George Staphos: I just want to come back to my earlier question. And it’s really around what are your customers asking you in particular in both segments relative to your product offerings? I know it’s kind of a broad question. But within Protective, do you see any difference between what your smaller distributor customers are asking for from Sealed Air relative to the larger ones? So for example, are the larger ones really more focused on fiber and the smaller guys are really more focused on pricing or service? Is there a way to differentiate and, in turn, kind of — I know it’s in your guidance, but what’s it costing you? And then when you get that fixed, maybe piggybacking a little bit on what Phil was getting at, what’s the uplift?
When you get that resolved, what does that mean in terms of revenue and earnings? Similarly in Food, we know you have the product offering that you think you need. We know that customers basically dictate whether they want PVdC or EVOH or any other barrier layer in their bags or whatever. Do you have, given your portfolio right now, basically offer whatever the customer needs, if they want to pivot to some other structure, you are not constrained from a supply chain standpoint, you can offer whatever they want and not have it impact your earnings? Or would it?
Dustin Semach: Yes, thank you, George. So to come back to the point about Protective, I would say that, keep in mind, when you think about our distribution footprint, your larger distributors tend to kind of offer the full breadth and depth of the entire portfolio, where you could have regional distributors offering different pieces of it, not holistically. So some of the needs are dictated by, obviously, the pieces of the portfolio that they all collectively sell. And I would tell you, in general, there is a desire to have a broader fiber footprint, which is what’s leading to us — I mean, it’s obviously that customer feedback, whether it’s direct or within our distribution that are leading us to kind of think about and shape our overall portfolio, where they’re seeing demand where we don’t have it right now more broadly.
And so I think that, that’s really been the focus area. And going back to your question around the intangibility, well, I just want to come back to that one point. So you also made a comment about is service different, et cetera, it depends. It really depends again on the portfolios they sell because the service models that you have are really structured around those individual areas, where if somebody is selling a lot more of automation portfolio, you also have a lot more technical services and related services on those machines. But it’s really dependent on that portfolio mix. So what we’re focused on is getting that optimum mix in each individual distributor and then the rest of it will kind of follow suit. I mean, again, our technical service has always been a bright spot in terms of competitive differentiation and it continues to be.
And our distribution as well as direct customers recognize that. When you think about our overall Food business more broadly, I think that a couple of comments I would make. The answer is yes. We obviously offer both. Today, our customers dictate what they want in that portfolio. We feel really good about — because specifically, the question you asked about really relates to our shrink bag business. And we feel well positioned to continue to offer either type of materials or bags that they would like at any given point in time. And so we’re in constant dialogue. No different when our distributors, we’re in constant dialogue, Emile and myself, with our direct customers, our largest customers to really understand what their needs are, how sustainability pressures are shaping their thinking around their overall needs in terms of what’s also important for their supply chain.
Because I’ll tell you that’s the most important part. A lot of those discussions are less about sustainability and more about performance. And we continue to be well positioned there. It’s rollstock that we mentioned that we need to continue to do more work. And then again, we’re really excited about the play that we have with our fluids and liquids business and the opportunity that presents to continue to displace rigids from an application perspective. And so I feel really well positioned there. Right now, going back to your question about cost, it is embedded and there’s nothing in our portfolio. Just think about it, over time, this isn’t the first time that we’ve had some type of pressure or we’ve shifted our portfolio or navigated these types of scenarios.
It’s embedded in our current capital outlay for 2024 and is part of our broader kind of — as we think about kind of getting to where we need to from a deleveraging standpoint in ’25, it’s embedded in that as well.
Operator: Our next question is a follow-up question from Gab Hajde with Wells Fargo.
Gabrial Hajde: We didn’t spend a whole lot of time talking about automation. Emile, you kind of teased out that you guys will be, I guess, updating us in the second half in terms of strategy or resources there. But just was that a drag here in the first half. We’re reading a lot about delayed CapEx projects from just industrial companies’, in general, lack of visibility, higher costs, financing costs, et cetera? And then just kind of what the book-to-bill ratio has been trending like. And then could that be — if things normalize in 2025, I think, on the Food side, your customers are pretty well incented to use your equipment. Could that be kind of an incremental tailwind for you in ’25?
Emile Chammas: Yes, thanks for that question. So actually, we did say in our prepared remarks, actually in the first quarter, we saw in the Food business, our automation sales is up double digits. But for the year, we’re still in line in terms of where we guided. It is going to be flattish, driven by all those factors that you highlighted. In terms of book-to-bill ratio, we’re at one, right? So some of that is burning through some of the backlog. So again, there are hesitations out there in terms of triggering investments from our customers. But if you look at our customers’ profitability profile, that is significantly improving. So we are still optimistic about the future. But this business, as you can imagine, is lumpy in terms of when exactly it comes, when you install, when you can recognize the revenue.
So again, our outlook on automation for this year has not changed. We’re off to a good start. And we do believe that cyclicality will come back and we’re going to be ready to take advantage of that.
Operator: Thank you. I would now like to hand the conference back to Emile Chammas for closing remarks.
Emile Chammas: I’d like to thank everyone for their time today. And just to reiterate, we are pleased with the first quarter results, and we’re excited about the momentum building in the business and the progress we are making in our transformation. And we look forward to speaking to all of you again in August. Thank you.
Dustin Semach: Yes, thank you.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
