Sealed Air Corporation (NYSE:SEE) Q1 2024 Earnings Call Transcript

Sealed Air Corporation (NYSE:SEE) Q1 2024 Earnings Call Transcript May 2, 2024

Sealed Air Corporation beats earnings expectations. Reported EPS is $0.78, expectations were $0.53. Sealed Air Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the First Quarter 2024 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 that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Sullivan. Please go ahead.

Brian Sullivan: Thank you, and good morning, everyone. With me today are Emile Chammas, Interim Co-CEO and COO; and Dustin Semach, Interim Co-CEO and CFO. Before we begin our call, 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 as revised and updated on our quarterly reports on Form 10-Q and current reports on Form 8-K. 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 reconciliation 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?

Emile Chammas: Thank you, Brian, and thank you for joining our first quarter earnings call. Today, Dustin and I will review SEE’s financial performance, provide updates on the markets we serve, discuss relevant trends and highlight the significant progress made on the transformational actions discussed on our previous calls. Lastly, we will conclude with our 2024 outlook before opening the call for questions. We closed the quarter with sales of $1.33 billion and adjusted EBITDA of $278 million, delivering strong results despite the continued challenging market dynamics in the Protective segment. Our first quarter results reflected for the first time since quarter four 2021 year-over-year volume growth across all regions of our Food business, continued volume stabilization in Protective and strong execution related to our CTO2Grow initiatives.

Through the focused efforts of our teams around the world, we delivered positive free cash flow of $78 million in the first quarter compared with a negative $13 million in the same period a year ago. Dustin will provide a more comprehensive overview of our financial performance shortly. Now let us move on to our market and business update. During the first quarter, our Food segment delivered low single-digit volume growth across all regions, primarily driven by our shrink bag business, which benefited from the carryover momentum of enhanced holiday demand and new customer wins from the fourth quarter. In the U.S., beef production was down low single digits year-over-year for the first quarter. For the rest of 2024, U.S. slaughter rates are expected to decline at a more rapid pace in the outlining quarters.

In South America and Australia, cattle cycles are at their peaks, driven by a robust domestic consumption and heightened export activities. Against a flat global proteins market in the first quarter, we drove volume growth, gained share and delivered double-digit growth in automation. Following its successful launch last quarter, our new compostable tray continues to gain traction in the market. Additionally, we are actively engaged in the development and introduction of more sustainable packaging solutions, such as recycle-ready barrier display films, poultry bags and post-consumer-recycled trays to address evolving market needs and support food processors and retailers in meeting their sustainability goals and regulatory requirements. The regulatory landscape concerning plastics continues to evolve rapidly with recent legislative attention being directed towards polyvinylidene chloride or PVdC due to chemical similarity to PVC.

PVdC is used as a very thin barrier layer in multilayer films within our protein shrink bags. Our shrink bag business that contains PVdC is approximately 1/3 of our Food segment. This barrier material plays a vital role in preserving the quality of fresh proteins, extending shelf life, enabling global distribution and minimizing food waste and its environmental impact on greenhouse gas emissions. Currently, there is no alternative to PVdC that matches its performance level. Through close collaboration with our suppliers, customers, industry associations and government agencies, we actively advocate for the essential role packaging plays in mitigating food waste and ensuring safe, affordable food on a global scale. For decades, we’ve been assisting our customers in adapting to the changing regulatory environment and safeguarding their food supply chains.

We already provide alternative barrier layers to PVdC, such as EVOH among others, particularly for applications with lower performance requirements. As the market leader in shrink bags, we continue to be best positioned to help food processors navigate the evolving regulatory landscape and deliver market-leading solutions that combine world-class material science, equipment and technical services. Transitioning to Protective. Revenue performance in the first quarter was in line with expectations. Industrial portfolios continued to be under pressure across all regions, contributing to a low to mid-single-digit year-over-year volume decline for the segment. As discussed on our last quarter’s call, the pricing environment remains pressured as we compete in a low volume, low visibility environment.

In the Americas, volume growth was less than 1% as growth in box rightsizing solutions and recovery in retailer fulfillment sectors were offset by industrial weakness. EMEA experienced continued double-digit volume decline, primarily driven by intensified sustainability pressures across all portfolios and destocking from our APS product line. The electronics sector in Asia is improving from last year. However, uncertainties around China’s economic recovery continue to temper short-term regional growth expectations. Consistent with our previous discussions, we still anticipate an L-shaped recovery across the Protective segment. The organizational changes implemented in February, which established dedicated commercial teams for both Food and Protective, are beginning to gain traction.

