Thanks to everyone for joining us today for Sonoco's Second Quarter 2022 Earnings Call. Joining me this morning are Howard Coker, President and CEO; and Rob Dillard, Chief Financial Officer; and Rodger Fuller, Chief Operating Officer. Earlier this morning, we issued a news release highlighting our financial performance for the second quarter of 2022 and we prepared a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of our website at www.sonoco.com. As a reminder, during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Please take a moment to review the forward-looking statements on Page 2 of the presentation. Additionally, today's presentation includes the use of non-GAAP financial measures which management believes provides useful information to investors about the company's financial condition and results of operations. Further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations to GAAP measures, is available under the Investor Relations section of our website. For today's call, Howard will begin by covering a summary of second quarter performance. Rob will then review our detailed financial results for the second quarter and discuss our guidance update for the third quarter and the full year of 2022. Howard will then provide a progress report on our strategic priorities, followed by a Q&A session joined by Rodger Fuller. If you will please turn to Slide 4 in our presentation. I will now turn the call over to our CEO, Howard Coker.

Thank you, Lisa, and thanks to everyone for joining our call today. Hopefully, you've seen our press release and the strong financial results we delivered in the second quarter, which exceeded the high end of our recently raised guidance. We've made tremendous progress on our strategic priorities that enabled the quarter's performance and our outstanding first half of 2022. Revenue for the quarter was up 38% over last year and the $1.9 billion in quarterly sales marked the highest in the history of Sonoco. Our revenue performance was driven by the continued benefit of our ongoing strategic pricing actions, great performance from the Sonoco Metal Packaging acquisition, relative stability in volume mix, and solid operational improvements. As you have no doubt heard repeatedly from companies across various industries, global supply challenges and inflationary issues persist. Despite this, we expanded our base EBITDA margins over 200 basis points to 16% compared to last year from strong profit performance across the entire portfolio. On the bottom line, we grew base earnings per share to $1.76 which was 89% above our result in Q2 of last year. Based on our first half results and third quarter outlook, we're again raising our full-year base earnings per share guidance to a range of $6.20 and $6.30. Our operational, commercial excellence, and supply chain teams have done an outstanding job, and I want to extend a special thanks to the entire Sonoco organization for delivering these results while continuing to support our customers. We've had great execution in the first half of the year. And again, these results are not by chance. We have been working very hard on a set of strategic priorities to make our great company even better. And later in the call, I'll provide further updates on this progress. Now, to go over more details on our second quarter performance and our guidance, let me introduce you to our new CFO, Rob Dillard. Rob has been with Sonoco since 2018, handling corporate strategy and M&A activities. Rob is a strategic leader of our company and brings extensive experience in corporate finance and accounting, operations, strategy, and corporate development from both Fortune 500 companies and investment banking. Rob has a deep understanding of Sonoco's culture and strategic opportunities to partner with our global business leaders to further drive performance improvements and shareholder value. Let me say congratulations, Rob, on your new role, and I'll now turn the call over to you.

