Thank you for standing by and welcome to the Sunoco Second Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, again, press star 1. Thank you. I'd now like to turn the call over to Roger Schrum, Interim Head of Investor Relations and Communications. You may begin.

Thank you, Rob, and good morning, everyone. Yesterday evening, we issued a news release and posted an investor presentation that reviews Sunoco's second quarter 2025 financial results. Both are posted on the investor relations section of our website at sunoco.com. A replay of today's conference call will be available on our website, and we'll post a transcript later this week. If you would turn to slide two, I will remind you that 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. 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 operation. 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. Joining me this morning are Howard Coker, President and CEO, Roger Fuller, Chief Operating Officer and Interim CEO of Sunoco Metal Packaging EMEA, Jerry Cheatham, Interim Chief Financial Officer, and Paul Johimczyk, our new Chief Financial Officer. For today's call, we have prepared remarks followed by Q&A.

If you turn to slide four in our presentation, I will now turn the call over to Howard. thank you roger and good morning everyone our second quarter results reflected the growing strength of the new sunoco as we produce strong top line and bottom line growth along with margin expansion however we were impacted by global macroeconomic pressures which affected consumer and industrial demand and by the delay of the european packing season compared to last year Slide 5 shows net sales grew 49% and adjusted EBITDA was up 25%, while adjusted EBITDA margin expanded by 100 basis points to 17.2%, due primarily to improving margins from our industrial business. Total adjusted earnings grew 7% and were impacted by higher-than-expected interest expense. The 115% growth in adjusted EBITDA in the consumer packaging segment reflects 10% gains in volume mix in our metal U.S. business, and the addition of EVOSIS acquisition, which we have rebranded as Sunoco Metal Packaging, SMP, and EF. The segment also generated solid productivity savings. Our industrial segment grew adjusted EBITDA by 16% due to a favorable price cost environment and productivity. Industrial segment EBITDA margins expanded to 19%, which was the seventh consecutive quarter of margin improvement. This performance is a tribute to our industrial team's efforts to drive value-based pricing and focus on productivity savings here we'll go through all the numbers and business drivers for the quarter in a few minutes but i also want to formally introduce paul joan check who joined us as chief financial officer at the end of june we're really excited to have paul join us and he will discuss our guidance before we take your questions over the past five years we've been progressing a transformation journey to create a more focused enterprise providing value-added metal and fiber packages slide six illustrates our strategy in particular what markets we will participate in and how we expect to win in these markets we're focused on businesses where we can drive a competitive advantage through advanced material science and technology expertise where our products possess high functionality and where we can best leverage continuous process improvements to drive productivity. We now have a portfolio of businesses with a mix of large growing global consumers to value the competitive advantage we provide. As always, Sunoco wins through superior customer service, strong operational execution, innovation, and a culture that is built on our guiding principle that people build businesses by doing the right thing. As illustrated on slide seven, we believe we have now focused our portfolios along the competitive strengths that will allow us to win in the marketplace. Our core businesses include metal packaging, rigid paper containers, and industrial paper packaging. In each of these businesses, we check the box on our key strategic principles, including focusing on markets where we have market leadership. This slide also illustrates why we decided to divest Thermoformin and Flexible Packaging, and while we plan to sell ThermoSafe, our temperature-assured business. Both have developed into meaningful, profitable, and attractive businesses. However, we felt they lacked certain aspects that would allow us to best deploy our operating model to our advantage. So we believe monetizing these assets to redeploy capital back into our core was the right capital allocation decision. Now, turning to slide 8, we continue to progress our transformation journey in the second quarter with the successful divestiture of TFP and the utilization of proceeds and cash to reduce our net leverage ratio to below 3.8 times. We're preparing ThermoSafe for a second-half sale process with the expectation that proceeds will be used to further reduce net leverage towards our target of three to 3.3 times by the end of 2026 as a result of our portfolio changes we're in the process of further optimizing our operating footprint and reducing support functions to align them with the needs of our fewer bigger businesses we've actioned approximately 20 million dollars in annual savings from spending costs left by the divested businesses but also we're now positioned to better leverage shared services strategies for some of our global administrative function to better serve our business our customers and to reduce costs our successful integration of smp maa continues where the team is now projecting between $40 million to $50 million in run rate synergies by the end of this year. We also have line of sight to achieve greater than $100 million in cost savings through 2026. At the end of June, we were saddened by the news that Thomas Lopez, CEO of S&P EMEA, had died in his hometown of Murcia, Spain. Lopez was a legend in the European can-making industry dating back to his leadership and is developing the visa into the largest food camp producer in the iberian peninsula and morocco he later became ceo of eviosis and stayed on in that role when we acquired the business last december roger fuller our chief operating officer and who has been leading the integration of smp em was named interim ceo most of you are familiar with roger's 40 years leadership experience at Sunoco. He has been deeply engaged since day one of the acquisition and worked alongside Tomas to build strong customer employee and supplier relationships. While Tomas will be missed, Roger is providing leadership stability working with the team to continue our strategy of building global leadership and metal packaging.

