Ghansham Panjabi

Ghansham Panjabi asked about the drivers behind the Acetyl Chain's lower EBIT margins, distinguishing between cyclical and structural factors, and inquired about the 2026 working capital assumptions and the basis for confidence in free cash flow targets amidst a challenging first half.

Answer

President and CEO Scott Richardson discussed how Celanese adapts to structural market changes, asserting that the underlying Acetyl Chain business is stronger than in previous downturns, despite current overcapacity. CFO Chuck Kyrish expressed confidence in achieving the $650M-$750M free cash flow target for 2026, driven by an additional $100M in inventory reductions, lower cash taxes, interest, and cost reduction outlays.

Ghansham Panjabi from Baird asked about the Acetyl Chain's EBIT margins, which were in the mid-teens last year compared to a previous trend of mid-twenties. He sought to understand how much of this differential is cyclical versus structural changes like new supply and spot market challenges. He also questioned Chuck Kyrish about the 2026 working capital assumptions and the basis for confidence in free cash flow targets amidst a challenging first-half operating environment.

Answer

Scott Richardson, President and CEO of Celanese, explained that while structural changes like China overcapacity impact the Acetyl Chain, the company's underlying business is more resilient than in previous downturns, emphasizing adaptation. Chuck Kyrish, CFO, outlined plans for 2026 free cash flow, targeting an additional $100 million in working capital reduction (mainly inventory), $50M-$60M lower cash taxes, $50M lower cash interest, and $25M-$50M less cash outlay for cost reduction programs, expressing confidence in achieving targets through these levers.

Ghansham Panjabi asked if Celanese is observing accelerated inventory destocking at the customer level or if inventories are already low, and inquired about working capital contribution to free cash flow for 2025 and 2026 parameters.

Answer

President and CEO Scott Richardson noted seasonality from Q3 to Q4 is similar to past, with no extensive accelerated destocking, though some pockets exist. CFO Chuck Kyrish stated working capital was a $250M source of cash in 2025, expecting zero change in Q4. For 2026, he anticipates lower restructuring cash outlay and EBITDA improvement to support free cash flow in the $700M-$800M range, which is sustainable.

Ghansham Panjabi asked if Celanese was observing accelerated inventory destocking at the customer level or if inventories were already low, and sought expectations for working capital contribution to free cash flow in 2025 and parameters for 2026 free cash flow.

Answer

Scott Richardson, President and CEO, indicated that accelerated destocking was not extensively observed across the board, with Q3 to Q4 seasonality being typical. He noted some pockets, like North American channel partners, aiming to reduce year-end inventories. Chuck Kyrish, CFO, reported a $250 million working capital source of cash year-to-date, expecting zero change in Q4. For 2026, he anticipates continued EM inventory actions to provide some free cash flow source, lower restructuring outlays, and confidence in achieving at least the low end of the $700-$800 million free cash flow range, which he believes is sustainable.

Ghansham Panjabi of Robert W. Baird & Co. questioned whether the Q3 inventory reduction impact in the Engineered Materials (EM) segment was driven by weaker demand and asked for the sequential outlook on pressure points in the Acetyl Chain (AC) segment, specifically acetate tow and vinyls.

Answer

CEO & President Scott A. Richardson affirmed that prioritizing free cash flow is a key company goal. SVP & CFO Chuck Kyrish explained the $25 million sequential headwind in EM is largely due to the timing of semi-annual production campaigns, which created a benefit in Q2 and a corresponding negative impact in Q3 as inventory is drawn down. Regarding the AC segment, Richardson stated that pressure in acetate tow and vinyls is expected to continue.

Ghansham Panjabi of Baird asked for clarification on the drivers behind the Q3 inventory reduction impact in the Engineered Materials segment and the sequential outlook for pressure points in the Acetyls segment, specifically acetate tow and vinyls.

Answer

CEO & President Scott A. Richardson highlighted the strategic priority of free cash flow generation. SVP & CFO Chuck Kyrish detailed that the $25 million sequential headwind in EM is primarily a mix effect from a semi-annual production campaign that benefited Q2 and will reverse in Q3 as inventory is drawn. Richardson added that pressures in acetate tow and vinyls are expected to persist into Q3, with potential volume softness offset by the absence of major turnarounds.

Ghansham Panjabi from Baird asked if the $25 million inventory reduction impact in the Engineered Materials (EM) segment for Q3 was a function of weaker demand, and also inquired about the sequential outlook for pressures in acetate tow and vinyls.

Answer

CEO Scott A. Richardson reiterated that free cash flow is a top priority. SVP & CFO Chuck Kyrish clarified the $25 million sequential headwind is primarily due to mix and the timing of a semi-annual production campaign that benefited Q2 earnings by $10-15 million and will negatively impact Q3 by a similar amount as inventory is drawn down. Regarding the Acetyl Chain, Richardson expects similar pressure from tow and vinyls to continue, with potential for slightly lower volumes.

Ghansham Panjabi followed up on nylon 66, asking what specifically changed versus expectations at the time of the M&M acquisition, and also inquired about the pricing inflection point in the upstream Acetyl Chain segment.

Answer

CEO Scott Richardson identified the combination of reduced demand and a simultaneous increase in new capacity, particularly from China, as the biggest change impacting the nylon business. For the Acetyl Chain, he highlighted that while overcapacity is contained in Asia, Celanese's downstream integration provides some differentiation and flexibility, with 65% of third-party sales being in products other than acetic acid or VAM.

Ghansham Panjabi asked how strategy in the Engineered Materials (EM) segment might evolve under new leadership and what contingency plans exist if the global manufacturing slump persists for another year.

Answer

CEO Scott Richardson explained that new EM leader Todd Elliott is bringing intensity to cost reduction and focusing on accelerating growth in segments like medical and EVs. Regarding contingencies, Richardson stated there is always more that can be done, highlighting a 'no-stone-unturned' approach to cost and complexity reduction in both the EM and Acetyls businesses, as well as a focus on extracting full value from every customer interaction.

Ghansham Panjabi of Baird sought to understand if the dividend cut implies a worsening outlook for 2025 and if the cut was linked to recent financing arrangements.

Answer

CEO Lori Ryerkerk explained the dividend cut addresses both lower-than-planned 2024 cash flow and high uncertainty for 2025, making it a prudent step to ensure deleveraging goals are met. CFO Chuck Kyrish confirmed the dividend decision was independent of securing the delayed draw term loan.

Ghansham Panjabi inquired about the progress of the $100 million natural color conversion opportunity, specifically how much converted in 2025, the embedded expectations for 2026, and the overall pipeline. He also asked about the impact of the FDA's 'no artificial color' designation on conversion timing and sought quantification of the operating leverage associated with current investments.

Answer

Paul Manning, Chairman, President, and CEO, stated that approximately $5 million was invoiced in Q3 and Q4 2025 from the conversion opportunity, with significant acceleration expected in Q3 and Q4 2026, and further growth into 2027. He detailed the complexity of conversions, including reformulation, testing, compliance, and packaging changes, which influence timelines. Manning expects double-digit revenue growth for the Color Group in 2026. Regarding investments, he clarified that the FDA guidance is unlikely to alter brand timelines, as consumer demand is the primary driver. Investments are focused on technical personnel, commercial organization, and accelerated R&D, which impacted Q4 2025 profit leverage and will continue to do so in H1 2026, but are crucial for maximizing conversion capture. He anticipates 'hyper leverage and revenue growth' in 2027, with leverage building through 2026.

Ghansham Panjabi asked about the $100 million natural color conversion opportunity, specifically how much converted in 2025, the embedded expectations for 2026, and the pipeline's timeline drivers. He also inquired about the impact of the FDA's 'no artificial color' designation change on conversion cadence and the specifics and quantification of operating leverage investments in the Color Group for 2026 and 2027.

Answer

Paul Manning (Chairman, President, and CEO, Sensient Technologies Corporation) stated that approximately $5 million of the conversion opportunity was invoiced in Q3 and Q4 2025, with acceleration expected in Q3 and Q4 2026 and further into 2027 due to the complexity of reformulation, testing, compliance, and packaging changes for CPGs. He clarified that the FDA guidance change is unlikely to materially alter timelines. Manning detailed that investments are in technical personnel, commercial organization, and accelerated R&D to capture the $1 billion sales goal, impacting Q4 2025 and Q1 2026 profit leverage, but leading to strong revenue growth. He expects improved leverage in the back half of 2026 and building into 2027 and 2028.

Ghansham Panjabi from Baird asked about the current conversion activity for the $110 million synthetic color business, which food and beverage categories are showing the most momentum, the reasons for the Color segment's high incremental margins, the recovery timeline for the Natural Ingredients business, and the specifics behind the significant increase in CapEx guidance.

Answer

CEO Paul Manning explained that conversion activity is strong across all customer sizes, with many aiming to match synthetic vibrancy, and noted that the recent strong Color Group results do not yet include major conversions. He stated the Natural Ingredients business should see an inflection point in late Q4, with a much-improved cost position for 2026. He confirmed the CapEx increase is almost entirely for natural colors to build more capacity, enabling Sensient to win new business and accelerate customer conversions. VP & CFO Tobin Tornell added that the Color Group's high margins were driven by new wins and leveraging the SG&A cost base.

Ghansham Panjabi inquired about Sensient's competitive advantages in the natural colors market, its ability to manage the upstream supply chain, and whether its customer focus would shift. He also asked for the 2025 growth outlook for the Color segment and specifics on the $10 million tariff impact.

Answer

Paul Manning, Chairman, President & CEO, detailed the significant opportunity in converting its $110 million synthetic color business, highlighting Sensient's competitive strengths in technical formulation, application support, and its integrated global supply chain. He confirmed the company would prioritize customers but serve a broad base. Manning reiterated the mid-single-digit consolidated growth guidance for 2025, with the Color segment expected to perform similarly, and stated the tariff impact would be offset by pricing. Tobin Tornehl, VP & CFO, added that the tariff cost represents about 1% of COGS, with two-thirds affecting the Color group.

Ghansham Panjabi inquired about the specific drivers of new business wins in natural colors, the natural product dynamics within the Flavors & Extracts segment, the margin profile of natural versus synthetic colors, and the contribution of natural colors to the 2025 sales growth forecast.

