Sonoco Products Company Stock

Hello, everyone. Thank you for joining us, and welcome to the Sonoco Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Roger Schrum, Head of Investor Relations and Global Marketing Communications. Roger, please go ahead.

Thank you, Warren, and good morning, everyone. Last evening, we issued a news release and posted an investor presentation that reviews Sonoco's Second Quarter 2026 financial results. Both are posted on the Investor Relations section of our website at sonoco.com. A replay of today's conference call will be available on our website later today, and we'll post a transcript later this week.

If you would turn to Slide 2, I'll remind you that 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.

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; and Paul Joachimczyk, Chief Financial Officer. For today's call, we will provide prepared remarks followed by your questions. If you'll turn to Slide 4 in your presentation, I will now turn the call over to Howard.

Thank you, Roger, and good morning, everyone. Our Sonoco team delivered solid second quarter results that met our expectations and exceeded consensus estimates as productivity and cost controls helped offset global inflation in logistics, petroleum-based chemicals and coatings and raw materials. Paul will go through the financial details, so I'll concentrate my comments on the solid operating performance of our Industrial and Consumer segments, where we are the global leaders in uncoated recycled paper and metal and paper cans.

Results from our Industrial segment exceeded our expectations with operating profits up 4% from what was a strong quarter last year and up 29% from the first quarter. The segment's improvement was driven by $16 million in productivity gains, which more than offset price cost headwinds stemming from rising costs for freight, chemicals, OCC and lumber.

Driving industrial growth was strong results from our North American URB mills as trade tons were up 6.4%, which boosted mill utilization rates to 95%, the highest level in years. Much of this increased demand came from new market development, such as saturated URB for laminates as well as share gains. Reels volumes were up 10% as we continue to benefit from demand from wire and cable customers who are helping with the infrastructure build-out of data centers, serving artificial intelligence investments.

Overall, global industrial volume mix was flat for the quarter as the strong results from our mills were partially offset by lower demand in Latin America and some of our converting operations. On the consumer side, operating profit was off by 5% during the quarter, but was up 22% sequentially from the first quarter. Productivity and cost containment initiatives boosted consumer results. Paper can volumes were up 9% in EMEA and APAC, with Asia volumes being up 29%.

Overall, segment volume mix was off 1.8%, driven primarily by lower metal aerosol cans and adhesives and sealant tube demand in the United States. I would add that both U.S. food can and aerosol volumes were strong last year in the second quarter with volume mix up 6%. As shown on Slide 5, global inflationary pressure driven by higher energy expenses stemming from the Middle East situation costs us roughly $10 million of operating profit in the quarter.

Freight was the largest component of those cost headwinds, but raw materials were also higher, particularly OCC, which is up $40 per ton year-to-date to $100 a ton. While we were behind the price/cost curve in Q2, recovery mechanisms are now in place to fully offset these costs.

This includes an April URB and converted product price increase, which fully goes into effect in the third quarter and a $60 ton increase for URB, which went in place on July 8. We have also implemented contracted paper can price increases globally and are adding necessary surcharges to offset higher diesel costs. Now I'll take a minute and turn the call over to Paul, and then I'll come back on with some thoughts regarding second half expectations.

Thank you, Howard, and good morning, everyone. Before turning to the quarter, 2 quick reminders. First, all the results discussed today are on an adjusted basis, unless otherwise noted, with a full GAAP reconciliation included in our earnings release and accompanying presentation. Second, while the TFP divestiture has now fully annualized, ThermoSafe continues to affect certain year-over-year comparisons within continuing operations, and I'll provide underlying context where it is helpful.

Turning to the second quarter results on Slide 7, the second quarter was another quarter of solid execution in line with the priorities we outlined at Investor Day. We delivered earnings growth, generated strong cash flow, maintained margins and continue to realize benefits from our profitability performance plan. Most importantly, these results demonstrate that the strategic actions underway across Sonoco are translating into measurable financial improvement and positioning the company for stronger long-term performance. Net sales were $1.9 billion, down 1% compared with the prior year.

Pricing gains continue to provide support and helped offset softer demand in select markets, while foreign exchange was a modest tailwind during the quarter. Adjusted EBITDA was $324 million, down 1% versus the prior year, and adjusted EBITDA margin was 17.2%, in line with the prior year period. Productivity, pricing actions and early contributions from our profitability performance plan helped offset inflationary pressures and supported margin stability in the mixed demand environment.

Adjusted EPS to $1.51 compared to $1.37 in the prior year, supported by the continued execution across the business, benefits from the profitability performance plans and lower interest expense resulting from the debt reduction actions completed over the last year. Prior year second quarter results from the divested ThermoSafe businesses were $66 million of revenue, $11 million of EBITDA and $0.08 of EPS.

Excluding those results, second quarter 2026 revenue and EBITDA grew by 2% and adjusted EPS increased by 17%. Operating cash flow was also a highlight, coming in at $301 million, more than $100 million above the prior year. This performance reflects strong earnings conversion and continued discipline around working capital and capital deployment. Taken together, the quarter reinforces the strength of our operating priorities and demonstrates continued progress off of the strategy we laid out at Investor Day.

Turning to the EPS bridge on Slide 8, I'll take you through the primary drivers of the year-over-year improvement in earnings per share. Adjusted EPS grew $0.14 or 10% year-over-year within the business. Both the Consumer and Industrial segments benefited from pricing gains and productivity improvements, which helped mitigate input cost pressures and softer volume in several markets. Nonoperational items also contributed meaningfully to the year-over-year improvement.

Lower net interest expense provided $0.14 of a benefit driven by debt reduction actions completed over the past year. Foreign exchange and improved tax rate and other elements also supported the EPS improvement. Our profitability performance plan contributed $0.07 during the quarter, marking the second consecutive quarter of realized benefits. This is an important proof point that the program is gaining traction and beginning to deliver the structural cost and productivity improvements we committed to at Investor Day.

The key takeaway from the bridge is straightforward. While the operating environment remains uneven, our teams are executing well. Pricing, productivity and cost discipline actions are helping offset external pressures and support continued earnings growth. While the earnings bridge highlights the benefits of those initiatives on profitability, turning those earnings into cash is equally important. Turning to the cash flow on Slide 9, cash generation remains a central priority for the company, and the second quarter results were strong.

Operating cash flow of $301 million was up 56%, and free cash flow of $237 million was up 139% year-over-year. Gross capital investment was $64 million, consistent with the first quarter spending levels. We continue to monitor capital spending very closely and remain focused on projects that generate attractive returns. Our capital allocation priorities remain unchanged: fund the business, support the dividend and continue strengthening the balance sheet through disciplined capital deployment.

Turning to our segment performance on Slide 10. Looking at the Consumer segment first, sales increased 1% year-over-year to $1.24 billion despite continued demand variability in select markets, pricing discipline remains strong at plus 2 points and favorable foreign exchange contributed an additional point. We are seeing volume improvements in several served markets. Looking at metal cans, we had double-digit unit growth in our pet food in EMEA, which now represents 15% of our global food can units.

As Howard mentioned earlier, we are seeing strength in the paper can volumes in EMEA and APAC as well. The consumer team continues to make steady progress through pricing discipline, productivity improvements and profitability initiatives. The team remains focused on simplifying processes, strengthening their cost structure and improving operating performance. These actions are helping position the segment for stronger execution as we move through the balance of the year.

Turning now to Industrial, Industrial sales were $643 million, up 4% versus the prior year. Pricing contributed 3 points of growth, while favorable foreign exchange rate added another point. Volume and mix were flat as growth in the global URB, reels and industrial plastics offset softer demand in the LatAm market and converting. Segment adjusted EBITDA increased 3% year-over-year to $122 million. The Industrial segment delivered solid execution in the quarter, supported by productivity improvements, commercial initiatives and disciplined cost management.

While inflation in materials and freight and other operating costs exceeded price recovery during the quarter, productivity initiatives more than offset the remaining pressures and supported year-over-year earnings growth. Given the exit rates we are seeing in both pricing and productivity initiatives, the current actions underway position this segment as we move through the second half of the year.

On the next slide, I'll take you through the progress of our profitability performance plan. On Investor Day, we outlined a 3-year initiative designed to strengthen margins, simplify our operating structure, improve commercial execution and enhance the long-term profitability and competitiveness of Sonoco. We are encouraged by the progress we've made through the first half of the year. During the second quarter, the program delivered $10 million of savings, bringing the year-to-date savings to $18 million.

Annualized savings now stand at roughly $38 million for modeling purposes, representing 25% at the low end of our 3-year target range. More importantly, these benefits are already visible in our financial results today and reinforce our confidence in margin improvement and earnings growth objectives we outlined at Investor Day. The progress we are seeing reflects the quality of the initiatives underway and the organization's ability to execute. While we are still early in the program, the results achieved to date are encouraging and reinforce our confidence in the path ahead.

Turning now to our full year guidance on Slide 12. Based on our year-to-date performance, the momentum we are seeing across our operating initiatives and our expectations for the balance of the year, we remain confident in our ability to deliver results within our previously communicated guidance.

For the full year, we continue to expect net sales of $7.25 billion to $7.75 billion, adjusted EBITDA of $1.25 billion to $1.35 billion, adjusted earnings per share of $5.80 to $6.20 and operating cash flows of $700 million to $800 million. As we move through the second half of the year, our priorities remain unchanged.

We are focused on executing the profitability performance plans, driving productivity improvements, maintaining pricing discipline and strengthening the working capital performance. Sonoco is becoming a more focused, more streamlined and more financially disciplined company. In summary, the second quarter demonstrated continued execution aligned with priorities established at Investor Day. We generated strong cash flow, maintained our EBITDA margins, advanced our profitability performance plans and delivered year-over-year EPS growth.

Collectively, these actions are improving the quality of our earnings, strengthening the balance sheet, increasing the company's long-term value creation. We are encouraged by the momentum we have built through the first half of the year and remain focused on delivering our commitments for 2026. With that, I'll turn the call over to Howard.

Thanks, Paul. And to your point, Sonoco is well positioned entering the second half. Let me explain why I'm bullish, starting with our Industrial segment. As shown on Slide 14, our team continues to ramp up production of saturating URB for a growing opportunity in high-pressure lines. Recognizing an unmet need in this market, we took more than a year of technical development, trialing and testing to develop a recycled paper grade that can be used in making laminate products for countertops, flooring, composite boards and decorative panels.

By the end of this year, we'll be producing roughly 10,000 tons annually. And with added capability, we expect to increase to 20,000 tons annually by the end of 2027. We're being conservative about this new market, but we think there is additional growth potential, but we will need further capacity to meet domestic demand. In addition to market leadership in URB, we also are the North American market leader in the production of nailed wood, metal and poly fiber reels as shown on Slide 15.

In the second quarter, we completed a $20 million expansion at our Hartselle, Alabama wire and cable reels production center. This capacity addition is vitally needed to address the fast-growing wire and cable industry's demand and building out artificial intelligence data centers, along with serving the growing power grid and communication markets. Even though we increased sales by 13% and volumes 10% in the second quarter, we have been essentially sold out and needed this additional capacity to meet market demand.

Currently, we're starting up new robotic equipment that will enable us to increase our nailed wood reels production by approximately 15%. Now switching to our Consumer Packaging segment. We continue to develop new commercial opportunities through new products and market developments as illustrated on Slide 16. Our new paper can plant in Thailand, which came online in March is continuing to ramp up production and recently started a second line that allow us to produce roughly 200 million units annually with room for additional growth.

In addition, we will be adding new paper can production lines in South America and the U.S. in 2027 to serve growing snack customers. In Europe, Sonoco is the largest producer of metal cans serving seafood and vegetables, which are 2 of the largest can markets. To improve efficiency and to meet demand in the Italian market, we are installing 2 new can lines to serve tomato and tuna customer. As Paul mentioned, pet food grew double digits in the quarter and represents one of the fastest-growing markets globally. We're launching new projects to grow our position, particularly in Europe.

We recently opened a new metal can and ends production line in France that will enable us to work more closely in partnership with key brands and co-packers. Finally, our commercial teams have been working with our engineers as we invest to grow new products, which include examples such as Orbit, easy-open closures, which make opening jars easier than regular twist closures. Ecopeel, an easy-open feature for metal food cans, which uses less materials. New microwavable-safe metal bowls, which are a highly recyclable alternative to traditional plastic trays for ready meals and convenience foods.

And finally, our proprietary Greencan packaging innovation featuring up to 98% paper content that is able to package a wide range of dry food products. Turning to Slide 17, we are encouraged that several key indicators are strengthening in our favor as we begin our busiest period of the year.

Demand for Sonoco URB in North America, as we've noted, is very strong and our backlogs have grown, which requires that we import paper from Europe and Latin America mills through the third -- all the way through the third quarter. To remind you, this is a very complex market, and this allows us to not only ensure supply security, but also enables longer sustainable grade runs in North America, which further drives our productivity.

In consumer, as I mentioned, new paper can growth in Europe, Asia, South America and North America has us exploring additional capacity expansions while customer promotions and new product launches are projected to lift can volumes as we enter the important pack season in both the U.S. and EMEA. And finally, we now have in place inflation recovery mechanisms, which will help us restore our margins. While we remain mindful of external macroeconomic conditions, we are confident in our strategy, our portfolio and ability to execute through economic cycles. So with that, operator, we'd be happy to take any questions that the folks may have.

[Operator Instructions] Your first question comes from the line of George Staphos with Bank of America Securities, Inc.

My 2 questions. Howard, over the weekend, we got some of the market commentary from the trade publications regarding some of the markets. And there was commentary that the URB market actually loosened at least in terms of what the trade pubs were hearing from their respondents. Is there anything -- I recognize you're bringing in paper from Europe, but did any of your markets loosen? What, if anything, do you think might be observed by respondents?

And I guess, do you remain comfortable with your pricing for July? The second question, as we look back at our notes and what you're talking to coming out of 1Q, looks like industrial did better. It looks like consumer maybe was a bit off from kind of your trajectory coming into 2Q. Would you agree with that? And where were, if there were some of the variances in consumer, especially in consumer volume in North America, if you can talk to that.

Sure, George. Look, no, we are not seeing any weakness in our served markets under URB. As you know, we focus on the high end of the market. It just -- frankly, that was a bit of a surprise for us to read that. So we have gained some share along the way. But I really can't comment because we, as I said in my commentary, are actually looking at backlogs all the way through the third quarter. We are bringing paper in support of demand here in North America.

But as I noted again in my commentary, we can serve the market. It's just when we get to these type of operating rates in order to be as efficient as we can, it makes better sense for us to set up on our high-quality, high-performing grades and run, run and fill in with material from overseas. So I can't answer the question on what that survey -- where that data came from because we certainly are not seeing that.

On the consumer side, particularly in North America, we did see a bit of a slowdown, but it was somewhat, I would call, macro related, particularly in the adhesives and sealants. As you know, we are the largest producer of caulking cartridges, mastic cartridges in the U.S. And particularly in June, we saw a bit of a pullback. But that is more of a housing-related remodeling type -- and could that be an indicator of what's to come? Maybe. But that was probably the biggest.

Aerosols were slightly down. We had a tough comp for sure. But the 2, you can say, portions of that are related to that segment, spray paints, et cetera. Other than that, things seem to be well in order. I also talked about the international side, really strong snack performance and overall performance outside the United States that really help balance things.

George, on the commentary, too, on the URB markets, our North American mills are running at 95% utilization. Our European mills are at 92%, and we're not seeing any slowdown in there. So I echo what Howard said, too, is we have a very technical quality grade of paper and our servicing industry goes out there really, really well. So we're not seeing any slowdown in the markets that we serve today in that URB space. So it is a very strong demand still.

Your next question comes from the line of Anthony Pettinari with Citi.

Just following up on George's question. I was wondering if you could talk about maybe second half volume expectations that are assumed for your full year guide? And if there's any finer point you'd put on RPC versus metal cans and any early reads on pack season or maybe it's too soon.

I'd say year-over-year, as we've entered the second quarter, pack season looks to be solid in both regions. What are we modeling low to mid-single digits on the consumer side of things year-over-year and low single digits on the industrial side. But the pack seasons are starting out pretty impressively at this point in time. We'll see if that sustains itself through the quarter.

Okay. That's helpful. And then I was wondering, over the weekend, we heard news about potential tariffs on Canadian paperboard maybe coming into place next month. I think in the past, some URB had come from Canada. And I'm just wondering, does that impact any part of your business?

I would say it's still an understanding and process of how this is going to settle out. But while we do cross-border, it's relatively immaterial. However, then...

Your next question comes from the line of John Dunigan with Jefferies.

Congrats on the solid quarter. I just wanted to touch first on the news that one of your peers who hasn't been in URB is now looking to add about 10% to URB capacity by the end of 2027. So I'm just wondering how much of your open market tons would you say is insulated from this and whether that be from longer-term contracts or markets like laminates that you have a clear competitive advantage? Just trying to gauge the potential impact going into next year.

Thanks, John. Yes, Howard was saying. So what I would say is URB is a very complex market. We -- as you're well aware, we have invested heavily frankly, we've been in it for over 125 years. But in the last 5 to 8 years, we have really invested in our capabilities. And one thing that we have been clear about is that we are focused on the high end, high-quality, truly demanding markets.

It's not just about the product that we produce, but it's what's behind the scenes, the service, the various applications and our deep knowledge of usage of our product and how we can solve problems for our customers. So we don't target. We don't play in a commodity side of this business on a regular basis. And we are full as we can be servicing the high end of the market. We're now bringing materials in from Europe and Latin America. That's because they too can make and do make and participate in these higher-end markets. So yes, we hear that. And I don't see where that has any bearing on what we do for a living.

That's great to hear. And then just going back to the comments on tariffs. So I understand that you guys don't really ship a lot from Canada into the U.S. I believe some of your peers in Canada do. Do you think that's material enough to maybe offset the new capacity coming online from one of your U.S. competitors. Obviously, the whole situation is fluid, and we had to actually see 50% tariffs on URB get implemented. But I'm just wondering how much could actually be constrained if these tariffs go into place?

Yes. I think first off, it depends on what the ultimate ruling is, meaning is of what's tariffs, what's not tariff. I'm not all that familiar. I agree with you. There's a couple of folks that in Canada that probably do cross-border. I would imagine they participate. And I would assume in the tube and core side of things with smaller players. I don't want to be speculating, but there'd be a real effort there to requalify someone that's not been a participant in this market to make sure they've got a product that would perform outside of the simplest grades that are available in the marketplace.

Your next question comes from the line of Mike Roxland with Truist Securities.

One quick one just on the -- on your guide. Howard, I think your comment, it sounds like your guidance for the year embeds the July price increase of $60 per ton. However, as George noted, the trade publication didn't reflect that in the latest print. So can you help us understand any downside risk to the guide should that price increase not ultimately be implemented, particularly, I would assume that you still be negative price cost if you don't get that additional $60 through. So any color you can provide on negative or downside risk to your guide should that not be reflected?

Yes. Thanks, Michael. I'll let Paul jump in this in a little deeper, but what I would say what we really feel good about the third quarter that we've got the recognition and pricing, while it was recognized in second quarter, contractually July 1 is when we really start seeing complete pass-through of the inflation that we have seen and the pricing that we deserve going into the third quarter.

And I'll add to it on the consumer side, we have some major contracts that based on our customers' financial years were pricing in the first half of the year was not passed that we'll be passing July 1, August 1 time frame. So it's on both sides of the business for Q3, Q4. Paul, do you have...

Yes. So Michael, just I kind of echo what Howard is saying it too is our demand is really strong. And even though the guide came out last Friday and didn't indicate any movement in the pricing that's out there, we're not seeing any slowdown. Our full expectation is that we will be able to pass it. But just as a reminder, we're kind of shifting to like to tan bending chip as an indicator for our profitability and a $10 movement in that is about a $10 million annualized number that's out there, so call it, $2.5 million a quarter of an impact.

So if you do see some movement, it's hard to predict the future that's out there. But given our demand levels across our industrial space today, we are not seeing any weakening. So that would help us position for a very strong pricing position on a go-forward basis. Now we do have that this round of price increase would impact primarily the fourth quarter. Given the timing and the nature of it, it would go live into basically starting kind of October time frame. So it would be more of a fourth quarter impact than it would be a third quarter impact for us.

Got it. Very clear. Appreciate the color. And then just one quick follow-up, follow-up if I have you. It seems like in terms of profitability performance, you stressed that's gaining traction, but it seems like there was a little bit of a deceleration in 2Q relative to 1Q. Is that just a function of the macro higher inputs? Or is there something else going on? And can you help us think about the profitability performance acceleration in 3Q and 4Q?

Yes. So the profitability performance plans that we outlaid at Investor Day, we feel really good about it. Now we are focusing more on kind of the back-office functions in the first early phases of this, and that's really what you're seeing in that $8 million in Q1 and then $10 million and it's accelerating.

Now we do have plans on the operations front to focus on our footprint and some more of the improvements that are out there. Those structural changes take a little bit longer to implement. We need to move lines, things of that nature. So you'll see larger acceleration of the profitability performance plan kind of in Q3, Q4 and then also in '27 and '28 and beyond. But I feel really good about where we sit today, confident that the teams are doing the right things and the whole organization is focused in on.

Your next question comes from the line of Mark Weintraub with Seaport Research Partners.

First, just one quick clarification on the URB. You talked about $10, $10 million-ish or so. I thought though that some of the pricing is actually like tied to OCC, not necessarily what Pulp and Paper Week is doing. Could you just sort of clarify -- recognizing the expectation is that you are going to see that price increase reflected. But if it were not to be, what type of impact does it have? I think it's less than that kind of the numbers you were saying, but if you could just clarify, please.

Yes, Mark. So OCC is -- it's definitely an input cost that's out there. But really, what we had shifted the market to is tan bending chip a while ago. OCC will move. And if it moves up or down, that's a reflection of our input costs. And I think before we have said a $10 movement in OCC is a $6 million to $8 million impact on an annualized basis, so call it, $1.5 million to $2 million a quarter type of a number.

Okay. Got it. So you have moved more to -- you did say that. I'm sorry. Second, -- so it's sort of interesting because you've been -- you're pointing out a lot of areas where you're seeing nice growth on the consumer side and where it can make sense for you to be investing in some of that going on right now. And yet sort of the overall number still hasn't been very good.

I mean, are there certain areas where you would highlight where you think it's cyclical, i.e., like the building products area. Are there other areas where there are cyclical or secular concerns that are offsetting the areas where you are talking about growth? Just sort of trying to get a sense as to with all these specific areas of opportunity, where are the risks of offset that it doesn't translate to as much upside as potentially one looking at the specifics of growth might believe is possible?

Well, let me start with the positive side of things. I noted in my commentary that globally, our stock volumes have been turbocharged, if you will, 29% increase in Asia, 9% in EMEA, APAC total region. And we've talked about this in many, many calls about one of our largest customers on the consumer side has changed hands. Prior to that, we had invested capital that kind of got put on hold.

We're seeing that capital go to work now. So I've had folks independently ask about World Cup and that impact. But what we're really seeing is an acceleration of market expansion from a couple of customers actually on an international perspective. So that's really a positive thing for the rigid paper side of the business.

I guess your question, as we look into the third quarter, and as I said earlier, early indicators, don't see -- we're not expecting to see much improvement as it relates to the housing market-related caulking cartridge, that type of business. But what we're hearing from our customers is things like pet food, things like canned fish, it's a global phenomenon going on in terms of the growth rates.

And so we're seeing tuna volumes in Europe almost -- well, outstripping our demand to the point where we're adding additional capacity tomato similarly. So yes, are there macro, are there weather-related issues that are unforeseen at this point in time, they could come in play. That's certainly always the case. But right now, things are feeling really positive.

Yes. And Mark, just to add on to that, too. In last year, we had a really tough comp. We had some really strong growth in our aerosols businesses and all of those categories kind of really tied to that discretionary spend with the variability in demand and just kind of the current macroeconomic conditions that are out there today. We did see a softness in that in the second quarter here for us.

That is not dependent in our Q3 volumes. Q3 volumes are very critical for this organization in our consumer space. They are tied to pack seasons. Pack seasons is a little bit tied to mother nature out there, but early indicators, as Howard mentioned, too, are really strong for us, and we're expecting a strong pack season.

Your next question comes from the line of Hillary Cacanando with Deutsche Bank Securities.

Just going back to the weakness in aerosols and sealants and adhesives. Can you quantify the volume declines? I don't know if you talked about that. I don't know if I missed it, but what was the volume decline associated with those? And then did you see any improvement just exiting June -- the month of June?

Yes. Are you saying that we see improvement in those particular markets, Hillary?

Yes, in those the consumer categories, so aerosol cans.

On the adhesives and sealants side, yes, no, we don't have that available in terms of what...

Yes. Actually, Hillary, I'll jump in here a little bit, too. So on the adhesives and sealants and the aerosols, remember, too, there was a large player exited the space in 2024. So that capacity shifted over to a few markets that are in there. That did pick up and increase our volumes in '25, which created a really tougher comp for us.

So I don't expect any long-term issues. It's just as a comp issue from a year-over-year of as you're shifting out suppliers to those large aerosol customers, you're requalifying things, they're restocking your shelves, things of that nature. So I'm not seeing any long term, but now it is tied to, obviously, discretionary spend that's out there as well. So we have to be cautious of it, but not seeing anything that's of concern for us at this point in time.

Okay. Got it. And then I guess your presentation talked about World Cup-related demand and promotions boosting volumes. How much is that -- I guess, are we going to see -- how much of that, I guess, is in the third quarter and fourth quarter?

The World Cup volume impact is really hard to read. That would have been more of the first quarter type as our customers are building to load up their distribution chain. What we're really seeing is that our customers, particularly 1 or 2 in particular, are actually growing their geographic and distribution channels, and we see that going on for -- throughout this year and frankly, into the coming years as well.

So we're just seeing an overall lift in terms of new ownership of one particular brand that is being very aggressive. Good news is we both had invested capital that got put on hold during the sales process that is now being fully utilized. I noted Thailand as an example. We're only about -- with the units I noted, that represents about 1/3 of the targeted output of that particular location, and there's more to come in other parts and regions of the world. So it's not a World Cup pop. This is what we've been looking for, for the last couple of -- well, 18 months to 2 years as new ownership comes into play.

Yes. And Hillary, to add on to that, too, we are seeing increased promotional activity in that space as well, which is leading to higher volumes. And that growth is really sitting in the international markets. You think about Europe, the Asia Pacific regions that are out there, too, and seeing really strong generation for that demand, but led to, I'll say, all of those competitors in that space, really promoting the product and driving the growth. And that's just -- we are -- I'll call it, we ride on those coattails a little bit.

Your next question comes from the line of Ghansham Panjabi with Baird.

