PTVE - Earnings call 4 2023 | Pactiv Evergreen Inc.

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Operator

Good day and thank you for standing by. Welcome to the Pactiv Evergreen Fourth Quarter and Full Year 2023 Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Curt Worthington, Vice President of Strategy, Investor Relations. ahead. go Please

Curt Worthington

Events Please earnings and Investor supplemental Relations of and quarter CFO. operator with remarks Management's me everyone. to King, Welcome the Thank full today good year www.pactivevergreen.com Baksht, heard section fourth access President reviewing Michael have and today, With in presentation. and at tandem and XXXX our the our visit Jon our presentation. website call should you, be we morning, CEO; earnings on call. this

by Before remarks, everyone we put statements, materially want forward-looking that we and guidance should statements I risks These our our those regarding statements. performance and results forward-looking you future forward-looking for Therefore, actual actual those undue our differ include are from could cause are begin could on formal results of contemplated also materially to not statements to statements. not XXXX. These to uncertainties what from subject discussions numerous remind today including guarantees reliance those our will expect. that differ

our these forward-looking on any statements statements today's to all ended us except date based SEC required forward-looking as make this for refer more XXXX, update December on to discussion the report as we recent XX-K you of law. annual of XX, filings, including year detailed obligation any and are formal call a information to remarks. available on Form we The We of by our for disclaim

useful in measures, certain and performance. financial be we we which believe discuss will Lastly, our can call, GAAP during today's evaluating non-GAAP

appendix in the with substitute today's today's in in presentation. otherwise during comparable considered measures most all GAAP only. earnings are in for be stated, Unless and not results or continuing isolation should the operations discussed to and measures as release are non-GAAP our figures GAAP call to available directly for reconciliations a accordance prepared Our

President Evergreen's King. to turn call Mike? me the let and that, CEO, over Pactiv With Michael

Michael King

Good our morning, continue and the for everyone year XXXX joining overview I'll to thanks messages of us Slide key pivotal Curt. X. today. an we company. a Thanks, on as reshape start with was

set flow. and adjusted primary X% marking our year including EBITDA EBITDA cash to for year free we financial the adjusted EBITDA, Full margin $XXX of increased adjusted consecutive First, records growth. third million, metrics,

last Our of adjusted XXX EBITDA margin improved points year. the to basis compared XX.X%

We free in also cash up $XXX generated million year-over-year. XX% flow, almost

of by drive we Second, our journey overall launching progress beverage excellence, milestones restructure. merchandising important to number our operational our made significant initiatives productivity improving on transformational in a achieving new and

priorities we the one line net reach sight at of Third, XXXX. to high with X.Xx in top achieved our leverage ratio Xs of by reducing year-end, our to

our performance we've significant and business, since underscores improvements the meet our to XXXX. Our operational our ability of the resilience customers needs evolving the of implemented

to recognize now our also possible of would effort I these accomplishments all of have employees. want been tremendous without the

Our same. underlying value proposition the remains

and free focused leverage We distribution of remain strategy continue volume value of to and broad to our flow. generate product coverage to balance enhance to We emphasizing allow make improving value. progress confident and higher-margin sheet. shareholder excellence operational products, our continue will us on we concentrating our offerings, and improved margins on channel on on priorities strategic over range cash that these network We're focusing

against for discuss will our the provide outlook full the Q&A. on XXXX. during performance start financial we the year open we'll updates up key and for made metrics XXXX. for of Jon call, discuss our end and of then At it our to priorities Slide strategic fourth I'll quarter the and the X. progress rest of with on Turning overview an the agenda the our

Turning to Slide X.

business. journey that This we our slide is of of our company that the in a is all of the emphasized midst over One includes year transformational themes aspects the past touches further an during the we progress our for made to that Pactiv Evergreen overview unlock path highlights as for lies strive ahead past on and year value the the we've stakeholders.

reduce our we Olmsted step merchandising our forward X These converting into our associated closure fixed announced were Canton We operation converting completed and pure-play as a in our becoming ongoing mill the the and merchandising food businesses facility well with efforts and cash of costs major free Falls. flow. segment. and capital earnings First, and support combination to reduce broader intensity beverage volatility a of as in the decisions

our heard Beyond fundamental beyond price. the deliberate our down but to on approach the how to really about past our talk goes most stakeholders. It value customers we we about position approach over our changes in volume create our driving to comes restructuring, to and value us you have to it portfolio This year, the being concentrated marketplace. simply

we relative years, extensive goal customers Over a we could profits. effort, this value optimize organization how with resources grow our of with to relationships deliver the across to last leaders have the and the market. X where category long-standing to our we completed potentially allocated analysis Through to customer we and identifying partnered

develop Our products help sustainable look achieve to highest us customers to them also their own goals. to the innovate and sustainability quality,

but for goals meet An the the that solutions journey to our important develop our is in their [indiscernible] own customers goal not them develop transformational to to solutions world. reduce our just help sustainable help

goal at better continuously a packaging operations starts we our Evergreen level, which at improvement. their future Our of evaluate Pactiv

a out operational taking This opportunities our in the need at journey, same recognized improved to of was Production and ultimately several organization. driving identifying across entire Evergreen the us productivity, with with we quickly while excellence. on helps quality reliability the improved operational performance implementation Pactiv company-wide drive time, realization cost the Early System or the the PEPS, goal system. of to our of led effort that This top-down

set that Production is our XX was status during and our philosophy our aspects System status all of Evergreen to end Pactiv doubling I'm reminder, a XXXX to almost holistic a a of rollout bronze achieve facilities facilities first operations. X As share management year year. bronze by the initial target. of the for achieved the XXXX, goal PEPS that touches pleased we

facilities have in XXXX, we already first early silver date, our X facility To status in bronze recognized and February. achieved additional

