President and Chief Executive Officer at Sealed Air
Thank you, Brian, and thank all of you for joining our Second Quarter 2022 earnings call. Starting on Slide 3. The graphic is showing where we are taking packaging with automation, digital and sustainable solutions. We start with our purpose. We are in business to protect to solve critical packaging challenges and to make our world better than we find it. This enables our vision to become a world-class digitally driven company automating sustainable packaging solutions. Our purpose and vision drive value creation for our people, customers and shareholders. On today's call, Chris and I will discuss our Q2 results and 2022 outlook.
I'll first recap our quarterly performance and then provide a deep dive into our SEE sustainability strategy. After that, Chris will review in more detail our financial results and our 2022 outlook. On Slide 4, you can see we delivered strong sales and earnings despite sustained inflationary pressures and a challenging global operating environment. Our SEE Operating Engine continues to perform.
In the quarter, net sales were up 7% to $1.4 billion and adjusted EBITDA was up 12% to $293 million. Adjusted earnings per share of $1.01 was up 28% compared to a year ago. Free cash flow through Q2 was a source of cash of $94 million. We continue to invest in our global operations to drive growth and increase productivity.
On Slide 5, we share our SEE Operating Model where we highlight our growth targets driven by automation, digital, and sustainability, which are fueling our SEE Operating Engine. We leverage all three into our innovative solutions to create customer value with attractive returns. Our SEE Operating Model highlights our growth targets through 2025, and as well as our actual performance over the past four years. We aim to deliver 5% to 7% annual sales growth over the next three years.
We're targeting adjusted EBITDA growth at 7% to 9% and adjusted EPS growth of greater than 10%. We've updated our SEE Operating Model for free cash flow conversion, defined as free cash flow divided by adjusted net earnings to be greater than 90%. We will continue to accelerate investments, expecting capital expenditures of approximately 5% of sales each year.
Let's turn to Slide 6 to take a look at our market-driven solutions and how they create value for our customers using automation, digital and sustainability to drive growth faster than the markets we serve. We experienced solid sales performance across our diversified portfolio despite persistent supply constraints as well as inflationary and macroeconomic headwinds. Our strongest growth in the quarter was with Liquids & Fluids, which was up over 30%, driven by food service recovery and our new flexible pouch solutions. Our auto pouch system coupled with prismiq digital printing technology is creating an ecosystem that help customers automate food safety, streamline inventory management unlock new capacity, and improve product yield. In consumer retail and fulfillment markets, we experienced a reduction in volume as our customers are quickly throttling back their own inventory levels.
I'd like to highlight the launch of our Bubble Wrap paper bubble mailer. You can see the illustration of this product on the right side of this slide. The product is made with recycled and renewable materials and is curbside recyclable while living up to the Bubble Wrap brand promise is also smaller and lighter than boxes, which reduces shipping costs in dimensional weight. Our paper Bubble Wrap mailers will include innovative digital packaging features and will be expanding globally by early 2023.
We are relentless in designing and delivering solutions that maximize food safety, minimize waste, protect goods, and create productivity savings for our customers. In Q2, automation sales were up 5% year over year in constant dollars, driven by Auto Box and AUTOBAG. Customers continue to embrace our value proposition of automation to address labor scarcity, productivity, quality and employee safety. We're on track to achieve approximately $500 million on automation revenue for the year.
Though food placements in the second half will continue to be pressured due to various supply constraints and impacts from economic sanctions imposed on Russia. Our digital business continues to grow at an accelerated pace. In Q2, we saw almost 400 customers come online. We more than doubled online revenues in Q1 and we continue to be on pace to have more than 15% of our global business transacting globally by the end of this year. Digital packaging is creating customer demand after our launch of prismiq last quarter.
Let's turn to Slide 7 for an update on SEE Automation. As we continue to share with our SEE Operating growth model and in our previous earnings calls, we are looking to double our equipment business in the next three years with increased investments internally and through strategic acquisitions. As you can see in our updated SEE Automation strategy, we're looking to take sea automation to over $1 billion in the next three years with both organic and inorganic investments.
Our strategy to allocate capital is purpose-driven. And we have a pipeline of potential acquisition opportunities to accelerate our journey to a digitally driven company automating sustainable packaging solutions. We have our own SEE proprietary playbook to take acquisitions to successful outcomes. The playbook has proven its value during the last three years with the APS acquisition, where we created significant value to our shareholders. We continue refining it with real-world experience in searching for targets with win-win value creation power. There are several potential acquisitions within our space where M&A can create meaningful synergies and drive our profitable growth.