I'll now turn the call over to roger to give us an update uh brief update on smp amea roger yeah thank you howard good day everyone uh if you turn to slide 10 i'll review some key points related to metal packaging amea's second quarter performance third quarter outlook along with a preview of some significant growth wins that will help us in 2026 and beyond second quarter results were impacted by the delay in the startup of the european vegetable package packaging season as compared to last year. As we've explained, approximately 40% of our EMEA sales are seasonal and dependent on the timing of the vegetable harvest. In addition, difficult macroeconomic conditions in Europe have slowed consumer demand, and we've also seen a decline in sardine availability in Africa, which has further reduced our volumes. That said, demand for pet food and certain premium food categories have remained resilient. Looking at the third quarter, which is by far our strongest quarter we're seeing the harvest season ramp up our customers and experts predicting a solid vegetable harvest that could extend through october and we expect other food categories to be in line with our expectations as howard mentioned the team is making tremendous progress to achieve synergy savings in the second half of 2025 along with generating opportunities for cost savings that benefit our u.s metal packaging business we recently integrated our u.s and MIA steel procurement teams into a single, globally focused organization based in Europe and led by a veteran Sunoco steel procurement expert. As we previously said, we expect significant procurement synergies in 2026 after they were delayed in 2025 due to the late closing of the acquisition. So let me close with some exciting new growth projects that our MIA team signed in the second quarter. First is a multi-year contract with a pet food customer in Eastern Europe where we'll provide up to 400 million incremental units annually. We expect to start providing cans for this customer from existing operations late in the fourth quarter and will be ramping up production in 2026. Also, we've committed to developing a new satellite production facility in Eastern Europe to help manage their large volume needs. Next is a new five-year contract to provide unique shaped cans for a powdered nutrition product that will begin in the fourth quarter of 2026 and scale up in 27. The EMEA team is targeting several additional new customer opportunities that should lead to further volume growth in 2026 and beyond. I'm really excited to be working alongside such a strong international leadership team as we build upon their past success and drive future growth. With that, I'll turn it over to Jerry for the quarterly financial review.

Thanks, Roger. I'm pleased to present the the second quarter financial results, starting on page 12 of the presentation. Please note that all results are on an adjusted basis and all growth metrics on a year-over-year basis unless otherwise stated. The GAAP to non-GAAP EPS reconciliation is in the appendix of this presentation, as well as in the press release. Sales and adjusted EBITDA bridges are also in the appendix. Adjusted EPS was $1.37. Earnings per share increased 7% year-over-year, mainly driven by favorable price-cost performance in our industrial businesses of $20 million and continued strong productivity of $15 million, driven by our S&P, U.S., and industrial businesses and the net impact of acquisition and divestitures. This was partially offset by favorable volume mix in our industrial business and all other businesses and higher interest expense. Interest expenses were seven cents higher than anticipated due to the pull forward of amortization fees associated with the term loan paid off in April of this year and higher commercial paper balance. Second quarter net sales for continued operations increased 49% to 1.9 billion. This change was driven by the impact of the S&P EMEA acquisition, strong volume in our S&P US business and favorable price. Adjusted EBITDA of $328 million was up by an impressive 25%, and adjusted EBITDA margins improved by 101 basis points to 17.2%, primarily driven by items that affected sales growth in addition to productivity improvements. Page 13 has our consumer segment results on a continuing operation basis. Consumer sales were up by 110% due to the S&P EMEA acquisition, favorable volume, and Our domestic metal packaging business achieved double-digit growth, reflecting solid demand and continued commercial execution. Sales for our global rigid paper-can businesses were essentially flat as favorable price was offset by mixed and lower volume. Consumer adjusted EBITDA from continuing operations grew a remarkable 115% year-over-year due to the impact of acquisitions, continued productivity gains, higher volume, and the favorable impact of foreign currency. Page 14 has our industrial segment results. Industrial sales decreased 2% to $588 million. Results were impacted by lower volumes and actions to exit the China market, partially offset by better pricing. Adjusted EBITDA margins expanded by 290 basis points a year over year in the second quarter, primarily driven by favorable price cost, cost dynamics, and productivity gains. These benefits were partially offset by negative volume mix. Adjusted EBITDA increased by $15 million to $113 million, representing a 15% increase. Phase 15 has our results for the all-other business. All-other sales were $95 million, and adjusted EBITDA was $16 million. Sales were flat, as higher volumes in ThermoSafe were offset by weaknesses in our plastic industrial business. Adjusted EBITDA declined 8% as unfavorable mix and price costs were partially offset by favorable productivity and other non-recurring items. Now I'll hand it over to Paul to walk us through an update on our full-year guidance.