The renewed focus on our Protective channel and direct customers has created positive momentum internally and has well been received by our customers. Similar to Food, we strive to protect products in transit in a sustainable way. Our strategy entails a dual-pronged approach. First, within our flexibles portfolio, we are continuously increasing the level of recycled content in our product lines. Second, we are in the process of adding more fiber solutions to our portfolio, which will enable us to fully serve our channel partners in all segments within our markets. As an example, we are expanding our paper mailer offerings with various sizes to match the versatility traditionally associated with plastic and hybrid mailers. Moreover, we’ve developed more resilient paper coilers as a sustainable fishing solution to address demands of protecting high-value heavyweight products.

Additionally, we are introducing fiber alternatives within our APS solutions, enabling substrate-agnostic capabilities for our automation portfolios. This approach ensures that existing equipment installations can accommodate both substrates, providing our customers with enhanced flexibility in their distribution processes. The transformation outlined in previous quarters continues at SEE. We are focused on improving underlying business fundamentals by improving our commercial effectiveness, innovation processes and overall talent. Overall portfolio and footprint optimization continues to progress with three plant closures last year and another four in process in 2024. Throughout the first quarter, we continued to wind down pieces of the portfolio announced last year.

And we continue to evaluate the rest of the portfolio and footprint for further opportunities. As mentioned earlier, we continue to accelerate our cost takeout initiatives. And it is driving improvements to our bottom line. With the actions implemented so far, we have achieved an annual run rate savings of $78 million. Continuing with this momentum, we are confident in our ability to achieve approximately $90 million in year-over-year cost savings in 2024. Finally, we are in the process of pivoting our digital and automation strategies. And we’ll have more to share in subsequent calls. Now I’d like to turn it over to Dustin to review our financial results. Dustin?

Dustin Semach: Thank you, Emile, and good morning, everyone. Moving to first quarter results, let’s turn to Slide 4. Net sales were $1.3 billion in the quarter, down 1% on a constant currency basis. Adjusted EBITDA in the quarter was $278 million, up 4% compared to last year. Volumes were flat year-over-year for the quarter with growth in the Food segment across all regions offset by declines in Protective, primarily in EMEA. As reported, adjusted earnings per share in the quarter of $0.78 were up 5% compared to a year ago. Our adjusted tax rate was 25.9% compared to 24% in the same period last year. The increase in the tax rate year-over-year was driven by discrete impacts related to our share-based compensation. Our weighted average diluted shares outstanding in the first quarter of 2024 was 145.4 million.

Turning to Slide 5. In Q1, inorganic growth from Liquibox contributed 2% to total company sales or approximately $23 million. As anticipated, we saw lower pricing across both the Food and Protective segments, primarily in the Americas and EMEA regions, following the reduction of resin costs from the post-COVID peak in 2022 to the middle of 2023. Year-over-year volume improved in the Food segment across all regions through carryover momentum from last year’s holiday season and new customer wins. Protective volumes were down 4% year-over-year, driven by a rebound in Americas, more than offset by declines primarily in EMEA. First quarter adjusted EBITDA of $278 million, which included $4 million inorganic contribution from Liquibox, increased $11 million or approximately 4% compared to last year with margins of 20.9%, up 110 basis points.

This performance was mainly driven by accelerated savings from our CTO2Grow and productivity efficiencies, partially offset by unfavorable net price realization. Moving to Slide 6. In the first quarter, Food net sales of $868 million were down 1% on an organic basis, primarily due to declines in price, partially offset by positive volumes led by carryover holiday benefits within our Food business, solid equipment performance, cattle cycle tailwinds in Asia Pac and Latin America, along with share gains of our case-ready solutions in the poultry market. Food adjusted EBITDA of $190 million in the first quarter was down 3% with margins at 21.8%, down 100 basis points compared to last year. The decrease in adjusted EBITDA was mainly driven by unfavorable net price realization of $10 million, partially offset by higher volumes.

