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Sealed Air Corp (NYSE:SEE)
Q4 2019 Earnings Call
Feb 11, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2019 Sealed Air Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions].

I will now hand the conference over to your speaker today, Lori Chaitman Vice President, Investor Relations. Please go ahead.

Lori Chaitman -- Vice President, Investor Relations

Thank you, and good morning, everyone. Before we begin our call today, I would like to note that we have provided a slide presentation to help guide our discussion. This presentation can be found on today's webcast and can be downloaded from our IR website at sealedair.com.

I would like to remind you that statements made during this call, stating Management's outlook or predictions for future periods, are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the information in the section entitled, Forward-Looking Statements in our earnings release and slide presentation, which applies to this call.

Additionally, our future performance may differ due to a number of factors, many of these factors are listed in our most recent Annual Report on Form 10-K, and is revised and updated on our quarterly reports on Form 10-Q and current reports on Form 8-K, which you can also find on our website or on the SEC's website at sec.gov.

We also discuss financial measures that do not conform to U.S. GAAP. You will find important information on our use of these measures and their reconciliations to U.S. GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial statements that correspond to some of the non-U.S. GAAP measures we reference throughout the presentation.

With that, I'll turn the call over to Ted Doheny, our President and CEO. Ted?

Ted Doheny -- President and CEO

Thank you, Lori, and thank all of you for joining us for our earnings call. I'll start with a quick recap of our fourth quarter and full year 2019 results and discuss the progress we are continuing to make on Reinvent SEE and how it's transforming Sealed Air. This is an exciting journey and we look forward to the year ahead.

I will conclude with an update on our 2025 sustainability pledge. Jim will expand on our financial results for the quarter and full year and provide our outlook for 2020. We'll end the call with Q&A.

Turning now to Slide 3. In the fourth quarter, we delivered 9% adjusted EBITDA growth on 3% higher sales compared to last year. Our EBITDA margin expanded by 120 basis points to 20.9% due to productivity improvements from Reinvent SEE, earnings from Automated Packaging Systems acquisition and favorable price cost spread.

For 2019, our top line was driven by acquisitions and organic growth in our Food business, mostly offset by currency translation headwinds and volume weakness in Protective Packaging. Despite modest sales growth of 1%, we delivered strong adjusted EBITDA growth of 8% and free cash flow of $321 million.

Slide 4 reiterates our vision, our strategy and how we're using Reinvent to make this happen. Our vision is to transform Sealed Air from the best packaging Company to a world-class company, servicing the global packaging industry. Today, we are the leading innovator in packaging that are making a difference in the industries we serve with automation, service and materials.

I'm proud of how our global team has embraced Reinvent SEE. We've executed well and have delivered strong results in a difficult environment. We're reinventing everything we do, from how we innovate to how we solve our customers' toughest challenges. We're doing this by operating as one Sealed Air and building a high-performance culture centered around operational excellence.

We will continue to reinvent our powerful CRYOVAC and BUBBLE WRAP brands with new and sustainable innovations. This will expand our leadership in core markets and allow us to further penetrate adjacent markets.

In 2019, we closed three acquisitions that expanded our product portfolio, our geographic presence in food and digital printing capabilities. Automated Packaging Systems brings us new innovations in automation and sustainability, while opening up new markets for Food.

To expand our presence in the fast-growing market in Asia, we made a small yet strategic acquisition in Food. And finally, our disrupted printing technology acquisitions is already helping us improve our digital capabilities and enabling higher level of automation in the near future.

We're confident that these acquisitions, coupled with the investments we're making in our core business will accelerate our rate of innovation and growth. Jim will provide more detail, but you can see on this Slide, in 2020, we expect 5% to 7% adjusted EBITDA growth on 2% to 3% higher sales and free cash flow of approximately $350 million.

Let's now turn to sustainability on Slide 5, which is at the heart of our purpose, to lead the world better than we found it. We're leading the industry to a more sustainable future and believe its critical element of our growth strategy. We have a broad portfolio of essential packaging solutions that are designed to reduce food waste, maximize food safety and protect valuable goods shipped around the world.

We're focusing on delivering the best products at the right price and making them sustainable. We established aggressive targets as it relates to our recyclability, reusability and recycled content with our 2025 sustainability pledge.

In 2019, we made meaningful progress toward these objectives and have accelerated our innovation rate. By the end of 2023, we expect half of our solutions will be either recyclable or reusable, putting us on-track to achieve our objective of reaching a 100% by 2025.

In Food, the majority of our case ready portfolio has been reinvented to meet recyclability requirements. We continue to redesign our materials to lighten the weight, reduce scrap and increase recycled and/or renewable content, while maintaining the highest performance standards of our CRYOVAC brand.

In Protective Packaging, we're gaining market share in EMEA with our recycled cushioned mailer and increased demand for paper-based products. We just launched a reinvented Bubble Wrap with 90% recycled content.

In summary, sustainability is in everything we do, top of mind for all of our constituents and will fuel our future growth.

Before I pass the call to Jim, I want to share an early assessment of the coronavirus as it pertains to our people and operations. Our top priority is to protect our people and their families, our customers and our operations from any adverse impacts. We're taking all precautionary measures as directed by health authorities and the local government. We have over 1,000 employees in eight facilities in China.

