REYN - Earnings call transcript Q2 2020 | Reynolds Consumer Products Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Reynolds Consumer Products Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s call is being recorded. I would now like to hand the conference over to your speaker today, Mark Swartzberg. Thank you. ahead. go Please

Mark Swartzberg

morning Reynolds Good call. you joining for Thank Products and second on Consumer conference quarter us you. thank XXXX earnings

On Principal Chief Lance Officer; the Chris for Mayrhofer, Senior are Q&A. and Corporate and will call Executive Controller also President, Chief available and Finance Mitchell, Director; and Officer, Officer. Financial President Graham, Vice Nathan Accounting Lowe, Michael today be

and like statements from statements Securities time time are risks available conducting it actual note posted being of be this remote are cause adjusted of on this our to and prepared Investor remarks expressed on has of measures made heading. is uncertainties heading any company our other securities differ note, statements Relations presentation which reports call, also Please under Investor respective and webcast, non-GAAP A the would posted within that website. forward-looking Exchange the Products and in we Please call The described the morning additional I implied the those will discussion that course materially available the supplemental cause in make few of from website Reynolds press Consumer archive federal reynoldsconsumerproducts.com. also This and meaning filed materially these with the financial differ expectations GAAP During for Relations to is on on measures. today locations. management’s laws. XX-K slides today. actual annual on focus or results current forward-looking also refer release forward-looking to the may the These financial the Reynolds based at under financial and management’s risks could outcomes and our are reconciliation statements. today to the website a information, Form of report its non-GAAP Commission management detailed an to from issued earnings call release or to will in a from results involve and results those could on that

ask delays, As minor issues We and to In would if follow-up your advance patience rejoin the or to crosstalk time, you for and now, maybe ask answer such, question-and-answer during there turn I interest understanding. over call questions your additional And this in you a to all session. like brief technical the of thank questions. you during question of we the one call. Lance queue and would Mitchell. have other like the I that

Lance Mitchell

everyone. of thanking Thanks stepped sick. Employees Today, professionals to to up an with continue start Mark. especially Good on morning, at by partners ongoing basis. I healthcare the workers, frontline have work those for who and firsthand people to essential would supply retail caring products like also are our essential recognizing

and testing, to learned including them, I on for We to how each review and incredibly second agile high-level the stronger will are team speak challenges the as are new and continues faced in believe second everywhere pleased proud present comments grew to we together, quarter. our from a support financial have half I capabilities them, we and challenges I’m fully company. areas temperature and distancing, the are at the and Reynolds quarter safety implemented implemented leading March safe of where plans to has five included mask pandemic they in and people another working be better to to underway a usage, we come of able increased ahead unprecedented cleaning. and how that We then quarter in The pandemic more washing emerge immense us second basis. has develop from results, company this and ensure hand throughout policies entire of partner. we day pivoting our on managing CDC there to the demonstrated guidance the and our priorities was These stronger served become culture as day yet Safety, protocols our are procedures. one urgency. crisis to and with safety-first well quarter. developed shift It’s and a barriers, thing It’s mandatory and separation, out

the favor capacity that pandemic. demand, products; re-commissioned continue and has stay-at-home improve to to safety staff; ensured we Supply increase be continue accuracy; in the mothballed emphasis rapidly outset in pause unlocking COVID-XX cooking partners our shifted line of in low-volume segment; and creative additions; in items; chain. We plant our innovation centralized retail measures of Our the we a inventory portion expand worked established replenishment and baking with capacity to priority added culture against SKUs to and other We we from to accelerated to guidelines capacity. of for deliver successfully on-the-go undertook products follow the management at moved higher-than-planned were in all to demand.

result, many categories. quarter rate our As in our increase, to levels in of contributing the a to in-stock continues early above retailer capacity well

However, economies. child and including: hiring new challenges hot conditions full and staffing multiple reflect in are to spots; fully and in not operating capacity challenges employees’ product local care existing contributing certain Staffing absences we stocks needs; at factors, utilization reflecting categories. certain out in rates, of local

product Overcoming making and is proprietary advantage more on to We’re new competitive by new spending top the and team. consumer We development. this we management. our but strengthened do. research, developing support retailer implementing here, to have more priority analytical leadership tools progress insights partners Category future a of our