Answer

Paul Manning, Chairman, President & CEO, explained that the Color Group's double-digit growth was fueled by new product launches and existing brands converting to natural colors, an opportunity he described as the largest in Sensient's history. He noted that the conversion to natural is largely complete in the Flavors portfolio (97-98% natural). Manning clarified that while natural colors have a lower gross margin due to higher volume requirements (up to 10x), the operating profit margin remains stable. He confirmed that growth in natural colors, which constitute about 40-45% of the Food Colors business, is a primary driver for the company's mid-single-digit growth outlook.

Ghansham Panjabi asked for more color on the high single-digit growth in the taste segment in North America during Q4 2025, and whether this regional performance was the primary driver of the segment's margin improvement.

Answer

EVP and CFO Michael DeVeau explained that North America's strong growth in the taste segment was primarily driven by new wins, with Latin America also performing well. He clarified that the largest contributor to the taste segment's margin performance was productivity, complemented by favorable net pricing relative to input costs.

Ghansham Panjabi requested more color on the high-single-digit growth in the Taste segment in North America during Q4, what specifically drove it, and if it was a key component in driving margins due to favorable mix.

Answer

EVP and CFO Michael DeVeau stated that North America's growth in the Taste segment was primarily driven by new wins, with Latin America also strong. He clarified that the largest contributor to margin performance was productivity across COGS and SG&A, supplemented by favorable net pricing to input costs.

Ghansham Panjabi asked for an update on IFF's internal initiatives related to cost optimization and growth, including capacity tightening in certain areas and the expected flow of cost savings and productivity into 2026.

Answer

CFO Michael DeVeau explained that IFF has significantly improved its competitiveness over the last 18 months. He reiterated investments in R&D and commercial capabilities for the H&B health business, starting in H2 2024 and continuing through 2025, to bolster innovation and strengthen commercial capabilities. He also mentioned increased CapEx in H&B to improve capacity for growth potential and incremental margins. For 2026, he expects improved growth trajectories and incremental productivity to expand margins and reinvest in the business through a self-funding mechanism.

Ghansham Panjabi requested an update on IFF's internal initiatives for cost optimization and growth across the portfolio, including potential cost savings flowing into 2026, especially given the challenging operating environment.

Answer

CFO Michael DeVeau reiterated investments in H&B for R&D and commercial capabilities, and increased CapEx for capacity in H&B to improve growth potential and incremental margins. He stated that IFF is well-positioned for 2026 with cautious optimism for improved growth trajectories, alongside a focus on generating better incremental productivity through streamlining corporate functions, automation, and process redesign. He indicated that these efforts would continue into 2026 to expand margins and reinvest in the business.

Ghansham Panjabi requested details on the monthly cadence of Q2, the embedded volume assumptions for the second half by segment, and more specifics on the challenges IFF anticipates.

Answer

CFO Michael Deveau stated that Q2 was consistent with expectations, with all businesses delivering volume growth. He noted a more cautious second-half outlook due to tough Q3 2024 comps (+9% growth) and weakening trends in Health & Biosciences, which is expected to see negative growth in Q3 2025, specifically driven by the Health sub-segment.

Ghansham Panjabi of Baird asked for more detail on the specific end-market verticals driving the Taste segment's 7% core sales growth and inquired about any potential pre-buy activity ahead of tariffs.

Answer

CFO Michael DeVeau attributed the Taste segment's strong performance to an increased project pipeline and a higher win rate, resulting in broad-based growth across all regions and most categories. Regarding pre-buys, he acknowledged a possible modest benefit but stated it was difficult to quantify as sales trends remained consistent into April. CEO Erik Fyrwald added that increased R&D investment is also strengthening the long-term pipeline.

Ghansham Panjabi of Baird requested an early high-level outlook for 2025, specifically asking about expectations for volumes, price, compensation expense reset, and cost savings flow-through.

Answer

CEO Jon Erik Fyrwald stated it was too early to provide specific 2025 guidance, which is typically given in February. However, he highlighted a positive factor for 2025: an incentive compensation reset of over $100 million. He emphasized the team's focus on customer engagement, innovation, and productivity.

Ghansham Panjabi asked if Avient provided a breakdown of core sales by segment for its 2026 guidance.

Answer

Jamie Beggs, Senior VP and CFO, stated that Avient did not provide specific guidance by segment. However, she reiterated that healthcare is expected to perform well across both segments, with Specialty Engineered Materials benefiting from defense exposure, and the Color segment's performance largely dependent on the evolution of consumer, industrial, and building and construction markets.

Ghansham Panjabi of Baird asked for more detail on the evolving weakness in consumer markets and requested quantification of the Q2 maintenance impact on SEM's EBITDA. He also questioned the wide range for the full-year debt paydown target.

Answer

President, CEO & Chairman Ashish Khandpur explained that consumer weakness worsened in Q2, falling 8% after being flat in Q1, with the decline spreading geographically beyond just the US and Canada. SVP & CFO Jamie Beggs quantified the planned maintenance impact on SEM EBITDA at approximately $3 million for Q2. Regarding the debt paydown, Beggs stated the $100-$200 million range reflects a conservative approach to ensure the macro environment evolves as expected, while remaining confident in their cash flow generation.

Ghansham Panjabi questioned the drivers of Avient's packaging strength given sluggish volumes reported by CPGs. He also asked if Asia's growth involved pre-buying and what mitigation strategies exist for the stated tariff exposure on raw materials.

Answer

President and CEO Dr. Ashish Khandpur attributed packaging outperformance to share gains in personal care and solid growth in beverage applications. He saw no evidence of pre-buying in Asia. SVP and CFO Jamie Beggs outlined a three-pronged tariff mitigation strategy: reformulating products, localizing sourcing, and implementing pricing actions where necessary, noting the overall impact is not expected to be material.

Ghansham Panjabi of Baird inquired about the drivers behind the 10% volume decline in the Americas during the fourth quarter, specifically regarding inventory adjustments and current 2026 volume trends. He also asked if the increased Fit to Win savings target was a response to lower volumes and sought clarification on the $150 million energy headwind for 2026.

Answer

CEO Gordon Hardie attributed up to half of the Americas' volume decline to year-end inventory adjustments in spirits and beer, noting high spirits inventory levels are expected to continue impacting Q1, though Fit to Win benefits and growth in food/NABs are offsetting. He clarified that the increased Fit to Win savings target was due to faster execution and new opportunities, not lower volumes. CFO John Haudrich confirmed the $150 million energy headwind is a one-time reset for 2026, as favorable contracts expired.

Ghansham Panjabi inquired about the 10% volume decline in the Americas during the fourth quarter, specifically attributing how much was due to year-end inventory adjustments and current volume performance in early 2026. He also asked if the increased Fit to Win savings target was due to lower volumes and if the $150 million energy headwind for 2026 is a one-time impact.

Answer

CEO Gordon Hardie explained that up to half of the Americas volume decline was due to inventory adjustments in spirits and beer, particularly Mexican beer, with high spirits inventory levels expected to continue impacting Q1. He clarified that the increased Fit to Win savings are due to faster execution, not lower volumes, reinforcing confidence in 2027 targets. CFO John Haudrich confirmed the $150 million energy reset is a one-time impact for 2026, resulting from the expiration of pre-Ukraine war energy contracts, with 2026 exposure substantially hedged.

Ghansham Panjabi of Baird inquired about the segment-level breakdown of O-I Glass's 2025 volume assumptions and sought details on the strategic pivot for the Bowling Green plant, including its new focus, timeline, and associated costs following the halt of Magma development.

Answer

CFO John Haudrich clarified that both the Americas and Europe segments are expected to have stable year-over-year volumes, with some quarterly shifts due to comps. CEO Gordon Hardie explained the Bowling Green facility will be reconfigured to produce premium spirits containers for the U.S. market, aiming for lower operating costs and capital intensity than the Magma platform. Haudrich added that the project will fit within the existing CapEx outlook and must meet a WAC+2 return threshold.

Ghansham Panjabi asked for details on volume stability across end markets, the size of the alcohol category for O-I, and the company's confidence in its 2025 pricing outlook, particularly in Europe.

Answer

CEO Gordon Hardie described a 'story of 2 hemispheres,' with volume growth in the Americas (Brazil, Mexico) but a 5% decline in Europe due to soft demand and lower exports. He noted alcohol is a significant part of the portfolio. Regarding pricing, Hardie acknowledged pressure in over-supplied Southwest Europe but saw stability and some growth in the Americas. CFO John Haudrich added that with 55% of the portfolio under long-term contracts, 80-90% of 2025 pricing is already established, supporting their outlook.

Ghansham Panjabi of Robert W. Baird & Co. questioned the larger-than-expected negative working capital impact, asking if excess inventory would persist into 2025. He also sought clarification on the flat Q4 volume guidance given a positive October start and inquired about the 2025 European pricing outlook.

Answer

CFO John Haudrich acknowledged that year-end inventory days (IDS) would be in the low-50s, higher than the mid-40s target, due to softer sales. However, he expects at least half of the associated expense to reverse in 2025 as internal destocking eases. CEO Gordon Hardie explained the flat Q4 volume outlook reflects a balance between growth in the Americas and softness in Europe (wine/spirits). For 2025 pricing, Hardie anticipates a generally flat scenario, with some pressure in Europe due to excess capacity but less so in the tighter Americas market.

Ghansham Panjabi asked if the Q4 emergency medicine performance aligned with internal projections, whether Q1 EPS guidance could proxy Q2, and about the funding strategy for the new $600 million share repurchase authorization.

Answer

CFO Vanessa Kanu confirmed that Q4 emergency medicine performance was in line with expectations. She declined to provide specific Q2 guidance but reiterated the $65 million full-year emergency medicine headwind, mostly in H1, and that full-year models should capture this. President and CEO Stephan Tanda expressed confidence in the company's momentum despite the headwinds. CFO Vanessa Kanu stated the $600 million authorization offers flexibility and can be funded by both excess free cash flow and flexing the balance sheet.

Ghansham Panjabi asked if the Q4 emergency medicine performance aligned with internal projections, whether the Q1 EPS guidance is a reasonable proxy for Q2 given destocking dynamics, and the funding intent for the new $600 million share repurchase authorization.

Answer

CFO Vanessa Kanu confirmed Q4 emergency medicine was in line with expectations and reaffirmed the $65 million full-year headwind, mostly in H1, but declined to provide specific quarterly guidance beyond H1/H2 dynamics. She stated the $600 million authorization offers flexibility and can be funded by both excess cash flow and flexing the balance sheet.