Thanks, Howard. On Slide 5, we start our financial review with GAAP EPS and the reconciliation of GAAP EPS to base EPS. GAAP EPS was $1.33 for the quarter, a meaningful increase from the same period in 2021. As Howard said, the strong performance was due to continued strategic pricing performance, a relatively stable demand environment, strong performance in metal packaging, and improved productivity. This improved profitability resulted in base EPS of $1.76, an 89% increase from the same period in 2021. The reconciliation from GAAP EPS to base EPS has $0.43 of adjustments, primarily related to the amortization expense of the Metal Packaging acquisition, an increase in LIFO reserve, and the exit of our Russian operations which impacted restructuring. Slide 6 has our base P&L summary for the period. These exceptional results illustrate the power of our positions in stable and defensive end markets where we differentiate ourselves as a supplier of choice. We achieved value for this differentiation through strategic pricing performance that greatly contributed to our net sales growth of 38% to $1.9 billion in the quarter. Furthermore, this price is translating into strong operating leverage. This is best exhibited by our 62% increase in base EBITDA and our 78% increase in base operating profit in the quarter. Base EBITDA was $306 million and base operating profit was $250 million in the quarter. We increased base EBITDA margin 230 basis points to 16% and base operating profit margin 290 basis points to 13.1% in the quarter. This focus on margin improvement is strategic and is backed by portfolio management actions, footprint optimization activities, value-enhancing capital investments, and ongoing strategic self-help programs. Turning to Page 7, net sales grew $531 million versus the same period in 2021. This strong performance was driven by several key factors. First, volume mix was negative 1% in the quarter, which was largely an indicator of relatively stable demand conditions in our increasingly defensive, consumer-oriented market profile. Best exhibited by our market-leading global rigid paper cans business which achieved 1% volume mix growth. This growth and growth in our other core U.S. businesses were offset by strategic actions that led to volume declines as well as market weakness in consumer durable markets and international industrial markets. Pricing performance in the quarter was particularly strong with net price of $297 million, contributing 21% to growth in the period. This figure excludes the pricing performance of Metal Packaging, which was also strong. This exceptional pricing performance was both contractual and strategic in nature and is the product of our commercial excellence strategy. Acquisitions and divestitures generated $290 million of sales in the quarter as Metal Packaging continues its strong performance. Excluding the impact of acquisitions, net sales growth was still 17% in the quarter. Finally, FX and others was negative $44 million in the quarter. It's important to note that approximately 72% of our net sales are generated in the U.S. As shown on Slide 8, base operating profit increased $109 million or 78% from the same period in 2021. As previously stated, the primary drivers for this growth were strong price/cost performance, acquisitions and divestitures, and improved productivity. Metal packaging was largely responsible for the acquisition growth. This business achieved a 21% operating profit margin in the quarter due to strong price/cost performance and the benefits of integration. Slide 9 has our segment analysis and base figures. This analysis illustrates the strong performance across the breadth of our diverse and improving portfolio of businesses. Consumer net sales grew 66% to $990 million in the quarter. Consumer volume mix was essentially flat during the second quarter as strong international rigid paper can volume mix and 4% flexibles volume growth was offset by mix and flexibles and strategic volume reductions in our perimeter store business. Consumer operating profit grew 114% to $139 million, a 320 basis point increase in operating profit margin to 14.1% due to strong price/cost and productivity. Industrial paper net sales increased 20% to $727 million, marking the eighth consecutive quarter of record net sales. Industrial paper volume has declined approximately 2% in the quarter due to disrupted demand in international markets and the impact of a tight URB market in the U.S. This URB market condition is moderating in Europe as our U.K. paper mill is again operational after a capital project. We anticipate that the U.S. URB market will be in balance once Project Horizon is completed. Industrial paper operating profit grew 57% to $94 million, a 310 basis point increase in operating profit margin to 13% due primarily to price/cost.