X of conducted out in categories, predict discovering fulfill the most of to of to product new And the that in trends and and in by U.S. of product are us restaurant accuracy. allowing conducted For normals orders, helping that of growth analytical a in XX% undertook trends terms of predictions start We needs and identifying new look of research, state-by-state for shoppers tool waves continually to share pandemic, our back-testing trends for the e-commerce changes a predict our since business. to now in dining growth example, their shopping progressive behavior patterns see identify reopening segment. to us to analysis of research relation we successive important tableware e-commerce, an purchase we categories. our latest the We adopted average factoring localized

we’re of in tells a behavior All sustained our benefits and this categories retail shift us our seeing ability serve our partners. to that

continues and developed growth. are on shifts our track promote operating consumer that which of the today. engaged investment of organizing us cybersecurity XXXX, and the they exit of terms finds increase agreements. heightened in but too. training over of communications behavior, a alignment, benefit cleaning Leadership in categories, that In expectation in workforce remain is allow expect in that with for service only in not tools, order We’ve our and that to and our fourth these nesting training transition lead and plans consumers baking, policies are the the Poll majority long-term, to a adapted increased significant increased cooking, Harris July and planning distributed majority Consequently, to we continue manage to area We on also remotely. our to

store spite tableware party business. revenues we strong lower for revenue price second investments a Reynolds of decreased our results, brand point in low-margin performance reported and demand business, of in certain related financial last quarter, lapping the Wrap year’s exit Our in foil,

goals. we spite had Our the primarily in create costs, Reynolds in their leadership to of and Today, manufacturing and an that XXX operating opportunity as and resilience built agile company, our EBITDA families, When the legacy leads public. more I well-known challenges of elevated to benefiting material going new And brands IPO opportunity lower of that team the digits, capture from X continue requirements solid ethics costs. margin be not to our responding COVID-XX line for from formed financial and achievement success the successful and more and e-commerce entered create years stronger the presented expansion were process our proud we a from top we the in incremental used driven the Products by a opportunities company, platforms. even strong and quarter, a safety, We XXXX, culture grew company of points, in pandemic. COVID-XX-related e-commerce and basis also companies. our and we on competitor, of partner Consumer later, strategic retail adjusted prioritizes to sales team double employees gross by could participation and

you safety transformation like and reiterating we accidents. five, to for additional even at experienced record years; automation top readying products revolution to and three, to net conclude last rightsizing on of and processes; we innovations increase I’m XX% delivery our of in two, capacity. and our to capacity; understand journey. of X standing staffing and and As would build-out, with of production new of number business culture least to the are: low focus our revenues four, we safety move one, to and of shopping a make preferences, that year-to-date, levels the projects That’s priority, happy I support our behaviors incidents priorities with by striving tell advertising other additional that second through next momentum year, work initiatives. a half, patterns; have changing X a the and pandemic from of challenges continuation spending continue consumer into launched of better continued

our turn our I injury the for results last now quarter to our the XX%. discuss have Over we it outlook. reduced X years, to over rate Michael by and will

Michael Graham

quarter increase pandemic, reflecting Lance, good the of that Waste net stronger response saw navigating in of spend We team. minutes across of whereas whose & results through the to year. volume & this compared that stronger went Cooking net Hefty been the the to stemming increases. $XXX due increased $X.XX. negatively echo our last for Storage year. Thanks, was was noted the Products these details the demand primarily the driven for The few second in increase morning, shortly. financial were as impacted Reynolds the thanking be comments $XXX IPO. The and quarter was the the consumer the in crucial the a our to adjusted Total prior second segments our million in was by employees million the million to for of part lower dedication million from the million revenues for We’ll structure quarter. said, previously I the Tableware XXXX. go of our primarily will as quarter reviewing $XXX by Adjusted second pandemic. The volume the like quarter Presto for the EPS compared now capital quarter prior with aforementioned Adjusted the $XXX Baking, extremely effect $XXX interest well to in volume second driven expense, into the and $XXX company million to million segments, has everyone. segment EBITDA Lance’s the primarily compared XXXX $XX to proud increase by and to was implications Net second of I’m was pandemic. income quarter Hefty and I’d Reynolds With year, was was into income