At this point, thankfully, none of our employees have been affected by the virus. Our five largest facilities are up and running and we are working with our customers to ensure continuity of supply. The remaining three facilities are in the process of returning to full production. China accounted for approximately 3% of sales in 2019% and 5% of our global supply.

I'll now pass the call to Jim, to review our results in more detail. Jim?

Jim Sullivan -- SVP & Chief Financial Officer

Thank you, Ted, and good morning everyone. On Slide 6 we'll start with the review of our net sales by region. In the fourth quarter, sales of $1.3 billion increased 3% as reported and 5% in constant dollars. We delivered growth across all regions, which included a full quarter of sales from Automated Packaging Systems.

In constant dollars, North America, our largest region, representing 58% of the company sales, grew 3% year-over-year. EMEA was up 4% and Asia Pacific was up 2%. South America, where we have U.S. dollar index pricing was up 31%, of which 12% was volume growth.

As a reminder Automated Packaging Systems generate 75% of its sales in North America with 20% in EMEA and the remaining 5% in Asia-Pacific.

On Slide 7, you can see our net sales by region for the full year. Similar to the fourth, quarter we had constant dollar growth across all regions. North America was up 4% and EMEA and Asia-Pacific were both up 2%. South America was up 27%, of which 5% was volume growth.

Turning to Slide 8, here we highlight our organic sales volume and pricing trends by segment and region. In the fourth quarter, overall volume excluding acquisitions was down about 2%, driven by a modest decline in Food Care and a 4% decline in Product Care. Food Care faced market challenges in the year-end mainly due to a heavier than expected mix of frozen pork and beef exports into China to alleviate protein supply shortages ahead of the Chinese New Year. Overall, Product Care volumes were in line with our expectations.

Product Care volume in North America declined high single digits, which was a similar trend to what we experienced in the third quarter and is to a large extent due to a weak industrial manufacturing environment exacerbated by year-end inventory destocking actions with key distributors.

The decline in North America Product Care was partially offset by volume growth of 3% in both EMEA and Asia Pacific, due to strengthen our value-added portfolio and sustainable solutions.

Overall, price performance in the quarter and for the year was up modestly, primarily driven by U.S. dollar index pricing in South America. In Food Care North America, pricing was down about 2% in the fourth quarter, primarily due to resin based formula pricing.

On Slide 9, we present our year-over-year sales and adjusted EBITDA bridges for the fourth quarter and full-year. Organic sales in the quarter were down 1.6%. For the full year, organic sales were flat as volume decline of about 1% was offset by favorable pricing.

Acquisitions contributed $78 million in the fourth quarter and $195 million for the full year. Automated Packaging Systems sales were $70 million in the quarter and $117 million for the five months post-acquisition period.

Unfavorable currency translation negatively impacted sales in the quarter by 1.5% and for the year by 2.9%. Fourth quarter adjusted EBITDA of $271 million increased $23 million or 9% compared to last year with the margin up 120 basis points to 20.9%. The adjusted EBITDA increase in the quarter was driven by Reinvent SEE benefits and acquisitions, partially offset by lower organic volume, higher operating cost and unfavorable currency.

Reinvent SEE benefits of $44 million in the fourth quarter included $19 million of restructuring savings, $13 million in price cost spread and $12 million in operating cost.

In price cost spread, we benefited from our Reinvent SEE processes that are structurally lowering our direct materials and transportation costs and increasing value capture. Higher operating costs in the quarter were largely due to labor and indirect material and services inflation and increased incentive compensation and corporate expense.

The increase in corporate expense was driven by currency transaction losses associated with the emerging market currencies strengthening against the U.S. dollar. Reinvent SEE benefits partially offset these higher operating costs, including yield in manufacturing optimization, material substitution and alternative raw material qualifications, SG&A efficiencies and savings on indirect spending.

Adjusted EBITDA from acquisitions was $13 million in the quarter. This was essentially all from Automated Packaging Systems with our cost synergies running ahead of schedule. Adjusted EPS in the fourth quarter was $0.78 compared to $0.75 in the fourth quarter of 2018, as the year-over-year $23 million increase in adjusted EBITDA and a modestly lower share count more than offset higher D&A and interest expense of $17 million, mostly related to the acquisitions.

Turning your attention to the full-year EBITDA bridge, you can see we realized approximately $168 million of Reinvent SEE benefits in 2019, with $67 million coming from restructuring. Similar to the fourth quarter, the 8% growth in adjusted EBITDA and a 130 basis point improvement in margin, demonstrates our strong execution of Reinvent SEE.

Throughout the year, we also benefited from favorable price cost spread; and in the second half, contribution from the Automated Packaging Systems acquisition. Adjusted EPS was $2.82 for the full year 2019, which included $0.04 dilution from the Automated Packaging Systems acquisition.

The average diluted shares outstanding were 155 million. This compares to adjusted EPS of $2.50 for the full year 2018 based on 160 million diluted shares outstanding. The adjusted tax rate was 26.4% for the full year 2019, compared to 27.5% in 2018.

Turning to Slide 10, here we highlight our total Reinvent SEE benefits in 2019 and what we expect for 2020 and '21. As mentioned, total benefits in 2019 were $168 million, which exceeded our previous guidance of approximately $150 million and more than offset our volume shortfall.