Thanks, Rob. And if you'll turn to Slide 13 in the presentation, I'm going to provide an update on the progress of our strategic priorities. Let me remind you that Sonoco is on a journey. I took the role of CEO one month before the COVID outbreak in 2020. At that time, I challenged the team to really start thinking about a better operating model to optimize our portfolio and footprint and asked them to imagine what the organization would look like to support us. I'll remind you that these planning sessions were going on amidst a global pandemic compounded by worsening supply chain conditions. Fundamentally, our aim was to be a much stronger company and to build a playbook that would result in long-term step change in profitability and value creation for our shareholders. To do that, we have to first look at our portfolio. We are intentionally aligning to fewer, bigger businesses, focused on markets where we believe we have a right to win and gain leadership positions. Today, our Consumer Packaging segment represents over 50% of our business, and industrial paper packaging has retracted to around 38%. We're using a rigorous portfolio management lens to determine where and how we invest organically and otherwise. In parallel, we're focusing on optimizing our manufacturing footprint. The outcome of these efforts has been to exit some unprofitable operations in Europe and North America as well and to scale growth opportunities, particularly in Asia, South America, Europe, and yes, here in the United States. Our couple focused portfolio and operational strategy is centered on serving our customers in the right locations with maximum efficiency to drive superior service and, of course, improve margins. Secondly, we're aligning our organizational structure and talent to support these larger scale businesses with a simpler infrastructure, leveraging centers of excellence and shared services. We're doing this with a greater focus on process standardization to lower operating expenses. In this more streamlined model, we're building a diverse and inclusive workplace through a set of focused actions to promote and hire the best talent in a highly competitive labor market. We have a great leadership team at all levels to execute on these positive long-term changes for the company. Thirdly, we're investing to grow our consumer and industrial business with high-return capital projects for organic growth and productivity improvement. In 2022, we have allocated a record $325 million on capital projects, of course, led by Project Horizon which Rob spoke to earlier. We're also investing more than $60 million to expand our global paper can production, $60 million to grow our flexible packaging business, and recently $25 million into our domestic metal can division, to name a few of our other new investments. As we shared in our December Analyst Meeting, we are further investing in self-help actions with operational, commercial, and supply chain excellence programs for EBITDA growth and margin improvement over the next several years. In addition to organic investments, we will evaluate targeted opportunities to inorganically augment these core businesses. Lastly, executing on sustainability initiatives is central to our mission and we're increasing our focus on sustainability to reduce the environmental footprint of our operations and commercially through the products we design. These work hand in glove with our customers and supplier partnerships to drive circular economy solutions that support both our commitments to improve recycling and recyclability of our products while meeting our aggressive targets to reduce greenhouse gas emissions by 25% by 2030. You can get more information on sustainability progress when we publish our updated corporate responsibility report later this quarter. As we continue to navigate these initiatives, we will keep capital allocation aligned to our strategic priorities. We're committed to returning cash to shareholders as evidenced by our 40 consecutive years of increasing dividends and maintaining a strong balance sheet. In closing, I've been with Sonoco for over 35 years, and I've never been more excited to be a part of this organization. We are making step change improvements in how we more efficiently operate the company that is yielding the strongest financial performance in our history. I am optimistic about the actions we're taking to make Sonoco a better company and the value we will create for shareholders not only this year but on into the future. So, thank you for your support. Thank you for your interest in Sonoco, and we certainly welcome any questions you may have.

Our first question comes from Cleve Rueckert at UBS.

Congratulations on your new set of results. Just two high-level questions for me on the guidance. Firstly, I'm just curious, I appreciate that cash flow is sort of second-half weighted but I'd like to understand what it would take to unlock the working capital that you called out and perhaps outperform the cash flow guidance. Secondly, I think in the release, you talked about returning to a more normalized margin in the future, and I'd just like to know if you can give us a sense of what that margin run rate is and whether it's contemplated in your implied Q4 guidance?

Yes, sure. Cleve, thanks for that question. I'll take the cash flow question and then we can let Howard and Rodger discuss margins as well. I would say on working capital, we were conservative. The inflation trends that we've seen have still persisted in some areas. We're seeing nice trends there. But that definitely has impacted net working capital in the first half and this has continued just supply chain disruptions which have led to elevated inventory levels as we've persisted in being a stable supplier for our customers. We're starting to release some of these excess levels. We also have, of note, relatively meaningful seasonality in metal packaging, and that packaging, as you can imagine, releases in the fourth quarter after the past season. I'd say the other thing kind of, of note to your question on how we unlock this value, that's exactly what we're focused on now and we want to guide to what we can control. We've got new and accelerated initiatives really to manage working capital in the future. We think there's a meaningful opportunity to improve asset efficiency, and it's really just the timing to achieve the key variable, whether or not it will be this year or next, but we're opportunistic about what's ahead there.

