Executive Summary / Key Takeaways

• Sealed Air Corporation is undergoing a significant transformation, reorganizing into market-focused Food and Protective segments, which is yielding improved operational discipline and financial performance.
• The Protective segment is demonstrating a turnaround, with material volumes inflecting to growth for the first time since 2021 in Q3 2025, driven by strategic go-to-market changes and new substrate-agnostic packaging technologies.
• The Food segment remains resilient despite North American market headwinds, strategically shifting its focus and innovation towards higher-growth retail and foodservice end markets.
• The company maintains strong financial discipline, raising its 2025 Adjusted EBITDA and EPS outlook, reaffirming free cash flow, and remaining on track to achieve a net debt to Adjusted EBITDA ratio of approximately 3x by the end of 2026.
• While macroeconomic uncertainties, particularly U.S. consumer spending and the beef cycle, present near-term challenges, Sealed Air's accelerated transformation and technological differentiators are positioning it for long-term sustainable profitable growth.

A Foundation of Innovation: Setting the Scene for Sealed Air's Transformation

Sealed Air Corporation, established in 1960, stands as a global leader in packaging solutions, integrating sustainable materials, automation, equipment, and services. The company designs, manufactures, and delivers solutions crucial for food preservation, goods protection, and automated packaging processes. Its iconic brands, including CRYOVAC® food packaging, SEALED AIR® protective packaging, LIQUIBOX® liquids systems, AUTOBAG® automated packaging systems, and BUBBLE WRAP® packaging, underpin its market presence.

The packaging industry is dynamic, influenced by broad trends such as the expansion of e-commerce, increasing demand for sustainable materials, and the indirect impact of technological advancements like AI and data centers, which drive demand for protective packaging in tech sectors. Sealed Air's overarching strategy is centered on a comprehensive transformation, reorganizing into two distinct, market-focused segments: Food and Protective. This strategic pivot, completed by Q1 2025 with the full integration of commercial, innovation, and supply chain teams, aims to enhance customer-centricity and instill operational rigor across the business.

Historically, Sealed Air's journey has been marked by strategic acquisitions, such as CRYOVAC in 1998, which significantly shaped its asset base, and LIQUIBOX in February 2023, expanding its fluids and liquids portfolio. The company also divested its Diversey business in 2017. A key initiative, the 3-year CTO2Grow Program, launched in August 2023 and concluded by September 30, 2025, targeted up to $160 million in cash cost savings, underscoring a commitment to operational efficiency. This foundational restructuring and cost-management drive are critical to its current strategic responses to market dynamics.

Technological Edge: Driving Value and Competitive Moat

Sealed Air's core competitive advantage lies in its integrated packaging solutions, which combine advanced materials, automation, equipment, and services. These technologies offer tangible benefits to customers, including enhanced food safety, extended shelf life, reduced food waste, optimized processing yields and throughput, and superior goods protection during transit. For instance, CRYOVAC brand food packaging solutions are designed to preserve food and extend shelf life, directly addressing food waste concerns. LIQUIBOX systems facilitate the displacement of rigid packaging with flexibles, offering efficiency and sustainability benefits.

In the Protective segment, solutions are engineered to increase packaging velocity, minimize waste, reduce labor dependencies, and address dimensional weight challenges. The AUTOBAG brand automated packaging systems, for example, streamline packaging processes, while Instapak foam and Korrvu suspension and retention packaging provide superior cushioning and protection.

The company's commitment to innovation is evident in its R&D initiatives and new technological developments. A notable recent launch is the AUTOBAG brand 850HB Hybrid Bagging Machine, capable of processing both poly and curbside recyclable paper bags with high-speed precision and print-on-bag capability. This innovation directly addresses the growing demand for sustainable and versatile packaging solutions in e-commerce. Other proof points include the fully fiber Jiffy and BUBBLE padded mailer and the upcoming ProPad Mini, a new tabletop paper system. Sealed Air's R&D strategy is shifting towards a more balanced approach between internal and external solution development, aiming to increase speed to market and accelerate the build-out of a substrate-agnostic portfolio. This technological roadmap is crucial for strengthening the company's competitive moat, driving higher value for customers, and enabling market share gains, particularly in evolving e-commerce and foodservice sectors.

Competitive Landscape and Strategic Positioning

Sealed Air operates in a highly competitive global packaging market, vying with diversified players such as Berry Global Group, Inc. , Amcor plc , Sonoco Products Company (SON), and Packaging Corporation of America . The company's competitive strengths are rooted in its high-performance packaging solutions, well-established customer relationships, iconic brands, and global scale.

In the Food segment, Sealed Air's specialized offerings, particularly under the CRYOVAC brand, provide a distinct edge in food safety, shelf-life extension, and automation. This specialization allows it to differentiate against competitors like Berry Global (BERY), whose broader focus on flexible plastics may offer versatility but potentially less specialized performance in critical food processing applications. Sealed Air's direct sales model for food solutions fosters deeper customer relationships, enabling tailored solutions and potentially stronger customer retention.