In 2020, we expect Reinvent SEE to contribute approximately $110 million of incremental benefits to adjusted EBITDA, of which roughly half will flow through from actions taken in 2019. And the other half will come from new actions.

Given our success today, along with the initiatives currently being implemented and in our planning pipeline, we now anticipate over the 3-year period ending in 2021, we will realize approximately $330 million of Reinvent SEE benefits. Cash restructuring payments associated with Reinvent SEE were $91 million in 2019 and are expected to be approximately $100 million in $2020 and $25 million in 2021.

So, we are on-track with our original Reinvent SEE cash investment of approximately $215 million and now expect to exceed our adjusted EBITDA benefits commitment by approximately $80 million.

Turning to segment results on Slide 11, starting with Food Care. In the fourth quarter, Food Care net sales of $760 million were down $12 million or 2% as reported, but up $5 million or 60 basis points in constant dollars, as currency continue to weigh on top line results in this segment in particular. Despite the decline in sales, adjusted EBITDA in Food Care increased $9 million or 5% to $171 million with the margin improving 150 basis points to 22.5%.

Global protein markets were up modestly in the quarter compared to our volumes, which were down 40 basis points. South America delivered higher than anticipated volume growth of 12% as we continue to benefit from this market shifting from unpackaged to packaged beef format, which is being fueled by strength in their export market. Growth in South America was offset by volume declines in other regions.

As previously noted, starting in the later part of the fourth quarter, China aggressively bought frozen pork from North America and frozen beef from Australia, and polyline boxes instead of waxing packages as a way to quickly address their protein shortage in advance of the Chinese New Year.

This dynamic impacted our sales volumes with North America, down nearly 1%; in Asia-Pacific, down 2%. We had anticipated low single-digit volume growth in both regions heading into the quarter. EMEA was broadly impacted by the weak economic environment with volume declines in the U.K., Germany and France.

Looking ahead, the global protein markets are expected to be approximately flat in 2020, driven by favorable protein production in North America and South America, offset by declines in Asia-Pacific.

For our Food Care segment in 2020, we expect approximately 1.5% constant dollar growth with volumes up approximately 2%, partially offset by unfavorable pricing from resin-based formulas in North America, particularly in the first half of the year.

Our above-market sales growth will be driven by increased demand for new products, including our sustainable Plantic and Darfresh offerings, our FlexPrep and vertical pouches for fluids and strength in equipment sales.

On Slide 12, we highlight results from our Product Care segment. In the fourth quarter Product Care net sales of $539 million were up $50 million or 10% as reported. Organic sales were down 3.5%. Adjusted EBITDA of $107 million increased $22 million or 25%, including a $13 million contribution from Automated Packaging Systems. Product Care's adjusted EBITDA margin of 19.8% expanded 230 basis points year-over-year.

Product Care's value-added solutions portfolio, which represents about 1/3 of the segment sales, delivered mid-single-digit growth in the quarter and for the full year. This portfolio includes our inflatables, automated systems, paper systems, core view and temperature-controlled packaging. As a reminder, we are also including Automated Packaging Systems sales in this value-added solution sub segment.

Growth in value-added solutions in the quarter was more than offset by an approximate 7% decline in industrial applications, and a 6% decline in traditional packaging, which taken together account for the remaining 2/3 of Product Care sales. Both of these product categories and higher cyclical exposure to the industrial manufacturing and transportation sectors, which are currently relatively weak, but are positioned well to benefit when the cycle rebounds.

Additionally, in traditional packaging, the available market for void fill applications is declining as our customers automate their processes, right size their packaging and eliminate waste. In 2020, we expect Product Care sales to increase approximately 7% on a constant dollar basis, including about $170 million of incremental sales from Automated Packaging Systems during the first 7 months of the year.

On an organic basis, Product Care sales are expected to decline approximately 2%. This outlook assumes a continued decline in traditional packaging and to a lesser extent, industrial applications, as we anticipate some stabilization in the industrial manufacturing environment following inventory destocking at key distributors in the fourth quarter of 2019 and the first quarter of 2020. These declines will be partially offset by continued growth in our value-added solutions portfolio. We are encouraged by Product Care sales increases in the fourth quarter in EMEA and Asia-Pacific and expect these trends to continue in 2020. We also expect cross-selling opportunities with Automated Packaging Systems across our global network. We expect these to materialize in the second half of the year.

Now, let's turn to free cash flow on Slide 13. Our heightened focus on cash generation is paying off as we ended the year very strong and delivered $321 million of free cash flow, well above guidance and 2018 results. The year-over-year free cash flow improvement was driven by higher adjusted EBITDA, lower working capital levels and reduced cash tax payments, partially offset by increased capital expenditures and Reinvent SEE cash restructuring payments.

Net debt at the end of the year totaled approximately $3.6 billion, pro forma net debt to adjusted EBITDA was 3.6 times, which is at the lower end of our 3.5 times to 4 times target range and better than previously expected due to the higher cash generation.

In November, we successfully refinanced our $425 million, 6.5% bonds due December 2020, with new 8-year bonds at a very attractive 4% rate. With this transaction, our annual interest expense in 2020 will be on-par with 2019, despite having an incremental 7-months of interest expense from the term loan we took on to finance the Automated Packaging Systems acquisition.

