Yahoo Finance

Veronika Johnson

Thank you, Dustin, and good morning, everyone. Let's turn to slide 4 to review Sealed Air's first quarter performance.
The team executed well in the quarter, and we came in ahead of expectations. Net sales were $1.27 billion in the quarter, down 2% on a constant currency basis. Adjusted EBITDA in the quarter was $276 million, up 2% on a constant currency basis. Adjusted earnings per share in the quarter of $0.81 was up 4% as reported and 9% on a constant currency basis compared to a year ago. Our adjusted tax rate was 25.7% and compared to 25.9% in the same period last year. Our weighted average diluted shares outstanding in the first quarter were [$147 million].
Turning to slide 5. During the first quarter, volumes were down 2%, primarily on anticipated declines in Protective due to prior year business churn and continued softness in our fulfillment and industrial portfolios. Protective weakness was partially offset by modest volume growth in Food of less than 1%. Price was flat for the quarter, with Protective down 1%, fully offsetting marginal pricing gains in Food.
First quarter adjusted EBITDA of $276 million decreased $2 million or less than 1% as reported and increased 2% on a constant currency basis compared to last year, with margins of 21.7%, up 80 basis points. This performance was mainly driven by cost takeout and productivity efficiencies, partially offset by unfavorable net price realization.
Moving to slide 6. In the first quarter, Food net sales of $852 million were up 1% on an organic basis, primarily driven by pricing actions and formula pass-throughs, combined with marginal volume growth due to continued growth in our case-ready solutions.
The protein markets overall were flat from prior year and slightly worse than our initial expectations. While the US deepwater was better than expected, this was more than offset by reductions in pork and poultry.
From a regional perspective, volumes continued to grow in our EMEA, Latin American and Australian businesses, partially offset by flattish volumes in North America and declines in Asia.
Food adjusted EBITDA of $203 million in the first quarter was up 7% as reported or 10% in constant currency. Adjusted EBITDA margin was 23.8%, up 200 basis points compared to last year. The increase in adjusted EBITDA was mainly driven by productivity and cost takeout savings, partially offset by unfavorable net price realization.
Protective first quarter net sales of $420 million were down 8% organically, driven primarily by volume declines of 6% with growth in Asia and Latin America being more than offset by declines in other geographies and primarily North America. As a reminder, all of our large customer churn came from North America last year and will have fully ramped in the second quarter.
North America was where much of our transformation effort was initially focused, and we expect results in this region to improve throughout the year. EMEA continued to show signs of stabilization having its best quarter since 2021, with volumes down 1%.
Protective adjusted EBITDA of $74 million was down 18% in the first quarter as reported or 16% on a constant currency basis. The adjusted EBITDA margin was 17.6%, down 180 basis points from the prior year. The year-over-year decrease in adjusted EBITDA was primarily attributable to lower volumes and unfavorable net price realization, partially offset by productivity and cost takeout savings.
On a sequential basis, margin improved 280 basis points compared to the fourth quarter driven by continued productivity and cost takeout initiatives.
Now let's turn to free cash flow and leverage on slide 7. During the first quarter, free cash flow was a use of $12 million compared to a source of $78 million in the same period a year ago. The primary driver of the anticipated use of cash with an increase in incentive compensation and tax payments, partially offset by lower interest payments.
At the end of the quarter, our total liquidity position was $1.3 billion, including $335 million in cash and the remaining amount in a committed and fully undrawn revolver. Our net debt leverage ratio was 3.7 times, down from 3.9 times a year ago. We remain on track to drive net debt to adjusted EBITDA to approximately 3.0 times by the end of 2026.
Let's turn to slide 8 to review our 2025 outlook. During the first quarter, we generated strong earnings against sales that were slightly ahead of our expectations as we navigated a shifting landscape, executed business fundamentals and continued our ongoing efforts to turn around Protective.
We continue to operate in a low visibility environment, especially in Protective, and anticipate we will have better visibility into how tariffs are impacting our end markets and the translation into second half performance during our next call.
As Dustin mentioned, we are reaffirming our full year 2025 outlook ranges across sales, earnings and free cash flow. We see a softer volume outlook offsetting improved foreign currency in both Food and Protective, reflecting a slight shift in industrial and consumer sentiment. Foreign currency headwinds are now expected to be approximately 1% better than previously anticipated in our February outlook. Our net price realization assumptions across the total company trending relatively the same for the full year.
Looking ahead to the second quarter, we anticipate a sequential increase in sales in both segments, reflecting an improving trend within the Protective portfolio, and more favorable turkey and pork outlook than in the first quarter in Food. As a result, we expect second quarter net sales of approximately $1.3 billion, adjusted EBITDA of $270 million and adjusted earnings per share around $0.71.
We remain committed to restoring underlying fundamentals by executing in the market, progressing our transformation, navigating the changing trade policy and deleveraging balance sheet.
With that, Dustin and I look forward to your questions. Operator, we would like to begin the Q&A session.

