By the numbers: Q4 2023
Net revenue: $1.27B
Down 13.7% year over year
Net revenue for food service segment: $626M
Down 1.1% year over year
Net revenue for food and beverage merchandising segment: $653M
Down 25.1% year over year
- Results: Executives on Pactiv Evergreen’s Friday earnings call covering its fourth-quarter 2023 financial results said that dips in revenue were largely due to lower sales volumes stemming from “a focus on value over volume,” in addition to facility closures. CEO Mike King reported that the inflation-hit consumer “has become more stressed in recent months,” continuing a trend seen in the last several quarters of consumers trading down to lower-cost products, including at food service establishments and grocery stores. Customer destocking moderated over the course of 2023 and is largely over, King said, with only a “minimal impact” expected in 2024.
- Restructuring: The company announced a restructuring plan to “optimize its manufacturing and warehousing footprint." Executives declined to give specifics, but said this will affect about 10% of the company's approximately 100-facility footprint. “Over the next few years, we intend to rationalize a portion of our physical footprint and shift existing production and warehousing within our network to better manage our capacity with the industry demand,” King said. Pactiv Evergreen expects the restructuring to enhance operating efficiency and result in $35 million in annual run rate cost savings by 2026.
- Building on footprint changes: Executives also reiterated the ongoing search for strategic alternatives for the mill in Pine Bluff, Arkansas. In 2023, the company incurred $324 million of non-cash charges, $9 million of which came in Q4, resulting from a prior restructuring announced last March. This involved reorganizing the management structure by combining the beverage merchandising and food merchandising businesses. Pactiv Evergreen also closed its Canton, North Carolina, mill and its Olmsted Falls, Ohio, converting facility, which made cartons. Some customers and observers point to the Olmsted Falls closure as being at the heart of the nationwide 8 oz. carton shortage that emerged late last year and has stretched into 2024.
- Outlook: Already this quarter, January’s “severe weather” negatively impacted the company, as restaurant customers reported reduced foot traffic. Executives expect that hit will be isolated to Q1 earnings. Looking ahead, in 2024 to 2025 the company expects to incur capital expenditures of $40 million to $45 million to execute its restructuring plan and total cash restructuring charges of $50 million to $65 million. Executives expect 2024 earnings before interest, taxes, depreciation and amortization to be $850 million to $870 million, with $160 million to $170 million occurring in the first quarter.