Ghansham Panjabi from Baird inquired about the normalization of naloxone sales, its expected impact on Pharma's core sales growth and margins for the second half of the year, and the nature of the growth inflection seen in the U.S. cough and cold market.

Answer

President, CEO & Executive Director Stephan Tanda explained that naloxone sales growth is expected to be muted due to distribution channel uncertainty and a recent executive order, which will slow overall Pharma growth in the second half. He noted that other areas like Injectables are performing well. Tanda also confirmed that the U.S. cough and cold market saw a positive inflection with mid-single-digit growth.

Ghansham Panjabi from Baird sought details on the cold and cough inventory situation, including its location in the supply chain and the timeline for normalization. He also asked about the potential impact of an oral GLP-1 pill on the Injectables business and the reason for the sales divergence between Masstige and prestige fragrances.

Answer

President and CEO Stephan Tanda explained that the U.S. saw a two-quarter inventory correction, but the inflection has not yet occurred internationally. He characterized the potential for an oral GLP-1 as a long-term prospect, not an immediate threat to auto-injectors. He attributed the fragrance sales divergence to the timing of customer launches post-COVID, expressing confidence in Aptar's market share and a Q2 recovery in prestige.

Ghansham Panjabi inquired about the full-year EPS headwind from currency and taxes for 2025, the reason for lower-than-trend corporate expenses in Q4, the timeline for destocking normalization in cold & flu, and the drivers of Prestige beauty weakness in EMEA.

Answer

Executive Vice President and CFO Vanessa Kanu stated that while full-year guidance isn't provided, the FX and tax headwinds are significant and expected to continue. She attributed lower Q4 corporate costs to year-end true-ups like bonus accrual reversals. President and CFO Stephan Tanda noted that while consumer health is bottoming out, tough comps remain. He clarified that Beauty's weakness was a mix issue, not a volume decline, as high-end prestige launches did not repeat.

Ghansham Panjabi of Robert W. Baird & Co. asked if the highlighted new product cadence in the Pharma segment is higher than typical and how it affects the 2025 outlook. He also questioned the specific drivers of weakness in prestige fragrance volumes and sought clarification on the new $500 million share repurchase authorization.

Answer

CEO Stephan Tanda and CFO Robert Kuhn affirmed confidence in the Pharma segment's continued growth within its target range, driven by both new therapies and growth in core areas, but declined to specify a position within the 7-11% range for 2025. On fragrances, Tanda explained the volume decline is a channel destocking issue after a period of high sell-in, not a drop in consumer demand. Kuhn clarified that the $500 million repurchase authorization is not a change in philosophy but an update reflecting the company's current size and share price, providing discretionary capital allocation flexibility.

Ghansham Panjabi inquired whether Crown Holdings' 2-3% North American beverage volume growth forecast for 2026 aligns with their industry growth assumption and asked about current capacity utilization in the region. He also questioned if the $550 million CapEx target for 2026 represents a new baseline and its potential for U.S. expansion in 2027, alongside the competitiveness of cans given rising aluminum prices versus stable plastic prices.

Answer

Tim Donahue, Chairman, President and CEO, confirmed that the 2-3% North American volume growth aligns with industry expectations, noting that industry capacity remains tight despite new lines coming online. He clarified that the $550 million CapEx for 2026 is driven by specific needs in Europe and Latin America, not a new baseline, and Crown does not foresee new capacity needs in North America for the next 1-2 years. Donahue acknowledged elevated aluminum costs but stated that cans remain the cheapest and most effective package, with demand appearing firm despite sustainability cost pressures.

Ghansham Panjabi asked if Crown Holdings' North American beverage volume growth outlook of 2%-3% for 2026 aligns with their assumption for overall industry growth, and he sought insight into current capacity utilization in North America. He also questioned if the $550 million capital expenditure target for 2026 represents a new baseline for future CapEx and whether future investments would shift towards the U.S. from 2027 onwards. Additionally, he asked for management's perspective on the affordability and competitiveness of the can, given rising aluminum prices versus stable or declining plastic prices.

Answer

Tim Donahue, Chairman, President and CEO, confirmed that the 2%-3% volume growth outlook for North America in 2026 is consistent with their industry growth assumption, noting that industry capacity remains tight. He clarified that the $550 million CapEx for 2026 is not a new baseline but is driven by specific capacity needs in Europe (Greece and Spain) where Crown is oversold, and he does not foresee a need for new Crown capacity in North America for the next 1-2 years. Regarding can affordability, he stated that it remains the cheapest and most effective way for customers to deliver products, despite higher aluminum costs and tariffs, and demand appears firm for 2026 and 2027.

Ghansham Panjabi inquired about inventory levels along the supply chain, given that volumes have been better than initially forecast. He also asked for an update on the 2026 outlook, specifically regarding contract renewals, market share, and the primary drivers of earnings growth.

Answer

President & CEO Timothy Donahue stated that Crown's inventory is no higher than at the start of the year and is likely a few hundred million cans lower than desired, indicating a need to build inventory in Q4 for a strong 2026. For 2026, he sees a potentially tight year with growth aspirations from customers under contract. He expects earnings growth to come from the core business, particularly from a volume recovery in the Asia and Transit segments, supplemented by capital returns.

Ghansham Panjabi asked for color on the drivers behind the strong incremental margins in the Americas Beverage segment. He also questioned the source of confidence for a strong summer selling season and whether customer promotional plans are changing due to rising tariff-related costs.

Answer

CEO Timothy Donahue attributed the high incremental margins in Americas Beverage to adding volume to already highly utilized and efficient plants, describing it as 'all gravy.' While acknowledging Q1 cannot be extrapolated, he noted that current demand feels very high. Regarding tariffs, Donahue believes the potential cost increases can be absorbed by the consumer in the beverage can market and noted that food can customers have been managing steel tariffs for years.

Ghansham Panjabi of R.W. Baird questioned how a flattish North American volume environment would impact the segment's record margin profile and what strategies, beyond cost-cutting, are being employed in the Transit Packaging business during its prolonged downturn.

Answer

President and CEO Timothy Donahue stated that maintaining margins in a flat volume environment depends on the rational behavior of market participants and the industry's ability to hold price for the value it provides. For Transit Packaging, he mentioned ongoing facility consolidations and a focus on managing the business for cash returns. While hopeful for a second-half recovery, he noted the first six months of 2025 are expected to reflect current sluggish conditions.

Ghansham Panjabi inquired about the drivers behind the strong margin conversion in the Americas Beverage segment, whether any 2024 benefits might be non-recurring, and the potential for price/cost headwinds in 2025.

Answer

President and CEO Timothy Donahue attributed the strong margin to market share gains (which are not expected to recur at the same rate), exceptional performance in Brazil and Mexico, and manufacturing efficiencies of $20-$25 million. He noted that while lower aluminum costs helped percentage margins, this may reverse. Looking to 2025, Donahue acknowledged that PPI-based contract adjustments could be a small headwind favoring customers, but cautioned that PPI is an imperfect proxy for the company's overall cost structure.

Ghansham Panjabi inquired about the growth outlook for Intelligent Labels in 2026 following low single-digit growth in 2025, expectations for other high-value categories like Vestcom and Embelex, and the rationale behind providing only quarterly guidance.

Answer

President and CEO Deon Stander stated that Intelligent Labels growth is anticipated to be above 2025 levels, driven by apparel adoption, a major grocery customer rollout in H2 2026, and expanding logistics pilots. He added that most high-value categories are expected to grow mid-single digits. Deon Stander and SVP and CFO Greg Lovins attributed the quarterly guidance to a dynamic environment and limited market visibility due to various cyclical challenges.

Ghansham Panjabi asked about the growth outlook for Intelligent Labels in 2026 following low single-digit growth in 2025, expectations for other high-value categories like Vestcom and Embelex, and the rationale behind providing only quarterly guidance.

Answer

Deon Stander, President and CEO, projected Intelligent Labels growth in 2026 to exceed 2025, driven by continued apparel adoption, the Walmart fresh grocery rollout in H2, and expanded logistics pilots. He stated that most high-value categories, including Vestcom and Embelex, are expected to achieve mid-single-digit growth. The decision for quarterly guidance stems from a dynamic environment and limited market visibility, with no macroeconomic tailwinds anticipated for 2026.

Ghansham Panjabi of Baird followed up on the projected apparel improvement in Q3, asking for specific volume assumptions for the second half of the year. He also sought clarity on the key drivers behind the company's confidence in returning to year-over-year earnings growth in Q4.

Answer

President & CEO Deon Stander stated that while the apparel outlook is cautious, he anticipates overall Intelligent Labels growth in Q3, with new programs gaining traction in Q4. SVP & CFO Greg Lovins detailed the path to Q4 earnings growth, citing favorable seasonality from Q3 to Q4, increased savings from restructuring and productivity actions, and continued growth in non-apparel segments like VESCOM. These factors provide confidence in year-over-year growth even without a significant apparel recovery.

Ghansham Panjabi from Baird followed up on the expected improvement in the apparel segment, asking for specific volume assumptions for the second half of the year and the key drivers behind the company's confidence in achieving year-over-year earnings growth in Q4.

Answer

President & CEO Deon Stander stated he anticipates growth in Intelligent Labels (IL) in Q3, with new programs gaining traction in Q4. SVP & CFO Greg Lovins detailed that the confidence in Q4 earnings growth stems from favorable seasonality, increased savings from restructuring and productivity actions, and continued growth in non-apparel businesses like VESTCOM, even without assuming a significant recovery in apparel.

Ghansham Panjabi of Baird followed up on the expected apparel improvement in Q3, asking for specific volume assumptions for the back half of the year and the key drivers underpinning the confidence in year-over-year earnings growth in Q4.

Answer

President & CEO Deon Stander stated that outside of tariff-impacted apparel, the business is largely on track and he anticipates growth in Intelligent Labels (IL) in Q3, with new program rollouts gaining traction in Q4. SVP & CFO Greg Lovins detailed the path to Q4 earnings growth, citing favorable seasonality from Q3 to Q4, ongoing productivity and restructuring benefits, and continued growth in non-apparel segments like VESCOM, all of which contribute to confidence in year-over-year improvement.

Ghansham Panjabi inquired about the embedded core sales growth assumptions for the Materials segment in 2025, specifically the breakdown between volume and price.

Answer

President and CEO Deon Stander explained that the company's overall 3% to 4% organic growth guidance is based on GDP-level growth in the base business. For the Materials segment specifically, the assumption is for mid-single-digit volume growth accompanied by a small contribution from price.