Question and Answer Session

Operator

(Operator Instructions)
Ghansham Panjabi, Robert W. Baird & Co. Incorporated

Ghansham Panjabi

Thank you, Alfredo. Good morning everybody.
I guess, first off, on the comments on Protective volumes as it relates to progress that you're seeing over the past year. If we kind of zoom out, that segment had seen volumes down on a year-over-year basis since the first quarter of '22. So I'd love to hear some color as to what specific progress you're referring to as it relates to how the business is unfolding. And if you gave this, I missed it, but what were the volumes by vertical, industrial versus fulfillment?

Dustin Semach

Sure. Ghansham, and a pleasure for the question and to talk to you today. So a couple of ways I'll qualify that. One is we talked about volume being down roughly -- think of it as 6% kind of in Q1 and then some pressing impact on top of that. And if you go back to the prepared remarks, both in Roni's and mine, what we refer to is really around the wrapping effect of that churn.
And just for context, the large customer churn kind of fully ran out. Think of this as a piece of it, we would have talked about, which is like the Fill-Air business with Amazon. That happened in Q1 of 2024 with the last quarter. And so we've really minimized churn along the way. So no major customer churns since the first quarter of '24. And you've seen that wrap around to the fact now starting in Q2, which you'll see a sequential improvement of roughly 2 points relative to year-over-year. So we're down, think of it as 6% volume will be down 4%.
Also, if you go back to the commentary, if you look at -- if you go back to even '21, '22, every -- was down, pretty much every product line was down. Now you're talking about Asia showing growth. You're talking EMEA stabilizing, being down roughly 1 point. And again -- and you have LatAm growing as well. So really, what we've narrowed it down to is really North America, which is where we've been spending our time. The piece around the positivity is around the minimization of churn and a lot of the initiatives that we're doing when it goes back to the go-to-market reorganization.
Again, it's too early to call the ball, but the feedback we're getting relative to our distribution partners, our major customers, and I mean directly as I'm spending time with them, it's been overwhelmingly positive in terms of our approach. And going back to this whole getting closer to the customer, improving our service levels, improving business fundamentals, really tackling -- kind of blocking, tackling and doing it better, and it's working. And that's what we're seeing. And you're going to see it in the Q2 guide right now relative to Protective.
Going back to your question around fulfillment industrials, industrials have continued to -- our industrial portfolio has continued to outperform our fulfillment portfolio, and it has done so as well in Q1. But keep in mind, churn that I'm referring to, that's fully lapping. To give you an idea, if you go to Q1, the net six number is down 4% in industrial, down 9% of fulfillment. But all of that merch churn that we talked about in North America is in fulfillment, going back to the Fill-Air business in Amazon.
And so as you go forward, fulfillment gets a lot more positive, but begins to perform similar to our industrial specials have been performing along the way and to continue to improve. And so hopefully, that answers the question. But we're quite positive about the progress we're making and hopefully give you some insight into how we're driving it.

Operator

George Staphos, BofA Securities

George Stapos

Dustin, I just want to talk a bit on how you're measuring your customer improvement and whether you're doing Net Promoter Scores or anything to that effect? And how you're managing that and how you're trying to improve scoring with customers for all the right reasons? While at the same time, you're taking out cost, which is kind of a difficult balancing act, right? You're taking out, in some ways, people while also trying to improve your position with your customers. So how is that going?
And then broadly, if you could give us a view relative to where you sit today versus, say, when you were talking about fourth quarter, would it be fair to say that Protective is maybe trending a bit better than you would have expected relative to Food or vice versa? How would you have us think about that as we think about momentum in the second half.