We expect our locations, year, XXX% the status to facilities the They're seen X the with locations the an that company more get of helps lessons across by silver remaining reach status certified. up gold which learned much X XXXX. the share up additional by of next achieving XXXX velocity locations our to to pick become facilities PEPS able other with facility We've bronze as curve end the first have in and faster.

recognize team for our opportunity discipline. this their take to and want to applaud I

to we more transformational long-term sustainable is there continue However, for our journey company do as our and position growth.

intend roll to PEPS, on Looking operational for strategic ahead excellence which continue out our free alternative and drive and beyond, XXXX the mill, cash include accomplishments, to of our review generate flow. of paper build solid the the we major Pine rest Bluff

pivot these Achieving allowed optimization of important milestones in of a next transformational to has our through the journey targeted to XXXX the operating us phase footprint.

and our with better intend of shift Over the existing the we production to our within rationalize footprint physical industry our next capacity X network years, a demand. portion and warehousing match to

yield XXXX. cost approximately will savings million run $XX by We estimate in this annual rate

we help cost the serve. compete and improvements the and expect customers markets continue will to We our the meet win to company unique in of position these needs

also long-term improved profile and productivity. and contribute our firmly overall believe utilization enhance We margin the plant will of network actions business these to

we as over Before I how end across observing the to as customers. want well what call turn markets I on with touch key win to continue our Jon, our are we to

Turning to Slide X.

to food trading months, options filling their in are moderated While their budgets still by restaurants many food and recent shifting to out dine levels, opting in quick-serve pantries. overall inflation. of inflation by responded towards to outstrip has have historical lower elevated Consumers down or restaurants cost favor prices of restaurants dine-in compared prices instead in like continue where particularly not

Within weather months, consumer become consumers items which we industry has goods. like important for dynamic the the has of demand past volumes and the that conditions through can to impact grocery discretionary This reduced XXXX. consumer quarters It's note demand. more have baked stretched impact several may believe persisted also and in recent store, purchases more

a foot XXXX, we January temporarily quarter saw of wasn't and restaurant of supply this the weather winter traffic in XXXX fourth reduce While severe during the chains. restrict headwind our customers'

on unfavorable volumes January. an had our effect during This

we We expect profitable be Driving the severe impact driven have weather and growth for everyone, isolated our will the returns quarter first top of inflation headwinds. experienced Like to priorities. results. consistent shareholders are generating our

However, we believe resilient. remains the business underlying

invest activity we've of those resources allocate strategically taking well seen the some marketplace. our are to continue promotional in We positioned customers that customers. our and by in On that front, in share limited to

yet, as pricing Pactiv be extent activity for customer believe would activity net a up, picks haven't Although overall for large-scale promotional we seen we sector the the that positive well as to that Evergreen. promotional

As we've a customer mentioned material that, XXXX. the trend standpoint, in and will mostly impact prior worked through XXXX a have as than when ease. price in our pressures flow calls, that we're inflationary minimal due pass-throughs. From destocking raw dynamic that generally confident towards last in are levels, contractual lower was to cost XXXX year compared broader trend seen through lower to overall our We've which to

Additionally, we've pass-through effort contractual lag mechanisms. our reduce the with concerted to made a

to the on commodity near have don't impact So volatility we future. in expect price the recent a results material

to which of underpin and favorable and core our Overall, attempt consumer positioned price across to profitable Food the remain to including leverage capitalize Separately, our to by through expect we've to Beverage fourth volume we base packaging in At during our was years identify XXXX. strengths some the evident time, the to end customers propel on their continue sensitivity designed fundamentals transformation growth These costs, offset strategy, we our input trend the that markets. uniquely we come. seen continue of over reducing to opportunities value in Merchandising and same they're segment long-term our quarter.

turn With the I to now Jon? call that, like over to would Jon.

Jonathan Baksht

Slide start Thanks, our fourth I'll highlights quarter Mike. on with XX.

that of has our XXXX, QX XXXX as context performance. results were inventory from destocking historically underlying quarter performance Both still we over moderated the I modestly inflation still the levels. a high provide is Before improved well course in result, experiencing I'll historical end for cost still were as levels contending in markets as demand costs the detail, across Recall, cover the reflects weaker those and material fourth raw our but with structure. lower financial than of some XXXX, have our of impact dynamics our

million decline of restructuring mill merchandising impact We plan was the results, represents due last majority for the quarter $XXX Canton reported last decrease the a net year. third $X.X just over to our compared beverage the Similar the revenues to the May. and of of billion to quarter, of closure which

over just to value a the over environment down million, prior is Excluding strategic versus those as as revenue items, unfavorable $XX material largely volume cost our year, decisions. lower mix, raw due well

were Foodservice year down X%, was volume down period. merchandising contractual mainly of strategic beverage continue quarter. X% the a costs lower while value compared Price/mix year-over-year, as we Overall, and was volumes increased food pass-throughs, due volumes the portfolio. material raw optimize over volumes to driven function to to lower prior in decreased which mostly decisions by the

continue reflects We with of those are the core the The price/mix XXXX align their we our positioning strategically to with grow trends business customers ourselves over success. efforts. to and course

material was a raw $XXX costs, our compared pass-through year from and ahead the of was transportation range. to cost benefited We increase which costs. of prior million, net EBITDA guidance slightly lower and Adjusted lower XX%

year. coming which since points adjusted almost highest at is XXX for quarterly basis XX% better our adjusted Our margin quarter, IPO second in the margin second consecutive our last and EBITDA EBITDA than surpassed XX.X%,

our is quarter a considering The particularly fourth is seasonally quarter. margin performance lower impressive typically

cash cash Our fourth due quarter CapEx free of flow to timing interest payments. negative was and

$XXX full of was CapEx of Our slightly million previous year our above guidance $XXX million.

