Sonoco Products Co Q2 FY2023 Earnings Call

Good day and thank you for standing by. Welcome to the Second Quarter 2023 Sonoco 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, Lisa Weeks, Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and thanks to everyone for joining us today for Sonoco's second quarter '23 earnings call. Joining me this morning are Howard Coker, President and CEO; Rob Dillard, Chief Financial Officer; and Rodger Fuller, Chief Operating Officer. Last evening, we issued a news release highlighting our financial performance for the second quarter, 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 '23 performance. Rob will then review our detailed financial results for the quarter, and along with Rodger Fuller, we'll discuss our guidance update for the full year 2023. Howard will then provide closing comments, followed by a Q&A session. If you will turn to slide four in our presentation, I will now turn the call over to our CEO, Howard Coker.

Thank you, Lisa, and good morning to everyone. I just want to start by acknowledging the strong performance in cash flows Sonoco against the backdrop of a highly volatile environment. Rob will take you through the details, but what I'll tell you is that market conditions were pretty turbulent in the quarter with a marked downshift in demand as the quarter progressed, translating into lower volumes across virtually every area of our business on a global basis. For the second quarter, net sales were $1.7 billion, EBITDA was $275 million, and adjusted earnings per share were $1.38. Most of our businesses were at or above expectations for the quarter due to commercial and operational excellence and productivity improvements. However, the businesses that were most affected by lower volumes were consumer metal and global industrials which were impacted by inventory management and destocking programs with our customers. To give you my perspective overall, customers in metal and industrials are buying less, both related to safer full-time discretionary items. Our customers are searching for price point elasticity which creates demand and inventory management challenges throughout the supply chain. Our customers are faced now with real macro-driven changes to consumer buying habits, their own working capital management priorities, and promotional timing, which makes visibility harder in the near-term. The downstream impact is reflected in our Industrials business though we provide products serving the broader manufacturing sector, and packaging use in household staples, discretionary goods, and construction. Demand is falling, and lower volumes are resolved. However, even through these turbulent times, we were able to deliver 16% of adjusted EBITDA in the quarter. Our hard work over the past few years on the portfolio structural simplification, operational improvements and commercial excellence have enabled more stable profitability in prior economic slowdowns in our history. Though we are not satisfied with these results, our excellent cash flow and EBITDA margins reinforce the durability of our underlying profitability and the integrity of our strategy. And with that, I'll turn the call over to Rob for more details on the quarter and our '23 outlook. Rob?

