Sonoco Products Company - Q1 2024

Transcript

Operator (participant)

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Lisa Weeks, Vice President of Investor Relations. Please go ahead.

Lisa Weeks (VP of Investor Relations)

Thank you, operator, and thanks to everyone for joining us today for Sonoco's Q1 earnings call. Last evening, we issued a news release highlighting our financial performance for the Q1, and we prepared a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of our website at sonoco.com. As a reminder, during today's call, we will discuss a number of forward-looking statements based on current expectations, estimates, and projections. These statements are not guarantees of future performance and are subject to certain risks and uncertainties. Therefore, actual results may differ materially. Please take a moment to review the forward-looking statements on slide two of the presentation. Additionally, today's presentation includes the use of non-GAAP financial measures, which management believes provides useful information to investors about the company's financial condition and results of operations.

Further information about the company's use of non-GAAP financial measures, including definitions as well as reconciliations to GAAP measures, is available under the Investor Relations section of our website. Joining me this morning are Howard Coker, President and CEO, Rob Dillard, Chief Financial Officer, and Rodger Fuller, Chief Operating Officer. For today's call, we will have a prepared remarks section, followed by a discussion of the results for the quarter and outlook for the Q2, followed by a Q&A. If you will turn to slide five in our presentation, I will now turn the call over to our CEO, Howard Coker, for business update.

Howard Coker (CEO)

Thank you, Lisa, and thank all of you for joining us today. Let me kick off the discussion this morning with an update on our Q1 2024 overall financial performance. We executed well and delivered solid results in the quarter, which were in line with our expectations. Sales were $1.6 billion, Adjusted EBITDA was $245 million, and EBITDA margin of 15%. Our adjusted earnings per share were $1.12, which was above the midpoint of our guidance, and operating cash flow was $166 million, with strong working capital management. Productivity in the Q1 came in strong as well at $51 million, which is just an outstanding result from our team's focused execution and operating discipline.

Our productivity results are from the value-adding capital investments across our plant network, including automation, process improvements, and energy cost reductions, all of which is underpinned by our portfolio simplification activities and strong expense management. So I do wanna say thank you to our team for your hard work and commitment for our results this quarter. If you'll turn to slide 6, this past February, we were happy to host our Investor Day 2024 in New York to share our strategy updates and what's next for Sonoco. Since I took over the CEO role in 2020, we've been on a transformation journey to improve the performance of the company, and we are making progress. We've built a strong portfolio that delivers greater value, simplified the company, and unified our global operating model to improve financial results while maintaining our disciplined capital structure.

At our Investor Day, we provided our outlook over the next 5 years, where we are targeting Adjusted EBITDA of $1.5 billion with a high-teens EBITDA margin. We are expecting to generate cumulative operating cash flow of $4 billion-$5 billion, all while we remain committed to growing our competitive dividend. Our next era, that enterprise strategy, is supported by our commitments to maintain a focused portfolio, align the appropriate capital to our businesses, and invest in our people and sustainability while we operate with discipline. If you turn to slide 7, we're committed to keeping you updated on our progress along the way on our near-term strategic priorities through 2025, which are centered on continued alignment of our portfolio and investments in our 4 core businesses.

We'll continue focused on investing and streamlining operations for these core businesses, while we resolve the all other group of businesses. If you turn to slide 8, we made an important step toward the all other resolution with the completion of the Protective Solutions divestiture on April 1. This was a great business for Sonoco for many years, but through our portfolio simplification and investment analysis lens, we deemed this business to be non-core and took the appropriate action to find the right owner. As we progress through additional portfolio activities, we'll keep you apprised of our progress, which is focused on strategic sales, time for value. In parallel, we announced that as of January 1, 2024, we have taken 5 businesses that will run independently and now merge them under one leader and operating structure in our consumer segment called TFP.

This new scaled platform of $1-$1.3 billion, based on last year's revenue, is focused on niche markets where we believe we have the right to win and the right to grow. The integration of these businesses is well underway, and we expect to see operational and sales benefit in the future. The spirit of innovation to drive sales growth in the business is alive and well. Two of our most recent products were recognized with PAC Global Awards for 2024. Our EnviroSense paper blister award won the Best in Show for Sustainable Packaging, and our EnviroCan with a paper bottom also won Best in Class Award for Sustainable Packaging and Award for Distinction for Design Innovation. We're delighted to be recognized for our proprietary designs to help our customers achieve their sustainability packaging goals.