Dustin Semach

Yes. Thank you, George, and I appreciate the question. I'll give it to you in the three parts, right? So the first is, yes, to customer satisfaction. If you think about going back even 1.5 years ago, two years ago, that was really the starting point to really go out there and get our customer feedback, which is something that had been lost along the way. And since then, we've repeatedly gone back and checked it. And beyond that, it's also just being out there in front of our distribution partners personally and with our customers and our executive team to be out in the field a lot more than they have been historically.
And so the combination of those three things are -- when you think about customer scoring, that's absolutely -- there's the analytical side of it and then there's the softer side of it, just actually being out in the field. And in both cases, that's how we're getting the feedback today to make sure that we're certain that things are improving. And the answer would be -- so far, the answer is yes. It is improving. It's not where it needs to be is. I don't want to leave you with that. There's still a lot more work for us to do to continue to do that, and that will continue to happen through the efforts that we're talking about.
On the balancing act, I wanted if you go back to the prepared remarks because it's a great question, this balance between how do you continue to drive effectiveness in the business and efficiencies, while at the same time maximizing growth. And it really comes from the starting point. Do you think you're organized effectively, structured effectively? Are you processes effective?
And so where are we focused, and if you go back to the prepared remarks, we've actually been investing back into Protective sales, right? So we've been putting more feet on the street, particularly in North America over the past past, I would say, 90 days has really started as part of our planning effort in Q4 and that we've executed across Q1. And this is really a restoration.
If I go back to prior cycles, there was areas where we touched -- I go back and think of it as four or five years ago, where feet on the street were touched as part of some of the restructuring process. That's not been the case this time around. And it's really about trying to find efficiencies in other areas of the business. A perfect example of that is we shared a significant portion of our back office operations to Manila. And as a result of that, we're able to take some of those savings and put it back into the -- to still drive net leverage in the business.
And so I still think there's plenty of opportunities across the business for us to become more effective and efficient. So it's not just about cost takeout for cost's sake, how do we actually drive that in a way that brings about organizational agility, speed to decision-making, reducing spans and layers, getting us closer to the customer. So it doesn't have to be perceived as a negative or impaired growth.
And then your question on the last and the third part around is Protective trending better than original thought or relative to Food. And I would say right now, both businesses are kind of performing in line with our expectations kind of coming into the year. We talked about a drop in the second half, but these transformational efforts of Protective have been ongoing for the past year, and they've been waves of implementation and execution. And from that perspective, I feel good about where that's at.
Keep in mind, over the past couple of months, we've actually accelerated a number of those initiatives. But the benefit of that acceleration will happen more in the second half. So I feel good about some of the language we've used around urgency and pace and how do we drive those improvements. So I do feel that stepping up, but the strategy has been the same, and it's just about how quickly we can pull forward those results, and that's what we're focused on.

Operator

Matt Roberts, Raymond James.

Matt Roberts Roberts

Hey, good morning, Dustin Ron and Mark, thanks for taking the question.
On the price side, you noted that net price was relatively unchanged. But maybe in each segment. Protective, are you seeing any changes in the competitive landscape? Or how do you think about price, particularly now that the areas where you saw churn out of the portfolio? Similarly on food, any changes or impacts from underlying resins? And it seems like everybody seems to be gaining share in Food. So any changes in the competitive environment? How that impacts price through the rest of the year?