net response year of Baking of I were second Now driven million was pandemic. discuss $XX the primarily demand Reynolds segments. to will lower The pricing. by costs, as material lower revenues million material the the was year cost. our COVID-XX revenue, million taken to the increase in and compared largely year. pricing supported & of and The increase results prior achieving last in actions from partially each compared $XXX points with the key sales our and the consumer the as lower offset price $XX in we by customers related same of which higher prior along the party lower increased Cooking manufacturing by in due impact of impact partially to was the period lower $XXX result quarter a Adjusted offset million quarter to EBITDA as of in of

to revenues in response the the by compared driven the were pandemic. driven For $XX EBITDA consumer increased The million COVID-XX the was increase million by million $XXX $XX in to in year. the $XXX prior was net quarter primarily demand due million Hefty to in Waste the second quarter year, compared Adjusted & prior the to primarily Storage, revenue. the increased

the Now fewer summer gatherings, events. prior for the on the around quarter end net and $XXX negatively year This because moving of segment million during Hefty compared segment the were of to was school to particularly million in social Tableware, year. impacted revenues $XXX

to in costs a Additionally, and the serviced by standalone manufacturing increased contributed the year, transition $XX our businesses million million retail decreased in to EBITDA decline. well partners our lower primarily the resulting from foodservice was demand prior due to material $XX revenue Adjusted from entity. to as quarter the as compared

the EBITDA Finally, offset The million pandemic, quarter in by $XX by low-margin prior exit the driven $XXX was in the primarily to demand response in to were partially Presto prior Products compared the businesses segment the second store-branded to the $XXX increase million million year. consumer net increased to year, due Adjusted in driven revenue. of compared revenues prior by million year. certain the primarily $XX was increased COVID-XX

which a net moving of and our as prior cash of on $XXX for quarterly I record compared expected million to am paid in billion. million had XXXX, to as the million cash August $X.XX of XX year. to we cash per debt is the shareholders XX. total Now $XXX Board prior common approved million capital a year. dividend share, operations of of compared our a quarter June structure, to for pleased August $XX from quarter outstanding $XXX XX, be operations that was CapEx the from was to announce $XX $X.XX adjusted million to balance in Adjusted net has of the of

secured the $X.XX $XXX Additionally, loan range to in we to subsequent to quarter guidance $XXX adjusted $XXX in of be ending $XXX on per be in is adjusted December of be the million EBITDA be million; of to like facility. payment share in per range fiscal income to for to the range now end, the net the be I million following $X.XX range what we to our balance million; $X.XX the billion of in of the to to million be share to in senior adjusted XXXX. billion. XX, $X.X $X.XX $XXX earnings term our per $XXX and to million of a The range net $X.X against XXXX: per provided fiscal to comment principal voluntary for made the year net guidance on would earnings the range to debt million; share; share; $XXX income previously to

be our higher-than-previously expect previously net for net over per ranges balance expect demand to the result of adjusted planned the end a of upper adjusted at continue now And share, income earnings provided the many earnings the adjusted year. income, EBITDA, We products per of and results to for as XXXX share.

the facing forward. going our reflects quarter. confirming our of outlook is of context communicated previous provided of high net our expectations for third degree for and positive particularly We debt. are number also guidance the in limiting we our on business This guidance a a a May also fourth and uncertainty headwinds quarter, in fourth It the

XXXX. track We early are to on objectives completing capacity our by

the involves cost we existing as However, in environment, of challenges additions factors reflecting capacity Lance the earlier. capacity, add the added staffing lines are noted and compounded this on

of smaller continued of indicate us moderation to we balance to and Our the expect over of consumption tableware an from the Also from pressure sales. QX’s foodservice offset higher fewer improved expected research lows, headwinds trends pandemic trends business and our business out and holiday-related of the many year. leading dining less see for is as this gatherings to social everyday rates products, from expect our while are

all We outlook in worse commodities have also our of increases seen our in the QX is recent when May. expectations earnings than in months, reported we key and

to We COVID-related of safety million were discrete In rise. have range in $X items the seen related costs cleaning, million. cost quarter, $XX for and the

and operating the environment, other in increased in and distribution have operational are of units and fuel from cost Logistics In result delays savings programs certain as costs a addition, supply arising efficiencies. inefficiencies a higher experiencing and costs chain we high-demand lower factors.

