Good day, and thank you for standing by. Welcome to the Q3 2023 Sealed Air Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, today's conference is being recorded.

I would now like to hand our conference over to your -- our first speaker today, Brian Sullivan, Investor Relations. Please go ahead..

Thank you, and good morning, everyone. With me today are Emile Chammas, Interim Co-CEO and COO; as well as Dustin Semach, Interim Co-CEO and CFO. Before we begin, I would like to note that we have provided a slide presentation to supplement the call.

Please visit sealedair.com where today's webcast and presentation can be downloaded from our Investor Relations page. Statements made during this call stating management's outlook or estimates for future periods are forward-looking statements. These statements are based solely on information that is now available to us.

We encourage you to review the information in the section entitled Forward-Looking Statements in our earnings release and slide presentation, which applies to this call. Additionally, our future performance may differ due to a number of factors.

Many of these factors are listed in our most recent annual report on Form 10-K and as revised and updated on our quarterly reports on Form 10-Q and current reports on Form 8-K, which you can also find on our website or on the SEC's website. We discuss financial measures that do not conform to U.S. GAAP.

You will find important information on our use of these measures and the reconciliations to U.S. GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial results that correspond to the non-U.S. GAAP measures we reference throughout the presentation.

I will now turn the call over to Emile and Dustin. Operator, please turn to Slide 3.

Emile?.

Thank you, Brian, and thank you for joining our call. Today, I will discuss SEE's leadership transition, provide an update on the markets we serve, trends we are seeing and how we operate in this dynamic environment.

Dustin will take you through our third quarter results, provide updates on our 2023 outcome [ph] and talk about our progress and plans around capital allocation. After that, we will open the call for your questions. Moving to Slide 3. As previously announced, Dustin and myself are Interim Co-CEOs in addition to our [technical difficulty] roles.

Before we move to the market and business update, I would like to talk through how our Co-CEO operating model will work. First, we expect this model to accelerate the turnaround of our results and improve overall execution. Together, we will evolve SEE strategy, connect that strategy to the overall business and deliver results.

I am focused on driving our innovation, supply chain and commercial teams, specifically bringing these teams closer to improve our market intelligence, time to innovate, cost to deliver and commercial execution. Dustin will be more focused on driving our Cost Take-Out to Grow program, optimizing our portfolio and strengthening our balance sheet.

While automation, digital and sustainability continue to be key enablers of long-term growth, we are shifting our focus to address the current market dynamics. As a result, we are reevaluating our solutions portfolio and go-to-market strategies with an intense focus on meeting our customers' evolving packaging needs in our core to protective markets.

Now turning to the market and business update. Our end markets remain challenged and visibility limited. We are facing multiple headwinds, including soft retail demand and consumer trade downs in the food markets, compounded by a global capital cycle that is net down due to the U.S.

Europe remains firmly in the recession, and the recovery across Asia has been slower than we initially expected earlier in the year. On the Protective side, industrial output remains flat to down. Economic uncertainty is increasing, driving customers to put inventory below historical levels and reduced capital spending.

Destocking is moderating in North America, but continues with EMEA and APAC. Pricing pressures have increased as consumers and customers react to inflation. Despite these headwinds since the beginning of the year, our Protective packaging business delivered largely flat sequential performance.

And our CRYOVAC, Fluids and Liquids and Automation businesses have performed very well. In this economic environment where our existing customers are challenged to grow and are focused on acquiring new customers and taking share in the marketplace.

We are actioning this by first investing in and redeploying resources towards lead generation, marketing and new sales roles that are closer to the markets our customers operate in. Second, improving the competitive positioning of certain solutions within both Food and Protective by rationalizing the cost to serve across our portfolio.

Third, financing our innovation efforts between long-term, higher risk reward and shorter term projects that address our customers' more immediate needs. Lastly, continuing to lead with Automation, which provides our customers with a single point of contact for both materials and equipment.

These solutions solve their most critical packaging challenges and drive longer term sustainable efficiencies within their operations. On Cost Take-Out to Grow, we have actioned approximately $40 million in annualized run rate savings, approximately 25% of our $140 million to $160 million program.

As of September year-to-date, we have exited over 600 positions related to both reductions in volume with our network and workforce optimization. On portfolio optimization, we completed the previously announced closure of Kevothermal temperature assurance business in quarter 3. Separately, we decided to exit our plant based roll-stock business.