Turning to our 2020 outlook on Slide 14. We anticipate net sales to increase in the range of 2% to 3% as reported or $4.9 billion to $4.95 billion. On a constant dollar basis, net sales are expected to increase 3% to 4%. As noted earlier, Food Care and Product Care are expected to deliver approximately 1.5% and 7% growth in constant dollars respectively.

Adjusted EBITDA is expected to be in the range of $1.01 billion to $1.03 billion, which at the midpoint would equate to an adjusted EBITDA margin of approximately 20.7%. Incremental Reinvent SEE benefits of $110 million and adjusted EBITDA from acquisitions of $25 million will be partially offset by inflationary cost increases, negative price cost spread in Food Care mostly in the first half of the year driven by resin-based formula price declines and a favorable currency translation.

In 2020, on average, we are assuming the raw materials and freight will be relatively flat as compared to 2019. Depreciation and amortization is expected to be approximately $215 million as compared to $185 million in 2019. The $30 million year-over-year increase is driven by the 2019 acquisitions, recent higher capex levels, and an increase in stock compensation as Reinvent SEE drove stock forfeitures in 2019 that are not expected to be repeated in 2020.

We expect adjusted EPS to be in the range of $2.85 to $2.95. Our outlook for adjusted EPS is based on approximately 156 million shares outstanding and does not assume additional share repurchases. The adjusted tax rate in 2020 is expected to be about 27%.

For free cash flow, we expect to generate approximately $350 million. This is net of capital expenditures of approximately $200 million or 4% of sales in Reinvent SEE restructuring and associated payments of approximately $100 million.

Beyond 2021, post implementation, Reinvent SEE will be the engine of our business system that drives profitable growth and mitigates annual inflationary costs without further incremental investment.

Let me now pass the call back to Ted, for closing remarks. Ted?

Ted Doheny -- President and CEO

Thank you, Jim.

Operator, if you could turn to Slide 15. As we head into 2020, it's clear we're well on our way to achieving our vision of becoming a world-class company serving the packaging industry. As illustrated on Slide 15, you can see how we're reinventing our powerful brands and operating as one company.

The four piece of Reinvent SEE are our guide. Going forward, we'll continue to focus on our performance by delivering new and sustainable products to our markets faster and breaking into attractive adjacent markets. This will ensure that we grow faster than the markets we serve.

Our success will be dependent on our people, operating as one Sealed Air with a focus on growth in productivity, as well as developing, retaining and attracting the best and brightest talent. From a product perspective, our goal to deliver the best products, get the right price, and make them sustainable is resonating with our customers.

We have made significant progress on our processes. Operational disciplines are becoming embedded in the organization and demonstrating sustained results. We will lead in sustainability by bringing value to our customers while helping them meet their own sustainability goals. We're excited for what's ahead, and as always, we'll focus on what is in our control.

With that, I'll now open up the call for questions. Operator, we'd like to begin the Q&A session.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question is from Brian Maguire with Goldman Sachs.

Brian Maguire -- Goldman Sachs -- Analyst

Hi, good morning guys. Just a question on the Food Care volume outlook. I think you said you expect the global protein market to be flat but for Sealed Air to grow volumes 2%. Just given the fourth quarter number was a little bit below the market, so I was wondering what gives you the confidence to say that you'll have the ability to outgrow the market by 200 basis points or so? And just related to that, wondering if you could provide some more details on the small strategic acquisition you did in Food Care?

Ted Doheny -- President and CEO

Okay. First, we’ll talk about North America. As we've seen some of our customers reporting, we're expecting the North America production to be up around 2% in next year. We do expect there is going to be some choppiness as we've highlighted going into -- which in the fourth quarter and what's going on with China right now. But we think in the second half of the year, we should see the growth that we have out there. So, we feel good about that.

The dynamic that we've been talking about with what's happened in the pork market with frozen exports, we do think that will be a rebound, specially we're working directly with our customers right now, both from the U.S. and as well as from South America. Right now, we're not getting most of that frozen business, but we think over the year that will convert back to fresh and we think we even have some opportunities to get -- participate in that frozen export business.

On the second question on the small acquisition in Food Care, that's a geographic acquisition that we made in the Philippines that actually is exceeding expectations. It's small, it's less than $10 million, but it's giving us that local presence that we need in that fast-growing market.

Jim Sullivan -- SVP & Chief Financial Officer

And Brian, this is Jim, just to add a little bit to the above-market growth in Food. We do have new products that we're confident will start to have traction in the market. We talked in the comments about the sustainable Plantic and Darfresh offerings, as well as our new vertical pouches for fluids. And in addition, we have a strong backlog of equipment orders that we expect to deliver in 2020. So, it gives us high confidence given the backlog, that we can deliver there.

Lori Chaitman -- Vice President, Investor Relations

Operator, next question please?

Operator

Thank you. Our next question is from Ghansham Panjabi with Baird.

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

Hey guys, good morning. Just as a follow-up to Brian's question on the Food Care volume assumption, can you just kind of break that out between the regions, Ted, Australia with the wildfire -- with the fire impact and so on? What do you think about that market?

And then second, on the EBITDA bridge between $965 million in '19, and call it $1.02 billion at the midpoint. You've given us some of the moving parts with Reinvent SEE savings and APS and FX, but what about price cost and also operating costs? How should we think about those moving parts? Thank you.