pandemic-related plans are amounts delays increases to by increases of half. A&Ps first above well the in half, are the SG&A second our levels momentum that QX elevated, additional as scheduled reflecting build for to to A&P as portfolio Thus, for planned quarter originally XXXX. driven the We be heavily expect fourth skewed well

we assume partners of to Finally, or it significant retail our operations, is important the supply to that XXXX. note chain disruption for no remainder

lock-off you expired. by Packaging the the Finance Limited on executive On know, in many the of as officers a topic XXX-day sales of the secondary, directors, of recently shares

and any largest the shareholder for its intended and advised Our very the with performance not is is of position outlook pleased in change company.

positioned look attractive we model drive continue that to ahead, the believe in As our to well returns term. is business long we

you. to and single low of continued investment to to average digits; continue growth be the volume EBITDA expansion; turn average annual margin expectations net growth growth low focus a Thank income it to Our approximately Mark. annual digits; ratio net in adjusted dividend and that, areas average we the over in mid-single will mid-single digits; of support annual of payout With income. XX% back

Mark Swartzberg

Michael. Thanks,

the it for over operator As Operator? the I turn questions. Instructions] [Operator to

Operator

of question comes Bill proceed Our Please Chappell the question. Thank from first your Truist. Instructions] line you. with [Operator with

Bill Chappell

Good thanks. morning. Hey,

Lance Mitchell

Bill. morning, Good

Bill Chappell

I private-labeled portfolio. on – just with portfolio well certainly, is positioned guess your your store-brand

trying of if year are of consumer Just you to you remainder the understand or related of are to kind kind trade to of down for if the margins? expectations consumer starting see and kind impact trade-down

Lance Mitchell

If this – is Mitchell. Bill, Lance

If by brands, to opposite continuing. just we have from the you store shifting trade-down seen mean is brand

see data, that branded that strong shares in cases. in in categories the some they across And for can the businesses. through fact, have continued remained scanner to You July, even have our grow

Bill Chappell

rest move to we expect And for do the a of you the it. as and Got year kind that of in recession? continue forward

Lance Mitchell

legacy recession meaningful that there a this have for companies And last we has of products. through during historical as gone Products, changing have. majority the Reynolds company the not in shares back talked Consumer was recession look Well, but difference the previously, as no the indicates the

Bill Chappell

are the you do road things need to there planning this well just it these and on is continue expecting being that down pulled COVID into you anyways? additions? it. XXXX And the then one demand Got were Are past to is follow-up or just for forward additions capacity a

Lance Mitchell

some capacity our pull permanent more in is increased a but on based this consumer pattern planned combination my talked type we additions, remarks, also about It indicates for both. have because from research demand, consumers of is demand our We capacity a our categories. outlook forward for I the did that opening of

adding the we additional So long-term. capacity for are

Bill Chappell

you it. much. so Got Thank

Lance Mitchell

you. Thank

Operator

comes from next with Our Please proceed question Evercore. Ottenstein you line Rob of the with question.

Rob Ottenstein

you Thank Great. very much.

how something So going given are as March your given June. there’s retailers you think I that, the that retailers permanent you they through with am role do see that here, discussion in is let’s a And related to is – as And pattern progressed captain that e-commerce dialogue the through how saying give how And continues? to of whole with you what going shelf category And demand retailers say important then has more crisis are space? agree with? a more wondering the of therefore the terms development e-commerce?

Lance Mitchell

Okay. first the guess, two relationship in relationship was And think it the there our the is pandemic regarding emerged quarter one before. has partners, I our than retail questions from I there. with stronger last

about them been capabilities, have we on and transparent about that. with come going We our a SKUs we that capacity to agreement our collaborative our And very have are additions. pause talked to

that before grow anticipated there are stronger agreements pandemic the a had categories originally the than we behaviors to are permanently and So are changing. demand going because consumer

that’s Regarding shelf space, premature.