Dustin Semach

Matt, great question, and I'll work through it step by step. So what we mean relatively unchanged, it really is. Like to give you an idea, we were down in our prior guidance on roughly 63%, now we're down roughly negative 57%. So it's improved slightly, but really not material in the full year. And the composition actually by segment is pretty comparable as well.
So if you remember going back to February, what we talked about is that a majority of the negative price realization is in Protective for the reasons we've discussed in the past, due to a lower-for-longer volume environment in that business and just the competitive pressure, particularly in some of the areas like Fill-Air, et cetera, where, when Amazon decided to lead that business, it created a lot of supply in the market and put pricing pressure in that business. And so that's -- and all of us, whether you're IPG or StorePack, we're all feeling the effects of that decision.
And so going back to -- so the dynamics really haven't shifted and they're kind of in line with expectation. There's no been real shift in direct material inflation, nondirect material inflation. And if you get back to resins specifically, what I would say is that -- and this maybe dives a little bit into that tariff conversation in terms of the questions around that, is that right now, particularly with the recent change in China where they made an exemption for polyethylene, to be able to freely trade without being tariffed, it really kind of -- PEs kind of settled out right now.
And you're seeing maybe even some flattish sequential movement right now, but it's still inflationary for the full, year. which is baked into our formula pricing. So that's not really changed much. It hasn't been a material impact. And with that change, you see the PE market kind of settled out. Because there was a period there where we were concerned there may be oversupply in the US market. Just as a reminder, for polyethylene, most of those are produced kind of domestic production for domestic consumption.
The area where we are seeing some pressure is in specialties. And a lot of those right now today are sourced outside of the US And obviously, with that, it could have some inflationary kind of indirect inflationary pressure relative to tariffs. But so far, we have not really experienced that. We don't see an impact, at least in Q2, at this point that's material. And so those are the areas that -- and that's why net price realization right now is relatively the same.

Operator

Jeff Zakukas, JPMorgan

Jeff Zekauskas

Thanks very much. Your sales were down year-over-year, but your gross margins expanded nicely. Why is that?

Dustin Semach

Jeff, pleasure and good question. So there's a couple of things. If you go back to really to the prior year, we continue to drive productivity initiatives into the into the business and cost takeout, right? So if you go over the prior year, we were kind of on track to obviously exceed the $150 million, $160 million we talked about as our cost takeout program. We're on track this year for $90 million. And what you've seen is that a lot of that goes into cost of goods sold, right, in terms of focusing on improving our cost positions in the business, in both businesses.
And so that's been really the -- as we've kind of talked about it over the past three or four quarters, and we're continuing to focus on it. What we're doing now as we think about the second half is actually looking at and saying, okay, is there more opportunity in the business beyond the $90 million that we really have baked into our outlook at this point in time. And that's where we're focused, and that's what's been able to drive our improvements.
And if you get into specifically why is that the case, it's optimizing production, optimizing scheduling, being able to try to minimize impactful supply base in terms of negotiation with suppliers from a pricing standpoint. It's everything from network optimization. I mean it's a whole swath of activity that we've been undergoing over the past over the past year to really drive that outcome. It's a great point, and we've been really pleased with the outcomes. So thank you for the question.

Operator

Philip Ng from Jefferies

Philip Ng

Congrats on a solid quarter in a choppy environment. So Dustin, I guess to kind of kick things off. Can you give us a little more color on the order patterns in April and May for Food and Protective? It sounded pretty steady, which is pretty encouraging, particularly on Protective. Appreciating at the shorter cycle business, how much line of sight do you have? And then certainly, you sell an element of that business through distribution, so that adds to element of visibility. But what are your channel partners saying as well?

Dustin Semach

Yes. So it's a great question. I would tell you that for the most part, whether you're in Food or Protective and you're talking to our end customers, their Q1s were in line with expectations in terms of their understanding, and most people are focused on what does that mean for the second half. So we actually haven't seen, going back to the prepared remarks, it was intentional in there and -- Phil, around -- we have -- our Q1 was really in line with expectations. We were ahead in a couple of areas.
And then if you go to April and May, I mean, May is obviously very early at this point, but April has been largely on track. I would say the businesses where we're closely watching, potential trade downs in that beef area is a real close watch out. And you've seen some of the large industrial processors begin to hone in on that in the US But it's really a US specific commentary that I make in that comment around. But so far, Protective for April is in line with our expectations. And obviously, May, it's too early to call right now at this point, but we're quite pleased with where we're at.
Now it doesn't mean that we're not being cautious or being thoughtful about the second half. And going back to your question about distribution partners, the feedback I've gotten so far is that their Q1s were also kind of in line and on track, and April is kind of trending line where they think it needs to be.
And -- but again, I go back to it, they're also cautious about the second half and trying to figure out which industries may be affected and what does that mean to overall demand and what does it mean by geographical composition. And those are the areas that we're going to be focused on in the second half, beyond what can we do to mitigate. And so if you think about it over the next couple of months, I think a lot of this will play out, and we'll get a lot more it across the entire ecosystem, whether it's our distribution partners or ourselves directly or our direct customers.