Jim Sullivan -- SVP & Chief Financial Officer

Let me take the numbers question and then Ted will take the question on the regional sales expectation for 2020. So, we're looking at about, let's call it $55 million higher EBITDA in 2020 versus what we delivered in '19, $110 million as we laid out is coming from Reinvent. So, that's a positive. Incrementally, for APS, seven months, having APS in the portfolio for a full-year will help by about 25. So, we're up 135. And we ask ourselves, well, how do you get back down to that 55? Well, its inflation, is a big part of the reduction, that's about $50 million.

And then we talked about negative price cost spread in Food Care in particular driven by the formulas. So, keep in mind the formulas are driven off of the resin profile that the Company experienced in 2019. And those will be passed. Some of those gains in 2019 will be pass through these formulas as we talked about mostly in the first half of 2020.

So, together between inflation and call it net price cost spread, that's about, let's call, it $70-ish million, and then the remaining $10 million is unfavorable currency. We talked about currency at the top line being less than it was in '19 versus '18, but still a drag $40 million sales and about $10 million of EBITDA.

Ted Doheny -- President and CEO

Okay. Thanks, Jim. And Ghansham, going back to on the Food Care piece and building off the previous question and our confidence why we think we can get that 2% growth. I just want to reiterate again, the first quarter, probably even the second quarter, there's going to be some choppiness as we're working through some issues. But we do expect to see growth in North America. And as we especially as -- the North America where we're seeing growth from our customers, but also you've seen some of our customers talk about the automation. We do have some line of sight to that equipment business. We see some of that equipment business in clearly in 2020. So, that's giving us confidence in North America.

We also, we're seeing some penetration in some of our adjacent markets in -- that being in our liquids business and also the alternative proteins. And we're all seeing some growth in seafood. Again, those are small, but we are seeing that growth coming through in North America.

Your question on the fires in Australia. We do see Australia is trying to cover that market through into China. We do expect some of this market to return probably more again on the second half. But we are -- the growth in Australia will not be there because that herd continues to be reduced.

We do see strength still in South America, we're doing well. We even see more potential in South America, quite excited about what we can do and continue that growth in South America into 2020.

So, net-net, we do have some challenges out there that we've identified. We do think we can recover the growth in our Food Care. So, we think we definitely have a doable guidance out there for 2020.

Lori Chaitman -- Vice President, Investor Relations

Operator, next question please.

Operator

Thank you. Our next question is from George Staphos with Bank of America.

George Staphos -- Bank of America Merrill Lynch -- Analyst

Hi, everyone. Good morning. Thanks for all the details. I wanted to spend my question on Product Care. So, recognizing it's hard ultimately to call the future of Ted. When do you think, with your traditional markets shrinking particularly the traditional void fill for various reasons, that between the sales of your more value-added products and anything else that you have in the pipeline or that you're thinking about, that your volume growth within Product Care will crossover and turn more positively? Is that really likely in 2021 or is it too hard to call that given all the secular issues that you're seeing in traditional void fill markets?

Relatedly, if you could mention to us a bit in terms of how Instapak is doing? I'm assuming it's not doing great given the industrial exposure. But what are you doing to -- because it's such a good product line for you, what are you doing to have it sort of break out of industrial?

And then as we put it all together, combining Reinvent, combining whatever volume and price cost trends you're seeing, when should we see or can we continue to look to improving EBITDA growth in this segment in spite of the headwinds on volume, because of what you've got going on from Reinvent? Thank you and good luck in the quarter.

Ted Doheny -- President and CEO

Okay, thanks George. I'm going to get Jim to tag team some of this with me. So, make sure I recall those questions there. I'm going to go through first on the Product Care, then I'll go through the Instapak of what we're doing and then only because if Jim you can jump in on where we see the Reinvent going forward on the price cost spread?

So, first on the Product Care, I think we do see it turning, we still for next year we're saying organic down 2%. And so, if we break up our portfolio, we have seen some gains with our new products, just not fast enough. We're actually using this -- well, I keep saying it over and over again, "Best product, right price to make it sustainability, the sustainability to help drive that portfolio."

We have seen success in our paper products. We have seen that move still, not enough. What I feel good about North America, actually have to look into Europe and see what the EMEA team has done, similar conditions, they actually got growth in 2019 with the new products, redesigning the mailer to a recycled content, bringing in the paper products.

So, we still have more work to do. And plus, in Europe, they got growth in the e-commerce with an automated solution. So, in the Product Care, I think the 2%, we have to do it internally our numbers. I think that turn -- you asked specifically is it 2021? Like to under-promise and over-deliver, that I think we can do that.

The other key piece on Product Care that we are seeing move ahead is what the acquisition with Automated Packaging Systems, which internally we're using their name and calling Automated. That's where the market is going. Our customers are looking, can you help us with automation? They can't get labor. And their product lead on that has really helped and actually learning from them in the acquisition and what we can do with especially our equipment piece there with Product Care, so.

Long answer, simple question, don't think we're not planning on that to turn positive in 2020; 2021, we better, and see if we can pull that forward.

The next question you had was on Instapak. And do appreciate George, your comment. It's a tremendous product. So, with Instapak we get penalized there right now as we had the chemical that's in there to make that such a great product. We've been working hard. Can we take their cost down as we've done with some of our other products? We've got some cost-out issues there that I think we can take care of. It ties directly with the industrial market though, and with the industrial market down, so is Instapak with its market-leading position.