Within the Protective segment, Sealed Air's BUBBLE WRAP, Instapak, and Korrvu brands offer superior cushioning, retention, and customization for diverse applications, from e-commerce to medical devices. This contrasts with Amcor 's expertise in rigid plastics for healthcare or Packaging Corporation of America (PKG)'s strengths in bulk corrugated packaging. The company's recent 7-figure competitive wins at national accounts in the fulfillment space underscore its ability to compete effectively by leveraging the breadth and depth of its portfolio and strong distribution relationships.

However, Sealed Air faces vulnerabilities, including potential supply chain dependencies and the need to continuously innovate in sustainable materials to keep pace with environmentally conscious customer demands. Competitors like Amcor (AMCR), with their strong focus on recyclables, may be better positioned in certain advanced sustainable material segments. Barriers to entry in the industry, such as economies of scale, proprietary technologies, and regulatory requirements, generally protect established players like Sealed Air, though larger competitors may benefit more from scale advantages in commoditized products. Sealed Air's strategic response involves accelerating its R&D to build a substrate-agnostic portfolio and optimizing its network to improve cost positions and customer service, thereby enhancing its competitive standing.

Financial Performance and Operational Momentum

Sealed Air's recent financial performance reflects the initial successes of its transformation efforts amidst a challenging macroeconomic backdrop. For the three months ended September 30, 2025, the company reported net sales of $1.35 billion, a modest 0.5% increase as reported but a 1% decline on a constant currency basis. Adjusted EBITDA for the quarter rose 4% as reported to $287 million, or 3% on a constant currency basis, with the Adjusted EBITDA margin expanding by 80 basis points year-over-year to 21.3%. Adjusted EPS saw a significant 10% increase as reported to $0.87, or 9% on a constant currency basis.

Year-to-date through September 30, 2025, net sales were $3.96 billion, a 1.5% decrease as reported compared to the prior year. Adjusted EBITDA for the nine-month period was $856.3 million, up 2% as reported, and Adjusted EPS reached $3.14, a substantial 67.9% increase as reported. This strong EBITDA performance was primarily driven by lower operating costs, including favorable productivity savings and cost control actions, which largely offset slightly lower volumes and negative net price realization, primarily due to labor inflation. The company's effective income tax rate for the three months ended September 30, 2025, was 60.50%, favorably impacted by the reversal of accruals for uncertain tax positions in the U.S. following an IRS audit resolution.

Segment-wise, the Food segment's gross profit increased by $2 million (1% on a constant currency basis) for the three months ended September 30, 2025, and by $19 million (2% on a constant currency basis) for the nine months ended September 30, 2025. This was attributed to lower operating costs and productivity benefits, despite unfavorable net price realization and lower volume. The Protective segment, however, saw its gross profit decrease by $8 million (6% on a constant currency basis) for the three months ended September 30, 2025, and by $35 million (8% on a constant currency basis) for the nine months ended September 30, 2025, primarily due to unfavorable net price realization and lower volume, partially offset by lower operating costs and productivity benefits. Selling, general and administrative (SGA) expenses decreased by $14 million (7% on a constant currency basis) for the three months ended September 30, 2025, and by $18 million (3% on a constant currency basis) for the nine months ended September 30, 2025, reflecting lower professional service fees, cost reductions, and productivity benefits.

Liquidity remains robust, with total liquidity of $1.3 billion as of September 30, 2025, including $282.5 million in cash and cash equivalents. The company's net leverage ratio stood at 3.5x, on track to reach approximately 3x by the end of 2026. Free cash flow for the third quarter of 2025 was $120 million, a 4% increase from the prior year, though year-to-date free cash flow was $201 million, down from $323 million in the prior year, primarily due to higher incentive compensation and tax payments. The company's refinancing of its 5-year revolving credit facility on October 31, 2025, and the inclusion of a new delayed draw term loan to refinance 2026 notes, extends maturities to October 31, 2030, enhancing financial flexibility.

Segment Performance and Strategic Shifts

Food Segment: Resilience and Strategic Rotation

The Food segment's performance in Q3 2025 demonstrated resilience despite persistent market headwinds. While net sales were relatively flat on a constant currency basis, the fluids and liquids portfolio, including LIQUIBOX, achieved volume growth above expectations, driven by a focus on service quality and dairy growth. This aligns with the strategic intent to drive conversion from rigid to flexible packaging.

However, North America continues to face challenges. Consumers are rotating into value grocery, leading to trade-downs to private label, different pack formats, and prepackaged solutions. This shift, for example, from fresh sliced deli counters (a shrink-back application) to pre-sliced deli meats (a roll stock application with a lower margin profile), impacts the product mix. On the supply side, U.S. beef harvest rates were significantly lower than anticipated in Q3 2025, down approximately 10.5% year-over-year, putting pressure on industrial exposed volumes. This U.S. cattle rebuilding is expected to persist into 2026, be relatively flat in 2027, and return to growth in 2028, with 2025 beef slaughter projected to be worse than 2024 by mid-single digits.

