Summary of Graphic Packaging Company (GPK) Conference Call Company Overview - **Company**: Graphic Packaging Holding Company (GPK) - **Sales**: Approximately $9 billion, with 70% in North America and 30% in Europe [3][63] - **Market Focus**: Primarily in packaging, with significant operations in recycled paperboard manufacturing [2][3] Key Points and Arguments Transformation and Growth Strategy - **Vision 2025**: Over the past seven years, the company has transformed its business model, focusing on expanding capabilities, innovation, and competitive advantage [4][64] - **Acquisitions**: The purchase of International Paper's consumer packaging business in 2018 positioned GPK as the number one player in paper cups, manufacturing about 30% of all paper cups in North America [5][64] - **Innovation**: GPK has invested heavily in innovation, establishing five global innovation and design centers to develop solutions that replace plastic and foam packaging [5][70] Financial Performance and Projections - **CapEx Reduction**: CapEx is expected to decrease to about 5% of sales, down from previous levels of 12%, leading to significant cash flow generation [2][61][30] - **EBITDA Growth**: Anticipated mid-single-digit growth in adjusted EBITDA, driven by innovation and operational efficiency [29][30] - **Dividend Growth**: The company is committed to growing dividends, which is seen as attractive to investors [31] Market Dynamics and Challenges - **Near-term Headwinds**: The company faces challenges including high food prices affecting customer volumes, the MAHA movement, and GLP-1 drugs impacting reformulation costs [21][24][25] - **SBS Market Issues**: The addition of capacity in the coated SBS market has led to lower operating rates and pricing pressures, impacting GPK's ability to push pricing on coated recycled paperboard [26][27] Sustainability and Environmental Commitment - **Carbon Reduction Goals**: GPK aims for a 50% reduction in overall carbon emissions by 2032, supported by investments in recycled packaging [15][73] - **Recycling Investments**: Nearly $2 billion invested in creating a high-quality recycling platform, allowing the company to process dirtier fiber into high-quality packaging [13][73] Additional Important Insights - **Customer Portfolio**: GPK has diversified its customer base, reducing reliance on top accounts, which previously represented 80% of sales [7][67] - **Market Adaptation**: The company is adapting to consumer trends, particularly in food service, by replacing plastic and foam products [18][19] - **Future Outlook**: Confidence remains high in the long-term business model, with expectations of resolving current challenges and capitalizing on market opportunities [28][43] Conclusion Graphic Packaging Company is positioned for growth through strategic investments in innovation, sustainability, and operational efficiency, despite facing near-term market challenges. The focus on reducing CapEx and enhancing cash flow generation will support its long-term financial stability and shareholder value.

Financial Data and Key Metrics Changes - The company reported a 4% compound annual growth rate (CAGR) in net sales since 2021, with consistent volume and mix growth observed over the last couple of years [10] - Operating margin improved by 300 basis points over the past two years while marketing spending increased by 33% [10] Business Line Data and Key Metrics Changes - The North American diaper business saw a significant shift towards premium products, with the premium segment increasing from 40% to over 70% [13] - E-commerce now accounts for more than 25% of consumer sales, with a strong share index compared to national averages [9] Market Data and Key Metrics Changes - The global category growth rate in the second quarter was around 2%, with expectations to outpace this through innovation and premiumization [16][18] - In China, the premium segment of the diaper market grew from 6% in 2019 to 42% [13] Company Strategy and Development Direction - The company is transforming into a pure-play personal care and wellness company, focusing on high-growth, high-margin categories [5][42] - A new leadership appointment aims to enhance the company's operational capabilities and drive growth [11] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers are under pressure, but the company is well-positioned to meet their needs across all price tiers [16] - The company expects to continue investing in innovation and marketing to drive growth, despite a challenging consumer environment [16][39] Other Important Information - The company plans to increase capital expenditures to around 6% of net sales in the coming years to support supply chain transformation [28] - The joint venture with Suzano is expected to reduce earnings volatility related to fiber costs significantly [43] Q&A Session Summary Question: What is driving the positive volume mix growth? - Management highlighted that consumers are willing to trade up for better-performing products, leading to a significant shift towards premium offerings [12][13] Question: What are the key drivers of the current 2% category growth? - The focus on driving new benefits, innovation, and premiumization across all price tiers is essential for growth [18] Question: How is the company approaching innovation? - The company plans to accelerate the pace of innovation, focusing on both incremental and category-changing advancements [20] Question: What are the priorities for the new COO? - The COO emphasized the importance of performing while transforming, ensuring the company executes effectively while laying the groundwork for future growth [40] Question: How does the company view its advertising investment? - The company has doubled its advertising spend since 2018 and is focused on creating brand love through effective storytelling [39] Question: What is the outlook for earnings growth into 2026 and 2027? - The company expects ongoing operations to grow in line with its long-term algorithm, with specific adjustments for the joint venture's impact [56]