Protective first quarter net sales of $461 million were down 7% organically, driven by lower pricing in Americas and EMEA and volume declines primarily in EMEA, where both industrial and fulfillment end markets remain soft and sustainability pressures are accelerating. Americas volume rebounded with strong automation solutions offsetting continued industrial weakness. Protective adjusted EBITDA of approximately $90 million was up 11% in the first quarter with margins at 19.4%, up 320 basis points. The increase in adjusted EBITDA was driven by cost control actions, which included CTO2Grow savings, partially offset by unfavorable net price realization of approximately $10 million in lower volumes. On Slide 7, we review our first quarter net sales by region.

On an organic basis, Americas was down 2% primarily due to lower pricing. Volume turned positive year-over-year for both segments for the first time since the end of 2021 with robust equipment placements in both businesses and strong volume within Food. EMEA declined 7% organically on lower pricing, persisting market softness and sustainability challenges in the Protective segment while Food volumes grew mid-single digit. Asia Pac was flat organically as tailwinds from Australian cattle cycle and improving electronic performance were offset by continued weakness in the industrial markets. Now let’s turn to free cash flow and leverage on Slide 8. Through the first quarter, we generated strong free cash flow of $78 million compared to $13 million use of cash in the same period a year ago.

The primary driver of this improvement was higher earnings, lower incentive compensation payments and better working capital management, partially offset by higher interest costs. During the first quarter, we further reduced our total debt by $28 million, ending the quarter with a net leverage ratio of 3.9x, flat from the end of 2023. Our total liquidity position was $1.4 billion, including $353 million in cash and the remaining amount in committed and fully undrawn revolver. We continue to focus on driving net debt to adjusted EBITDA to below 3.5x by the end of 2025. Let’s turn to Slide 9 to review our 2024 outlook. We are pleased with the strong finish to the first quarter and encouraged by the momentum that is building in parts of the business.

The strength of the first quarter is giving us more confidence in our full year guidance. We continue to operate in a low visibility environment, especially in Protective. And we’ll have better visibility into how this momentum translates into the second half during our next call. For now, we are reaffirming our full year 2024 outlook. Looking ahead to the second quarter, we anticipate a slight sequential decline in sales, reflecting the dynamic low visibility environment and subsiding holiday demand from last year. As a result, second quarter net sales, adjusted EBITDA and adjusted earnings per share are expected to be ranging around $1.3 billion, $260 million and $0.64, respectively. Turning to Slide 10. We remain committed to restoring underlying fundamentals by executing in the market, progressing our transformation, delivering CTO2Grow savings and deleveraging the balance sheet.

Lastly, I’d like to close by thanking the global SEE team, who are at the center of our transformation, for their efforts in solving our customers’ most critical packaging challenges day in, day out. With that, Emile and I look forward to your questions. Operator, we would like to begin the Q&A session.

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Q&A Session

Operator: [Operator Instructions] Our first question is going to come from the line of Ghansham Panjabi with Baird.

Ghansham Panjabi: Emile, I guess, on your characterization of the Food segment as it relates to the various trends across your geographies as you look out for the rest of the year, is that pretty much in line with your initial view coming into the year, especially as it relates to the North American cattle cycle? And then related to that, what drove the upside specific to Food in the first quarter? A lot of companies have called out — at the customer level, called out timing of Easter, et cetera. Do you think that played a role as well?

Emile Chammas: Thank you, Ghansham. Thanks for your question. I mean, overall, in terms of the underlying market trends, they are more or less in line with our initial expectations. Although the — if you look at the North American cattle cycle, even though it’s down year-on-year, it is slightly better than initially thought. We have strength in the other two regions, in Latin America in terms of their cycle as well as in Australia and New Zealand, where the market is up double digits. And as in our prepared remarks, we did highlight the strength in Q1 came from a couple of pieces, one is carryover in terms of the holiday demand but also in terms of new customer wins across several sectors. And so we’re very encouraged in terms of the momentum of that business.

Dustin Semach: And Ghansham, the only thing I would follow on there, too, it was a broad base, as Emile alluded to in terms of overall regions, but also across many of our portfolios, right, which was well received, obviously, for the first quarter and demonstrating some of the strength in not just our shrink bags business but across the board with rollstock as well.

Operator: And our next question is going to come from the line of Adam Samuelson with Goldman Sachs.

Dustin Semach: Adam, are you on mute?

Operator: We can move to our next question. And our next question is going to come from the line of George Staphos with Bank of America Securities.

