers who are at the center of our transformation. Thank you.

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