Sealed Air Surpasses Q4 Expectations Amid Challenges

Sealed Air Surpasses Q4 Expectations Amid Challenges

Sealed Air ((SEE)) has held its Q4 earnings call. Read on for the main highlights of the call.

Sealed Air’s recent earnings call revealed a mixed sentiment, with strong performance in the food segment and overall expectations exceeded for the quarter. However, the company is grappling with challenges in its protective segment, facing sales and EBITDA declines, compounded by external pressures from foreign exchange rates and tariffs.

Exceeded Fourth Quarter Expectations

Sealed Air surpassed its Q4 2024 expectations, outperforming the guided midpoint across key financial metrics such as adjusted EBITDA, adjusted EPS, and free cash flow. The company also achieved constant currency sales growth, showcasing its robust financial health.

Consistent Performance

The company has demonstrated consistent performance over the past six quarters, meeting or exceeding expectations. This consistency is attributed to improved discipline, solid fundamentals, and enhanced commercial execution.

Strong Performance in Food Segment

Sealed Air’s food segment showed impressive growth, with food sales increasing by 5% organically in Q4 2024. The segment’s adjusted EBITDA rose by 7%, and there was a margin increase of 70 basis points, highlighting the segment’s strength.

Successful Cost Takeout Actions

In 2024, Sealed Air successfully implemented $89 million in cost takeout actions and plans to achieve an additional $90 million in savings in 2025. These actions are part of the company’s ongoing efforts to optimize its cost structure.

Challenges in Protective Segment

The protective segment faced difficulties, with sales dropping by 7% in Q4 2024 and adjusted EBITDA declining by 26%. These declines were driven by lower volumes and unfavorable net price realization.

Pressure on Shrink Bags Business

The North American beef cycle is expected to compress, which could pressure shrink bag volumes. This potential downturn poses a challenge for the company moving forward.

Currency and Tariff Headwinds

Sealed Air is experiencing uncertainties due to foreign exchange headwinds and potential tariff impacts. FX is anticipated to have a 2% unfavorable impact on adjusted EBITDA for 2025.

Adjusted EPS Decline

The company reported a 15% decline in adjusted EPS for Q4 2024 compared to the previous year, primarily due to higher tax rates.

Forward-Looking Guidance

Looking ahead to 2025, Sealed Air is focused on its transformation journey, despite a projected 2% sales decline. The company expects mid-single-digit adjusted EBITDA growth, with a 1% sales growth at the midpoint, excluding a 2% FX headwind. Sealed Air aims to deleverage its balance sheet and maintain strong free cash flow conversion. In the food segment, they target mid-single-digit earnings growth, while in the protective segment, they anticipate a second-half volume inflection and plan to close two plants by year-end.

In conclusion, Sealed Air’s earnings call highlighted a strong performance in the food segment and consistent overall results, despite challenges in the protective segment and external pressures. The company’s forward-looking guidance reflects a strategic focus on transformation and growth, with an emphasis on cost optimization and innovation.

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