Yes. Cleve, let me talk about the commentary on normalized margins. That's really talking into the third and fourth quarter. We've got the inflation, that discrete inflation that Rob alluded to. We also have the impact noted between $10 million and $15 million on the industrial side with our number 10 shutdown and restart. So we've got some exposure to supply chain, etc., that we'll publicize and retirements as we finish out the year. If you go beyond this year, we are extremely bullish about not only the performance this year but continuing that all into next year and beyond. Just to give you some color to macro things that are going on right now. If you think about number 10, the costs that we're going to incur this year and the benefit next year. Back in December, we talked about our walk to $180 million of self-help work. We've been working that, frankly, for the last year and a half, with some little benefit. I think the most benefit we've seen is on the commercial excellence side. But we've got that tailwind as that really starts kicking in into next year, synergies from the acquisition, and frankly, continued improvements on the capital that the prior owners put into the metal business and that we're putting into the business today, and portfolio optimization. I could keep going on. So the real headline here is we're having a remarkable year, and we do not expect to step back from that going into next year in the future, and the expectation is to improve on that year after year.

Our next question comes from the line of George Staphos from Bank of America Merrill Lynch.

Thanks for the details and congratulations on the quarter. Rob, we look forward to working with you. Congratulations. I wanted to pick up on that question. Howard, could you give us a sense for on the shared services and that area of self-help what we could be looking at into 2023? It sounds like there's not been as much, for understandable reasons, pickup on that this year. But next year, if you could help us understand what that could be perhaps. And if not, quantitatively, sort of directionally, if there's any way to talk to that point.

Yes. George, I do not want to take up the entire Q&A session to talk through all of the work we're doing and I'm going to try to summarize. Basically, we're taking a different approach and look towards the company. So we've identified what we call our core businesses, and those are our can businesses, our flexibles businesses, and our global integrated paper business. We're structuring our centralized functions to support those critical long-standing businesses within the company. On the other side, we have a group of disparate businesses in the 'all other' category that we're going to manage differently. We are no longer going to support from the center. We're going to allow them to stand alone and take support from the center when that makes sense to the core from a cost perspective. The end result is going to be a much greater focus on those core businesses. Significant SG&A savings will be realized as we fully implement this strategy. Rodger is heading that up and he may have a couple of comments that he would like to make as well.

Yes, I think you covered it well, Howard. But George, I'd add, we've talked a lot about automation and we've got a tremendous amount of really strong capital automation projects going through that will be hitting next year. A lot of focus on operational technology and how to give our operators, our maintenance teams better online data to improve productivity. As you know, productivity has been very tough this year. I think the team has done a fantastic job under very difficult situations with supply chain challenges and labor challenges. So unlocking that productivity in '23 is going to be critical, and I'm feeling very, very bullish about that as well. So we'll start to see those projects pay off as we head into early '23 as well.

And Howard, would it be fair to say that in '23, clearly, the incremental pickup will be more than what you saw in '22 and that, in turn, it would be more than what you see incrementally in '24 versus '23?

That's correct.

Okay. Two others for me and I'll turn it over. One, can you talk about the trajectory that you're seeing in industrial as the quarter progressed from May into June. I realize we're not that deep into the third quarter but any views that you could share with us in terms of what you're seeing in industrial early third quarter? And similar question, looking at consumer, there are some puts and takes. Your important businesses did well, is my take, obviously, in cans and flexibles. Any change in the trajectory of the businesses as the quarter progressed and then early into 3Q?