This was a sustainable offering within our consumer-ready vertical that was displaced by more competitive solutions in the market. Moving forward, we will continue to bring new sustainable solutions while maintaining an enhanced emphasis on market competitiveness.

While we are in good progress on Cost Take-Out to Grow and portfolio optimization, we need to accelerate to get ahead of future market impacts. Before I turn it over to Dustin, I wanted to say that I'm excited to [indiscernible] SEE with him.

While he has only been here for a short period, he has quickly come up to speed on the business, pushed us to challenge every aspect of how we operate and became a trusted business partner.

Together, we are looking through the entire company for opportunities to grow in a cost-effective way, drive further efficiencies and ensure we are world-class in everything that we do. This is an ongoing process, and we will keep you updated as key decisions are made. Now I'd like to turn it over to Dustin to review our financial results.

Dustin?.

Thank you, Emile, and good morning, everyone. I would like to start by saying it's a privilege to co-lead SEE with Emile. Emile has been with SEE for 13 years and has done a tremendous job transforming our supply chain. He's a proven leader, who is well respected within the industry and across all of SEE.

I can't wait to see his impact across our commercial and innovation efforts, and I'm really excited about all that we can accomplish together. Now moving to third quarter results. Let's turn to Slide 4.

In the quarter, net sales were $1.38 billion, flat on a constant currency basis, and adjusted EBITDA was $285 million, down 6%, excluding currency compared to last year. Volumes have improved sequentially, excluding M&A and FX, since the beginning of the year.

Sequentially, adjusted EBITDA improved about 2% from $280 million in the second quarter, mainly driven by improved volumes and better net operating costs. Adjusted earnings per share in the quarter of $0.77, were down 27% compared to a year ago on a constant currency basis, primarily driven by lower adjusted EBITDA and higher interest expense.

Turning to Slide 5. Liquibox contributed 6% to total company sales or approximately $82 million, but was offset by organic declines driven by continued market pressures and customer destocking in Protective as well as continued weakness in food retail end markets.

Third quarter adjusted EBITDA of $285 million, which included $17 million contribution from Liquibox, decreased $8 million or 3% compared to last year with margins of 20.6%, down 30 basis points. This performance was mainly driven by lower volumes within Protective.

As it relates to adjusted earnings per diluted share in the third quarter of $0.77, our adjusted tax rate was 25.7% compared to 25.6% in the same period last year. We did not repurchase any shares in the third quarter. Our weighted average diluted shares outstanding in the third quarter of 2023 was 144.9 million. Moving to Slide 6.

In the third quarter, Food net sales of $893 million, were flat on an organic basis with price favorability offsetting organic volume decline. Volume decreased year-over-year by approximately 1%, driven by continued weakness in retail demand, partially offset by growth in our Food automation solutions.

Food adjusted EBITDA of $194 million in the third quarter was up 7% in constant dollars compared to last year, with margins at 21.7%, down 60 basis points. The increase in adjusted EBITDA was mainly due to contributions from Liquibox, partially offset by lower volume and unfavorable net price realization of $5 million.

Protective third quarter net sales of $488 million, were down 15% organically, driven by volume declines in all regions with continued market pressures in industrial, fulfillment markets and continued customer destocking activities within our APS business.

Protective adjusted EBITDA of $95 million, was down 15% in constant dollars in the third quarter, with the margins at 19.5%, up 30 basis points. The decrease in adjusted EBITDA was driven by lower volume, partially offset by favorable net price realization of $2 million in cost control activities.

Protective adjusted EBITDA margin improved 30 basis points compared to the second quarter, primarily driven by favorable cost control. On Slide 7, we review our third quarter net sales by segment and by region. In [technical difficulty] net sales were flat with 10% growth in Food, our Protective was down 15%.

By region, we grew EMEA by 1%, offset by a decline of 1% in Americas and with Asia Pac flat. Now let's turn to free cash flow and leverage on Slide 8.

Through the third quarter, excluding the impact of the IRS to positive $175 million, free cash flow was a source of cash of $183 million compared to $137 million source of cash in the same period a year ago, representing an increase of 33% year-over-year.