Thank you, Jerry. First off, let me say that I'm deeply honored to join the Sunoco team at this exciting time for the company. With the recent acquisition and divestitures, it is time to reinforce the core values that that have made Sunoco successful for more than 125 years that are grounded in the culture of innovation, collaboration, and operating excellence. We are confident that our teams will drive the targeted synergies from the SMP EMEA acquisition and continue to build upon our Global Metal Packaging Foundation. My first weeks at Sunoco, I've been impressed with the strong operational foundation of the company. I also want to thank Jerry for doing an excellent job as interim CFO and helping me transition into the organization. Looking at our outlook for the remainder of the year, shown on slide 17, we are maintaining our guidance with net sales in the range of 7.75 billion to 8 billion. While we have seen some softening of the market conditions due to global macroeconomic pressures, we are expecting strong results in our metal packaging and North American industrial businesses. From an adjusted EBITDA guidance, we remain confident in our range of 1.3 billion to 1.4 billion. Again, we see continued strength from our North American consumer and industrial businesses being partially offset by softness in Europe and other international markets. Delays in recovering rising input costs as well as impacts tariff uncertainty is happening on overall market conditions. For adjusted EPS, we are targeting the low end of our range of $6 to $6.20. cents. This reflects our first half performance and the projected performance improvements in the second half. In addition, we are expecting variability in FX and interest, helping to mitigate some of the macroeconomic impacts mentioned earlier. Operating cash flows are still within our range of our previous guidance, but we are targeting the lower end due to higher than anticipated levels of net working capital usage, primarily from material inflation. We are extremely focused on improving our overall metrics and will continue to make the right strategic investments in the business to ensure we can hit our future strategic goals. I will now turn the call back over to Howard for closing comments.

Thank you, Paul, and again, welcome to Sunoco. One of the key tenets of our strategy is investing in ourselves to drive profitable growth and productivity. For the first half of 2025, we've invested $188 million in capital. and expect to be in line with our estimate of $360 million in total spending by year-end. If we turn to slide 18, I'll highlight a few new projects. The first is a $30 million investment we're making to expand production capacity to serve the growing U.S. adhesives and sealants market. This initiative will add a total of 100 million additional units of annual capacity at three facilities in Florida, Kentucky, and Ohio. Snuka is one of the largest producers of cartridges for adhesives in the U.S., and we are currently sold out. As part of the capacity additions, we will be adding new state-of-the-art technology, including digital printing. Recently, we expanded the robotic assembly of nailed wood reels in the Harsall, Alabama facility to speed production, increased capacity, and lower unit costs. Sunoco is the leader of the production of wire and cable reels in the U.S., and this new automation project will allow us to keep up with our customers who are expanding the domestic energy and communications infrastructure. Overall, we're targeting $65 million in productivity savings in 2025. To achieve that goal, we're upfitting several of our manufacturing operations with automation to improve efficiency and reduce costs. A great example is an autonomous forklifts and robotic assemblers we recently added to our Jackson, Tennessee, rigid paper containers office. New customers and product development is key to the consumer packaging business as growth is illustrated on slide 19. Our S&P US business is projecting 12% and 15% growth in food and aerosol cans, respectively. For the year, this growth is coming from both new and existing customers. And as Roger mentioned, we have several new projects starting up in Europe in the fourth quarter and into 2026 and beyond. In addition, our global rigid paper container business continues to launch new all-paper and paper-bottom cans for customers looking to substitute from less sustainable packaging subspray. As an example, we launched two new all-paper cans for pet nutrition products in the second quarter in Europe. The sustainability of our metal and fiber-based packaging is also getting recognition. As shown on slide 20, Sunoco and our customers won three awards for Sustainable Packaging Business of the Year, sustainable brand and sustainable investment projects at the environmental packaging and hosted a packaging news about 21 and 22 were developed to better explain the key tenants of our investment thesis and to illustrate the new sunoko our businesses our markets our geographic footprint in closing we are encouraged by our trajectory as we enter the busiest quarter of the year. We expect continued strong performance in our consumer segment with our S&P U.S. operations capitalizing on commercial wins to organically grow well above industry growth rates. And we continue the integration of our metal packaging EMEA operations and expect to exceed our synergy target. And our legacy industrial paper packaging segment should have another strong quarter as it continues to benefit from improved market conditions while focusing on driving margin expansion through operation and commercial excellence initiatives. Finally, we remain mindful of external risks, which are leading to global macroeconomic uncertainty that may affect our customers and consumers. We remain flexible and focus on meeting the changing needs of our customers while conscious consciously controlling cost, capital, and reducing leverage while creating long-term value for our shareholders. Operator, we will now take any questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of George Staffos from Bank of America Securities. Your line is open.

Hope you're doing well. Hope you can hear me okay. Yep, here you are. I wanted to – hey, Howard. So you mentioned you're pleased with the trajectory that you have going to the third quarter. Can you talk about across your major businesses what kind of run rate you're seeing on volume right now? And related to that, if you can talk specifically about SMT, EMEA, what kind of organic volume growth, it sounded like declines, did you see 2Q versus 2Q? And what are you expecting in third quarter? And then I had a quick follow-on, and I'll turn it over after that.