Thanks, Howard. I'll begin on slide six with a review of key financial results for the second quarter. Please note that all results discussed will be adjusted and all growth metrics will be on a year-over-year basis, unless otherwise stated. The GAAP to non-GAAP EPS reconciliation can be found in the appendix of this presentation as well as in the press release. As Howard said, the second quarter financial results highlight Sonoco's ability to deliver strong results despite a low-volume environment. We continue to achieve strong results in most businesses in the portfolio, including meaningful improvement in rigid paper containers and all others, and record results in flexible. A few businesses were below expectations and meaningfully impacted the consolidated results, mainly metal packaging and consumer and industrial North America. Consolidated sales decreased to $1.7 billion. This sales decrease was primarily driven by lower volumes due to inflationary pricing and destocking at our customers in retail, as well as index-based price decreases in metal packaging and industrial. Adjusted operating profit decreased to $211 million, and adjusted EBITDA decreased to $275 million. Importantly, we maintained an above 16% adjusted EBITDA margin through continued focus on commercial and operational excellence, as well as long-term cost controls associated with our business transformation program. Adjusted earnings per share decreased to $1.38. Non-operating factors impacted EPS negatively by $0.07 due to higher interest rates on floating rate debt. The sales bridge, on slide seven, provides the primary drivers for revenue growth in the quarter. Volume/mix was negative $190 million or negative 9.9%. This volume decrease was anticipated and was in the low-to-mid-single digits in most businesses. We continue to have active dialogue with customers and have been able to mitigate low volumes with operational and cost actions in most businesses. Two notable exceptions to this were the disrupted demand in a handful of customers in metal packaging, and lower than anticipated demand in industrial North America. The fixed cost structures of these businesses make them more sensitive to volume uncertainty, and this had a meaningful impact on the consolidated results. Acquisitions/divestitures also had a minor negative impact on sales, which were accounted for in volume on the bridge. Excluding acquisitions and divestitures, volume/mix was negative 9.7%; price was negative $15 million. Our pricing performance continues to reflect strategic pricing efforts associated with our commercial excellence strategy, managing contracts to recover inflation. Most businesses achieved marginally positive price performance in the quarter. This was offset by meaningful index-based price decreases in metal packaging and consumer and the paper businesses globally in industrial. The adjusted operating profit bridge illustrates the year-over-year change in greater detail. Volume/mix was negative $65 million as operations were impacted by the previously discussed impact of inflationary pricing and destocking at our customers and retail. Price/cost was positive $12 million in the quarter as strategic pricing and purchasing offset the predicted impact of $27 million of metal price overlap. Other included higher depreciation and positive foreign exchange, improving operating profit by $4 million in the quarter. Slide eight has an overview of our segment performance for the quarter. Consumer sales decreased to $924 million. Flexible sales grew mid-single digits, and rigid paper container sales grew low single digits due to strong price and generally resilient volume mix. Sales in Metal Packaging decreased due to tinplate-based price pass-throughs and inventory management-driven volume decreases at a handful of customers in both food and aerosol. Consumer operating profit decreased to $95 million due primarily to lower volume and negative price/cost. Flexibles had record operating profit, and rigid paper containers grew operating profit more than 15%. Consumer operating profit margin decreased to 10.3%. Consumer price/cost was negative $20 million. The strong price/cost in rigid paper containers and flexibles was offset by the impact of metal price overlap. Excluding Metal Packaging, the Consumer segment would have grown operating profit over 30%, and operating profit margins would have been 15%. Metal Packaging is performing well in a disrupted demand environment and has improved results from the year we purchased the business when adjusted for metal price overlap. We're ahead of plan on our synergy projects and we believe we've improved the competitive position of the business as we continue to invest in higher-return projects. Turning to Industrial, Industrial sales decreased to $585 million, Industrial volumes decreased 15% due to lower demand in all key markets and geographies. This decrease was most acute in North America and Europe, though all regions were impacted. Operating profit decreased to $87 million as positive price/cost was offset by lower volumes and negative productivity from deleveraging. Notably, this was only $7 million less than the record results in the first quarter of 2023. The Industrial segment achieved positive price/cost of $21 million as commercial excellence activities continue to align price with the value our products create. Operating profit margin increased to 14.9%, a meaningful improvement from previous cyclical lows. All Other sales were flat at $197 million, and operating profit increased 73% to $29 million. Moving to slide nine, our capital allocation framework is aligned with our business strategy to drive value creation for our shareholders. Our priority is to allocate capital to high-return investments in our core businesses to drive growth and improve efficiency. We remain focused on increasing the dividend, which at present is $0.51 per share on a quarterly basis or greater than 3% average yield over the past 12 months. After capital investments and the dividend, we prioritize investments in accretive M&A aligned with our long-term strategy balanced against our strategic priority of maintaining strong liquidity. We ended the second quarter with over $1 billion in total liquidity. In the second quarter, we generated $251 million operating cash flow and invested $78 million in capital expenditures. On slide 10, we have our guidance update. Our Q3 EPS guidance is $1.25 to $1.35. We are revising our full-year 2023 EPS guidance to $5.10 to $5.40. We are also revising our full-year 2023 adjusted EBITDA guidance to $1.02 billion to $1.07 billion. We are affirming our full-year 2023 operating cash flow guidance to $925 million to $975 million. We anticipate closing the RTS and WestRock paper mill acquisition this year, and this is not in our forecast.