In response, Sealed Air is intentionally rotating into retail and foodservice end markets, applying the transformation playbook developed in Protective to its Food business, starting in North America. This involves rewiring the organization to connect end markets across commercial, R&D, and supply chain teams, supporting go-to-market changes, new innovations, and network asset optimization. The EMEA region has been a standout performer, demonstrating strong operating environment and share gains across its portfolio since late 2024.

Protective Segment: Turnaround Gaining Traction

The Protective segment's turnaround remains on track, showing improving fundamentals despite a subdued demand environment and cautious consumer. A significant milestone was achieved in Q3 2025, with material volumes inflecting to growth for the first time since 2021. This marks the first year-over-year adjusted EBITDA growth in this segment since Q1 2024.

The North American business has stabilized and is performing in line with the market, securing multiple 7-figure competitive wins at national accounts, largely in the fulfillment space. These wins are a direct result of the reorganized go-to-market strategy, which focused on minimizing churn, rebuilding customer and distribution partner engagement, and resetting the large account strategy. The company is now expanding these efforts to EMEA and APAC, aiming to upgrade talent, create efficient go-to-market strategies, and enhance distributor relationships.

R&D efforts in Protective are being refined to improve effectiveness and connect directly with customers, adopting a balanced approach between internal and external solution development. This is yielding better solutions with stronger product-market fit and increasing speed to market, accelerating the build-out of a substrate-agnostic portfolio. Innovations like the AUTOBAG brand 850HB Hybrid Bagging Machine, the fully fiber Jiffy and BUBBLE padded mailer, and the upcoming ProPad Mini tabletop paper system are key to this strategy. Network optimization is also a focus, evaluating the manufacturing footprint to improve cost positions and customer service.

Outlook and Forward-Looking Strategy

Sealed Air's management has provided a clear outlook for 2025, reflecting both confidence in its transformation and prudence regarding market uncertainties. The company continues to target the $5.3 billion midpoint of its tightened full-year sales range. Adjusted EBITDA expectations have been raised to a range of $1.12 billion to $1.14 billion, implying $274 million in the fourth quarter. This Q4 Adjusted EBITDA outlook anticipates continued operating discipline and ramping productivity initiatives, partially offset by lower volume and unfavorable net price realization.

Full-year Adjusted EPS is now expected to be between $3.25 and $3.35 per share, assuming approximately 147 million shares outstanding and an updated full-year tax rate of 26%. Free cash flow for the full year is reaffirmed at approximately $400 million, with a seasonal ramp-down of inventories in Q4 expected to drive stronger cash generation. Capital expenditure projections have been lowered to $175 million, reflecting increased rigor around capital deployment and refocused priorities aligned with transformation efforts.

Management acknowledges accelerating market pressures in Q4 2025, particularly in North America Food, with lower-than-anticipated volumes and further competitive pricing pressure. These dynamics are expected to be partially offset by tailwinds from a weakening U.S. dollar. The near-term implications of a potential U.S. government shutdown, specifically regarding Supplemental Nutrition Assistance Program (SNAP) funding, are being monitored, as they could exacerbate trade-downs among lower-income households. The outlook for 2026 will be shaped by further clarity on consumer behavior, the demand environment, and the timing of transformation initiatives, with a more comprehensive update expected in February.

Risks and Challenges

Despite the positive momentum from its transformation, Sealed Air faces several pertinent risks. Macroeconomic conditions, including softer global growth outlooks, muted industrial production, and a cautious U.S. consumer with decreasing purchasing power, particularly in lower to middle-income households, contribute to increasing uncertainty. The steeper-than-anticipated decline in U.S. beef production and its persistence into 2026 also poses a headwind for the Food segment.

Competitive pricing pressure, especially in the Protective segment, remains a challenge. The company is also exposed to fluctuations in foreign currency exchange rates, notably in Argentina and Russia, and changes in raw material pricing and availability. While mitigation strategies are in place for potential tariff impacts, the downstream effects on customer demand are difficult to predict. Litigation, such as the ongoing dispute with Water.IO Ltd, and environmental matters, including claims related to polyfluoroalkyl substances (PFAS), represent additional areas of potential financial exposure.

Conclusion

Sealed Air Corporation is executing a profound strategic transformation, repositioning itself for sustained profitable growth in a dynamic global market. By reorganizing into agile Food and Protective segments, the company is sharpening its customer focus, accelerating innovation, and driving operational efficiencies. The Protective segment's return to material volume growth and strategic wins, coupled with the Food segment's resilience and intentional shift towards high-growth retail and foodservice markets, underscore the effectiveness of these initiatives.

The company's disciplined financial management, evidenced by its deleveraging trajectory and upwardly revised earnings guidance, provides a solid foundation. While macroeconomic headwinds and specific market challenges persist, Sealed Air's technological leadership in integrated packaging solutions and its proactive approach to cost management and market adaptation are critical differentiators. The ongoing transformation, supported by strategic investments in R&D and network optimization, positions Sealed Air to capitalize on evolving industry trends and enhance shareholder value in the long term.