year our free our flow $XXX at in As a slightly cash million million, guidance plus. full below of $XXX came result,

net during deleveraging at quarter our of to We leverage debt by and X.Xx achieving sheet continue balance a by focus the million year-end. ratio on reducing $XX total

net compared $XXX beginning by million turn to year, X.X leverage the brought our by the our the we full and year. reduced debt ratio For of down total

pass-through a first in X% From than a reflected was adjusted and perspective, due typical to to EBITDA third lower quarter-over-quarter contractual decline tend to volumes seasonal sequential quarters. and and patterns volumes second our have and net partially fourth the quarter revenue mostly in as quarter The due decrease revenue lower the pricing.

seasonal and And the Adjusted The inventory as a interest net quarter, of timing Merchandising of to EBITDA was of slight XXXX. than was Canton payments finally, proud a seasonal due in mostly we Free Asia quarter cash flow to third and CapEx lower build extremely revenue the X% divestiture lower XX% as well year mill volumes. decline sequential lower of closure was our fourth due mostly to quarter. basis during in on business due the full for third are Beverage our results our the XXXX. the

is net revenue inflation-driven impacts on and over those items, volume X%, down our due Excluding mostly consumer value strategy. spending to

our leveraged margin adjusted which EBITDA to XXX-basis -- deliver X% on over compared of an excellence we point we XXXX, year. to EBITDA XX.X% the improvement However, we was for full which year a focus operational the prior achieved growth

food industry Slide look despite highlighted the quarter, return of service weakness by a restaurant another strong to overall our positive third X% ongoing Please When traffic Foodservice we to segment volumes turn volumes. XX. in year-over-year and to foot quarter, posted

strategic value allowed in end from our and markets. again once benefit to in us are customers food continue core that service end primary proposition turn align We winning ourselves unique outpace our This to markets. our with their

mostly year EBITDA was lower and last passthrough, which benefited adjusted XXX pass-throughs, volume to EBITDA as XX% by we year. successfully improved absorbed to Price/mix lower Adjusted costs, margins material down last sales compared compared of lower rose a points environment and from lower X%, net basis material over increased cost function were to costs. cost raw due raw transportation contractual of

impacted net in driven a offset factors. EBITDA to On that by the traffic raw by volumes, offset. Net mostly Adjusted higher partially strategically seasonal U.S. X%, did lower foot sales results the although across were to is showcased year, revenues manufacturing to declined costs profitability. Restaurant compared by including pass-through. last was the strong solid lower it Overall, volumes, quarter-over-quarter lower our deliver temperatures and down basis, a costs, cost December warmer quarter volume provide slight our costs, down manage and material were due grow a dynamics. ability still X%, of seasonal really primarily

XX. Merchandising still a are elevated towards food are end the egg. the Slide consumer experienced recent moderation like despite consumers to the of to levels themes spending prices. from result and and Turning curbing Food budgets continuation The prices staples is as and that third protein weighing in and quarter their compared Beverage beverage historical their

also We opting see different lower-priced beverages packaging formats. for to dairy continue consumers that utilize

by quality conditions the fourth delayed the weaker channel XXXX. in during from easier the agricultural which of This benefited severe reduced of an overall our comps addition, In impact unfavorable caused first quarter of results. half weather offset impact on the and the our XXXX, fresh market residual causing quarter partially fruit ultimately fruit harvest third

year-over-year of the a mostly in May closure Canton XX%, which due was down were standpoint, impact mill volumes the to From XXXX.

was focus X% mostly Excluding customers over core to the volume decisions down due strategic our Canton to that impact, service our on offering. value value unique volume

net raw impact and in and broader higher Canton costs helped lower down volumes, was to material working transportation costs X% market also was levels manufacturing lower which demand of up costs, as costs. from our the customers more and digits, prices. Underlying the closely match cost of nearing manage food Adjusted EBITDA single lower pass-through with offset to the volumes, profitability. production the higher inventory our mill our than closure has low We're

volumes declines seasonal sequential lesser and value basis, a Volumes large-format season pass-throughs. X%, products material manufacturing decisions due roast XX% mainly holiday costs, [ quarter offset turkey net [ to a use to were prior declined X%, and year. lower lower the due sales by costs, to of like to volume in compared to last mostly extent, costs partially was X%. Price/mix higher to where packaging. EBITDA ] On over like ], different lower down was of to due turkey by contractual types Adjusted leads that revenue categories down the

Turning to Slide XX.

and to important year we from has high single in cash digits almost teens flow. that into to into incurring Our for margins improved continue Again, approach our company's intend $XXX free The reflects also us transformational $XXX to year discipline free cash to profitability It's Over time flow results our $XXX charges. million XX% from period, cash all journey past over note the grown that cost evident improve million pricing to million been of X generating trajectory In financial our despite years. the diligent dramatically time. $XXX over of adjusted million. this aspects has generated and ability. we upper translated our that higher outflows of our the cash EBITDA mid-teens strongly XXXX, has same past inherent that full restructuring our helped

to and improved make balance Finally, our progress we XXXX. flow on profitability in strengthening free cash our sheet capitalized in

fourth bringing million reductions to our total reduced our the the $XXX total over last million we quarter, years. $XX debt During by X debt

ratio the we our year-end. net X.Xx leverage a and XXXX closed low As goal a by stated previously with achieved result, reach of to Xs

of moment to and We ratio reflect just net sheet XXXX. XXXX. our with a delevering through our that like reduced the top I'd leverage established we solid net combination continue flow began high for year cash by leverage on adjusted momentum into and turn because Xs in X.Xx excellent ratio accomplishment X.X the in was XXXX balance to growth, our in EBITDA free one priorities of this and a of a

us to brings the That transformation. of next phase our

incremental of in that our third indicated quarter recall and optimization structure may that that we journey the rightsizing. You earnings, would include next cost leg