Let me kind of go around the world, and I'll pass on the EMEA question to Roger. but let me start with our paper can business expectation is we're heading into our strongest part of the year really September end of all August September and early October so but we're not we're not forecasting a significant growth maybe one one percent or so low single digit If we look backwards into Q2, the business was slightly down, but Europe played a part of that, and we all know what's going on in the European marketplace today. And surprisingly, Asia, for the first time in a long time, was down. So, not forecasting a lot of heavy recovery, but just slight going into the busy season. On the metal can side here in the U.S., as I noted in my commentary, we saw about a 10% volume mix type improvement in Q2. If you look at that on a unit-based, container-based, it's 15% up in food cans, 25% up in aerosol. We expect pretty close to that. A little bit more of a difficult comp in Q3, particularly on aerosol. But the pack season is strong, and the winds sustain themselves through the remainder of the year. On the industrial side, just slightly up in the third quarter in total around the world. almost, I'd call it flat, in our biggest market here in North America or the Americas. And what we really see happening there is, well, particularly in North America, operating rates are strong. We see that continuing going forward with a pretty good lift from a price-cost perspective.

And Roger, if you want to talk about the end. Yeah, thanks Howard. Good morning, George. Yeah, thanks for the question first. Let me just say, as expected, it's clear to me now. You know, we remain really excited about the set of the S&P and MIA business into Sunoco and convinced that we can deliver all the values to the shareholders that we committed when we made the acquisition. So I feel like we're off to a good start with the team. We acknowledge the first half was softer than expected, You know, the two primary reasons. number one the sardine catch uh we talked about but if you look at the balance of the fish segment uh has been on expectations for the first half is on expectations for the second half and and the sardines is a relatively small sub-segment of that overall uh segment a small part of the overall segment the vegetable harvest we talked about uh we're getting a late start it looks like it's about three weeks behind so if you think about the fact that 40 of our volume is seasonal to the vegetable market you push that three weeks out into the third quarter and and potentially into october as well you can do that math and see what kind of growth that we expect coming in the third quarter versus the first half of the year july's off to a good start for our expectations we're not building any any kind of starting recovery into our re-forecast in the second half you know based on what we see now we could it could be mid the upper single digit uh increases year over year in the third quarter and so far uh in july it's leading you know it looks like we're heading towards that that level for those reasons that i've already talked about there's been no material loss this year in the business for any reason so pretty upbeat on the third quarter versus last year okay at this point okay roger so let me maybe try to put a point on that and the last question we'll turn over so was smp emia you know round

numbers organically down 5% into, you know, if you want to give us a range there. And then one thing I noticed, incremental margins in the consumer were relatively light from my vantage point. I think they were up only like, they were 12.5%. Any reason why? Thanks and good luck in a quarter.

No, I don't think so, George. I mean, the business is performing well, even with the volume shortfall in the first half versus our expectations. The business produced positive productivity. So, the business is executing well. As I said, no share law. So, for me, it could be – go ahead.

So, were you happy with 12.5 percent incremental margin? Because that would be normally relatively light and with all the productivity. So, just trying to get a sense there.

Mixed – yeah. The mix, the seasonal mix, did impact margins to some degree in the first half for S&P and me and George. So, that's probably what you're seeing. Okay.

Hey, George, Can you repeat your second? I think you were getting ready to do it again.

So can you repeat that second half? So it's like mix of the fact for an incremental margin. I'm just wondering, what was S&P EMEA's volume year-on-year in 2Q on an organic basis? Down 5, down 10, down 3, just a rough word.

Thank you, guys. Your final, the 12.5%.

12.5? no no no volume was not down 12 and a half cents we'll give you a range but it's probably in that mid single digits yeah yeah very similar to the product on this one first perfect thank you guys good luck in the quarter thanks your next question comes from a line of john dunnigan from jeffries your line is open hey guys appreciate all the details um i just wanted to to touch on, first, it seemed like you guys had some stranded costs, stranded corporate costs that were coming through in the quarter. We hadn't really factored that in. Is that something that would improve moving forward? Or maybe you can give us just some thoughts around that. And then the interest expense stepping up in 2Q here, is that something that we should see as more one time in nature or let's step up kind of moving forward um as as uh you know he had a decent amount of death pay down as well so maybe just interest expense for the full year as well yeah yeah thanks john let me let me take the interest expense question first on on the interest expense yes we do expect to see some improvement on that in the second half really in line with what we previously assumed uh for the second half of this year uh and also in the second quarter we had we

were impacted by you know about three cents a share of a pull forward on some uh loan uh amortization fees uh that will not happen in the uh in the second half of the year on the stranded cost front uh yeah we do expect to see uh some improvement on that over over the back half of the year and heading into into 2026 yeah let me just add to that on stranded costs we are laser focused on on that we have a sub team that has been working literally since late last summer knowing that we were going to be turning over for selling the tfp business

So, we have a roadmap that will benefit us as we enter into next year, but it'll take time. Some of these costs are pretty sticky, but we absolutely have a roadmap to full elimination going forward. The second half of this, which is not part of stranded costs, is comments that I alluded to in my opening that as a much simpler company where we're managing, in my words, basically two big businesses, a large canned business, metal and paper, and a large industrial integrated converted business. The amount of resources that it should take to manage those two businesses versus our prior portfolio dating back not too many years ago, we should be able to simplify what we're doing in terms of how we support that business. So, right-sizing that is a second work stream that we'll be talking about in more detail later in this year, early next year.