Ghansham Panjabi asked if the Materials segment's volume rebound is plateauing due to a weaker consumer and questioned if the lower-than-expected Intelligent Labels logistics volume was due to end-market conditions or difficult comparisons.

Answer

CFO Gregory Lovins stated that Materials volumes were largely as expected, with some softness in Europe, but no major trend change, attributing some sales comparison differences to price deflation. CEO Deon Stander added that the macro environment remains uncertain, especially in Europe. Regarding Intelligent Labels, Stander explained the logistics variance was primarily due to prior-year customer inventory builds and a specific customer transition that is now largely complete, framing it as a first-year annualization issue.

Ghansham Panjabi inquired about the normalization of demand in the Dispensing and Specialty Closures (DSC) segment, particularly for categories initially impacted by downturns, and the broader status of destocking, including any lingering effects into early 2026. He also asked about the commercial synergies and specific growth wins from the Weener Packaging acquisition, especially in pharmaceuticals and healthcare.

Answer

Adam Greenlee, President and CEO, confirmed that food and beverage destocking in DSC, which occurred in Q2 2025, has normalized, and personal care/home care destocking in DSC was completed in Q4 2025 with no Q1 2026 impact. He noted a slight carryover of destocking for Custom Containers into Q1 2026 due to its distribution business. Regarding Weener, Mr. Greenlee stated the integration is complete and synergy targets achieved, highlighting commercial synergies from leveraging Weener's valve technology with Silgan's food customers in North America and growing deodorant/personal care products, with Weener fully integrated into DSC's mid-single-digit growth outlook.

Ghansham Panjabi asked about the Dispensing Closure segment's demand normalization for categories initially impacted by destocking in 2025, and the broader status of destocking, including any lingering effects into early 2026. He also inquired about the commercial synergies from the Weener Packaging acquisition, seeking specific wins or underlying growth related to pharmaceuticals and healthcare.

Answer

CEO Adam Greenlee confirmed that food and beverage destocking in DSC occurred in Q2 2025 and volumes are now normalized, with year-end inventory levels meeting targets. He stated that personal care and home care destocking in DSC was completed in Q4 2025, with no anticipated impact on Q1 2026. Mr. Greenlee noted a slight carryover of destocking into Q1 2026 for Custom Containers due to its distribution business. Regarding Weener, he highlighted that the integration is complete, synergy targets achieved, and commercial synergies are evident through leveraging Weener's product technology (e.g., valve technology) with Silgan's large food and consumer product customers, driving growth opportunities for both legacy businesses.

Ghansham Panjabi inquired about the current inventory destocking cycle compared to 2022-2023, seeking insights into its causes and differences. He also asked if the weakness observed in food and beverage closures, and now personal care/home care, might extend to the pet food segment in early 2026.

Answer

Adam Greenlee, President and CEO, Silgan Holdings, differentiated the current situation from the broad 2023 destocking, attributing it to specific 2025 challenges like a customer bankruptcy, poor weather affecting sports drinks, and a bifurcated consumer market. He noted strength in food cans due to lower-income consumers stretching dollars, while high-end fragrance/beauty continued to perform well. Greenlee confirmed no expected broadening of weakness to pet food, citing 10% Q3 growth and anticipated high single-digit Q4 growth, clarifying that prior food and beverage weakness was specific to sports drinks and weather-related.

Ghansham Panjabi sought confirmation that the 2025 EPS guidance revision was exclusively due to the weakness in North American beverage closures and the customer bankruptcy impact. He also asked about the timing of when the beverage closure weakness became apparent during the quarter.

Answer

President & CEO Adam Greenlee affirmed that the guidance change is due to two 'incredibly discreet items' and that the rest of the business outlook remains unchanged, with dispensing and pet food expected to accelerate in H2. He noted that the beverage weakness was observed mid-quarter, with customers officially pulling back forecasts later in the period.

Ghansham Panjabi questioned the stability of the 2025 guidance amid macroeconomic uncertainty and asked about any changes in customer new product activity. He also inquired about the cross-border tariff exposure for the DSC segment and the target for net debt to EBITDA by year-end.

Answer

CEO Adam Greenlee reiterated confidence in the guidance, highlighting new product launches in soup and a robust innovation pipeline in high-end fragrance and beauty. He downplayed tariff impacts due to a localized manufacturing strategy. CFO Kimberly Ulmer stated that the company expects its leverage ratio to be toward the low end of its 2.5x to 3.5x target range by year-end, thanks to strong earnings and cash flow.

Ghansham Panjabi questioned the confidence in the mid-single-digit volume growth forecast for 2025, given muted outlooks from customers, and requested an earnings bridge from 2024's results to the 2025 guidance, detailing the impact of the Weener acquisition versus organic business performance.

Answer

CEO Adam Greenlee expressed high confidence in the 2025 volume forecast, stating that markets are normalizing post-destocking and Silgan's volumes now better reflect consumer demand. He provided an adjusted EBIT bridge, attributing approximately $50 million to the Weener acquisition, $30 million to the cost-savings program, and the remainder to organic growth, which is partially offset by higher interest and corporate expenses.

Ghansham Panjabi asked for clarification on the effectiveness of customer promotional activity in the closures business and sought more detail on the drivers behind the 2025 double-digit EPS growth forecast.

Answer

President and CEO Adam Greenlee clarified that promotional activity was highly effective in driving pet food volume but less successful for isotonic beverages, where record promotions did not spur expected growth due to high consumer price points. For the 2025 outlook, he cited the Weener acquisition, incremental cost savings, strong organic growth in dispensing products, and growth in custom containers as key drivers, even without assuming a recovery in pack volumes.

Ghansham Panjabi asked about Amcor's volume expectations for the next two fiscal quarters (H2 2026), inquiring about any improvements in production backlogs or forward indicators, and the impact of CPGs shifting towards volume velocity.

Answer

CEO Peter Konieczny stated that Amcor is approaching the second half with similar expectations to the first half, anticipating low single-digit volume declines and focusing on cost and productivity. CFO Steve Scherger added that the lower end of guidance assumes a market environment consistent with the 1.5% volume decline seen in the quarter, while the upper end allows for potential positive activity from customers and revenue synergy capture.

Ghansham Panjabi from Baird inquired about Amcor's volume expectations for the next two fiscal quarters of 2026, asking if there's any improvement in production backlogs or other forward indicators, especially given favorable volume comments from some CPGs.

Answer

CEO Peter Konieczny stated that Amcor is approaching the second half of the fiscal year with expectations similar to the first half, anticipating low single-digit volume declines. He noted potential upside from revenue synergies and growth initiatives. CFO Steve Scherger added that the lower end of guidance assumes a consistent volume environment (down 1.5%), while the upper end aligns with more positive customer activity and revenue synergy capture.

Ghansham Panjabi asked about the recent decline in the flexibles business volume cadence, specifically if it's a reversal of prior growth, driven by consumer affordability challenges, confectionery/cocoa price increases, or order pattern distortions.

Answer

Peter Konieczny, CEO of Amcor, explained that volumes were in line with expectations, down approximately 2% excluding non-core North American beverage. He noted that the weakness in flexibles was primarily in Europe, specifically in the unconverted film category, reflecting general market softness.

Ghansham Panjabi asked about the volume cadence reversal in the flexibles business, inquiring about the driving factors such as consumer affordability challenges, confectionery/cocoa price impacts, order pattern distortions, or a potential further decline in consumer-level volumes.

Answer

CEO Peter Konieczny (PK) explained that volumes were in line with expectations, down about 2% (excluding non-core North American beverage). He specified that the weakness in flexibles was primarily in Europe, particularly in the unconverted film category, which followed general market softness in those segments.

Ghansham Panjabi asked about the drivers behind the sequential weakening in North American volumes and whether Berry Global's volume profile differed from Amcor's.

Answer

CEO Peter Konieczny explained that the North American weakness was driven by soft consumer demand due to inflation and tariff uncertainty, not destocking, particularly impacting the beverage business. He confirmed Berry's volume performance was better, attributing it to a different product and category mix with no exposure to North American beverage.

Ghansham Panjabi asked for CEO Robbert Rietbroek's perspective on the U.S. paperboard pricing dynamics over the next few years, given his CPG background, and how Graphic Packaging plans to navigate potential substitution. He also questioned if structural changes in the industry prevent a return to high-teens EBITDA margins, given the projected deterioration from 2023 to 2026.

Answer

Robbert Rietbroek, President and CEO, noted that recycled and unbleached paperboard markets are in good balance, but bleached paperboard is oversupplied with new capacity and declining demand, leading to producers not earning adequate returns. He stated Graphic Packaging's high integration helps its bleached business margins, though they remain below the cost of capital. Chuck Lischer, SVP and Interim CFO, confirmed AF&PA data supports this view. Rietbroek expressed confidence in restoring EBITDA margins to higher teens in the long run through restored demand and cost management productivity, aiming for the original Vision 2030 level.

Ghansham Panjabi inquired if Q3 end markets met expectations, whether any deviation was due to share shifts from bleached board conversion, and the near-term outlook for this dynamic. He also asked about the confidence in Waco's EBITDA contribution for next year, considering current market conditions.

Answer

Mike Doss (President and CEO, Graphic Packaging) clarified there was no share loss, attributing performance to customer purchasing patterns and $52 million (approximately 2%) in innovation-driven volume. He expressed high confidence in Waco delivering $80 million in EBITDA next year, with another $80 million to follow, noting that $100 million of total savings comes from mill closures. He added that if 2026 volumes are flat or down, they would optimize operations by taking downtime on the K1 machine to prioritize K2 and Waco. Steve Scherger (EVP and CFO, Graphic Packaging) also shared his positive outlook on the business's future and cash flow inflection.

Ghansham Panjabi asked about the alignment of end market performance with expectations in Q3 and the impact of bleached board conversion on share shifts, questioning the near-term outlook for this dynamic. He also inquired about the confidence in Waco's EBITDA contribution for next year, considering current market dynamics.

Answer

President and CEO Mike Doss clarified that Graphic Packaging did not experience share loss, attributing their outperformance in volumetric terms to innovation, which contributed approximately $52 million or 2% to sales. He expressed high confidence in Waco's $80 million ramp-up for 2026, noting that the total impact depends on future volumes and the flexibility to toggle the K1 machine if needed to optimize operations.