In support of our environmental commitments, we were pleased to announce that we entered into a 15-year Virtual Power Purchase Agreement with ENGIE's Big Smile Wind Project. Starting in 2025, we will contract 140 megawatts of electricity through ENGIE, which is almost half of our U.S. electrical needs. Projects like this help in our progress towards our emission targets by consuming clean, reliable power in the communities where we operate. If you'll turn to slide 9, our sustainability efforts are highlighted in our 2023 Corporate Sustainability Report update, which we published just last week. Excuse me, similar to last year's report, our materials were prepared in reference to GRI, TCFD, and SASB standards, and detailed progress to our 2023 targets are in line with the Science Based Targets initiative.

On the social side, we've updated our workplace diversity hiring progress, provided updates on our supplier diversity programs, as well as our community investments through the Sonoco Foundation. We're grateful for the recognition we've received for these efforts, and we are most recently named by Newsweek as one of America's most trustworthy companies, which is fully aligned to the mission and values of Sonoco. And with that update, I'm gonna turn the call over to Rob to take us through more details on our results and Q2 outlook. Rob?

Rob Dillard (CFO)

Thanks, Howard. I'm pleased to present the Q1 2024 financial results, starting on page 11 of this presentation. Please note that all results are on an adjusted basis, and all growth metrics are on a year-over-year basis, unless otherwise stated. The GAAP to non-GAAP EPS reconciliation is in the appendix of this presentation, as well as in the press release. As Howard said, we've built a solid foundation for continued resilient financial performance, building on our enduring operating model and strong market position. Our strategy is to deliver shareholder value by growing these positions through disciplined and targeted investment, while also maintaining our investment-grade balance sheet and our differentiating dividend. Q1 results again represent the resilience of our teams and our ability to deliver strong earnings despite a low volume environment.

Adjusted EPS was $1.12, which exceeded the midpoint of our guidance range of $1.05-$1.15. This result was driven by positive productivity of $0.39 per share, offset by negative price costs of $0.51 per share and negative volume mix of $0.12 per share. For the quarter, net sales decreased 5% to $1.64 billion due to index-based price pressure. Volume mix was flat due to low single-digit volume declines in consumer, high single-digit volume increases in industrial, and double-digit volume declines in all other. These metrics include acquisitions. Organic volume mix was negative mid-single digits due to lower organic volumes in consumer and flat organic volumes in industrial. Index-based price pressure impacted sales negative $57 million.

This result was expected as paper, metal, and some resin indexes have declined from their peaks. Adjusted operating profit was $176 million, a sequential increase due to positive sequential volume mix, as well as improved sequential productivity. Adjusted EBITDA was $245 million. We maintained this historically strong profitability due to incredibly strong operating performance. Productivity was +$51 million. We achieved positive manufacturing productivity due to our lean programs, and we achieved positive fixed cost productivity due to continued efforts to reduce our plant footprint and optimize our supply chains. From an EBITDA perspective, volume mix was -$16 million, as consumer continues to be impacted by inflationary pricing at retail and industrial begins to improve. Acquisitions were +$10 million, as the Inapel, RTS, and Chattanooga acquisitions are all ahead of plan.

Price cost was -$67 million, as industrial price cost was -$56 million and metal price overlap was -$16 million. The price cost in metal was only -$4 million due to pricing actions. Adjusted EBITDA margin was 14.9%. We expect EBITDA margins to improve throughout 2024 as we anticipate price costs and volume mix to improve in both segments. Page 12 has our consumer segment results. Consumer net sales decreased 5% to $911 million. Consumer volume mix decreased low single digits due to continued inflationary pricing at retail. Many consumer customers are beginning to return to historical pricing practices, including discounting. However, with list prices at elevated levels, volume has been slow to return to historical patterns. Despite the year-over-year decline, consumer volumes remain on trend and increased 5% sequentially.