The primary driver of this improvement was significant inventory reduction, partially offset by lower earnings and higher interest costs. Since the peak of Q2, we have reduced total debt by approximately $100 million, exiting Q3 with a net leverage ratio of approximately 4.1x.

Our total liquidity position of $1.2 billion, including $281 million in cash and the remaining amount in our committed undrawn revolver. For capital allocation, we remain laser focused on debt reduction, targeting to drive below 3.5x net debt to adjusted EBITDA over the next 2 years.

We also plan to refinance our December 2024 notes over the coming months. Let's turn to Slide 9 to review our 2023 outlook. Our full year 2023 guidance, which we reaffirmed last week, remains unchanged.

Q3 top line performance was right in line with our expectations, and adjusted EBITDA has exceeded original expectations due to better pricing and cost control activities.

However, going into Q4, we have greater-than-expected FX headwinds and now target sales to be slightly below the midpoint of our full year range, driven by approximately $30 million impact from FX, with volume projections still in line with original estimates.

We continue to expect adjusted EBITDA and free cash flow to be in line with the midpoint in respective guidance ranges. Adjusted EPS will be at the higher end of the range, driven by lower depreciation and amortization expense, reflecting improved discipline around capital deployment.

Reaffirming our current guidance ranges, despite exceeding expectations in Q3, reflects the limited visibility environment we continue to operate in. The outcome of our fourth quarter will depend on the strength of our seasonal tailwinds related to the holiday cycle in both Food and Protective.

We continue to expect an L-shape recovery through 2023 and into 2024, reflecting an increasingly uncertain macroeconomic environment driven by lingering destocking, weakening consumer demand and a higher for longer rate environment.

At this point in time, for fiscal year 2024, we are targeting flattish revenue growth, low single-digit volume growth offset by negative pricing. We expect the acceleration of our cost reduction and operational excellence initiatives to continue to position us to deliver adjusted EBITDA growth next year.

While a transition in leadership can raise questions about disruption, let me be clear. Emile and I have the full Board support to take any necessary action to navigate the current market and maximize value for our shareholders, and that's exactly what we intend to do.

Lastly, I'd like to close by thanking the 17,000 plus SEE team for their commitment to each other and for solving our customers' most critical packaging challenges day in and day out. With that, Emile and I look forward to your questions. Operator, we would like to begin the Q&A session..

[Operator Instructions] And our first question comes from George Staphos from Bank of America Securities..

Hi, everyone. Good morning. Thanks for the details and Emile and Dustin congratulations and best of luck with the transition. The question that I had, you talked about putting more resources closer to the market and changing both Europe, it sounds like your commercial and, if you will, transformation strategies.

Can you talk a bit more to what that means in specific examples on what you hope to gain from that? And relatedly, in terms of being closer to the market, what are you directly doing now to be out in the sites and out with your customers more frequently? Any changes to the way you're scheduling the way you're visiting with your employees? As you mentioned, it's a transition, you want to keep everybody focused.

Thank you..

Thank you, George. Thank you for your question. So again, in the prepared remarks, we talked about two items. So the way we are going to get closer to the markets and operate faster is essentially on two fronts.

One is, we are investing into better revenue ops capabilities into the company, but also we are moving more resources from working on longer term projects at a global level, closer to the markets and the customers that [technical difficulty].

Similarly, we are doing the same around our technical resources by balancing the efforts around those longer term higher risk reward projects and the shorter term projects to address the customers more immediate needs in this tough environment..

And a couple of follow-up points, George, to that.

And just in general, when we talk about our resources and you think about the shift in leadership that we've had now, it's about making sure that you think of it as resource allocation where we are placing our efforts, particularly as we reinvest some of the cost efficiency we drive from CTO2Grow as part of that broader program.

It's about getting more feet on the Street as an example, investing more in marketing, but at the regional level, investing more in some of our revenue operations capabilities.

The second piece to your question around meeting with specifically customers and plants, Emile and I are going to start, obviously, in 2 weeks with our first beginning set of plant visits as an example, and we've already been meeting with customers.

So I think on both fronts, while we are dividing and [indiscernible] short-term, we are making sure that we are out in the field more than we have been historically..

Thank you. Please stand by for our next question. Our next question comes from Adam Samuelson from Goldman Sachs..