Turning to Slide 8. We'll now take you through a deep dive on how we see ourselves as a sustainable company. We are focused and determined to be a world-class digitally driven company automating sustainable packaging solutions. Our approach combines automation, digital, and sustainability which positions us to drive efficiency within the operations of our own business and our customers. We're enabling product identification and traceability from products sourced to the consumer home, reducing resource waste across the value chain, accelerating circularity through recovery and recycling, and decreasing greenhouse gas emissions in our own operations and at our customers to mitigate climate change. We call this the SEE net positive circular ecosystem, designing, developing, in deploying automation and digital packaging solutions that have a positive impact on our stakeholders and society.
One of the key components of this circular ecosystem is collaboration. We lead and engage in partnerships that are reshaping the future of the industry. By collaborating with organizations such as the Alliance to End Plastic Waste, Closed Loop Partners, and SEE Venture Investments like plastic energy, we are creating our circular future where packaging never becomes a waste. Last year, we collaborated with a key resin supplier, SABIC, on a circular demonstration of flexible plastic packaging with the leading UK retailer for cheese. We are expanding the use of certified circular materials in our product solutions globally. Earlier this year, we partnered with ExxonMobil advanced recycling solutions about a key collaboration with a major grocery retailer in the US to drive circularity of flexible plastic packaging used for fresh proteins.
Now let's turn to Slide 9. Why do we call it net positive? As you can see, the integration of our solutions generates economic, environmental, and social benefits. Our solutions create a multiplying effect where the beneficial impacts far exceed the investments in those solutions. Our customers benefit from materials efficiency productive packaging processes and more effective distribution of their products.
Society benefits from essential packaging that enables access to safe and fresh food with less waste and spoilage. The producer benefits from preventing damage to products during transport, retailing, e-commerce or storage. Our ecosystem allows for recovery materials after use driving the circular economy for packaging. SEE benefits by getting recyclable and reusable material so that we can offer the best solutions at the right price and make them sustainable. Our SEE net positive circular ecosystem will make our world better than we find it.
Moving to Slide 10, let's talk about some of our sustainable solutions that underpin our net positive circular ecosystem. Our packaging solutions are designed to meet the current and anticipated needs of our customers and position them to achieve their sustainability goals. We are material agnostic in our solutions. We integrate materials and equipment with advanced technologies to drive customer benefits. We offer a wide range of fiber, plant-based and plastic material solutions that minimize waste, reduce resource use, and overcome labor challenges. By enabling circularity, we lessen reliance on virgin materials for both packaging and equipment expanding advanced recycling capabilities, like we have proven through partnerships with Exxon, SABIC and Plastic Energy allows essential packaging to be recovered and reused for demanding applications such as food packaging, while enhancing safety and performance.
We are intensely focused on reducing our own greenhouse gas emissions and working hand in hand to reduce those of our customers while avoiding emissions associated with wasted or damaged products. For example, our ability to extend the quality of life of foods such as fresh meats from days to weeks while ensuring package integrity through distribution allows customers and retailers to avoid significant waste. By eliminating waste, our customers reduce their greenhouse gas Scope 3 emissions.
Let me now turn to Slide 11. We effectively design, develop, and deploy integrated solutions that have a positive circular impact on our stakeholders and society, it starts with us and how we operate. Here are some of the metrics we are using to track our progress on our journey to creating and transforming to SEE net positive circular ecosystem. We pledge that by 2025, 100% of our solutions would be designed to be recycled or reused and contain an average of 50% recycled or renewable content. We are on track to meet that pledge.
We have ambitious internal goals to improve our operational efficiency by 2030 in key areas such as energy, water, greenhouse gas emissions, and landfill diversion of our manufacturing waste. We're making steady progress against all these goals. SEE is leading our industry to net zero in our CO2 emissions from our operations by 2040. For example, we have a picture of our Madera, California manufacturing facility where we have installed more than 10 acres of solar panels and battery storage. The panels will provide 99% of the electricity for that facility. This is the first plant in SEE that is powered with on-site renewable energy. We are a sustainability company.
I will now pass the call to Chris to review our financial results in more detail.