Ghansham Panjabi asked how customer strategies are changing to counter prolonged consumer affordability issues and how the revised 2026 free cash flow guidance impacts the capital allocation priority between buybacks and debt reduction.

Answer

CEO Michael Doss noted that while the period of consumer weakness has been long, customers are showing more urgency through strategic actions like M&A and leadership changes. EVP & CFO Stephen Scherger stated that with leverage expected to be around 3.5x, the company's clear priority is to lean towards share repurchases, given the compelling long-term value of the stock, and will deploy the vast majority of free cash flow to this activity.

Ghansham Panjabi inquired about the primary drivers of weak volumes, questioning whether it's consumer affordability versus other factors like GLP-1 drugs, and asked for the timing assumption for when price-cost dynamics will turn positive.

Answer

CEO Michael Doss confirmed that consumer affordability is a key factor, noting that customers are buying fewer items. He explained that while GLP-1 drugs present challenges for snacks, they also create opportunities for protein-rich product reformulations. CFO Stephen Scherger added that the guidance midpoint assumes a negative 2% volume and over $80 million in inflation for the year. He expects pricing actions to turn positive late in 2025, with full inflation recovery occurring as the company enters 2026.

Ghansham Panjabi asked about customer promotional activity and potential strategy shifts in 2025, and also inquired about the broader supply chain implications of potential tariffs for Graphic Packaging's customers.

Answer

President and CEO Michael Doss observed that 2024 promotions often shifted market share rather than growing categories, but he sees high customer engagement for 2025. Regarding tariffs, Doss and EVP & CFO Stephen Scherger suggested a potential modest tailwind for the company if tariffs encourage more localized production, which would leverage their extensive North American manufacturing network.

Ghansham Panjabi from Baird asked about the base-case assumptions for market conditions in 2025 that support the low single-digit sales guidance. He also inquired about the current trend in customer promotional activity and their outlook for 2025, given ongoing consumer affordability pressures.

Answer

CFO Steve Scherger confirmed the base case for 2025 assumes a couple hundred basis points of growth from innovation on top of a flat to modestly up consumer market. CEO Mike Doss commented on promotional activity, noting that while it is happening, it's primarily causing mix shifts rather than an overall category lift. For example, a promoted branded item gains share from a non-promoted one, but the total category volume remains stable. He expressed confidence that this stable market, combined with strong innovation, supports the low single-digit revenue growth target for 2025.

Ghansham Panjabi asked about the drivers behind the 4.8% volume growth in the North and Central America beverage segment in 2025, contrasting it with prior negative years, and inquired about the 2026 volume growth outlook for all three segments.

Answer

CEO Ron Lewis attributed the 2025 North America volume growth to strong customer partnerships and an unrivaled network, outpacing the 2% industry growth. For 2026, North America is expected to grow at the low end of the 1%-3% range due to capacity constraints until the Millersburg asset is operational. He did not speculate on specific category performance but noted a good start to the year.

Ghansham Panjabi with Baird asked about the significant improvement in North and Central America's beverage volume growth in 2025 (4.8%) following three negative years, seeking to understand the drivers (industry growth vs. Ball's initiatives) and the volume growth outlook for all three segments in 2026.

Answer

CEO Ron Lewis attributed the North America volume growth to Ball outperforming the can industry (which grew ~2%) due to an unrivaled customer portfolio, innovation, and network. For 2026, he noted North America is capacity-constrained until the Millersburg asset is online, expecting growth at the low end of the 1%-3% range. SVP and CFO Dan Rabbitt added that startup costs for Millersburg and ends production domestication would be approximately $35 million in 2026.

Ghansham Panjabi asked about the operational inefficiencies, operating profit, and operating leverage within the Beverage North and Central America (NCA) segment for the third quarter, noting that operating leverage remained below historical norms. He also inquired about the volume outlook for the NCA segment in 2026, specifically whether Ball expects to grow in line with or ahead of the industry given tougher comparisons.

Answer

Daniel Fisher, CEO of Ball Corporation, acknowledged the continued customer and pack-size mix shift towards lower-margin categories, which impacted operating leverage despite mid-single-digit volume growth and a 4% increase in operating earnings. He highlighted a 32% growth in profit per can since 2019 and anticipated improved efficiency with the Millersburg, Oregon facility coming online in late 2026. For 2026, Mr. Fisher indicated it's early for granular guidance but expressed confidence in global volume, earnings, and EPS growth, expecting North America to be in line with or ahead of the market.

Ghansham Panjabi of Baird inquired about the drivers behind the strong performance in non-alcoholic beverage categories in North America and the reasons for the segment's 140 basis point margin decline despite higher volumes. He also asked about the potential for European margins to expand to North American levels.

Answer

CEO Daniel Fisher attributed the North American volume strength to the energy drink category, noting one partner grew nearly 20%. He explained the margin pressure resulted from a combination of operational inefficiencies serving unanticipated demand, a product mix shift towards lower-margin non-alcoholic beverages, and a minor drag from tariffs, totaling a ~$10 million impact. For Europe, Fisher stated that while margins are not expected to improve, consistent operating leverage would be generated from sustained mid-single-digit growth.

Ghansham Panjabi inquired about the drivers of outperformance in North American non-alcoholic beverage categories and the reasons for the segment's margin decline despite strong volumes. He also asked about the potential for margin expansion in Europe.

Answer

CEO Daniel Fisher attributed the North American volume strength to energy drinks and promotional multi-pack purchases. He explained the margin pressure of approximately $10 million resulted from an unfavorable product mix (less beer), inefficient logistics due to unexpected demand spikes, and tariff impacts. For Europe, Fisher stated that while margins may not improve, consistent operating leverage is expected from sustained mid-single-digit growth.

Ghansham Panjabi inquired about the drivers of outperformance in North American non-alcoholic beverage categories and the reasons for the segment's margin decline despite strong volume.

Answer

Chairman & CEO Daniel Fisher attributed the volume strength to energy drinks and promotional multi-pack purchases. He explained that margins were pressured by approximately $10 million in operational inefficiencies from unexpected growth, an unfavorable product mix toward lower-margin non-alcoholic beverages, and a minor drag from tariffs. Regarding Europe, he does not expect margin expansion but anticipates consistent operating leverage from sustained growth.

Ghansham Panjabi inquired about Ball's supply position and utilization in Europe, the drivers for future growth, and the status of North American productivity initiatives and their effect on operating leverage.

Answer

CEO Daniel Fisher stated that European investments are scaling up to meet tight demand, with future investments being incremental and cautious. He clarified that for North America, the goal is to maintain, not expand, margins, as the region is further along its operational excellence journey, with current improvements focused on Europe and South America.

Ghansham Panjabi asked if the new investments in Oregon and Florida provide an opportunity to accelerate the productivity initiatives outlined at the Analyst Day, and inquired about the volume growth outlook for Europe in 2025.

Answer

CEO Daniel Fisher confirmed the new assets will enhance efficiency by optimizing the supply chain, such as reducing freight costs. For Europe, he expressed confidence in being at the high end of long-term guidance for 2025, driven by strong demand, low can penetration, and a favorable sustainability backdrop, despite tougher year-over-year comparisons.

Ghansham Panjabi inquired about the performance of premium and other non-beer categories in North America, the primary catalysts for volume growth in 2025, and the base volume assumption needed to achieve the reaffirmed 10%+ EPS growth target.

Answer

CEO Daniel Fisher expressed optimism for 2025, pointing to potential interest rate cuts and improved consumer discretionary spending as key catalysts. He stated that Ball is winning its share of new business and should grow in line with the market. Fisher confirmed the 10%+ EPS growth target for 2025 is supported by an initial assumption of 2-3% global volume growth, ongoing efficiency gains, and the compounding effect of 2024's share repurchases.

Ghansham Panjabi inquired about the significant margin outperformance in the Performance Coatings segment during Q4, seeking more color on the drivers behind the very high incremental margins.

Answer

Heidi G. Petz, Chair, President, and CEO, attributed the performance to discipline, aggressive new business wins, market share gains, and simplification efforts. Ben Meisenzahl, VP of Investor Relations, added that SG&A control was a key focus, leading to improved adjusted operating margin in the second half, particularly in Q4, despite volume challenges.

Ghansham Panjabi inquired about the Performance Coatings segment's margin outperformance in the fourth quarter, specifically asking for more color on the drivers behind the high incremental margins, noting strong performance in Packaging and Auto Refinish.

Answer

Chair, President, and CEO Heidi G. Petz attributed the outperformance to discipline, aggressive new business wins, market share gains, and simplification efforts. VP of Investor Relations Ben Meisenzahl added that SG&A control was a key factor, highlighting a significant improvement in adjusted operating margin in the second half of the year, demonstrating the importance of managing operating margin over just gross margin or SG&A.

Ghansham Panjabi asked for more color on the 7% price increase for the Paint Stores Group, questioning its rationale given the flat to low single-digit raw material outlook and tepid demand environment, noting it's the highest increase since the COVID inflation spike.

Answer

President and CEO Heidi Petz emphasized the company's philosophy of demonstrating value to customers to earn the right to implement price increases and fund investments. SVP of Finance and CFO Al Mistysyn explained the 7% increase is driven by higher year-over-year cost increases, including raw materials and other cost basket items. He highlighted the balance between aggressive volume growth and price effectiveness, noting that segment mix can temper overall price mix realization, as seen in Q3 2025.

Ghansham Panjabi inquired about the rationale behind the 7% price increase for the Paint Stores Group, noting that raw material costs appear flat or only slightly increasing and demand remains soft. He questioned how this specific percentage was determined, especially as it represents the highest increase since the COVID-19 inflation spike.

Answer

Heidi Petz, President and CEO, explained that their pricing philosophy focuses on demonstrating value to customers to justify investments. Al Mistysyn, SVP of Finance and CFO, elaborated that the 7% increase is driven by higher year-over-year cost increases, including raw materials, wages, and healthcare. He emphasized balancing aggressive volume growth with price increase effectiveness, noting that segment mix (e.g., stronger performance in commercial, property maintenance, and new residential) can temper overall price mix realization, even with consistent price effectiveness.

Ghansham Panjabi from Baird asked if the base case assumption is that industry volume weakness will extend into early 2026 and which Paint Stores Group verticals would likely recover fastest if interest rates decline.

Answer

Chair, President & CEO Heidi Petz highlighted ongoing challenges in commercial, multifamily, and property maintenance. SVP of Finance & CFO Al Mestyshin noted that visibility into the first half of 2026 is limited, but emphasized that the company is proactively investing now to influence future results regardless of the market environment.