We haven’t discussions. had those

been regarding not discussing yet. But introductions. something We that’s that’s the the as agenda product on of are new space, shelf

The again, second question, remind please. me

Rob Ottenstein

XX% think, your products. I towards looking based that, e-commerce mentioned as population was research, a had for of you your channel the XX% Just on –

terms what adapt you discussions that to to are of brick-and-mortar with means that means how in of trying understand what going terms to your in your am retailers? I So that and

Lance Mitchell

I of brick-and-mortar retailers, first include all, we e-commerce. Well, in would our say,

we brick-and-mortar the our of from faster e-commerce growing, traditional second our categories, is and we not quarter the in home retailers that at participating than forward but because e-commerce. grown So, standpoint, and all of look programs as very with are the It’s it’s results look in growing we in way e-commerce. share a fact, pleased the we curbside we through in in that brick-and-mortar are those most aspects And just products delivery, have pickup included channels. are

Rob Ottenstein

sales to looks in of able give your and your a e-commerce you were Are of what sense sense like? what of e-commerce us a percentage share

Lance Mitchell

murky. at that share because can’t partially is Yes. I the point this still number data

are not. retailers are detailed very Some and numbers some sharing

get data. getting information. provide we going and as to specific more more data we directional is So not are there, over retailers but clean That improve time

Rob Ottenstein

very thank Okay, much. you

Operator

with English question line question. your comes next Our Please from of the Sachs. proceed with Goldman Jason

Jason English

Hey, morning good folks.

Lance Mitchell

Hope you doing are well.

Jason English

surprised Can think looking the of the in In little light what a the the gap? expected are was walk many see why some figure. at these offsets? numbers, posted we of is? IRI, you the all data are us quarter. I by I Nielsen As you disconnect What more we a or revenue to at of this look us through robust

Lance Mitchell

this are data straight and related really want a We on must talk our so quiet out the and on decline branded private our net also and this, macro Mark. and We period, attribute about take at reach that in level I focus did the category the to party to mainly revenue performance. scanner of label

try break So down me for let the and quarter. it

and party for Our primarily restaurants, aluminum bakeware, and foodservice pans. down were $XX is net foil revenues million party related the foodservice and related into quarter, just the

into revenues, accurately Our said you net I And X% performance That’s the revenues to we go net the net label excluding up below how – from our rates well branded net perform see related important of the party deep it’s the for data. category reported the were to still I private scanned and scanner many and channels. cited know quarter. related

from way note is new segment paper we segment, performance part performance For plate in of disposable area, significant introducing also in In that it’s are the Hefty meaningful in to whereas products example, but the performance, don’t label in than we cup tableware, outgrew that that more private by a label our standpoint. offset was yet segment our dishes in tableware, a a Cups private our participate foam important paper branded. and

the our certain of for Tableware in some applications. business foodservice addition, from is channels In sold revenue

data you that company. of those events, and the scanner across across can’t – So entire on our of combination a look all at our apply just business

Jason English

the point. really I That’s helpful. appreciate

ahead. go Sorry

Mark Swartzberg

substantive is covered substantive you I the are add it granular get This Lance most the that to at get data speaking, you tracking nothing that, can. will we points. – But trying Jason. Mark the and because to And Jason level

Nathan to definitely that number to And was and get just was – Lance the and to said, the of help that closer as to given quarter. be it obviously I because – month see want you look for you able plus try follow as X%. intra So number to through sort go underlying you

Jason English

Absolutely.

You are trying a are learn here. and still company, new all we to

heavily. forward So we you will on lean a little going more

end The of on in and ad lot way of Can second spend your SG&A that from commodities quarter. From to costs, the there? Michael, of give headwinds logistics quantum investment? contextualize level sort question. to the of COVID about in you talking any of tail are prepared headwinds remarks, heavy-up in Any moving fourth you a incremental ran to the through fourth quarter. you cost, the us expenses