George, Rodger. On Industrial, as we look at the third quarter, surprisingly, the U.S. is maintaining really good strength. If you look at the tubes and cores business in the U.S. in the second quarter, it came in 1.6% positive, strong film results, strong textile, tape, and specialty, with a little bit of downside on paper mill cores but strong. We've seen that continue into the first part of July, and we expect very similar trends in North America than we had in the second quarter. So we're really not seeing any kind of slowing to speak of. As you would expect, Europe and China, specifically in Asia, was difficult. Our tube and core numbers in Europe were down about 6% but we had the Russia exit. We've exited a plant in Saudi Arabia. We exited a losing plant in France. So we're making really smart moves. You take that out, and the European business was down about 3%. Most of that is coming from textiles, and that textile softness is really generated by the war in Ukraine and the supply chain disruptions we're seeing there. Asia, overall was weak and that's driven by China. As an example, China, our cone business, which is textile-focused, was down 37% year-over-year. So China was soft. The most optimistic piece is really that U.S.-Canada piece which is holding up well. No significant changes as we rolled into the third quarter in our can business. We are seeing a rebound in our powdered infant formula business. There's a well-publicized challenge with one of our large customers in the powdered infant formula business. That seems to be behind us now. So our North American paper can business should be stronger. Rob has already mentioned that seasonally, the second half in metal can is softer than the first. That's in the guidance. I want to call it our plastic food business. Yes, the volume was down, but it was down by our choice. We've been talking now for three or four quarters about the consolidation, plant consolidations we're doing in that business, the pricing strategy we have in that business, and we've walked away from some unprofitable business. So the volume was down in plastic foods, but they had a record profit performance. So I'll take that tradeoff at any time. The only significant change we're seeing is really energy-focused in the third quarter and that's a watchout, not only price of energy but availability of energy, specifically in Germany, as we get into the quarter.

Our next question comes from the line of Mark Weintraub from Seaport Research Partners.

Another really good quarter. Thank you for laying out some of the controllables that you're going to be pulling to drive profits going forward. One thing you helped us out with in the first quarter is you had noted that there had been about $0.30 to $0.35 from quasi-onetime price cost. Was there much, if any, in the second quarter as we start thinking about what's the right platform to think 2023, where kind of the starting number should be? Is there a number for the second quarter that would be equivalent to that $0.30 to $0.35 you talked about in the first quarter?

Yes. Mark, for the second quarter, really across several divisions, we probably saw in that $0.08 to $0.10 type benefit. You can back that out and say the rest was pretty much pure. Your question really is around how do we comp that to next year. There you go, I'm not going to repeat all the things that we have from a tailwind perspective that the number 10 is a great headline. We've got just, I don't know, 10, 20, 30, 40, 50 number 10-like projects that are in the $1 million, $5 million, and $10 million type range that drive us up to that $325 million in capital spending and increased capital spending last year, and the returns coming from those are really going to start kicking in next year. Finally, synergies have started with the acquisition that we expect to see meaningful improvement and tailwinds from that as well. So you talked about the $0.30 to $0.10. While you've gone from $3.93 to $6.20, we expect to maintain that going forward because of all the work that this great team has undertaken over the last two years.

One question that people have been asking is about the volumes, which were flat and down slightly. You mentioned the decisions around the plastic food segment. Can you provide us with an idea of what the remaining business volumes would have looked like if those decisions had not been made?

Yes. I don't think we can hit a number for you, but it is something that we are going to start pointing out going forward. When you say you're down 1% and whatever, we do make strategic decisions that actually can impact that 1%. That was a great example that Rodger pointed out where our perimeter store business was down 9%, which is in our consumer sector, and we had profits that we haven't ever had in that business, making smart moves, sacrificing volume in exchange for much, much higher profits. So, Mark, sorry, I can't just sit here and say, 'Here's a number,' but we recognize that we're not giving you guys the total picture of what is actually market-driven versus our own self-actions that are causing our volumes to be down. That will be coming in the future.

Our next question comes from Gregory Andreopoulos from Citigroup.

Greg on for Anthony. I just had a quick question about the full-year guide, circling back to that. The rate of $6.20 to $6.30, to my mind, that's above what the 2Q preannounced would have implied. So my thought process is your expectations for the second half are above what they were back in April when you updated us last. So I guess my two kind of related questions. First question is, how has the second half outlook changed since April or since earlier this year? And is it possible to kind of parse out some of the drivers of the guidance raise? I also wanted to know how costs are trending in July in terms of resin, OCC, natural gas, and what levels of inflation the full-year guide assumes for the rest of the year.