Thanks, Rob. If you please turn to slide 11 for our view on segment performance and drivers for the third quarter of 2023, first, with the consumer segment for the third quarter, we expect continued strong performance in our global rigid paper containers from both existing and new products as sustainability-driven initiatives are driving our pipeline and new growth opportunities. And on a positive note, select European customers are launching our all-paper products in European markets this summer using Sonoco's unique and proprietary technology. In fact, we are expanding capacity for rigid paper containers in Brazil, Malaysia, and Poland to take advantage of globalization of products that use our technology. We also expect continued strong performance in our flexible packaging business. The team is doing a phenomenal job expanding this business with new and existing customers. And, the productivity numbers are very impressive. These drivers will sustain flexible's performance into the next quarter. We anticipate metal volumes improving sequentially in the third quarter as we enter pack season for both food and aerosol can lines are below our original expectations for the second half due to inventory destocking that Howard and Rob have already referenced. Even with lower volumes, metal profitability will improve from higher sequential volumes and the reduced impact of metal price overlap. Lastly, we expect seasonally soft volumes in our rigid plastic foods business where volume was also a challenge in the second quarter. Turning to the industrial segment, we expect volumes to decline sequentially from the second quarter and remain soft relatively through the second half of the year in both our paper and converted products. All geographies are suffering from persistent demand weakness across our core industrial markets for paper, cores, and flexibles. Our customers are citing mill end market demand and customer destocking as factors for these declines. Protective packaging for the consumer light goods was up 5% versus a relatively soft demand in 2022. We are also expanding this paper-based protective packaging into the European market. With lower volumes, productivity improvements remained challenging from deleveraging. We continue to aggressively manage variable expenses to minimize the impacts from the lower volumes. In all other businesses, we continue to have net stable demand across this collection of business with some positive seasonal impacts on shippers in our ThermoSafe products business. We are managing price costs as resin prices remained stable to declining, so, minimal impact to all other businesses from resin in the third quarter. And finally, as we have discussed before, we will continue to invest in high-return capital and all other businesses with productivity and run these businesses as efficiently as we can. We expect to also see the benefits of these improvements into the next quarter and beyond. So, overall, in the consumer segment in the third quarter, we had seasonal sales improvement. And the all-other segment is expected to continue to perform well. In our industrial segment, we are suffering through a really challenging demand environment. Thanks to our team for their diligence in managing these tough times as we will see greater benefits in industrial when volumes return as evidenced by our margin performance in industrial in Q2. With that, Howard, I give back to you.

Thanks for that update, and thanks Rob and Rodger for covering the results. Before going to questions, I just want to provide an update on elements of Sonoco at the quarter. First, I continue to receive questions on where we are relative to reshaping the following quarter. I'll just tell you, it is active. We are managing a funnel of accretive acquisitions and plans for non-core divestitures over the next few years. As you know, the deal environment is not great right now. Any future selling or buying of assets or businesses will be based on timing for the best value for our shareholders. On the operating model side, I think our EBITDA results prove we are operating well in choppy waters right now. We have the plans, capabilities, and discipline to operate in this market. We have durable processes to manage and align costs to opportunities and challenges. Given our expectations for market demand, we have amplified our ongoing discipline and expense management. As Rob highlighted, we're continuing to generate solid cash in the business, and our investment-grade balance sheet is strong. We raised our dividend last quarter and will remain focused on the best ways to generate returns for our shareholders. Finally, our commitments to ESG and sustainability initiatives are unwavering and remain wholly aligned to the core values of the company. I'll just close with this, a hallmark of Sonoco is to serve our customers whenever, wherever, and however they need us to be. They know we will be there to help them navigate the future as we have through COVID and a number of other challenges. Actions we have taken over the past three or four years have resulted in a stronger operating model to handle times of uncertainty. We will continue to adapt and evolve to build a better Sonoco now and in the future. With that, we will be happy to entertain any questions you may have.

Our first question comes from the line of Ghansham Panjabi with Robert W. Baird.

Hey, guys, good morning. There's obviously a lot going on with comparisons or the impact of COVID. But you're now around 10% EBIT margins for the Consumer segment, which basically matches segment margins from back in 2019. Just curious, Howard and Rodger, is this the right baseline for margins on a go-forward basis?

On the Consumer side, if you consider the impact and look back at the metal issues we've had to manage year-to-date and in the first two months of the second quarter, those have really lowered our margins. Therefore, we expect to exceed 10% moving forward once we address some of these one-off events.

Okay. And then on the Industrial side, I think you mentioned a 15% decline in volumes in the segment. Obviously, the end markets are weaker, and that's playing a major role in that. I'm just trying to reconcile that versus the operating margins you're delivering in that segment, which are quite a bit higher relative to your historical baseline and just your thoughts as it relates to the sustainability of that margin threshold?