Howard, just going back to the consumer business. I know there's a lot going on depending on specific end markets, including aerosol, et cetera. But how has Eviosys been performing relative to your initial plan, including synergy realization, et cetera? It looks like it's been about 18 months since you closed on the acquisition. So just your thoughts as it relates to the franchise position there, your market share in the region, et cetera, would be helpful.

Yes. Thanks. Things are going -- evolving nicely. It's a big acquisition. It's going to take us a while to fully settle things down. We're seeing the benefits. Frankly, we said this from the very beginning across the globe. So we're seeing benefits here in North America. Certainly, incrementally every day, we see improvements in Europe. And -- so not to belabor the point, but volumes have, as we've mentioned multiple times, continue to improve. Our playbook is being rolled out.

It's going to be a multiyear playbook, and it's going to be a global base as well. So benefit around the world, volumes look good, key markets. I talked about investments that we made last year that are already contributing. And I'm talking about volume-related investments as well as productivity. And we have a nice funnel over the coming periods related to both growth and productivity.

So we feel good about how things are heading and looking forward to continued progress, frankly, from a global perspective as these teams continue to work together to make it a much stronger business than there ever was.

And then in terms of URB, as it relates to the strength that you're specifically seeing, you step back, is it a function of just tighter capacity in the industry or improving demand? And if it's improving demand, what is that specifically being driven by you think?

Yes. Well, we talked about new markets that we've entered relatively on scope and scale, small, but really what we're seeing good share gain as well. And it goes back to an earlier question.

We compete with some really good competitors out there. But one thing that Sonoco has done I don't know -- we probably invested close to $200 million in our network over the last 5, 6, 7 years, obviously, including the conversion of the # 10 machine. And we continue to separate ourselves from the existing competition. And with that, you get market share gains. So it's a combination of new products as well as doing what we do better than the rest of the market.

Ghansham, I think one of the things, too, being relatively new to this space is the innovation that, that industrial business keeps driving and keeps challenging to get into those new markets to provide the better customer service across the space is phenomenal.

And just seeing the demand generation that they have done and been able to do in the last 12 months is great to see, and they're not stopping. They're very aggressive on working with customers to find new solutions to continue to utilize our URB mills to their full capacity and keep that funnel completely full.

Yes. And I don't want to belabor the point. We don't spend a lot of time talking about our Adhesives division and the hand-in-glove relationship and how do you take a select greater board and ensure that it's going to be bound and wound and meet the needs of customers. And it's not just making paper. It's making sure that the adhesives are absolutely -- and it's an enabler for us to be in the saturated kraft market. It's our adhesives group working with our paper group, which is now all under one roof to again, separate ourselves from the existing competition and allow us to enter into new markets.

Your next question comes from the line of Matt Roberts with Raymond James.

Second half, that inflation number came in at the high end, I think, of the 8% to 10% since last quarter, but then ran up again here in July. So maybe what are you betting in 3Q and second half? And would you say your inflation outlook has improved or worsened since April and where the greatest pressures there would be?

Yes. So Matt, the inflation did come in at the high end of the range of $10 million, and that was just due to, I'll call it, our inability or kind of lack of passing the recovery through it. Q3, though, all of the recovery mechanisms, as Howard talked about it, we have contractual increases that are out there, fully expect to cover that now as it sits today.

The changes can happen in reality is there could be new issues that pop up. But as we sit, we feel really confident in our Q3 recovery of that inflation, and we don't see it as a headwind on a go-forward basis.

And then one last clarification. That's a hard one, but what portions of the industrial paper are you able to get the list price into as of July 8? Or is it basically all tied to the tan bending chip index now that should then start layering in, in October given that 1 quarter lag on those index-based contracts?

Yes. I think we've been pretty public about 70% is tied to index. So that recovered day 1 of the following quarter, so July, July 1 or so. And the rest is open market, and those are typically able to pass through a big portion of that during the course of the quarter. So the real recovery starts as we enter the second -- or excuse me, the third quarter.

Your next question comes from the line of Gabe Heide with Wells Fargo.

I'm going to try to put maybe a little bit of a finer point on consumer and industrial sort of first half, second half. I think you're actually on a year-over-year basis, ahead on price cost in consumer. And I think, Howard, you said you've got some contracts that kind of reset effective July 1, August 1. And then on a year-over-year basis, it's on the first half, you're down in EBITDA terms, about $20 million, all of which I think is attributable actually a little bit more to volume.

And it sounds like you said low single-digit year-over-year volume growth in the second half. So if that's the case and then you recover, I guess, maybe what you're behind on price cost or what you're envisioning for the second half, does that mean that we should get back to year-over-year growth of $20 million to $30 million in consumer in the second half? And then the URB hike, I think, Paul, $2.5 million per quarter per $10 a ton. So a $15 million swing factor is what we're thinking about for Q4 should RISI not reflect the price increase? Is that directionally how you're thinking about it?

Yes. So Gabe, I'll break this down. So the consumer impact, you're spot on around the positive price cost sitting in consumer. Now with the contractual targeted increases that are out there, that will help keep that momentum out there for us and still have a positive price/cost relationship in the consumer space.

On the industrial side, though, it was lagging on kind of call it the price cost recoveries that are out there, and we're seeing a little bit more stronger lift. And that really had to do with the inflation that was incurred in the second quarter.

So saying specifics around numbers, there is -- that's a -- I'll say I'm going to stay away from that, but we do expect our Q3 to sit still right on top of consensus as it sits today. We're not seeing anything that's changing around there.

Now the URB though, the $15 million, it's highly dependent upon what actually happens in the market base from a pricing that's out there. So if you do see a drop and we don't get any recovery, a little bit tough too to balance it out because we have such high demand in our mill utilization that's out there. So it's really -- it's challenging to say that, that would be the impact. But if it did market stop, I'd say you'd be in the right range for that for industrials.

Okay. And then I appreciate a little bit of a management philosophy, but you're talking about low end of the guide for EPS. And the range, I appreciate, is still pretty large for EBITDA for understandable reasons. Is there maybe some justification or thought behind maybe not lowering that to $12.50 to 1.3 or something like that?

I don't want to put words in your mouth, but just given the volatility and seemingly things re-escalating in the Middle East, putting some upward pressure on input costs? Or is there something that you see in the second half that can kind of give you still a clear path to maybe mid-range, upper end of the guide?

Yes. So Gabe, honestly, Q3 is our most critical quarter for this company, and it is highly dependent on our pack season. And right now, the early indicators of pack seasons are it's coming in strong. And so what I wanted to do is give us the optionality. Now after Q3 gets done, we'll be able to tighten that range up and dial it in right for the full year. But given that close to 40% of all of our profits happen in that third quarter, we wanted to keep the optionality around the range open.

Your next question comes from the line of Anojja Shah with UBS.

I just have a quick question. It sounds like you have the investment in saturating URB. You have some capacity expansion plans in paper cans. So given what we know now, is it correct to say that there will be a step-up in CapEx in 2027? And if so, what kind of order of magnitude are we talking about?

No, we really -- first off, on the paper can side of it, what we've seen from a growth perspective is actually capital that's been deployed year-to-date. Going forward, and I noted several multiple different projects, we're very comfortable to maintain the type of capital expenditure range that we've been in, which is roughly about 4% of our turnover and pacing ourselves through that. So as we work with our customers, we think that the timing, we should not see a material step-up beyond just what I said, about a 4% rate against our sales.

Okay. And then just sticking with capital allocation. I know you're planning to continue paying down debt through your 3-year plan through 2028. But how do you think about share repurchases within there? Is there any opportunity to maybe step that up a bit over the next couple of years? Or how are you thinking about that?

Yes. it's a great question. And honestly, we remain committed to paying down our debt. But now we do get to a spot once we get our leverage ratio to the right kind of, I'll call it, targeted for the rating agencies. Our cost of debt sits around 3.5% today. And if our dividend yield is north of 4%, now it does create a different equation for us.

And now this is just math. Do we buy back shares because it's costing us more in a dividend? Or do we pay down more debt? And that's really an answer that we'll get to more in the '27 and '28 equations. But we feel really good about where we sit. And so share repurchases can become an option for us in the future.

Your next question comes from the line of John Dunigan with Jefferies.

So just looking at 3Q volumes, I get that they're much more dependent for consumer on the pack season. But with the businesses that struggled focusing on Americas, sealants and aerosols in 2Q, I'm just wondering what do you have baked into the guide? Have you lapped some of those aerosol gains that you had at this point? And then specific comp issues, anything that we should think of in second half as we're modeling?

Yes, I wouldn't think so from a comp perspective. And our go forward is not to expect that we're going to see much lift. And let's don't overreact in terms of the A&S side. It represents about 15% of our turnover or so in our North America-only paper can business, it's down, but it's still a bit highly active, but it's just not meeting our original expectations. So as we go into the second half, we're not planning on any material improvements that's built into our guide.

Great. And then I just wanted to touch quickly on the freight surcharge opportunities that you called out in the deck. Just wondering what the opportunities are. Is this contractual price recovery that you guys are able to implement, have implemented? I would think it's going back up. And then maybe you could just touch on how your freight is. Is it mostly spot contracted? I'm thinking particularly on the URB side where you guys are running particularly having to import tons from abroad?

Mostly contracted and balance with some spot to answer that side of it first. And we are just simply putting in surcharges. There will be an exception here and there, but for the most part, it's -- and this is not new to the world. It's a line item at the bottom of the invoice that says fuel surcharge, and it will come and go as diesel varies.

We have reached the end of the question-and-answer session. I will now turn the call back to Roger Schrum for closing remarks.

Yes, I want to thank everybody's participation today and look forward to further communication during the next quarter. You can now hang up.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by, and welcome to the Sonoco First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

I'd now like to turn the call over to Roger Schrum, Head of Investor Relations and Global Marketing Communications. You may begin.

Thank you, Rob, and good morning to everyone. Last evening, we issued a news release and posted an investor presentation that reviews Sonoco's First Quarter 2026 financial results. Both are posted on the Investor Relations section of our website at sonoco.com. A replay of today's conference call will be available on our website later today and we'll post a transcript later this week.

If you would turn to Slide 2, I would remind you that 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. 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 operation. 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 today are Howard Coker, President and CEO; and Paul Joachimczyk, Chief Financial Officer. For today's call, we will provide prepared remarks, followed by your questions. If you'll turn to Slide 4 in our presentation. I'll now turn the call over to Howard.

Thanks, Roger, and good morning, everyone. During our February Investor Day, we set up a framework for our focused strategy over the next 3 years, which is linked to our 3 priorities of sustainable growth, margin improvement driven by our profitability performance plan and efficient capital allocation, which is focused on investing in our sales, debt reduction and returning value to our shareholders. We made strides in each of these priorities in the first quarter while achieving a solid start to the year despite some significant headwinds. Paul will go through the numbers in more detail, but as shown on Slide 5, our adjusted earnings for the first quarter of $1.20 net our and consensus estimates. This performance was primarily driven by strong productivity savings, favorable price/cost environment and a successful start to our profitability performance plan despite lower volume mix.

I was really proud of our team's performance in the first quarter despite severe winter weather, which temporarily closed some of our customers and our operations to fire that destroyed our recycling facility in Greenville, South Carolina and the effects of rapidly changing macroeconomic conditions stemming from the Middle East conflict. Our Consumer Packaging segment exceeded our expectations during the quarter our Industrial Paper Packaging segment managed well through both operational and demand challenges. As I mentioned, severe winter weather disrupted several of our U.S. operations in late January as well as some of our large consumer customers who face for ologies, some lasting over a week. February was a much better month from a volume perspective. But with the onset of the Middle East conflict, we began experiencing rapid input cost inflation in March. And as I mentioned, an unfortunate fire in our Greenville facility on March 24. Thankfully, no one was hurt, but it did lead to a onetime cost of $2 million within the quarter. As you would expect, we're not standing still in the face of these macroeconomic challenges. If you turn to Slide 6, I'll talk further about the steps we're taking to mitigate rising costs and ensure supply for our customers in this challenging inflationary environment.

Energy and freight and other petrochemical-related input calls such as resins, coatings and other chemicals represent approximately 10% of our annual sales. While the impact on the first quarter was under a few million dollars. Based on current estimates, we believe this inflation could add between $8 million to $10 million in additional costs in the second quarter. We are leveraging our global sourcing and supply assurance team to do all we can to help offset these rising costs. That said, we must recover this inflation and have implemented a number of necessary price increases, including a $70 per ton uncoated recycled paperboard increase in the U.S. and an EUR 80 per ton increase in Europe, along with other pricing actions. These actions are showing traction in the market. fast markets reported by Friday and an initial $60 per turn increase in U.S. URB prices. Given our current backlogs and solid mill utilization rates entering April, we feel confident about the sustainability of our actions. As shown on Slide 7, we have purposefully shifted our mix to more resilient consumer-focused businesses where today, 2/3 of our sales were generated by our leadership positions in paper and metal cans. We're focused on affordable center of the store safe food categories, which have historically remained resilient during periods of economic for us. I'm happy that our recent portfolio work has substantially reduced our exposure to resin based packaging.

In 2023, we used approximately 240 million pounds of petroleum-based resins. While today, we used only about 75 million pounds primarily in our plastics industrial plastics business and our plastic cartridges for adhesives and sealants, where we do have recovery mechanisms in place. As it relates to our growth pillar, we recently opened a new paper can plant in Nong Yai, Thailand. As shown on Slide 8, Paul and I had the opportunity to participate in the grand opening with our team in Asia in March. This highly automated operation is expected to annually produce approximately 200 million units for the growing STACK chip markets in Asia and is one of the reasons we saw a 6% lift in paper can volume in the region in the first quarter. This plant was built to accommodate future capacity expansion, and we believe it could eventually become one of the largest global paper can operations over the next several years. In our industrial business, we are investing $20 million to add a new automated nailed wood, real production line at our Hartselle Alabama, facility. As shown on Slide 9, when this new line opens at the end of the second quarter, we expect it will increase our capacity by 15%, and able us to meet the needs of the fast-growing wire and cable industry. as it supplies the booming power infrastructure demand for AI center broad. I'll add that sales in our reels business were up 13% in the quarter.

In addition to funding our growth, our disciplined capital allocation strategy remains focused on reducing debt and returning capital to shareholders. As shown on Slide 10, last week, our Board of Directors authorized the 43rd consecutive annual increase of dividends to shareholders, raising the payout to $2.16 per share which provides an annual yield of about 3.8%. Sonoco is one of only a few public companies that has paid dividends consecutively for more than 100 years. In summary, we had a good start to the year despite challenges, and we remain confident in our portfolio, our strategy and ability to execute through economic cycles. With that, I'll turn it over to Paul.

Thank you, Howard. I'll walk you through our first quarter financial performance, starting on Slide 11. With our portfolio transformation complete, we're entering the next phase defined by sustainable growth, margin improvement driven by our profitability performance plan and efficient capital allocation, which is focused on investing in ourselves, debt reduction and returning value to our shareholders. Today, I'll cover our first quarter results and our early progress against the profitability performance plan we laid out at Investor Day in February.

Before I review the quarter, a quick note on comparability and some nuances related to the accounting treatment for our divestitures in 2025. TFP was divested on April 1, 2025, is reported as discontinued operations in last year's first quarter. ThermoSafe was divested on November 3, 2025, and was included in continuing operations in that same period. In 2026, neither TFP nor ThermoSafe as part of continuing operations. As a result, all year-over-year comparisons I discussed for continuing operations with ThermoSafe included in the 2025 figures, and I'll highlight the differences were applicable. Net sales from continuing operations were $1.7 billion, down 2% year-over-year. Results reflect lower-than-expected volumes, weather impacts as well as macroeconomic and geopolitical pressures win on both our supply chain and our customers. Those headwinds were partially offset by pricing actions and a foreign currency benefit primarily from the Euro. Also in the year-over-year comparison is ThermoSafe, which contributed $55 million of sales in the first quarter of 2025. Excluding ThermoSafe, our sales increased by approximately 1% versus the prior year. Adjusted EBITDA was $277 million, down 4% year-over-year and margin was down approximately 35 basis points. The decline was driven by lower volumes and the absence of operating profit from the divested ThermoSafe business. These impacts were partially offset by productivity initiatives strong pricing realizations, early savings from our multiyear profitability programs and favorable foreign exchange rates.

Excluding ThermoSafe, adjusted EBITDA would have been flat reflecting strong cost containment from our profitability programs despite softer volumes. Overall, we're encouraged by how our continuing operations performed following last year's reorganization. On a consistent comparison basis, our key metrics are up year-over-year, reinforcing that we're building a more agile and resilient organization to navigate challenges as they arise. Now moving to Slide 12. Adjusted EBITDA for the quarter was $1.20, flat year-over-year after excluding the impact of discontinued operations. The year-over-year results reflect the balance of a softer volume and the impact of divestitures, offset by productivity gains, pricing, early profitability savings from our 3-year program, a lower effective tax rate and a favorable foreign currency. If we go a little deeper into the bridge here, I'd like to walk you through the components of each bar. We'll start with the discontinued operations adjustment, which is a net impact of $0.18 led by the TFP divestiture, partially offset by interest. The divestiture of ThermoSafe represents a $0.07 decrease. Operational changes are down $0.08 due to the pressures on the top line due to the macroeconomic and geopolitical factors within the quarter, partially offset by operational productivity.

Nonoperational changes are up $0.09, led by FX, especially the euro, reduction of our debt and tax benefits which helped to offset several headwinds the business faced within the quarter. Profitability performance drove $0.06 of improvement. I want to underscore the importance of what we're doing to drive margins for the rest of the year, by controlling the controllables. We're maintaining pricing discipline, accelerating productivity, advancing our profitability performance plan and tightening -- tightly managing both our costs and our capital. While the macro environment remains uncertain, we remain committed to executing the long-term financial targets we shared at Investor Day. Turning to cash flow on Slide 13. Operating cash flow in the first quarter was a use of $368 million, consistent with normal seasonal patterns as we build inventories ahead of the canning season. Gross capital investment was $62 million below our expectations. Given the current macro environment, we are actively monitoring capital spending to stay disciplined and meet our targets. The year-over-year decline in cash flows was primarily driven by approximately $140 million of higher tax payments. That includes $103 million related to capital gains from prior period divestitures, which will not repeat.

As discussed at Investor Day, we have a clear and disciplined approach to capital allocation. That includes prioritizing high-return projects, continuing to optimize working capital, especially inventory and payables and preserving balance sheet flexibility by paying down debt while still supporting long-term growth initiatives. Turning to Slide 14. Before I go deeper into the segment results, I want to share a brief disclosure related to our consumer segment and a footnote we've included for this discussion. In first quarter of 2025, Consumer segment adjusted EBITDA did not include $18 million of unallocated corporate costs. You can find these details in the earnings release table on Page 20 of our press release dated April 21, 2026. Now let's turn our attention to the 2 segments and overall results. Starting with Consumer. Sales increased 3% year-over-year to $1.1 billion, driven by pricing and favorable foreign currency exchange rates, partially offset by volume and mix softness related to the macroeconomic conditions. Adjusted EBITDA from continuing operations declined 7%, reflecting lower volumes, partially offset by productivity initiatives, pricing actions and early transformation savings. Adjusting for the 2025 unallocated corporate costs I just described, consumer adjusted EBITDA would have been up with margins flat.

In Consumer, the team remains focused on price realization and mix discipline across key geographies while driving manufacturing and supply chain productivity. They are also leveraging accelerated transformation savings to improve their margins. Let's move on to our Industrial segment. Sales were $579 million, down year-over-year by 1%, driven by softer volumes, partially offset by favorable pricing and index-based resets with foreign currency benefits. Adjusted EBITDA declined by $7 million to $100 million, a 7% decrease as lower volumes were partially mitigated by pricing resets and productivity improvements. EBITDA margin was lower year-over-year due to unfavorable volume and mix, along with losses attributed to a fire at our recycling facility in Greenville, South Carolina. The Industrial segment is focused on fully on capturing index-based pricing resets as they flow through. Executing it against cost and productivity initiatives already underway, and preserving margin discipline while managing demand variability. We've seen good progress throughout the current one, which supports our confidence as we move into the second quarter.

Turning to Slide 15. We are pleased with the early progress of our 3-year profitability performance plan outlined at Investor Day. In the first quarter, we delivered $8 million of savings progressing towards our $150 million to $200 million target. These savings were primarily driven by structural transformation initiatives, which contributed $6 million, along with $2 million from commercial excellence and operational improvement efforts. Importantly, these savings are already flowing through the P&L reinforcing our confidence in the program's execution and durability. And as they annualize, they represent approximately $32 million of recurring savings. Turning to guidance on Slide 16. We are maintaining our full year outlook while recognizing that continued macroeconomic and geopolitical uncertainty, particularly late in our quarter, rates a dynamic operating environment. We will continue to monitor inflation and demand trends closely. With that, let me walk you through our full year expectations. For the full year, we expect sales of $7.25 billion to $7.75 billion, adjusted EBITDA of $1.25 billion to $1.35 billion, adjusted EBITDA of $5.80 to $6.20 with results expected to trend towards the lower end of the range.

While we are maintaining our adjusted EBITDA outlook, EPS will not track EBITDA 1 for 1 because of the tighter EPS range of only $0.40. In the current environment, inflationary cost pressures and macro volatility will create a larger impact on EPS rather than EBITDA. Operating cash flow of $700 million to $800 million, inclusive of the $103 million of tax payments related to 2025 divestitures, which were paid in the first quarter. For the remainder of 2026, our mandate is clear. deliver on our 3-year strategy of focus by executing the profitability performance plan, which is delivering $32 million of annualized savings in 2026. We have to offset volume pressures that we experienced in the early 2026, and we are protecting our margins through disciplined pricing and productivity, strengthening our cash flow through working capital and disciplined capital spending. We are more focused and have stronger execution levers than in recent years, building a higher quality earnings base and strengthening cash generation even in a challenging demand environment. Let me turn the call back over to Howard for some closing comments.

Thanks, Paul. Let me close by again thanking our global team for successfully guiding us through these uncertain times during the first part of the year. The year started out fairly strong, but were affected by winter weather in the Americas, losing 2 weeks of production from 2 of our major consumer customers in the Tennessee region. We also had mill and converting downtime by our and our customers throughout the region. We lost the facility to fire and other relatively one-off type issues and, of course, the impact of the Middle East complete.

In spite of these, we stayed focused on controls and long-term productivity to deliver well within our expectations. I think it's also important to note -- while uncertainty remains, there is concern how the rest of the year will unfold. However, April has shown thus far some encouraging signs. As we enter the pack season, consumer EMEA has seen early positive signs in the South, the tuna pack has been strong, and while we have not built expectation for a rebound in [indiscernible] this market, too, is showing some promise for improvement and salted snack volumes are increasing, which is typical in a World Cup year. We see necessary index-based price in North America in our industrial business. which will drive full benefit during Q3 with incremental help in Q2 and early but reasonable expectations for URB and converted products and announced prices in Europe. Our focus on our drive for $150 million to $200 million over the next 3 years is on pace and will only build as we go deeper into the year. But the reality is we are in uncertain times. Things are changing on a daily basis. We do have some catch-up to deal with from the quick hit of inflation as we entered into Q2 and thus the cautionary tone in our EPS forecast.

Let me close by saying how pleased I am we have made over the past several years, the changes you all have seen. If we had not made the portfolio shift, we'd be living in a vastly different world. Without our simplification efforts, we would not be driving the level of SG&A and other savings noted today. And we would be facing serious supply chain issues at a much larger degree of inflation impact and volume pressure. So again, thanks to our team as we continue to drive through this difficult operating environment and certainly looking forward to any questions that you may have. I'll turn it back over to the operator.

[Operator Instructions]

Your first question today comes from the line of George Staphos from Bank of America Securities.

I guess I had 3 questions. I'll ask them in sequence and turn it over. Howard, first of all, Paul, could you discuss what the effect of the storms was in the first quarter a percentage of volume standpoint. In other words, if you did not have the storms, what would volumes have been? And what kind of early run rate are you seeing on volumes in consumer and in Industrial for the second quarter?

Second point, we appreciate you calling out the inflation effect so far of $8 million to $10 million in 2Q. Is that a sequential impact from 1Q or year-on-year and if costs stay where they're at right now, would that be the effect in 3Q? Or would it be a lesser effect? And then the last question I had for you is, can you talk to us about how you feel on your metal supply chain, both aluminum and steel? Are there any flash points we need to watch out against relative to the Street? Or do you feel like you're pretty well situated as far as you can see for the rest of the year?

Thanks, George. I'm going to let Paul cover. I don't have the direct, Paul does either the full numbers in terms of the impact of the storm. What I would say on the metal side, which I will handle is -- we have no issues, no concerns, not only in terms of supply chain, but we have fixed pricing through the year. Obviously, we've seen tariffs and other things that an impact. But based off of where we sit today, we're in good shape.

And George, on the first question that you had around the storm effect, we did experience more declines in our consumer business in the Americas, primarily due to the weather that was out there with some of our CPGs being down, 2 of our largest customers being down for over a week, that did create a, I'll call it, a larger impact disproportionately than our international business that are out there. I'll say the early run rate, though, that we're seeing is we're seeing some recovery back in the business, more so on our industrial businesses. We're seeing strengthening in those markets as mills are getting closer back to the 90% effective rates, run rates that are there. We're seeing some lift back in our consumer businesses, but still more focused on the international side. The Americas are still lagging behind, but it did impact the volume pressures there for sure. Moving on to your second...

Just -- so I know it's early, but what kind of volume are you seeing up down? Can you put a percentage on it in your key consumer or industrial categories?

Yes. I would say internationally, say, low single digits that were up there. Industrial in the same ballpark too is March was impacted primarily because of all the uncertainties that are out there, we're starting to see the recovery of those flows coming in early part of the month. And I'll say it's -- right now, if that trend continues, it will be a nice quarter for us in Q2.

If I move on to your second question around the inflation impact, the $8 million to $10 million is what we have line of sight to for Q2. And with our recovery mechanisms that we have in place, there is a little bit of a lag. So I'd say right now, our exposure for Q2 is 8% to 10%. Obviously, if there's more macroeconomic effects, if there's something that happens with pricing pressures on our input costs, those could change to be greater in Q3 and Q4. But we do think our recovery mechanisms will help cover and offset this in those future quarters that are there. But we don't have full line of sight to what's going to happen in the macro world that's out there. But today, we feel confident in our exposure for what Q2 is going to bear, say, if everything holds steady, those would not recur and we could recover that by Q3 and Q4.

Your next question comes from the line of John Dunigan from Jefferies.

Thank you, Howard. Thank you, Paul. I really appreciate all the details. I wanted to start back on the cost inflation with the $8 million to $10 million. Can you walk us through some of those key buckets and in particular, nat gas electricity across U.S. and Europe? And how much of that you have hedged across your businesses? And then if we're thinking about the freight surcharges that you called out, is there any kind of lag to putting those through contractually? And maybe you can help us quantify how much of your contracts currently have those surcharge mechanisms contained in them?

