Net Sales: $1.27 billion, down 2% on a constant currency basis. Adjusted EBITDA: $276 million, up 2% on a constant currency basis, with margins of 21.7%, up 80 basis points. Adjusted Earnings Per Share: $0.81, up 4% as reported and 9% on a constant currency basis. Food Segment Net Sales: $852 million, up 1% on an organic basis. Food Segment Adjusted EBITDA: $203 million, up 7% as reported or 10% in constant currency, with a margin of 23.8%, up 200 basis points. Protective Segment Net Sales: $420 million, down 8% organically. Protective Segment Adjusted EBITDA: $74 million, down 18% as reported or 16% on a constant currency basis, with a margin of 17.6%, down 180 basis points. Free Cash Flow: Use of $12 million compared to a source of $78 million in the same period a year ago. Total Liquidity Position: $1.3 billion, including $335 million in cash. Net Debt Leverage Ratio: 3.7 times, down from 3.9 times a year ago.

Warning! GuruFocus has detected 3 Warning Signs with SEE.

Release Date: May 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Sealed Air Corp (NYSE:SEE) reported a strong first quarter performance, with adjusted EBITDA up 2% on a constant currency basis and adjusted earnings per share up 9% on a constant currency basis. The company successfully completed the integration of its supply chains into two market-focused businesses, Food and Protective, enhancing its ability to serve customers and adapt to market dynamics. The Food segment delivered modest volume growth, driven by market share gains in retail end markets and a shift in consumer preferences towards fresh foods. Sealed Air Corp (NYSE:SEE) is well-positioned against direct tariffs due to its largely domestic production for domestic consumption model and exemptions under USMCA. The company is taking proactive measures to mitigate potential tariff impacts and minimize inflation through supply chain optimization and pricing actions.

Negative Points

Net sales for the first quarter were down 2% on a constant currency basis, with volumes declining primarily in the Protective segment. The Protective segment experienced an 8% organic decline in net sales, driven by volume declines and unfavorable net price realization. There is ongoing concern about potential trade-downs in the US beef market, which could impact the Food segment's performance. Sealed Air Corp (NYSE:SEE) operates in a low visibility environment, particularly in the Protective segment, with uncertainties around trade policies and market demand. Free cash flow was a use of $12 million in the first quarter, compared to a source of $78 million in the same period last year, primarily due to increased incentive compensation and tax payments.

Story Continues

Q & A Highlights

Q: Can you provide more details on the progress in the Protective segment, particularly regarding volume trends and customer churn? A: Dustin Semach, President and CEO, explained that the Protective segment saw a 6% volume decline in Q1, with improvements expected as customer churn from 2024 is fully lapped. The segment is seeing growth in Asia and stabilization in EMEA, with North America being the primary focus for improvement. The company is optimistic about the progress made through go-to-market reorganization and improved customer relationships.

Q: How are you measuring customer satisfaction and balancing cost reductions with customer service improvements? A: Dustin Semach noted that customer satisfaction is measured through both analytical methods and direct engagement with customers. The company is investing in Protective sales, particularly in North America, while finding efficiencies in other areas, such as back-office operations. The focus is on driving organizational agility and improving customer service without impairing growth.

Q: What are the pricing dynamics in the Protective and Food segments, and how are they affected by competitive pressures and raw material costs? A: Dustin Semach stated that net price realization is relatively unchanged, with most negative price impacts in the Protective segment due to competitive pressures. In the Food segment, pricing is stable, with no significant changes in resin costs. The company is managing potential tariff impacts through supply chain adjustments.

Q: Why did gross margins expand despite a year-over-year decline in sales? A: Dustin Semach attributed the margin expansion to ongoing productivity initiatives and cost takeout efforts, which have improved cost positions in both the Food and Protective segments. The company is optimizing production and supply chain operations to drive these improvements.

Q: How are order patterns in April and May, and what is the outlook for the second half of the year? A: Dustin Semach reported that order patterns in April were in line with expectations, with no significant changes in buying behavior. The company is cautious about the second half due to potential economic uncertainties but remains focused on mitigating any impacts through strategic actions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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