Ghansham Panjabi of Baird asked if the company's base case assumes industry volume weakness will extend into early 2026 and which Paint Stores Group verticals would be the first to improve if interest rates were to decline.

Answer

CEO Heidi Petz highlighted ongoing challenges in commercial and property maintenance. CFO Allen Mistysyn noted that visibility into 2026 is limited in the current dynamic environment, but emphasized that the company is taking action now with investments to influence its own results rather than waiting for the market to improve.

Ghansham Panjabi asked for the outlook on the new residential end market, considering the contrast between cautious homebuilder expectations and Sherwin-Williams' reported share gains.

Answer

Executive Heidi Petz stated that while the near-term market is challenged by high mortgage rates, the long-term outlook is solid. She emphasized that Sherwin-Williams is gaining share by deepening partnerships with builders, helping them manage affordability and simplify product offerings, which positions the company well for an eventual market recovery.

Ghansham Panjabi asked if the 2025 outlook for the six verticals within the Paint Stores Group has changed materially since the Q3 earnings report, with a focus on the commercial segment.

Answer

CEO Heidi Petz confirmed the outlook has not changed, maintaining a 'softer for longer' view with an eye towards 2026. SVP & CFO Allen Mistysyn added that since recent rate cuts haven't significantly impacted long-term mortgage rates, the view remains consistent with the one provided in October.

Ghansham Panjabi asked about the sentiment among major customers in the Paint Stores Group for 2025, particularly given the volatility in interest rates.

Answer

Executive Heidi Petz reported that customer sentiment varies by segment. The broad consensus is pragmatic, with expectations for a modest recovery in the second half of 2025. She noted customers are more bullish on Residential Repaint, while the Commercial segment is viewed as the most challenged due to ongoing project delays from capital and labor constraints.

Ghansham Panjabi asked for more details on PPG's raw material guidance for 2026, which projects flat costs for the year and Q1, specifically inquiring about the constituents (TiO2, petros) and any categories experiencing inflation.

Answer

Chairman and CEO Tim Knavish explained that a favorable supply-demand balance generally leads to good pricing for PPG. However, he noted inflation in epoxies (due to tariffs, affecting industrial businesses), specialty pigments (tariffs), and metal packaging (aluminum/steel tariffs). He stated that TiO2 remains soft, and oil prices are driving solvent costs down. Senior Vice President and CFO Vince Morales added that targeted pricing actions in late 2025 and Q1 2026 are expected to result in higher overall pricing for 2026.

Ghansham Panjabi asked for more color on the raw material constituents influencing PPG's flat raw material cost guidance for 2026, particularly which categories might be inflating despite weaker spot markets in Q4 2025.

Answer

Chairman and CEO Tim Knavish explained that while the overall raw material supply-demand balance is favorable, epoxies and specialty pigments are seeing inflation due to tariffs, and metal packaging costs are up. TiO2 remains soft, and solvents are influenced by oil prices. Overall, raw material costs are expected to be flat for Q1 and the full year 2026. Senior Vice President and CFO Vince Morales added that targeted pricing instituted in late 2025 and early 2026 is expected to result in higher pricing for 2026.

Ghansham Panjabi asked for more color on the operating environment in Mexico, specifically how the bifurcated retail and project activity is expected to evolve into 2026.

Answer

Chairman and CEO Tim Knavish reported a recovery in Mexico, noting a negative Q1 due to tariffs, followed by low single-digit growth in Q2 and mid-single-digit growth in Q3. He expects continued sequential recovery in Q4, with retail sales already strong and project spending showing sequential improvement. He anticipates a return to expected performance for PPG Comex, especially if a trade deal is reached.

Ghansham Panjabi from Baird requested more color on the operating environment in Mexico, specifically how the retail component versus project activity has been bifurcated and how this is expected to evolve into 2026.

Answer

Chairman and CEO Tim Knavish noted that Mexico, a consistent growth engine, experienced a dip in Q1 2025 due to tariff uncertainty, but returned to low single-digit positivity in Q2 and mid-single-digit in Q3. He expects continued sequential recovery in Q4, with retail already strong and project spending showing sequential improvement. Knavish believes a deal with Mexico would accelerate project spending, leading to a return to expected performance for PPG Comex.

Ghansham Panjabi from Baird inquired about the outlook for underlying market conditions in the Industrial Coatings segment for the second half, considering macroeconomic uncertainties like tariffs.

Answer

Chairman & CEO Timothy Knavish stated that PPG's confidence for second-half growth in the segment is 'entirely share gain driven.' He characterized the underlying end-market demand as flat to slightly down, with weakness in areas like U.S./Europe auto builds and heavy-duty equipment. CFO Vince Morales added that they are not seeing any significant inventory stacking in the supply chain.

Ghansham Panjabi from Baird inquired about the underlying market conditions for the Industrial Coatings segment in the second half, separate from the impact of share gains, given the uncertain macro environment.

Answer

CEO Timothy Knavish stated that PPG's confidence for the second half is "entirely share gain driven," as they view underlying industry demand as flat to slightly down. He cited weakness in U.S./European auto builds and heavy-duty equipment. CFO Vince Morales added that they are not seeing inventory build-ups in the channel, which mitigates the risk of a sharp downturn.

Ghansham Panjabi of Robert W. Baird & Co. sought clarification on the European recovery, asking whether the improvement is due to easier comparisons or a sustainable inflection in underlying demand.

Answer

CFO Vince Morales noted that while comps are easier, there is genuine stabilization in industrial production and better order patterns in Western Europe. CEO Timothy Knavish added that momentum grew through Q1, and even in automotive, new model launches in H2 should help. He emphasized that PPG only needs stabilization to achieve good earnings leverage due to its structural cost actions.

Ghansham Panjabi asked about PPG's pricing strategy for 2025 to mitigate risks from tariffs and potential price-cost mismatches.

Answer

CEO Tim Knavish stated that the guide for low single-digit raw material inflation is based on enacted tariffs on TiO2 and epoxies. He anticipates Q1 pricing to be flat to slightly positive, with full-year pricing expected to be positive in the low single digits. CFO Vince Morales added that beyond tariffs, the broader supply chain for coatings commodities remains a buyer's market.

Ghansham Panjabi asked if the $550 million in gross proceeds from the architectural sale was within the expected range, how the proceeds would be allocated, and if there were any potential procurement dis-synergies.

Answer

Chairman and CEO Timothy Knavish confirmed the 14x multiple and sale price were consistent with expectations, noting strong interest from over 100 parties. Regarding proceeds, he pointed to PPG's track record of share repurchases. He also stated that significant raw material dis-synergies are not expected, as procurement is largely regional and PPG remains a major coatings producer in North America.

Ghansham Panjabi inquired about the specific drivers impacting the BAS segment in Q4 2025, including any effects from a government shutdown and the segment's trajectory from December onwards. He also asked about the ongoing weakness in HHC's packaging business, particularly in North America, and requested a breakdown of core sales guidance by segment for fiscal year 2026.

Answer

President and CEO Celeste Mastin attributed the BAS segment's Q4 performance to a tough comparison from Q4 2024 (+7% organic growth) and the wrap-around of a significant customer win. She noted continued success in data centers and LNG projects, despite a generally weakening construction environment, and confirmed the government shutdown had no impact. For HHC packaging, Ms. Mastin highlighted ongoing weakness in North America from CPG customers, attributing it to affordability issues and lack of mobility, but noted growth in EIMEA (Algeria, Turkey) and Asia-Pacific (China bounce back, anti-slip coatings). EVP and CFO John Corkrean detailed the 2026 guidance, projecting flat to up 2% net revenue, with organic revenue flattish (FX +1%). He anticipated positive pricing of 0.5-1% across all three GBUs, with EA delivering positive volume growth (excluding solar headwinds) and HHC and BAS volumes likely to be slightly down year-on-year.

Ghansham Panjabi from Baird focused on the BAS segment, asking about the drivers impacting its Q4 performance, potential effects of the government shutdown, and any changes in trajectory from December onwards. He also inquired about the weakness in HHC packaging, specifically if there were trends beyond aggressive inventory management, and requested a breakdown of fiscal year 2026 core sales by segment.

Answer

President and CEO Celeste Mastin clarified that BAS faced a tough Q4 2024 comparison (+7% organic growth) due to a large customer win, and the government shutdown did not affect the business. She noted continued success in data centers and LNG, with new project wins. For HHC packaging, Mastin attributed weakness primarily to North America's CPG customers struggling with affordability and lack of mobility, but highlighted growth in EIMEA (Algeria, Turkey) and Asia-Pacific (China, anti-slip coatings). EVP and CFO John Corkrean detailed the 2026 revenue guidance, expecting flat organic revenue with 0.5% to 1% positive pricing across all GBUs. He projected positive volume growth for EA (despite solar headwinds) and slight volume declines for HHC and BAS.

Ghansham Panjabi asked for an explanation of the volume decline in the HHC segment compared to the EA segment, considering HHC is typically more defensive. He also requested an update on the number of accelerating versus decelerating GBUs and inquired about the future impact of solar headwinds into fiscal year 2026.

Answer

Celeste Mastin, President and Chief Executive Officer, explained that the EA business is outperforming the market due to share gains and unique solutions, while HHC volumes reflect eroding global consumer economics with mid-single-digit declines across regions. She noted that about 18 out of 30 market segments were accelerating, with roughly half in each GBU. Regarding solar, she stated that revenue headwinds would continue into 2026 as they de-emphasize lower-margin silicon sealant products, but EBITDA and EBITDA margin would improve by exiting that space.

Ghansham Panjabi questioned the HHC segment's volume decline compared to EA's strength, despite HHC typically being more defensive, and asked for an update on accelerating versus decelerating GBUs, and the 2026 outlook for the solar business.

Answer

CEO Celeste Mastin attributed EA's outperformance to market share gains and unique solutions, while HHC's mid-single-digit volume declines reflected eroding global consumer economics. She noted 18 out of 30 market segments were accelerating, with about half in each GBU. For solar, she explained a strategic de-emphasis on lower-margin silicon sealant products, expecting continued revenue headwinds but improved EBITDA and margins.

Ghansham Panjabi asked about the contrasting volume trends between HHC (Hygienic and Health Adhesives) and EA (Engineering Adhesives), the acceleration of market segments across GBUs, and the fiscal year 2026 outlook for the solar business.