Yes, thank you. Good morning, everyone. Maybe keying off of that discussion a little bit more, Emile, in the prepared remarks, there was a discussion or a mention of reevaluating some of the automation and solutions offering.

And I guess, I think longer term and as a growth driver for the company, automation solutions, digital has been kind of key kind of, say this, drivers of Sealed Air market outgrowth over time.

Is that still the intention, but maybe less kind of big whale hunting and more for big projects and trying to just drive shorter term business wins while we continue to pursue those longer term opportunities? Maybe help bridge kind of how we think about reallocating resources from longer term growth opportunities to near and kind of feet on the Street?.

Yes. So just clear and again, automation, digital sustainability, we are not abandoning those. These are key enablers of our strategy in terms of our execution and winning in the marketplace. And we continue to drive and lead with automation, which provides our customers with a single point of contact for the entire solution.

And we are continuing to drive into more automation capabilities in parts of our portfolio which are lacking. So with that said, the effort continues and there are key enablers. But while we are working on some of those more longer-term capabilities, we need to execute and win in the marketplace.

And that's what we mean by shifting and allocating resources..

Thank you. Please stand by for our next question. Our next question comes from Ghansham Panjabi from Baird..

Hey, guys. Good morning. Going back to George's question, I mean, the interim designation suggests a very short period of time, right? And some of the things you're talking about are sort of longer term improvements and so on and so forth.

So at this time, as you see it over the time line of the interim designation, is there cost outs that are going to take priority versus anything else on the commercial side? I'm just trying to think about prioritization..

Ghansham, it's a great question. I think what's important to think about within that statement is that while it's an interim designation, Emile and I have been partnering already together to run Cost Take-Out to Grow, which is really encapsulating both the Cost Take-Out as well as efforts we're already driving with commercial.

So you have continuity with that program and then the two leaders that were already driving it today. And so in both cases, it's being balanced. We are -- that's part of the discussion in terms of the Co-CEO model and we're focused on, where Emile is now spending even more time than he already was in the commercial teams.

You have myself now focused more still dedicated to Cost Take-Out to Grow as an overall program. So it's really balancing both.

But -- and then in the middle of that and the heart of that message is that we're focused on execution, right, and go ahead and improving how we can execute day-to-day as we kind of move continuum and improve our overall results profile..

Thank you. Please stand by for our next question. Our next question comes from Matt Roberts from Raymond James..

Hey, good morning, everybody. Thanks for the time. I just want to dig a little bit more on the near-term versus long-term decisions you're taking. Are there specific end markets or product rollouts you're referring to? And if I look at specific end markets, it seems like automation has trended down, which is consistent with your prior commentary.

So should we expect that deceleration to continue? Or -- another one being like eCommerce is trending down as a percent of your mix. Is that more market share losses or potentially end market related? Just trying to see where some of those decisions are allocated. Thanks..

Thank you for that question. So in terms of the automation in terms of it trending down, this is mostly driven in terms of the current economic environment. With the interest rates and the uncertainty, there is hesitation by many customers in terms of the timing of driving the CapEx. That's what's driving that piece.

It's not driven by reduction in focus. In fact, we have very strong automation solutions in many parts of our portfolio. In other parts, we don't have automation solutions, and we are actively driving to create those capabilities through partnerships and other pieces. So stay tuned on that as we go forward.

So it's really about the amount of -- it's the allocation of resources and balancing how many resources we have, whether it's within our innovation teams, our commercial teams that are focused on very long-term projects versus those that are focused on driving winning solutions today and winning today in the marketplace..

Thank you. Please stand by for our next question. Our next question comes from Jeff Zekauskas from JPMorgan..

Thanks very much. I got a two-part question. The first part is when you look at Liquibox and its growth initiatives since you've acquired it, how would you assess it? That is -- are the growth initiatives as strong as you expected or stronger or weaker? And second, on Slide 16, you show your Protective prices 2% lower after they've been positive.

Can you discuss what's behind that?.

All right. Let me first head off on the first question and then Dustin will take over the second one. So first of all, let's talk about just in general what's driving Fluids, including the Liquibox. The first piece is the CRYOVAC fluid side, we've been making very good inroads, both in terms of automation and driving our FlexPrep solution.

We are now present into more than 25,000 stores globally by -- this was a solution mostly in the U.S., and it's been expanded. So we have that part of our portfolio that's continuing to drive growth. On the Liquibox, as was shared in the last quarter, there were many operational issues. So we've addressed those.

