Dustin Semach
President and Chief Financial Officer at Sealed Air
Thank you, Patrick. Let's turn to slide 4 to review Sealed Air's third quarter performance. We closed the quarter with sales of $1.35 billion and adjusted EBITDA of $276 million, each down 3% compared to last year on a reported basis.
Our third quarter results reflect a continued solid performance in Food, persisting challenges in Protective and strong productivity benefits, including our cost takeout initiatives.
Adjusted earnings per share in the quarter of $0.79 were up 3% compared to a year ago. Our adjusted tax rate was 24% compared to 25.7% in the same period last year. The decrease in tax rate year-over-year was driven by the jurisdictional mix of income and non-recurring discrete items in the prior year. Our weighted average diluted shares outstanding in the third quarter of 2024 was 146 million.
Turning to slide 5. In the third quarter, organic sales were down 2% driven by lower pricing across both the Food and Protective segments. On a year-over-year basis, relative to prior quarters, third quarter pricing was sequentially less negative as the carryover pricing actions from 2023 started to diminish.
Volumes were relatively flat year-over-year for the quarter with growth in the Food segment across all regions, offset by declines in Protective in Americas and EMEA. Third quarter adjusted EBITDA of $276 million, decreased $9 million or approximately 3% compared to last year with margins of 20.5%, down 10 basis points.
This performance was mainly driven by lower volumes and unfavorable net price realization in Protective, partially offset by higher volumes and favorable net price realization in Food, and lower operating costs, mainly driven by productivity benefits, including cost take-out initiatives.
Moving to Slide 6. Food net sales of $898 million for the quarter were, up approximately 1%. Lower pricing primarily in Americas and EMEA was more than offset by positive volume growth in all regions, driven by strength in protein end market demand and share gains within our bags and case-ready solutions.
In the third quarter, the global protein markets were net positive by approximately 1%. Continued strength in Australian cattle cycles, stronger-than-anticipated U.S. beef production and robust pork demand more than offset declines in poultry production caused by Avian flu, outbreaks affecting North American turkey flocks.
Meat increased consumer demand in the protein markets, we further drove competitive lens. Our case rate solutions experienced high single-digit growth, driven by the ongoing recovery of the Roll-Stock business where we lost share in previous years due to resin shortages and by market share gains in the retail space with our trades and lending offerings.
Protein sales, however, declined as customers continue to exercise caution in deploying capital. Food adjusted EBITDA of $206 million in the third quarter was up 6% with margins at 22.9%, up 120 basis points compared to last year. The increase in adjusted EBITDA was mainly driven by volume growth and net price realization.
Transitioning to Protective. Third quarter net sales of $447 million were down 8%, as anticipated in our Q2 guidance. Industrial portfolios remained weak due to subdued manufacturing activities in the developed world. Volume in fulfillment portfolio has declined approximately 10%, driven by the slowdown in equipment automation and continued pressure within void-fill product lines.
In our APAC region, volumes grew approximately 1% in the quarter, as the gain in box rightsizing automation offset weakness in industrial and fulfillment portfolios. In the Americas and EMEA regions, volume performance remained largely unchanged from the prior quarter. Sustainability pressures on the void-fill product lines, ongoing weakness in the industrial sector and lower automation sales continue to negatively impact our results.
Protective adjusted EBITDA of approximately $75 million -- was down 21% year-over-year with margins at 16.9%, down 260 basis points. The decrease in adjusted EBITDA was driven by lower volume and unfavorable net price relation, partially offset by productivity benefits, including cost takeout initiatives.
On slide seven, we review our third quarter net sales by region. On an organic basis, America was down 2%, primarily due to lower pricing. Volumes were down 1%, driven by continued softness in protective portfolios, partially offset by strength in Food.
EMEA declined 6% organically, driven by lower pricing across both segments and volume declined in Protective. APAC was up 3% organically as tailwinds from Australian cattle cycle and the gain in fulfillment automation more than offset lower pricing and continued weakness in our other Protective portfolios.
Now let's turn to free cash flow and leverage on Slide 8. With the focused efforts of our teams around the world, we delivered strong free cash flow of $323 million as of the third quarter year-to-date. This is well above the $183 million a year ago, when excluding payments and deposits for resolution of certain prior year's U.S. tax matters.
Our teams continue to focus on improving working capital, which as a percentage of sales has improved by 120 basis points year-over-year, as we continue to improve payables and inventory velocity.
We maintained our focus on deleveraging the balance sheet and ended the quarter with a net leverage ratio of 3.7 times. Our total liquidity position was $1.4 billion, including $386 million in cash and the remaining uncommitted and fully undrawn revolver. We are highly confident in achieving our net debt to adjusted EBITDA target of below 3.5 times by the end of 2025.
Let's turn to slide 9 to review our 2024 outlook. Our third quarter results were largely in line with expectations. We are pleased with the continued momentum in our Food business. At this point, we expect our Protective volumes to remain soft in the fourth quarter due to continued portfolio challenges and overall market dynamics. As a result, in total, we expect our Q4 volumes to be slightly up year-over-year in Q4 with the strength in food being partially offset by weakness in Protective.
Heading into the fourth quarter, we expect sales to be approximately $1.3 billion, consistent with the midpoint of our sales guidance with year-over-year volume performance improving slightly versus the third quarter levels for both businesses.
We continue to expect adjusted EBITDA to be in line with the midpoint of our guidance range, mainly driven by continued cost control actions. We are raising the midpoint of adjusted EPS to be at the higher end of the previous range, driven by lower interest expense, effective tax rate and depreciation and amortization expense, reflecting improved discipline around capital deployment. We're also raising the midpoint of our free cash flow guidance to $400 million, reflecting the continued improvement in working capital.
We will be working with the new management team over the coming months to operationalize each vertical and fully form the growth strategies and transformation plans for each business. This will inform our outlook for 2025 and beyond. In the meantime, we are accelerating our cost reduction and operational excellence initiatives to drive profitability.
Turning to slide 10. I'm very excited about the reorganization into Food and Protective verticals and their new leadership teams. As Patrick mentioned earlier, the transformational steps we have taken will position each business and Sealed Air as a whole for long-term growth and success.
With that, Patrick and I look forward to your questions. Operator, we would like to begin the Q&A session.