Operator

Michael Roxland, Truist Securities

Michael Roxland

Yeah, thank you, Dustin Rooney and Mark for taking my questions
I'll echo a big congrats on a good quarter despite the backdrop. Dustin, you mentioned that the Protective turnaround is going to take some time to realize, and you've been working on it actually, it sounds like the last year or so. But in your transition to see the Board stressed that they have a sense of urgency around timing. So given the fact you've been working on the Protective turnaround for about a year, can you help us frame what the timing looks like on a go-forward basis? Is it nine months, 12 months, 18 months?
I'm realizing it's a delicate balance between expediency and ensuring that the changes you're making are the right ones. But just trying to get a sense of -- help us frame how we should think about the Protective changes and the timing for the change to occur? And then one last one quick one. Just realizing the Protective has multiple portfolios across many geographies, is it possible to separate some of those portfolios that you determined maybe are not core without negatively impacting the remainder of this? Thank you.

Dustin Semach

Mike, it's a great question. So a couple of things, because I'm going to contextualize it in two ways because you talked about the urgency and then you're balancing the commentary in the script around taking time to realize. So -- and then you're just posing that all what does that mean in terms of translating to results. So you got to park to the side to the second on the macro row backdrop in some of those areas.
So what's happened? The question is really you go back to the transition to CEO and what have we been doing differently. We've really been focused on accelerating the transformation programs that we've had within that business. We talk about it in the script, and we hit on a couple of different areas. But one of them is -- again, we talked about the North American go-to-market transition. The focus now is translating some of that benefit into our other geographic regions, right? That's an acceleration that's happened over the past, say, 70 days.
And then if you go into this kind of idea of having a fit purpose cost model to continue to drive effectiveness and efficiencies in the business, also giving us the ability to reinvest in growth and continue to maintain operational leverage as we work through the deleveraging the business from a volume perspective. That's also relatively new and also being accelerated as part of this effort. And then beyond that, just -- we've talked about it briefly, but some of the enhancements in our leadership. That piece of it continues to be underway, and I think that we'll be in a much better position, think of it over the next 90 days to six months.
On the last piece, which we didn't really touch on the script because a lot of that work is still ongoing and we've highlighted in the past, is really around -- and I'll touch on your point about portfolio optimization. But when you think about this idea around the fiber side, how we're approaching mailers, how we're approaching our paper systems, how are we thinking about our APS business, particularly in our hybrid auto bagger bringing to market now over the summer, we feel really good about those areas. And that portfolio relative to fulfillment and making sure that we're more substrate agnostic, that we're making progress in that area, and that's an area of acceleration.
So when you put those things together, and you think about the business over holistically, we're already demonstrating that if you look at our perception of quarters that we have currently in our guide, you're already talking about being down roughly 6%, being down 4%, and that progression will continue throughout the second half. And we're still targeting that, take outside the macro backdrop for a second if there's something cyclical impact associated with that.
But right now -- and you're seeing this, so I'll go back to is a proof point, is that you're seeing some of these outcomes already being driven. And another highlight, just to reiterate the commentary, which is on EMEA being the best quarter we've had since 2021. And whilst down 1 point, it's a significant improvement over the past, say, two years. And our Asia business is growing. It's really North America that we're really focused on improving that bottom line.
So to answer your last question around specifically the portfolio optimization, at this point in time -- and just as a reminder, we have -- we're still the largest protective packaging business in the world by a factor of almost two. And it's the breadth of our portfolio, the strength -- that drives the strength of our relationships and distribution.
And we -- it's an area that, at least at this point in time, outside of the smaller things that we prune, if you think about EVOH fill business, if you think about (inaudible), if you think about a couple of these areas that were smaller we've already called out, we don't see large portfolio shifts at this point in time. We're really trying to optimize the business that we have, particularly in this current M&A environment.