Michael Graham

spending. I a Sure. our on big comment A&P large attribute that, that a related – would is part headwinds, I did to of and

to of couple spending. a things A&P that contributed So

related that was but make sure that for the levels to COVID, we of – our large we build A&P franchise the supportive for start it spending. of of as it’s Some a want is part momentum to appropriate with also to

relates big a that A&P to to you that of cost see spending. So additional chunk directly

aluminum in The side as second a rising it would in do well And from quarter. on of we the is resin say, costs the the standpoint side. as increases other larger an part we is that see that I have that that, both commodity overall

Lance Mitchell

expect our to expecting different say holidays December partially because standpoint, this of standpoint, already be of from That we we and because don’t and are partially I And gatherings be they is quarter to the a kind from those Jason, past, largest volume on the in volume holidays. have would the year. different. hand a products many have drive seasonality Thanksgiving the to traditionally is consumers the going as our are same also

Jason English

be your see out. to it time how plays I that all Thank will and It Yes. on. for interesting will pass you

Operator

question with comes from your questions. Lieberman next with proceed Barclays. Lauren of the Please Our line

Lauren Lieberman

morning. Good Thanks. Great.

Lance Mitchell

morning. Good

Lauren Lieberman

we follow-up also looking line clarify to I your going guess, through in-stock wanted offline. I versus some again just up just further just wanted I at to details you to that we’ll on and know be out-of-stock. Nielsen helping how on, through – forward, pick us ran comments the But I should

would they say that let’s retail need inventory So where July, and that, to in be? are with line say, takeaway of kind right guess, back I shipments levels as now, your are you now of that

Lance Mitchell

Let of ways. me a different that couple in answer

of they all, were our from have levels First April. where improved in-stock in

So adding demand we inflection closer saw we to the to as talked rapid April opening of out of combination as coming that the place. point I solutions that our and until a stocks about with put easing have is my Capacity increases increase demand, remarks in end staff. of due capacity our at planning, well creative matching in

we by we capacity at retail returned, work but So to XX.X% fill I indicated, target are continuing keeping It’s yes, have in-stock that in to we levels my in companies and remarks. low we hold said the that continuing that partner like the varies case that, and we go as ourselves. the for not not categories, you XXs. although our and the levels allocation because with But seeing as But level to many like product our add like out in the not may a improvements, are our ourselves a the see you into not retail it’s in than improve lot staffing, us shelves are would at to we opening it to, retail our to are others. doing and still I wiped partners. we better the have partners are And And of our products of other rate, tell on in-stocks. we

and of in high – our of demand, are everything are lot we a making. – are our We products are in lot that we shipping essentially, a

scanner And the in you’re is so what shipments. seeing data

So retailers sitting are inventory. on not

lot of inventories. a depleted their they’ve fact, In

Lauren Lieberman

touch innovation, because already beginning on that remember continue Okay this wanted to The you under now conversations we pre-COVID, of that some the some share on at about for time, to performance pressure. I Hefty can story your is, back gains when think and also be part to came strong if market the But if were right? the they of I had reason – data, that were we’ve very of alleviated. was capacity-constrained shares was we you see to Nielsen look that the

kind retailers in-stock CapEx, the thinking that market that a products just superior requires pressure, of investment share persist levels, to kind of on this can deliver stock but of there prioritize share of and of needing some to continued greater got? to the so that worry manufacturers outside because with that And you’ve is build issues, market ahead back

Lance Mitchell

categories those are the in be have capacity to about by I waste end that case flow talked expect Across which be able And we that the bags, restored of high year. demand, the to we Yes. underway. increases at levels significant includes

talk waste we So through business bag directly. the can

shares are I very to primarily minor few think will during out-of-stocks this at this time. some up to I of rebounding have our that retail a those any period partners, and rebound. strongly held attribute but change continue month

Michael Graham

in share absolute a you can what like scanned to in to at channels am Lauren, after add I just are more simply is reading that the actually we good. going Lance confident time, the our did that channels to market be scanned what in performance little accurate because terms of saying. see I would just and is trends more

as the where from. pick of hear are where looking you’re dominant coming share performance. trend looking said, healthy So not a or in-stock, your performance, the at and but the I at your Lance pick pick perspective your – the one from way I about But is there channel channel, few exceptions, the you’re you’re your share data, category, concern very understand

getting a proper really Barclays comment. our granular not you’re at the So what’s that’s happening in just of really to sure unique I down making think to business, it and level boils