Yes, John, I'll take the first part of that. So the cost inflation, the breakdown of it you go through your freight as your primary driver of that. That was the one that we experienced almost immediately saw rising fuel prices primarily in the diesel aspect, come through. We do have recovery places and mechanisms out there. There is a lag related to those, call it, roughly 3 weeks, 4 weeks of a time period that's out there to get that recovery back. So you're exposed, let's just say, a month to be simplistic out there.

As far as all the other inputs that are out there, whether it's the resins, the energy and things like that, I'd say we do have some coverage on our hedging. We haven't gone out with exactly what that coverage is from a hedging -- the $8 million to $9 million is inclusive. It's net of that. So that is an impact of us from already factoring into what we already have hedged and placed into programs. So that's the impact that we'll experience in our P&L. But freight is primarily the largest impact for us.

Great. That's very helpful. And then just on my follow-up, I just wanted to jump over to the cost savings. You called out the $8 million from the initiatives towards the $150 million to $200 million. But productivity in the quarter was pretty impressive. It was up $33 million year-over-year. Can you just walk us through the difference between those 2 figures and how we should think of the cadence through the rest of the year, that would be helpful.

Yes. And John, that's a great question. And really, what we're trying to do is we're trying to delineate productivity, which really is covering our inflationary impacts, things of that nature versus the profitability performance plan. The profitability performance plan, as we think about it, this is costs that are going to fall right to the bottom line, and they're going to be there every quarter on a go-forward basis. So that's why we did the delineation this quarter more so, and we'll continue that going forward. But we want to assure you that what we are delivering in those savings on that program of the $150 million to $200 million, that is something that you can bank on for us that's going to be there quarter after quarter after quarter, and it's going to be recurring.

Your next question comes from the line of Michael Roxland from Truist Securities.

This is Niko [ Pacini ] on for Michael Roxland. Just to clarify on the inflationary impacts, does your current guide assume that $8 million to $10 million is the limit of the impact? Or do you assume current conditions basically persist through the rest of the year rather than kind of improve? And then secondly, what do you think to your customers and consumers' ability is to absorb price? How much in you can push before the manustructure might occur?

Yes. I would say the -- this is what we have visibility at this point in time. I went to extra effort to point out that with the new portfolio, particularly our key raw materials being still on the consumer side, is basically flat, contractually protected through the year. And so we do have the resin exposure I spoke to in my opening comments, that too has recovery mechanisms in it, and it varies from -- within the month within the quarter. But will we see more? It's hard to say. It depends on what happened while we were talking during this call virtually just seems to be changing on an immediate basis.

But the point here is that from a key raw materials perspective, we feel really good in terms of the position that we're in at this point in time. And the customer impact, it's hard to say. We're being a staple food. All I can say is what we've seen historically when, obviously, the inflation being felt at retail is also showing up in QSR and other outlets as well, while it's get tight. We historically have seen in our consumer business that volumes are not affected and in fact, in some cases, have improved as people shop in the grocery store, cook at home as opposed to going out. So hard to predict how that's going to go. But certainly would think that while we're talking about the packaging side of things, that there's pressures on all raw materials associated with all food items, really on all items going forward, and it ultimately will we'll see how that fares through the consumer.

Got it. Understood. Just a quick follow-up. I think you mentioned a little softer EV volumes in 1Q, but a pickup more recently in April. What do you attribute that pickup to? And can you share where backlog stands right now?

Yes. We don't really track backlogs on URB. But what we're seeing is, as Paul had noted, roughly 90%, 91% operating rate here, which is our largest market and URB in North America. And frankly, there's a couple of things going on. The main is that we told at Investor Day about new products and new markets that we're entering with URB that traditionally have been served by other grades of paper that have been -- some of which has been taken out of the market the mill closures. We've been successful in converting saturated craft. So we've got our first customer and a line of customers in the funnel right now that is really helping us to as we look out into the quarter, go from the low 90s -- well still low 90s, but from 90 to 92, 93 type operating rates as that volume starts flowing through the mill now.

Your next question comes from the line of Hillary Cacanando from Deutsche Bank.

Just regarding the softer volumes and inflationary pressures in the first quarter, could you just elaborate on what specific end markets or geographies underperformed expectations or outperformed expectations, most notably. I know you talked a little bit about tuna pack and sardines but if you could give more -- a little more detail on other end markets.

Yes. What I'd say, I'm really just talking to geography. It was -- if you go around the world, all already noted that Consumer EMEA was a very -- well, low single digits off from a volume year-over-year. It was a bigger impact here in North America. And I don't think I want to get into just from a confidentiality with customers. But our 2 largest customers on our paper can business loss 7, 8 days during the winter storm. Now we talked about that in February and what would typically happen is as we see the rush to make up that time and enough time would be held in the quarter. Then, of course, 5, 7 days after our Investor Day, you wake up and find out on February 27, we bombed Iran.

So we think they took the opportunity to bring inventories down, and we're starting to see now a bit of a pickup and the expectation is the magnitude of what we saw in the first quarter will not repeat itself. In fact, they should be looking to make some of that up through the year.

Got it. Great. And then just a follow-up. As we're 3 weeks into the second quarter, I know you said April picked up, but are you seeing any real discernible change in customer ordering patterns or conversations? Like has anything like really changed? I know you're forecasting weaker volumes. But just wanted to see if any pattern -- like any discernible change in patterns?

Yes. Hilary, this is Paul. So really no discernible patterns that are out there. We're seeing a slight uptick in the volume that's given us a little bit more confidence in our guide that's out there. But really nothing that's -- I'd say you could lead anything to other than just a recovery from Q1.

Your next question comes from the line of Anthony Pettinari from Citi.

Actually this is [ Bradbury ] on for Anthony. Maybe just focusing on consumer a little bit. Volumes were down against a pretty tough comp from last year. Do you think we start to see some improvement in year-on-year volume growth in 2Q and as we start to get into the back half, maybe from easy comps or ramping investments? Just any detail on maybe how that volume trend could develop '26 in consumer?

Yes. Pretty hard to really nail it with the amount of sorting that we have out there. What I would say is probably on our aerosol business here in North America, pretty tough comps coming up here in the summertime and somewhat of a discretionary spend you can do without. But on the other side of that, that would be reflective of a consumer that more of an economic downturn situation. So you could see that being a tougher comp. But at the same time, as I said earlier, you would expect that the food side of the business, on the center of the store, drive to the supermarket as conditions stuff and they would balance that, if not, actually exceed that. So tough to say.

I mentioned earlier, in Europe, World Cup, that's kind of the normal thing for us to see that volume start to pick up around that particular event. But kind of a wait and see. I don't know if the consumer is fully, fully, fully felt it to the point, it does appear we're heading in that direction. That could be favorable, frankly, for the most part of the consumer side of the business.

Got it. And then maybe just on working capital. I'm not sure if there's any maybe sensitivity to raw material inputs that we should be mindful of, just as the year goes on, trying to be mindful of higher metal prices and then pet chems. I'm not sure if like an earnings sensitivity or just any detail you would want to put on maybe working capital or free cash flow as we think about higher metal?

Yes. So really, from a working capital perspective, no real concerns there. I'd say one thing to highlight that we are being very disciplined about our spend on capital for the remainder of the year. We want to make sure that we're hitting our guide and our targets that we've committed to the Street. So there will be some products that we'll postpone but we're not cutting back any of our growth or our value adding capital products that are out there, but feel really confident that with our supply chain team and our efforts that they've done to secure are really strong. Supply chain, both around Metalpack and all the other inputs that are there. So really no concerns from this perspective right now. That's what our current environment is, as we said.

Your next question comes from the line of Ghansham Panjabi from Baird.

Just kind of picking up on some of the last few questions. So obviously, 1Q was impacted from a volume standpoint for all the reasons you kind of went through. 2Q, you gave some parameters as it relates to raw material cost inflation, et cetera, and we know what your full year guidance is. So specific to 2Q, do you expect earnings to grow year-over-year? Or will it be comparable to sort of 1Q just given what you called out as it relates to the price cost headwinds?

Yes, Ghansham, we do expect earnings to grow in Q2. I will say though, there is that inflationary impact for the raw materials that we talked about with freight and everything else that's there. So that will create a little bit of a margin drag for us. and some of the pressures that are there, but we definitely expect earnings to grow.

On a year-over-year basis, just to clarify.

Yes.

Yes. And Ghansham, I do want to reiterate that I know we talked about it over and over, but in the full volume environment, the team really did deliver on the bottom line expectations for the most part. And that is not changing as we see seasonal volumes increase in terms of the levels of productivity and savings, and the programs that we've got in place. So I just want to say, again, hats off to our team in the sole volume environment still being able to drop down within our expectations.

Yes. For sure. A lot going on. So as it relates to the volume impact of this particular inflation cycle and obviously, customers know that price increases are coming and so on and so forth. Have you seen any sort of preordering or just some sort of order pattern distortions that maybe amplifying some of the volume that you're seeing early part of 2Q in terms of the recovery you called out

No. In fact, it's, again, based off the portfolio. The type of inflation that we're seeing is not really about product inflation. It's how we deliver it's freight, obviously, some energy. But not to your typical, hey, you've got a 5% or 10% price increase coming in the next quarter I need to load off that.

Okay. And you haven't seen any change in the macro backdrop, just broadly speaking for your industrial business either right?

No. In fact, a little bit of concern about, yes, we had the weather impacts in the first quarter, but we've seen some green shoots here. A lot of it is self-help entering new markets that we've never participated in before. As I mentioned earlier, with saturated craft using I guess the furniture industry. So right now, things are -- you got to put that into the model to say, "Hey, we've got new business coming on that we never participated in before. So that our operating rates, as I said, we've said a couple of times, we're in pretty good shape.

And Ghansham, we have a realty business, too, that is doing really well in performance for us in Q1, and we expect that to continue into Q2 as well.

Your next question comes from the line of Anojja Shah from UBS.

So first, I just want to confirm that $8 million to $10 million of inflation that you pull out in 2Q, based on the lag in your pass-through, you're confident that, that should get recovered in the second half?

Yes.

I would get, okay. Assuming and if there is additional inflation, then it's about 1/4 you said. Is that right?

Correct. Yes.

And then also, you announced a new term loan at the end of March. And in the bridges you gave last quarter, you had a $0.20 to $0.40 nonoperational contribution on EPS. So is that -- is the interest on that new term loan sort of a headwind to that $20 million to $40 million? And is that part of why the EPS guidance is now on the lower end? How is that still filtering through your guidance?

So the term loan that we announced is really it's a delayed draw term loan to effectively retire our loan that would be due in September later this year. that really does not have -- it's a meaningful or call it, it's not a significant impact to our EPS strain that's out there. It's more of this inflationary impacts in the short term that is driving our EPS down more than anything else.

Okay. And because of the tight range on EPS, that's why it's impacting EPS and not as much EBITDA, is that correct?

You got it. Yes, if you think about EBIT --

Go ahead.

I was going to say for the EBITDA range, if we think about it, it's really $100 million that's out there. If you take the taxes out of that, it really becomes a $133 million range and your EPS is only $0.40. So the 2 are disaggregated and disproportionate, almost a 3:1 ratio. So it's your EBIT impact, you can have a $10 million impact in your EBITDA, but it will drive a much larger impact on our EPS change that's out there.

Right. Got it. And then finally, how are you feeling about your geographic footprint now with your current split between U.S. and Europe? I only ask because some of your peers are reconsidering the benefits that they thought they would get by adding on a European business and they're sort of saying that the large global customers tend to source more regionally. Do you believe that your global platform gives you significant economies of scale that maybe outweigh some of the complexity drawbacks?

Yes. We do -- certainly, economies of scale. We like the way we're situated right now. We're over half North America. I think it's about 40% in total company, both consumer and industrial. In Europe, -- and we've seen that flip back and forth over the last decade or so, more in favorable -- stronger in favor of North America. It just depends on the market, the opportunity -- it's not a conscious type situation, but we're happy with the portfolio. We're happy with the geographies that we participate in. Southeast Asia has on -- particularly on the consumer side, it's becoming even more material. And frankly, as we noted earlier, continues to grow at a nice pace. So we are where we are today, and we do not plan on any future portfolio or inorganic moves, but it wouldn't surprise me if we weren't talking years down the road and there's a different ratio there.

Your next question comes from the line of Mark Weintraub from Seaport Research Partners.

I got disconnected, so apologies if there's any repetition in the question here. But I was hoping to focus a little bit more on the volume side. And 2 things. One, maybe a little bit more color possible on some of the growth on some of the potential business wins and some of the expansions. If you could perhaps scale the size of opportunity and what you've seen so far. So for instance, with the new paper can facility in Thailand, how much revenue or opportunity might that provide? And then in Europe, you had been talking about at one point, the possibility of converting some customers who were doing their own accounting, if there's any update there, on progress there. You mentioned on the saturating kraft that was helpful.

And then just on the flip side of that, where volume has been disappointing and certainly, there's the macroeconomic bears the weather, et cetera. But there's also the kind of a GLP-1 issue and hopefully, it's not as big a deal for you for some others, but maybe just update us on your thoughts relative to that.

Yes, Mark, good question. And as Paul has said, I do not have a total off of -- we're not going to give out specific plant level type details. But I can't really answer that question. What you did answer in your own question was where we're seeing opportunities, certainly, Thailand is reportedly going to be possibly even the third largest paper can plant that -- well, that we operate globally. So it's in its infancy in terms of -- and we're doing about somewhere around 200 million units right now during the start-up phase. Saturated kraft is really turning out to be quite an interesting market. And we're in with our first customer and I could keep going in terms of investments that we've made across the portfolio.

But let's put that down as a homework assignment to aggregate that for you and the rest of the group. But no, we're not going to talk about individual opportunity, but I think it's a fair question from an aggregate perspective. You're right on the GLP side, we feel better about our situation today. If you go back just over a year ago, it just feels good not to be in the type of markets confectionery, cookies, crackers and things like that, that we were pretty heavy in. So the portfolio shift, I think, is more favorable this context. And I would say, but yes, we do participate with salted snacks that what we're seeing there, as we just spoke to in a bit, was that, that growth seems to be -- it is really materializing internationally, where GLPs are just not at the same level as they are here in the United States, particularly in Southeast Asia, that Eastern Europe and even South America, where we've got expansions going on. So feel much better about our situation today from a portfolio perspective to drive through where GLPs will finally settle on that.

Yes. And Mark, just to give you a little bit more context in the Thailand plant and referring back to a comment that Howard made in his opening statement to that plant will lead to 200 million units on an annual basis for us, and it did contribute a 6% lift in our paper can volume in that region. So it is going to be a significant asset for us and contribution to our overall growth and the strategy for that region.

With a reminder that that's the start-up of the plant.

You got it.

Right. And the point being to start up, a, there's more to come. B, are there also extra costs that you incur during the start-up phase that presumably fade away?

Yes. Always, when you're starting a new operation, yes, you've got a ramp-up curve. But I'll tell you though, we have a heck of a good team -- we do a lot of cans in Southeast Asia, and it's -- you never have a vertical, but you're right. We did see some cost including a grand opening that you saw the picture in the slide was well done by the team.

Great. And maybe this is getting a little too detailed. And if so, you either take it offline or whatever, but is it possible sort of to walk us up a little bit to the $8 million to $10 million, and if we annualize it, $32 million to $40 million, you've got $7.5 billion of sales. So we're talking about 4% or 5%, 40 to 50 basis points of increase, which seems kind of low if freight and those other variables are about -- I think you had said about 10% of revenue. So it would seem like not too big an increase? I don't know if you can quickly easily walk us up sort of the big drivers, basically, how much is freight up on a percentage basis if that's the biggest driver?

Yes. And Mark, we did -- probably when you were disconnected, we did cover this. But freight is the largest component of that. And really, we're the I'll call it as a recovery to go after that is going to be lagged and delayed. So the $8 million to $10 million is net of all of our recovery efforts set out there. So that's I would say -- so it does seem small. And the reason it is small is because we did put the net number out there, not a gross number.

Your next question comes from the line of Gabe Hajde from Wells Fargo Securities.

I'm struggling a little bit with maybe just the commentary on the second quarter, and I appreciate there's a lot of uncertainty out there. But specifically, even to growing earnings in Q2, are we talking in EBITDA terms or ETFs because I think just the reduction in interest expense would get you something like $0.15 or so of EPS growth. So just a little bit of clarity there, please?

Yes. So Gabe, it will be both an EBITDA and EPS. EPS does receive the benefit of interest favorability year-over-year as well, too. So that is part of it.

Okay. And then maybe going -- looking backwards and thinking about even the second quarter, I know there's a lot of moving parts, and I apologize if I missed it. But if we think about North America Food, European food cans and then, I guess, maybe global composite cans. You talked about, I think, Europe food being up low single digits in Q1, which would imply maybe down by single digits, 8% or so in North America food or aerosol and then I guess, composite can. And then half of that was off because of weather? Just help us maybe on Q1 volume trends in the 3 different geographies or 3 different businesses as you think about it.

Yes. You're pretty close in your math in terms of low single digits in EMEA and your -- the correlation to how that would have impacted the Americas. I really don't have that full, what does it mean, available to us at this point, and maybe it can be a follow-up that we can give to you.

Okay. And then I guess, Paul, when I think about tax rate, you gave us 26% at the beginning of the year, maybe interest tracking around $150 million and D&A was a little light in Q1, $125 million. I think we were kind of thinking about $135 million or so. Is the $125 million a good run rate going forward? I'm just thinking about it again, what the translation between EBITDA and EPS, if I take the low end of EPS, call it $585 or so coming off to like $165 implied EBITDA. So anything that we should be mindful of there?

No. I'd say your depreciation will probably tick up a little bit as some of our products come online later this year, so you'll see a little bit of an increase. But your range is -- you're right in the same ballpark there.

Okay. And last one for me, and I apologize if it's repetitive. But getting to Mark's question, our math on transport as our paper businesses, about $20 a ton of inflation flowing through the system. I think you have 1 million for tonnes in North America, maybe 1 million tonnes in Europe. So that would imply I don't know, something $100 million just on inflation there, maybe I'm overestimating things. And then the 75 million pounds of polyethylene or resin buy that you were talking about, I think that was on a quarterly basis. It's up $0.30 give or take, just between April and March, but that would be implied just a lag on that would be maybe the $10 million? Again, I'm trying -- I'm having a hard time reconciling kind of and I believe you, right, $8 million to $10 million of inflation versus sort of the math that we have come up with independently. So maybe we're over, under estimating?

Yes, Gabe, I'd say I'm going to give hats off to our supply chain. They have done a phenomenal job negotiating things. We do have in our contracts, too, some delays in the way the pricing gets passed, those surcharges, the things that you're talking about for freight and hit quicker. Also, you think about how we optimize our transportation, we keep our plants close to our customer bases and things like that as well, too. So we -- they've done a phenomenal job, and we feel fairly confident in our numbers around the $8 million to $10 million as being in that number and exposure. So the gross number, you're probably absolutely spot on. It's definitely in that range. But the team has done a phenomenal job of mitigating it. So like I said, I'm very happy with the progress that they've done.

On the resin side of it, it's variable in terms of contracts, some of which are monthly extending out to quarterly. So that's the balance there. And you've got to look at the anticipation of what was coming and the inventories that we were able to build. And so all of the above points to exactly what Paul said, hats off to our procurement organization and how they manage through this.

Your next question comes from the line of Matt Roberts from Raymond James.

A couple of questions. They're all on RPC. So I'll just fire them off one by one here. First, what was RPC volume performance in 1Q? I believe that used to be in the slide deck. On April...

Yes, I don't have visibility of that level. So Matt, when we did the reorganization to the 2 segments, we're really talking about consumer in total -- we're not going to break out RPC cans. We're not going to break out Metal pack cans. We'll talk to any major events that happen within the quarter, but we're going to keep that more at a consumer total level.

[Technical Difficulty] last couple of quarters. So about later a couple of more lines. I'm all good there. And then if I may, on the April promotional trends, I mean last year, we think because there is a customer on hold for working capital. [indiscernible] Promotional environment changes from that customer now that the deal has closed or has there been broader promotional environment given your customers are seeing cost inflation as well?

You're kind of breaking out, Matt. But I think I understand your question. We're seeing -- it's slowly happening. It's 1 quarter post new owner of that particular brand. and seeing probably more activity on an international perspective than we have seen here in North America, but things are improving. The relationship is rock solid and again, it does appear, if you look over in Europe and Asia, that's really the starting point of focus when the expectation is then we'll start seeing more activity here in North America over time.

And then last one, if I may, on RPC. In 2025, how big was frozen juice in that category? And any material headwinds in 2026 we can call out?

Concentrate, gosh, it's been a long time since anybody asked about that. was fill in production here, probably more -- it is more related to the Spirit side of things and mixtures. I guess I can say it is public minute made has discontinued relatively immaterial to us and that the volume had reached such a low level. So it's just really not material at this point or prior to.

Your next question comes from the line of George Staphos from Bank of America Securities.

So [indiscernible] just fishing up here. Can you talk about or give us some clarity on the size of the reals business within the portfolio? Or remind us how big that might be for you? Secondly, related to some of the activity that didn't necessarily happen last year on the consumer side with some of your customers. Are there any new products that are now being considered that you may actually get some business on for this year? And if you were in a position, could you size any of that for us in terms of the revenue opportunity later in the year?

And then lastly, Howard, kind of longer term, looking at Slide 10, where you've got the dividend, and you do have a very good track record at Sonoco over the years. Certainly, that dividend has been growing more quickly than the organic volume growth rate for the company. You're obviously doing a very, very good job with productivity and mix and all the things that has made Sonoco successful over the years. But how long do you think you can keep growing the dividend at that rate if volume isn't growing at that rate? And when do you think that we will get to a positive on volume in the businesses, consumer and industrial? Is it third quarter, fourth quarter 2027? Any thoughts there would be great.

Sure. George, yes, there's more than a few new products that will be launched through the second half of the year. I can't tell you what the success rate is going to be and what type of volumes that's ultimately going to materialize in but pretty excited about some of what we see in the formula. It's here in North America. It's also on the consumer side. On the rail side of the business, it's doubled in the last couple of years, and it's probably about 10% of our industrial segment at this point in time. But again, continues to grow, and we certainly continue to support with capital. I guess that ties into your comment about dividend. Yes. I mean the good news is, if you look at the dividend payout ratio of where we are today, as we've continued to grow, it continues to go down as opposed to where we were not too many years ago, 6, 7 years ago.

But you're right, productivity and other benefits to the P&L has certainly helped to support that dividend and the lowering of the payout ratio. When do we get back to growing? We've got some really exciting things in the funnel. But if you recall, in February, we said, look, we got a lot ahead of us over the next 2 to 3 years in terms of improving the bottom line for the company with the portfolio that we have today. There's incremental growth. We just talked to some of that. But I'm also very excited about some fairly large innovations from a capital perspective, from a market perspective that are in the funnel, that kind of overlap as we, over the next couple of years, continue to drive the SG&A and other savings within the simplified organization that we'll be starting to kick in with some new products that are indeed material in existing markets that we're excited about.

So I can't give you timing, I can't give you amounts, but yes, we like the trajectory of the dividend. We also like the trajectory of the payout ratio, and we're going to continue to do what we need to do to improve the bottom line while we work on again, some pretty exciting things that are to come in the future.

And that concludes our question-and-answer session. I will now turn the call back over to Roger Schrum for closing remarks.

Again, thank you for your time this morning. And as always, if you have any further questions, please don't hesitate to give us a call. Thank you, and you can disconnect.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning. Good morning, and welcome to Sonoco's 2026 Annual Shareholders Meeting. I'm John Haley, and I'm honored to serve as your Chairman of the Board.

Now before we get started, I'd like to recognize the junior and high school students joining us from the East Clarendon School, who are studying Business and Engineering. Welcome.

I'd like now to introduce you to the members of our Board of Directors. Please hold your applause until they have all been announced. Steven Boyd. Steven is Chairman of the Board of Trustees at Johnson C. Smith University in Charlotte. And throughout his career, he has held many leadership roles at various consumer products companies most recently Coca-Cola.

Scott Clark. Scott is Chief Executive Officer for Tire Rack, a leading independent tire tester and source for consumer direct tires and accessories based in South Bend, Indiana. Scott was previously Executive Vice President and a member of the Executive Committee of the Michelin Group.

Howard Coker. Howard is Sonoco's President and CEO. He served our company for 41 years and lives in Hartsville. Dr. Pamela Davies. Pamela is President Emerita and Professor of Strategy at Queens University in Charlotte.

Theresa Drew. Theresa was Managing Director of the Carolinas Practice of Deloitte, a global accounting firm until her retirement, Theresa lives in Charlotte. Philippe Guillemont. Philippe is Chairman and CEO of Vallourec, a world leader in premium tubular solutions for energy markets based in Meudon, France.

When I'm not working with our Board, I'm CEO of Gosiger Inc, a national provider of machine tools and factory automation systems based in Dayton, Ohio. Robert Hill. Robert is our Lead Independent Director. Robert was most recently Executive Chairman of South State Corporation, a regional nationally chartered banking company based in Columbia, South Carolina.

Eleni Istavridis. Eleni was Executive Vice President and Head of Investment Services for Asia at Bank of New York Mellon, a global commercial banking company until her retirement. Rich Kyle. Rich was most recently President and CEO of Timken Company, a global manufacturer of engineered bearings and industrial motion products based in North Canton, Ohio.

Craig Nix. Craig is our newest Board member. He's Chief Financial Officer of First Citizens BancShares, a Fortune 500 top 20 U.S. financial institution based in Raleigh. It is with sincere appreciation now that we recognize today 2 board members who are not standing for reelection after serving the company for decades.

Blythe McGarvie, Blythe served on Sonoco's board since 2014 and most recently chaired the Financial Policy Committee in addition to serving on several other committees, Blythe taught accounting for Harvard's MBA program and previously held the CFO title at several consumer products companies.

And Tom Whiddon. Tom recently achieved 25 years on Sonoco's Board having joined in 2001. Tom served as a financial expert for the Audit Committee and previously chaired that committee for many years. Tom has also served on our corporate governance and nominating committees. Tom was previously an Advisory Director of Berkshire Partners, a Boston-based private equity firm, and is a retired Vice President of those companies. We are sincerely grateful for Blythe and Tom's wisdom and counsel throughout their years of service to Sonoco. This completes our introduction to our directors.

Finally, let me also recognize a couple of our other retired directors who are with us today, Harris DeLoach. Harris served on the board from 1998 to 2019, including serving as Chairman from 2005 to 2013, and Executive Chairman from 2013 to 2019. James Coker. James served 44 years as a director from 1969 to 2013. Please join me once more in giving our current and past directors a very warm welcome.

