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PE

Pactiv Evergreen Inc. (PTVE)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $1.333B (-3% YoY; roughly flat QoQ), with Adjusted EBITDA of $214M (16% margin) and Adjusted EPS of $0.36; GAAP net loss from continuing operations of $213M was driven by a $322M non-cash impairment tied to the Pine Bluff/Waynesville divestiture .
  • Segment mix improved: Foodservice EBITDA rose to $120M (18% margin) and Food & Beverage Merchandising (FBM) EBITDA to $111M (17% margin), supported by favorable price/mix and lower incentive-based comp, partially offset by higher manufacturing costs .
  • FY24 Adjusted EBITDA guidance was updated to $800–$810M (from $800–$820M in Q2, and $850–$870M initially in Q1); FY24 capex reduced to $240–$250M (from ~$260M), free cash flow guidance unchanged at $180–$200M, and year-end net leverage targeted at ~4x .
  • Potential stock reaction catalysts: divestiture closure and shift to a more capital-light model, cost-savings momentum (footprint optimization and SG&A actions), and management’s expectation of sequential uplift in Q4 from promotions, efficiency gains, and pricing/mix .

What Went Well and What Went Wrong

  • What Went Well

    • Sequential profitability improved: Adjusted EBITDA increased to $214M from $183M (+17% QoQ) on lower manufacturing costs (following Q2 outage), favorable pricing/mix and lower incentive costs; CFO highlighted leverage reduction progress and strong free cash flow .
    • Foodservice outperformed industry foot traffic, with segment EBITDA up 10% QoQ to $120M and margin expanding to 18% on favorable mix/pricing .
    • Management execution and strategic pivot: “We maintained strict cost discipline… and overcame challenges at the Pine Bluff… mill during its final quarter under our ownership,” positioning for a more capital-light model post-divestiture .

  • What Went Wrong

    • Volume/macro headwinds: Company-wide volumes fell ~5% YoY in Q3 (FS -2%, FBM -8%) amid consumer price sensitivity and value-over-volume portfolio actions; net revenues declined 3% YoY .
    • GAAP net loss: $213M loss from continuing ops, primarily due to a $322M impairment tied to the mill transaction; tax expense decreased by $60M largely due to the impairment .
    • Mill disruptions: Operational challenges at Pine Bluff created a ~$17M negative variance vs prior internal forecast in Q3; Pine Bluff LTM EBITDA was negative and 9M 2024 contribution was -$38M, with Q2 most impacted .

Financial Results

Consolidated metrics

MetricQ1 2024Q2 2024Q3 2024
Net Revenues ($USD Millions)$1,252 $1,338 $1,333
Net Income (Loss) from Continuing Ops ($USD Millions)$10 $20 $(213)
Diluted EPS from Continuing Ops ($)$0.04 $0.10 $(1.18)
Adjusted EBITDA ($USD Millions)$168 $183 $214
Adjusted EPS ($)$0.14 $0.17 $0.36
Cash from Operations ($USD Millions)$(33) $94 $244
Capital Expenditures ($USD Millions)$41 $57 $54

Segment performance

Segment / MetricQ1 2024Q2 2024Q3 2024
Foodservice Net Revenues ($MM)$597 $668 $670
Foodservice Adjusted EBITDA ($MM)$90 $109 $120
Foodservice Adj. EBITDA Margin (%)15% 16% 18%
FBM Net Revenues ($MM)$660 $674 $667
FBM Adjusted EBITDA ($MM)$100 $93 $111
FBM Adj. EBITDA Margin (%)15% 14% 17%

Selected KPIs – YoY drivers of net revenue

KPIQ1 2024 (YoY)Q2 2024 (YoY)Q3 2024 (YoY)
Foodservice Price/Mix-2% +2% +1%
Foodservice Volume-1% 0% -2%
FBM Price/Mix-5% -1% +3%
FBM Volume-4% -5% -8%
FBM Mill Closure/Other-14% (Mill Closure), +1% FX -10% (Mill Closure) -1% (Mill Closure)

Notes: Company-level Q3 narrative indicates total volumes -5% YoY, FS -2%, FBM -8% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAFY 2024$850–$870M (Q1 reiterated) $800–$810M (Q3) Lowered (Q1→Q2 to $800–$820M; Q2→Q3 narrowed to $800–$810M)
Capital ExpendituresFY 2024~$260M (Q2) $240–$250M (Q3) Lowered
Free Cash FlowFY 2024$180–$200M (Q2) $180–$200M (Q3) Maintained
Net LeverageFY 2024~4.0x year-end (Q2) ~4.0x reiterated; “3s” targeted next year (Q3) Maintained; next-year goal added
DividendQ3 2024$0.10 per share declared Q2 $0.10 per share; payable Dec 13, 2024 (record Dec 2) Maintained quarterly dividend