George Staphos: Thanks for the details. I guess, my question centers around sustainability, the transition that you’re trying to achieve, particularly within Protective. So I guess, the question is this, Sealed Air has always had fiber-based solutions in protective packaging. What factors, to the extent relevant in terms of the going-forward model, allowed you to, to some degree, maybe fall behind in terms of share and lose share in fiber-based? What’s it going to cost to bring out these new programs and new SKUs? And what’s the uptake been as you’ve been talking about this with your customers? Said differently, how much is it going to cost? And how much volume do you think you can regain as you bring out these new products? And are you seeing more demand for this from your larger or smaller customers in protective packaging?

Dustin Semach: George, this is Dustin. And again, appreciate the question. So a couple of comments I would make, starting with why haven’t we been able to kind of gain share with the lost share of fiber, considering our portfolio? So you’re correct that in many cases, we already have a very strong portfolio in fiber. And the statements that Emile alluded to earlier today is that our intention is to really round that out, complete it and to make it more fulsome across the board. He alluded to the paper coiler as an example as well as continue to extend our fiber-based mailers in terms of sizes, et cetera. So going back to the past, we talked about this a little bit on the — kind of towards end of last year around this commercial reorganization.

So if you go back three or four years ago, we really consolidated our sales teams into regional teams and, as a part of that, lost some focus on our overall Protective business, right, being roughly 35% versus Food being more dominant in terms of the total portfolio. And so part of that reorganization was really to drive that focus, that intentional focus on the Protective business holistically. And so right now, our customers as well as our internal teams, because for them, they’re really excited about the dedicated marketing teams, a rededicated focus on I&D. And so just being more intentional about driving that business forward. The second piece is from a customer reception, they’re noticing it as well. So Emile and I have had an opportunity to sit down with some of our distributors, direct customers.

And they’re noticing the difference in terms of just focus. And they’re very excited about kind of our recommitment on some of these different offerings and again to advance that portfolio. And it’s more of a timing for us in terms when we bring it up to market. In terms of cost, think of it as right now in terms of our guidance, our capital allocation from CapEx, et cetera, that’s all really today fully baked into our overall guidance and encapsulated in our kind of total top line and bottom line.

Operator: And our next question is going to come from the line of Matt Roberts with Raymond James.

Matt Roberts: I think last quarter, you previously expected EBITDA to sequentially improve throughout the year, I believe. Now I know 1Q impressively came in higher partially due to some holiday carryover. Could you quantify that holiday carryover or any of the cost takeout acceleration? And the decline now expected again in 2Q, is that more volume-related? Or have any of the price flow-through expectations changed? And any put and takes there would be helpful.

Dustin Semach: Yes, Matt, this is Dustin. I’ll take this one. And so a couple of comments I want to make. One is we are continuing to accelerate our CTO2Grow program. We’re really excited about obviously the improvements we’ve made. We talked about the $78 million in terms of run rate we’re already on and the confidence that gives us at this point in time really being at the end of Q1 and being able to achieve the full $90 million. And candidly, we’re not going to stop there, right? I mean, in general, I think driving that cost-conscious mindset into the organization is driving benefits to the bottom line and you’re seeing some of that. A lot of that is going to be continued momentum, right? So that’s kind of baked into the forward-looking guidance.

But when you go to Q2, right, there’s really two impacts, I would say, more broadly overall. One is you have FX coming down roughly — the U.S. dollar strengthening, so some of that decline is just purely FX or probably roughly about $10 million. The rest of them, there’s a little bit of price in terms of sequential pressure. But it’s relatively small. Think of it as roughly $5 million. And then on volume, it’s about $15 million. And that’s really the subsidization of — the holiday demand kind of subsiding from Q1, which was stronger than we originally expected. However, baked in that is also the momentum of the gains that you saw. So if you go back to Q1, it was a mix of that carryover but also a number of gains, particularly in poultry, that we’re really excited about that continue to ramp throughout the rest of the year, which is again going to continue to drive some of that.

As you kind of get beyond Q2, then you get into Q3 and Q4, you’re going to see Food continue to ramp and kind of be in this low single-digit range from a volume perspective with pricing subsiding as we go throughout the year in terms of an impact.

Operator: And our next question comes from the line of Jeff Zekauskas with JPMorgan.