As a comparable, Q1 2023 was unusually strong due to the end of destocking in most consumer markets. RPC sales declined high single digits due to high single-digit volume mix declines, with particular weakness in North America relative to last year's strong comparable. TFP sales were flat, as weakness in core flexible segments in cookies and confection and thermoforming food was offset by acquisitions. Metal packaging sales declined mid-single digits as negative index-based price actions offset low single-digit volume gains. Aerosol volumes were positive, and food volumes were slightly negative. Consumer EBITDA was flat at $129 million, as $16 million of productivity and $8 million of benefit from restructuring and non-operating benefits was offset by $9 million of price costs and $6-$15 million of volume mix. Consumer EBITDA margin increased 60 basis points to 14.1%.

We anticipate that EBITDA margins will increase in Q2 due to improved mix in RPC and increased mix of thermoforming and TFP. Page 13 has our industrial segment results. Industrial sales decreased 4% to $593 million. The reclassification of recycling reduced sales by $33 million, or 5%, as we now account for recycling as a procurement function, with recycling sales margins reflected only in cost of sales. This accounting better aligns with our strategy of conducting recycling activities to ensure low cost and available supply of recycled materials. In 2023, recycling contributed $100 million in sales. Adjusted for the impact of recycling reclassification, industrial sales would have increased 2%. Industrial volume mix was positive high single digits due to acquisitions and a mid-single-digit recovery in Europe. North American volume mix was positive mid-teens due to acquisitions.

Organic volume mix in North America was flat. Industrial volumes are improving, but the recovery is uneven across our markets in a way that is unique relative to historical recoveries. We expect industrial volumes to improve as we are experiencing improved order rates and higher utilization, especially in the North America paper markets. Industrial price decreased mid-single digits due to index-based price actions. We have achieved the majority of our announced market price increases, enacted to offset higher OCC and other inflationary inputs. However, paper indexes have not met the market. We anticipate paper indexes will correct in the Q2, and industrial prices will more accurately reflect the inflationary environment and the improving market conditions. Industrial EBITDA decreased to $95 million due to $56 million of negative price costs, offsetting $28 million of productivity. Industrial EBITDA margin was 16.1%.

We believe this is our new low-cycle profitability level, and margins will improve with volume recovery and future pricing actions. We believe we have changed the fundamental profitability of the business through a series of restructuring activities in the last four years. We have shuttered six older, smaller paper machines and replaced their volume with larger and more efficient machines. We believe that this, along with restructuring our converting network and increased automation, have driven lasting profitability improvements. Page 14 has our results for the All Other businesses. All Other sales decreased 14% to $134 million due to volume mix declines in Protective Solutions and the ThermoSafe cold chain business. All Other EBITDA decreased to $21 million due to lower volume mix and negative price cost, offsetting $7 million of productivity. We completed the sale of Protective Solutions on April 1.

This business underperformed in the quarter by $0.03 of adjusted EPS, and will now have a -$0.10 pro forma impact on the year. We continue to evaluate strategic alternatives for the remaining all other businesses. We're being disciplined with our approach to divestitures and are intent on maximizing value over the long term. Moving to page 15. Our capital allocation framework aligns with our business strategy to drive value creation through earnings growth and margin improvement. The 4 pillars of our capital allocation model are: capital investments to drive growth and improve profitability, dividend increases to reward shareholders, programmatic M&A to action the portfolio strategy, and share repurchases to return capital and maximize shareholder value. We are intent on driving shareholder value by maximizing cash flows and investing or returning cash in the most efficient manner.

Currently, we're focused on investing in our RPC growth strategy and in M&A with a focus on metal packaging and TFP. We are being disciplined in the disrupted M&A market and will execute the right acquisitions at the right time for us. On page 16, we have our cash flow performance for the quarter. In the Q1, we generated operating cash flow of $166 million. This was a meaningful improvement from a year ago due to strong working capital management and increased focus on other cash costs. Capital expenditures was $86 million for the quarter. We're on track with all major initiatives and anticipate investing approximately $350 million of capital expenditures in 2024. Turning to page 17. The foundation of our value creation strategy is disciplined management of our investment-grade balance sheet. Our balance sheet is in excellent condition.

We have over $1.1 billion of liquidity, we have a weighted average maturity of 6.9 years, and we have a weighted average cost of debt of 3.8%. We developed this position through continued focus on debt reduction and management of our leverage levels. We repaid $22 million of debt in the Q1 of 2024 and reduced net to Adjusted EBITDA to 2.8 times. Furthermore, we used proceeds from the Protective Solutions divestiture to repay $75 million of debt subsequent to the end of the Q1. Since the Ball Metalpack acquisition in 2022, we have now repaid gross debt of $375 million. Page 18 illustrates our history of increasing our dividend. We're excited to increase the quarterly dividend to $0.52 per share.