Great. I really appreciate the details.

Yeah, and John, just to be a little more helpful on the interest expense side, you know, we're expecting that number to be around, you know, $50 million-ish a quarter, you know, for the second half of the year.

Great, that's very helpful. And then just to move over to EVOSIS for a second question here. Coming into the year, you guys had expected about 10% improvement on EBITDA for the full business. Obviously, a little weaker here in 2Q. It seems like synergy capture should be a bit better this year. Are you still expecting to be up year over year in that EVOSIS business? And then just kind of adding on to that, the projects that were called out, you know, 400 million of incremental units in one project and adding some of these other new projects that are going to be flowing through, you know, it sounds more like a 2026 type of flow through. How much does that actually add to volumes for the total business? Thank you. Appreciate the details again.

Yeah, John, to answer your first question, yes. We expect EBITDA to be up year-over-year versus what the business experienced in 2024, so the answer to that question is yes. You know, if you think about total volumes for the business, you know, 400 million, you know, add another 100 million to that of incremental business, you know, it's significant. You know, I'm not going to get into the exact numbers for that. But, you know, we produce, you know, we put these numbers out, what, 8 billion-ish cans a year. So you can do the math. I think what I am very optimistic about is not only those two wins, but what I'm seeing in the business about other potential new business that we can bring in. I mean, it's clear to me now we are the service quality technical support leader in the market. You know, we inherited a strong and deep leadership team, and you combine this with the strong business team we have in the U.S., you know, I am convinced we will build a global leader in metal packaging. So, none of that's changed, and being directly involved with the business, I have even more confidence at this point that we will do as we said we would do. Very helpful. Thank you, guys.

Your next question comes from a line of Anthony Pentaneri from Citi. Your line is open.

Good morning. I'm wondering if you could talk a little bit more about any potential tariff impacts, you know, whether you're seeing them directly, you know, maybe in terms of steel or how your customers are positioning the food can or maybe indirectly in terms of consumer behavior or, you know, just any impact that you're seeing directly or indirectly on any of your businesses.

Yeah. Thanks, Anthony. You know, of course, I don't think there's many people that like tariffs. We certainly don't. We're doing all we can to mitigate those, and we've said this multiple times, but unfortunately, they're happening, and we have efficient ways to push those through. I'd suggest to you that our customers are saying that this is certainly going to be an impact in retail. When you start looking at the numbers, it doesn't sound material, but when you do it by volume, it is material. So more to learn in terms of how that impacts the consumer. Ultimately, our expectation is if there's a slowdown, and it's not going to be just in our categories, it's going to be throughout retail, throughout grocery, but we say if there's slowdown that drives consumers to to to the center of the store and that's been something you know historical within our paper can business and our closures business and probably see more upside the downside if you will in that regard jerry may want to talk about what we're seeing in terms of a financial perspective uh just what is the magnitude of the numbers etc yeah I would just just say we've been able to to mitigate the impact as far on our from

from a from an EPS standpoint and from from a margin standpoint and that's that's our expectation going forward that we would you know anticipate fully recovering that on the PNL side and we are seeing some impact of that on the balance sheet as we talked about earlier just the impact of you know, higher carrying levels of network capital balances.

Got it. Got it. That's helpful. And then maybe switching gears on the industrial business, maybe just two very quick questions. Pultman Paperweek recognized, I think, most of a URB price increase. And I'm wondering if you can remind us on kind of the flow through or timing around that. And then you called out strength in reels, which I don't think you've necessarily called out before in the slides. I'm just wondering what's driving that and, you know, maybe how big of a business that is for you on the industrial side.

Thanks. Thanks, Anthony. On the URB pricing, we're going to start seeing benefit, healthy benefit in the third quarter growing into the fourth quarter. So the timing of those increases coupled with the open market increase which was fairly successful in terms of getting through to the market, is going to both cases be favorable, again, building through the course of the end of the year and in the next year. Reels, it was a point out, it's not necessarily a very large business for us, but it's just a highlight. It's a very profitable business. We're number one, and we don't talk about it a lot. It's been embedded in our industrial converting business for a long time, but because of the growth that we're seeing with fiber, I'm not a technical guy, so fiber optics and this overall energy shortages that that are throughout north america we're seeing heavy demand we're out of capacity and it's important for us to note to our to our stakeholders that we are putting significant capital uh to maintain our our large market share uh in that business the relationship to it uh within our industrial is we take the uh uh the scrap and use it to make core plugs for our tube and core business. We sell into it with paper tubes for barrels. So it is definitely a great fit within our industrial business. And again, because of the capital and the improvements we see there, I just wanted to point that out.

Okay, that's very helpful. I'll turn it over.

Your next question comes from a line of Matt Roberts from Raymond James.