transformation. million, will levels operating optimization to to our serve base operations. in efficiently. positions to operate of we investments and alluded costs will enhances next annual the customer the term allow us to we initiative today's and effectively our approximately our expect more adaptable more discussed reduce when ability by us more near be This The We which $XX last incremental utilization while our next require across announcement of our stage our footprint improving quarter phase

approximately expect optimize process. demonstrated willingness to noncore our to businesses important, our of maintain XX% a effort and markets capital have disciplined this portfolio is our our to footprint. This us allocation on we We focus continuously core evaluating help impact total by

consider additional to generate our reduction growth. us ability cost As we flow business initiatives, consistently enables our reinvest in for to cash strong

put is objective. best in the our Our journey ongoing transformational invest framework to to achieve and capital in designed growth position that us help profitable allocation company we expect our to

outlook same several introduce despite for build remain It the a XXXX. year Now customers' U.S. turning the we us operating to prices accomplishments. recent important and milestones on XXXX our the to economy consumer At Slide with quarter may the also and remains and allowed into XXXX inflation, solid XX. order for time, purchasing the at moderating This first carry patterns in our term. the full near was that uncertain as We momentum strong year. to overall the of well levels. historic decisions as as outlook the weigh spending expect

EBITDA, for and adjusted we between $XXX the with full the $XXX million for million $XXX first between Starting year. to million and and million $XXX expect deliver quarter

mentioned, in while Mike food of are moderated, XXXX. early seeing persistent inflation we demand the on impact consumer prices As cumulative have

volumes. We also of have to the strategy drive impact through continue category which quarter We flow our leaders of to plan severe aligning weather in with results. will January, first our

opportunities the cost to year improvement half of year from We our we which continuous EBITDA guidance. expect initiatives expect to supply help chain, to in recognize us achieve realize order through the and second are in full our improvement benefits our adjusted identifying

CapEx. Moving to

in million $XXX XXXX. incur to expect We

we investments of definitive improve we the future. free journey, take making taking transformational achieve actions flow to the year, ultimately our This profile volatility reduce necessary those into and to our are earnings cash the business intensity to and steps, of continue capital our part goals. As

$XX slightly CapEx earlier. optimization footprint million footprint our uplift XXXX, on of higher with puts CapEx result and XXXX. $XX expect $XX portion the can to to alluded a basis, forecast this optimization Between million XXXX be occurring a we attributed $XX in around year-over-year in we the While million to million to to in the

include $XX XXXX expect out facilities million, equipment that to million incur Additionally, the footprint of to of property point total $XX benefit also any impacted during cash proceeds and I'll to possible million during optimization. the and not any we charges of restructuring cash XXXX. ranges restructuring these do primarily of charges $XX total non-GAAP the by sale $XX million from and the

million mill. Bluff of CapEx also includes on $XX capital Our guidance Pine spending our approximately

continues, While success our for future we of in committed the our investing review strategic to alternatives business. remain mill of the

Excluding million. both time initiatives footprint and CapEx to impact optimization the our of XXXX well expected is $XXX our spent, approximately be

it $XXX million, million As non-cash expect restructuring, range our for previous were range beverage in reiterate of total which we million during to the XXXX. charges to the expected cash-based charges our $XXX the and charges to and guidance $XXX relates million $XXX majority of incur merchandising to incurred of in

a presentation. appendix We reconciliation included today's have in the to

generate cash to XXXX, offset expect least and partially We higher a cash in reflects benefit restructuring $XXX which working million taxes and to capital XXXX flow by at expense free reduced of charges. interest compared reduced

guidance, expect Finally, to consistent net Xs XXXX. previous high by our year-end bring into leverage with we our the ratio

first our declining do expect first to on based we during year of leverage to Although quarter ratio increase net the temporarily our the before half first guidance, XXXX, year-end. into EBITDA relative quarter

turn the call I'll that, over to back Mike. With

Michael King

Jon. Thanks,

on are all profitable stakeholders, Evergreen. and Part a provide Packaging benefits here we with focus to I on which that to social Pactiv to from resilient, what Future and the is one our at our Pactiv environmental, sustainability more communities. our Q&A. aligned for employees growth line of shareholders Before ethical a governance and initiatives, and Better to an build This open Evergreen, want update sustainable purpose. our customers, is drives

UN emissions energy energy It received X X Scope emissions. location-based and intensity our with and of limited X and the The consumption on with ESG the and to marked XXXX based showcasing release fourth development report XXXX. X in made latest we is the We sustainable In alignment for and frameworks. Scope GRI our and our ESG commitment SASB also details transparency, assurance location-based the quarter goals. on report, our line progress

proud and report this the details. team's journey achievements of We're the dives into our ESG on incredibly

we by environmental we our our that XXXX, For example, and results. which XXXX between yielding demonstrates Scope X and X is XX%, believe action reduced emissions commitment to

over XXX XX have develop new helping products And compostable champions launched XXXX. sustainability more in We our goals, across innovating practices driving their customers through we're achieve certified facilities sustainable our sustainable while over options sustainability company. to offering our

Internally, we're investing in communities. also and our people

Our do, practices in new products explore empowering reporting to programs supplier leadership chain. sustainability day, report development the We supply from are we we while at ensure audits invite to section. future supply investors.pactivevergreen.com throughout our our in chains. to ethical the leaders, full everything strive found Every integrate our ESG manufacturing and shareholders

We I'm particularly model. major actions our on optimize journey. operational XXXX. proud have progress of our for positioned eliminate excellence. towards took to pure-play us a waste, our capital-light focus our decisive focused transformational We We Those through the business actions of next significant XXXX. portfolio, increase for team phase their becoming operation made a steps journey converting our during with on execution took

the excited of our the demonstrated by of and Pactiv proud very are future We results about remain progress XXXX Evergreen.