We've now paid a dividend for 99 consecutive years and have increased the dividend on an annual basis for the last 41 years. We're committed to increasing the dividend and place a priority on dividend increases when allocating capital. Page 19 has our guidance for Q2 2024. Guidance for Q2 2024, 2024 adjusted EPS is $1.25-$1.35. We expect consumer volumes to remain on trend in Q2, and expect year-over-year volumes to increase due to acquisitions. We expect industrial volumes to improve in Q2 as we are experiencing improved order rates and backlogs, especially in the North American paper markets. Industrial price trends are expected to improve, and price cost is expected to improve sequentially. OCC is expected to increase in the quarter, and Bending Chip is expected to reflect market increases.

We're revising our guidance for full year 2024 adjusted EPS to $5-$5.30. This guidance now includes the sale of Protective Solutions, which reduced results by approximately $0.10. Similarly, we are revising full year 2024 adjusted EBITDA guidance to $1.05 billion-$1.09 billion. We are reaffirming our operating cash flow guidance to $650 million-$750 million. We're confident in this guidance as we anticipate we can continue to outperform our working capital expectation for the year. Now, Rodger will further discuss the outlook for the business.

Rodger Fuller (COO)

Yeah. Thanks, Rob. Please turn to slide 20 for our view of segment performance drivers in the Q2 of 2024. In the consumer segment, we expect volume to be up sequentially and essentially flat year-over-year. We believe that continued retail price inflation and a slower uptick from promotions are the primary drivers of volume in the Q2. In rigid paper containers, we see sales decline sequentially and year-over-year in the Q2 in North America, primarily in snacks and other discretionary food products. Customer demand is lower than originally forecast, and we see limited impacts from promotions in the near term. Rigid paper container net sales for the rest of the world are flat year-over-year, where new product launches are progressing against a backdrop of sluggish consumer demand for legacy products in Europe.

Our newly merged thermoforming and flexible packaging business, we anticipate sales, excuse me, to be up sequentially in the Q2 from seasonal volume improvements in both flexibles and thermoforming. The thermoforming and flexible packaging team is making excellent progress in the integration of the leadership team and plant structure, and we'll see near-term cost benefits from the integration. Our focus now will be on driving growth through these resin-based businesses. In our Metal Packaging businesses, sales are expected to be up sequentially in both aerosol and food cans. Aerosol demand improvement is offsetting lower volumes in food cans, and we expect total year-over-year volumes to be up mid-single digits in the Q2. The Q1 was impacted by metal price overlap, which extended into the Q2 last year, so this will be a net positive for the quarter.

It's worth noting that we are carefully monitoring tightening tin plate steel availability. Domestic supply constraints, as well as uncertainties around import tariffs, have created tight supply market. Our teams are doing a great job of managing this issue, but it bears watching in the near term. Across all of our consumer businesses, we expect strong productivity in the Q2. In industrial, we expect sales to be up low single digits year-over-year. In our North American paper businesses, volumes in support of tissue and tile consumer end markets remain strong, and we've seen improvement in sales to the construction industry versus the low, the lows we saw at the end of last year. The capacity utilization of our North American paper operations will remain strong in the Q2.

The same is true for our North American converting businesses, where volumes are projected to be up organically, year-over-year and sequentially in the low single digits. Similar to Q1, we experienced negative price-cost in the Q2 as higher input costs, such as OCC and wage inflation, have not yet been recovered through pricing increases. We believe this, as Rob said, to be a timing issue, as price increases have not been fully reflected in deck-index pricing, but our open market increase in North America has been fully implemented. While overall international sales and industrial will continue to be sluggish, we are seeing some signs of improving volumes in Europe. In all other, we expect lower than expected sales as volume demand remains soft in our temperature-assured packaging business due to product transition delays in various shipping products.

However, effective price cost is offsetting some impacts from these lower volumes. The remaining businesses in all other are also benefiting from positive productivity. Our teams are doing a great job on the productivity front across all businesses, and we expect continued strong productivity results in the Q2, supported by footprint rationalization, ongoing expense activities, and continuous improvement programs. We are very well positioned operationally for volume improvement. So with that, Howard, I'll turn it back to you.