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q1)Current Period (Q3)Trend
Macro/consumer affordability; promotionsQ2: Consumers more price sensitive; promotion ramp at customers; foot traffic down ~3% . Q1: Macro challenges noted .Promotions extended into Q4; industry foot traffic down >3% YoY; cautiously optimistic on demand stabilization .Stabilizing near term; promos supportive into Q4.
Value-over-volume, distribution approachQ2: Exited some business; price/mix pressure; long-term approach to preserve value .Continuing value-over-volume in FBM; shifting away from redistributors towards direct where appropriate .Continued portfolio repositioning; direct go-to-market.
Pine Bluff/Waynesville divestiture (capital-light)Q2: Definitive agreement; negative LTM EBITDA; capex burden; expected H2 weighting .Closed Oct 1; $322M impairment in Q3; pro forma margin/leverage improvement; negative Q3 variance ~$17M; YTD -$38M .Transaction completed; removes volatility/drag.
Cost actions/footprint optimizationQ1: Launched footprint optimization; cost/SG&A focus . Q2: $15M 2H24 SG&A/discretionary savings; footprint savings expected in 2025–2026 .On track: $15M savings in 2024; footprint ~10% reduction over ~2 years; ~$35M run-rate by 2026 .Execution progressing; benefits to build in 2025–2026.
Innovation/new productsQ2: Invest for growth post-mill sale .Recycleware reduced-density PP trays; SmartPour packaging to expand into branded consumer categories .Pipeline building; 2025–2026 ramp expected.
Supply chain/weatherQ2: Temporary mill disruptions post-outage .Hurricanes Helene/Milton caused limited disruption; contingency plans executed .One-offs, limited financial impact.
Regulatory/industry eventsQ2: Noted end-market pressures .Bird flu reduced egg production, impacting carton volumes; normalizing by early Nov .Transient headwind easing.
Regional trendsQ2: Not highlighted.Expect strength in Mexico in Q4; ag season timing shifted from Q3 to Q4 .Q4 tailwinds expected.

Management Commentary

  • Strategic pivot and execution: “We maintained strict cost discipline, optimized enterprise resources and overcame challenges at the Pine Bluff, Arkansas mill during its final quarter under our ownership… we intend to leverage our heritage of product innovation and design to foster growth and assist our customers in achieving their sustainability goals.”
  • Capital-light model benefits: “Now that we have executed on our strategy to exit paper mill operations, we expect to improve our future profitability while also reducing the volatility in our earnings.”
  • Cost programs: “Our footprint optimization… is expected to reduce our overall footprint by approximately 10% over the next 2 years… full run-rate cost savings of approximately $35 million by 2026… cost reduction plan… expected to generate roughly $15 million of savings in this year.”
  • Innovation pipeline: “We announced a new line of reduced density polypropylene protein trays under our Recycleware brand… In October, we introduced SmartPour portable containers… we believe it will expand our reach into markets such as premium cereals, baking ingredients, pet food, powdered laundry detergents and dishwashing liquids.”

Q&A Highlights

  • 2025 bridge and outlook: Starting from pro forma 2024 ex-Pine Bluff of $838–$848M, CFO outlined ~$20M footprint savings in 2025 offset by ~$5M non-repeat of 2024 SG&A benefit and ~$7M normalization of incentive comp; “not unreasonable” to think north of $860M for 2025 (preliminary) .
  • Volumes: Q4 expected down low single digits in Foodservice and up low single digits in FBM; Q3 volumes tracked in-line with plan .
  • Distribution strategy: Moving from redistributors to more direct sales where redistributors compete against PTVE, leveraging hub-and-spoke distribution .
  • Pine Bluff impact: ~$17M negative Q3 variance vs forecast; Q4 would have been ~$17M contribution but removed post-close; YTD -$38M with heavier pressure in Q2 .
  • Q4 uplift drivers: ~1/3 from volume/price/mix (ag season timing, Mexico, bakery, bird flu normalization), ~2/3 from manufacturing/SG&A efficiencies and seasonal mix, plus raw material cost tailwinds .

Estimates Context

  • S&P Global/Capital IQ consensus estimates for Q3 2024 (EPS, revenue, EBITDA) were unavailable due to a mapping issue for PTVE, so we cannot provide beat/miss comparisons versus Wall Street consensus for this quarter. Values retrieved from S&P Global were unavailable.

Key Takeaways for Investors

  • Sequential improvement with mix/price discipline: Adjusted EBITDA rose to $214M (16% margin) on better mix and cost control despite soft end-markets; Foodservice led with 18% segment margin .
  • Transformational pivot largely complete: The Pine Bluff/Waynesville exit reduces earnings volatility and capex intensity, supporting a capital-light model and targeted innovation-led growth .
  • 2024 guide credible with Q4 sequential uplift: FY24 Adj. EBITDA $800–$810M assumes promotions support volumes, cost efficiencies ramp, and footprint actions progress; capex cut to $240–$250M, FCF guide unchanged .
  • 2025 setup constructive: Pro forma 2024 run-rate ($838–$848M) plus footprint savings and volumes (with some offsets) imply EBITDA growth potential; CFO indicated “north of $860M” is not unreasonable preliminarily .
  • Cash generation and deleveraging on track: Q3 cash from operations was $244M and free cash flow $190M; net leverage targeted at ~4x by year-end, with a path into the 3s in 2025 .
  • Watch near-term demand signals: Restaurant foot traffic trends, QSR promotions, ag/bakery seasonality, and egg supply normalization are key volume drivers into Q4 .
  • Execution priorities: Maintain value-over-volume in FBM, accelerate direct distribution where advantaged, deliver footprint savings and SG&A actions, and scale innovation launches (Recycleware trays, SmartPour) through 2025–2026 .

Other Q3 2024 Press Releases

  • Quarterly dividend declared: $0.10 per share, payable December 13, 2024, to shareholders of record on December 2, 2024 .