Answer

Celeste Mastin, President and Chief Executive Officer, explained EA's strength through above-market growth and share gains, while HHC's mid-single-digit volume declines reflected eroding global consumer confidence. She noted 18 out of 30 market segments were accelerating in Q3, with roughly half in each GBU. For solar, she anticipates continued revenue headwinds from de-emphasizing lower-margin silicon sealants but expects improved EBITDA and EBITDA margins.

Ghansham Panjabi inquired about the drivers behind the strong Q2 margin performance in the Engineering Adhesives (EA) segment, given mixed end-market conditions and weakness in solar. He also asked about volume velocity across the company's portfolio and the expected timeline for a positive inflection in the solar business.

Answer

President & CEO Celeste Mastin attributed the robust EA margin expansion to the outperformance of the ND Industries acquisition and strong cost controls. She noted significant share gains in transportation applications offset solar weakness, which she expects to have less of a top-line impact by year-end. EVP & CFO John Corcoran added that overall volume trends were similar to Q1, with strength in automotive and flexible packaging balanced by softness in residential construction.

Ghansham Panjabi inquired about current operating conditions amid tariff volatility, asking if H.B. Fuller observed any pre-buying from customers. He also asked for an update on the competitive environment, market share gains in consumer markets, the ongoing weakness in solar, and the impact of raw material inflation.

Answer

President and CEO Celeste Mastin confirmed they have not seen customer pre-buying, noting that durable goods markets remain weak. She highlighted significant market share gains in the HHC segment, particularly in hygiene, driven by innovation and a strategic shift away from lower-value products. Mastin explained that while solar revenue will be constrained due to repositioning towards higher-end applications, margins in that business are expected to improve. She also stated that the major impact of raw material inflation has passed, positioning the company to achieve its guided price-cost benefits for the remainder of the year.

Ghansham Panjabi asked for clarification on the manufacturing footprint optimization strategy, focusing on whether the goal is to build larger plants and how the company is managing execution risk. He also sought to reconcile the significant Q4 EBITDA margin decline, given that volumes were positive, and asked how Q1 volumes were tracking.

Answer

CEO Celeste Mastin clarified the restructuring strategy focuses on reducing redundancy and lowering production costs, particularly for the HHC business, by consolidating within the existing footprint. She attributed the Q4 margin decline primarily to an unexpected $20 million increase in raw material costs that impacted HHC. CFO John Corkrean added that Q1 volumes are tracking 'modestly better' than Q4, though Q1 is seasonally the company's lowest margin quarter.

Ghansham Panjabi inquired about the 7% volume decline in the auto refinish component for Q3 2025, seeking a breakdown between industry volumes and inventory destocking, and asked about specific commercial strategies for improvement in 2026.

Answer

Chris Villavarayan, CEO and President, explained that market declines were mid to high single digits, with destocking contributing a similar mid-single-digit impact. He highlighted growth from new body shop wins (2,200 year-to-date), adjacency sales, and Cover Flex integration. Villavarayan expressed confidence in stabilization, expecting refinish to pick up in the latter half of 2026 as destocking abates and win rates continue.

Ghansham Panjabi asked about potential catalysts for volume growth in the auto refinish market and how the strategic shift toward the economy segment could impact price-mix.

Answer

CEO Chrishan Anthon Villavarayan identified catalysts like reduced body shop backlogs and rising used car prices. He explained that Axalta is aggressively pursuing the economy segment, where its market share is only 9-11% versus over 40% in premium. While this segment has lower margins than premium, he confirmed it is accretive to Axalta's overall results and is a key part of their growth strategy.

Ghansham Panjabi of Robert W. Baird & Co. Incorporated asked for specifics on the self-help initiatives planned for 2025 and requested a summary of the bridge items for the guided year-over-year EBITDA improvement.

Answer

CEO Chris Villavarayan detailed the 2025 self-help initiatives, including targeting $30 million in savings from SG&A reductions and plant closures, continued supply chain optimization, and productivity gains from increased capital investments. CFO Carl Anderson provided the EBITDA bridge, stating that incremental revenue should convert at 35-40%, while the $30-40 million in transformation savings will be largely offset by labor inflation and tariffs.

Ghansham Panjabi inquired about the specific dynamics and quantifiable impact of Precoat Metals' market share gains on AZZ's performance, particularly in light of overall declining segment volumes.

Answer

President and CEO Tom Ferguson explained that share gains stemmed from reduced pre-painted imports due to tariffs, with AZZ capturing 3-4% of the market, offsetting a 9-10% decline. He noted these gains maintained normal margins. SVP and CFO Jason Crawford added that HVAC and appliance markets were minimally impacted. Ferguson also highlighted a solid September, suggesting a market turnaround.

Ghansham Panjabi asked about the dynamics of Precoat Metals' market share gains, seeking clarification on how these gains offset volume declines in building construction, HVAC, and appliance end markets, and the outlook for segment volumes in the second half of the year.

Answer

Tom Ferguson, President and CEO, explained that market share gains were driven by reduced pre-painted imports due to tariffs, offsetting a 9-10% market decline. He noted these gains were at normal margin profiles and expected to sustain. He also highlighted the ramp-up of the Washington, Missouri facility and aggressive pursuit of other conversions. Jason Crawford, SVP and CFO, added that HVAC and appliance segments were performing reasonably well, with minimal drag compared to construction. Tom Ferguson also mentioned a solid September, indicating a potential market turnaround.

Ghansham Panjabi from Baird asked if AZZ's Q1 results benefited from a volume normalization after weather and tariff uncertainties impacted Q4, and also requested more detail on the drivers of improved zinc utilization and specific volume figures for the quarter.

Answer

President & CEO Thomas Ferguson confirmed that about half of the Metal Coatings volume increase was a recovery from Q4, with the other half being organic growth. He attributed the strong zinc efficiency to the company's digital galvanizing system, leadership development, and technical expertise, stating they are approaching theoretical efficiency levels. SVP David Nark noted that the company does not typically disclose specific volume numbers by segment.

Ghansham Panjabi of Baird asked if Q1 2026 results for AZZ included a volume recovery from weather and tariff-related disruptions in the prior quarter. He also sought more detail on the drivers of improved zinc utilization in the Metal Coatings segment and requested specific volume data.

Answer

President & CEO Tom Ferguson confirmed that approximately half of the Metal Coatings segment's strength was due to recovery from Q4, with the remainder being organic growth. He attributed improved zinc efficiency to the company's digital galvanizing system (DGS) and operational expertise, noting they are nearing theoretical efficiency. SVP David Nark stated that AZZ does not typically disclose specific volume numbers by segment.

Ghansham Panjabi from Baird inquired if AZZ's Q1 results benefited from volume normalization after weather and tariff issues in Q4, and asked for details on improved zinc utilization and segment-specific volumes.

Answer

President & CEO Thomas Ferguson confirmed that about half of the Metal Coatings strength was a recovery from Q4, with the rest being organic growth. He credited enhanced zinc efficiency to digital tools, leadership, and operational excellence, noting they are approaching theoretical limits. SVP of Marketing, Communications & IR, David Nark, stated that the company does not disclose segment-specific volume numbers.

Ghansham Panjabi from Baird asked if AZZ's Q1 results benefited from a volume normalization after weather and tariff issues in Q4, and requested details on improved zinc utilization and specific Q1 volume numbers by segment.

Answer

President & CEO Thomas Ferguson confirmed that about half of the Metal Coatings volume recovery was from Q4 normalization, with the other half being organic growth. He attributed improved zinc efficiency to the digital galvanizing system, leadership, and training, which has brought operations close to theoretical efficiency. SVP David Nark stated that the company does not typically disclose specific volume numbers.

Ghansham Panjabi from Baird asked if AZZ's strong Q1 results included a volume recovery from weather and tariff-related disruptions in the previous quarter, and inquired about the drivers behind improved zinc utilization and specific Q1 volume figures by segment.

Answer

President & CEO Thomas Ferguson confirmed that approximately half of the Metal Coatings volume increase was a recovery from Q4, with the remainder being organic growth. He attributed the near-perfect zinc efficiency to the company's digital galvanizing system, leadership development, and technical expertise. SVP David Nark stated that the company does not typically disclose specific volume numbers by segment.

Ghansham Panjabi of Baird inquired about the extent to which Q1 volumes were a recovery from a weather-impacted Q4, the drivers behind improved zinc utilization in the Metal Coatings segment, and requested specific volume data for the quarter.

Answer

President & CEO Thomas Ferguson confirmed that approximately half of the Metal Coatings volume increase was a recovery from Q4, with the other half being organic growth. He credited the improved zinc efficiency to a combination of digital tools like the DGS platform, leadership training, and operational excellence, noting they are approaching theoretical efficiency limits. The company, including SVP David Nark, declined to provide specific volume numbers.

Ghansham Panjabi from Baird asked for the financial impact of Q4 weather, the company's confidence in FY26 guidance amid macro uncertainty, the expected earnings cadence for the year, and the M&A pipeline outlook.

Answer

Executive Tom Ferguson estimated the weather impact at $8-$12 million in lost revenue for Metal Coatings, which was fully recovered in March and April. He expressed confidence in guidance due to a strong Q1 start, planned acquisitions, and pricing initiatives. Executive Jason Crawford outlined a normal seasonal earnings pattern, but with a Q1 boost for Metal Coatings and a slight drag from the new Precoat facility in H1 before it ramps in H2. Ferguson described the M&A pipeline as strong, with active one-off galvanizing deals and larger potential Precoat deals under evaluation.

Ghansham Panjabi of Baird asked about Greif's capital allocation strategy, particularly regarding acquisitions in defensive end markets. He also sought clarification on calculating a baseline EBITDA for 2026 following divestitures and inquired about any changes in the operating environment due to tariffs.

Answer

President, CEO & Director Ole Rosgaard reiterated that the M&A strategy is focused on core polymer-based products serving high-growth end markets like food, pharma, and specialty chemicals. EVP & CFO Larry Hilsheimer confirmed the methodology for calculating a baseline 2026 EBITDA and noted the additional benefit from cost optimization programs. Rosgaard also stated that tariffs have an immaterial impact on the business due to its local-for-local operating model.

Ghansham Panjabi questioned the Fiber segment's Q1 operating profit, which was below expectations, and asked about the disparity in regional performance, with EMEA showing more resilience than North America. He also inquired about the volume assumptions embedded in the fiscal 2025 guidance.