Lauren Lieberman

will awesome. you Okay, follow-up. Thank you. much so guys. I Thank

Operator

[Operator Instructions] comes the Our Mark with Please your with from Stifel. question. next proceed question of Astrachan line

Mark Astrachan

of if have and everybody. about the look kind presumably oil there two I the good the to questions. and look year, morning just One, at at appreciate so related at beginning for thanks they’re cost outlook, ask But they resin Yes, to levels below outlook. been relating still on just where commentary would aluminum, initial we Wanted of the your increasing.

you guess, maybe balance year relative for more maybe then didn’t are this, press And related EBITDA in you what that, be that? metrics helpful? over show release, improvement could of your challenged year-on-year I guidance changed XXXX to in terms that to touch around have commodities? so in would the I’m commentary of within those in the same adjusted being over-analyzing to What has you the anticipating that, the maybe if too, on just So

Lance Mitchell

take Nathan, question, take And can Michael, XXXX the question? commodity you and you the can

Nathan Lowe

No. Lance. Yes. Thanks,

pick just commodities. on our will about So one I

mentioned as expectations commodities up again increases as prices, commodities. worse increased polyethylene just followed – So of we contributing in Within and are the than and for frankly, and part by in additional of of are I is those our which of and year our signaling commodity back spend of COGS, – example, worsening polyethylene in June entered is More above June the in are, if All we certainly the outlook as are that just and our points polystyrene materials half. now a largest which were the an reminder, I’ve resin. are about suppliers those to our July where started recently, that slightly year. three and aluminum XX XX% then

Michael Graham

bit we more a little on expectations that. be have And yet figuring But still to look, we relates we XXXX clear as uncertainties that. far visibility, a the will give and talk goes a as to concerned, ready get and of bit are you to is as still little more we out. into not quite as it yet there our insight are around And about year is XXXX we lot

Mark Astrachan

Okay. Thank you.

Operator

proceed of question Teixeira with line comes RJ the Andrea your question. with Commodities. Please next from Our

Andrea Teixeira

Hi, JPMorgan. it’s

everyone. thanks you dynamics, So, question I the happy good My you color consumption am consumer and are morning and the is the earlier question. on gave in appreciate to hear all I well. all

about growth, you see trying progress – idea as I or the give in it you. a exit rate bulk the us of Thank I was became have cooking shipments inventory, innovation, you And reopening. for I’m and that you give from try you also consumers So follow-up weaker And I think in if X. pantry can please I distribution comment for also particular the basically, particular, out us of while the for are on for shipments the of to come on less exit their the level cooking can the an additional you already rate the benefited to And against still of has yet to you quarter an inventories? year? balance of negative tableware destocking? idea mean, accelerated, hoping those figure with has talked for working you do if tableware? so think on can your to

Lance Mitchell

Thanks, Andrea.

continuing For are and are experiencing elevated to categories they usage, the – grow. RCP the in-home

I that think takeaway. seeing is of the data you’re representative scanner

moment there’s on a point no they’re on our this of allocation because As high-demand inventory retailers I’ve products. mentioned replenishing most really at ago,

We back, are more we’re tableware seeing and actually And states recover, states. items. that than within to seeing those particularly stronger others. those in But have demand geography-by-geography tableware overall, start reopened – we are those tracking state-by-state those that in

data overall So QX I as think demand really further reflects that. on the comment shipment from shipments, than scanner and I and any an the can’t well, standpoint data

So the could two you asked? me remind of you questions other that

Andrea Teixeira

Yes.

surveys. and to have to a foil color. you then pantry the that this Sorry, or inventory Like I that basically you at what still consumption Nielsen appreciate there’s think there run out But of your Lance. point? tracking shelves? products and their meet they aluminum foil, of know still clean are baking probably people meaning consumption you stocking on products, more all you habits. kind demand try I lot or bags, and trash see few I consumption of and are through Do think think bought obviously and Yes, the the is these Nielsen because now, we

Lance Mitchell

over over they in more disposable XX%, generating no to well ease our burden work say our past majority, are Our baking, the yard cooking, consumers research dishes months, of of and consumers and say months once and stocking occurred pre-COVID indicates is already are X/X that products data meals. frame, steady few doing for our our that the foil that per are cleaning, the trash of The three ago. time the via about now more they’re customers longer did than of the are least shows survey, pantry foil, And over, May XX% in half usage April, they – – day, of occurring using X%. more has cleaning. over at The occasions. occurred that use is tracked the up that de-stocking from using a these and and organizing benchmark example, often more And is cooking

sticky to continue this So really long is behavior the expect that for we term.