Howard Coker (CEO)

We've created tremendous value over the last several years with a smooth foundation and look forward-

Operator (participant)

Ladies and gentlemen, please stand by. Again, ladies and gentlemen, please stand by.

Howard Coker (CEO)

Yeah, I'm sorry. We had a little technical issue here. Yes, operator, let's handle any questions that you may have.

Operator (participant)

Certainly. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again, and one moment for our first question. And our first question will be coming from Ghansham Panjabi of Baird. Your line is open.

Ghansham Panjabi (Senior Research Analyst)

Hey, guys. Good morning. I hope I didn't miss too much with the call. But I guess first off, on consumer, you know, if we kind of look at that segment, is it fair to say that at this point, you know, coming out of 1Q, that destocking is behind you for the most part, and now you're just kind of mirroring, you know, what the major end markets are doing? Is that how you see things unfolding here?

Howard Coker (CEO)

Yeah, Ghansham, this is Howard. Yes. We feel like, you know, we're fairly well through the destocking, and it is, it is market conditions at this point in time.

Ghansham Panjabi (Senior Research Analyst)

Okay. And then in terms of aerosol, is that... You know, your performance seems a little bit better than the market. What do you attribute that towards?

Howard Coker (CEO)

You know, only thing I can say to that is the mix of customers that we have. The only way I can really answer that. It's certainly. I don't think I see any share movements as much as the customers that we have in our portfolio are doing better than they did, obviously, last year.

Ghansham Panjabi (Senior Research Analyst)

Okay, that's a fair answer. And then last question is on the consumer segment and the RPC component. You know, just give us a little bit more color in terms of what drove the extent of that decline and the evolution, you know, in terms of getting back towards flat. Is that just a function of easier comparisons as the year unfolds?

Howard Coker (CEO)

Yeah, I'd say, you know, for the quarter, you know, really impressed if you look at internationally with high, I don't even know how to say that, high teens growth in Asia, South America, relatively lower numbers in Europe. And then we, you know, North America really, really had a difficult quarter, really around a few discrete customers. And it's back to, you know, not unique to Sonoco, but in North America, the price versus volume equation and our customers on the RPC side and on the flexible side as well are telling us that they're starting to feel the pain of deleveraging and are planning to start increasing their promotion and marketing activity.

So as we go into the remainder of the year, we feel like we should see some benefit from that, but it really was a North America story in RPC.

Ghansham Panjabi (Senior Research Analyst)

Gotcha. Thank you so much.

Operator (participant)

One moment for our next question. Our next question will be coming from George Staphos of Bank of America Securities. Your line is open.

George Staphos (Managing Director)

Hi, everyone. Good morning. Thanks for the details. I guess first question I had: You generated, I think you said $51 million of productivity, Howard or Rodger, on the back of not a lot of volume. And so on the one hand, you know, kudos to everyone on the Sonoco team in that regard, but how much longer can you continue to drive productivity if the volumes don't materialize? Can you remind us what your budgets are for productivity for this year and, you know, how volume dependent they might be?

Rodger Fuller (COO)

Yeah, George, this is Rodger. I think we said last quarter, our productivity guide for the year is over $100 million. If you remember, last year we had a record year in productivity, over $100 million last year. Certainly, we're tracking to do better than that this year. As I said in my comments, Q2, we should see continued strong productivity. You know, it's volume sensitive to some degree, but the work that, the capital investments we've made, the footprint work we've done, and that continues this year. You know, we're confident we can have another record year in productivity this year.

We don't really guide quarter to quarter, as you know, but, based on what we see for the year from a volume standpoint, the plans we have in place around productivity, we expect a stronger productivity this year than last year. So hopefully that helps.

Howard Coker (CEO)

Yeah, and George, I'd just say, you're right. Volume equals leverage, and, you know, we're looking forward to volume returning to really start driving the invested at the plant level improvements that we've made. And we'll talk about this, I'm sure, but really encouraged with what we're seeing from a loading of our North American paper business.

George Staphos (Managing Director)

Yep.

Howard Coker (CEO)

I think it's the first time we've seen the amounts of backlogs that we have in place since we've made some really material capital investments, rationalizations, and so see this as upside as we go forward.