Financial Data and Key Metrics Changes - In the fourth quarter, reported net sales increased by 1%, while organic net sales declined by 3% due to unfavorable shipment timing and divestitures [9][27] - Adjusted EBIT decreased by 2%, and adjusted EPS was down by 2% to $0.62, reflecting the impact of tariffs and divestitures [29][32] - For the full year, net sales grew by 6%, primarily driven by the Sovos Brands acquisition, while adjusted EBIT increased by 2% [9][29] Business Line Data and Key Metrics Changes - Meals and Beverages organic net sales decreased by 3% in Q4, with volume and mix down by 4%, while dollar consumption grew by 1% [15][32] - Snacks reported a 2% increase in net sales, but organic net sales decreased by 2%, driven by lower volume and mix [33][34] - The consumption of leadership brands in Meals and Beverages increased by 1% in Q4, while Snacks leadership brand consumption declined by 2% [13][15] Market Data and Key Metrics Changes - In-market consumption for the overall category declined by 1%, with consumers remaining cautious in their spending [7][8] - The broth category saw a 7% consumption growth, driven by increased usage among millennials and boomers [16] - The Italian sauce category grew by 2% year-over-year, with Campbell's Italian sauce portfolio outpacing this at 4% growth [17] Company Strategy and Development Direction - The company plans to increase marketing investments and focus on innovation to support brand growth, particularly in the Meals and Beverages segment [8][25] - A new growth office has been established to align innovation with consumer needs, emphasizing health and elevated taste experiences [11][25] - The company is committed to mitigating tariff impacts through cost savings initiatives and strategic pricing actions [25][37] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers are increasingly seeking value through at-home cooking, which supports growth in the Meals and Beverages segment [7][8] - The company anticipates a challenging operating environment in fiscal 2026, with expected declines in adjusted EBIT and EPS due to tariffs and divestitures [40][41] - Management expressed confidence in the ability to navigate challenges while capturing growth opportunities through strategic investments [42] Other Important Information - The company plans to discontinue the use of FD&C colors in its products by the second half of fiscal 2026 [12] - The Sovos Brands acquisition has been accretive to adjusted EPS and has performed well since its integration [29][30] - The company generated $1.13 billion in operating cash flow for fiscal 2025, with capital expenditures at $426 million [35][36] Q&A Session Summary Question: Can you provide more detail on the outlook for fiscal 2026? - Management highlighted the importance of brand support and innovation, with expectations for stabilization in the snacking business in the second half of the year [45][46] Question: What are the expectations for the snacks category stabilization? - Management noted that snacking occasions are stable, and the company is focused on premiumization and flavor exploration to connect with consumers [56][58] Question: How does the company plan to address tariff impacts? - Management discussed a combination of inventory management, supplier collaboration, and surgical pricing initiatives to mitigate tariff impacts [65][72]

Financial Data and Key Metrics Changes - The company experienced a mixed fiscal year 2025, delivering less than expected top-line growth but exceeding expectations on margin and earnings due to a strong margin transformation program [1][2] - In Q4, the company delivered strong margin and earnings performance but underperformed on top-line growth [2] - The company expects to be at the low end of its range for Q1, with shipments rebounding and consumption expected to improve in September [3][4] Business Line Data and Key Metrics Changes - The U.S. business, which constitutes 85% of the company's operations, is undergoing a greenfield implementation of a new ERP system, which has faced some initial challenges but is expected to stabilize [3][4] - The company noted volatility in category growth, particularly in food, which has historically been steady, indicating a shift in consumer behavior [11][12] Market Data and Key Metrics Changes - The company anticipates U.S. retail growth to average 0% to 1% through the year, with category growth expected to be lower than historical averages [52][53] - The consumer is under stress, leading to cautious spending behavior, which is impacting category growth [13][25] Company Strategy and Development Direction - The company is focused on transforming its capabilities through significant investments, including over $550 million in rebuilding its digital foundation [21][22] - The strategy includes a strong emphasis on innovation, with plans to launch new platforms and expand existing ones in the back half of the year [35][55] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by a volatile consumer environment and competitive activity, but remains optimistic about the company's ability to recover and grow [20][25] - The company expects sequential improvements in consumption and market share, particularly in the back half of the year [54][55] Other Important Information - The company is currently in a stabilization phase following a cyber attack in 2023, which impacted operations but demonstrated the strength of its brands [23][24] - The company is committed to ensuring that its categories grow again and is focused on innovation and consumer insights to drive this growth [25][48] Q&A Session Summary Question: What are the long-term category growth expectations? - The company expects its categories to grow about 2% to 2.5% in the U.S., with recent volatility noted but stabilization expected [11][12] Question: Why is Clorox losing share in several categories? - Management indicated that while some categories are performing well, execution issues in certain areas, such as Kingsford, have led to share loss [16][19] Question: How is the organization managing the transformation amidst operational challenges? - Management clarified that the organization is not distracted but is focused on building strong capabilities to better respond to consumer needs [20][24] Question: What is the outlook for promotional activity in the current competitive environment? - The company sees a rational promotional environment overall but acknowledges heightened competitive activity in specific categories like litter and trash [47][49] Question: Can you discuss the guidance for the upcoming quarters? - The company anticipates a year-over-year decline of 7% to 8% due to ERP implementation noise, with organic sales growth expected to be between -1% to +2% [52][54]