Yes, Gregory. That's a great question. Regarding our guidance, the main factors we're considering as we move from the first quarter to the second and then into the third quarter are the demand drivers in our markets. We're closely monitoring and actively participating in these markets. In our defensive consumer segments like rigid paper cans, metal foods, flexibles, and thermoforming food, we feel positive about the stability and defensibility of these areas. This should continue to offer performance opportunities on the pricing side. In the industrial sector, which is cyclical, we are keeping an eye on it. As both Rodger and I have mentioned, there are various factors at play, but we are not anticipating a significant downturn in our core U.S. tube and core and paper markets; those areas remain relatively strong. One unique aspect of the guidance is that metal packaging has significant seasonality throughout the year, with the first half showing substantial profitability. We expect that profitability to normalize for the rest of the year, along with margins adjusting from the approximately 21% range observed in the second quarter. The primary focus remains on price and cost dynamics. It's important to note that we are not fluctuating around a neutral price/cost equilibrium where margins would frequently revert to an average. We have been dedicated to expanding margins and pricing to reflect value. Therefore, we anticipate that the price/cost for the full year will be between $250 million and $300 million.

Yes, this is Rodger. We believe inflation peaked in the second quarter. However, there will still be supply chain and inflation challenges. We are finally seeing some easing in freight, truck availability, driver availability, and somewhat lower diesel costs. There is also a decrease in aluminum ingot prices. We are monitoring the resin prices we purchase. Last quarter, resin inflation was around 18%, and now it has increased to about 26%. Half of the resin we buy, which totals 500 million pounds annually, is PET, and it seems that PET prices will rise by 30% to 45% this year. It's important to keep that in mind. In the second half of the year, we have a clearer understanding of supply chain and inflation challenges, allowing us to be more precise in our approach. As Rob mentioned regarding strategic pricing, we are incorporating a little easing in inflation into our guidance changes for the second half.

Our next question comes from the line of Kyle White from Deutsche Bank.

Congrats, Rob, on the new role and looking forward to working more closely with you going forward. I guess just to start, I'm curious if you guys are starting to see any kind of trade-down impacts, maybe consumers moving more to food cans or rigid paper containers versus fresh foods, anything that you would call out?

I don't think we're seeing any notable changes in our portfolio, particularly in the high-value segments of our business, which include supplying the white goods industry, such as refrigerators, washers, and dryers. Some of this is tied to their own supply chain challenges, but our customers are indicating some pullbacks. However, we are not currently experiencing the typical signs of a recession, such as a significant increase in the staples food segment of our business. So it feels like business as usual at this time.

That makes sense. And then, Rob, since you're not new to Sonoco and you already have an understanding of the business, just curious what strategic actions you might be looking to implement here from day one. Anything you're thinking about in changing regarding the capital allocation? Or what's your view on leverage and share buybacks?

Yes. We're still evaluating that. I mean it's early days. I think the legacy practices have certainly served us well. We definitely have a dedication to being investment grade and are thinking really thoughtfully about what that means for the capital structure and what strategic alternatives are. We've bought back shares in the past and we consider doing that but we really like returning capital to the shareholders through the dividend and think about that every quarter with the Board.

Our next question comes from the line of Adam Josephson from KeyBanc Capital Markets.

Rob, congratulations. I look forward to collaborating with you as others have mentioned. Regarding the price cost, Rob, you updated your expectation of a benefit between $250 million and $300 million for the year. If I recall correctly, the company's expectation at the start of the year was over $125 million. So, that figure has more than doubled since then. Can you specify which segments this pertains to? Also, could you provide some context on how this full-year price/cost benefit compares to what the company has historically experienced?

Yes, Adam, that's a good question and it's something we're really focused on. If you think about it in a historical context, over the last two years, we've experienced negative price costs of $153 million. In the first half of this year, we were back to positive $164. So really offsetting the two years of a negative trend. We have been really working on getting price in a strategic way and thinking about how to deliver value in the right way to our customers and receive the right value for what we're delivering. That has changed a lot how we think about price and how we think about margin. That's really the driver for how we think that this price/cost curve over the three-year period, if you include the last two years, will actually show if you get to the $250 million to $300 million, just the good work that we've done over the last couple of years. We feel really confident about that. It's a capability we've been building for a number of years and one that we've increasingly gotten focused on. I think Rodger can talk a little more about some of the puts and takes. I mean, there are definitely businesses that are experiencing better pricing, but it is a core capability that we're pushing from the center.