Operator

Josh Spector, UBS.

Josh Spector

Yeah, hi, good morning. I had just a couple of follow-ups on Protective. First, can you say explicitly what your volume assumption is for the second half? I'm not entirely clear if you've updated that or you're saying you're going to update that next quarter relative to the 4% decline you're assuming in second quarter. And then somewhat related, I guess, with tariffs. I was just curious on the equipment side, how domestically sourced those materials and parts are? I guess, more explicitly, how much of that comes directly from China? Is that a risk on cost and delaying or pushing out some deployments for you guys?

Dustin Semach

Josh, this is Dustin. And the equipment question, just to be specific, are how about Food and Protective, or Protective, or both?

Josh Spector

I was asking more about protective, but if it's easy to answer for both, go ahead.

Dustin Semach

Yes. So to be explicit about the second half, we're down about 1 point in -- in Protective. And so going back to the question on equipment, so again, on the tariff piece of it, for the most part with the USMCA exemptions, that's largely significantly reduce our exposure to any potential direct tariff impacts. There are some in equipment, but we right now we see them as relatively material, and that we're able to manage through sourcing and changes that we can put in our supply chain.
So at this point in time, we don't see a material impact in terms of being able to place or drive equipment sales outside the demand environment. And our equipment business, to answer the question directly, right now is still in line with our expectations. And just as a reminder for everyone, holistically, it's about -- it rounds to about $0.5 billion, 50-50 between equipment sales and parts and services. And split 50-50 between both businesses.
And so -- and right now, the first quarter, to give you a sense in both businesses, our book-to-bill was above one, kind of indicating some of the strength in the order intake. And so hopefully, that answers the question. So quite positive about that with there.

Operator

Gabe Hajde, Wells Fargo.

Gabe Hajde

Dustin, Ronnie, good morning.
I wanted to go to margins, and you guys kind of came in 100 bps above our model on a consolidated basis. Maybe drilling in a little bit on Food, that was where some of the outperformance was. And I appreciate that things can move around based on timing of resin recovery and raw material movements, et cetera.
But just higher level, Dustin, as you look at the business and the value-add that you bring to your customers, are you performing in line with where you would expect in that business? Was there anything peculiar in the first half of '25 that would kind of prevent you from being in that range on a go-forward basis?

Dustin Semach

It's a great question, Gabe. And again, what I would tell you goes back to some of the prior commentary. If you look at our guidance right now, I mean, we're expecting to be in the -- for the Food business overall holistically, in that -- think of it as 23 points of margin range, which is obviously kind of in line with how we performed in 2025 and we demonstrated again in Q1. So I don't see anything peculiar in either year that would not lead to be long-term sustainable margin growth.
There is a -- or in terms of that 23 percentage point range, we get the question often times about how much more leverage you're trying to drive in that business. And right now, this has been really on growth. And so as you think about stepping that margin up, that we don't really see it from here in terms of having like this long growth ramp relative to margin expansion, unlike Protective where there's more room to run.
And so right now, we're focused on how do we find areas to step up our growth kind of above market, which is where we've been performing kind of here recently in terms of market growth rates. Think of it as pre '24 and '25, and that's our focus right now.
The question is how have we been able to drive, that. It goes back to some of the prior commentary, a lot of that is really just putting -- driving productivity in both the businesses and cost takeout. And there's nothing, at least at this point in time that would indicate we're not able to do it. On a positive note as well, if you look at this year, our net price realization is -- while it's not positive or 0 yet, it's still is still relatively low compared to prior year. So you're seeing that gap begin to narrow, which obviously makes it a little easier of kind of managing the business going forward, where pricing kind of help offset a lot of that inflationary impact.

Operator

Stefan Diaz, Morgan Stanley.

Stefan Diaz

Hi Dustin, Ronnie Mark, thanks for taking my question.
So you originally, and I guess still do, sort of expect a second half recovery in Protective volumes as you fully lap some of the customer churn that you mentioned earlier. But your original guide, I guess, was given before Liberation Day and before the escalation of the US-China trade tensions. Maybe if you could just give us your thinking about sort of holding that guide. And maybe to the extent you have the ability in your Protective business, how much of your international Protective exposure is for importation into the US?