George Staphos (Managing Director)

Understood. Not to push too hard on this one, but let's say, hopefully not, you know, we're here in October, and we're talking about this persistent issue. Consumer hasn't come back. There's still this lingering destocking, if that would even be possible, you know, and let's say volumes are trending, especially in consumer, kind of low single-digit declines. Does that put at risk your productivity target for the year? Just trying to get a sense there.

Rodger Fuller (COO)

No. No, it does not put at risk the target we laid out for the year of over $100 million.

George Staphos (Managing Director)

Okay. Thanks for your thoughts and your patience on that one. So if we talk about consumer a bit more, I guess the overarching question would be: what are your customers, especially in paper, seeing? It sounded like, in answering Ghansham's question, a lot of it is just inflation and the effect on the consumer and their discretionary spending. If I missed that, please relay what you think is happening. And if overall consumer volumes are flat in the quarter coming up, and I think you said metal overall will be up mid-single digits, it would suggest that everything is down. But can you give us a you know sort of size order of what of the other large consumer segments are down the most, and why? Thanks, guys, and I'll turn it over from here.

Rodger Fuller (COO)

Yeah, George, Rodger again. RPC Global, we're expecting to be down a little over 1% in the Q2, which is an improvement, obviously from the Q1, and that's driven by, Howard already mentioned, some really nice international growth with the, with softness and continuing in North America. And it's exactly what you said. Our customers are telling us it's the price on the shelf. They are promoting, but we've seen limited impact from that. Hopefully, that shows up over time. Slightly positive in flexibles in the Q2 from a year-over-year standpoint, and then, slightly negative in thermoforming, versus a strong Q2 last year. And then metal, as you said, up, mid-single digits. So that's why we're calling, excuse me, consumer flat, for the Q2.

George Staphos (Managing Director)

Thanks so much.

Operator (participant)

One moment for our next question. Our next question will be coming from Mark Weintraub of Citi. Your line is open, Mark.

Mark Weintraub (Analyst)

Thank you. So, you know, if we look at page 27 or slide 27, the number that really jumps out was that negative $56 million price cost in industrial. And as you said, you announced the price increase for February, and that didn't get reflected by Pulp and Paper Week in February, March, or April. But you're seeing it in your open market transactions. And so I guess the question is, what do you do if Pulp and Paper Week doesn't reflect it? How dependent is your ability to get prices on the converted product, et cetera, for it to be reflected in Pulp and Paper? What options do you have to make sure it happens? And maybe I'll start there.

Rodger Fuller (COO)

Mark, I'd say, just direct to your question, we have contractual obligations that are aligned to certain indices, and we're gonna have to live by those. I think maybe where you're going is a longer-term question, and that's something that we're taking into consideration. But, what do you do, if it doesn't happen? We pull the contingency plans that we've got in place to make up for the difference. But you noted, exactly right, that the uptake from our open market was highly successful. We are running here in North America with backlogs, as I just noted a minute ago, that we haven't seen in literally years. And that is as far as we can see out, let's just say, into the Q3.

So, I would be shocked if any index didn't reflect those type of market conditions. But I think maybe you're asking a longer-term question, and that's one that we're certainly considering at this point here as well.

Mark Weintraub (Analyst)

That, that's very, very helpful. And maybe now with the RTS transaction done as well, could you remind us sensitivities for every $10 per ton change, let's just say, in the index, how does it... how it impacts the North American market, how it would flow through to EBITDA?

Rodger Fuller (COO)

Yeah, each $10 move in Bending Chip is about $5 million a year, up or down.

Mark Weintraub (Analyst)

I'm sorry, but don't you have north of 1 million tons of-

Rodger Fuller (COO)

Yes, we have 1.1-1.2 million tons in North America. But remember, almost 40% of that does not move off the index.

Mark Weintraub (Analyst)

Got it. Okay.

Rodger Fuller (COO)

It's either open market and U.S. and some OCC movement.

Mark Weintraub (Analyst)

Okay, super. That is helpful. And just maybe real quickly, too, you noticed—noted that OCC, you thought, would be higher 2Q than 1Q, I believe, yet it had shown signs of moderating in April. Is that just a carryover from 1Q having been rising as it progressed, or is that you're expecting OCC to start ticking higher again?

Rodger Fuller (COO)

Some carryover, and we have projected another $5 move in the quarter, as you get to the end of the quarter.