I will now call the business meeting of Sonoco Products Company to order. I'd like to start by introducing our Corporate Secretary, John Florence, who also serves as Sonoco's General Counsel. The 2025 Annual Report, 2026 Notice of Annual Shareholders Meeting, proxy statement and proxy were mailed on March 13 to shareholders of record as of February 25. Approximately 99 million shares of our common stock were outstanding and entitled to 1 vote each.

We've appointed Elizabeth Kremer of Sonoco and Mark Zimkind of Continental Stock Transfer and Trust as inspectors of the election to oversee tabulation of the ballots. Elizabeth and Mark, would you be stand and be recognized? Thanks.

Now are there any shareholders present who did not vote by proxy and would like to have a ballot? If so please raise your hand. I don't see any. Mr. Secretary, will you please advise if a quorum is present?

Mr. Chairman, I've been advised by the inspectors of election that we received more than 90% of proxies of shares outstanding entitled to vote. So therefore, we do, in fact, have a quorum.

Thank you, John. John has the minutes of last year's meeting, if anyone wants to inspect them. At this time, however, I would ask if there are a motion to dispense with John's readings of the minutes.

[indiscernible]

Thank you, Jessica. And a second?

[indiscernible]

Thank you, Melia. Today, we have 4 proposals for consideration and 1 individual shareholder proposal. Starting with the first proposal. Your Board of Directors recommends the election of 11 directors for a 1-year term expiring at our next annual meeting in 2027. They include Steven Boyd, Scott Clark, Howard Coker, Pamela Davies, Theresa Drew, Philippe Guillemont, John Haley, Robert Hill, Eleni Istavridis, Richard Kyle and Craig Nix. I've been advised by the Secretary that there were no other nominations submitted. Do I have a motion?

[indiscernible]

Thank you, Lauren. And a second?

Mr. Chairman, I second the motion.

Thank you, Steve. Our second proposal is for the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending 2026. Do I have a motion?

Mr. Chairman, [indiscernible]

Thank you, Raj. And a second?

Mr. Chairman, I second the motion.

Thank you, Deborah. The third proposal is an advisory nonbinding approval of compensation of the named executive officers as provided in a proxy. Do I have a motion?

Mr. Chairman, [indiscernible] resolution on executive compensation.

Thank you, Susan. And a second?

Mr. Chairman, I second the motion.

Thank you, Howard. The fourth proposal is to approve an amendment to the 2024 Omnibus Incentive Plan as detailed in the proxy. Do I have a motion?

Mr. Chairman, [indiscernible] approve the amendment #1 2024 Omnibus Incentive Plan.

Thank you, Bob. And a second?

Mr. Chairman, I second the motion.

Thank you, Murphy. The final item is an advisory nonbinding shareholder proposal entitled avoid brand damage from political spending, which is outlined in the proxy. I would point out that your Board has recommended a vote against this resolution as fully described again in the proxy. Is there anyone here who would like to speak for or against this proposal?

Hi. My name is [ Charity ] and I will speak for the proposal, avoid brand damage from political spending. Shareholders request that Sonoco Products Company provided a report, updated annually, disclosing the company's one, policies and procedures for making contributions, to, a, participate in any campaign on behalf of any candidate for public office or b, influence the general public with respect to an election; two, monetary and nonmonetary contributions and expenditures used in the manner described in Section 1 above, including the identity of the recipient as well as the amount paid to each. The report shall be presented to the Board of Directors and posted on the company's website.

This proposal does not encompass lobbying spending. A company's reputation, value and bottom line can be adversely impacted by political spending. The risk is especially serious when given to trade associations, Super PACs 527 committees and social welfare organizations, groups that routinely pass money to or spend on behalf of candidates and political causes that can cause the company might -- that a company might not otherwise wish to support.

A recent poll of retail shareholders by Mason-Dixon polling and research found that 80% of respondents said that they would have more confidence investing in companies that have adopted reforms that provide for transparency and accountability in political spending. Sonoco scored only 3% out of the possible 100% in the CPA-Zicklin Index of Corporate Political Disclosure and Accountability. In its statement next to this proposal, Sonoco failed to name one small step taken to improve its 3% score on the scale of 100%.

Without knowing the recipients of Sonoco's political dollars, Sonoco directors and shareholders cannot sufficiently assess whether Sonoco's election-related spending aligns with or conflicts with its policies on climate change and sustainability in other areas of concern. Please vote for this important reform, avoid brand damage and political spending.

All right. Thank you. If there are any other shareholders holding a ballot, which I don't believe there are, please hold them up at this time. Mr. Secretary, please report on the preliminary tabulation by the inspectors on the voting of the proposals and resolutions presented at this meeting.

All right. The moment of truth, I feel like we should have like a commercial break or something before I reveal this. Obviously, as I noted, we had a large number of proxies submitted before the meeting. So that's great, a ton of shareholder engagement, which is fantastic and, of course, seeing so many shareholders live here today.

So without further ado, Mr. Chairman, the Inspectors of Election have reported shareholders voted to elect all nominees for director, voted by a majority to ratify the selection of PwC as the company's independent public accounting firm for the fiscal year ending December 31, 2026.

Shareholders approved the advisory resolution on executive compensation and the amendment #1, to the 2024 Omnibus Incentive Plan. Lastly, the shareholder proposal entitled avoid brand damage from political spending again failed to receive majority support.

Thank you, John. This concludes the business portion of the meeting. At this time, we invite you to watch a short video, then I will turn the podium over to Howard Coker, our President and CEO, who will provide an update on the state of the company.

[Presentation]

Well, good morning, and thank you all for joining us today. Sonoco has transformed over the past several years to create a more focused, simplified and stronger company. I've been at Sonoco for over 4 decades, and have experienced a wide range of economic cycles, changing competitive dynamics and shifting consumer trends, but I have never been more excited about the opportunity we have for the next phase of our growth.

What gives me confidence today is not just optimism for clarity. Clarity around our portfolio, our strategy and our ability to execute through cycles. But before I go further, let me remind you that today's presentation contains 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 vary materially. For more information, visit the Investor Relations sections of sonoco.com.

Now with that out of the way, let me talk about my favorite subject, Sonoco. Our scaled, well-capitalized asset base underpins our belief that Sonoco is the investment of choice in packaging. We are global leaders in high-value paper and metal cans as well as uncoated recycled paperboard and converted products. Significant investments in our operations, systems and people position us to drive improved profitability. Our streamlined portfolio supported by our proven operating models enables accelerated margin expansion and consistent earnings growth.

We focus on essential center of the store food categories and partner with large growing brands and private label customers. With more than 125 years of value creation, strong cash flow generation and disciplined capital allocation, we are investing for growth, strengthening our balance sheet and returning capital to our shareholders.

Today, Sonoco has grown to a $7.8 billion global packaging leader with 22,000 team members working in 265 facilities across 37 countries, serving some of the world's best-known brands guided by our purpose of better packaging, better life. We strive to foster a culture of innovation, collaboration and excellence to provide solutions that better serve our customers.

Over the past several years, we have balanced our geographic sales mix, growing in the EMEA region, which now accounts for approximately 40% of sales. But we still maintain half our revenue right here in the United States. We believe there are significant economies of scale in our global platform, particularly in consumer packaging that are a significant competitive advantage to serve large global customers with complex needs.

In 2020, only 42% of our sales came from Consumer Packaging, while 44% was industrial, and the remainder of sales came from a variety of diversified businesses. Since then, we have purposefully shifted our mix to more consumer focused today, more than 2/3 of our sales are generated by our leadership positions in paper and metal cans.

The remaining 1/3 of our sales comes from our leading position in uncoated recycled paper or URB and associated converted products. Furthermore, in our URB business, approximately 70% of our paper product sales are in consumer staple, durable end markets.

I've been asked many times while we went through this transformation, and the objective of straightforward to improve the quality, predictability and durability of our earnings and cash flow for the long term. Early in our transformation, we increased investment in technology and innovation in our core operations to drive growth and efficiency. We then reshaped our portfolio by exiting noncore businesses that we recycled that capital to acquire and create scale in our market-leading segments.

By the end of our journey, we reduced a number of our highly diversified businesses from 20 to 2 core segments. We simplified our operating systems and concentrated our resources where we can best drive profitable growth. Today, our foundation is set and the transformation of our portfolio is complete. Since we began this journey in 2020, we've grown revenue by 50%. We've increased adjusted EBITDA by 67% and expanded adjusted EBITDA margins by 200 basis points.

Adjusted earnings grew 50% during this period. We generated over $3 billion in operating cash flow and returned $1.2 billion to shareholders through dividends and share repurchases. I am pleased to report that the state of Sonoco is strong and growing. In 2025, net sales from continuing operations increased 42% to $7.5 billion, driven primarily by the acquisition of Eviosys, our metal packaging business in Europe. Adjusted operating profits rose 67% to $955 million, and adjusted EBITDA reached over $1.3 billion, an increase of 28%. While margins expanded 120 basis points to just under 17%.

GAAP net income attributed to Sonoco was a record $1 billion or $10.07 per share due to gains from the sale of divested businesses, and adjusted earnings increased 17% to $5.71 per share. Finally, operating cash flow was $690 million, included -- including $216 million of onetime expenses of taxes paid on capital gains from divestitures.

While our results in 2025 were strong, we believe there is much more we can accomplish by focusing on our strategic priorities, sustainable growth, margin improvement and efficient capital allocation. But the key to our success over the next few years will be our ability to control the controllables.

As we look ahead, margin expansion remains one of the most important value drivers in our financial outlook. We are targeting approximately 200 basis points of margin expansion by the end of 2028, which equates to roughly $150 million to $200 million of incremental value. This is not dependent on a single initiative or a change in market condition, but rather the result of a coordinated enterprise-wide productivity system that is already embedded in how we operate.

Roughly $20 million to $30 million of this improvement is expected to come from structural simplification and cost alignment as we continue to reduce complexity and align our cost base with the portfolio we operate today. Beyond that, the majority of the opportunity sits within operations, where we're targeting $130 million to $170 million through commercial excellence and operational improvements. These targets are embedded in our operating plan, reviewed regularly through our finance governance process and tied directly to management accountability.

Now let me switch gears and provide a brief update on our 2 operating segments, starting with Industrial Paper Packaging. This is our foundational business which dates back to 1899 and has been transformed into the low-cost leader in uncoated recycled paperboard and converted products.

Today, our Industrial segment generates approximately $2.4 billion in sales, operating across 25 countries and around 9,000 employees. 73% of our sales are from North America and 16% from EMEA. While we call this the industrial business, about 65% of our products support customers and consumer-facing markets.

Our industrial team is coming off of record earnings performance in 2025, has a track record of consistently driving solid EBITDA and cash generation. Since 2020, the Industrial business has grown adjusted EBITDA 71% while expanding margins by 615 basis points through a strong focus on customer value creation, strategic acquisitions, footprint leverage and a robust internal productivity process.

Our paper business is vertically integrated from fiber collection through our strategic mill network and into paper converting. We produce approximately 2 million tons per year which are split 52% for internal use and 42% -- 48% for external. Our internal versus external sales balance is a result of positioning to deliver the highest value from the products we make based on the end markets we serve. In some markets like tissue and towel, the majority of the value is in papermaking and less in converting. In other markets like tubes and cores or paper cans, we deliver critical value-add across papermaking and converting.

As a result, we have reoriented our business towards more stable consumer end markets. We continuously pursue new opportunities for growth through innovation, entering new markets that reward us for technology, quality and service to our customers. Our entry into the high-pressure laminates market is a great example. Recognizing an unmet need, we developed a URB replacement for saturated kraft that supports high-pressure laminate products used in countertops, flooring, composite boards and decorative panels. This new product, which we believe can grow to between 20,000 and 30,000 tons per year. It's a great example of how our chemists and our process and paper engineers work together to develop new value-added products.

Another exciting area for us and one of the strongest organic growth engines in our portfolio is in producing reels for the fast-growing North America wire and cable market. We've doubled sales over the past 5 years in this business, driven by an explosion in the build-out of power grid infrastructure needed for new data centers, mostly servicing artificial intelligence.

To meet growing demand, we've invested to add a new nailed wood reel production line at our Hartselle, Alabama facility, which will increase production capacity by 15%. This new line is expected to be operational by the end of the second quarter and will give us the most state-of-the-art automated production capabilities for reels in the world. Last year, we grew in this business by 15%, and we are projecting solid double-digit growth this year as the new capacity comes online.

Now let me switch to our fast-growing Consumer Packaging segment. This segment now accounts for 2/3 of our consolidated sales or $5 billion annual. Today, we're one of the largest global producers of metal and paper cans. We operate in 100 facilities in 25 countries. Today, Sonoco produces more than 12 billion steel food and aerosol cans in both 2-piece and 3-piece formats along with closures and components. Whether you're in the center aisle of a local grocery store or working on a do-it-yourself project on a Saturday afternoon, our cans are likely to be well represented.

Within our leading paper can portfolio, we provide solutions for global markets like baby formula, snacks, [ chilledow ], nuts and more. For decades, we have partnered with some of the best-known global brands to innovate every component of our can to satisfy the sustainable packaging consumers want and need. In addition to our metal and paper cans, we've also invested in expanding our footprint and capabilities to provide cartridges that serve the adhesives and sealant space within the construction market.

Our Consumer Packaging earnings growth is a story of leadership, focus and opportunity. We substantially grew earnings in 2025 following the acquisition of Eviosys and with strong performance from our metal packaging business right here in the U.S. As we look forward, shoppers aren't pulling back, but they are rebalancing. Inflation, slower job growth and tighter markets are reshaping budgets, while more and more U.S. adults are now using weight-loss drugs, which is driving diverse shopping baskets and new eating behaviors. This is exactly where Sonoco thrives.

The majority of our consumer volume sits in the center of the store, where consumers turn for value for mills that stretch further. As budgets tighten and eating patterns change, Sonoco is uniquely positioned to help brands rethink pack size, formats and overall shelf execution. These moments of disruption create opportunity, and they play directly into our strength and helping our customers win on the shelf and protect volume.

Few partnerships illustrate this better than BUSH'S where we are co-located on their site in Chestnut Hill, Tennessee. As the market evolves, BUSH is protecting volume through premium promotions like its new Bluey Beans collaboration designed to bring more consumers into the category. Our co-located model has expanded our 2-piece food can capabilities and enables daily collaborations with their team, helping move faster to the shelf, drive demand and create value for both our companies.

Our paper can serve resilient, diverse and growing categories and geographies. Pringles is a flagship example. Working together, we moved the can to over 90% recycled paper content without compromising shelf life, manufacturing speed or most importantly, consumer experience. Recently, I was honored to join our team in Asia for the grand opening of our new operation co-located with Pringles in Nong Yai, Thailand located about 60 miles southeast of Bangkok. This new can plant has started up 2 lines to serve stacked chip growth in Asia and should ultimately become the largest paper can operation in the region.

Our focus on sustainability excellence remains an important initiative for many of our customers and shareholders. In February, we announced that a virtual purchase power agreement between Sonoco and ENGIE North America, consisting of 60 wind turbines in Crockett County, Texas has become operational. This project is another step in Sonoco's integrated sustainability efforts to reduce our global carbon emissions by 25% before 2030 by improving packaging design, installing energy-efficient equipment and renewable energy sources, such as solar panel installations.

At Sonoco, we believe that people build businesses by doing the right thing, at work, at home and in our communities. Our partnering with nonprofits, community organizations and other charitable entities, we empower our employees to share their time, talent and resources to help build stronger, more sustainable communities. Recently, we launched Sonoco In Action to bring our charitable efforts under one unified umbrella.

Our mission is to uplift local communities by investing in initiatives that support youth education development and health. Let me pause to show a brief video of our Sonoco In Action efforts.

[Presentation]

Okay. Well, let me close by focusing on our high-level targets for the next several years. We expect future organic growth for our consumer and industrial business to be around GDP in aggregate. As I mentioned earlier, we're targeting around 200 basis points of margin improvement, which will result in between $150 million and $200 million in savings by the end of 2028. And finally, we expect to achieve cumulative 3-year operating cash flow of approximately $2.5 billion, while reducing our long-term net leverage ratio to below 2.5x.

One thing that has not changed at Sonoco is our commitment to the dividend. Sonoco is one of only a handful of companies that has paid consecutive quarterly dividends for more than 100 years. And I'm pleased to announce that your Board of Directors today approved a 2% increase in the dividend, raising the quarterly payout to $0.54 per share to be paid on June 10, 2026 to shareholders of record on May -- May 8. This will be the 43rd consecutive year that Sonoco increased the annual dividend, and it provides a solid yield of nearly 4%, double the payout of the S&P 500.

On behalf of the entire -- on behalf of the entire Sonoco team, I want to thank you for your investment, your support of our company -- of your company. Everything you've heard today ties back to one thing, focus. We are a more focused organization. We're deploying capital where it matters most, and we have more levers to create value than ever before. Bottom line, we're positioned not just to compete but to win.

With that, I'll be happy to answer any questions that you may have. So seeing no questions, we thank you for your attendance, and our Chairman has signaled to me that we do stand adjourned.

Let me make sure we're there. Again, good morning, everyone, and thanks for joining us at today's Sunoco's 2026 Investor Day. I'm Roger Schrum, I'm Head of Investor Relations for the company. And it's been my honor to work for Sunoco for 20 years, although I did have a couple of years off for good behavior.

This morning, Howard Coker, our President and CEO; and Paul Joachimczyk, our Chief Financial Officer, will start with a brief review of our fourth quarter and full year results. Sunoco issued a news release and posted a presentation on our website at sonoco.com yesterday evening, which provided detailed information on our financial results. We also will post today's presentation on our website after we conclude prepared remarks.

Once we finish with our review of 2025 results, Howard will come back on the stage and do our strategic review and follow that with our presentations from our 3 business unit presidents on our industrial and consumer businesses. We're then going to take a short break, and Paul will come back up and provide further financial review and present our targets for 2026 through 2028.

Howard will close our formal presentation, and then we'll take your questions. For those of you that are listening virtually, we do have an option for sending us questions as well. After we conclude Q&A, we'll be hosting a short modeling session across the hall over here and Harvard Room 1 to answer any your detailed question than you may have. With that in mind, we hope that you limit your financial modeling questions during the Q&A, we'll take care of them over there. But before we get started, let me remind you that during today's presentation, 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. The company undertakes no obligation to revise any forward-looking statements. 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 and reconciliations to GAAP measures is available in the Investor Relations section of our website.

Now with that, let me turn it over to Howard.

Okay. Well, good morning, and thank you, Roger. It's really great to see so many of you who I've come to know over so many years, and I'll certainly look forward to getting to those that don't know through the course of this conversation and others.

Before Paul and I review fourth quarter and full year 2025 financial results and present our '26 guidance. Let me open with a few comments about what you will hear today. First, our portfolio transformation is complete. In fact, what differentiates us from so many in our industry today is that the most difficult part of our transformation journey is behind us and we're poised to create greater value for our customers and shareholders going forward. Second, there was a purpose behind our portfolio changes and we have built global market-leading franchises in both metal and paper, consumer and industrial packaging. And while our portfolio is set -- we have plans to further improve profitability and cash flow generation.

Finally, we believe we are in the best position to deliver consistent earnings growth going forward. Our Sonoco team executed well in the fourth quarter despite a difficult macroeconomic environment, delivering strong operating results we reduced net debt by approximately 40% year-over-year and lowering the company's net leverage ratio to approximately 3x. And we concluded our portfolio transformation following the successful divestiture of ThermoSafe and further simplified our Consumer Packaging segment by consolidating our global metal packaging and rigid paper containers business into a single integrated structure driven geographically. Which we believe enhances our go-to-market strategy and will drive additional synergies across global channels.

I'll let Paul go through the numbers in detail, but we improved revenue, operating profit, adjusted EBITDA and adjusted EPS above consensus and our own expectations. We achieved this improvement despite the divestiture of ThermoSafe earlier in the quarter. Providing some context for the quarter. October was a strong month for all of our businesses, while November was a bit weaker than we had expected. December is always a difficult month to predict due to our customers' inventory management practices and consumer demand at year-end. But overall, the month was better than we had planned.

Productivity, favorable price cost environment and structural cost savings throughout the quarter improvement, meaning we were effective in controlling the controllables. Demand was about what we expected with volume mix overall down just under 2%. Metal Packaging U.S. had a record quarter and a record year. U.S. food can units were up 10% in the quarter and 9% for the full year exceeding reported industry averages.

Results from metal packaging EMEA exceeded our expectation, although food can units were down about 3%. Some of our customers manage inventories below what they had done historically. Rigid Paper Containers were down in North America on soft construction, stack chip and other food categories while unit volumes in Europe were flat. Industrial had another solid quarter on top of a record year and margins expanded for the ninth consecutive quarter. As mentioned, we completed the sale of ThermoSafe, our temperature-assured packaging business in early November and received $656 million in cash which equates to a valuation of approximately 13x.

We used net proceeds and free cash flow in the fourth quarter to reduce debt by $966 million. Year-over-year, we reduced net debt by approximately $2.7 billion, if you include the proceeds from our TFP divestiture and free cash flow. This debt reduction effort lowered our net leverage ratio from 6.4x starting the year to approximately 3x at year-end. As you recall, we had targeted to reduce our leverage to 3.3x to 3x by the end of 2026.

So we are tracking ahead of our expectations. Net-net, it was a good end to the year, an excellent setup for 2026. Now I'm going to turn the podium over to Paul to go over the numbers in more detail and review our 2026 guidance. Paul?

Thank you, Howard, and thanks, everybody, for being here today. I'll walk through our fourth quarter and full year 2025 financial performance. All of the results are presented on an adjusted basis, with growth on a year-over-year basis unless otherwise noted. The GAAP to non-GAAP EPS reconciliation is included in the appendix and in our press release.

As Howard noted, 2025 was a pivotal year for Sonoco. With our portfolio transformation complete, we now have global market-leading positions across 2 focused segments, positioning the company for more consistent execution and sustainable long-term performance.

Turning to the fourth quarter. Results reflected strong execution across the businesses despite a mixed demand environment. From a revenue perspective, fourth quarter net sales for continued operations increased 30% to $1.8 billion, driven by the metal packaging EMEA acquisition, strong pricing and favorable FX. This was partially offset by volume and mix which declined approximately 2%. Adjusted EBITDA increased 10% to $272 million with margin expansion of 51 basis points, reflecting strong operational discipline, despite softer volumes.

Adjusted EPS was $1.05, up 5% year-over-year, driven primarily by favorable price cost largely in our consumer segment. Continued productivity gains were evenly split between consumer and industrial. FX tailwinds and lower SG&A also contributed to that. These benefits were partially offset by softer volume and mix, slightly higher interest expense and lost net earnings from our divestitures.

Operating cash flow was $413 million for the quarter, while that includes a onetime tax payment from divestitures, it also demonstrates the strong seasonal cash generation of our Med can businesses.

Turning to the full year results. Full year net sales for continued operations increased 42% to $7.5 billion, driven by the metal packaging EMEA acquisition, favorable FX pricing, which was partially offset by volume and mix. Adjusted EBITDA of $1.3 billion increased 28% with margin expanding 120 basis points to 16.9%. This improvement was driven by the metal packaging EMEA acquisition, strong price/cost execution, continued productivity, lower fixed costs and favorable FX partially offset by volume softness, primarily in our converting and Consumer business. We also had lost earnings from our divested businesses within the year.

Adjusted EPS was $5.71, representing a 17% increase year-over-year. This improvement was driven by metal packaging EMEA acquisition, favorable price cost productivity gains and FX, partially offset by divested businesses, unfavorable volume, a higher tax rate and interest expense. Operating cash flow was $690 million, including $216 million of onetime items, primarily $196 million in taxes paid on capital gains from our divestiture.

On a normalized basis, full year operating cash flow was $906 million, underscoring the strong cash generating capability of the portfolio. Looking ahead to 2026, we expect continued earnings growth, supported by improving volume and mix, disciplined pricing, strong productivity and lower interest expense. We are projecting sales of $7.25 billion to $7.75 billion, adjusted EBITDA of $1.25 billion to $1.35 billion and adjusted EPS of $5.80 to $6.20.

Operating cash flows of $700 million to $800 million. This includes approximately $100 million of taxes related to our capital gains from the businesses divested in 2025. Before reviewing the 2025 to 2026 bridges, let me clarify our definition of pro forma. It reflects our 2025 reported results adjusted to exclude divested businesses and represents the comparable asset base for growth in 2026. Relative to the 2025 pro forma sales of $7.3 billion, we expect low to mid-single-digit sales growth driven by favorable volume mix, pricing and FX. We are also projecting EPS growth of approximately 20% versus our 2025 pro forma EPS of $4.97, driven by our operational improvements, favorable volume mix, lower year-over-year interest expense and FX. This growth will be partially offset by 150 to 200 basis points increase in our effective tax rate.

In summary, 2025 was a year of disciplined execution and strategic processes. We entered 2026 with a stronger portfolio, improved margins and enhanced cash flow generation, positioning Sonoco well for durable earnings growth. This concludes our recap of 2025 and our outlook for 2026. At this time, we invite you to watch a short video transitioning into our Investor Day, where we will focus on 2026 and beyond.

[Presentation]

Again, thank you for joining us today. I really, really am looking forward to the next portion of our presentation, which, as you just saw, is all about our focus towards the future. Sunoco has transformed over the last several years to create a more focused, simplified business. This focus allows us to move faster, allocate capital, with greater discipline and hold ourselves accountable for returns.

After reviewing our strong finish to 2025 and our outlook for '26. We now want to take a step back to talk about our transform portfolio, our focused strategy and the experienced leadership team that we have in place, which you'll hear from today. Importantly, what is different today is not just where we are but how decisively we will run the business going forward. Focusing management attention, capital and resources on fewer but scale businesses, we have a strong competitive advantage. I've been at Sunoco for over 4 decades and have experienced a wide range of economic cycles, changing competitive dynamics and shifting consumer trends, but I've never been more excited about the opportunities we have for the next phase of our growth.

What gives me confidence today is not simple optimism, but clarity, clarity around our portfolio, our strategy and our ability to execute through cycles. Our scaled well-capitalized asset base underpins our belief that Sunoco is the investment of choice in packaging. We are a global leader in high-value paper and metal cans as well as uncoated recycled paperboard and associated converted products. Significant prior investments in our operations, systems and people position us to drive improved profitability.

Our streamlined portfolio supported by our proven operating model enables accelerated margin expansion and consistent earnings growth. We focus on essential center of the store food categories and partner with large growing brands and private label customers. Through strong relationships, product quality and service excellence core to Sunoco's culture, we continue to gain share. With more than 125 years of value creation, strong cash flow generation and disciplined capital allocation, we are investing for growth, strengthening our balance sheet and returning capital to shareholders, including 100 consecutive years of sector-leading dividends.