We are looking at reinventing that product and we have to make that happen, but we think with the industrial turn, Instapak will come on and match that return quite quickly. So, confident that will turn. But we have more internal things to work on that as well.

Jim, you want to handle the Reinvent, if you remember his first question from way back?

Jim Sullivan -- SVP & Chief Financial Officer

Sure. And George, I think despite the fact that we had organic volume decline across the year in Product Care, let's call it 4% total or 3.5% with a little bit more on volume. We were able to improve margins from 17.5% to 18.3%. So, even in this segment we are seeing the benefits of Reinvent SEE more than drive through the negative impact from volume.

Now, we did have favorable price cost spread in 2019 versus 2018 that we would not expect to repeat in 2020. So, having said that, we do think that the margin within that business will continue to improve and likely closer to 18.5% for the full-year next year.

So, not a huge improvement from where we ended year-to-date in 2019, but still a modest improvement. And again, it's driven by the Reinvent contribution as well as APS.

Recall when we acquired APS, the margin in that business was roughly 14% and we recognized that there was an opportunity, if you will, to Reinvent their cost structure and we made good progress. In 2019, we got it up closer to 17% by the exit point in '19. And we would expect that to continue to improve in '20.

It will still be -- close by the end of '20, close to the average for the segment, which is really good. So again, next year, we can count on in 2020, we can count on favorable price cost spread. We're looking at the flattish raw material and freight profile and pricing. There will be some drag there not a lot, but then you've got the Reinvent benefits coming through that line as well. So, overall, I think the company is doing a pretty nice job in the cyclical volume environment, holding margins and slightly -- even slightly improving it.

Lori Chaitman -- Vice President, Investor Relations

Operator, next question please?

Operator

Thank you. Our next question is from Adam Josephson with KeyBanc.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Ted and Jim, good morning, thanks for taking my question. I appreciate it. Jim, just in terms of the cadence of volumes for the year, it sounds like you're expecting Food Care volumes to get better, particularly in the second half, because I think Ted referred to some expected choppiness in the first half as you transition from fresh to frozen.

I think in Product Care, you're talking about expecting some stabilization in global industrial activity, but it sounds like that's also more of a second-half phenomenon and correct me if I'm wrong.

Can you just help me with how back-half weighted you expect this volume recovery to be just across the company? And any impact from coronavirus that you're expecting in the first quarter, specifically?

Jim Sullivan -- SVP & Chief Financial Officer

Yes, that's a good question. I think we would probably say based on what we know today that there is likely some push out of Q1 into Q2 due to the coronavirus. We did have some facilities down. Transportation is not moving real well right now in China. We do think as we sit here today though, that it's just a movement within quarters and not a issue for the full year. Obviously, it's a developing issue and we'll have to stay close to it.

So, I think it's a fair comment on Q1. Probably, overall, Food Care in the first half of the year is going to be in that 1% range on volume and stronger than that in the back half of the year as some of these equipment orders I talked about that are in our backlog are scheduled to deliver, as well as some of these new products. So, overall, in the back half of the year, slightly above 2%. So, a little bit of sequential strength in volume in Food Care.

Lori Chaitman -- Vice President, Investor Relations

Operator, next question please?

Operator

Thank you. Our next question is from Rosemarie Morbelli with G. Research.

Rosemarie Morbelli -- G. Research -- Analyst

Thank you. Good morning, everyone. I was wondering if you could talk about the reason behind no longer ceasing operations in one of your manufacturing facility? And then your lack of presence, if I can quantify it like that, in the frozen food market, why aren't you in it, and then how do you expect to get into it?

Ted Doheny -- President and CEO

Could you just help, the first part -- got the why frozen food is impacting us, got that question. The first part just came through, we couldn't hear.

Rosemarie Morbelli -- G. Research -- Analyst

Sure. It looks as though you are no longer going to cease operation in one manufacturing facility. Could you give us some detail as to why -- first you were planning closing it down and now you decided not to? Unless I misread it.

Ted Doheny -- President and CEO

Are you talking about the comments on the coronavirus?

Rosemarie Morbelli -- G. Research -- Analyst

No, it was a comment in the press release. It's all right. I can get back to it offline.

Lori Chaitman -- Vice President, Investor Relations

Rosemarie, yes, I'll take that offline. We're not sure what you're referencing.

Jim Sullivan -- SVP & Chief Financial Officer

Are you talking about the credit on restructuring that occurred in the quarter? Yes, when the company originally set up this reserves, and then anticipated that it would shut a facility in that region. And as we got further into the implementations, the margins of that business and the cost structure of that facility and through some local sourcing that we did, we were able to improve dramatically the economics. And therefore, we decided that it didn't make sense for us to go ahead and follow through on that action.

So, we reversed that restructuring into the GAAP results for the quarter. Of course, that's called out as a special item. It's not in our non-GAAP results, if that's what the question was.

Ted Doheny -- President and CEO

Okay. Yes, and Rosemarie, I'll take the frozen one. And thank you, Jim. The question on why the frozen versus fresh is affecting us? It's a good question. The Protective Packaging that we have with our CRYOVAC brand is what we offer is tremendous barrier protection on fresh meat, fresh proteins. When you go to -- when you freeze it, you'd use a simpler structure that doesn't use the same level of barrier protection that the CRYOVAC brand has. So, hence, that is not a strong market for us.