We've actually accelerated the integration and brought in more resources from the broader company to address that. We've also re-expanded the portfolio so that we can attack a broader set of the markets, which was not accepting the limited portfolio of solutions.

So we've put those behind us and we've accelerated our growth into Q3 and into next year..

And Jeff, this is a follow-on point to your point number two, on Slide 16. In general, it's on the commentary and the prepared remarks references the pricing environment beginning to shift. If you think about resin prices and Protective is more affected by where we have from a spot perspective.

The first half, it kind of came down to about the middle of the year, and then it's trended sideways. Now it's actually ticking up a little bit going into the fourth quarter.

And so that's really what's reflected now is that overall intensification of -- because the volumes are down, so intensifying of competition coupled with where -- how rest of the trend is what's leading to that impact. And that's -- in the commentary, we talked about 2024.

That's what's playing into some of our thinking right now of the impacts we can potentially see into the following year..

Thank you. Please stand by for our next question. Our next question comes from Josh Spector from UBS..

Yes, hi. Thanks for taking my question. So just regarding the guidance for this year, you reiterated the midpoint of EBITDA. If you do the math in 4Q, it's down about $100 million from 3Q, which could be an incredible abnormal seasonality.

Just wondering -- I understand the need to be conservative and want to be conservative on your end, but what are the moving pieces that get you to that scenario? And are customer conversations reflecting that view at all at this stage? Thanks..

Josh, I appreciate the question. And as I mentioned back in the prior remarks and the commentary just made around being cautious, again, our fourth quarter right now at this point in time kind of you think about how we came through the first half and the second half of the year.

It does reflect some of the limited visibility environment that we are in right now.

And so the second piece, if you go back to the prepared remarks, we talked about fourth quarter, that [technical difficulty] impact, which is primarily driven by the GDP in Europe piece of our business is also having a corresponding impact on our bottom line, which is obviously not operational.

Now what could lead in terms of differences kind of how we talk about the fourth quarter, we talked about in the prior remarks, and it's really driven by the strength of our seasonality in our business, whether it's in the -- think of it as the eCommerce cycle that can affect our Protective business or the Food cycle relative to holidays that can affect our Food business.

And so those are the two areas. The strength of that could really determine that outcome and what we've seen so far in the month of October that we are on track and -- but obviously, more to come there. So that's kind of the variability in outcomes..

Thank you. Please stand by for our next question. Our next question comes from Anthony Pettinari from Citi..

Good morning. You've talked about rationalizing cost to serve across the portfolio and exiting some product lines like that roll-stock business.

Just wondering, with the new management approach, are there components of the business that might be larger and might have a more logical owner and maybe could help accelerate deleveraging? Or would those kinds of dispositions or asset sales or larger portfolio moves, would those be kind of outside the mandate given kind of the interim designation? Or how should we think about that?.

Great question. This is Dustin speaking.

So as we mentioned beforehand and kind of going back into Q2, we've really kicked off this effort in portfolio optimization, right? As Kevothermal was already announced, now we talked about the plant-based roll-stock business we've announced today, that effort is continuing and now accelerating, right, as we go from here.

The mandate is really to take any action necessary to create value, whether it's large and small. So we are looking at the entire portfolio, trying to understand what's best fit for purpose moving forward. And then obviously, deleveraging is the primary focus.

We talked about that in terms of getting -- trying to get below 3.5x within the next 2 years or less and certainly opportunity to deleverage. Now many other factors come into that perspective in terms of where we sit right now and overall, we believe to be nearing the bottom of an overall cycle.

So again, we are factoring timing, factoring the kind of overall environment we're operating within from a rate environment, debt markets, et cetera. And -- but all of those things are kind of factored into the -- how we are thinking about things.

But just again, just to finalize that point, is this is intended to accelerate those type of actions, not decelerate it or whether they're small or large..

Thank you. Please stand by for our next question. Our next question comes from Lawrence De Maria from William Blair..

Thanks. Good morning. Two quick things here. So you amended the bylaws, I guess, maybe more difficult to nominate Directors. So the question really is whether that's preemptive or to any potential activists? And then secondly, and related to that, you've looked at the Protective portfolio, assuming you're thinking about doing some pairing.

