GRAPHIC PACKAGING HOLDING CO Q1 FY2025 earnings call

• Waco recycled paperboard investment is on track for startup with hiring complete and training underway. Middletown, Ohio recycled paperboard facility will close on June 1st.
• Board approved a new $1.5 billion share repurchase authorization.
• Innovation sales growth was $44 million for the quarter across various product categories.
• Macroenvironment challenges include stretched consumers, pullback in spending, and input cost inflation.
• Continued innovation sales growth target of at least 2% in 2025.
• Waco project expected to deliver incremental EBITDA of approximately $80 million in 2026 and 2027.

In the first quarter, Graphic Packaging sales were $2.1 billion. Adjusted EBITDA was $365 million with margins of 17.2% and adjusted EPS was $0.51. Sales by market: Food represents approximately 38% of packaging sales, Beverage about 25%, Foodservice 21%, Muscle products ~12%, and Health and Beauty the remaining. Overall, first quarter sales were basically flat year-over-year. Volumes in the Americas were down about 1%, while the smaller international business was up about 3%.

• Lowered and widened volume range: 4% volume decline at low end to flat volumes at high end.
• Adjusted EBITDA and EPS guidance reflect lower and wider volume assumptions and ongoing input cost inflation.
• Capital spending expected to be in the range of $700 million in 2025, with 5% of sales for 2026 and subsequent years.
• New $1.5 billion share repurchase authorization approved.

• Input cost inflation remains significant.
• Consumer pullback and retrenchment due to economic uncertainty.
• Tariffs could impact European coffee producers.
• Volumetric challenges in the Americas and international markets.

Q: Just on the revised guidance at the midpoint. It's about $210 million. You mentioned $80 million from inflation. And I think that's going from zero to 80. So I think that $80 million is a change. Just wanted to confirm that. And then that would leave $130 million. And you've talked about 2% volume declines. So I recognize there's presumably mill downtime as well related to that. But is that what's driving the rest of that? That $130 million?

A: The $80 million is from inflation. There's a 400 basis point call down at the midpoint on volume. Plus 2 going to minus 2. That's a solid $350 million top line call down. 30% margins historically get you above $100 million, and aggressively matching supply and demand for the remainder of the year picks up the rest.

Q: Morning, Mike, Steve, Mark, good morning. Bear with me first. Thanks for taking the question. Bear with me for a second. If I were putting together a case study and thinking about the North American consumer board market, one could argue you had a competitor that maybe your largest that was undergoing a pretty big transition, change of ownership, et cetera. You had another one that was transitioning their strategy. You have a new entrant in North America, et cetera. Meanwhile, you guys were really kind of had offense on the field. You had low-cost assets, incumbent supplier position, et cetera. I'm curious, Mike, if we play that forward for the next couple of years, now these folks have got their feet under them. Are you seeing more RFPs come into the business, your customers may be coming back to you and kind of asking for better terms as they're facing their own inflationary headwinds?

A: The answer is that's considered in the guide, but it isn't something we've seen yet. In terms of the competitive landscape, Graphic Packaging's Waco facility and integrated operations position them well. Our customers are always looking for value, and we embrace competition as it helps us take care of our customers.