How these dynamics are working though it's quite interesting, as trying to serve that China market quickly because of the issues, first with the swine fever, now with the coronavirus on how do you get protein to that market quickly, it did shift heavy to frozen. But in the process, especially in Latin America, we have a strong presence and we're at the table with the larger meat producers. They were using our bags to actually freeze. Also, when they're freezing, they're freezing larger carcasses.

So, they again, wanted our protective capability and our barrier bags. So, in the short-term, it actually -- going frozen doesn't support the product lines we have. Though in the long-term, it will because fresh is what is preferred and even if they stay frozen, we are in there in the automation change and we think where there is some growth opportunity.

So, it's really a short-term phenomenon. But we're at the table and we think this will be a growth opportunity for us, probably more in the second half of the year than the first half.

Lori Chaitman -- Vice President, Investor Relations

And Rosemarie, happy to take more clarification questions offline on that first question. Operator, could you take the next question please?

Operator

Our next question comes from Anthony Pettinari with Citi.

Anthony Pettinari -- Citigroup -- Analyst

Hi, good morning.

Ted Doheny -- President and CEO

Good morning

Anthony Pettinari -- Citigroup -- Analyst

Ted, you referenced some of the success that you're seeing with paper-based solutions. And I was wondering if it was possible to quantify how big that paper-based product set is for you or how big that opportunity is? And I guess, we typically think of Sealed as a resin-based packager, is paper something that you're making significant growth investments in or is it something where you could even potentially look to acquire?

Ted Doheny -- President and CEO

Yes, probably don't have the actual numbers. But I'll just tell you how it fits in. We've had, we actually have had paper-based products for quite sometimes and paper shows up in a lot of our products. our core view products is actually a cardboard solution with a film inside. Our mailers, we have multiple set of different mailers with paper. The paper fill very specifically is paper for void fill, which is the paper versus plastic decision versus a Bubble Wrap opportunity.

So, with the question on plastics versus paper, which we believe it's actually going to probably drive even more of our Bubble Wrap solutions by giving the market a choice, paper versus plastic.

So, as far as the percentage and probably Lori can follow-up with you the exact percentage, but rather than give you a number right now, we can follow up with that. We are seeing its growth though as we've introduced new paper products growing and I just rather not quote the wrong number, we could follow-up on that.

Jim Sullivan -- SVP & Chief Financial Officer

Yes, let me go ahead and jump in. I think I can give him a sort of a dimension there, Ted. So, if you look at straight paper, it's pretty small percentage, low-single digits percentage of the total Product Care sales. But we do have paper that's in some of our mailers. So, mailers would probably bring that up to mid-single digit part of the Product Care portfolio growing faster.

Ted Doheny -- President and CEO

And it's also growing in the core view products etc.

Jim Sullivan -- SVP & Chief Financial Officer

Yes.

Lori Chaitman -- Vice President, Investor Relations

Operator, next question please.

Operator

Thank you. Our next question is from Neel Kumar with Morgan Stanley.

Neel Kumar -- Morgan Stanley -- Analyst

Thanks for taking my question. In Product Care, just in terms of your expectation of stabilization in the industrial markets following the inventory destocking. Can you just talk about what gives you confidence that the inventory destocking is in fact over? And, what are you seeing in terms of underlying demand trends in the industrial space so far in the first quarter?

Jim Sullivan -- SVP & Chief Financial Officer

Well, the first quarter right now is choppy for us around the world for what's going on right now in China. So, but in the U.S., what gives us confidence is we've seen that slowing down. Plus, and looking deeper into the portfolio, we think some of our new products can help us fight some of that, the secular decline that as you highlighted that's out there.

So, we're seeing that. And as I highlighted earlier to a previous question, we're seeing what we've been able to do in Europe and move faster.

So, we think bringing new products and the sustainability play, we think we have an opportunity to turn that quicker. And the question was asked before, not seeing it turn to 2021, but we think we have an opportunity.

And then the third area is, just to highlight again, our acquisition of APS was one of the product gaps we had there in that portfolio in the automation, the equipment, the Autobag product, the side pouch, so we think filling that product gap portfolio will help turn that quicker and see if we can actually turn that to a positive before 2021.

Ted Doheny -- President and CEO

And I would just add that we have talked directly with our key distributors and they've indicated to us that they have been doing destocking, so their underlying sales rate is at a better rate if you will than what we're posting because of the destocking.

So, it's really a combination of what we can observe directly through those discussions, as well as our own internal data seems to be stabilizing albeit at a level that's not where we want it to be longer-term.

Lori Chaitman -- Vice President, Investor Relations

Operator, next question please.

Operator

Our next question is from Mark Wilde with BMO Capital Markets.

Mark Wilde -- BMO Capital Markets -- Analyst

Good morning, Ted, Jim, Lori.

Ted Doheny -- President and CEO

Good morning, Mark.

Mark Wilde -- BMO Capital Markets -- Analyst

I wondered, Ted, if it's possible to just give us some sense with Reinvent SEE of where you're seeing the upside. And then just as a follow-on, I know that you've been trying to kind of reengineer the relationships on the distribution side for Product Care. So, I wondered if you could just give us an update on that?

