Graphic Packaging Holding Company Q3 FY2025 earnings call

• Mike Doss acknowledged Steve Scherger's decade of service as Chief Financial Officer and introduced Chuck Lischer as interim CFO. - Graphic Packaging produced the first commercially saleable rolled paperboard at its Waco recycled paperboard facility earlier than planned, which is a critical enabler for consumer packaging, improving supply surety and reducing waste. - East Angus and Middletown mills ceased production. - The company's innovation platforms continued to open new markets for paperboard packaging, such as the development of paperboard punnets for produce. - Year-to-date, Graphic Packaging used $150 million to repurchase approximately 6.8 million shares, reducing shares outstanding by 2.3% in 2025.

Graphic Packaging's sales for the third quarter were $2.2 billion. Adjusted EBITDA stood at $383 million, with an adjusted EBITDA margin of 17.5% and adjusted EPS of $0.58. In terms of segments, food and household products were relatively steady, while beverage and foodservice segments were weaker. Health and beauty (mostly European) remained solid. Volumes were down 2% year-on-year but outperformed most markets served. Recycled and unbleached packaging markets were in good balance, though bleached packaging producers faced unusual competitive pressure with unsustainable pricing.

• Modestly revised guidance to reflect performance to date and an increasingly uncertain volume outlook. - Focus on cost and inventory management, with a $15 million impact on EBITDA expected in the fourth quarter due to actions to balance production with customer demand. - Year-end leverage target is modestly higher, driven by changes in EBITDA expectations and share repurchases. - Anticipates $700 million to $800 million of free cash flow in 2026, with the Waco investment nearing completion expected to drive a significant free cash flow inflection. - Entered a $400 million delayed draw term loan to repay bonds maturing in April 2026, with the loan having a floating rate and maturing in June 2027.

• Competitive pressure from bleached packaging producers with unsustainable pricing, as bleached capital costs and sustaining requirements are high, making the situation unsustainable in the long term. - Uncertain consumer demand and purchasing patterns, including bifurcated consumer spending and unpredictable order flows. - Impact of market imbalances, such as the large excess bleach capacity in the North American market, which affects pricing power in recycled and unbleached packaging.

Q: Congratulated Steve Scherger and asked about whether end markets tracked as expected.

A: There was no share loss; Graphic Packaging outperformed via innovation, with innovation contributing approximately $52 million (2%) to results in the quarter.

Q: Asked about confidence in Waco's EBITDA contribution for next year.

A: Confident in Waco's ramp-up delivering the $80 million discussed, but it depends on volume trends; if volumes are flat or down, adjustments to Kalamazoo's K1 machine can be made.

Q: Inquired about productivity opportunities and foodservice outlook.

A: Confident in Waco's $80 million contribution, with focus on cost control and inventory management; foodservice is under pressure but innovation helps maintain position.

Q: Asked about competitive price pressure and sales mix by paper types.

A: Graphic Packaging has not lost share, with a cost advantage in recycled paperboard; focus is on protecting and growing share with high-quality, low-cost recycled material.

Q: Asked about Waco start-up phasing and year-end leverage.

A: Onetime costs associated with Waco's start-up are phased 2/3 in 2025 and 1/3 in 2026; year-end leverage is expected to be in the range of 3.5 to 3.7x net debt to EBITDA.

Q: Asked about 2026 free cash flow and Waco tonnage.

A: Confident in $700-$800 million free cash flow in 2026, with Waco ramping as fast as possible to service customers and align with demand