concludes that, prepared it With That Operator? questions. let's open up remarks. for our

Operator

from Viswanathan RBC Instructions] Markets. Our Capital question comes with first [Operator Arun

Arun Viswanathan

on Congrats Yes. progress. the

an So just the outlook wanted to of here. get idea

QX, would that should that how great. maybe Or you gains? you there be restructuring bucket out into you items so and to the cost a growth is for could EBITDA maybe the midpoint price of when evolves? also the million 'XX 'XX or if think about think And about $XX how that on touch and of we So range, from those way could volume

Jonathan Baksht

speaking, it's broadly broad-based. -- think I so gains Arun, Yes. the are

a try Really, from we we're cost starting to some have going some high-level are look -- you I here And excuse positive year. as are the of go around look you inflation think give initiatives improvement We've And been COLA the going thematics just year forward. by to at a ramp up as the look the as QX, cost at starting me, throughout got that that net to if you some how XXXX some as we've have guidance you XXXX, of us and paint lag. to items, year. some at to the those be bridging impacted improvement you got -- narrative initiatives you to bridge help here. XXXX, additionally, recoveries the

From to both the a a low have a are volume be and expected and comparison and piece year-over-year, results be merchandise was foodservice we up Canton the recall down digits up And for the in May. food expect the volumes -- to benefit of we the XXXX single shut other last beverage standpoint, food year's portion -- to just in do you mill year. of is, the if mill That merchandising.

did contributed that a of that, to partial year. benefits we So year get last

are, goes some year-over-year more nothing comparisons. So Those out. probably I think, of the material impact

Arun Viswanathan

And point factors things, that you go better, be great. maybe out would out push element this some of conservatism within maybe And able back the the over couple can of been to you or your upper put that the you that what there's that if guidance beat Great. range if range the of you've through last a go to above? and an Maybe years, of of Would fully year, you've are if guidance so, year? could move higher. that you couple that say would end

Michael King

Arun, wouldn't -- I there's say No, would conservatism. I a

with consumer backdrop, where the think where the journey sit throughout we we're I you've largely we've today been mentioned.

our maximizing of and of out has gone on result the just schedule we a quality ability the up also function our up and really productivity have. earnings as ahead of our get move our a of us being earnings So guidance slowly And of us to planning. have just after, quality been beat cost

that, -- classify think continue I -- a obviously, always not customers has to we're I we a don't opportunity. map. a different outlook our outpace as would it's consumer, in could there's I So map and to the think And boat Right realistic. extent and road have the so road now, our

improvement I'd see And it's always so say but room there's to realistic.

Arun Viswanathan

Okay. on progress. the Congrats

Operator

Ghansham comes question Our Baird. Panjabi from with next

Ghansham Panjabi

growth kind Is of of to Kind then now merchandising starting those fourth a divergence the showing that's why that segment? beverage a previously down. gone or volumes about food fair down and the and kind the you're are right, think foodservice trying function up the it? the volume segments, Is through back you're of and were that quarter beverage merchandising later. of value understand way that and going why of and initiative to comparisons volume is having just that sort in you X% and and lapping the foodservice Or so X between just to food

Michael King

bit Yes, And well. lot value of volume think ahead right. over certainly, we think it have to is Foodservice, you've terms our articulated I execution. that and had early you business I it work a a do in of

And in execution and thick so their food phase value merchandising volume. is over beverage of of the

Jonathan Baksht

just also a not dynamic. add, that's look you just I'll Ghansham, in QX as -- And no,

you is think as beverage merchandising. volume there value element, in over guidance and is look out that for more year, that I our I food see in play ahead think this foodservice that we'll of still journey into kind than

so dynamic should that throughout out play And XXXX. more

Ghansham Panjabi

slightly exposure the spending, customers, segments food et of a of CPGs, see you up just standpoint, you across out normally relatively Got in packaged of that it. counterweight that food your packaged your the resilient. XXXX starting sort Foodservice cetera. got that from see ramp et to as of that different And some seemed there? high-level because consumer year dynamic X was a board obviously, a last lot the promotional as do of destocking think just Do to just sort How hammered more cetera, the are volumes and elasticity with would you plays exhibiting. in

Michael King

I as you I relates well. it think articulated elasticity, think to it So

activity and businesses will see -- up. Our food see trending promotional we ramping merch merch started certainly to the tea all and the leaves -- beverage around,

point, I by. gone think has to destocking, largely your

trends a more that of we're business. seasonally. destocking it's for And a think theme normalized our back less you of would I to see

got resiliency, yes, our continues be will right it you've of say and kind is gains. from I foot and look if activity should to for HX show And But elasticity segments would at traffic that's what's for of that outlook that you promotional that. our foodservice that benefit moderate reflected if foodservice tougher both

Ghansham Panjabi

do portion savings -- so would you those so and XXXX, on Okay. the normal versus And sort think your and to what cetera. inflation, that line that on levers you program the optimization labor just just would of savings Is that finally bottom et being forth? announced actual offset drop are through -- on

Michael King

Yes.

where So incremental today, because savings plan, true we that multiyear we a expect sit savings. it are is those

where inflation. in program, year, we've with leaned successful impact we've and PEPS handling been throughout strategy any to the at Our our largely

So as position low-cost is would we and that mature weapon for expect PEPS, value the I PEPS internal to these value fully programs the inflation. against largely changes we'd base expect And capital functional and us be creator our low create well intensity. and

Jonathan Baksht

to sense to, the of some taking add And that are Ghansham, just Yes. system. costs of cost savings. sustainability we're give of you These those fixed to the out

system So it really take that down. to cost effort fixed the base in is an

really isn't an there offset. so And

hard So it is come really dollars will that out.