Ted Doheny -- President and CEO

Sure. The first question is, where we see the upside on Reinvent? Obviously, as we've been talking about since we've introduced, the upside is we're actually performing better than we had planned and we want to continue that into 2020.

One of the areas that we brought into Reinvent is really could we bring the same discipline that we put in our cost structure in actually bringing it into the growth of our business as well. And what I mean by that is the tracking and tracing of initiatives that we do on cost, bringing that into our new product development, bringing that even into our sales opportunities. And so, that's under way, we put that in place in the fourth quarter. So, I think that same discipline that's been driving our effectiveness on our cost structure. I think I'm pretty optimistic we'll see that benefit in 2020 and we need it.

As far as moving your second part of your question and where we are with our -- or how we go-to market in our Product Care business? First, you've heard me mention and somewhat repetitive: "Best product right price and make it sustainable." So, really working with our sales channels to make sure that we truly do have the best product. And the right price is really working with our customers through our distributors, through our channel partners. If we don't have the right price, what do we do to look for more savings in their operations and also what other products do we need to bring into the market?

So, that's helping us. But also being clear and direct with our channels. The channels have to perform as we're reinventing everything. It's how we go-to market. We have actually in e-commerce platform that we're piloting that's actually working ahead of schedule, to make it easier to do business with, so our customers can actually connect with us online and use our service team, our distribution team, our direct team to really support and service our customers and the geographies where we serve.

So, we're making progress, Mark. I'm never happy. We're moving fast enough, but we're -- I think with our Product Care structure on the whole thing of how we go to market, how we make it, and how we develop these new products, I think we have lots of opportunities to turn that tide around sooner rather than later.

Lori Chaitman -- Vice President, Investor Relations

Operator. I think we have time for two more questions please.

Operator

Thank you. Our next question is from Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great, thanks. Good morning. I just wanted to ask about the guidance specifically, if you look at the EBITDA this year $965 million going to $1.02 billion at the midpoint next year, that's about $55 million of growth. It looks like you've assessed around $25 million for the acquisition, and so the other year-on-year at $30 million improvement. I guess, FX, you're saying negative $8 million. Assuming that the organic side maybe offsets that, is the other $30 million mainly in restructuring savings or how are you thinking about the bridge from '19 million to '20?

It would seem that there is maybe a little bit more upside there maybe on the price cost side if those resin prices continue to be benign. Is that right?

Ted Doheny -- President and CEO

Well, keep in mind that formula pricing is really driven by what we experienced in '19. We are expecting kind of a stable resin environment in '20. So, yes, I think you had most of the bridge items. We talked about earlier of $110 million of Reinvent SEE and APS be in $25 million, with the takeaway as largely being in place in of about $50 million and a net price cost spread of about $20 million. And then you hit on the unfavorable currency of $8 million to $10 million. So, that kind of gets you to the midpoint.

Again, if you look at our consolidated sales, there's not a lot of what I'll call sales upside beyond what we're consolidating it with APS. Organically, volumes are up 0.5% consolidated and that's offset by this formula pricing.

So, that's kind of where we've laid it out. We tried to do kind of middle of the road, tend to be a little bit conservative here. But hopefully we beat the numbers and the market, especially in the Product Care business where we are really being impacted by a weak manufacturing economy. Big chunk of the Product Care is cyclical. And we'renot benefiting from the cycle now, but when that turns, we would expect to see nice incremental margins on the pickup in sales there.

Lori Chaitman -- Vice President, Investor Relations

Operator, we'll take our last question, if we have one more in the queue.

Operator

Yes, ma'am. Our next question is from Daniel Rizzo with Jefferies.

Daniel Rizzo -- Jefferies -- Analyst

Hi, thanks for squeezing me in guys. Just a quick question. With the push into frozen you guys kind of discussed. I mean, given that it's is kind of an easier product, would that suggest that there's going to be kind of a mix headwinds as you head into 2020 and 2021?

Ted Doheny -- President and CEO

No, not for us. Because where they want to use our products there, if I can describe it clearly, where they're using us now for our product on the frozen, they're using larger carcasses and bigger pieces. So, they want our protection, they want our barrier capabilities and also trusted supply. So, that's not a margin mix. Actually, it's an opportunity for us.

We don't really compete on the very simple poly bag in a box for the frozen market. That's very -- that's low margin, that's something that we don't compete in right now. But when they use our products, when they go frozen, that will not be a margin hit for us at all.

Lori Chaitman -- Vice President, Investor Relations

So, operator, we'll conclude our call. Thank you all for joining us today. We look forward to speaking with you in the near future, and safe travel to all.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Duration: 61 minutes

Call participants:

Lori Chaitman -- Vice President, Investor Relations

Ted Doheny -- President and CEO

Jim Sullivan -- SVP & Chief Financial Officer

Brian Maguire -- Goldman Sachs -- Analyst

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

George Staphos -- Bank of America Merrill Lynch -- Analyst

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Rosemarie Morbelli -- G. Research -- Analyst

Anthony Pettinari -- Citigroup -- Analyst

Neel Kumar -- Morgan Stanley -- Analyst

Mark Wilde -- BMO Capital Markets -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Daniel Rizzo -- Jefferies -- Analyst

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