Your line is open. hey good morning everyone thanks for the time here um howard you just discussed some of the the timing of the urb price but um and i know you also gave you know you all talked to the bridge earlier but could you quantify maybe how the guidance bridge has changed versus last quarter you know how much incremental from that urb price or lower occ cost and then um additionally maybe maybe how FX has changed, and I think productivity stayed similar at $65 million, unless I'm wrong there.

Right. Great. I'll let Jerry handle that. You're right on productivity. Yeah, Matt.

Let me take the URB question first. You know, as we've said previously, about, you know, every $10 movement, you know, equates to about, you know, $6 million annualized benefit to us from that URB movement, and we've modeled that to start happening in the third quarter. So, we do expect to see that blow through of that, you know, $40 ton movement that happened, you know, to start kicking in.

$10.

Yeah, each $10 represents about $6 million of annualized benefit, is what we've shared previously. On the FX front, you know, we're looking at that number going forward somewhere, you know, call it, you know, on the euro to the U.S. dollar, somewhere between $1.17 and $1.18, and we ended the third quarter at $1.13.

Okay, thanks, Jerry. Appreciate that. Let me switch gears. I guess ThermoSafe, suddenly volumes were positive in 2Q. Could you quantify what that was and what type of volumes you all are expecting in second half there? I believe there were some exciting growth opportunities in pharma products in that business. And maybe versus 2024 investor, Dan, I know a lot has changed, but how have conversations, potential suitors of that business, how have those changed, whether that be buyer appetite or just general business performance for most safe overall? And it might be a little early, but not sure if you'd care to throw out such a goal post on what a pro forma leverage could be factoring in at sale there. Thanks again for taking the questions.

Yeah, you're correct. We've had some good wins, and we're onboarding those right now. I really don't have the detail exactly which products and markets. I believe it has to do, again, with the continuation of the expanse of GLP-1. and how they are now starting to ship. That has added nice growth, and the profitability is going to continue to improve as we onboard that business. As far as the process goes, as I said, we're getting ready to go. The expectation is that we intend to have something signed by the end of this year, and really at this point, I'd be guessing and not sure to really talk about what type of yield we'd get off of that and how that impacts our overall leverage, certainly in a positive way.

Fair enough. Appreciate it, Howard. Fair worth the try nonetheless. Thank you. Yep. Thanks.

Your next question comes from a line of Mike Roxman from Truist Securities. your line is open.

Yeah, thanks everyone for taking my questions. And congrats on the new role, Paul, and look forward to working with you. Thank you, Mike. One quick question, just following up on John's question regarding S&P and EMEA, and the EBITDA generation you expect this year. I think when you announce the deal, I mean, I think, Roger, you mentioned there's going to be up year over year. And I think a couple of quarters ago, you mentioned that the business itself would achieve EBITDA $430 million after $390 million of EBITDA last year. So I know you mentioned you're still expected to be up, but do you expect it to achieve that $430 million that you laid out a couple of quarters ago?

Yeah, I guess, you know, we don't share business-specific profitability, what I will say is that certainly EBITDA will be up third quarter year over year as expected and as in the forecast. You know, you have the bridge.

You got the profitability bridge that we put out with the announcement.

And I will just repeat, we're pleased with where we are. Volume was softer than expected in the first half. We expect a nice recovery in the second half and confident that we'll get to the to the levels and return on that business that that we expected you know one half doesn't make a year and doesn't make a doesn't tell the story of an acquisition so there's nothing that at this point that i would say would lead us to believe that we're not going to get a return a good return on that acquisition as expected and deliver the value to the shareholders thank you and just one quick follow up.

Can you just help us understand the factors affecting your revised guidance? You're maintaining EBITDA, but EPS is coming in at the lower end of your previous guide, and it seems like interest expense should be favorable in the second half. So can you help us, walk us through how you're going to wind up at that lower end of your EPS guide while maintaining EBITDA and your better interest expense? Thank you.

Yeah, Mike, this is Paul. So I want to reiterate too, we're really confident in our guide around the revenue and EBITDA. So we have really strong sales and our performance in North America and consumer businesses and industrial businesses that are there. But we did experience some softness and some weakness in international markets that were out there in the S&P and MIA. So that factored into our first half performance. You combine that with the tariff impacts as well, really led to macroeconomic uncertainty. So if you think about from a revenue perspective, EBITDA perspective, really confident. Now EPS, let me switch gears to that. This was brought down primarily due to the interest expense that we experienced in the first half of the year. So Jerry talked about in his script, it was about seven cents higher in the first half of the year. That was more than what we anticipated. That will pull through and it does bring down our overall EPS guide for the full year that's there. But we are going to have benefit in the back half of the year. As Howard and Roger both said, our Q3 is our strongest quarter that's out there to really are confident once you come back in that EBITDA and the revenue perspective. But EPS is really impacted by the interest expense that's out there. And then operating cash flows, we did lower that guide down as well to the low end of that range, mainly due to the usage of the net working capital, primarily as a result of the material inflation that Jerry had talked about in his results.

Thank you.