Financial Data and Key Metrics Changes - The fiscal year 2025 was mixed for the company, with top-line performance falling short of expectations, but margins and earnings exceeding expectations due to a strong margin transformation program [1][2] - The company expects to be at the low end of its range for Q1, but anticipates a rebound in shipments and consumption in September [3][4] Business Line Data and Key Metrics Changes - The U.S. business, which constitutes 85% of the company's operations, is undergoing a greenfield implementation of a new ERP system, which has caused some initial disruptions but is expected to stabilize [3][4] - The company has seen volatility in category growth, particularly in food, which has historically been steady, but is now expected to be flattish to slightly growing this year [11][12] Market Data and Key Metrics Changes - The company noted that consumer behavior is under stress, leading to cautious spending and a tendency to trade down to larger sizes or value SKUs, which compresses category growth [13][14] - The company expects U.S. retail growth to average 0% to 1% through the year, with category growth anticipated to be lower than historical averages [55] Company Strategy and Development Direction - The company is focused on strong category investments and winning market share, aiming to return category growth to the historical range of 2% to 2.5% [14][27] - The company is investing over $550 million in rebuilding its digital foundation to enhance capabilities and respond more effectively to consumer needs [22][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by a volatile consumer environment and the need for rapid adjustments to plans in response to changing consumer behavior [21][20] - The company is optimistic about its innovation pipeline and plans to launch new platforms in the back half of the year, which are expected to drive growth [36][37] Other Important Information - The company experienced a significant cyber attack in 2023, which impacted operations but highlighted the strength of its brands as it regained distribution and share [24][25] - The company is currently in a stabilization phase following the ERP implementation, with expectations for productivity improvements and cost savings in the future [59][60] Q&A Session Summary Question: What are the long-term category growth expectations? - The company expects U.S. categories to grow about 2% to 2.5% on average, with recent volatility noted [11][12] Question: Why is Clorox losing share in many categories? - The company identified execution issues and rapid changes in consumer behavior as key factors for losing share in certain categories [15][20] Question: How is the organization managing the transformation and operational challenges? - Management emphasized that the organization is not distracted but is focused on building strong capabilities while navigating various challenges [21][26] Question: What is the outlook for promotional activity in the current environment? - The company noted a rational promotional environment overall, but acknowledged increased competitive activity in specific categories like litter and trash [48][50] Question: What are the key assumptions in the guidance for the balance of the year? - The guidance includes a significant impact from the ERP implementation, with expectations for organic sales growth to be between -1% to +2% [54][55]