Dustin Semach

Stefan, all great questions. There's a couple of things that I will comment on on this particular one. Keep in mind that when we talked about the outlook for the year, we are seeing some volume pressure in Protective, and we called that out and the numbers I quoted already reflect that. So while the guide overall is intact, we're really seeing some modest volume softness based on what we can see already today and think of how that's going to cascade and proceed throughout the year, and then that's being offset by a benefit in FX.
And it's a moderated FX outlook is similar to others, where we don't think the yields of these other currencies will remain at the levels they are out today in terms of devaluation, in terms of the US dollar weakening against them. And so that's guide is constructed. And so you see some slight volume loss and kind of reductions in Food, and you see it some in Protective kind of reflecting that uncertainty in the marketplace, being offset by an improved FX outlook.
So in terms of international exposure, paring through this lens and really understanding Protective packaging materials, what's coming in from import, export, how does that eventually make it to the end user and what's being affected by, as an example, the reduction in potential Chinese imports into the US, that area is an area where we have limited visibility. Other than to say this, which is, if you think about our business, a majority of it is obviously in industrials, which is going to have far less exposure from that particular perspective.
And keep in mind that most of our business outside of the import export is domestic production for domestic consumption. So it is hedged to some degree, geographically from the tariff impacts themselves and the demand localized to those economies. And so right now, at this point in time, we haven't seen a change in buying patterns, change in order behavior. No living cautiousness relative to saying, hey, we could let's destock for a bit and wait and see what happens before we restock. We haven't seen any form of that, at least at this point in time.
And then going back to the prior commentary, because it's an excellent question, this is an area that we're going to continue to pressure over the next two to three months to really understand if there's back half. Because going back to the prepared remarks, there is limited visibility in Protective. It's not just for us or for our distribution partners, and to some degree, the diversification of the business geographically, product-wise, and then just diversity relative to customer base.

Operator

Christopher Parkinson, Wolf Research.

Christopher Parkinson

Great, thank you so much for taking my question. Can you hit on a little bit on the trends that you're seeing in red meat markets? If you could just parse out international trends versus the US and how that flows in not only to your second half assumptions, but also just intermediate to long term in terms of your competitive positioning? Thank you so much.

Dustin Semach

Chris, all great questions. And so going back to some of the prepared commentary, I would say, in general, market expectations have largely been the same. If you go back to February to today across the protein markets, was an exception of really in the US And so in the US is where -- the question has been around the US beef cycle.
In Q1, we had some a little bit of a flip where beef was better than we anticipated similar to last year, where kind of every quarter, industrial food processors were still taking advantage of market pricing, continuing to keep the herd low, but effectively slaughtering everything they could along the way, where you've seen that dynamic kind of play out in Q1, but there was an offset this time relative to turkey and to pork.
We're going to see that reverse going back to the remainder of the, year where we do believe that to come back and help offset some of that weakness that we do perceive to be in beef. And what we've talked about, going back to the commentary, and you've seen this in some of the other industrial food processors where there is a perspective that with the impacts we're having potentially on the consumer it may apply pressure on premium beef purchases, and you start working your way down, trade downs and trade-outs and working our way down that spectrum.
We're well positioned to make sure to take share across those product lines. So today, we have great share across most of those areas. So it's not that we're not in a position, but there is a potential mix impact that we would need to mitigate throughout the second half as those trade downs to occur. But again, it's a US market.
If you go to the international markets, the Australian beef cycle, Latin American beef cycle, continue to be very strong. We are seeing some shifts in exporting. So if you think about, as an example, in the US, you're seeing lower exports to China and you're seeing that demand being picked up by Australia, by Brazil and other geographies. But again, we're well positioned in all these geographies that pick up that demand.
It's just the big area that we're focused on is North America. And really looking at how this market plays out in, because it does still, being roughly 65% of the Food, it's hard for the other markets to offset it. But if you go back to the commentary, those markets outside the US continue to perform incredibly well.

Operator

Arun Viswanathan, RBC Capital Markets.