Your next question comes from a line of Gansham Punjabi from Baird.

Your line is open. yeah hey everybody good morning and uh paul um i congrats to you as well um before working with you um i guess you know if you look at the consumer segment kind of zooming out on a legacy basis so you know setting aside ebos for a minute um you know volumes are off to the best start in you know several years um and i'm just curious as to your thoughts as relates to the sustainability of that in context of you know big food obviously reporting very weak wall volumes uh the consumer being impacted by affordability and maybe some GLP-1, etc. So how were you thinking about the sustainability of that? Obviously, this year has been led by the metal food can business, but just share your thoughts on that.

Yeah, so Ganshan, thanks. You're right. Year-to-date Q1 was strong, Q2 was strong, and we see that maintaining itself through the end of the year and frankly flowing in the next year. And you're right, again, as it relates to the strength that we've seen in our S&P U.S. business. We've talked over and over again in terms of how much investment that we've got going on right now on the remaining part, effectively, of our consumer side, which is our paper can business. We've got a new plant starting up in Mexico right now that's just, in our terms, starting to pull paper, just starting up. Similarly, in Thailand, we have assets that are going in place literally around the world, Brazil, the United States. It's all incremental, and it's going to take time, as in any capital deployment, to get these up and running. On the foundation of the business, you know, again, bullish. You're seeing new products in the marketplace today. I won't really talk to them.

I don't want to talk to customers.

But the expectation is, and we're not forecasting, you know, major or big double-digit type growth rates. It's going to be incremental, and it's going to take us time as these assets come on board and as these products continue to launch. From a GLP perspective, I don't think we've seen anything there. I can't say that definitively. I think most of it, if there's any type of softness, it's a balance between new winds, growth, and just some of the legacy products dating back for decades that have been in slow decline that we don't see that changing. So what we do see is that the growth will overtake that in the growing quarters in years.

Got it. Thank you for that, Howard. And then, you know, as it relates to ebiosis, I mean, obviously the first half, you know, has played out slightly differently from a volume perspective. You know, you can't control where the fish swim, if you will, and the fish catch, et cetera. But can you just give us the specifics of where you are on the synergies relative to plan? You know, what's been done so far? And just, you know, having another quarter of the business under your belt, how are you thinking about the $100 billion of synergies and, you know, maybe some upside to that relative to your initial forecast for 2026.

Yeah, gosh, Mr. Roger, I feel really good about it. I think we've mentioned that a couple of times in our opening comments. We've raised the run rate for 2025 to that $40 million to $50 million level. And just a reminder, you know, we closed the deal late in December, so we were not able to negotiate a lot of the raw material synergies that we were looking for in 2025, and those will hit in 2026. So, I would say we're ahead of the game. You know, what's encouraging about that, a lot of those are non-raw material synergies that we're seeing in that $40 to $50 million. So, at this point, we think there's upside to the $100 million. You know, we're starting to have those discussions now about 2026 from a raw material standpoint. So, at this point, I see no reason why we would not hit and or exceed that $100 million level. You know, the team is executing extremely well, as I said before, really focused and looking at a number of other non-raw material opportunities. But those have exceeded our expectations to this point.

Thank you. Your next question comes from Alina, Mark Weintraub from Seaport Research Partners. Your line is open.

Thank you. First of all, thanks, by the way, for reinstuding the sales and adjusted EBITDA bridges at the end. Those are very helpful. on this on slide 17 uh the full year financial outlook on the left side you've got upside downside risk and then you have the six variables but it seems that those are sort of the drivers of what created the adjustment in the uh in your kind of guidance so i'm just trying to understand are those to be seen as the drivers that have created change in what you're now telling us or are those things that you think could impact the numbers that you are, the updated numbers? A little unclear to me on that.

Yeah, so Mark, great question. So go back into, and I'll start kind of at the bottom of the operating cash flow. So if we look at our usage of net working capital, that is a true update to the guidance that's out there. We did have more usage of our net working capital related to material price inflations that are out there. So that is a true change for us. And if you think about the interest expense that is out there, too, that is a driver of why we lower the EPS range that's down there. So those are the drivers that are there. Now, if we go into it and we look at the upside of it, too, we'll say is we do have some things around our criss-coach controls. We will control our controllables and softening markets and things like that as demand. So those are things that we can do to help enhance the outlook that's out there. But right now, to those largest two items around the interest expense and networking capital is what did bring the guy down on EPS and the networking capital or operating cash flows.

Gotcha. So then the other thing is, obviously, we've had a big move in the dollar. And so two questions on that. So what's the sensitivity for every one cent move in the dollar euro exchange rate? I mean, we know EBITDA at the former Aviosis, you know, order magnitude $400 million. So you might say just on conversion, that's $4 million. And so we've had like a, you know, a pretty significant move there. And then are there offsets? Because I do know you have some financial instruments, et cetera, which may be create offsets. So two questions. One, how should we think about the sensitivity to dollar-euro moves running through your financial statements? And two, what do you have embedded?