Yes, Ghansham, not to go back too far and talk about the last three or four years, but really the last five or six years, we have really put a lot of capital towards improving the performance of our Industrial business on a global basis. And I won't talk through all of the projects and opportunities that we've pursued over this period of time, but one I will mention is Project Horizon. What I'll say about Horizon is, on the surface, with volumes where they are, we have not been able to take advantage of the productivity associated with that investment. However, it also took us out of the corrugated medium market where we were non-integrated, and a very small machine compared to the rest of the industry. You can think about previous times where we saw similar type slowdowns via COVID or even all the way back to the '08 or '09 time period; we self-helped ourselves by taking away 15% of our North American paper volume which was no longer tied to a market that we had absolutely no outlook for that capacity. So, I'm using that only as a reference to the number of projects that we've undertaken to improve the overall durability of our Industrial business.

Perfect, thank you.

Our next question comes from the line of Gabe Hadje with Wells Fargo.

Yes, good morning. Thanks for the question. One was something we picked up in the trade publications here in the past week or so, talking about URB imports into the U.S. I don't really recall this being a topic we've read about, maybe not in the last 10 years or something like that. So, just curious, Howard, do you view this more as a function of local demand patterns that producers are maybe experiencing in their local markets, and then perhaps something you expect to persist for whatever reason? I'm also curious if you're moving anything around your own system just based on ability or cost of OCC?

Hi, Gabe, this is Rodger. Imports of URB into the U.S. is really nothing new. I know it was picked up in the publication, but there have been imports coming in for many years. It did stop during COVID because of the high cost of logistics and transportation, and it has picked back up now as the cost of containers have returned to a more reasonable level. As far as our system, we represent it in every region, so we really don't move board from region to region simply because we don't need to do that. But when volumes are soft, like they are now, seeing board coming in from on the East Coast, from places like Italy or on the West Coast from Asia is not unusual, and we've dealt with that for many years.

Okay. And I guess maybe a question going into '24, to the extent that we see some of these choppy order patterns or maybe softer than what we'd expect demand. Can you talk about just your ability to variabilize the cost structure? Or you guys have been fairly active to drive margins higher here, of late, on the commercial side, maybe how demand-dependent some of your productivity is that you talk about getting on an annual basis, and if there's anything outside a pattern that you could do as things are soft right now?

Yes, we are implementing necessary adjustments to align with the current demand trends, affecting all areas of our operations, particularly fixed costs. I am encouraged by our current situation as we have stated previously that we are better equipped to navigate through uncertain times like these. I feel optimistic that demand will begin to recover, and our capability to build on that recovery, beyond our current margin expectations, gives me a very positive outlook as volumes increase.

Okay, thank you. Good luck.

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

Thank you. First, could you just update us in your guidance, how much is the metal price overlap, is it still in the $40 million or has that changed?

Hey, Mark, this is Rob. For the quarter, metal price overlap was negative $27 million. That includes what we incurred this year plus the year-over-year impact. In Q1, as you remember, that was $86 million. That's largely completed, if not totally completed for the year, at this point. So, the full-year metal price overlap will be $113 million.

Okay. And so, you've cut your guidance on EBITDA by $80 million. Could you walk through what the biggest components of that reduction would have reflected?

Yes, it was about a 5% to 15% decrease in the EBITDA guide. If you think about that by segment, consumer is going to be down. We're expecting between 15% and 20%, largely driven by the metal price overlap, which we just discussed, and also some relatively negative or meaningfully negative performance in plastic foods, which has been down due to the store business, which we're working through right now. Industrial is going to be relatively flat, actually year-over-year with some positive price costs and volume mix kind of offsetting each other. Other will be up 40% to 50%. That should bridge you to the total impact for the year.

Okay. And just to clarify, in terms of the delta versus your prior expectations, where was that concentrated?

It's really in industrial. I think that when we originally set up the view for the year, we thought that the industrial would only really have this negatively low-volume environment for the first half and see some moderation in the second half. What we're seeing really with our customers is that they haven't seen it this low for this long. We are at kind of 2009 levels in terms of volumes from an industry perspective and utilization perspective. There has been this expectation that it has to recover sooner than later. Our current view is that it won't recover in 2023.

Right, and it really is striking, because it had fallen quite a bit even in the second half of last year. And are you getting a better sense as to how much of this may have been a function of the volumes having been inflated during the pandemic versus a destock or sort of where the trend line would be?

