Edward (Ted) Doheny II
CEO & President at Sealed Air
Thank you, Brian, and thank you for joining our call today. Today we'll discuss our Q4 and year-end results, our 2023 outlook, reinvent SEE 2.0 and our acquisition a Liquibox. After that, we'll open up the call for your questions.
Starting on Slide 3, the graphic is showing where we're taking packaging with automation, digital and sustainability solutions. We start with our purpose. We are in the 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 company partnering with our customers on automation, digital and sustainability packaging solutions.
Moving to Slide 4. We're excited to announce that on February 1, 2023 earlier than originally anticipated we completed our acquisition of Liquibox, a global leader in sustainable packaging for the fluids and liquids industry, and the pioneer innovator of bag-in-box solutions. Fluids and liquid is our fastest-growing and highest-margin product-line within our CRYOVAC portfolio. This is a fast-growing attractive market for us as flexible packaging is disrupting the rigid container market. Liquibox springs to see new competitive capabilities and is highly synergistic with our existing business. The combined Liquibox and CRYOVAC business in 2023 is expected to exceed $600 million, representing more than 10% of our portfolio. Our plan is to turn the fluids and liquid business into a $1 billion vertical by 2025 with an operating leverage of over 40%.
Liquibox will enable us to open significant new opportunities for growth in areas like ready-to-drink liquids, wine and spirits, consumer packaged goods, quick-service restaurants and other attractive spaces as the best suitable and cost-effective alternative to rigid containers. The combined business will leverage upon CRYOVAC technologies for freshness and shelf-life extension, broad market access and global footprint.
To the question of why now, we've been investing in this attractive space for quite some time. Our team identified Liquibox as a prime target in our M&A pipeline and the most coveted asset in the fluids and liquid space. As the window of opportunity was getting closer, we pre-empted a potential auction process. We quickly close the transaction within three months, two months earlier than originally anticipated. I've appointed Emile Chammas, to lead the fluids and liquids vertical, deploying our proprietary integration playbook, delivering on our target revenue ambitions of greater than $1 billion and achieving cost synergies of approximately $30 million before year three. Under Emile's leadership SEE's and Liquibox's cross-functional teams are highly energized to implement the plans they have been jointly developing.
Let's turn to Slide 5, which highlights how we're moving to be market-driven, customer-first company, fueled by our iconic brands. Our solutions focus on automation, digital and sustainability, create value for our customers by improving their productivity, sustainability and enhancing their competitive advantages while allowing SEE to deliver growth faster in the markets we serve. Our digital online sales have now ramped up to 10% of our total sales in Q4, doubling that from Q3. This digital transformation will be a driving force behind the evolution of our go-to-market strategy in source of new innovation, while enabling us to reach more customers effectively and efficiently.
Our online sales platform, MySEE empowers us to reach new customers and new geographies for highly profitable BUBBLE WRAP Inflatable solutions. In the quarter we converted two of our largest distributors to online partners to make this happen. Our CRYOVAC's fluids and liquids business grew over 20% in 2022. Now with the addition of Liquibox, we expect this new vertical to be over 10% of our portfolio with a 40% operating leverage. The fresh proteins we saw retail going down in Q4 driven by declining customer spending. Consumers are trading down from premium proteins and customers are working through excess inventory.
Leading with SEE automation, we were able to win with major customer conversions. Fulfillment, industrial and especially electronic markets were significantly down in Q4, destocking amplify this trend. The outlook for these markets is to stay challenged in the first-half with a rebound in the second half of 2023. We plan gains from new innovations in automation that were constrained over the past 24 months. Following our investments to double capacity, including our new developments in fiber-based solutions we're well-positioned for growth in the second-half of 2023. We're excited about the recent launch of our new line of paper BUBBLE WRAP mailers and high-recycled content content BUBBLE WRAP filler solutions.
Moving to Slide 6, following, the success of Reinvent SEE we now advance to the next phase of our transformation with Reinvent SEE 2.0, moving from the best-in packaging to a digitally driven world-class automated solutions company. Starting in 2018 Reinvent SEE built and solidify the foundation for the next phase of SEE's journey through development of the SEE operating model and our growth platforms, including leading with automation, digital and sustainability. Reflecting on the last five years, we've met or exceeded our operating model targets, sales growth has compounded at 5% versus are 5% to 7% target, adjusted EBITDA has been 8% versus our targeted range of 7% and 9%, adjusted EPS growth has compounded at 18% versus our goal of over 10% and we've averaged 89% free-cash flow conversion over the last three years.
2022 was challenged on free-cash flow with the building of working capital as we fought through supply constraints and volume headwinds. Reinvent SEE 2.0 focuses on high-quality, profitable growth and improved productivity. The Liquibox transaction accelerates our growth platforms, highlighting our transformation from product to customer-first solutions approach. Our digital transformation will empower us to attack new areas of opportunity and will drive profitability through accelerating the use of automation in our own operations. By moving the business online, we'll focus efforts to grow faster than the markets we serve through a simplified, more digitized organization, reducing our cost structure by $35 million to $45 million over the next 12 to 18 months.
Let's now discuss how Reinvent SEE 2.0 will fuel our SEE operating engine. Turning to Slide 7, we've updated the SEE operating model out of 2027 with Reinvent SEE 2.0 targets. On the left-side of the slide we outlined SEE operating model growth assumptions. In 2023, we expect a flat growth performance despite a 3% market decline. The downturn in the first-half will be recovered by a strong second-half. Liquibox were at 6% profitable growth to the total SEE for the full-year. We are confident our SEE operating engine will convert sales at more than 30% operating leverage, resulting in continued margin expansion. The combination of the SEE operating engine, our high-performance culture, digital transformation, fleet of acquisitions and strong free-cash generation will deliver world-class growth and returns in the next 5 years.
Let's turn to slide 8 to discuss Q4 and full-year results. In the quarter, on a constant-currency basis, net sales were down 4% and adjusted EBITDA was down 7%. Despite the tough environment, we maintained adjusted EBITDA margins above 21%. On a full-year basis and constant-currency net sales were up 6% and adjusted EBITDA was up 10%. Our margin expanded by 110 basis-points, setting a new record in earnings for SEE.
Adjusted earnings per share in the quarter of $0.99 were down 7% compared to a year-ago and up 20% for the full-year of 2022 on a constant-currency basis. Free-cash flow through Q4, though disappointing was a source of cash of $376 million. We continue to invest in our people and our business as we accelerate our journey to world class.
Moving to Slide 9. We updated our SEE automation growth plan. Full-year 2022 automation sales were up $475 million, up 10% in constant dollars. In Q4 we had a record quarter with equipment sales of 24% year-over-year, driven by food equipment, which was up 30%. We continue to work with our customers to deploy automation solutions that create savings and fast returns by addressing labor shortages, inflation, safety and productivity. Our bookings continue to outpace revenue for 2022 and though supply shortages linger we expect to deliver double-digit growth in 2023 to achieve revenues greater than $525 million.
We are aggressively expanding our SEE Automation Solutions portfolio and driving faster growth by integrating equipment and technologies like robotics, vision systems, digital printing from a network of strategic suppliers. In 2023, we're expanding our SEE Automation solutions in auto bagging, filling and boxing with a respected fiber-based materials.
Now, I'll turn it over to Chris, who will review our financial results in more detail.