So curious if you're still looking at that? And any updates on how much of that portfolio might be considered preparing and where we are in that process? Thank you..

Hey, Larry, this is Dustin speaking. So on the first point on the 8-K we filed related to the amendments to our bylaws, that's really related to an updated SEC rule around universal proxy.

It's very common for all kind of companies in the process of doing some form of that, which is really just combining the ability for -- I won't get to the technical details, but the ability for whether a shareholder or ourselves to raise kind of nominees and the voting aspect of it, that it consolidates on to the card and is part of improving and continuing to improve our overall corporate governance.

And then the last piece when you talk about Protective portfolio, in line with the prior question, Protective, we are absolutely going to the portfolio and looking at areas where we can optimize. Kevothermal is an example of that.

I won't give an update relative to the status of that because we are right now in the process of dissecting many different pieces, which each in their own way, take a level of effort and energy to get through, understand, obviously, viability in the market today, value and then really the disposition going forward relative to the timing.

So there's no update in terms of like a progress versus other than it's underway, and we are accelerating the pace..

Thank you. Please stand by for our next question. Our next question comes from Arun Viswanathan from RBC Capital Markets..

Thanks for taking my question. Yes, congrats on the new roles there to both of you.

Just wanted to understand -- yes, just continuing on the last theme, maybe you can help us understand the synergies between the two businesses and where automation and maybe some of the other initiatives you have overlap? I'm just thinking that we've seen these huge double-digit declines on volume in Protective? And do you think it's necessary to take more decisive action and maybe separate the Protective portfolio? What really makes it important to keep within the portfolio as is? Thanks..

So I'll answer that question really in two parts. Obviously, the business is -- obviously create -- there's a lot of similarity in terms of overall raw materials [indiscernible] resins that are used within both businesses.

And so one of the key advantages of our company and the scale that we operate at is the level of purchasing power that we have in that particular space, right? And so any form of action like that could lead to form [indiscernible] beyond of -- beyond kind of thinking about how you would structure kind of that disposition between the two businesses.

The second piece is in terms of the comment about should you be more decisive about where we are at. What I want to remind, kind of everybody is thinking about Protective is we are sitting from our point of view towards the bottom of an overall cycle, right, which is really important to take into consideration from a timing point of view.

Second, broader market dynamics that are in play around taking an action like that, that could effectuate the timing if and when you chose to make an action like that.

And the second piece around Protective holistically and the comment about shared aspects underneath it, some of these strategies, whether it's automation, they're very independent for each business, but they're effectuating the same outcome, right, relative to the points that Emile made earlier around the combination of materials and equipment together, drawing a bigger pull-through for us by having huge advantages for overall customers relative to having a single point of contact from a relationship perspective, from a service perspective and the overall value creation.

So that's where we are at..

Thank you. Please stand by for our next question. Our next question comes from Gabe from Wells Fargo..

Emile, Dustin, thank you and thanks for the crisp messaging this morning. Two-part question. The first is, you had a large customer put out a press release saying that they're migrating, I think, one of their first locations here in Ohio, actually to 100% paper-based.

So I'm curious if this is specifically what you were referencing in terms of working more closely with your customers? And does this require sort of additional investment, either in the P&L and/or CapEx side? And I guess, relatedly, if there is some sort of P&L impact, would that be sort of incorporated or included in still being able to achieve your $140 million to $160 million of Cost Take-Out to Grow? And I apologize if I missed it.

So the second part is, I think, Dustin, you mentioned a $30 -- or $30 million discrete fourth quarter revenue item.

What was that associated with? And then in your commentary as well, I know you talked about going into '24 price cost being a headwind, but specifically in Q4 with the moves that we've seen in polyethylene as it relates to timing, is there a bracket that you can give us $5 million to $10 million or so that you guys are incurring specifically in the fourth quarter?.

Yes. Great question. So I'm going to hit the first the question you have around the discrete item, and then I'll bring it back to Emile, he'll walk through your points around kind of paper-based solutions and where we are headed. So on the first one for what we call it out for the fourth quarter, a nonoperational issue with FX.

So if you think about where we were in July and then where we are at now today and where the GBP and the euro moved, that's creating an FX impact in the fourth quarter to the tune of about $30 million, right? And the secondary point we made to that was that underlying volume estimates that we made are still intact, right, for both businesses.