Operator

Pettinari next from Anthony Citigroup. with comes Our question

Anthony Pettinari

and food guide wondering foodservice between for single-digit give of low maybe year, in that's if and And the detail the maybe terms volume On I'm more expected whether the cadence full us split any back-end on bev? you then can the weighted?

Michael King

Yes.

Jon level of So a said. let in high I'll a and take then empirically run I'll at what we fill kind

our traffic segments, think although backdrop start, both settling when both in and that merchandising the we're the bit a of with and all those here foot of front half of we're strained about softer mobility, foodservice year, we the with a and our late. to shoots consumer green seeing of things off being bit So a you expect kind QX segments,

and and foodservice the of as food forecasting really half in around an albeit So well. of side, food we're so kind than single-digit low our modest second ramp-up outlook half inflection in the side more a -- beverage first foodservice flat on and merchandising growth merchandising or the kind reflects -- in

going promotional half to is a So stronger, we're -- driving be second to inflection for stronger stronger and consumer expecting activity certainly that that us.

Jonathan Baksht

Yes. some of the to think add And I around a just bit inflection. more maybe color

first particularly touch in and we will on of the volume will the year. out, beverage food So out growth we're it to the think higher be up focused, there bit service year that dynamic still exit our as progress food volumes half beverage with we but you'll Canton before true that I throughout be of of dip ramping see the even part at but a merchandising, is expecting than some and of year year. netting volume that food merchandising, of probably back-end in hold the noise go a a that, as growth end And the

Anthony Pettinari

Okay. on a you wondering That's imports it. and it the that maybe asset, FBB been seems at recent there's just you're that State and acquisition kind boxboard potentially down of of recently for like mean in looking pieces wondering a just maybe Union and I'm understanding like then very if space. options give could I helpful. prices And Bluff. the different Pine consolidation some moving with some on us in SBS I'm coming

Michael King

Yes.

the So magic us manage have of that of. we're dynamic the the to reported -- as you be in us. material mechanisms midst we a that's That's and we've there that review we in that. midst no identified strategic And in continue allow prior -- to for quarters,

we just of our a to have terms end themes mill the and our things taking continue start and Q. the to the of right say invest kind going we're cold care we converting into that, other customers. the of mill In mill asset in share, at would and to network that start make here that I that is to Q outage that drive all of the second and And doing sure of that's

So that's on. really have share all I to

Operator

next with Our Sachs. Lee Jordan comes from question Goldman

Suk Lee

higher of rate the midpoint as year quarter, $XXX quarterly guidance. or of about I over EBITDA to the $XXX question versus first kind million hit year think if for to really balance the And am getting the full of first at guidance. quarter you the my the particularly on and bridging guess need I first is the of million to kind run So be

later make you're on mean get full savings in softer of the on And maybe to cost to there's quarter you the I the bridge that when year with it's where be to of be the to I January trying the -- magnitude of sense guess think counting a volumes magnitude. of you you're about going us outlook. just full year the pressure quarter the where quarter, in over magnitude incremental and but the think begin year the year I'm to in to balance that have first to the you help foodservice seasonality first always to would some

Michael King

Yes.

pace to work that Just rate but ability I think run starting of the a you look of benefits, not to year our the we're into benefits see eclipsing and if the at year-on-year only journey get prior we're after year good that. cost, are

year first out. we've the to fitness get kind be to and lap our productivity of some will of this we So got costs in the our

I we other So is, some expecting improvements the in you to we're a as we're of just things, in of as would that absolutely And thing year-over-year expecting one that a result being higher HX a as tell of quarter-over-quarter. productivity prior QX. of a stronger kind area the alluded QX couple questions also we've in online of a activity function promotional backlog of comes and secured but certainly, business

So one things. those a It's combination thing. it's all of not

Jonathan Baksht

the We that do feeling prior they a our one beginning a impacts I'd the of rest at the COLA the more other And QX bit alluded have but we also more some have than impact labor and of impact the is does this increases questions year. year of start inflation do in add, of recoveries to I a timing -- of there increases lag. and

year look And so you as basis start seeing that . margin goes really help a the from on. us

Suk Lee

as year costing that's out on of the hit terms recovery? given what coming Jon, that's in of on kind system way the about as specific of the going in we frame as the foodservice, or to weak is that think -- from first earnings just January in you point weather. back into -- that And What the volume back, well Okay. weaker quarter in not -- from that getting the maybe balance any of

Jonathan Baksht

So yes. of storms, terms in the winter

the quarter-over-quarter a we $X think probably range impact on the million, weather QX is -- I have the did from of It's there. impact standpoint, some $XX a what million in to basis.

million, is, QX one to quarter-over-quarter had quarter about also the [indiscernible]. And $X.X bit the QX lag -- note impacted onetime of thing rest note the a you you I'd might we other to recoveries of payment XXXX, customer of then a in do is COLA COLA be into year. a the comparison going recovery recall, and in might the The which last if the mentioned had of we we the more other true-up just year, that a --

Suk Lee

and other on for And higher year? know as any rate you up for now. What taxes book the helpful. items. expense Okay. interest cash And both to the some cash is expectation That's very modeling then to just true for alluded tax you XXXX, the on see, I

Michael King

a little end front you You the bit out question. of cut that kind of that? reask Could on

Suk Lee

rate? the what's on expectation interest and Just cash expense and book tax

Jonathan Baksht

give I flow No, I'll walk. take just back a maybe a free bit Yes. just -- cash a don't of step and

of higher. I year go last $XXX line if million EBITDA, think to our to CapEx, our understand it to midpoint more guidance guided million through million. $XX we've for the would about probably And so year's the versus just close $XXX $XX items, be helpful you guidance million-plus the about is

$XX negative a on basis. that's a flow So million cash free

mentioned, you $XXX we million which interest, down did pay So of debt.