Yes. That's well said, Rob. The only thing I would add, Adam, is we've talked about it now for 18 months or more. The other initiative is really going through all contracts with all customers across primarily the consumer and industrial, our two platform businesses, and really understanding price change mechanisms and timing on those price change mechanism using the correct pricing mechanism. Most importantly, in the environment over the last 18 months, making sure we can recover as we should, up labor increases and all other increases, materials besides things like OCC, resin, and metals. The team has done a fantastic job. I think that's the driver of most of the incremental that you're calling out and we continue to push that going forward and we see that continuing in the second half of the year.

And I would add to the COVID period, it's rare. I can't think of one where we actually materially caused downtime for our customer during these difficult supply chain situations. It really helped pull forward our customers' recognition of the value of doing business with a global company like Sonoco that when we have discrete raw material shortages that we have literally, a global reach and will do whatever it takes to make sure our customers stay in the market and deliver that value. I think they, too, are understanding that and we're being rewarded for that in terms of margin improvement.

No, I appreciate that, Howard and everyone. Just one clarification on that. So you recovered all of what you lost over the past two years just in the first half, and then you're expecting a lot more in the second half. I think in response to Cleve's question, you mentioned, Howard, that you don't think you'll be overearning this year despite what seems to be a historically large price-cost benefit. Is that because you believe you may have been underpricing in recent years, plus the drag from the past two years that you recouped in the first half? Is that how you want us to consider that issue?

That is how we think about it. In a perfect world, price has nothing to do with cost, right? Our customers are understanding that doing business with Sonoco is right. Our value recognition is higher today than it ever has been. As Rodger talked to, we've been working at this for one and a half years, two years in terms of our commercial excellence and making sure we're getting that message out. COVID just absolutely reinforced our customers that we are the right folks to be doing business with because, look, we have a major recession, a hurricane coming, it can happen literally in a matter of weeks, we have global supply chain issues. Our customers know that we will keep them in supply at whatever cost. It may be a short-term impact to our P&L, but we are going to be there to serve them.

I appreciate that. Just one other one on the URB business which is obviously in '08, '09 that business took a very big hit both in terms of volume and profitability. I know you think about the business a lot differently in the industry for that matter much differently than you did then. Can you just remind us of that? More near term, I think, Rob, you expressed confidence that North American tubes and cores demand would hold up. What gives you that confidence given the economic sensitivity of those end markets, particularly given what that business saw in '08, '09 volume-wise?

I've been looking around for someone to answer that question, so I’ll go ahead. In terms of our situation, we’ve been short for a while now and have discussed our allocations consistently. With number 10 coming online, we’re optimistic about getting our inventories back to where they need to be. The negative productivity we’ve experienced during this shortage — shifting volume between mills just to meet our needs and those of our trade customers — has kept the market very tight. As number 10 comes online, we expect to see some relief and hopefully increase our inventories to appropriate levels. Our productivity should improve significantly, and overall market conditions seem favorable for sustaining the margins we've been enjoying.

And Adam, it's Rodger. I think you have to go back before Project Horizon. If you remember, we've put tens of millions of dollars into our paper mill system. We're focusing on expanding the capacity of our lowest-cost machines and aggressively taking out our high-cost capacity. That continued for several years, leading up to Project Horizon. Project Horizon is just going to build on that, and we'll continue with that. Our system, our URB system is much lower cost. We've committed to keeping capacity basically flat, and that's what we've been doing and that is our commitment going forward. It's really a different market today than it was back in '08 and '09, in my opinion.

I would now like to turn the conference back over to Lisa Weeks for closing remarks.

Thank you again for joining our call today and thank you for your interest in Sonoco. If you have any follow-up questions, don't hesitate to give us a call and please enjoy the rest of your day.

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