Financial Data and Key Metrics Changes - The company delivered less than expected top-line results for FY 2025 but exceeded expectations on margin and earnings due to a strong margin transformation program [2] - The company expects to be at the low end of its range for Q1, with shipments rebounding and consumption expected to improve in September [6][7] Business Line Data and Key Metrics Changes - The U.S. business, which constitutes 85% of the company's operations, performed well in Q4, but there were challenges in order fulfillment and inventory management in August [4][5] - The company noted that while some categories are performing well, others, like food, have experienced unexpected volatility [11][12][23] Market Data and Key Metrics Changes - The company anticipates U.S. retail growth to average 0% to 1% for the year, with category growth expected to be lower than historical averages [71] - The company observed that consumers are trading down to larger sizes and more value-oriented SKUs, which compresses category growth [15][16] Company Strategy and Development Direction - The company is focused on strong category investments and aims to return to a growth rate of 2% to 2.5% once consumer conditions stabilize [16][33] - The company is undergoing a significant transformation, investing over $550 million to modernize its digital foundation and improve operational capabilities [27][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the consumer is under stress due to inflation and uncertainty, which is affecting spending behavior [14][71] - The company is optimistic about its innovation pipeline and expects to launch new platforms in the back half of the year [48][75] Other Important Information - The company is implementing a new ERP system, which has created some short-term noise in sales figures but is expected to drive long-term productivity improvements [70][78] - The company is focused on maintaining brand superiority and has a framework in place to assess and improve its brand performance [53][54] Q&A Session Summary Question: What are the long-term category growth expectations? - The company expects categories in the U.S. to grow at about 2% to 2.5% historically, but recent volatility has made predictions more challenging [9][12] Question: Why is Clorox losing market share in several categories? - The company identified execution issues in certain categories, particularly in adapting to rapid consumer changes, but noted strong performance in international and professional segments [18][20][23] Question: How is the organization managing the transformation amidst operational challenges? - Management emphasized that the transformation is crucial and not a distraction, focusing on building capabilities to better respond to consumer needs [25][32] Question: What is the outlook for promotional activity in the current competitive environment? - The company sees a rational competitive environment overall but acknowledges increased promotional activity in specific categories like litter and trash [61][62] Question: What are the key assumptions in the guidance for the upcoming quarters? - The guidance includes expectations for organic sales growth to be between -1% to +2%, with a focus on improving consumption trends in the back half of the year [71][73]

Financial Data and Key Metrics Changes - The company reported first half net sales of approximately $203 million, which is flat year over year, with strong adjusted EBITDA margins of 24.7% despite significant investments in marketing and personnel [74][76] - The company ended the second quarter with approximately $289 million in cash and $352 million in debt, having generated $18 million in cash from operations year to date [75][76] - Inventory was approximately $78.3 million, down from $100.2 million at the end of the previous year [75] Business Line Data and Key Metrics Changes - The company launched three new innovations in 2025 compared to only one in 2024, including a scalp longevity treatment and a wash care system tailored for fine hair [56][58] - The new product launches have been well received, with Olaplex's five Bond Maintenance Conditioner and four Bond Maintenance Shampoo being the top-selling prestige hair launches in 2025 [59] Market Data and Key Metrics Changes - The premium haircare market is forecasted to grow at a 6% to 7% CAGR from 2024 to 2028, with premium haircare representing only 20% of the overall hair care market in 2024 [10][11] - The company is well-positioned to benefit from the ongoing premiumization trend in the hair care category [11][12] Company Strategy and Development Direction - The company’s strategy is built on three pillars: moving beyond damage repair, empowering professionals, and adding emotional resonance to the brand [13][26] - The company aims to broaden its addressable market by shifting product development and messaging to position Olaplex as a solution for everyday foundational hair health [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's transformation progress and solid first-half results, while acknowledging that more work is needed to balance immediate improvements with long-term positioning [78] - The company maintained its fiscal year guidance, expecting net sales to range from a decline of 3% to an increase of 2% compared to fiscal year 2024 [76] Other Important Information - The company announced the acquisition of Bioscience, marking its first acquisition since its launch over ten years ago, which aims to develop transformative, bio-inspired technologies [62] - The company has implemented an AI-supported demand planning tool and enhanced data science capabilities to improve internal processes [68][69] Q&A Session Summary Question: What are the expectations for financial results in the second half of the year? - The company expects second half net sales to be more weighted towards the fourth quarter, with third quarter net sales anticipated to decline by high single digits year over year, offset by strong high single digit growth in the fourth quarter [76][77] Question: How is the company addressing its international market strategy? - The company has categorized its international markets into partner-led, direct investment, and lighter touch markets to focus investments where growth potential is highest [71][73] Question: What is the company's approach to innovation moving forward? - The company plans to leverage its R&D capabilities to launch two to three strategic products annually, supported by consumer education and stylist engagement [55][56]

The forward-looking statements in this presentation reflect the Company's current expectations and projections about future events and financial trends that management believes may affect the Company's business, financial condition and results of operation. These statements are predictions based upon assumptions that may such statements taken from third party industry and market reports. BARCLAYS GLOBAL CONSUMER STAPLES CONFERENCE SEPTEMBER 2, 2025 DISCLAIMER of any such state or jurisdiction. Forward Looki ...

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