No, we don't think that there was inflated volume at all during COVID actually, there was a modest slip down. We think that this is really just complete destocking of that industry and some disruption associated with inventories.

Okay, super. Just one last quick one, if I could just on RTS any update? You did say you anticipated it to close by the end of the year. I believe there's that second request. Any color you can give us in terms of how that's progressing?

Yes, Mark this is Howard. We expect to close late third quarter, early fourth quarter.

Our next question comes from the line of Anthony Pettinari with Citi.

Good morning. This is Greg on for Anthony. My first question is on the pack season. We've heard comments from others around maybe some inclement weather, kind of a lackluster harvest season impacting this year. From your perspective, how would you characterize this year's Ag harvest and pack season relative to prior years and to your expectations heading in and acknowledging the harvest is totally out of your control? Is it possible to quantify the impact of weather or adverse harvests on food canvas in the second quarter and to what degree a poor harvest is factored into your full-year guidance?

Yes, I would say if you really got deeper into our metal volumes, they were pretty similar to what CMI data represented publicly. But then when you really dig into it, it's down to a couple of discrete customers on the food can side and on the aerosol side as well. If you take those out, you are actually flat to up. And what we're seeing from a pack season perspective is that things are starting to pick up now and expect that they should start normalizing as we enter into the third quarter. Also, we are seeing volume starting to return there as well. Similarly, not pack related, but on the aerosol side, the same as we enter the third quarter. July does not make a quarter, but we are seeing remarkable improvements in a couple of aerosol accounts that brought us down. Broadly speaking, we're extremely pleased with the business performance, the integration, the synergies obtained, and frankly, the market reception that we've received. We view this second quarter phenomenon as not being one of any concern at all. We feel like we are starting to see positive turn at this point in time.

Thank you, Mr. Coker. Yes, that's very helpful. I appreciate the color. My second question, and last question is around price, I guess across the entire Sonoco portfolio. We've seen weaker volumes now for a few quarters. I'm wondering historically how and when volume weakness translates into customer pushback on pricing? And then if you could segue that into what you're seeing in today's marketplace, that would be really helpful.

Yes, let me talk about the industrial side to start with, which is a bit of a head scratcher for us. We've always looked at if you think about what our industrial business, we supply at the beginning of really industrial and consumer supply chains. Historically, we would have seen as the industrial businesses slow, we would see the opposite happening on the consumer side that would start to pick up. This is a unique situation that we're in right now where, looking at the data, you would say that the global economies are in pretty big trouble. But that is not what we're hearing, but it's certainly what we're feeling. The Question mark from our perspective is what is going on here for textiles, films, and major markets to be down on a global basis as they are understandably in Europe where they acknowledge a recession. But we have not thus far seen a pickup on the consumer side. I will say that we are seeing customers saying that they are taking price over volume at this point in time, but we are starting to see cracks in that as we are seeing more promotion activity.

Yes, this is Rodger. I would just add, we have built in some margin compression in industrial and into the third and fourth quarters, primarily due to higher costs. OCC on average went up, let's call it $8 to $10 a ton, well-deserved wage increases for our team. So not so much from price, but some continued inflation in the system. We did build in some margin compression as we get into the second half of the year.

That makes sense. Appreciate the color.

Our next question comes from the line of Cleve Rueckert with UBS.

Well, good morning. Thanks for taking our questions. I just had one follow-up on the guidance and really a couple of questions there. Firstly, how did market conditions develop in the second quarter? It sounds like maybe the plan had some improvement in industrial in the second half built in that didn't materialize. I'm just curious to understand, did market conditions weaken in the second quarter, or was it just those lack of orders that didn't come through? And now you sort of lost some visibility into the second half?

Yes, so this is Rodger. In industrial, yes, as we exited the first quarter, we expected some improvement in volumes in industrial in the second half of the year. What we're hearing from our customers now leads us to believe that's simply not going to happen. So as you look at sequentially, the third quarter is going to be down 4% versus our second quarter volumes. That's pretty weak, and then continued weakness into the fourth quarter. We were expecting some of the inventory to have worked itself out of the system, and we'd see some pickup now in our guidance. We're not seeing that in the second half of the year. I think that was the biggest volume change from our previous guidance to where we are today.