And then I'm going to turn it to Emile to head on the question..

Yes, on the first question, I mean, it's broader than just paper or plastic. It's really around the sustainable offerings that we bring to the marketplace, and that's both on the Protective and on the Food side. So yes, getting closer to our customers so that we are at the table helping our customers choose the right solution.

And you can see in our -- in parts of our portfolio, we were light, and we've seen some of that impact in terms of that share loss. But our paper solution continues to make progress on the Protective side, both on the automation piece of Protective as well as on the material side.

On the Food side, we are continuing to push on our sustainability pledge around bringing our solutions to being 100% recyclable or usable. Just to give you a perspective, we are around 51% of the portfolio away today. We did try to bring in that plant-based roll-stock solution.

But unfortunately, that was not successful in the market as the market shifted. And we'll be shortly announcing interesting, sustainable solution will bring into markets around roll-stock. But let's talk about that in our next call..

Thank you. Please stand by for our next question. Our next question comes from Mike Roxland from Truist Securities..

Thank you. In Food, obviously, you mentioned the company has mentioned in the past facing a growth headwinds, you mentioned again kind of U.S. cattle cycle customer preference shift in meat, the Food automation slowdown.

Can you talk about any of the initiatives you started to pursue maybe you have accelerated in your to reverse that and to drive better growth? And then just quickly on the second question, if you take out Liquibox in 3Q, what would Food volumes would have [indiscernible] grown or declined ex Liquibox? Thank you..

So great questions. And a couple of points to make.

One is -- and I want to just clarify the comment on automation, just to make this really clear, is that automation is still performing very well in this quarter and very well for the full year, right? What we are referencing in terms of commentary that going forward from a sales perspective, which is indicative of some of the pressure in 2024, it's under pressure, and that's really related to orders.

When someone purchased an automation solution, there is a decent lead time before it's delivered, which is a statement about kind of the future into 2024, but it continues to be very strong. Our offerings continue to be very relevant, and we are still very focused on those platforms in both businesses and bring them to market. Okay.

And then going back to Food overall relative to the cattle cycle and impacts in the quarter, in general, I think that we are going to accelerate it.

I would tell you, going back to Emile's commentary around competitive positioning in certain products as part of Cost Take-Out to Grow within Food and Protective, we are specifically focused within that business going back to this concept around the plant-based roll-stock business that we are disposing of, we are focused on our roll-stock business, right, at a competitive positioning within our bags business and the bags and the food automation we have in our bags business.

We are performing actually ahead of market and doing very well this year, considering some of the kind of negative market trends. In our roll-stock business, which we had commentary beforehand, if you go back to last year, this is the one that was really impacted by the specialty resin prices we had in 2022 into 2023.

And so as that business specifically, there's continued intensifying pressure around competitiveness, pricing. And so what we are working on is reducing the cost to serve, including the cost to deliver and produce in that area, so we can be more competitive and more relevant in the marketplace and drive growth going into 2024..

Thank you. Please stand by for our next question. Our next question comes from Phil Ng from Jefferies..

Hey, guys. Dustin, you kind of breeze through your early 2024 outlook. So I just want to make sure I heard you correctly. You're effectively going for flat sales, up volumes and up EBITDA in 2024.

Can you kind of help unpack the components a little more between how you're thinking about volume growth between the two segments, particularly Protective just because it's been under pressure, price cross and then progress on the restructuring efforts? I think last quarter, you were calling for a mid single-digit EBITDA growth.

I don't know if that's still achievable, especially with the FX headwinds you're seeing at this point?.

Yes. Great question. Thank you for raising it. A couple of comments. Keep in mind that right now we are sitting in November, we talked about this limited visibility environment we are operating in. So we are still very much in our process of firming up kind of how we think about 2024.

And so when we think about the Food business, the cycle, we still believe the beef cycle in general is going to the cattle cycle overall holistically continued to be a headwind. And 2024 are being more of a trough year than in prior. But keep in mind, we are still ahead of market. We gained share this year.

We continue to gain share going last year into this year and going into next year. So we think gain share is going to help alleviate some of that concern.

And then in our Food business, the competitive positioning in our roll-stock portfolio, the improvements we plan to make there, we believe the combination of these, coupled with what Emile alluded to in some of our newer sustainable offerings, will be bringing to market will give us some lift in get us to low single-digit volume within our Food business.