Mark Weintraub (Analyst)

Okay, super. Thanks for the color.

Operator (participant)

Thank you. One moment for our next question.

Our next question will come from Gabe Hajde of Wells Fargo. Your line's open, Gabe.

Gabe Hajde (Equity Research Analyst)

Good morning. Thanks for taking the question. I wanted to ask about the food can business. We're reading more reports about imported full cans of vegetables and fruits hitting shelves, maybe to circumvent templates, steel tariffs, and otherwise. I think that's roughly 40% of your food can mix. I'm curious, you know, based on conversations with customers, and I know they have to kinda plan for this stuff in terms of plantings, what the expectation is for the upcoming, you know, pack season that's embedded in the food can business?

Rob Dillard (CFO)

Yeah, Gabe, I really don't have that level of detail. I heard the same thing in terms of imports. I don't think we're hearing that as a direct impact to our customers, and, you know, as we said earlier, we expect to see a slight improvement in the Q2. And that's feedback from our customers. So at this point in time, I really can't speak to any type of material influence that we are aware of within our customer base related to import materials. Certainly, it's out there.

Gabe Hajde (Equity Research Analyst)

Okay. Thank you. That was it for me.

Operator (participant)

As a reminder, to ask a question, please press star one one on your telephone. To withdraw your question, please press star one one again. Our next question will be coming from Gregory Andreopoulos of Citi. Your line is open.

Gregory Andreopoulos (Research Analyst)

Hi, good morning. Just a few quick questions from me on consumer price costs. So, you know, you mentioned CPGs are kind of stepping up promotions or that could be happening, you know, in the near term. So I'm wondering how you think about your or the dynamic of CPGs stepping up promotions versus your ability to capture positive pricing in consumer or even positive price costs, depending on how you wanna address it. And then I had one follow-up after that.

Rob Dillard (CFO)

Yeah, I mean, I think that we definitely have seen, you know, pricing dynamics at the consumer level. We think that our customer, our customers are being really dynamic in their response to kind of higher prices on, on the shelf and are, you know, acting appropriately to drive the right volume for them. You know, from a, in terms of our price, you know, how we see that, it, you know, there are a number of index-based prices that affect that. I think overall, we've got kind of a little bit of price pressure, so I would say low single digit price pressure going into the Q2.

I think that, you know, some of that is gonna be metal, probably a little bit more offset, but overall, you know, modest pricing pressure going into the Q2 from a sequential basis and then also on a year-over-year basis.

Gregory Andreopoulos (Research Analyst)

Okay. That's fair. And, I mean, price cost didn't seem as bad as it could have been in 1Q, at down 9. You know, and I think you mentioned last quarter that you had some contracts resetting lower. So I'm wondering if you could kind of, you know, address what kind of kept price costs relatively close to neutral. And then, if you could remind us what was -- what's implied for the full year guide in terms of consumer price cost for the balance of the year? Thank you, and I'll turn it over after that.

Rob Dillard (CFO)

Yeah. Price cost was... We had really strong performance in the businesses. I think they're doing everything they can to kind of manage price at with their customers. Most of these are index-based prices that are causing a little bit of declines, and that was across the board, across consumer. So it was pretty evenly spread. You know, and Q1 is when we experienced metal price overlap, which was $16 million this year, so a little bit down because we've been managing the inventory at the end of the year. And they did a really good job kind of managing the timing and the activation around that. So that was only $4 million of the $9 million or $10 million that we had in price, negative price cost in Q1.

We think that'll relieve somewhat in Q2, and actually, we'll get some positive price costs in metal, which will get us to, you know, a modest positive in price costs for consumer in the Q2, and we expect that to continue through the balance of the year.

Gregory Andreopoulos (Research Analyst)

Great. Thank you.

Operator (participant)

Again, as a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Again, as a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. I'm showing no further questions. I will now like to hand the call back to Lisa Weeks for closing remarks.

Lisa Weeks (VP of Investor Relations)

Thank you again for joining us today. If you have any follow-up questions, we'll be around after the call, and please feel free to contact me if you'd like to schedule a follow-up meeting. We look forward to seeing you all on the road at our planned conferences and events in the coming weeks, and we look forward to reporting our Q2 results in early August. With that, please have a great day. Thank you.

Operator (participant)

This concludes today's conference call. Thank you for participating.