using year, our we last just is portion still cash year, still was rate. debt our -- have a -- This interest million. so X/X approximately floating about of And $XXX do

forward year-over-year. given roughly will it current So of the that's it's subject the roughly $XX be million interest of curve, million to so But $XXX interest, rate environment. cash savings

XXXX I'll we On a cash a tax tax benefit have basis, $XX the note restructuring. from did million. due And merchandising beverage was to that savings

that benefit. So from here -- taxes we our activities. cash we're cash This to restructuring year, the is have were able same our to going not benefit,

there taxes, in still that we're going would be do. so to $XXX in And would taxes. -- to say I approximately cash I But some work there's million likely

cash there about free $XX in flow. million degradation a So

the we had there remainder And year. We're between restructuring. inventory of other of Last $XXX million that's million more $XX The benefit $XX the free items, this on we to inventory. $XXX this year, should footprint to at is be the This based of the you million year, lower, announced, going levels year. that going the year. guidance something couple at on to around just million normalized million this A be is not year. Last restructuring then we merchandising restructuring repeatable had inventory and of I'll $X cash restructuring. charges. flow $XX if touch then beverage last this one And That's year, million optimization be is look reduction. number that

those together, adding -- taking So charges. $XX that's million restructuring $XX million to of roughly

$XXX But that that walk down, if level the in free accrued going of to cash you So flow. more cash obviously there end the $XXX million to working gets and than free million pursue year. bridge throughout the low you the that's some could into flow. the benefits that for We're that capital be

questions? other Any

Michael King

have do questions? other Operator, you any

Operator

Sure.

Staphos. Our next from George question comes

Unknown Analyst

George [ This ] is actually morning, Kashan sitting in this for [indiscernible]. he

comment So into maybe kind about volume March as are just all talked I of what know terms to staying in able February January here weather you here. the quarter to you seeing impacts and in just of but trends on first from you're well? in

Jonathan Baksht

from, I I -- as say, as, perspective, sources. third-party volume would a start the would foodservice. volume that just quarter -- bit for think Foodservice say what we're with sure. far general from Yes, the I From a market softer. is the let's seeing

this traffic ours, it feel But to a does isn't I'll get is foot ours. bit down. like So

for some outpacing And still help of with It's -- -- with that but we prepared drive do feel seeing And slightly in some within gaining strategically the we're certainly and what outperforming segment aligning so foodservice. slightly the the at are there. up share down. some moderating slightly. is are customers are just -- our consumer We probably remarks, really to like flat we the foot we market to traffic to our looking in challenges volumes foodservice mentioned We should there growth. like

think going to the food it's foodservice. be I -- the a further -- off merchandising merchandising side, volumes are On beverage bit little and food than

Part we effects from Canton into the quarter. is be still will obviously, down. year. that, So that going we're netting first degradation quarter But last some expecting out, first volume the should that of volumes see

Unknown Analyst

you and executing the on plan. generally it? just the all facilities you'll were optimization serving particular are And areas begin comment front kind then Got it. Can what footprint of steps the next that at Okay. just on business what on you when these -- of

initial you And at of the these outlined but some a we expect do the line top kind there facilities, volume 'XX? as maybe then know and you think about of closing impact if restructuring savings what cost result in impacts perspective, of least I or

Michael King

Yes.

So it's the combination of facilities.

So we're a model. operating hub-and-spoke

I book between we're expecting business. consolidation business really would result large and in other we've into effort there mostly And XXX certainly of footprint but rightsize the it's a warehouses just are manufacturing to tell are we're plants. business facilities this. as not degradation our in where attrition of footprint optimization, our a of roughly moving some There a optimizing split So distribution facilities plan. and is outlined our our and network we're XX% while got distribution what those facilities you it's approximately that

lower fruit. it's hanging So more

you it's of earlier, to costs, basically alluded a removal Jon of an as terms business. book of will, And if plan, exit in not fixed

Jonathan Baksht

already. are is year. are in to benefits expenses contemplated QX guidance But it financial year. incurring the And to think about the won't expenses real this benefit terms really of into going -- we way we'll the the year. into this be tell -- will year -- most financial is next you some in And I into there year, that later really this impacts -- impacts felt into start going of of of any really, this our see be would

at this But million 'XX looking cost rate savings from in the exit end $XX the and of item I somewhere that going $XX XXXX, that probably of item, rate the a year-end of 'XX. XXXX year million to would savings kind around you for at more terms -- we're is run than into entering into going annualized tell of 'XX, a

Operator

next Ng Jefferies. question Philip from with Our comes

Philip Ng

this a do from standpoint? versus guidance secured? if have of kind year, segment of more heavily much And have guidance in this business the business that wins levers environment the growth volume effectively more hit versus type you to you've other? X of your The new volume Jon, is enough for that's the you And for low single-digit year, flattish weighted how EBITDA is market won, an

Jonathan Baksht

the full that we the not, I expectations versus down our of are. what to really go just into macro with -- year. of as in in Yes, break aligned us hard general terms expectations it's are current the say terms for market would

some kind in consumer. results soft growth, So have If better will landing low If environment our cetera. single-digit weaker, of that's guidance. really et is -- type GDP that or you likely the track of terms effects environment, the of that, environment of the the

sense. think And about so really in business that we the

in of, short to have weaker expectations, would. guidance single-digit market additional terms gets the would of that and we some if if pull? a levers bit come low We volumes In

part be on We scalability we to results down. business delivering of flex this are to costs and well the the to flex as footprint focused optimization us remove and more help fixed from And of with that's have environment. effort the adaptable some very help frankly, sustainable business up to market the

Philip Ng

in at were absolute to doing a from guys price Can SG&A. with is along year. and Okay. negative are That's over that help standpoint, it going start out in helpful. Margins restructuring it like cost us reason lot your parse hard of sounds deflation? XXXX. have The it's in out tap with a still cost you up ask the kind little just And efforts the you work I a on volume of rather XXXX nicely the in you and do approach because of much why reduction inflation pretty the than be call how of some is value COGS

price the just do dynamic. neutral, expect to spread contractual positive as inflation well? back that the piece you And you to do this from when be to to cost year kind So get that of in neutral expect