Jeff Zekauskas: You were talking earlier in the call about the risks connected with PVdC. Is the issue the bill in California that’s being weighed? Or is it a European issue? Have your competitors already changed over to a different material, that is, do you feel like you’re lagging behind in technology? Are there particular dates that it may be good to be aware of in terms of when this packaging may or may not be used?

Dustin Semach: All right, Jeff. Thank you for that question. I’ll try to be as comprehensive as possible. So addressing PVdC, there’s a couple of comments I’d make. We’ve talked about 1/3 of the overall business, in Food specifically, being PVdC. But another point is about 1/3 is also EVOH, right? And to hit your question directly, are we lagging behind? Absolutely not, right? The intent of the conversation is to really demonstrate, one is that our offerings, because these really — PVdC specifically in our shrink bag business is really around three pieces, right? It’s the strength of the material science. And that can be whether it’s PVdC or EVOH, we offer both today as well as the technical services capability. And then you combine that with our automation.

That’s really the strength of what’s driven us to become the market leader in that segment and we’ll continue to be. And so we’re continuing to navigate that landscape and make sure that whether it’s our manufacturing footprint or other aspects, we’re able to candidly do both. And that’s generally the way you would update the technology across our manufacturing footprint. And as it relates to your specific question around California itself, at this point in time, there’s no specific dates. California recently in roughly Q1 of this year, earlier in Q1, kind of announced what’s called AB 2761, which is a bill related to — it’s really a toxins bill broadly that speaks to both PFAS, which we’ve already eliminated within our food packaging, and then as well as PVdC.

And the broader comment is we’re continue to work. At this point in time, that bill is not in a place where it’s enacted. And we’re continuing to make sure that we advocate with agencies and our coalition to make sure people understand the impact that you have more broadly with how PVdC plays an important role in mitigating food waste across the globe.

Emile Chammas: And maybe I’ll just jump in to add a couple of pieces. So one is, ultimately, we offer our customers what they would like. And in many cases, we help them in terms of coming up with different solutions to address any potential regulation. So we approach it multi-front, right, one, in terms of working with industry associations to make sure the legislators understand the benefits of the different packaging. PVdC, in this example, it is the best barrier layer out there. Two is within our portfolio, we are offering multiple solutions both on the food and the nonfood side. We talked earlier about the fiber part of the portfolio. And then finally, in some cases, customers are reaching out to us to solve problems that were not in our portfolio.

And we gave the example of the compostable fiber tray that we launched last quarter. So again, this was in response to specific customer coming to us and asking us to help them solve that problem with the EPS challenge, so really approaching it from end-to-end and tackling those issues.

Operator: And our next question is going to come from the line of Michael Roxland with Truist Securities.

Michael Roxland: You already touched it a little bit in terms of momentum building in the business. You already spoke about Food in terms of new customer wins, especially around poultry. Any other pieces that you can comment on that have inflected or that are doing better? And then secondly, Emile, you mentioned pivoting your digital and automation strategies. And you said you comment — you have more comments later on, on future quarters. But can you give us a sense of what’s happening there? What are you reevaluating? Any color you can provide about what the strategy around digital and automation.

Dustin Semach: Yes, thank you. And I’ll take the first part and then Emile is going to take the second part of that question. So just in terms of kind of what’s doing better and underlying, I would tell you, in general, across the business, particularly within Food, bags specifically, right? So if you think about despite some of the issues that you’re having in the overall protein cycles that we talked about holistically, our bags business, so think of it as poultry is more on the overwrap and then think of it as in our rollstock portfolio. If you think about our bag business, we’re really firing on all cylinders across all three regions. And so that’s really the momentum. And I think what’s happening is, what you’ve seen is it’s often no surprise to anybody in terms of where protein cycle is around — particularly around beef are.

But what you’re still seeing is strong retail demand. And so you’re seeing a lot more exporting activity right now happening across the globe as a result of that as you think about the major industrial food processors trying to make sure that they’re getting the right supply to where the strongest demand is. And so we’re obviously helping them through that. So I would say that’s the biggest area. And as you go back to Protective, I’m talking about some of the areas that were better in Q1 with really strong around our APS offerings, where we talked about a lot during 2023 some of the destocking activities that happened. There’s still some of that in EMEA. But in general, we talk about strength in Americas as well as Asia Pac. Again, APS plays a part in that.