Arun Viswanathan

Thanks for taking my question. Hope you guys are well. Congrats as well. Congrats on the Q1 there. '
I'm just curious on the guidance. So it's not like you've been -- understanding there is a lot of -- out there. But I guess have you seen any slowdown in maybe in Food volumes, you continue to outperform there. And maybe if I asked another way, in keeping the guidance as is, are you saying that there's maybe some pull forward? Or mainly just on that kind of 9% swing in volumes that you've kind of maintained your guide and just building in some conservatism?

Dustin Semach

Yes. All great questions. And so a couple of things I would say. One is going back to the question around kind of the first quarter and then what we're seeing in the month of April and the question around pull forwards, there was, I would say, in Q1, very minimal pull forwards, particularly in our Canadian business, where you saw some customers being concerned around the current tariffs that were impacted, but this is really de minimis relative to the overall kind of performance for the company.
And so in terms of slowdown overall, we haven't really seen a slowdown in the business. Other than I would say, the concern around premium beef and those cuts, and that's more a recent phenomenon that we're looking out for. But in general, we haven't seen any material change.
The concern on is really what's to come, right, relative to the economic outlook in the second half and what can we do to mitigate it if those outcomes do play out the way they they may. And that's where we're focused right now. But this is the challenging part of where we sit today, is just that the business itself for the first quarter as well as kind of heading into April has been performing really in line with expectations.

Operator

Edlain Rodriguez, Mizuho Securities.

Edlain Rodriguez

Okay, thank you. Good morning, everyone.
I mean just a quick one for me. If we see supply chain and other costs increasing because of tariffs, do you believe like you're positioned well to raise prices to pass through those costs? Or do you think you need like stronger volume to be able to do that? And also, which segments will have like an easier or harder time to pass through those costs?

Dustin Semach

Again, I was waiting for the tariff question. So I'm glad I got it here. And so a couple of things I would tell you around the tariff specifically, is that, in general, with the change with USMCA being exempt, that really minimized our exposure across both businesses.
There's more exposure in Protective -- excuse me, in Food than Protective. But in general, right now, keep in mind our Food business, contractually, in many cases, we can push through the price if necessary. But we see it relatively minimal.
I mean I don't want to overplay the exposure we have in each business. Right now, it's relatively minimal in both Food and Protective. And as we mentioned in the script, we, at this point in time, we believe we can mitigate whatever we need to through pricing actions and or supply chain actions. And that's the supply chain we've been -- we've had in motion really since November and have really continued to focus on that over the past four, five months.
The other area I'll leave you with is that the one that's kind of -- to play out. I think we got the question earlier, which is around how will resins perform in the full year. So we're highly focused there, and managing that with our suppliers. And seeing, as an example, opportunities where we may be getting a particular specialty from another country, but they have assets in another country where can we get it produced there to help mitigate it as an example.
Same thing for our equipment business, while there may be some impacts on this question came up earlier, we're looking at ways to source the different parts and components from other areas. And right now, at this point in time, we see a path in many of these cases to be able to do that. It's just a question of when, timing, et cetera. And also keep in mind that the trade policies themselves have evolved quite a bit already, and we expect that evolution to continue throughout the second half. So to some degree, it's not a -- it's not quite stable yet.
But anyway, I'll leave you with that, is we feel really good about in both cases. And to your question around do we need the volume? The answer is no, right? Because in most cases, we're in a similar position relative to our competitors. And so if one has to price, we'll probably most like you see the market price.

Operator

At this time, I am showing no further questions. I would now like to turn it back to Dustin Semach for closing remarks.

Dustin Semach

I'd like to thank everyone for joining us this morning. I look forward to updating you over the coming quarters on our ongoing transformation and how we will continue to successfully navigate the environment.
We have weathered similar challenges before and learned lessons that made us more resilient and prepared. From navigating past economic cycles to the turbulence of COVID-19, our business has demonstrated strength, resilience and adaptivity. This challenge is no different, and I'm confident that we will navigate the landscape accordingly.
I'd like to close by thanking the global Sealed Air team, you continue to focus on what's more important, delivering out for our customers day in and day out and each other. Thank you.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.