Today, Sunoco has grown to become a $7.8 billion global packaging leader with 22,000 team members working in 265 facilities across 37 countries, serving some of the best known brands around the world. Guided by our purpose of better packaging, better life. We strive to foster a culture of innovation collaboration and excellence to provide solutions that better serve our customers. Over the past several years, we have balanced our geographic sales mix, growing in the EMEA region, which now accounts for approximately 40% of sales. while still maintaining more than half of our revenue right here in the United States. We believe there are significant economies of scale in our global platform, particularly in consumer packaging, that are a significant competitive advantage to serving large global customers with complex needs.

In 2020, only 42% of of our sales came from Consumer Packaging, while 44% was industrial, and the remainder of sales came from a variety of diversified businesses. Since then, we purposefully shifted our mix to more consumer-focused packaging where today, more than 2/3 of sales are generated by our leadership positions in paper and metal. The remaining 1/3 of our sales come from our leading position in uncoated recycled paperboard and converted products.

Furthermore, in our URB business, approximately 70% of our paper and converted product sales are, in fact, in consumer staple and durable end markets. Both our consumer and industrial businesses are strategically aligned around technology, innovation, of course, customers, service and sustainability. During our transformation, we followed a set of principles that helped us determine what markets we would participate in and how we expect to win. We focused on value-added packaging where we can drive a competitive advantage to advanced material science and technology expertise, where our products possess high functionality and where we can best leverage continuous process manufacturing to drive efficiency and scale.

Our operating model leverages our quality and partnership approach to help our customers respond to a dynamic marketplace for customer preferences and buying habits, along with regulations are indeed constantly changing. Today, we have developed a focused portfolio serving a mix of large growing global customers who value the competitive advantages that we provide. I've been asked many times why we went through this transformation. The objective was straightforward: to improve the quality predictability and durability of our earnings and cash flow over the long term. Early in our transformation, we increased investment in technology and innovation in our core operations to drive growth and efficiency. We then reshaped our portfolio by exiting noncore businesses, and we recycled that capital to acquire and create scale in our market-leading segments. By the end of our journey, we reduced a number of our highly diversified businesses from 20 to 2 core segments. And we simplified our operating systems and concentrated our resources where we could best drive profitable growth.

Today, our foundation is set, and the transformation of our portfolio is complete. Since we began this journey in 2020, we have grown revenue by 50%. We've increased adjusted EBITDA by 67% and expanded EBITDA margin by approximately 200 basis points. Adjusted earnings grew 50% during this period, and we generated over $3 billion of operating cash flow. And returned $1.2 billion to shareholders through dividends and share repurchases. We believe there is much more we can accomplish by focusing on our strategic priorities, sustainable growth, margin improvement and efficient capital allocation.

During their upcoming presentations, each of the business unit presidents will detail specific actions that we'll be taking to drive these strategic priorities. But let me provide an overview of each of these initiatives. First is sustainable growth. We have a targeted strategy to take advantage of long-term trends and believe we can grow organic sales by focusing our customer partnerships to gain share, not by chasing volume, but by improving mix, strengthening customer service and relationships and achieving fair value-based pricing. We have a track record of improving profitability and margins by deploying our operating model.

Our model is centered around structural transformation, operational improvement, including commercial, supply chain and operational excellence, strategic capital allocation and maintaining excellence and sustainability. This model allows Sunoco to add $533 million in adjusted EBITDA since 2020 at a greater than 20% margin. Also, we've been able to reduce net debt by approximately 40% in the past year while achieving our sustainability goals. We're excited about the early results we're experienced in deploying this model across a more streamlined and simplified organization. We have an opportunity to further improve our business through structural transformation. As an example, we recently announced we are simplifying our consumer segment, by consolidating our global metal and rigid paper container businesses into a single integrated structure divided geographically.

This action, which you'll hear much more from our business unit presidents will enhance our consumer go-to-market strategy, focus our technology and service model to respond to changes in the marketplace and drive additional cost savings across our global footprint. We are targeting an additional $150 million to $200 million of cost savings, which translates into roughly 200 basis points of adjusted EBITDA margin improvement by the end of 2028. And importantly, this improvement is driven by actions within our control, not portfolio exit or large acquisitions. Paul will provide more color on the specific initiatives when he reviews our KPIs and financial targets later in the presentation. But this is the path the team, our team is working on to control the controllables and deliver on our long-term financial goals.

Sonoco has consistently generated strong operating cash flow and we're expecting that trend will continue. Efficiently allocating capital remains a key element of our operating model. Our top 3 priorities going forward will be to invest in high-return growth and margin expansion projects, maintain a strong balance sheet by focusing on further debt reduction and continuing to return capital to shareholders. Our focus on sustainability excellence remains an important initiative for many of our customers and shareholders. Earlier this month, we announced that a virtual purchase power agreement developed between Sonoco and NG North America, consisting of 60 wind turbines and Crockett County, Texas has become operational. This project is another step in Sonoco's integrated sustainability efforts to reduce our global carbon emissions by 25% before 2030 by improving packaging design, installing energy-efficient equipment and renewable energy sources, such as solar power installations.

Let me close by focusing on high-level strategic targets for '26 through '28 and Paul will build on these with a more detailed framework in his section. To achieve our strategic priorities of sustainable growth, margin expansion and efficient capital allocation, we have set specific targets, develop detailed plans and will measure our progress and will hold ourselves accountable. We expect our future organic growth for our consumer and industrial business to be around GDP in aggregate.

As I mentioned earlier, we're targeting 200 basis points of margin improvement, which will result in between $150 million and $200 million in savings by the end of 2028. And finally, we expect to achieve accumulated 3-year operating cash flow of $2.5 billion while reducing our long-term net leverage ratio of below 2.5x. I'm proud to say that Sonoco has one of the packaging industry's best and most experienced leadership teams to drive our focus mission going forward. Simplifying our structure also means we now have a simplified business and functional leadership team. I'd like to take a minute and provide you some background on our 3 business unit presidents. All 3 of which have long tenures with Sunoco as well as deep experiences in the businesses they run.

Let me start with James Harold. James is President of our Industrial Paper Packaging segment, which successfully completed a record year in 2025. James is 41 years for the company, leading the industrial segment since 2020 and is considered one of the leading experts in the global URB industry. Sean Karnes as President of Consumer Packaging, EMEA, APAC, and -- he's been with Sunoco for 17 years and previously was President of our global rigid paper container operations. Before coming to Sonoco, Shawn was a business unit leader for Crown's EMEA can business, which, of course, we now own. Sean is an engineer by training but he has strong commercial skills and led the team that significantly grew our paper can business internationally.

Ernest Haynes as President of Consumer Packaging Americas, Ernest has 28 years of experience with Sonoco and was previously President of Metal Packaging U.S., which is coming off a record year of performance. Prior to that role, Ernest was General Manager of our rigid paper container operations in North America. Also an engineer by training, Ernest started as a shift supervisor in our rigid paper container business, later serving as Head of Operations for our North American Industrial Paper Packaging business before taking the leadership role in consumer. Ernest also has strong commercial skills and led his team to more than double EBITDA for our U.S. metal packaging business since it was acquired in early 2022. I'd also like to recognize our functional leadership team who has manufacturing and operational leadership and experience in addition to being an expert in their fields. Andrea Way is our Chief Human Resource Officer and has 20 years with Sonoco.

Andrew is also an engineer by training and started out our career as a manufacturing excellence expert and has used her process improvement skills to simplify our global HR function. John Florence, our General Counsel, has more than a decade with the company, although he did outside legal work for Sonoco for nearly 10 years. John also recently was a General Manager of our U.S. and Canada industrial paper and packaging operations, working very closely with James.

Finally, as you know, Paul Jounce is our Chief Financial Officer. Paul joined the company in July with a proven track record of successfully leading financial functions for large multinational publicly traded companies in the building materials and manufacturing industry. Paul is comfortable in both finance and manufacturing and is taking on the task of helping drive our profitability performance plan, along with developing and tracking the companies key performance indicators. Before I turn the podium over to James, I want to leave you with one final thought.

Today, Sonoco is a simpler company. running fewer but market-leading businesses with clear priorities, consistent earnings growth, stronger cash flow generation and a management team focused on execution, not reinventing the strategy.

So with that, let me turn it over to James. James?

Thank you, Howard, and good morning, everyone. I'm incredibly proud to introduce you to our Industrial Packaging group. As you heard from Howard, I've spent more than 40 years at Sonoco in the last 30 with the industrial team, I absolutely love being the industrial guy. Very proud of this team and what they have accomplished. This is Sonoco's oldest business spanning our full 125-plus years. generation after generation of team leaders and team members have found ways to keep reinventing this business, and this team is no different. I know I'm biased that I wake up every day knowing I am competitively bringing the best talent to task to continue to create value for our customers and our shareholders. Our best is still ahead of us. There's a number of key themes I would like for you to consider as I take you through this business. We are the URB global leader focused on vertically integrated, low-cost system producing paper and converted paper products. We have a proven track record of EBITDA growth, cash generation and high returns on investment.

With our focus on customers and solutions through R&D and technology, we expect to achieve better than industry growth rates. As you have heard from Howard, we have been focused on simplifying our portfolio and structure. And this business has gone through those same filters. Five years ago, this business operated at 7 separate P&Ls and leadership teams. Today, it operates as one. From 2021 through 2024, we consolidated all the converting platforms, tubes and cores, post, partitions and corns together into paper converting.

Early last year, we brought together paper mills and paper converting groups as 1 team. This has removed the silos and focused our single leadership team on value creation along the full supply chain and significantly reduced our critical decision-making time lines. Complementing our paper business, we have a wood metal and poly fiber business, driven by the growing power demand in North America. Today, we're a $2.4 billion business operating across 25 countries with around 9,000 focused team members. 73% of our sales are from North America and 16% from EMEA. Now we do call this the industrial business. But as you can see from the graphic, over 65% of our products support customers and consumer-facing end markets. As mentioned, our paper business is vertically integrated from fiber collection through paper mills to paper converting producing over 2 million tons per year which are split 52% internal and 48% external.

Our internal versus external sales balance is the result of positioning to deliver the highest value from the products that we make based on the end markets we choose to serve. We target trade URB markets that are less correlated with our converting markets and allow us to use product development and tech service capabilities to add value to both our customers and our business. In some end markets like tissue and tau, the majority of value-add in paper making is in the paper making and less in converting. In other markets like tubes and cores and paper cans, we deliver critical value-add across both papermaking and converting. As a result, we have reoriented our business toward more sustainable consumer end markets. The mix of internal versus external tons is managed to reflect where we believe we can deliver the most value. It is not directed or dictated by the need to cover tons through internal consumption. More than half of the URB that we produce is utilized by our converted paper products business that produces tubes and cores, protective post, partitions, comes and paper for the paper can side of our consumer business, which you will hear more about from Sean and Ernest.

Our converted paper business is focused on partnering with customers that have leadership positions in markets they serve and where we have the right to win. With approximately 2/3 of our converted paper product sales in the consumer staple and durable end markets. The URB that we sell externally is focused on the following markets: tissue and towel, food packaging, floor paper and coal board. These markets provide long-term stable growth and are aligned with our differentiated capabilities. We are biased to markets that are less cyclical and consumer-facing.

Based on estimates from RISI, URB markets are expected to grow annually at just over 1% through 2028. RISI is also projecting that mill operating rates which averaged around 90% in 2025 should continue to improve to the mid- to the mid-90s as URB production levels increase through the expected growth. The industry has adjusted capacity to better align with post-COVID demand levels. The industrial team has driven solid EBITDA results through strong customer value focus, acquisitions like [ skarn ] and RTS, footprint leverage and a robust internal productivity process. Capital is driven by a disciplined allocation process, focused on keeping our system operating at high yields and delivering automation solutions in our converting operations. our operation model is strong and it is resilient. The bottom line of this slide is, you can depend on us. to continue to deliver strong EBITDA and margin results. We expect the macroeconomic backdrop to continue to present both challenges and opportunities.

As you will see later in the presentation, we believe the preference for sustainable recycled packaging, power grid reinvestment Power growth from data centers and AI will provide us continued opportunities to grow. Geopolitical uncertainties will continue to drive volatility in tariffs, will put upward pressure on equipment-related expenditures. We are also seeing efforts to lightweight packaging, and this could adversely affect some markets. investments that allow us to drive greater efficiency and better service customers will continue to be a priority in how we allocate capital. Forward margin improvement will be driven by getting our European and APAC regions to higher return levels, along with opportunities to further simplify and streamline our processes. We continuously pursue new opportunities for growth through innovation, entering new markets that reward us for delivering the highest quality levels and service to our customers.

Our entry into the high-pressure laminates market is a great example of this. Recognizing an unmet need in the market, we develop URB replacement for saturated kraft that supports high-pressure laminate products in countertops, flooring, composite boards and decorative panels. We are in final testing and expect to have our product in the market early this year. We believe this market opportunity is in the range of 20,000 to 30,000 tons per year. This is another great example of how our chemists our process engineers, our paper engineers can develop new value-added products in our URB converted paper space to meet new and evolving customer and consumer preferences.

Our entry into the high-pressure laminates market is a great example of this. Recognizing an unmet need in the market, we develop URB replacement for saturated kraft that supports high-pressure laminate products in countertops, flooring, composite boards and decorative panels. We are in final testing and expect to have our product in the market early this year. We believe this market opportunity is in the range of 20,000 to 30,000 tons per year. This is another great example of how our chemists, our process engineers, our paper engineers can develop new value-added products in our URB converted paper space to meet new and evolving customer and consumer preferences.

An absolutely exciting area for us and the strongest organic growth engine we have in the Industrial Group is our Reels business, focused on the wire and cable markets in North America. We have seen a doubling of revenue over the last 5 years in this business, driven by North American power demand, greening of the grid, infrastructure rebuild and the AI data center boom. We continue to invest capital in this business and to expand capacity, to increase automation to ensure we stay ahead of demand. And yes, that reel is real. It is truly that big.

We have now moved the Industrial and Specialty Packaging business into our Industrial group as there are product overlaps and internal supply chains that allow our paper converting, reels and I&S business to leverage from each other. We will continue to build on these internal supply chain elements and cross-selling opportunities. I&S also has a strong foodservice product portfolio that we will continue to drive for growth.

In summary, I am truly excited about this team, the opportunity to continue to deliver on the business we have built. We are committed to continued top line and EBITDA growth through strong value-based relationships with our customers, 1% to 2% growth in our URB markets and between 5% to 8% in our reels business. We will remain focused on being the best operators in the URB space, driving internal productivity and managing our footprint versus market needs. We will also continue a strong focus on improving returns in both our European and APAC regions, along with continued investment in our reels business to drive growth.

In closing, you can count on us to be disciplined in how we allocate capital. As we focus on creating customer value with great products, maintaining a strong mill system and using automation and data to support optimization and decision-making.

I want to thank you for your time this morning, and I hope I've created for you that same excitement and confidence that I feel every day about this business. We have a great team, capable of adjusting to whatever challenges we face and will continue to deliver and win for both our customers and our shareholders. I am honored to represent this team and this business for you here today, and I do love being the industrial guy.

I'll now turn the podium over to Sean Cairns.

Good morning, everybody, and thank you, James. So I'm actually super excited to be here today to share with you my passion for this business. As over the past years, my team and I have helped reshape how Paper Packaging perceived globally by inventing, commercializing and scaling all paper packaging solutions that resonate with both brand owners and consumers.

Late last year, Howard asked me to lead our newly combined consumer packaging business in EMEA and APAC. And after my early career as a Merchant Marine, I spent 13 years at Crown in the [indiscernible] Metals business that we acquired. Today, I'll walk you through how we're going to integrate these 2 businesses and continue to grow in this region. We're the only player in EMEA and APAC that produces both paper and metal packaging, the 2 most sustainable and circular packaging substrates.

Our customers require packaging solutions to meet increasing regulations and unique sustainability demands and, of course, their performance requirements. The streamlined organization improves flexibility, lowest cost to serve and strengthens customer partnership. Our consumer [indiscernible] APAC business is around about $2.9 billion in revenue with about 8,000 employees across 65 facilities. That scale creates meaningful advantages from procurement leverage, operational agility, supply security and, of course, capital efficiency. I'm proud to say we serve many of your most iconic brands across food, household and health and beauty with an innovative and versatile portfolio. In fact, I challenge any of you to look into any European household and not see many of our products. Rigid Paper continues to grow strongly, now enhanced by our ability to deploy assets across both paper and metal networks. And our market leadership in innovation and service helps us position that growth in both metal and paper with new and existing customers.

Importantly, we can excel combined resources to deliver the highest service and value to our customers. What is unique about this region is when I've got the opportunity to sit down with customers and brand owners, sustainability is at the forefront of that conversation. And the good news is we've got the right sustainable fit for purpose solutions to meet our consumers' needs. No one else delivers packaging solutions across the region in metal and paper and that makes us unique in this market. We actually have over 200 years of experience in can design, innovation and our customers come to us to meet their design objectives. -- which actually significantly vary by country.

Trust is actually essential in this business and our technical and service support teams enhance quality, improved consistency for our customers to reduce their waste and contamination risks. And as I said before, our manufacturing footprint and scale allows us to respond to variations in design, all while constantly delivering on productivity.

Our footprint allows us to optimize our -- across our network to drive better value to our customers. And finally, our dedicated R&D and regulatory teams are a clear differentiator in the business. Our footprint is a key strategic advantage. Our can network needs to be located close to our customers' fill-in operations. For example, if you think about vegetables from the time to pick into packaging is incredibly important to lock in that very freshness that consumers demand.

However, of course, we centralize operations where it makes sense to exploit our share economies of scale. A great example of this is our new can bottom for Pringles. We will produce all the world's demand out of 2 locations, 1 in Europe and 1 in Asia. Importantly, we're not simply merging these 2 businesses. since November, we've been undertaking a real deep dive structural review from the very top of this combined organization directly down to the shop floor to reduce the organization's layers while establishing best practices. I'm proud to say we've already implemented changes, and we expect further actions as we complete this review.

Finally, it would be [indiscernible] if I didn't mention APAC. APAC is a meaningful growth vector for us as new all paper packaging solutions are being launched within this region. In fact, as we sit here today, in the coming weeks, we will launch yet another new innovative product within the APAC region. Our new factory, which we just recently opened in Thailand is actually directly connected to the Mass Pringles plant. And this facility is being built to serve this region and has the capability of being the world's largest paper can plant, and it's a perfect example of disciplined customer-backed expansion. I'm proud that our portfolio spans metal and metal and closures rigid paper visas and premium specialty packaging. Metal provides over 80% recycling rates, unmatched shelf life and exceptional food protection, making it essential for the food security, flexibility and quality.

Meanwhile, paper cans delivers high recycled content, full recyclability and strong consumer appeal, which is driving rapid brand adoption. While premium cans deliver high margin and emotional brand engagement for our customers, particularly in gifting and luxury. This balanced portfolio creates resilience, premium upside and powerful substrate conversion opportunities for Sonoco. So from Pate to pet foods, stack chips to infant formula household to health, this portfolio unlocks opportunity with some of the highest growth end markets. And we're incredibly proud to operate across more than 70 countries, with all those differences in languages constant changes in regulation and customer requirements, formats and supply chains. Put simply, our job is to manage thatcomplexity.

So effectively, our customers don't have to. Regulation across EMEA and APAC is ever-changing and accelerating conversions away for more difficult to recycled substrates, such as plastics and that unlocks up rail opportunity for us. Sunoco has been at the forefront of this movement by developing mono-material packaging solutions even before mono-material was a requirement. [indiscernible] extended producer responsibility program or ERP, puts in place higher fees for manufacturers and brand owners to cover the cost of collecting recycling and disposing of product packaging. These fees are designed to incentify sustainable designs shifting the burden of waste management from local governments to producers.

This means as our customers require solutions to reduce their exposure EPR exposure. So now because of the knowledge the solutions in both paper and now metal to enable them to have a smooth transition. And I'm incredibly proud of because right now, we've got brand owners and retailers coming directly to us. asking for us to create solutions to reduce their environmental exposure. There is a classic example with Icopal. It's a Sonoco innovation, and it shows how regulation and innovation translates into growth. It reduces CO2 emissions by 20%, improves the consumer experience and simplifies production. APIs adopted it for Pat. And today, we're the only company globally that can produce this product. And we see broad adoption potential for this. Across mean APAC private labels are growing, while pet food premiumization and plant-based protein diets and trends are accelerating. All of these trends are influenced by continuous emphasis on sustainability, a key differentiator related to the U.S. Private label brands and owned brands are constantly looking for differentiation, and we're partnering directly with retailers and brands to meet these shifts often before they become mainstream.

The result is diverse, resilient growth across categories and geographies. Pringles is a flagship example. Together, we moved the can from over -- to over 90% recycled paper content without compromising shelf life, manufacturing speed or most importantly, consumer experience. This is the single largest change to 1 of the world's most iconic packs in the past 50 years. And in effect, we future-proof the brand. And now with Mars and in Pringles, we are their partner for the next phase of growth. As I mentioned earlier, technology underpins our competitive advantage. Beer automation, artificial intelligence and analytics, they improve our quality, help us improve our safety and, of course, our productivity while reducing our energy use and waste. As an engineer, I could tell you productivity is a never-ending process. It's simply a must do in order for us to remain competitive for our customers. And we will continue to protect and scale proprietary platforms like ECPL and our all paper can solutions such as green can or orbit closures, which you can see all at the bottom of this slide.

In fact, Orbit is a great example of how we use innovation to meet or met consumer needs. Who in the audience has not struggled to open a glass dark jar, while all bits the solution to that problem. Orbit's the only vacuum closure for glass jars that makes opening jars easy for anybody, how it works the outer ink rotates separately from the center panel. And this is another great creative innovation from Sonoco. Kicker costs started with 1 SKU and due to its success in the marketplace, they're currently rolling this out across the entire product range. And we see this as yet another growth vehicle as other brands realize its value. We're going to drive growth across the region by focusing on 3 levers. As we've been discussing, driving immediate paper can adoption, we expect to grow faster than any other substrate by catching sustainability and substrate conversion trends. While combined commercial teams, we have the right people and the right resources to approach the market with solutions that are sustainable and agnostic across paper and metal.

And lastly, by creating a disciplined approach to our commercial processes, which will include standardization and improve our value-based pricing. And I'm really pleased to say our teams will stay deeply embedded with our customers as they constantly evolve. Capital investment will prioritized by customer back programs, such as the Mars example that I mentioned earlier. We will invest with regulatory demand and commitments align across both metal and paper. Another example of our consumer -- our customer-backed investments includes our all-new 60-millimeter all paper can line in France. A brand-new product to serve a new market with an entirely new product. Similarly, our 2-piece aluminum Patti line in France was built to support the growing preferences for single-serve formats. And of course, every project is evalued through strict return on invested capital criteria to ensure long-term value creation.

To summarize, we're driving growth through the region's obsession with having sustainable packaged solutions driven by changing consumer preferences and regulation. We're expanding margins through integration and operational excellence. Strategic sourcing and materials remains a key competitive advantage, with which we can leverage to deliver value for our customers. Continuing to drive footprint optimization, standard processes and procedures with automation will be accretive to our margin profile. And we're allocating capital with disciplined where it's aligned with our customers or drives productivity enhancements. As I close out the section in my 31 years in the packaging industry, I've never experienced so much demand for change. This is mainly driven by the region's unique sustainability demands. And I'm incredibly proud that Sunoco is ahead of the curve with our proprietary sustainable packaging solutions. As you can see, I'm extremely excited about the future a consumer package in EMEA and APAC and the value it will bring and deliver for Sonoco and its shareholders.

Thank you for your time this morning, and I'll now hand over to my friend, Ernest.

Thank you, Sean, and good morning, everyone. I'm Ernest Haynes and it's really good to be with you all in New York. As Howard mentioned, I've had the great fortune to spend over 28 years with Sonoco between both our consumer and industrial businesses. and I feel positioned well to now lead Consumer Packaging Americas.

No matter the economic climate, 1 principle remains constant, consumers vote with their wallets every time they shop. That vote is shaped by where they are today and more specifically, how they think about grocery decisions, affordability and value and brands must meet them where they are. We have a really clear view of how consumers are shopping, how retailers are responding and how our customers are adjusting to win those choices. My team's role is to help our customers earn that shopper's choice by making our packaging a competitive advantage through quality, service, advanced technology and sustainability.

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each facility is equipped with advanced automation, affording us significant cost efficiencies. In addition, we implement lean technologies to promote operational excellence throughout our entire network. Today, we produce over 3 billion steel food and aerosol cans in both 2-piece and 3-piece formats, whether you're in the center aisle of a grocery store or working on your DIY projects on a Saturday afternoon at home, our cans are likely very well represented.

Within our leading paper can portfolio, we provide solutions for addressable markets like baby formulas, snacks, chilled dough and nuts. For decades, we have partnered with global CPGs to innovate every single component of our cans to satisfy the sustainable packages consumers both want and need. In addition to our metal and paper cans, we've also invested in expanding our footprint and capacities to provide cartridges that serve the adhesives and sealant space within the construction markets.

At Sonoco, sustainability is an integral component of our approach to both material selection and product development. Steel remains the most recyclable consumer packaging material globally. Approximately 85% of all steel ever produced is still in use, supporting a genuinely circular economy that ensures long-term material availability and contributes to decarbonization. Our rigid paper cans feature approximately 85% post-consumer recycled content directly supporting brand objectives related to recycled content and performance on many important retail sustainability metrics.

From a market standpoint, these attributes are incredibly significant. Sonoco's metal and paper can solutions enable customers to lead with confidence by mitigating risk, safeguarding shelf visibility and ensuring consistent supply. The macroeconomic environment significantly influences our industry and our market dynamics. Whether we're mitigating the high impact cost of steel-related tariffs, for our entire domestic customer base or adapting to evolving extended producer responsibility regulations, our strategies are specifically designed to manage those challenges and enable our customers to capitalize on emerging opportunities.

Our global tinplate procurement capabilities guarantee continuity of supply, a critical factor for all of our clients. while our ongoing investments to innovate mono material paper cans, demonstrates our commitment to reducing environmental impact. While additional challenges are likely to arise. We remain steadfast in our mission to lead the industry by delivering sustainable solutions. As we look towards 2026 and 2027, shoppers are not pulling back, but they are rebalancing, inflation, slower job growth in tighter markets are reshaping budgets, while about 5 million U.S. adults are now using GLP-1 specifically for weight loss, driving diverse shopping baskets and new eating behaviors.

But this is actually where Sonoco thrives. The majority of our Consumer Americas volume sits in the center of the store, where consumers turn for value, substance and meals that stretch further. As budgets tighten and eating patterns change, we're uniquely positioned to help brands rethink pack sizes, formats and shelf execution. These moments of disruption actually create opportunity, and they play directly into Sonoco strengths and helping our customers win the shelf and protect volume. Commercial excellence forms a fundamental component of our strategic initiative to drive earnings growth. The newly implemented organizational structure enables deeper analysis of customer requirements, and facilitates the optimization of internal processes.

Our sales teams are now equipped to represent our entire can portfolio, irrespective of substrate, ensuring that the customer remains central to all commercial initiatives. Additionally, we have recently launched a global CRM system within our business technology suite that enhances collaboration and operational efficiency across every work group. Our customers rely on our capacity for collaboration and innovation to sustain competitiveness in their respective markets. Crop production costs remain a primary consideration for all can makers.

Our operating model is distinguished across the Americas by its commitment to superior quality and service. We foster long-term partnerships with our customers, enabling value creation and supporting their growth in market share. A few partnerships illustrate this better than ours with Bush. -- where we are co-located on their site. As the market has evolved, Bush is protecting volume through premium promotions, like its new Blue Beans collaboration designed to bring younger consumers into the category.

Our co-located model has expanded our 2-piece food can capabilities and enables daily collaboration with their teams, helping move faster on shelf, drive demand and create value for both companies. Within our aerosol segment, we've recently introduced a digital case study featuring CRC a globally recognized and trusted brand with Sonoco serving as a key contributor to their ongoing reliability. Sonoco provides supply assurance and tailored aerosol solutions ensuring that CRC products remain available on shelves even amidst significant external challenges. This partnership demonstrates Sonoco's commitment to creating lasting value for our customers, through a combination of global scale, dependability and operational excellence. Within South America, Brazil represents a high-value growth vector for the business.

The country's dietary supplement market is expanding at nearly 10% annually, evolving rapidly from a sports nutrition focus to a broader everyday health and wellness category. Sonoco was positioned to capitalize immediately supported by established end-market capacity, strong customer and market intelligence and a purpose-built team capable of scaling powder supplement formats without the need for incremental platform investment. Investing in ourselves is something you've often heard Howard refer to. As a part of our greater strategy to drive long-term earnings and profitability. Our commitment to this philosophy is most evident in our Consumer Americas platform. where we have invested millions to enhance capacity, increased output across multiple lines raising OEE and installed advanced automation that continues to reduce our production cost.

Additionally, we've recently adopted AI technologies within our manufacturing networks, aiming to further expand capabilities across various back-office processes. Over the next 3 years, we're focused on driving growth by expanding our market share through strong customer partnerships. We aim to increase EBITDA through commercial excellence and the use of efficient capital allocation, focused on the highest returns. Combining metal and paper solutions makes it easier for our customers to work with us. speeds up execution and strengthens margins.

Our portfolio matches current consumer trends, supporting both private label growth and targeted premium products and what is expected to be a challenging 2026 marketplace. As the leading supplier in the Americas, we provide dependable supply through disciplined operations and smart capital investment. We're ready for market pressure, backed by a long-range plan designed to navigate tariffs and drive innovation-based growth. I have confidence in our new organizational structure, and our capacity to implement this growth strategy. But most importantly, I trust in the dedication of Sonoco's employees who've been instrumental in shaping our company over the past 125 plus years. I feel certain their commitment will remain a driving force in our continued success.

Thank you. Now we'll take a short break. So please join us back in just a few minutes for our financial review, led by Mr. Joachimczyk. Thanks, everybody.

All right. As we gather back here. Thanks again, everybody, for taking your time for being here today. We do not take your time lightly at all. The fact that you're here reflects the long-term relationships we're focused on building as we continue to strengthen Sonoco. Again, I'm Paul Joachimczyk, Chief Financial Officer. I joined Sunoco after 3 decades across global manufacturing, building products and consumer businesses.

All environments were capital discipline, execution and cash flow matter. Today, I'll walk you through our financial strategy and our 3-year outlook. It's grounded in discipline, shaped by transformation and designed to deliver durable long-term value. I'll focus on 3 things. First, how our recent financial performance reflects the transformation you've heard about today. Second, how we think about growth, margins and capital allocation going forward. And third, how our financial discipline underpins everything we do as we execute our strategy, what we call focus. As you heard from James, the Industrial business is a clear example of what happens when strategy and execution truly align.

Five years ago, this was a collection of assets in markets that didn't always move together. Today, it's a focused, integrated business with a clear operating model. Since 2020, Industrial has added $190 million of EBITDA with margins expanding by more than 600 basis points. These aren't incremental gains. There are structural step changes driven by discipline, customer focus, operational rigor and smart asset investments.

This is what repeatable value creation looks like at Sonoco. On the consumer side, the story is leadership, focus an opportunity. Sean and Ernest bring deep experience and long-standing partnership to this business, which has brought clarity and speed to our decision-making. Financial progress is already visible. EBITDA is expanding. And while margin expansion remains the largest opportunity, the leadership structure and operating rigor are now firmly in place.

Over the next 3 years, that progress increasingly shows up in the numbers. Across the enterprise, the last 5 years, fundamentally reshaped Sonoco. We simplified the portfolio, aligned our resources, built scale and eliminated complexity and the financial results reflect that work. Top line growth of 50%, EBITDA growth of 67%, margin expansion of 200 basis points. In total, we added more than $530 million of EBITDA at margins above 20%. Those aren't onetime gains, the result of a company that is clear about where it competes and what drives value.

Underlying every part of this transformation is a simple truth. Sonoco generates cash consistently. Since 2020, we've generated $4.4 billion in cash flows through a period of macro uncertainty and significant portfolio change. That reflects strong market positions, disciplined execution and alignment across the businesses. This cash flow allows us to invest in the business, reduce leverage and return capital to shareholders all at the same time.

Over the same period, we invested above our historical average to strengthen capabilities, drive our productivity and grow alongside our customers. The most visible example is Project Horizon completed in 2023, it wasn't simply a mill project. It reset the economics of our industrial business.

Today, we operate the largest, most cost-competitive mill in our system with differentiated capabilities. With Horizon behind us, capital needs normalize. Going forward, investments will focus on what drives competitiveness, automation and AI, international growth and selective technology upgrades with capital spending steady at roughly 4% of sales. Balance sheet discipline has been a constant at Sonoco, including through the transformation. Following the Evosys acquisition, we reduced net debt by approximately 40%, and we remain on a clear path for continued deleveraging through 2026.

Long term, we view the leverage below 2.5x as the right target to balance flexibility and returns. Strong liquidity underpins every capital allocation decision we make. We maintain an investment-grade portfolio with a total cost of debt of approximately 3.6%, supported by disciplined treasury management. And with $1.6 billion of liquidity at the end of 2025, we're positioned to invest even in uncertain environments. Being able to move when others can't is a real competitive advantage.

One thing that hasn't changed at Sonoco is our commitment to the dividend. We've increased the dividend for 42 consecutive years, placing us among the top 1% of dividend payers on the New York Stock Exchange, which makes us a dividend aristocrat. That consistency reflects the simple philosophy, long-term value creation requires long-term trust.

Our capital allocation approach is dynamic and return driven. In 2025, debt reduction was the priority. And more than 80% of our cash flow and divestiture proceeds went towards deleveraging. Debt reduction remains important as we strengthen the balance sheet, but we're not anchored to a timing model. We're anchored to risk-adjusted returns. If the best return comes from buybacks or dividends, will shift. If it comes from a growth investment, we'll invest. The objective is always the same: maximize long-term shareholder value. As we look ahead, margin expansion remains 1 of the most important value drivers in our financial outlook. And we are approaching it with the same discipline that has underpinned our performance over the past 5 years and the same discipline I intend to reinforce in how we plan, invest and measure the results going forward. We are targeting approximately 200 basis points of margin expansion by the end of 2028, which equates to $150 million to $200 million of incremental value. This is not dependent on a single initiative or step change in market conditions but rather the result of a coordinated enterprise-wide productivity system that is already embedded in how we operate.

Roughly $20 million to $30 million of this improvement is expected to come from structural simplification and cost alignment. As we continue to reduce complexity and align our cost base with the portfolio we operate today. Beyond that, the majority of the opportunity sits within operations, where we are targeting $130 million to $170 million through commercial excellence and operational improvements. These targets are embedded in our operating plan, reviewed regularly through our finance governance processes and tied directly to management accountability.

Importantly, these are not new concepts of Sonoco. Commercial excellence has been a long foundational element of our value proposition. And we see continued opportunity by partnering closely with customers, pricing for the value we deliver and maintaining service and quality standards that support margin integrity. On the operational side, continuous improvement remains core to our operating model with deeper focus across supply chain productivity, footprint optimization, and synergy capture as we bring our consumer businesses together. What is different this time is the integration and governance around these efforts. Rather than treating synergies, standard cost reductions and productivity initiatives as separate programs, we have consolidated them into a single coordinated framework with clear ownership, accountability and tracking. That structure gives us confidence not only achieving the targeted margin expansion, but also sustaining productivity momentum beyond the current planning horizon.

This is how we make margin improvement repeatable. When you put it all together, growth, margin expansion and disciplined capital allocation, the financial profile is compelling. We see a path to $1.5 billion in EBITDA and $2.5 billion in cumulative operating cash flow through the end of 2028. That profile gives us the flexibility, resilience and the ability to invest while continuing to reward our shareholders. Everything you heard today ties back to focus, sustainable growth, margin expansion of 200 basis points, disciplined capital allocation, generating more than $2.5 billion in cumulative operating cash flows. But beyond the numbers, the story is simple. We are a more focused organization. We're deploying capital where it matters most, and we have more levers to create value than ever before. We are positioned not just to compete but to win.

Thank you for your time and your partnership. Our focus is clearly in the future. Now let me turn the podium over to Howard for a few closing comments.

All right. Well, on behalf of the entire Sonoco team, I want to thank you. Thank you for your time today, your presence and interest in our company. We believe we have the right strategy at the right time. Let me close by summarize what we laid out today. Our portfolio transformation is complete. And the most difficult part of our journey is behind us. and we believe we're poised to create greater value for our customers and our shareholders. There was purpose behind our portfolio changes, and we have built global market-leading franchises in both metal and paper cans and industrial packaging, which we believe provides us with a competitive advantage in the key markets that we serve.

While our portfolio is set, we have plans to further improve profitability and cash flow generation. Finally, 2025 was a good year. But we were setting the foundation for a stronger '26, and we believe we're in the best position to deliver consistent earnings growth going forward. Now let me call on the management team, if you would join me. And we would love to entertain any questions that you possibly may have.

[Operator Instructions]

But let me start with questions from the audience. And George, I see you have a microphone. So would you like to start?

Appreciate all the details today. Two questions. One first on consumer for Ernest and Sean. Generally, when I was looking at the slides, I was coming up with kind of a rough sort of $2 million average revenue per customer, give or take. And I recognize customers are all over the range in terms of size.

Obviously, Part of the logic of putting metal and paper together is that you're serving the same customers, and there's going to be synergies from that. Can you talk right now about how many of your customers are buying, I don't know, $1 million each from both sides of the house and what the expectation is going forward? Are you -- how are you going to track that marriage that's going to lead to the revenue synergies there? And then a question for Paul. Again, thank you for taking us to the bridge to 2028 and the $2.5 billion, recognizing you're confident in, otherwise, and the $1.5 billion, excuse me, on EBITDA, you're confident in that, otherwise, you've not have provided it. How much of your pressure tested this, Paul? What are the biggest concerns you have recognize you're confident in terms of being able to achieve that over the next number of years.

Well, we start with Ernest and Sean.

Sure. I think speaking for the Americas, there are a number of customers that -- from a legacy standpoint, George, that have bought paper cans and the associated metal components that go with a paper can. And so the addressable market is going to be a little bit different between the Americas and Europe. But we see quite a bit of turnover between the 2. If you think about baby formula. There are customers that buy both metal and paper in that baby formula space. If you think about some of the legacy, what I call coffee and/or snacking products, there are some of both.

I think what's more important is we have a much simpler commercial organization. It's just easier to do business with. So almost regardless of the substrate, we have 1 commercial asset that is leading those work groups. I think the level of customer intimacy is much greater in the go forward. So we will continue to kind of shape out our go-to-market strategies. But I do think you see some. Obviously, there's differences in processable foods, which is the lion's share of what we would put inside of a metal can and what I call baby formula snacks, child that would be in a paper can. But a lot of those procurement assets with the customers we serve are the same individuals. So when we're selling a can, irrespective of substrate, we're generally talking to those same individuals and make sure we have all the options in front of them in a really simple way going forward.

Sean, anything to add?

Yes, to be honest, it's the same in Europe as well as the U.S. We do have customers who buy both products, been through about it, the metal cans bag for processed food, the paper can is very good for dry products. So there is some clear boundaries between them. As we progress the paper canning to be monomaterial, that's brought the growth. I think 1 of the things I would say is there's a lot behind the scenes that the same. So we're the largest buyer template in the world, which is great, and that's what we both enjoy that side of the portfolio.

But it's down so we can give a solution that is right and fit for purpose. But whilst in the back office, computers are computers, indirect spends indirect spend. So we can leverage all of that type of rationalization. And at the same time, as I explained earlier on, we've got an extensive program looking at structural review. We're about 20% through right now in Europe. That's going to give us a huge amount of cost out initiatives. And we've got 1 face to the customer. We've been -- you do pass 1 another as you go into the customer base, that has to stop and that will stop.

Paul?

Yes, George, I'll say I'll start with profitability first. We broke that out targeting $150 million to $200 million that's out there. So right off the gate, those are things that we can control. We're looking at our structural realignment going in and, I'll call it, simplifying our business to match what we are today, which is 2 segments. So we're in industrial and more consumer business as we go forward.

So right out of the gates, we will go get $20 million to $30 million just out of structural savings alone. Now if we go into the next phase of that, we look at operations, which is really broken into the commercial side and then our operational footprint. The teams have done a great job being really disciplined around our pricing mechanics, how we provide value to our customers.

So there is a little bit of element going on there, but it's deeper than that, and it's really focusing on our footprint, leveraging that agnostic material that's there, looking at opportunities to combine a metal on a paper can into 1 location is going to be something that will be a game changer for us as well, too, because before, we didn't have the opportunities to actually think about that.

Now it is, let's treat it as 1 business. It's agnostic. And as we ship our cans out paper or metal, it doesn't matter. They're going to go to the same customer base that's out there. So that's really how we feel confident in the, I'll call it, the profitability side. Profitability is a key driver then to the cash flows second part of your question that was there. We do feel if you look at next year, our guide of $700 million to $800 million, that does include $100 million of onetime payments related to taxes on the gain on sale of assets in 2025. That puts us back into the range of roughly around $900 million plus of a normal operating cash flow basis. So we do feel confident that after 2026, we will get back to north of that $900 million on a consistent basis that's out there.

Let me add 1 final comment. You may have covered it. But you heard over and over, the portfolio is complete. Now we still have a tremendous opportunity as it relates to how we support that portfolio and what I mean by that is that we've got back office, be it HR, finance, IT, that are -- we're working on it today, but it's part of that road map over the next couple of years, how do we rightsize the back office to support this much simplify.

We're no longer supporting 20 disparate business. with each one, the squeaky wheel, you know where I'm going with that pulling, now it's going to be focused, and that's going to drive a lot of things to include productivity, better service to our customers and cost outs. And that is part of what you're saying, do we have, I think, do we have a checklist of what are we going to do over the next 2 to 3 years to get the type of savings that we're...

Okay. Any next question? Gabe?

I had a question about change in behavior across your customer base and thinking about -- I mean, there's been a reasonable change in tone from their perspective to address some of the things you guys all talked about today, affordability, GLP-1, et cetera, population trends. and really attacking the cost side of the equation, right, as they try to promote and/or lower absolute cost levels for consumers on the shelf.

Maybe more of a near-term question, if you've been engaged in some of those conversations or have heard [indiscernible] teams and how that sort of informs your 2026 outlook. And then as you've seen, of course, this evolve over the past, let's say, 10 years, pre-pandemic comparing to where we are today. Does that typically make it more challenging for your business to drive cost out or to drive margin expansion when your customers are being a little bit more aggressive on the cost front.

I'll start. So look, it's a different market from pre-Covid to now. So -- and all the customer base is seeing there's price pressure, of course. So and population growth, except in Ernest has pointed out, in terms of the job, et cetera, that's having is challenging in terms of the the base business.

However, there's opportunity. I mean, so speaking for Europe, that sustainability drive is huge. Now are the customers going to pay more for sustainability? No. It's a very price-sensitive market. However, it's a place for innovation. I think that's the biggest opportunity we've got is continue to be ahead of the competition. R&D is essential to us. But for me, everybody in this business, everything we do, there's an opportunity to do anything. Whether or not that's the back office or the products or whatever, that's where we'll win. If we're going to just compete to be the same as everybody else, then it just becomes a price discussion. And that's not what we're here for. So for me, I'm super excited with the products we've got. They're very cost effective. We've got -- in Europe now, I mean, I can tell you, the retailers, we've we've been invited into the retailers to go around the shelves, look at all the private label products that they've got and come up with more cost effective, more innovative solutions. And that in itself is incredibly powerful. I've never seen that in 31 years in the business.

So yes, is it a price-sensitive market? Yes, the right -- but that's a place for [indiscernible]. We're not victims. Our destiny is in our hands.

Yes. Gabe, for me, I'm really encouraged by some of the early signals we're seeing from CPGs. One, a real recognition that affordability is a challenge, right? And so some of the pricing pressure that consumers have had to bear over the past couple of years has put pressure on volumes. And I think we see CPGs really recognizing that and leaning more into promotions. And we've seen kind of end of 2025 early '26 much more promotional velocity.

So that gives me confidence in some of the underpinnings of the volume. We've seen some resets or reset recommendations relative to the retailers of pricing of some of our products. So all of that encourages me the kind of late stage as we get into 2026. There's more optimism around a recognition that affordability is an issue, price on shelf has to be challenged. We recognize tariffs are a big part of that input cost. But I think our brands are beginning to realize the trade-off between margin and volume, and we're encouraged by some of that recognition.

James?

Yes. And I think when you look at our business, it's no different from what you've heard. It's always been competitive. This paper world has been competitive. I know for the 30 years that I've been in it. But we are making changes internally working on our footprint, working on our processes. You've heard about how we have restructured the business to bring a more focused group in and what Paul has talked about of how the cost to support us, and we'll continue to work on service and quality. So I think putting all that together, yes, we will have to be competitive we will have to understand customers, but we drive strong value. And when we need to adjust our costs, we're very good at doing that.

So I think we're positioned well for whatever battles may be ahead of us.

A question over here, and we'll do this 1 first.

Howard and team. Thank you all very much for the event and all the great content in the presentation. If I may ask about the sustainable growth profile, particularly the consumer packaging, EMEA, APAC, now Sean you've led a lot of the growth on the RPC side. Now you've round tripped your experience in metal and you're certainly tasked with 1 of the, I would think, higher growth areas. If I compare this to 2024, I think RPC was more of a high single-digit grower. Now is the low single-digit plus type growth in consumer EMEA, is that now mostly a function of just a larger metal shift? Or any other updates you could give us?

Is there any other impact from capacity expansions, particularly any updates from Thailand or your conversations with Mars now that the merger has closed there. So any confidence or what you're expecting on that side in 2026 and beyond even.

So it depends on the market. So if you look at Asia, you're talking of significant double-digit growth. For Europe, the sustainability drive is huge. The antiplastic movement has gathered so much momentum. For North America, the drive is not as much as we probably thought it was a few years ago. I just spent the weekend in New York buying food product and seeing how much plastic waste had compared to what, again, Europe is dramatic.

So you've got to look at -- you can't look at it in isolation. So Ernest showed you Brazil. We've seen exceptional growth in terms of rigid paper. Asia unbelievable growth. Europe, it's not slowing down. You're talking mid-single digit at least. For the metals business, it's a different type of argument as well. For paper, we dominate the market. So for us, in the rigid paper market, the only way we can grow is to create new markets, and that's what we've been doing for the best part of 17 years.

For the metal can business, in the market, we've got a number of competitors in there. The nice thing is you can compete to be different and take share like what Ernest has been doing in North America incredibly successfully. I think 1 of the things I would say for the metals business, the substrate is infinitely recyclable. I think with the antiplastic movement, you can see trays, single-serve units. There's a lot of opportunity out there. So there's a lot of products that we've got in Europe that we don't have in North America. And again, that's what we'll share going forward. So -- is it double digit? No, it's not going to be double digit, but it's going to be GDP. And in fairness, we've not put in the plan anything too aggressive. I think personally, I think we've got tremendous opportunity. I don't like being a victim. I think everything is in our hands. And I'm convinced with the getting the business rightsized.

Look, I came from this metals business. I know it incredibly well. Being back in the hands as a strategic is really important to the customer base. Somebody is investing in not just in the next 3 months or the 12 months to sell it, but investing into the future. And I think that's what's going to give us the competitive advantage in the marketplace compared to everybody else. And I don't take the fact that we're in the market lightly. We're the custom in our brands we deserve to be there, but we've got to show in our actions. I'm pleased to say, I think in the next 12, 18 months, we will start seeing significant growth again.

We had a question over here. You got a microphone. Okay. Go ahead.

Maybe one for James on the Industrial Packaging segment. Just from a high-level standpoint, just -- could you just walk us through just over time, how you've thought about your strategic evolution of the Industrial Packaging segment as it relates to growth. More specifically, how you think about capital deployment? I know about some innovation that you've -- that you guys are working through right now, some investments you're making. But just any high-level thoughts on how that's kind of developed over your time in the job, that would be great.

Yes. Thanks. It's a great question. And if I think back over the last 15, 20 years the industrial side has we've been able to grow through bringing innovative products or when our customers innovate themselves and need bigger faster examples or paper meals when they get wider, when they get faster when packages get larger is when we have an opportunity to bring our tech and R&D to task to answer those questions. We talked about the reals business.

We think the reels business has entered a a new growth phase with power generation and transmission, the rebuilding of that infrastructure, but also the growth that coming forward from there. And then when you think back about the evolution of the industrial side of the company, as I talked about, we operated in silos. We were stand-alone leadership team, stand-alone P&Ls, even though we were an integrated supply chain, we all self-optimized rather than optimizing from end to end. It took us 120 years to figure that out, but we only figured it out. And now it's unbelievable, the power that we're seeing as we put -- I mean, there's no reason why you have to have a post plant in a 2 plant and a partitions plant separate. They're paper converting and then bringing the P&Ls and the thought process of the paper makers and the adhesives makers in with the paper converting groups is just unlocking a lot of opportunity for us internal and allowing us to put structures in from a supply chain standpoint to really optimize from start to finish and it's a low-growth area, but I think that puts us in the best opportunity to either innovate for the growth when it's there or have a right to win on pricing because of how we're operating.

So I'm as charged up at any point in my career of the opportunity that's still ahead of us, both to capture growth and are to capture internal opportunities for profitability.

Michael, why don't we bring a microphone up to you. And then in the meantime, I've got a question Howard because he's feeling lonely up here [indiscernible]

I'm absolutely in great confidence.

But I had a question from online, a virtual question about we're into the first quarter, how are things looking so far?

I would say better than we expected in January, but 1 month does not make a year, as you all know, little disappointed as it related to the amount of downtime we had to take. We are fairly dense in terms of operations in the Southeast. So through the Tennessee value Carolinas, we lost significant days in January. But even still, I was pleased with what the team was able to deliver and the expectation is we'll catch that up as we get through the quarter.

Great presentation today. Two questions. First, we heard a lot about commercial capability, commercial excellence and that you're looking to build out your commercial team. What capabilities have you added? Or do you intend to add, whether it be commercial go-to-market approach, plan structure -- and what products are you targeting for that growth? And can you also talk about how you intend to penetrate end markets where your peers already have entrenched and strong market shares.

So that's question one. Question 2 is we've heard a lot also about you're trying to drive better returns in Europe a couple of times it was mentioned during the presentation. To that extent, can you comment about opportunities to consolidate self-manufacturing in EMEA similar to what was done in the Americas a couple of decades ago, whether that's part of your strategy in terms of driving better returns in Europe.

We start with Ernest.

Sure, Mike, a great question. Relative to the commercial teams, in large part, that structure has been codified as we looked at what will be important in the go-forward, if you think about how we restructured before, we probably had legacy assets more focused on aerosol within the tinplate space or more focused on food within tinplate and then paper.

Today, we have one unified structure. So there is 1 commercial team a group of leaders that sells everything in the portfolio. So no longer do we have any silos relative to food, aerosol metal paper, that's all agnostic under 1 umbrella within our commercial strategy. We think that simplifies our approach. We've got immediate feedback from our customer base, particularly in the Americas that have really warmed up to that structure. And so we're where we need to be from a structural standpoint. Relative to different go-to-market strategies, my good buddy here, Sean, over the past couple of years has really worked hard on innovating on the paper can and he's been at the tip of the spear. So there's certainly more opportunity for us on our paper can business relative to the Americas in terms of our green can, all paper can, paper bottom strategies. We're just beginning to unlock some of those opportunities where customers are looking for different options. So lots of opportunity there. And then certainly, what we've done on the Metalpack side over the past couple of years still have a lot of growth lanes on the metal can side.

So I'm bullish about our outlook. And certainly, that commercial team is at the front of that.

Yes. What I would say is, commercially, it's a very different marketplace than it was. So you look back in the day when I started in this industry 3 years ago, the sales guy would speak with the buyer and it was very bot-type or approach. As you're developing new markets and new products, it involves a lot more of the organization. So we use CRM systems, et cetera, to keep the data there. But more importantly, everybody is trained on project management schools. So when you're doing a new product or launching a new product, whether it's a design, et cetera, you're involved in a lot more people within the manufacturing scope speaking directly with their counterparts. I think that's a significant change.

And I do think that's a competitive advantage that we have as well. So more or less, everybody is a salesman in some way. So that's what we're focused on, particularly with the acquisition in EMEA, changing that dynamics and getting it more aligned to what we've been doing in RPC for a number of years. So that's the challenge. In terms of market where we will grow, again, it's innovation in not just the product, but everything we do. So being different from everybody else gives us an opportunity and that's where -- I don't want to start go in and just compete on price. That's -- there's no benefit to that. For us, it's going in the best product fit for purpose, whether it's paper, metal, et cetera. And again, innovation. Is there a way of getting the consumer more brand awareness, more shelf space, et cetera, with new products. So that's where the driver is. But in summary, our freebody works and Sonoco's a salesperson in effect.

How about soft manufacturer profiling.

Yes, self-manufacturing. I mean there is there's some very, very large players in self-manufacturing. Converting them. Is there anything in the plan. We've got a couple of things in the pipeline, nothing solid yet for people to realize the real cost to self-manufacturing is difficult. A lot of people don't see the real or true cost of it. But right now, we haven't got anything -- we haven't got a hockey stick in there of conversion, but we are working on them. We've got 2 in particular, we're working on quite aggressively, but I can't go into any more detail than that right now.

I think innovation plays into that as well.

Yes. Of course, yes.

Next question? Why don't we come up here with Anojja And Anojja you while you're doing that. I had a question come in from a virtual question that came in, this is for Paul. On the EBITDA bridge through 2028, how much volume growth is anticipated and what is the sensitivity to shortfalls or upsides and how much visibility do you have to -- on achieving possible business wins to supplement overall market growth?

Yes. If we go back to the EBITDA bridge that we provided, that was out there, not a lot of growth was baked in, low single digits that's out there. You've heard from both Sean, Ernest and James about the growth opportunities that are there, but we want to provide a plan that basically was within our control, something that we could deliver upon irregardless of the market conditions around growth.

So if there is a macroeconomic change to the upside for us, that will all be incremental gains for us from that projected that's out there. So strong performance expected.

My question was actually pretty similar to that, but I'll ask a follow-on hole. You mentioned that you're approaching operational improvement a little differently now from how you've done in the past. Can you talk about what you're doing? And also if there's any sort of quantification of upside that you expect from that?

Yes. So I'd say the different side of it is really the approach. So we're installing new KPIs across the board, working with the business senior presidents and the BU CFOs that are out there, creating that clear accountability pattern that's there. I'd say that's a little bit different than what we've done in the past is they were all there. The enhancements were there. We had tools like SPS and continuous improvement. But now it's exactly is and I hate to say it is we've created a detailed P&L for each business unit president, we went line by line and said this is your targets for each 1 of those areas. And then on a quarterly basis, we're going to be I'll call painstakingly antagonistic on there every single quarter. How did you do? How did you track against it? And then if we're short, is there another business unit that could actually cover that. So I'd say it's the discipline around it and the consistency of how we're going to go execute that is going to be a little bit of a difference.

Okay. Gabe, you have a question? -- follow-up, I should say.

Two, hopefully, they're quick. Would you say -- maybe, Paul, you talked about taking a little bit more of, I guess, maybe a homogenous approach to the productivity? And can you give us kind of the -- I think it was $130 million to $170 million in and cost breakout of the margin improvement. I think you also mentioned 20 to 30 of what I'll call, G&A improvement sort of back office, maybe shared service type operations. And if memory serves, maybe on the synergy -- legacy synergy realization associated with Eviosis, I think there was about 60 remaining. And so if we combine those together, let's say, on there's $100 million of sort of what we knew bringing to the table, which may appear conservative and maybe you can disagree or agree with that.

And then on the cost side, I think you have roughly between SG&A and COGS, let's call it, $6.7 billion of spend. I figured 2% annual inflation, $130 million inflation treadmill. Thinking about kind of gross versus net, I know you presented at $1.5 billion, but just if there's other productivity that we should expect to offset that? And sorry, last one, anything to think about with what I think was low double-digit metal price increases coming into 2026, if there was any movement between customers pulling forward into Q4 and/or impacts on H1 profitability.

Paul, do you want to start on the [indiscernible]

Okay, that was more 1 question. He's giving you room for your money, George.

Thank you beat you, George, right now. So Gabe, if you really think about the stranded costs. This is why we have shifted away from that to try to get away from all of those buckets that are out there. But you're absolutely spot on is about $60 million was going to carry over into the future plan. so that you could take that right off the top. And so now your plan goes from $90 million to $140 million of additional incremental upside for us. But what we want to try to do is, as we look at the businesses, as we try to drive 1 business, 1 consumer it's no longer like, let's give Sean a target, let's give Ernst target.

It's like we have one target for consumers, and that's how we needed to approach the business as we did the realignment of those organizations that were there. So it may look like it's a I'll call it, maybe in your eyes a little bit of a less lofty goal. I think it's a very aggressive goal still to go tack out another $90 million to $140 million of savings. To the second part of that question around productivity, those are all net those are going to drop to the bottom line. So we're going to go and offset all the inflation and everything else that is out there with our normal productivity gains.

So everything that we're showing there is above and beyond just the normal productivity -- so this will be truly incremental wins for us and our shareholders.

And Gabe, I think to the second part of your question, there was no material pull ahead into what I call Q4 2025 that would negatively impact '26, nothing appreciable there.

Next question. I do have 1 on George, why don't we grab my phone. I'll give you -- we do have a fan of the industrial guy who has asked a question in Industrial on saturated kraft, does the exit of some producers in that area boost that market opportunity for you? And is it actually larger than you depicted?

Answer is yes, yes. So yes, that's what created the opportunity was closure of some mills that focused in that area and the industry needs alternatives, and we feel -- we're being conservative in our estimate on the opportunity, and it could be larger if we're very successful with our product.

Great. George.

A couple of questions. Again, I appreciate the details. First, I want to come back to the growth question in paper and metal. How much capacity do you think you have right now to be able to grow before you'd have to reinvest significantly? What I heard was you're pretty much set, but I just wanted to test that and ask relatedly, what the incremental profit might be across both metal and paper and consumer. So that's part 1 of the question.

Part 2 again would be, it sounds like you see right now, even though it's the same purchasing manager on the customer side, you're really not doing a lot of cross-selling at the moment. And feel free to correct me if I misstated that. So the synergies are really on the back end. How are you -- Paul, what are you doing to make sure that that transmission, that commercial effort that tracking isn't messed up to the customer because you're now combining entities.

So capacity and incremental margin back in -- last question, Howard, for you. When you announced [indiscernible] and Grumettol,a even though Sonoco has been involved in metal packing for years, a lot of people took a step back and said sort of Sonoco metal what's that all about? How is the growth here similar and your view to what Sonoco did, whatever, 30-plus years ago when you did composite cans and everybody said, composite cans, what's that, tubes course paper, what's Sonoco doing that business? What's similar? What's different? And what do you think the -- I mean I'm -- we know you're posing because you made the acquisition, what do you think the sort of untapped market opportunity is there in metal that's similar composites many years ago?

I'll take part 1 and Paul, on that you can talk about profitability from pure capacity, and I'll just speak to the Americas, Sean can touch on Europe. We have available capacity on both our paper can and metal cans as match what we anticipate our growth trajectory through 2028. So some of that obviously depends on customer specification, geography of where that capacity would be filled -- but in large part, we have the available capacity to meet our needs through 2028 without incremental capital of installing new lines or new assets. So we feel really good about that.

Certainly, we evaluate any outside opportunities and look at the return on investments that, that would take. But fundamentally, we have the available capacity, both in paper and in metal.

Yes. So if you -- what I could say for paper, we've invested quite substantially over the last few years, increasing capacity, particularly on stack chips. We have a major customer who let's just say, slowed as they were being acquired. And that acquisition took longer than probably anybody expected. As they come out of that now, we've got an awful lot of capacity to fill. So we can grow substantially overnight with no investment. If you look at the metals business, the metals business, the vast -- it's a very seasonal business in Europe. It's food.

So there's a lot of capacity that's ramped up for the summer period. So you've got weekend shifts, you've got night shifts, et cetera. So again, we've got a lot of latent capacity there, which won't require a lot of investment to realize. So I think that's quick growth when the market changes, particularly as people go and do more promo. I think post COVID, that's one of the things I want to say. There's not been as much promotional opportunity. The CPGs are seeing a real opportunity to do that, to grow volumes. And the nice thing is we've got the asset base in there now that can grow with it. But of course, on top of that, we are investing in future products.

Yes. I'd say just to add on to that, the investments we've made similar investments have been made by customer as well that have slowed down in the past year. The other part of your question, I think, to these guys as margin profile. They're relatively on top of each other in terms of the profitability metal versus paper. George, what I'd say is the parallels between where we were in the late 70s, 80s on the paper can side, pretty crowded marketplace. We've been in it since 1962. And lots of players.

What happened was we started seeing markets such as motor oil change to plastics, blow-molding was a new thing coming out. And A lot of the strategics that were involved said, this is the end, I need to get out. We leaned into it. So direct peril and I should say that during -- from that time to our acquisition 3, 4 years ago, we've constantly said, this is -- the metal side of the business is a natural fit for what we do. It meets those core elements that makes a successful business where Sonoco has made a successful business. But there wasn't a need for another provider. So fast forward to 3, 4 years ago, we looked and said, guess what? There's a lot of strategics or several strategics that are moving out of the space. We think there is a tremendous opportunity for us to come in and put our playbook in place, just as we did in the 1980s when we consolidated on the paper can side. And the truth of the matter is that thesis has played out even greater and better than what we anticipated, if you look at our North American business. It wasn't the -- ones will probably say, "Hey, we're the funnest first year or so, but we put a playbook in. And so here we are showing and Ernest working very closely from a global perspective. We're as excited as -- we're as excited as we were in 1986 when we acquired Boise Cascade out of the paper can business.

So it's a recognition of a market that is a necessary important market. It's large and consolidated concentrated. And it checks all the right boxes which absolutely layers right on to what happened in the mid-1980s or so on the paper against side of the business.

Yes. I think 1 of the things I'd just add to that. since the major acquisition of [ Biodenama ], we've grown the rigid paper space in New York by 60% in 10 years. So it's easy to look at a market and say it's mature, but there's another -- for me, there's markets out there we've never been in before. And we're going into markets that we've never experienced before. So again, it's about innovative, it's about going into places that you just don't know. And I think that's been where we've got real opportunity.

Do you have an online question, then we'll take this 1 up here quick. But this is from Ghansham Panjabi with Baird, and he's asking industrial. He's asking what is -- what -- with productivity and strategic changes you have implemented over the years in industrial packaging. Will the segment be more resilient from an EBITDA margin standpoint relative to historical baseline, especially due to price cost variability.

Yes. We believe we've made fundamental changes in both the way we price the market and underlying manage our capacity, and I think it won't take completely away the volatility, but we believe we've significantly changed that profile.

I had a question up here.

This is [indiscernible] at Jefferies on for John Dunigan. I have 2 questions. One is based on your $150 million to $200 million of potential profitability initiatives. What would drive you to the top end or maybe above the target line -- the second one is more focused on consumer parts. You guided for low single-digit growth. So maybe -- just curious what's the breakout between the business win versus what's been already locking relative to the underlying market growth?

Yes. I'll take the first part of that question and turn it over to the rest of the panel. I'd say to get to the top end of that range really is going to be dependent on a few things as one, as we look at our overall portfolio of assets that are out there, in our footprint optimization. Some of those changes do take a little bit longer to enact and you actually cut into full fruition for us on savings.

Especially when you look at the European market, there is a little bit longer drawn out tail. We do have a road map and a plan already in place today. There may be an ability to accelerate that plan, which would allow us to get to the top end of that range. But right now, the plan is basically built off of a conservative approach. But if there is the optionality to go faster and drive more return for our shareholders, we will absolutely do that.

Yes. From a growth standpoint, I think Paul articulated this earlier, we expect to be around that GDP number. So we were not anticipating a bunch of macro health, particularly in 2026. The volume we've had today, we feel pretty confident in in the go forward. And we'll certainly be chasing volume, this is the right fit for our portfolio long term. But there are no outsized expectations in the volume growth for '26.

Other questions?

When I looked at the slide deck, I see a lot of commentary around value-added pricing. And I'm curious, as we go from $1.3 billion of EBITDA to $1.5 billion, -- how much of that increase is driven by value-added value-based pricing, excuse me.

Yes. So in that guidance, there is an element of that. It is not the largest element of those operational changes out there by any way, shape or form. And I believe George asked the question, we probably didn't answer from a back office perspective, we are giving the tools right to these business unit presidents. Their market is changing at a fast pace. We have to align the back office support to do that as well, too.

So our teams, it doesn't matter on the finance side, customer service side, we have to align to 1 tool. So we're going through, I'll call it, the buzzwords of master data management cleaning up those records, those elements. We're giving the standard financial processes and commercial disciplines to arm all the business unit presidents that's out there. So the discipline is really going to come from our own internal house and cleaning up those kind of like idiosyncrasies that were there to make sure we're consistently driving value for our customers as well.

And with respect to the value-based pricing, each of you has said it's a very competitive market. So why I imagine the only reason you bother with value-based pricing is because you'd like a better price. So why should we expect to get that better price given the competitive nature of the markets?

So service quality and the way we approach the market and the value that we deliver to our customers and making sure we're getting the appropriate recognition and understanding where the call leakage can be, and that's exactly what Paul is talking about, but it is being the best provider in the eyes of your customer. I'm not sure all of the procurement folks would tell you that these guys already talked about it in terms of how we are approaching our relationship with our customers to ensure that from the shop floor all the way to the conference run that the Sonoco image value is fully recognized within the customer.

Yes. I think what I'd say is we don't sell on price. We sell on value. And fundamentally, there's more towards than the [indiscernible] commodity market and that's essential. Having that pride, going into the customer being different in the face of the customer matters a lot.

I have a couple of online questions. First one for Howard. You've talked -- you've spoken with regards to the importance of debt reductions. But when will share repurchases come into the picture.

I think what we kind of went through that in pretty great detail. #1 focus is making the appropriate capital investments associated with growth and profitability, getting our debt down. So we're not really going to consider anything until we get our debt at that 2.5-ish type of range, and then we'll see what opportunities come from that point on.

And a question from Mark Weintraub with Seaport Research. Is there any metal overlap impact in 2026? And if so, is it embedded in your 2026 guide?

Nothing material. SP47135678 Yes. I was going to say there's really from an MTO perspective, you're not going to see -- like after the Bull acquisition, there was this massive uplift. So from our perspective, we really will be balanced out some minor impact, but it's nothing material that will change our results. .

Further questions in the audience? Anojja?

Thank you. I just wanted to get an update on pet food. I know that was an area of focus. You had pretty low exposure when you first bought the business, and it was an area you were trying to build -- where are you now? And also what drove that 10% volume increase number in Q4? Was pet food part of that?

Yes, I'll take that. Pet food is obviously 1 of the highest compounded annual growth rate subsets in the food category. It's not something we had a large presence in dating back -- so we've been really intention in getting our feet wet in that space.

So we'll have some pet-related products on shelves in 2026 that we're excited about and we'll continue to try to grow out that footprint relative to food can, we've just been very, very successful with organic growth with our existing customer base. We kind of call that core growth. So we've seen the customers we serve, continue to have good shelf presence, and we've grown with them. And we've had some opportunistic share gain wins along the way.

So we feel good about the persistency of that growth into 2026.

Yes. What I'd also add is if you look at the sort of pet premiumization, some people just -- since COVID, I think [indiscernible] bought themselves a dog. So there's a lot more pets, a lot more smaller pets. Gone are the days of buying a 13-millimeter dog food and spooning out. So there's a lot more single serve out there, and we've come up with new products that go into the single-serve market. On the rigid paper side, we've seen really good success in going into new markets for dog treats. So a sustainable dog treat package that can go into the waste stream, a paper waste stream, that's where we're seeing growth. So it's not just looking at the Pet segment as sort of wet pet food. It's much broader because to be honest, some people are spending more money on their pets than their kids.

So we need to be positioned.

Any further questions?

Wolf, we've got 1 more question?

Just curious, with respect to footprint optimization, how much will we have to spend to achieve that? Because I know how France can be.

Yes. So Paul talked about it in detail. We are taking I look at -- typically, we talk about capital dollars and not so much of our own restructuring. Now it's all 1 pool. So when we evaluate for the James comes in and says, I've got a 5-year great IRR on an investment that is not customer related, something can wait, and then we look at consolidation in France. And so for the same amount of capital, I can get a 2-year return or cash.

So that's how we're looking at it. When we talk about our cash capital allocation included in that is restructuring. And Certainly, if you look at the $150 million to $200 million, there's -- Sean and his team, especially are laying out what potential opportunities we have and making sure that we're managing our cash flow accordingly and choosing the best returns for our shareholders.

Yes. And I won't pick out France, but we know what your works like. I mean, restructuring is is a burden. However, the 1 thing I'd say is in my -- I've spent the majority of my career on the mainland of Europe, it makes you think differently. So for me, 1 of the big opportunities we've got particularly for the rigid paper business. We've had opportunities to say, build a rigid paper plant in Italy for a customer, but we'd have to employ a plant manager, a quality manager, et cetera. So utilizing the assets that we've got and putting some paper assets in those facilities is a massive opportunity for us. And that will give us a much lower cost of entry. So we look -- we've got a couple of projects that we're looking at right now, which are encouraging.

All right. Any further questions? If not, I would remind everybody we're going to have a brief modeling session for those that are interested in and getting to a little bit more detailed information.

Jerry Cheetham will lead that session. But again, thank you very much for your time. Please give the management team of Sonoco around of the applause.

Thank you very much for your time.

Thank you for standing by, and welcome to the Sonoco Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Roger Schrum, Head of Investor Relations and Communications. You may begin.

Thank you, Jenni, and good morning, everyone. Yesterday evening, we issued a news release and posted an investor presentation that reviews Sonoco's third quarter 2025 financial results. Both are posted on the Investor Relations section of our website at sonoco.com. A replay of today's conference call will be available on our website, and we'll post a transcript later this week. .

If you would turn to Slide 2, I will remind you that 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. 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; Roger Fuller, Chief Operating Officer and Interim CEO of Sonoco Metal Packaging EMEA; and Paul Joachimczyk, Chief Financial Officer. For today's call, we'll have our prepared remarks followed by your questions. If you'll turn to Slide 4 in our presentation, I will now turn it over to Howard.

Thank you, Roger, and good morning, everyone. Let me start by saying I am incredibly proud of our team's strong operating performance in the third quarter as we achieved record top line and bottom line performance along with margin expansion despite challenging market conditions, which affected both consumer and industrial demand, particularly in the EMEA region.

Slide 5 shows net sales grew 57% and adjusted EBITDA was 37% up. While adjusted EBITDA margin achieved a record 18.1% due primarily to improving margins from our industrial paper packaging business. Total adjusted earnings grew 29% in spite of higher-than-expected interest expense. Our Consumer Packaging sales and operating profit grew 117% and adjusted EBITDA increased 112%. Most of the improvements came from the addition of metal packaging in EMEA and strong results from our metal packaging U.S. business where we saw food can volumes up 5%.

Our Industrial Packaging segment also had an exceptional quarter with operating profits up by 28% and adjusted EBITDA up by 21%. If operating profit and adjusted EBITDA margins grew significantly during the quarter and registered an eighth consecutive quarter of margin improvement in the Industrial segment. Our industrial team continues to successfully drive our value-based pricing model while achieving solid productivity savings. Paul will go through all the numbers and those drivers for the quarter in a few minutes.

As shown on Slide 6, we successfully entered into an agreement on September 7 to sell our ThermoSafe temperature-assured packaging business to Arsenal Capital Partners for a total purchase price of up to $725 million. We expect the transaction to close during the quarter, subject to regulatory review. The first price includes $650 million of cash at closing, an additional earn-out opportunity of up to $75 million based on the businesses 2025 overall performance. The completion of the sale of ThermoSafe will substantially complete Sonoco's portfolio transformation from a large portfolio of diversified businesses into a stronger, more simplified structure with 2 core global business segments.

Consumer Packaging, which consists of our global metal and pet can businesses, and industrial packaging, where we have global leadership and uncoated recycled paperboard and convert products. Pro forma for the transaction, the expected net proceeds from the divestiture excluding any additional considerations are projected to reduce our net leverage ratio to approximately 3.4x.

I'm now going to turn the call over to Roger Fuller to give us an update on activities and where we are at S&P EMEA.

Yes. Thank you, Howard. Good morning, everyone. If you turn to Slide 8, I'll provide a brief review of Metal Packaging EMEA's third quarter performance and outlook for the rest of the year and actions we're taking to improve performance in 2026 and beyond. Third quarter results modestly improved over the same quarter last year, with adjusted EBITDA up approximately 9% and EBITDA margins improving to approximately 18%. Food can units increased 3.5% year-over-year but unfortunately, business activity was below our expectations due to macroeconomic headwinds and weaker-than-anticipated seafood availability. .

With the vegetable harvest season substantially behind us, we believe the fourth quarter will likely be weaker than we had anticipated based on our customers' projected demand throughout the EMEA region. In response to these challenges, we're taking actions now to improve our competitive position and drive cost savings to accelerate our performance in 2026. As I mentioned on our last call, our team is making tremendous progress in achieving our targeted $100 million in annual run rate synergies by the end of 2026, with savings benefiting our entire consumer metal and paper can portfolio. Our team expects to further drive procurement synergies in 2026 after they were delayed in 2025 due to the late closing of the acquisition. In addition, we are rightsizing our manufacturing footprint to match our customers' demand profile and better leverage our operating costs.

We're also building out our commercial team and have active growth projects that are focused on increasing our exposure to more nonseasonal products. As an example, we're making capital investments to gain new pet food and seafood business in Eastern Europe, which will improve our mix by large vegetable can customers.

In closing, while I'm not satisfied with our recent performance. I'm encouraged by the receptiveness Sonoco has received from our customers and our team's focus on taking the necessary actions to drive improved performance going into 2026.

So I'll now turn it over to Paul for the quarterly financial review.

Thank you, Roger. I am pleased to present the third quarter financial results, starting on Slide 10 of the 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 an appendix of this presentation as well as in the press release. Adjusted EPS was $1.92, representing a 29% year-over-year increase. This improvement was primarily driven by favorable price cost performance of $33.5 million, the EMEA Metal Packaging acquisition and continued strong productivity of $11 million primarily from our converting businesses. These benefits were partially offset by unfavorable volume mix, an increase in the effective tax rate by approximately 180 basis points and slightly higher legacy interest expense.

Third quarter net sales for continued operations increased 57% to $2.1 billion. This change was driven by the acquisition of Metal Packaging EMEA and strong pricing disciplines across all segments and favorable impact of FX. Adjusted EBITDA of $386 million was up by an outstanding 37% and adjusted EBITDA margin improved by 130 basis points to 18.1%. This was driven by strong price cost discipline, continued productivity and the net impact of acquisitions and divestitures. These benefits were partially offset by volume softness in the consumer and industrial segments and an unfavorable sales mix in our all other businesses.

Slide 11 presents information on our operating cash flows, which was a source of cash of $292 million during the quarter, up more than 80% over the prior year. Gross capital investments for the quarter were $65 million, and our annual capital spending is tracking below our $360 million target for the year. As we enter our fourth quarter, we expect similar operating cash flow performance as last year, as the seasonal build of net working capital reverses.

Slide 12 has our consumer segment results on a continuing operations basis. Consumer sales were up 117% and due to the metal packaging EMEA acquisition, price increases implemented to offset the effects of inflation and tariffs and the favorable impact of foreign currencies. This was offset by unfavorable volume mix. Our domestic metal packaging business presented higher sales versus the prior year to higher food can units and price, which was offset by unfavorable mix. Sales for our global rigid paper can business was relatively flat as favorable price was offset by mix and lower volumes. Adjusted EBITDA from continuing operations grew extraordinarily 112% year-over-year due to the acquisition, favorable price disciplines, continued productivity gains and the favorable impact of foreign currency exchange rates. This was offset by weaker volume year-over-year.

Now let's turn to our Industrial segment's slide on Slide 13. Sales were flat year-over-year at $585 million, with the recovery of price offset by volume softness and the exit from our Chinese paper operations. Adjusted EBITDA margins expanded 360 basis points year-over-year in the third quarter and increased by $21 million to $123 million, representing a 21% increase.

Adjusted EBITDA was positively impacted by price, improved productivity and fixed cost savings resulting from footprint rationalization in North America and head count reductions in Europe and Asia.

Slide 14 has the results for the all other businesses. All other sales were $108 million, and adjusted EBITDA was $21 million. Sales were higher versus prior year due to higher volumes in ThermoSafe. Adjusted EBITDA improved 2% to $21 million, as favorable productivity and fixed cost savings more than offset the negative impact of unfavorable mix and price cost.

Transitioning to our outlook for the remainder of the year as shown on Slide 15. We are tightening our guidance with net sales in the range of $7.8 billion to $7.9 billion. The European market continues to soften, and we are seeing pressures in the North American market with slightly lower demand. From an adjusted EBITDA perspective, we are narrowing our range to $1.3 billion to $1.35 billion, with strength in the performance of our North American businesses offset by the softness in the European and Asian markets.

We are reducing our adjusted EPS range of $5.65 to $5.75. This adjustment is primarily driven by subdued market conditions outside of the United States and the deleveraging process occurring across those facilities as sales volumes declined. Reflecting on the third quarter, July commenced successfully surpassing our patients. However, August and September experienced declines, mirroring the market weakening trend. This downward trajectory is continuing into our fourth quarter, which serves as the primary rationale for the lowered outlook. An additional item of note is our guidance assumes a full quarter of ThermoSafe performance. Given the projected pressures in our sales and operating profit, we are adjusting our operating cash flows range to $700 million to $750 million.

Over the next 90 days, we'll be closing out 2025 and getting ready for our Investor Day, which is scheduled in New York on February 17, 2026. We are very excited about the strength stability and simplification of the new Sonoco and the competitive advantage it creates in the marketplace. We intend to lay our road map over the next 3 years to show how we're going to grow our businesses, strengthen our balance sheet, and continue to drive margin expansion.

I will now turn the call back over to Howard for closing comments.

Great. Thanks, Paul. If we look ahead at the remainder of the year, our top priorities are to continue building momentum for growth and improving our competitive position by further reducing our cost structure. As the graphic shows on Slide 16, we believe our consumer and industrial businesses have solid funnels in place with several new products and market launches planned in 2026 and beyond. We believe we can continue to gain additional lens with both aerosol and food can customers in North America as we have successfully done through this year with can units up approximately 9%.

As Roger mentioned, Metal Packaging EMEA continues to achieve market wins, which will provide growth in '26 and beyond. Also, we believe our rigid paper containers business is on the cusp of reigniting growth in global stacked chips, and we continue to launch new all paper cans, and paper bottom cans for customers looking to substitute the less sustainable substrates.

Finally, our Industrial Packaging segment is purposely driving share gains while focusing on new product categories such as wire and cable reals, where we experienced double-digit growth in the third quarter as well as new markets and applications for URB paper. If you turn to Slide 17, I'll make some final comments with the planned sale of ThermoSafe, we will be entering the next stage of our transformation journey which is focused on optimizing our operating footprint and reducing future support function costs to align them with the needs of our now simpler portfolio. Our restructurings are never easy. They are necessary if we are to realize full value of these portfolio changes.

As an example, we recently closed a 25,000 ton per year URB machine in Mexico City, which eliminates an older higher-cost machine and allows us to better balance our North American own network. As Roger mentioned, we expect to continue to drive actions to meet our synergy target and expect to further optimize our EMEA footprint to better serve our customers and to react to changing market conditions. With the simplified operating model also comes additional opportunities to optimize support functions. We've actioned approximately $25 million in annual savings from stranded costs up from divested businesses. We're implementing additional actions that will enable our businesses to fully leverage our market capabilities and generate strong cash flow. We've added save-the-date reminder of our Investor Day in New York on Slide 18 of our presentation. I look forward to sharing our growth plans and the significant savings and value capture we expect to unlock with our simplified focused operating vision.

So with that, operator, we will now take any questions.

[Operator Instructions] And your first question comes from the line of Gabe Hajde with Wells Fargo.

Howard, Roger and Paul, thanks for all the detail. I wanted to dig into I guess, the European food can business. It feels like there's a couple of mixed signals here. And I'm thinking about you guys talking to win some share, I guess, in seafood. I appreciate you talked about some powdered formula wins. But just maybe more near term, you're talking about Q4 maybe getting a little bit sequentially weaker. I'm curious if that's associated with a shortened vegetable pack or if there's something unique going on there?

And then I thought kind of in the second quarter, you talked about Northern Africa some disappointing seafood trends. I'm just curious, your increasing exposure there? And then last part, on the footprint rationalization or consolidation what's going on there? It felt like that business was pretty well optimized when you acquired it? If you could just elaborate there.

It's Rodger. I hit all 3 of those. First one on volume. First of all, when you look at the third quarter volumes, we had guided to mid-single-digit can units up quarter-over-quarter. We came in at 3.5%. The seasonal business, fruits and vegetables for the third quarter came in almost exactly as expected. The shortfall was in Africa, and it was again the starting issue in Morocco plus we had a plant in Ghana, which supplies tuna and other products, it primarily supplies one customer and that customer's projections were too high and that was down. So if you strip out Africa for the third quarter, we would have been in that -- well into that mid-single-digit range. .

So as we look at the fourth quarter, what we're seeing and what we're hearing from our customers and the seasonal business is ramping down. So we'll have some of the seasonal business continue in October, but it is ramping down. What we're hearing from our customers, and while we take the guide down for the fourth quarter for the EMEA volume is they're going to be very sensitive to any inventory build in the fourth quarter due to what they see as macroeconomic conditions. Technically, this could help us in the first quarter. But again, they're watching the inventories very closely, and we're watching the Africa business very closely to see how that's starting business improves. We've not seen it this year. We're not expecting it, and we're not guiding that for the fourth quarter.

When you talk about the footprint issues, the #1 issue is for me right now is Africa because if you look across the board in Sardines, again, primary Morocco, other fish products in Ghana and others, we do have to address our footprint there and our cost base there, and we're actively, actively doing that. We've also started some negotiations in France to do some continued footprint optimization around our metal end supply across our platform, which was expected, and we intended to do that as we came into the acquisition. So that was as expected. So yes, it's been a little confusing. The starting business down hundreds of millions of units over a few year period is a fact, not really excuse is, in fact, and it's something that we're dealing with, and we've got to really get after the Africa footprint. So I hope that covers some of the confusion, I think, Howard, do you want to follow up .

Yes, sure. Gabe, thanks for your question. What I want to say is, first off, we are really, really pleased with this acquisition, the people, the technology, the market position all the things that you point out, optimization. As Rodger just said, we see more opportunity there. And yes, we are indeed disappointed in however we're going to finish up the year and what the fourth quarter is rolling to -- and again, Rodger talked to the main points there. But we did this to create a global platform. consumer for the first quarter ever is one product, basically it's can. It's cans made from steel along them on paper. That's it.

And so we have clear line of sight as we've talked about in terms of the synergies associated with the acquisition. But what really excites us is what we can do from a one consumer perspective. We are very early in the process that some of the structural, commercial and other opportunities that are materializing across our formats, metal, our legacy rigid paper and steel aluminum are creating really, really exciting opportunities that we're working now. And so as we talked about February when we go into February, we'll be able to talk more. But different ways to manage, run, go to market than we ever even thought about as we started on this journey that or incremental that, again, we'll talk about in more detail in February.

Thank you for that Howard. Unfortunately, we tend to be greedy over here, I guess. If we think about big moving parts into 2026, just to make sure we're calibrated properly, and we picked the midpoint [ 1,325 ] just to remind us, that does include $50 million TSP contribution in the first quarter. And then assuming that the ThermoSafe transaction closes, that will be another $50 million to $55 million adjustment again, starting with that 1,325. You've talked about actioning about $25 million of stranded cost savings, SG&A, et cetera. I'm not assuming all of that hits in '26, but a decent portion of it. And then we'll make our own assumptions about volume, FX and price costs. Is there anything else that we should be thinking about? I mean, are you -- would you say in the fourth quarter, you talked about Rodger throttling maybe production in the food can business to keep inventories in check. Do we have an estimate of order of magnitude, what that might be hitting Q4 earnings?

Yes. Gabe, this is Paul. And to answer your question there, too, you're thinking about the stranded costs, you're thinking about TFP and ThermoSafe exactly correct. I'd say the one element that you probably have to factor into your model for next year is the reduced interest expense that we're going to be using the proceeds from the ThermoSafe sale and transaction that have talked about earlier in the call. All of those proceeds will go directly to debt reduction. So I'd say that would be the largest element to change on there, too. If you think about our Q4 performance that's out there, you can see our operating cash flow guide did come down. That does rate a little bit of a strain on the ability to pay down our debt. So that's why we are experiencing a little bit of higher interest rate expense out there, too.

So as you're modeling in your Q4 projections that are out there, and this wasn't a direct question, but interest expense should be in the range of around $50 million for the quarter and all the other performance will be a little bit muted just due to the overall consumer demand that we're seeing really in the EMEA regions that are out there today.

Your next question comes from the line of George Staphos with Bank of America.

Congratulations on the [ product ]. I guess my first question, I know we'll get more of this in February, but is it possible at this juncture to quantify some of the cost or revenue synergies you expect to get from having a metal and paper can business together? And can you give us a couple of for instances in terms of what you already think you might be able to pick up commercially?

Yes. George, you want to be your follow-ups now.

No, we'll start first with that question as it possible.

Yes. And I hate that you started out correctly. It's too early for us and I truly mean it. It's been in the last, I don't know, a month or so that we've or to that we've really got into this and think it started to settle down from an integration perspective, when we start stepping back and we're saying, wow, we've got plant [indiscernible] plants around the world, how are we managing geographically, how are we managing substrates that are very, very similar. So it's -- we got a number of mine that we got to work that a little more but we're actioning now to be in a position to start generating the savings side of the thing as early as the first of next year. But...

What do you think the long-term EBIT growth is for the consumer business as it's currently constructed? And look, the reason behind the question, we recognize all the M&A heavy lifting that's been going on at the company over the last 1.5 years, 2 years. Having said that, this quarter, you're very happy with the platform, you love the structure, et cetera. But sardines don't swim, the pack is late and the volumes wind up being really not particularly good and nor is the earnings, and you spend a lot of capital to build out this platform. And so that's kind of the reason behind the question. So if you had a view on what you think the long-term EBIT growth is for the combined consumer business, that's what's in the question. If you had a view at this juncture. If not, we can move to the next question.

Yes. Well, we have a positive view. I can't sit here and give you a percentage point at this time, but we did this for that very reason to grow the profitability of the company. And you can talk about individual fair enough in terms of -- I'm a hell fishermen, but I can't guarantee you that I'm going to catch fish every time I go but that's the thing you worry about your controllables, you're not your noncontrollables. And that's where Rodger talked about getting rightsized structuring and -- when I talk about -- and you asked about commercial opportunities across substrates, it's amazing once we started putting pen to paper to say how many people are buying one or the other from us that we could materially take advantage of.

So all our conversations right now, all of our actions that we're taking right now over to do exactly what you're saying, the expectation should be that we should be growing our profitability on into the long term. And we have some very chunky growth opportunities in front of us as we sit here today. And that's without consideration of what if we go to market in a different way. What if we structure our plants in a different way that gives us the positive viewpoint that we have. And I'm really sorry, I can say, hey, this is -- it's going to be 8.75% going forward, we'll talk about this in February.

Okay. I understand, Howard. I guess next question I had on cans again in the U.S. I want to say little on the 2Q sort of commentary kind of into the third quarter, the commentary was that maybe it'd be a late pack, but you'd see an uptick in the fourth quarter. What in particular is driving the weaker volume? And then as regards to third quarter, food cans being up 5%, but I think overall, the performance in metals for the third quarter in the U.S. was down low single. That's just mix, right? That's pet food versus other end markets or something else behind that?

Yes. That's just mix. And what I'd say is it was a good pack season. It has carried over in North America into October. So we're actually looking at a pretty reasonable fourth quarter on the food can side of North America. I'd be extremely remiss if I didn't talk about the paper can side of things globally. We've got an issue going on that I can -- what's the appropriate word. I would say temporary situation with a very major customer that highly material to us, particularly on an international perspective, it certainly touches North America as well. And that's been an extremely disappointing but exciting at the same time, the point in terms of the performance that this particular transaction as nears closure but exciting in terms of where this business can go into the future. So we're seeing inventory draw down what we're seeing in the fourth quarter. So that's part of this forecast that we've got in front of you. And again, I look at that as a temporary problem.

Last one quick one. OCC prices are really low right now. That's probably helping you a bit on margin hopefully, OCC heads up in 2026 for macro reasons and the like. Any way you will try to avoid any margin pressure ahead of time? Or is it -- will it be really the same sort of mechanism you've had in the past in terms of pricing and the like, your pass-through mechanisms and just you'll manage it on the way up just like you always have.

Yes. Thanks, George. We're going to do what we've always done, but I did just highlight one example in my prepared remarks about preemptively making the right moves in terms of the balance of supply in North America. So if you listen, we're taking 25,000 tons out and it's a really smart thing to do just in and of itself, replacing coming off of a 25,000 ton machine. And here we're sitting in South Carolina with a 180,000-ton machine with the different cost profile. So we'll do what we have to do, what we've done traditionally as it relates to price cost management, but we're going to control those things that we can control as well to make decisions like I just announced.

Your next question comes from the line of John Dunigan with Jefferies.

I really appreciate all the details here. If I could start with the URB mill in Mexico City that you just touched upon, what does that do to your operating rates for the business? And what I'm thinking about is cost going to end up going up because you have to still supply those same customers. So freight may be more of a headwind next year? And then if you could touch upon much larger price cost spread in both Industrial Packaging, which obviously you had the price increases go through for URB. OCC continues to slide a bit. But overall, still quite a bit ahead of where we're expecting. Same with the Consumer Packaging business. I know there was pricing to help cover some of the tariffs, but price cost spread again seem outside to our expectations. So maybe you can touch upon price costs for both those segments going into 4Q and 2026 and how we should be thinking about that?

Sure, John. Let me start with your opening around the mill network. First off, we're running in the low 90s. And we've been proactive and aggressive all along the way in terms of making sure we were -- we had a pretty balanced portfolio here. As it relates to Mexico, that's a math decision as well as the capacity say, control, but a capacity-oriented decision -- but it just makes better sense. I mean, the math says that 25,000 tons coming off of the mill across the border versus what we can do from a leverage perspective with much larger facilities here. So strictly a math equation. Price costs going forward, we'll see what happens, very similar question to what George asked wouldn't surprise us to see OCC, hopefully, as noted that markets are going to continue, and that's what happens.

OCC starts going up. markets tighten up. That's a sign of market tightening up and net price cost and there's 2 forms of that. One is contractual related to the indices and the others are just good management of our cost side of the business as well. So are we going to no. I mean we've got -- it's a big quarter for us in industrial and we expect that it's probably going to step through the course of next year, but be at levels that very consistent with the last 3 or 4 years, which is remarkably higher than the old Sonoco.

Yes. John, just I had [indiscernible] question on the URB mill closure there, too. This is really to get us to the maintaining an operational efficiencies in the '90s. So this is balancing the overall portfolio. As we started to see, we have redundant capacity across the network and structure, and we wanted to make sure we maintain that because that efficiency rate. We had to balance out logistics costs and everything else like that to make sure that the net transaction actually was a benefit for the overall company. But our goal is to maintain all of those facilities in the '90s, and we started to see the trend, but starting to be a little bit overcapacity in the market space. So just to give you a little bit more context on that. And the total cost transaction after it is down, just to be clear on that.

Okay. That's helpful. And then just a couple of more questions on the bridge in 2026 that Gabe touched upon earlier. I'm sure we'll get more insights in February. But just thoughts of rounds with the moving pieces in S&P EMEA, what are you kind of expecting out of that $100 million or so synergy run rate by the end of next year? How should that be flowing through? And in terms of -- apologies, I'll leave it there.

Yes. And John, Rodger mentioned too, we're on track to getting the $100 million of synergies [indiscernible]. By the end of 2026, that would be the full run rate. Year-to-date, we're kind of expecting to have a run rate of $40 million by the end of '25 and the goal would be is to achieve that full run rate of $100 million. Now you could say that's a $60 million more run rate you have to go get. And then timing of this, as you can imagine, in Europe, it does take longer to take those costs out in those stranded cost and other synergies that are out there. So you can split the difference and say roughly $30 million will be actually realized in 2026 with the remainder coming into '27 and beyond.

Your next question comes from the line of Anthony Pettinari with Citi.

You talked about potential reacceleration in RPC, which I guess, was down low single digits in 3Q and is expected to be down that much in 4Q. In terms of the reacceleration, is that just a large customer getting to kind of a deal completion? Or are there new projects that are in the pipeline? Or are you seeing anything in terms of inventory. So I'm just wondering if you could give any more detail in terms of what drives that inflection? And is that something maybe we see in the first quarter, the first half of '26? Or any further detail there?

Yes. Anthony, the easy answer to that is all of the above. What I would tell you is that the receleration if that's a word, receleration of our snack business that's a foot on the gas pedal type thing that really is impactful immediately. If and when it happens, expectation that will happen, and that's a global phenomenon for us. We're continuing to win as it relates to all paper solutions in Europe. We're adding those capabilities to the U.S. Those are more incremental. They build as big as the businesses you win 50 million units doesn't really -- it's rounding error, but over time, and what we're seeing is our trajectory in that direction that will continue to build movement throughout. So I suggest to you that we're really bullish about the paper can side of the business, and then you start adding that to the synergies that are associated with the metal side we're looking forward to next year and on into the next coming years with what these businesses can do.

Okay. That's helpful. And then just switching gears to capital allocation. You talked about getting leverage down to 3.4x by year-end, debt pay down next year. I'm wondering if you can talk a little bit more about the capacity for share repurchases in terms of when you'd be able to really buy back at scale in terms of timing or leverage threshold? Or is there an opportunity to maybe pull that forward given valuation of the stock? And then I guess related question, the $100 million run rate synergies that you're going to get in '26, is there a cash cost associated with that we should think about when we think about that '26 cash bridge? .

Yes, Anthony, I'll start with the -- I'll call it the capital allocations. And that strategy, we will really lay out in our February meeting. But I wanted to reiterate too is we are committed to as an organization to getting our debt structure down. We talked about our last call getting our debt leverage ratio to 3% to 3.3% by the end of '26. You can see we'll be at 3.4% by the end of this year. So very strong performance. Once we are at that level, it does offer us the optionality to get things like share repurchase and other activities. But debt in the near term is going to be our primary capital allocation strategy that's out there. And I'm not kind of delaying the question, but I really want to wait for that road map in February to give you the full capital allocation story that's out there.

Now the $100 million of synergies and cost outs, we have put in a significant amount of money of restructuring charges already to date. We will have to allocate some capital to that in '26. That amount has not been released, and we haven't disclosed that but I will say there will be capital definitely allocated towards that as a priority to hit those synergies and run rate.

Your next question comes from the line of Mike Roxland with Truist Securities.

Congrats on the [indiscernible]. I just wanted to follow up on Europe again. And can you give us some more color on EMEA, S&P EMEA and the cost savings that you're looking to achieve? It seems like the business is facing headwinds that you think are structural, given the cost actions you're pursuing and the end market realignment. So any additional time you could provide on the cost you see to take out dollar-wise and whether you see there's a structural shift in the [indiscernible] initial expectations.

Yes, Mike, thanks. This is Rodger. Yes, I think if you look at what we've actioned. First of all, you've got the synergies that Paul just talked about, so I won't repeat that. Then you've got the incremental cost outs that were actioning now as a result of learnings that we've had in the marketplace. Typically, and we'll share the more numbers in February. But typically, we're getting 1-year returns on these cost-outs so whether it's footprint consolidation, whether it's actually going in and taking out costs to match the volumes that we see in places like Africa, we look -- we're getting a full 1-year return. And it's not -- if you look at the base business in Europe, the Europe-based business, we're really just advancing plans that the business had in place, again, going around the metal ends and consolidating our metal end production and low-cost facilities. And we're actually adding some plans, some capability in Eastern Europe where we see the growth in products like fish and pet food. So it really is a balance. What we found is, again, back to Africa, if you look at a small plant in Thailand, if you look at what we have in Turkey with inflation concerns, those outlying areas that we're really targeting getting some pretty significant cost out to match the volumes that we have today and make sure they have the profitability that we see in our base business in Europe. So there's nothing I would say that's extraordinarily different than what we went into the plan with.

The rationale -- strategic rationale around the acquisition is still solid. Service quality leader in the organization, strong operational team. Frankly, as we look at next year, where we're focusing, and I mentioned in my opening comments, is around our commercial capability and commercial excellence. We're building out our talent and our regional sales team. We've added talent in France and Italy and Germany. And towards the end of the year, we're going to have a new commercial leader coming into the organization. So I'm real excited about that. So as you get into all areas of commercial excellence, price cost, a real disciplined approach to share gain in the marketplace, so on and so on. That's where we're focusing our time, and I think that's really what will drive our improvement that we're targeting in 2026.

How much -- from your being involved in the business as closely as you are, how much of the weakness that you're seeing in EMEA relates to end markets versus commercial capabilities and maybe not having the talent in the right seats at present?

No, I think it's -- no. I don't see that. I think when I get into those type of comments, longer term, I think certainly it's going to help us. So we've got some exciting growth projects that are going to hit in 2026. For me, it's about recovering all forms of inflation. Again, back to the disciplined process to go to market to win share. So what we've seen this year, the surprises we've seen this year, I hate to repeat myself, is around things like sardines in Africa is some of the business that we've seen in Turkey to go -- be reduced that result really high inflation levels. So I don't think this -- volume-wise, I think the year played out exactly how this is going to play out. That had nothing to do with commercial capability because we've got wins coming from me, it's more around that value add, getting paid to be the service quality, technical service leader in the market and make sure we're getting paid for the value we're taking into the marketplace. The volume unexpected volume drops really, we talked about the reasons for those. And now they're included in our fourth quarter guidance, and we'll talk about more of that in February, how we see it for 2026.

Got it. And then just one quick follow-up. Can you just help us frame the procurement benefits you expect to receive next year from integrating both U.S. and EMEA steel procurement teams into a single globally focused organization. I think you -- the company originally mentioned $20 million from reducing support functions. Is that still what you're looking to achieve? Is there any upside to that? Any color would be helpful.

Yes, from the procurement, we said from the very beginning that procurement savings of the $100 million synergies would be about 60%. We said $20 million will come from synergies around support functions. That's still a really good number. What Paul has been talking about and Paul has mentioned before as far as future restructuring, that would be on top of that. But you're right, the numbers you called out are exactly right. Procurement is about $60 million of the full $100 million right and other support cost is about $20 million. And then final $20 million is supplying ends to our paper can business that we have not supplied before. Another one-off moves that we're making, again, we're fully confident we get to that $100 million run rate by the end of 2026.

I think, Mike, your comment related to mine about the $20 million that we've stranded costs that we've taken out through the course of this year. That's going to be rolling into next year. And then what I alluded to was that we're on the cusp of looking at even more opportunities corporately, I think -- well, it's corporate as well as operationally that we'll be talking about as we go into next year. .

Your next question comes from the line of Ghansham Panjabi with Baird.

Just given that there's so many moving parts with your portfolio, et cetera. Howard, if you just do a lot a bit and kind of think about the end markets, how are you thinking about the operating environment for both consumer and industrial as you look ahead to both 4Q and the early part of 2026. And I'm just asking, as it relates to the time line from what we've seen in consumer and the industrial markets over the last few quarters. Is it -- is there any inflection or is it just more of the same at this point? .

Yes. First, Ghansham, appreciate the comments about all the moving pieces. I get it. We've been busy for the last 5 years saying the portfolio in place that we have today. I just want to kind of put a stake in the ground and say that's done. So this first quarter being the third quarter, where you're actually able to look at the go-forward consumer business, which is nothing but cans. Industrial is what it is. .

On the consumer, what's happening at this point in time and into 2026, I'd say, I don't see a real stimulus across the globe at this point in time. We've spent most of this call talking about EMEA. And I talked about the consumer side as it related to certainly Rodger -- as it related to the metal, but the paper can can volumes are actually okay right now, flattish the last year, but that's with the impact of one discrete customer that I think we all understand. So I'm not looking -- we're not looking for. We're not planning on to see some great resurgence in terms of consumer volumes going forward.

Typically, if macroeconomics -- and I say typically, it's actually factual. We went back and looked at slowdowns in the macro, we win on the consumer side and the consumer spending more in the supermarkets than they are in the restaurant. So we'll see how that plays out. Industrial, just in North America, it's kind of flattish quarter-over-quarter, and I don't think you'll see us expecting that to materially improve either as we go into next year based on what we see at this point in time. Europe, as we talked about EMEA and we look at fourth quarter and the forecast came out of the August holiday season there. And typically, in our industrial business, we see a pretty good lift as we get into September falling off as we get to the latter part of the fourth. We didn't see that left. So there is it's September. So there is definitely signs that things aren't great. And again, additionally, that's been a good thing on the consumer side of the business because people are shopping in the markets more, but too thin to call at this point in time.

Okay. Howard. And then in terms of the industrial margin expansion of 380 basis points year-over-year for the third quarter, was there anything unique that boosted the quarter? I mean it seems like margins were quite a bit higher than the trend line over the previous quarters, just given the price cost flip that has benefited. Just more color on that would be great.

Yes. Price cost is certainly a part of it. And I want to take it back in time, our margins in our industrial business, if you go back to -- way back to project horizon to where we are today with our refocus of saying, we are the world's #1 in URB and converted URB products, let's behave that way. So the capitals that we started putting in 4 or 5 years ago have continued to drive improved margins, obviously, exceptional for this quarter and price cost is part of that. But I'd be remiss if I didn't say that as an example, our North American team is completely restructured how they manage the business, and they look at how they view the business. And what I'm saying is we no longer here have a paper division and a converting division. They're all on.

And it's created a powerful new viewpoint in terms of how we are optimizing our supply chain between the paper mills and the converting operations, driving cost out so there's some stickiness to the improved margins, but certainly, price cost is going to be a part that ebbs and flows. But I'm very, very proud of this team and be able to say that years if I told you guys we were operating in the 16%, 17%, 18% type margin range. You would ask the same question, when is it going to drop down to 13%.

Your next question comes from the line of Mark Weintraub with Seaport Research Partners.

Few quick follow-ups. One, on the synergies or really after the purchasing synergies. I remember last year, the deal closed a bit late. And so you did end up getting them in 2025. I would have thought you would have gotten most of that $60 million in 2026. But the way you talked about maybe like $30 million in total for synergies, it seems like that might not be correct. Can you explain why the purchasing it, how much have already come and why more of it wouldn't come quickly in 2026?

Yes, Mark, it's a great question. And if you think about the cycle of the sales as they come through throughout the whole year, the procurement is 60% of the overall savings. We did realize a portion of procurement in 2025. So it won't be a full of savings at additional incremental in $26 million. So that's why I'm kind of -- I gave you a midpoint of it to be conservative. We'll give you that real strong clarity in that February 20 of the outlook of the full synergies and the road map that's out there. But the $30 million is a conservative approach.

Yes. Mark, remember, we're not just thought people immediately go to tinplate, but we're talking about all purchasing, so compounds, coatings, indirect, freight and the like. So many of those, we were able to start realizing some synergies this year.

Okay. And second, congratulations. I think you say it's an all-time record quarter. Your stock doesn't seem to be reflecting the really strong financial performance. So I guess I was a little surprised that I didn't sense a more clear-cut communication on the share repurchase opportunity. I think buying back stock, the cash benefit of not paying out the dividend is probably after tax, even higher than your after-tax interest expense. And I was just wondering, is that a function of like debt maturities that you have to be conscious of? Or why not kind of a more -- this is a terrific opportunity to take advantage of what's a mispriced stock given the financial performance that you're putting up and I think you're going to continue to achieve.

Mark, what I'd say is, certainly, stock buybacks are in the mix, but we're also looking at. We talk about options, one of which is obviously stock buybacks, more resale pay back down debt and the third being capital reinvestments in the business and restructuring and so we're balancing -- that's our decision for, if you will, and which one is going to offer the longest term payback to our shareholders, to our owners. So again, we've talked about the restructuring that -- things that are really coming to light today talked about a very chunky business wins and opportunities that we're looking at that are going to require, in some cases, fairly significant capital. .

So we're taking the approach that at this point let's stay on the path, let's continue to pay our debt down, that's buying these opportunities. And at the right point in time, we look and say we've got this capital project. We can buy back shares. We can do this restructuring and still maintain the debt type levels that we think the shareholders expect of us to make that right decision at that.

Your next question comes from the line of Matt Roberts with Raymond James.

Following to Anthony's question earlier on RPC, any indications on when new international capacity, specifically Thailand will begin to ramp how many points of incremental volume is expected from that? Or is customer merger time line still a drag into 2026 and potentially delaying any benefit there?

Yes. So we're ramping up. We are starting up as we speak. So first lines up and running, going through qualifications with the customers. So things are moving forward. What I'll tell you is it was when first presented to us, and we've mentioned that to you guys, the intent is this will be the world's largest paper can facility in the market. So we've got -- we've got to see this transaction closed. The expectation would be that, that would be remained the objective but at this point in time, we're just kind of starting up and on hold. So we've got a new facility that's ramping up pretty aggressively and in Mexico, and we've got capacity additions that are fully ramping up right now in Brazil. So Matt, I wish I knew. It's all quiet right now until things are clearer through their process.

Second, you mentioned investments in pet and seafood in Europe. Is the timing of when those come online, any CapEx consideration next year? And relatedly, what is the mix of these categories expected to be versus what it is now? And how did the margins compare to the system average for novel packaging EMEA? .

Yes, Matt, Yes. Capital would be in process as we speak, and that will run into the first quarter of next year. So you're looking at growing really probably starting in the second quarter. of next year. If you look at fish and seafood and pet, they're both today about 15% to 17% share of our overall market. [indiscernible] mover we see it going to 20% on the same for seafood. So pretty nice gains in both those markets again with the whole idea being our seasonal business is a very good business, but it's very seasonal -- has really spread out and better leverage our operations.

As far as EBITDA margins in that business pretty much average, we approached 18% in the quarter. I'd say it's maybe slightly better than some of our average margins. But with the incremental investments that will be popping up starting, let's call it, at beginning of second quarter next year.

That concludes our question-and-answer session. I will now turn the call back over to Roger Schrum for closing remarks.

Again, I want to thank everybody for joining us today. And do please save the date for our February 17th New York Investor Day, and we'll be providing you more information on that in the future. Thank you again for your attention. .

This concludes today's conference call. Thank you for your participation. You may now disconnect.