Our box rightsizing solutions performed very well. But we also have pockets of green shoots. And think of these as shrink foams, inflatables and a couple of the areas that were inflecting back to positive volume. So again, we’re remaining cautiously optimistic. If you look at kind of the outlying periods for Protective, you’re going to see volume kind of improve. Q2 will be very similar to Q1. But then Q3 and Q4, our expectation right now is that business will continue to inflect. And on Food, Q2, you’re looking at a little bit of flattish volume, going back to the reasons we discussed earlier. But then that Q3 and Q4 will be strong, kind of low single-digit volume growth, driven off the back of those wins and just the momentum that’s building in our broader business.

Emile Chammas: And jumping in on the digital automation, again as we said, we will talk more about this in future calls, but let me just hit a couple of those highlight points to you, the things that we already started discussing in the last quarters. So first one on automation, so if you think about our business, where we build strength is where we have superior materials, technology to offer to our customers, accompanied by strong automation solutions as well as service. And that’s been the driver. And we mentioned at the last call that a big — where we have gaps in that portfolio is in a couple of areas. One, if you think on the Protective side, we’ve announced partnerships around getting the 3D right box solution. And we are starting to get some gains from that partnership.

Second, we announced recently in one part of our rollstock portfolio, where we’ve announced a partnership around trays and overwrap. And we are working there with more partnerships to come to complete that offering. But also on the fluid side, the Liquibox automation sales are a very small percentage in terms of the overall portfolio. And there, we’re working on a couple of partnerships, which we hope to announce in the next couple of quarters, around being able to offer full automation solutions. So again, if you think about it, our approach to the market is superior materials, automation, accompanied with service. Then jumping in on digital, again two pieces there that we’re going to be exploring further in the next upcoming calls. One is on the digital commerce.

So today, we have about 22% of our sales that are going through that channel. And as we talked in the past, we pivoted from just continuing to investing in more capabilities in terms of using the investments we’ve made to drive into commercial success both from the top and bottom line. And then the second piece that we’ve talked about, which will come to market in the back half of the year is around our digital printing technology, where we’re introducing for flexible shrinkable materials, the first commercial-scale digital printing capabilities with water-based inks. So again, more to come, but those are two key pillars in terms of our growth strategies.

Operator: Our next question is going to come from the line of Edlain Rodriguez with Mizuho Securities.

Edlain Rodriguez: So Dustin and Emile, so I’m just kind of looking ahead like the next two, three years, just wanted to get a sense of what keeps you awake at night? Like what do you see that has like the most opportunities and what concerns you the most? Like when you’re thinking about the business portfolios, what keeps you awake at night? Or do you sleep like a baby?

Dustin Semach: I appreciate the question. So I would say a couple of things. It’s what we’re really talking about in our call today, a lot of things that we’re working on as part of our overall transformation is really to address those — really maximize the opportunities we have and minimize the risk that we see ahead of us. And if you really think about that and break it down in a number of different areas, one is we recognize kind of coming off the volume losses in ’22 and ’23 that there was work to be done in the overall cost structure. We feel that we have that well underway. And the $78 million going to the $90 million. The second piece is around the commercial reorganization, where there was a sense that we had lost some focus on the overall Protective business.

We completed that reorganization in the first quarter of the year in February. We’re really excited about the traction that’s gaining. But that work will be ongoing in terms of us continuing to drive commercial execution, commercial excellence. And so those areas, it’s too early to call in terms of the intangible benefit that we’ll get relative to driving overall growth. But we’re quite optimistic already as we sit here in April, just a few months away from that initial organization. The second piece is around the overall portfolio, right? And I think that area, as we talked about, we’re excited about some of the things we’re building to drive in 2024. But that work will be ongoing. As you think about completing the portfolio from overall fiber, it’s not just the fiber piece.

Going back to the earlier question, I believe, George had, it’s also about making sure that we can commercially execute well in that area, not just across our direct customers but our channel partners. And we’re continuing on that work. And then we feel incredibly well positioned, as we mentioned earlier, about some of the sustainability challenges that we’re facing on Food and Protective, the fiber on Protective, and on Food, as we talked about earlier today, around PVdC and focus on certain plastics. But we feel incredibly well positioned. But we’ll have to also continue to manage through that transition and — from here on.

Operator: And our next question is going to come from the line of Gabe Hajde with Wells Fargo.