Graphic Packaging(GPK) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Graphic Packaging reported a Q2 2025 net income decline to $104 million and adjusted EPS of $0.42, despite volume growth, with the Waco investment nearing completion to enhance future shareholder returns Q2 2025 vs Q2 2024 Performance Summary (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $104 million | $190 million | | Diluted EPS | $0.34 | $0.62 | | Adjusted Net Income | $128 million | $183 million | | Adjusted Diluted EPS | $0.42 | $0.60 | - CEO Michael Doss stated that promotional activities drove modestly better-than-expected volumes, and the company is working closely with customers who may increase their focus on volume growth and market share protection[3] - The company's Waco, Texas recycled paperboard investment is nearing completion, which is expected to sharply decrease capital spending in 2026. This will enable substantial cash returns to stockholders through dividends and share repurchases, with a long-term goal of achieving an investment-grade rating[4] - Key operational highlights for the quarter include: - Waco, Texas recycled paperboard investment is on track for a Q4 2025 startup - Packaging volumes increased by 1% - Innovation Sales Growth reached $61 million - The company repurchased $111 million of its shares, reducing outstanding shares by 1.6%[8] Operating Results Q2 2025 Net Sales decreased 1% to $2,204 million due to divestiture, while Adjusted EBITDA fell 16.4% to $336 million, impacted by lower prices and cost inflation - Net Sales decreased by $33 million (1%) year-over-year, driven by a $40 million negative impact from a facility divestiture, partially offset by a $20 million favorable foreign exchange impact[5] Q2 Adjusted EBITDA Performance Drivers (YoY Change, in millions) | Driver | Impact (in millions) | | :--- | :--- | | Price | $(23) | | Labor & Benefits Inflation | $(26) | | Input Cost Inflation | $(10) | | Divestiture & Open Market Sales | $(5) | | Net Performance (Inventory Reduction) | $(13) | | Foreign Exchange | $11 | Q2 EBITDA and Margin Comparison (in millions) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | EBITDA | $323 million | $458 million | | Adjusted EBITDA | $336 million | $402 million | | Adjusted EBITDA Margin | 15.3% | 18.0% | Financial Position and Capital Allocation Total debt increased to $5,859 million by Q2 2025, raising the Net Leverage Ratio to 3.7x, while $177 million was returned to stockholders through dividends and share repurchases Debt and Leverage Profile (in millions) | Metric | Q2 2025 | Q4 2024 | | :--- | :--- | :--- | | Total Debt | $5,859 million | $5,209 million | | Net Debt | $5,739 million | $5,052 million | | Net Leverage Ratio | 3.7x | 3.0x | - Capital expenditures in Q2 2025 were $228 million, a decrease from $249 million in Q2 2024[8] - In the first six months of 2025, the company returned ~$177 million to stockholders, including $111 million in share repurchases in Q2 (5.0 million shares) and $66 million in dividends paid across Q1 and Q2[8][9] 2025 Annual Guidance and Commentary Full-year 2025 guidance was updated, projecting Net Sales between $8.4 billion and $8.6 billion, Adjusted EBITDA from $1.45 billion to $1.55 billion, and Adjusted EPS from $1.90 to $2.20, with increased capital spending for Waco not impacting free cash flow Full-Year 2025 Guidance (in billions, except EPS) | Metric | Guidance Range | | :--- | :--- | | Net Sales | $8.4 billion - $8.6 billion | | Adjusted EBITDA | $1.45 billion - $1.55 billion | | Adjusted EPS | $1.90 - $2.20 | - The guidance update reflects actual first-half performance and a modest increase in second-half revenue expectations, though market uncertainty remains high[10] - Full-year 2025 capital spending is now expected to be approximately $850 million, an increase due to higher final costs at the Waco facility, with the 2025 free cash flow forecast remaining unchanged due to offsetting factors[11] Consolidated Financial Statements Consolidated financial statements reveal a year-over-year decline in Net Sales and Net Income, growth in total assets and liabilities, and lower net cash from operating activities for H1 2025 Consolidated Statements of Operations For H1 2025, Net Sales decreased to $4,324 million from $4,496 million, with Net Income falling to $231 million, or $0.76 per diluted share Six Months Ended June 30, Performance (in millions, except EPS) | Metric (in millions, except EPS) | 2025 | 2024 | | :--- | :--- | :--- | | Net Sales | $4,324 | $4,496 | | Income from Operations | $414 | $602 | | Net Income | $231 | $355 | | Net Income Per Share – Diluted | $0.76 | $1.15 | Condensed Consolidated Balance Sheets As of June 30, 2025, Total Assets increased to $11,795 million, and Total Liabilities grew to $8,576 million, driven by property, plant, equipment, and debt Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,968 | $2,784 | | Property, Plant and Equipment, Net | $5,598 | $5,258 | | Total Assets | $11,795 | $11,144 | | Total Current Liabilities | $2,072 | $1,903 | | Long-Term Debt | $5,392 | $5,145 | | Total Equity | $3,219 | $3,013 | Condensed Consolidated Statements of Cash Flows H1 2025 saw Net Cash Provided by Operating Activities at $93 million, Net Cash Used in Investing Activities at $505 million, and Net Cash Provided by Financing Activities at $362 million Cash Flow Summary - Six Months Ended June 30 (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $93 | $164 | | Net Cash (Used in) Provided by Investing Activities | $(505) | $175 | | Net Cash Provided by (Used in) Financing Activities | $362 | $(368) | | Net Decrease in Cash and Cash Equivalents | $(37) | $(37) | Reconciliation of Non-GAAP Financial Measures This section reconciles GAAP to non-GAAP measures, showing Q2 2025 Adjusted EBITDA of $336 million, Adjusted Net Income of $128 million, and a Net Leverage Ratio of 3.7x Q2 2025 Reconciliation of Net Income to Adjusted EBITDA (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $104 | $190 | | Income Tax Expense | $35 | $74 | | Interest Expense, Net | $53 | $60 | | Depreciation and Amortization | $131 | $134 | | EBITDA | $323 | $458 | | Special Items, Net | $13 | $(56) | | Adjusted EBITDA | $336 | $402 | Q2 2025 Reconciliation of Net Income to Adjusted Net Income (in millions) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $104 | $190 | | Special Items, Net | $13 | $(56) | | Amortization of Purchased Intangibles | $15 | $15 | | Other Adjustments & Tax Impact | $(4) | $34 | | Adjusted Net Income | $128 | $183 | Net Leverage Ratio Calculation as of June 30, 2025 (in millions) | Metric | Amount | | :--- | :--- | | Net Debt | $5,739 | | LTM Adjusted EBITDA | $1,538 | | Net Leverage Ratio | 3.7x |