Okay. So it's sort of a lack of improvement, not necessarily a weakening of market conditions?

Correct. Well, seasonally Europe is always slower than the third quarter. Total industrial seasonally down about 4% versus the second quarter.

Yes, and then so just in the industrial business, what are your lead times there in that business? I'm just curious, how quickly do you think market conditions could turn around and improve? It looks like the guidance, if I just take the midpoints; Q4 is kind of the low point on EPS. It sounds like that's conservative, but I'm just wondering, is there potential to outperform that or do you kind of have visibility into the end of the year now? If you do get the orders that you're looking for, they'll be coming in 2024?

Yes, Cleve, we don't normally carry large backlogs, just the nature of our business. But what I'd say is right now, we're basing our forecast on the best information that we have. One of the best indicators I can look at is what we're hearing. Across the North American economic situation right now, it's on a positive trend compared to what most people thought, and you would certainly think that the business we're in, which is really the point, the tip of the arrow in terms of both manufacturing, industrial, and consumer products, should benefit from that. We don't have that crystal ball in front of us. Our customers can only tell us what they know at this point in time. We are continuing to drag out the current type of demand profile that we're seeing through the end of the year. Could that change? I certainly hope so.

Yes, that's pretty clear. I'll turn it over. Thanks for taking the questions, guys. Appreciate it.

Our next question comes from George Staphos with Bank of America.

Hi, everyone. Good morning. How are you? Thanks for the details. Can you hear me okay?

Yes, George.

So, happy August, I guess the first question I had, if we look at the sequential earnings downtick 3Q versus 2Q. Is it roughly 50:50 would you say between the inflation and the volume downtick you're seeing in industrial? Would that be or how would you frame it for us from the 2Q number to the 3Q guide?

That's close, George. I think that's probably very close.

Okay, now thanks for that. Now, what's interesting is that some of the other companies that buy tubes and cores for winding their products that we cover have started to see some sequential improvement. Still down year-on-year, but seeing improved trends 3Q versus 2Q. And yet what you're relaying here is industrial. That's still pretty weak. So how should we reconcile that? What are we missing in terms of that interpretation and which end markets look particularly weak sequentially 3Q versus 2Q?

Yes, for industrial. Yes, right, George, this is Rodger. Textiles and film are the weakest. As we look forward, we have seen some recovery in the paper side, more on the corrugated side not so much on printing and writing. However, what we're hearing primarily from textiles and film is that they are seeing little recovery. This goes back to inventory in the system and their customers working through the inventory they have in the system.

Okay, good. We appreciate that color there Rodger. Last, next question I should say. And then we'll have one other and we'll turn it over. In metal, can you give us what you believe the year-on-year volume impact to EBIT or EBITDA will be versus 2022? We have the middle overlap, as you called it, over $100 million between 1Q and 2Q. What is the year-on-year impact from volume for metal and consumer EBITDA for '23 versus '22?

Hey, George. It will be between $40 million and $60 million this year. And that's volume and the associated productivity with it.

Okay. My last question is, when you review your volumes and net impact in relation to CMI, what reassures you that you are not losing market share? Could you provide the year-to-date volume data by key end market in metal this year compared to last year? Thank you, and I'll turn it over.

Yes, I have that in front of me, George. Foods are down about 10%, aerosols around 14%, but again, when you dig into that, it relates to really a couple of customers in both segments of the business. Their stories behind, one being more inventory carry, and the other one related to price versus volume decisions that those customers are making. Again, I am repeating myself but that was the second quarter phenomenon that we see pulling out as we entered the third quarter, more normalized volumes. In terms of your question about share, we have not lost any share that I am aware of at all. Certainly nothing material and the market reception has been extremely positive as Sonoco has been in this business since last year. We know that, just say, a one-off for the quarter, and that we are going to be pulling ourselves out as our customers tell us that, and we are once again, excited about the market reception that received so far.

Thank you. I'll now turn it over and probably get back in queue.

Right, thanks.

That concludes today's question-and-answer session. I would like to turn the call back to Lisa Weeks for closing remarks.

Thank you for joining us today. If you have any follow-up questions, we will be around after the call, or we can follow up with the scheduled call later. We look forward to seeing you on the road in late summer and fall until we share third quarter results in early November. Thank you to everyone, and have a great day.

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