Andrea Teixeira

it That’s so pass will on. super helpful. I Thank you much.

Operator

comes Instructions] from with Our proceed Nicholson Wendy of next question Citigroup. line your [Operator with Please question. the

Wendy Nicholson

a low-margin My as is revenues the I just that that the with number $X Two remind is just do us, And Hi, million that to good as Or a million place? from on large That’s question that’s in protocols When Number expenses, Question be of to forward? with does that year, more got things. morning. $XX question headwind headwind? the you many quarters constraints. can $XX related those that to going one, business you the million expect it’s housekeeping capacity of had last? – hope permanent will you particularly have exit we put you then okay. expense real Michael, the there is new two, COVID you how one. last regard

to capacity contracts goods? Lance, Just to from Is do that much. your for brand a your Thank meet? the demand branded I you choice and can��t versus you that that what’s you like, you’ve how sense. demand for there hope have so demand the demand going when decisioning sometimes, manage label make got sides label like if a you’re you have where private the how you or constraints you meet prioritize obviously private the makes you process on have both

Lance Mitchell

makes two answer question. will why questions, and last It Michael, don’t I great take you sense. the first the

Michael Graham

Sure.

So what we upon overall million obviously, PP&E, will and some it are – gave discrete million, experiencing, type the the cleaning cost, I It’s and of you, that within because, to be relates that to that our peg depending $XX seeing the in country extra cases, we’ve experienced our thus and are to labor has on COVID, $X all around COVID far. impact things on locations. range hard happens in costs costs elevated these the that what – been we’re ramp-up as

that could So vary.

a range peg to a forward, is really $X hard in give it’s to I you reasonable assume million think but we – that $XX to going somewhere number. specific there, million to

exit to business, behind expect September. as to So lapping us of be of the it in relates we that low-margin the

it September, normal a – those losses relates of we’ll as So of as be business. on pace we could to

Lance Mitchell

will it the gradual to And majority through I add be it too, will It’s a vast through the So was then just right? a of of QX that. QX, QX, final right? part and in

Michael Graham

Correct.

Wendy Nicholson

it. Got

Lance Mitchell

capacity in demand items we’re the that So and items constraints is answer on the provide are both between both collaboration. you And capacity to how for product-by-product that SKUs. of store in-stocks RCP that and lower-velocity balance for brands the adding on as customer-by-customer, we pausing balance question brands, managing high-volume do that are on

retail partnership, So they our communications shelves. it products want in on both and because really the is partners decision-making with

balancing had store went probably made data both. in have way the the make one severe back to case decisions stop significant of we for And some we been case part, not able the plates, really brand other. decision after had foam in in-stocks on in it’s to the where scanner the been XXX% the we were on balanced, a you until Now in demand. that a of constraints one production or to for very we It’s Hefty But QX most time. and foam of capacity brand saw a period get and

Wendy Nicholson

enough. Well much. Fair Thank so done. you

Operator

over Mitchell, for now back this would We comments. you Mr. the closing further turn floor time. I questions to at to have no like

Lance Mitchell

thank Well, Products. participation Consumer interest you, in everyone, Reynolds your and for

Stay safe and a friends. vigilance our company, more families lead and Goodbye. strong team and your with safety an healthy. this and performance care discipline in on Please becoming and your agile We’re even more attractive to I’m a of yourselves, stronger and environment on for products. take great focus privileged

Operator

conclude teleconference. gentlemen, this today’s Ladies and does

your this may at a you for and Thank You have lines day. participation, your disconnect time. wonderful

Reynolds Consumer Products (REYN) 9 Aug 202020 Q2 Earnings call transcript