SEE Q1 2025: Margins Top Forecast as Protective Poised to Rebound
- Improved Protective fundamentals: The management highlighted minimized customer churn, accelerated go-to-market initiatives, and early signs of sequential volume recovery which suggest that the Protective segment could rebound as transformation efforts take hold.
- Enhanced cost control and margin expansion: Consistent productivity initiatives and cost takeout measures have led to improved margins—with Q1 margins exceeding expectations—and the ability to pass through pricing pressures, underpinning a stronger financial performance.
- Diversified geographic and supply chain resilience: The company's domestic production focus and USMCA exemptions reduce exposure to tariff risks, while an improved foreign exchange outlook and ongoing supply chain optimizations support a robust earnings outlook.
- Delayed Protective Turnaround: The Protective segment continues to face volume declines—with past large customer churn and ongoing softness in fulfillment markets—raising concerns that its recovery may be slower than anticipated.
- Tariff and Supply Chain Uncertainties: Despite current USMCA exemptions minimizing tariff impacts, evolving trade tensions and uncertainties in tariffs and supply chains may lead to cost increases and challenges in fully passing anticipated cost pressures to customers.
- Competitive Pricing Pressure: Competitive dynamics, including the impact of disruptive competitors in certain sub-segments (e.g., Fill-Air), are contributing to flat net price realization and eroding margins despite cost control efforts, which may pressure future profitability.
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Margin & Pricing
Q: Can you pass through rising costs?
A: Management confirmed they can mitigate rising supply chain costs by leveraging pricing actions and sourcing flexibility, with USMCA exemptions limiting direct tariff impacts. -
Protective Turnaround Timing
Q: What timing for Protective turnaround?
A: They expect improvements to materialize over the next 90 days to 6 months as accelerated transformation efforts take effect. -
Volume Guidance (Protective)
Q: What's second-half volume assumption for Protective?
A: Management projects about a 1 percentage point decline in Protective volume, anticipating sequential improvements as customer churn fully laps. -
Food Margin Sustainability
Q: Are Food margins sustainable long-term?
A: They believe Food margins will stay around 23%, driven by productivity and cost controls despite competitive pressures. -
Competitive Pricing Outlook
Q: How is competitive pricing managed?
A: Despite pricing pressures, net pricing remains flat across segments with ongoing actions to balance inflationary impacts and maintain stability. -
Customer Score & Efficiency
Q: How is customer satisfaction measured?
A: Increased direct engagement and field presence are enhancing customer feedback, ensuring improvements in both Protective and Food segments. -
Red Meat Market Trends
Q: What are red meat market trends?
A: U.S. beef is performing better than expected amid mix challenges, while robust international cycles, especially in Australia, support a strong competitive stance. -
Guidance and Pull Forward
Q: Is guidance affected by pull forwards?
A: Guidance remains intact as Q1 performance was stable, with only de minimis pull-forward effects factored into current outlook. -
Order Trends (April/May)
Q: Any change in April/May order trends?
A: Order trends in April have been steady with positive signals from distribution partners; May remains too early to assess, indicating overall stability. -
Vertical Volume Decline
Q: What is vertical volume performance?
A: Protective volumes declined roughly 6% overall, with industrials down about 4% and fulfillment down 9% due to prior customer churn. -
Import Exposure
Q: How exposed is Protective to imports?
A: Most of Protective’s business is produced domestically, limiting import exposure and associated tariff risks, though visibility remains limited.
Research analysts covering SEALED AIR CORP/DE.