Yeah, Mark, this is Jerry. On the sensitivity, on the euro to the U.S. dollar, every penny equates to about two and a half cents of movement on EPS on an annualized basis. And as I mentioned earlier, what we've modeled going forward for the second half of the year is that euro between $1.17 and $1.18.

Okay. And because I believe at the start of the year, you were thinking like $1.05. Yeah. And now we have, you know, so that would suggest that we got like 10 or 15 cents of, you know, averaging it out of benefit from the exchange rate and so that's already included in your updated guide is that the correct way to read that yeah that that's embedded in our guide and yes we did begin the year with uh with that url at a dollar a dollar one point oh five five call call it the dollar six okay thank you so much your next question comes from a line of gabe hot from Wells Fargo.

Your line is open.

Paul, look forward to working with you. Howard and the team, good morning. There's been a lot of moving parts in the organization. I don't think anyone would debate that. And I think shareholders today are worried about what's going to happen maybe on a go-forward basis. I'm just curious if you're willing to comment at all on some of the big moving parts into 26 and you alluded to some business wins in smp amea obviously the north american metal food and aerosol business is performing well so um from our vantage point a couple things that are obvious you talk about run rate synergies of 40 to 50 and escalating to close to 100 by the end of next year so call it incremental 40 to 50 next year if i flow through the the urb hike call it 10 million bucks positive you're working really hard on productivity you're doing 65 million this year maybe there's 50 to 60 million dollars of productivity yes i know there's the inflation treadmill um and maybe we can get a little bit of volume growth in the composite container business once that big customer transitions so i'm just curious if There's other things that we should be thinking about. And again, I appreciate you guys can't control FX. You can't control the macro, but maybe we can be out of the industrial winter as well. So just anything you can help us in EBTA terms, bridge 25 to 26. Thank you.

Hey, Gabe, I think you did a great job of kind of covering the moving pieces going forward into the second half of the year. You know, if you really talk about, yes. I mean, there has been a lot of activity over the last not just quarters, but years. And we're kind of we're at the point of now ending and normalizing the portfolio with a focus on a lot of things, but one of which is leverage. And we I think we've made really nice movement here in the early part of this year. And I've talked about ThermoSafe. That, too, is going to be another benefit on a go-forward base. But in terms of just from an EBITDA perspective and the puts and takes for the quarter, I can't tell you how bullish I am. If you just look at the first half, who would have thought that Sunoco is going to be running at north of the 17% EBITDA margin? The metrics and the execution across the core of the business is exceptional. And as we've noted, there's been spot issues in terms of volume, ups and downs, but our team continues to deliver. I'm even more bullish, particularly as we get into the second half of this year with the traditional seasonal upticks that we see, and how we're going to be able to leverage that. I think Jerry and Paul have done a nice job of talking about below the operating profit line in terms of interest and the improvements that we expect to see. We noted the FX implications, but I guess I'm here to just say that I'm proud of the team and all of what they've done and continue to do, and we're sitting in a better position than this company ever has been in a very difficult operating environment and with a lot of change. And I'm going to repeat myself, but the culture of the company is alive and well. And even though we've been through this much change, the future looks extremely promising.

Yeah, and Gabe, I would just add cost, right? I mean, we've talked about getting the standard cost out. We're on that. But with the new three global segments, the simplification of the business, a lot of efficiency opportunities around procedures, how we get things done on a day-to-day basis, where we operate some of those support services. So a real focus on cost that should also impact 2026.

Right. Well, I think you called out $20 million of annualized savings there. Okay. And then maybe one last one. it relates to taxes um obviously you talked about a net number and you've already redeployed those proceeds to pay down debt from from tfp but any other tax items that we should be mindful of um particularly given the the passage of of tax legislation here um if anything changes for you on the cash tax side uh you know from uh gabe from from a tax standpoint we expect the full year rate to really come in at approximately 25 percent that that we you know that we modeled in at at the start of the year uh and you know the tax legislation the impact of the uh you know

you know beautiful bill uh you know we don't see that having a significant impact on us in in 2025. perfect thank you your final question comes from the line of anosha shaw from ubs your line is open Hello?

Can you hear me? Hello?

No shit.

Hi. Hi. Just a quick clarification. I don't know if I caught it, but you do have a lot of CapEx projects going on. Did you give some sense of how much your CapEx is expected to step up in 2026? Did I miss that?

You know, a little early to talk about that. I don't see it stepping up materially. You know, we, if you go back a number of years ago, we were running in 170 to 190, and we ended up around 360 last year, and that's our forecast for this year. The beautiful thing is we've got a lot of growth, customer-assigned capital. We'll see how that looks going into 26. Any major win could mean we may need to pop up to support some serious growth. So we'll just see how that plays out. But this year is right on top of last year, your modeling, I would go there, but really too soon to say.

Okay. Thanks very much. I'll turn it over.

And that concludes our question and answer session. I will now turn the call back over to Roger Shrum for closing remarks.

I want to thank everybody for your participation today. And as always, if you have any further questions, don't hesitate to give us a call. Thank you.

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