Michael King

in thematically, think living of to adjustments, I look you QX. alluded just inflation a prior of Jon the happened lot COLA our at in your 'XX, if to cost and year start adjustments

throughout is think for it is ramp us Q will us up those I year. in COLA throughout for the -- difference out here spread adjustments this the -- year are

in that QX. where is time point on it quarterly than support more in getting of we've is a those, customer So the at been successful cadence

to are recover that the space it we electricity, as fuel, labor costs. predominantly we when space transit on costs, QX in the year all while like feel those those in so they things energy, hit variable as and comes inflation, And muted the diesel goes things us and and

kind last different, of year think view a important a of how are and from I understand to high-level just that. So this little a year it's

add want Jon, to you to that? anything

Jonathan Baksht

big just over of Yes. that give of to enhancement, a I focused last the that initiative do a And proposition Phil, with here. of of strategic and is sense driving value and that which value customers on were was heart really provide. very have on book margin the our you we business proposition, our kind your the strategic think, We the we're to Mike really Back operating much right what's we Value aligning value volume business question. differentiated the initiatives touched year.

paper merchandising was that our piece through there beverage I'd a more year. our so of a cost capital-intensive of mill. initiative And high model say, that big the restructuring, there which high-cost last probably, clearly, XXXX, paper of probably lower And and was mill, to was just and business restructuring fixed cost-out broadly help a reduction is

the it. clearly, And So we're that was cost initiatives, improvement that the program, other then part continuous of PEPS doing. the

As Mike really margins. early innings initiatives recognize still said, really themselves we're starting those in of the in to our

outpacing year, that going right and now up year the as for that we year, taking over you through probably value start guidance our start last cost reduction the offsetting the see half initiatives you'll saw this the keeping volume initiatives. either you this note year, XXXX, facing are those challenges hold, I particularly into initiatives in year. think COLAs cost back of or reduction that as through with But cost are inflation We

part there. help But initiatives are of the foodservice, reduction still over bringing the we point, the back go we're foodservice, we enhancement really XXXX. to value we specifically, in past is volume come mentioned -- and have other margin Food out cost that then as room really to of back going merchandising, the it's into in And some the over going value volume that. the beverage

Operator

Our UBS. comes next Curt of question Woodworth from

Curtis Woodworth

Yes.

understand model. So just operating wanted the to of leverage maybe within kind

get for you year the is And single-digit about up You're guiding talked productivity. guide low you're growth this to incremental unit but to going only EBITDA X%.

your look had improvement at COGS If slide year-on-year you've in the you over X last deck, basis. $XX the quarters, of million

the way COGS the So leverage basically is Or think and about to are to unit right price that? of an offsetting, way the right netting equivalent that about component kind growth? the is think of growth to operating EBITDA kind what's cost so that out

Michael King

that inflation think is actually for actually I close. you're We I mean on hitting the us real very secret. labor real no side. keep

So our our today back. productivity, leverage days early where to able we've we been fact, in in that -- sit operating early dial

I think the the there low fruit I was last quarters. there fruit, -- hanging in fruit know was hanging low

you've through. seen so And that come

get a PEPS, see outpace variable. we support our as see that inflation as of less we you'll we that that, you'll -- to think recovery. that ramp plus becomes customers improve I And start up from the that we and

come close you're see And EBITDA. unit our kind through growth, that in of seeing X:X to pretty the extent to you

enemy. it's so have friend And of more we're and after implement It's and certainly, times work, it definitely footprint well. think I why you've clean our operating we leverage. longer think to times the that I are excited facilities and get perfectly characterized it The improves are not some

Curtis Woodworth

going business, called of number more either CapEx Pine restructuring a for how the kind transition then or of to you given CapEx? footprint some Okay. what mean should guess you million maybe about I do I taking, term longer you're forma future the about I footprint a go out to just how requirements we pro know and forward? actions Bluff model a of that asset-light spending a sort means the of And maintenance kind see around $XXX capital that of lot this but thinking for think of ex forward spending capital and more

Jonathan Baksht

a $XXX bridge a capital And question. of did the paper the of and From XXXX we the Pine Yes, longer-term million that of this net more of you mill free It's $XXX to in year, call footprint but capital not the on composition give to -- sense this optimization, providing plan. sure. normalized Bluff of is give sense a of one good to we're reasons guidance of the a number. a million is the

In that terms geography of the capital. kind of of

capital million so investors the future the but savings, customer offset going probably million mix, mix to return you -- half and a shareholder when of opportunities we about investment cost the $XXX sense, growth We've plan. to will changes really or capital $XX changes got products, growth think value $XXX Just really XXXX, give remainder, through to year, in cetera. flex. in to this be to and about that part that that's et the We're the into yielding that of that cetera $XXX million, years, about about million is then in sustaining the customers, can automation, in consistently et drive growth, we're evaluating it's how find capital, extent going And we all certainly be value disciplined we for time.

Operator

questions any to like to over further And call time. Mike at I'm I'd this back not any remarks. showing for the closing turn

Michael King

Thank Yes. operator. you,

As the the entire entire I also behalf of Evergreen for to to XXXX. Pactiv joining. for team thank today, Evergreen want you an I we on result Pactiv team want close again thank in outstanding delivering

to are strategy conference thank our We We on first journey. progress and continue on forward you and transformational I again. our want you during executing updating we the quarter call look to to

Operator

gentlemen, presentation. today's does conclude Ladies and this

and You wonderful may have now day. disconnect a

Pactiv Evergreen (PTVE) 1 Mar 242023 Q4 Earnings call transcript