Protective, again, it is conditional based on markets beginning to move with us. And if you think about the year of 2023, the downside as you see go down, obviously, 2020 and now you're seeing 15 and about volume in the fourth quarter, you're going to be looking at roughly mid single-digit down, a couple of getting hit by price.

But the positive news within that, and Emile had hit it a little bit earlier, is a statement about volume stabilization throughout 2023, really since the beginning of this year. So as soon as markets begin to inflect and we are seeing that, right? And it really is going to be a statement about the strength of our fourth quarter cycle.

The stronger our fourth quarter is from a seasonal perspective, we are very indicative about how we head into next year. And so that is -- that's what we are kind of [indiscernible]. Again, broadly speaking, Cost Take-Out to Grow, et cetera, that is intended to continue to improve our overall competitive positioning within Protective..

Thank you. Please stand by for our next question. Our next question comes from George Staphos from Bank of America..

Hi, everyone. Thanks for taking the follow-on. Just on the discussion -- and again, thanks for all the detail, and again, a much cleaner presentation, I think.

Can you talk broadly about within Food and within Protective, how much of your portfolio do you think right now as a percentage roughly is disadvantaged on the cost curve versus your competition? And how much would CTO2Grow and the other imperatives basically catch you up if need be in those businesses? Relatedly, some of your peers have highlighted recently, even though they're small wins, we don't really remember this happening in the past.

Some small wins in the protein markets. Can you talk to why you think you're gaining share even with some of these headwinds? Thanks guys and good luck in the quarter..

Yes. Thank you, George, and thank you for the commentary on the slides. So a couple of points I would make going back to Food more broadly. And I'm actually aware of what you're referencing from who's making comments around taking share in our business of Food.

And just to be clear there, how we are performing relative to competition, how we are performing relative to the overall markets we serve, particularly the protein markets and specifically, where we have higher market share, think of this as beef as well as pork, so red meat more broadly do not see any form of competition in terms of real competitive threat within our bags business and automation solutions that we offer.

We don't see a combination of whether you look at the materials we provide or that you look at the bags themselves or you look at the automation, the equipment we provide, there is no -- I would say, from my perspective, we are in a competitive advantage and continue to be and will remain in the near-term.

So going back to your point about then kind of that's question and so when you go back and the share gains, go back from Q4, they're coming to this year, we are very confident that they're not just share gains in the sense of, they're small customers that were taking over, but large customers, large plants that we are taking away from competition that will continue to yield a tailwind, which gave us the tailwind this year to perform better than market in that specific end market and will continue to give us a tailwind going into next year.

So specifically about the pieces of the portfolio where we have price sensitivity, right, when you think about Food, you're looking at probably -- and this is a rough estimate, but maybe 10% to 15% of that business is specifically in the area, because when we talk about roll-stock holistically, it's really in sub segments of that business.

There's areas where there's, I would say, more competitive differentiation in areas where there's less competitive differentiation, and so those areas that are less that we're focused on rationalizing the particular cost to produce, so we can compete at more pricing, it becomes more of a factor than the competitive differentiation of materials themselves.

And then in Protective, we've talked about beforehand the areas of our business that tend to be more price sensitive or areas where we are not coupled with automation. And so you're thinking about roughly 20% to 25% of that portfolio that we are focused on.

And -- but the good news there is, even though there's different products than that, the overall manufacturing process, innovation processes and the cost to serve is very [indiscernible].

So when you're -- while it may sound like a larger piece of that portfolio, solving that problem in some ways is simpler because the applications are more, there's less of them relative to the overall portfolio offering versus our roll-stock business..

Yes. And George, I would just -- Dustin, said it very well. Just to add on the roll-stock part of the portfolio, also the fact that we have pigeon ourselves into very niche premium markets.

And right now with the consumers downgrading to different products, we intend to open up the aperture of our roll-stock business, not just to stay in the corner market, but to go after a broader set of opportunities..

Thank you. I am showing no further questions at this time. I would now like to turn it back to Emile for closing remarks..

I would like to thank everyone for their time today. Dustin and I are excited about the opportunities ahead for SEE, and we look forward to speaking again in February. Thank you..

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect..