Reynolds Consumer Products Inc. Q4 FY2024 earnings call

• Results review: Reynolds and Hefty brands lead in household categories, consolidated retail volume accelerated in Q4. Profitability in line with expectations, 2024 was strong profitability outside COVID 2020. - Plans for RCP: Have a program of action with growth, cost, and ROI pillars. Growth pillar focuses on organic retail volume, distribution, innovation, adjacent categories. Cost pillar focuses on supply chain cost optimization. ROI pillar promotes returns-based mindset with capital investments. - Strengths: Strong brands, national brands with equity, opportunity to expand into new categories, sustainable solutions, strong customer base, cost-competitive manufacturing, strong cash flows and balance sheet, good culture, veteran leadership team. - Opportunities: Volatile raw materials, secular headwinds in foam plate business.

Consolidated retail volume accelerated quarter-by-quarter and increased to 1% in the fourth quarter. Each business unit contributed to the fourth quarter's accelerating retail performance. Net revenues in 2024 were $3.695 billion. 2024 adjusted EBITDA was $678 million, a $42 million or 7% increase over 2023 with margin expansion of 140 basis points. Full year free cash flow was $369 million. Fourth quarter net revenues were $1,021 million, with retail volume growing 1%. Adjusted EBITDA in the fourth quarter was $213 million. Hefty Waste & Storage and Reynolds Cooking & Baking segments each delivered 3 points of volume growth in the quarter, tableware segment had sequentially improving volume and share trends, and Presto business unit was flat on volumes after product portfolio optimization.

• 2025 net revenues expected to be down low-single digits, driven by retail revenue at or above category performance, with pricing actions to cover aluminum cost increases and a 2% overall decline for categories, exclusive of double-digit decline for foam dishes. - Full year 2025 adjusted EBITDA in a range of $670 million to $690 million, adjusted earnings per share of $1.61 to $1.68. - First quarter 2025 net revenues expected to be down low-single digits by comparison to first quarter 2024, adjusted EBITDA in a range of $115 million to $120 million. - Adjusted earnings expectations for 2025 exclude approximately $25 million to $35 million of pretax cash and non-cash CEO transition costs and investments in strategic initiatives.

• Diversified but somewhat volatile set of raw materials contributing to inconsistent earnings growth. - Secular headwinds in small but cash generative foam plate business. - Tariff developments which have not been factored into the guide and could impact the business.

Q: Lauren Lieberman asked about the biggest changes in the new plant program from cultural and accountability perspectives.

A: Scott Huckins said it's a more targeted approach, force ranking innovation, and a more holistic top-down approach in cost pillar. Nathan Lowe added balance sheet is stronger now.

Q: Lauren Lieberman also asked about input cost expectations.

A: Nathan Lowe said commodities are a significant headwind but they have tools like pricing and productivity to offset.

Q: Mark Astrachan asked about changes from Investor Day and acceleration from 2025 to 2030.

A: Scott Huckins said it's a sharper focus based on category backdrop and they're deploying capital smartly for returns.

Q: Mark Astrachan asked about price volume and elasticity.

A: Scott Huckins said pricing actions are designed to manage within key thresholds and they lean on productivity.

Q: Robert Ottenstein asked about adjacencies being organic or M&A-driven.

A: Scott Huckins said both organic and M&A are options with aspiration to do it responsibly.

Q: Robert Ottenstein asked about tariff impact on pricing.

A: Scott Huckins said they're thoughtful about pricing in context of price gaps and thresholds, and typically observe sustained commodity cost changes before taking action.

Q: Andrea Teixeira asked about distribution white spaces.

A: Scott Huckins mentioned examples like Hefty Press to Close and innovation-led distribution opportunities.

Q: Peter Grom asked about delay to category growth.

A: Scott Huckins said foam is impacted by various factors and balance of categories is due to consumer state.

Q: Brian McNamara asked about key factors in delay to category growth and pricing across segments.

A: Scott Huckins said foam has multiple contributing factors and pricing is thoughtful considering price gaps and thresholds, and complemented by productivity.

Q: Brian McNamara asked about CEO transition costs breakdown.

A: Scott Huckins said roughly half is CEO transition costs and half is targeted investments for revenue growth management, cost takeouts, and ROI-oriented investments.