Sealed Air Earnings Call Insights: Synergies Outlook and I&L Business
Philip Ng – Jefferies: Margin in I&L was a little stronger than we would have expected, looks like the synergy is really flowing through during quarter, and that actually helped. But how should we be thinking about the cadence of the margins in the coming quarters and should we expect, synergies to pick up a little bit here and I do understand there is some seasonality of the business?
Carol P. Lowe – SVP and CFO: I mean we had good leverage, we’ve communicated previously that this business does have a high fixed cost structure, because it is very service intensive. Also as Jerome noted our second quarter is very seasonally strong. And because of that you do see the benefit of that leverage we talk about. We also had the benefit of cost savings that have helped to partially offset inflationary costs. However with that there is some caution related to the economy, Europe, China deceleration, Jerome highlighted that France has been down significantly. Tourism in France is down 10%, you’ve got the issues in Turkey with Taksim Square and everyone’s well aware of what’s going on in Egypt and a lot of this business, especially through the summer months is driven by tourism. So based on that and the fact that we’ve also highlighted while we are working on our new earnings quality improvement program and that will benefit the institutional laundry business. Especially beginning in 2014, we won’t see any savings from the earnings quality improvement program for them for 2013. Because we have to go to a lot of worker’s councils and have those negotiations. So we feel really good about the performance for I&L, but because of some of the headwinds at a top line basis we felt like we need to be modest as we look towards the balance of the year.
Philip Ng – Jefferies: So, should we expect margin step down a little bit in Q3?
Carol P. Lowe – SVP and CFO: Well, I guess, we don’t really provide margin guidance by any of the division specifically. We provide EBITDA for full year, but we don’t give margins.
Philip Ng – Jefferies: Then on pricing for across the board, it seems like it’s a little stronger than expected, but if you look at F&B, your margins were kind of in line with your expectations. When should we really start seeing a real net pricing? I guess it’s more of a 2014 event, but can you kind of handicap what the leverage that could be going down the road?
Jerome A. Peribere – President and COO: So, we are seeing a very good effect already on our margin, because pricing has two components. One thing is the raw materials that you pass or you don’t, and this also depends on how strong we are seeing those materials go up. We have seen also margin expansion. So this is for us the important thing. It is, of course, not across the board and not across the regions. Let me start with a bad news. We are seeing it, for example, in F&B that in Western Europe, our pricing margin expansion has not been good, because the situation is extremely difficult there. But we’ve seen selectively some good progress in some specific countries and very good results also on low margin products. But when we don’t have pricing success, we’re going back and this is across the board. What I just mentioned here was F&B. In North America, we are seeing progress in there, again, selectively, but we are seeing that we have had some selective progress there, because on some product lines we have quite a lot of business on formula, and the formulas are starting to kick-in since May and June depending on the product line. Some other regions have been showing very nice growth in pricing, for example, in Latin America where we’ve seen substantial progress on our pricing action. On Protective Packaging, we have not pushed sales because we voluntarily went out of some product lines or some products where we had low margin. So, when we look at the sales growth in Q2 of our Protective Packaging business, we have – I’m actually not looking at it very much, because I have pushed our people to show determination in our pricing situation. So this is what we have observed. As a result of this, we have had some sales down in Europe, but we have seen also some nice margin expansions because of our initiatives.
Al Kabili – Macquarie Capital: Congratulations on a great quarter. I just wanted to circle up on the I&L business and to what degree do you think that price cost spread that you saw in the second quarter, is $5 million sustainable throughout the remainder of the year?
Carol P. Lowe – SVP and CFO: So Al, as the – it sort of goes along with the comments that I provided just on the first question. We do expect that we will continue to see improved performance in I&L as we move forward based on a lot of the changes that are happening – taking place and the year-over-year comps will be favorable from that standpoint in terms of some of the challenges that were faced in the prior year. But again, we do have some slight caution because this business is so driven by top line because of that cost structure. So it’s going to be very dependent on the sale and what they maintain for the balance of the year. There are some concerns out there with what’s going on in Western Europe.
Jerome A. Peribere – President and COO: Let me add a little bit of flavor here. Number one, the seasonality of this business, which is heavily loaded towards Q2; second, we are going to be slightly negatively impacted by our current – by the change in currency and by a few selective events in countries, which are important to us. The – Turkey is an important country, and what we have seen is that as the events were developing in June on Taksim Square, we had our customers load some business or load some product in order to prevent any disruption. As a result and what we have seen also is that the tourism in Istanbul and in some parts of Turkey has suffered since then from some quite a few cancellations. We have seen the same event or situation in Egypt where our month of June has been strong in anticipation for preventing product delivery disruptions. I don’t know to which extent you know that, but tourism right now in Egypt is a complete disaster. In Western Europe, the season is not very good because of all the Latin countries are actually doing very poorly in this kind of business altogether. So I think that we’ve got to take things as they are. We’re very pleased with the initiatives that Ilham has taken, very pleased. She has announced just two weeks ago internally a reorganization of her business, and this organization is around simplifying it, in order to ensure clarity, simplicity and affordability. We are going to see over time the benefits of these initiatives. She’s taking out also bleeders, and this is going to have an impact on our top line but over time, a positive impact on our bottom line…
Al Kabili – Macquarie Capital: That’s helpful. Just – and the follow-up question is you highlighted conservatism on some of these items you noted. Can you just talk to us about how July volume trends are going across each of the segments so far?
Jerome A. Peribere – President and COO: Well, we just don’t give guidance specifically, but I gave you a flavor on the I&L business, which is in there. And overall, we are – well, again, I don’t want to give a specific guidance to – onto Q2. But the seasonality is in there, and we have a slight currency impact for the second half of the year. We believe that this might have – that if currencies stay at the levels where they are, this is going to have about a $10 million negative impact on the second half of the year. So, when you do $1 billion of EBITDA, you have 1% which just went off there.
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