Answer

CFO Lawrence Hilsheimer clarified that the Fiber segment's performance was in line with internal plans but appeared lower externally due to a higher SG&A allocation under the new business model, which is based on value-add. CEO Ole Rosgaard attributed EMEA's strength to targeted growth in GDP-plus end markets like agrochemicals. Regarding volumes, Rosgaard noted that while there are some positive signs or 'green shoots,' the company has not yet seen a significant demand inflection point and is maintaining a cautious outlook in its guidance.

Ghansham Panjabi requested details on the new $100 million cost reduction program, including its origins and timing, and asked for clarification on the base volume assumptions underpinning the fiscal 2025 guidance.

Answer

CEO Ole Rosgaard explained the cost program is enabled by the new operating structure and GBS 2.0, targeting SG&A, network optimization, and operating efficiencies, with full realization expected by the end of fiscal 2027. CFO Larry Hilsheimer detailed the volume guidance, which assumes growth in the paper segment, driven by the new Dallas sheet feeder and a significant U.S. Postal Service contract, and growth in Polymer Solutions, offset by a projected volume contraction in Metal Solutions.

Ghansham Panjabi requested more detail on customer sentiment and the competitive landscape within the Global Industrial Packaging (GIP) segment. He also asked about the strategic rationale for reorganizing the business by material substrate instead of geography and what percentage of GIP sales are to multinational corporations.

Answer

CEO Ole Rosgaard described the competitive environment as intense, with some players pricing at what Greif believes are loss-making levels. He reiterated Greif's commitment to a 'value-over-volume' strategy, noting that customers who chase lower prices often return for Greif's superior service and quality. Regarding the reorganization, he explained it is designed to deepen subject matter expertise, create a more effective and unified commercial organization to drive cross-selling, and improve the speed and efficiency of integrating future acquisitions.

Ghansham Panjabi from Robert W. Baird & Co. asked about the Food segment's margin outlook for the near-term and into 2026-2027, considering its current high-watermark margins and headwinds in the profitable North American beef market.

Answer

President, CEO & Director Dustin Semach acknowledged the high margins but stated the impact from the beef cycle is contained to a specific part of the business. He expressed confidence that ongoing network optimization and productivity initiatives would effectively offset any potential margin pressure from volume mix, allowing the company to maintain its earnings power.

Ghansham Panjabi inquired about the specific progress in the Protective segment, noting its year-over-year volume declines since Q1 2022, and requested a volume breakdown between its industrial and fulfillment verticals.

Answer

President and CEO Dustin Semach explained that progress stems from lapping significant customer churn from early 2024, leading to minimized churn since. He noted that while North America remains the focus, Asia is growing and EMEA is stabilizing. For Q1, Semach specified that Protective's industrial volumes were down 4% while fulfillment volumes were down 9%, with the latter heavily impacted by the now-lapped customer losses.

Ghansham Panjabi asked for historical context on the shift back to a vertical operating structure and what specific positive changes are expected from this new model and leadership.

Answer

CEO Patrick Kivits explained that while it is a return to a pre-2018 vertical model, the focus is on a new go-to-market strategy to address the secular decline in Protective and strengthen distributor partnerships. President and CFO Dustin Semach added that the change aligns innovation and customer service closer to the customer, pointing to the Food segment's recent share gains as evidence of the model's effectiveness.

Ghansham Panjabi from Baird asked for a high-level bridge for the revised 2025 EBITDA guidance, which appears flat year-over-year. He also requested an expansion on the commentary that European volumes improved in July, sought clarification on the drivers of the Q2 gross margin decline, and asked for an update on the full-year free cash flow outlook.

Answer

EVP & CFO William Drew provided the EBITDA bridge, attributing the performance to high single-digit volume growth offset by about five points of gross margin compression, with 1.5 points from warrants and 2 points from temporary inefficiencies. Chairman & CEO Omar Asali confirmed that after softness in Q2, European volumes showed year-over-year growth in July, potentially aided by tariff stability, but noted it was too early to call a trend. Drew detailed that the Q2 margin pressure was driven by warrants, restructuring, and temporary storage costs, which have since been resolved. He also revised the year-end cash target down to $70-$75 million due to lower EBITDA and a slight use of working capital.

Ghansham Panjabi asked for a breakdown of the 2025 volume growth forecast by product and end market, an explanation for the Q4 EBITDA margin performance relative to strong sales growth, details on the 2025 free cash flow bridge, and clarification on the Amazon warrant expense accounting.

Answer

Omar Asali, Chairman and CEO, attributed the Q4 margin pressure to growth surpassing expectations, leading to short-term inefficiencies as the company prioritized customer experience. He expects margins to improve with better forecasting. CFO Bill Drew broke down the 2025 growth forecast, projecting mid-to-high single-digit PPS volume growth, a 3-5 point contribution from automation, and a 2-3 point price/mix headwind. Drew also provided a 2025 free cash flow walk, projecting ~$20 million, and confirmed the Amazon warrant expense is tied to sales and will vary in future periods.

Ghansham Panjabi inquired about the modest sequential EBITDA increase despite strong revenue growth, the margin profile of new business, the source of the 26% North American volume growth, the company's strategy for debt maturing in 2026, and details on a recent patent sale.

Answer

Chairman and CEO Omar Asali explained that margin pressure stemmed from a mix shift towards void-fill and inefficiencies during the ramp-up phase with new large strategic accounts, which should normalize. He clarified that North American volume growth reflects actual consumption, not inventory loading by customers. CFO William Drew addressed the debt, stating the company is focused on demonstrating strong operational performance to access credit markets favorably. He also noted the patent sale was part of a Q2 litigation settlement with a competitor.

Ghansham Panjabi of Baird inquired about the consumer volume assumptions embedded in the fiscal 2026 guidance and the key drivers behind the expected operating leverage in the EBIT forecast.

Answer

Chairman & CEO Frank Sullivan and VP & CFO Russell Gordon indicated they are not expecting significant underlying growth in the consumer market but aim to outperform through innovation, new products, and new platforms like cleaning. Sullivan attributed the expected leverage to a pivot to growth, organic growth of 2-3%, acquisition activity, some pricing, and favorable FX, all building on the efficiencies gained from the MAP program.

Ghansham Panjabi of Baird requested an update on the MAP to Growth program's progress in Europe, clarified the nature of CPG backlogs, and asked about the scale of the cleaning products business after The Pink Stuff acquisition.

Answer

Chairman and CEO Frank Sullivan explained that MAP initiatives in Europe are progressing well, with 8 facility closures completed and an expected $100 million impact in fiscal '26. He confirmed strong backlogs in roofing. He also detailed that the cleaning business will grow from about $50 million to over $225 million post-acquisition, providing entry into a $12 billion+ market.

Ghansham Panjabi asked if the underlying volume trend is positive going forward, adjusting for weather, and whether weakness in office construction is being offset by strength elsewhere.

Answer

CEO Frank Sullivan affirmed the underlying growth trend is positive, with Q2 momentum being temporarily interrupted by winter. He explained that weakness in areas like office construction has been successfully offset by an agile sales force redirecting efforts to high-growth areas like data centers, demonstrating an ability to 'move to where the money is.'

Ghansham Panjabi questioned the sustainability of strong legacy consumer volumes amid weak trends from major food companies. He also asked for specifics on synergy progress from the SMP EMEA acquisition and the outlook for the $100M target.

Answer

President and CEO Howard Coker expressed confidence in consumer volume sustainability, citing new product launches and capacity investments. COO Rodger Fuller reported being ahead on synergies, raising the 2025 run-rate target to $40-50M. He sees upside to the $100M target for 2026, noting strong non-raw material savings and future raw material benefits.

Ghansham Panjabi inquired about the operating outlook for industrial and consumer volumes heading into 2025. He also asked how Sonoco is managing organizational consistency during its significant portfolio transformation and what the pro forma business mix between metal and paper would be after the planned divestitures.

Answer

CEO Howard Coker stated that the 2025 outlook is conservative, with low-single-digit growth expected for consumer and flat for industrial. He emphasized that the company is managing the major organizational changes through open communication and maintaining high levels of customer service. He also confirmed the post-transaction split would be roughly 60% paper and 40% metal, with the company largely exiting single-use plastics.

Inquired about the most surprising aspect of the current market dynamics, the potential catalysts for volume recovery, and the financial impact of the Pine Bluff divestiture on 2025 EBITDA.

Answer

The company was surprised by the speed of the market reaction and the delayed promotional response from customers. For volume recovery, they are actively lightweighting products and partnering with key customers rather than just waiting for consumer confidence to improve. The Pine Bluff mill had a negative LTM EBITDA of $14 million with $35 million in CapEx, so its divestiture is expected to be a deleveraging event and a cash flow benefit for 2025.

Sought to reconcile comments about the Foodservice channel, asking if the company expects conditions to worsen throughout the year. He also asked for more detail on customers focusing more on their own cost structures and how a shift to value menus by Foodservice clients would impact Pactiv Evergreen.

Answer

Management noted that while Q1 Foodservice foot traffic was down significantly (~4%), Pactiv's volumes were down only slightly, indicating outperformance. They anticipate a low single-digit recovery in the second half driven by customer promotions. They confirmed that customers are increasingly focused on their own costs, putting pressure on the entire supply chain, a trend expected to continue. Pactiv is partnering with these customers to help them create value.

Inquired about the Q4 volume divergence between the Foodservice and Food & Beverage Merchandising segments, the potential impact of CPG promotional spending in 2024, and how much of the savings from the new optimization program will contribute to the bottom line.

Answer

Management clarified that the Foodservice segment is further along in its 'value over volume' strategy, leading to its volume growth, while Food & Beverage Merchandising is still in the execution phase. They expect increased promotional activity to benefit the second half of the year. The savings from the optimization program are expected to be incremental 'hard dollar' savings from fixed cost reductions, not just offsets to inflation.

Asked about the alignment of Berry's portfolio with price-sensitive consumers and the current competitive environment. Also requested the size of the foodservice business and the strategic criteria for future divestitures.

Answer

The company feels well-aligned, with strong positions in both branded and private label products, allowing them to win even with consumer trade-downs. The foodservice portfolio is largely cups and lids and represents 20-25% of the CPNA business. The primary lens for divestitures is the core strategy to be a consumer-facing sustainable packaging supplier; businesses that don't fit this profile are considered for divestment.