Financial Data and Key Metrics Changes - In Q2 2025, Graphic Packaging reported sales of $2.2 billion, adjusted EBITDA of $336 million, and an adjusted EBITDA margin of 15.3% [5][25] - Adjusted EPS for the quarter was $0.42, with overall volume up approximately 1% [25][30] - Packaging prices were approximately 1% lower, reflecting third-party price recognition from 2024 [25] Business Line Data and Key Metrics Changes - Volumes in The Americas were modestly better than expected, driven by increased beverage promotions and targeted promotional activity in food and foodservice [5][11] - Innovation sales growth reached $61 million in Q2, on track to meet the 2% of sales growth target for the full year [12][13] - Food results remained uneven, with snacks under pressure while pasta, sauces, and prepared foods saw gains [14] Market Data and Key Metrics Changes - International results remained positive but growth slowed, confirming that consumers in those markets are also stretched [11] - Private label and store brands continue to gain traction in select food categories, indicating a shift in consumer preferences [12] - Beverage season in 2025 started strong, with good growth in carbonated soft drinks and moderation in beer decline [15][18] Company Strategy and Development Direction - The last major investment in the Vision 2025 program is nearing completion, with expectations to generate cash substantially in excess of needs starting in 2026 [5][6] - The company is focused on sustainability, with recycled paperboard being a key area of growth due to its lower environmental footprint [7][9] - Graphic Packaging aims to grow its presence in household products and health and beauty sectors, leveraging recycled paperboard as a more appealing alternative [13] Management's Comments on Operating Environment and Future Outlook - Management noted that consumers are stretched, impacting spending habits, with more money spent on groceries but fewer items purchased [10] - The company expects second-half adjusted EBITDA margins to improve significantly due to inventory management and less scheduled maintenance [30] - There is caution among CPG and QSR customers regarding near-term volume outlooks, reflecting broader economic uncertainties [30][56] Other Important Information - Capital expenditures for 2025 are estimated at $850 million, with a decline to 5% of sales in 2026 [6][31] - The company has repurchased 1.6% of its outstanding shares during Q2 at an average price of $22.26 per share [28] - The Waco investment is expected to provide significant economic and quality advantages, with anticipated EBITDA contributions of $80 million in 2026 [30][54] Q&A Session Summary Question: Impact of increased capital spending on free cash flow in 2026 - Management clarified that the increase in capital expenditures for 2025 will not change free cash flow expectations for that year, with 2026 cash flow updated to reflect current EBITDA expectations [35][36] Question: Drivers of higher permitting and labor costs for Waco - Management explained that higher labor costs, particularly for electricians, and evolving project requirements contributed to increased costs, but they remain optimistic about the project's returns [39][41] Question: Confidence in achieving second-half margin targets - Management outlined that reduced planned maintenance and inventory management would contribute to improved margins in the second half of the year [47][48] Question: Competitive dynamics in the packaging market - Management noted that the oversupply in the solid bleached market has created a competitive environment, but they have been able to outperform their customers [105]

Financial Performance - Net sales decreased by 1% year-over-year, from $2.237 billion to $2.204 billion[31] - Adjusted EBITDA decreased from $402 million to $336 million, a decrease of $66 million[31] - Adjusted EBITDA margin decreased by 270 basis points to 15.3%[31] - Adjusted EPS decreased by $0.18, from $0.60 to $0.42[31] - The company repurchased approximately 5.0 million shares at an average price of $22.26 per share, resulting in a 1.6% reduction in shares outstanding[34] Strategic Updates and Innovation - Waco, Texas recycled paperboard investment is on track for Q4 2025 startup[7] - Innovation Sales Growth reached $61 million in the quarter[7] - Volume increased by 1% year-over-year, while price decreased by 1% year-over-year[7] Guidance - Net Sales guidance revised to $8.4 billion to $8.6 billion[36] - Adjusted EBITDA guidance revised to $1.45 billion to $1.55 billion[36] - Capital Spending guidance revised to approximately $850 million[36]

Financial Data and Key Metrics Changes - In Q1 2025, Graphic Packaging reported sales of $2.1 billion, adjusted EBITDA of $365 million, and margins of 17.2%, which were significantly below expectations due to weaker volumes and input cost inflation [7][30][31] - Adjusted EPS for the quarter was $0.51, reflecting the challenging operating environment [7] Business Line Data and Key Metrics Changes - The Americas business experienced a volume decline of approximately 1%, while the international business saw a growth of about 3% [10][30] - Innovation sales growth was reported at $44 million for the quarter, indicating a positive contribution from new product categories [13] Market Data and Key Metrics Changes - Overall sales were flat year-over-year, with food representing approximately 38% of packaging sales, showing uneven results across product categories [17] - Beverage packaging sales, which account for about 25% of overall sales, saw a decline after two years of strong performance, attributed to slowing beer consumption trends [19] Company Strategy and Development Direction - The company is transitioning from Vision 2025 to Vision 2030, focusing on reinvestment and returning capital to shareholders, with a new $1.5 billion share repurchase authorization approved by the Board [9][36] - The Waco recycled paperboard investment is on track for a fourth-quarter startup, expected to generate substantial cash flow in the coming years [8][36] Management's Comments on Operating Environment and Future Outlook - Management noted that consumer confidence has significantly declined in the U.S. and other markets, leading to a stretched consumer base and reduced spending [10][24] - The company has adjusted its guidance for 2025, now expecting a volume decline of 2% as a base case, reflecting the challenging backdrop for CPG and QSR customers [34][35] Other Important Information - Input cost inflation was significant in Q1 2025, with expectations for continued inflation in the coming quarters [31][34] - The company plans to implement a $40 price increase on recycled and unbleached paperboard grades effective May 15, 2025, to help recover margins [11][31] Q&A Session Summary Question: Trends in volume and affordability issues - Management acknowledged that affordability is a key issue affecting volumes, with consumers buying fewer items due to economic pressures [46][48] Question: Guidance assumptions for price-cost dynamics - The company expects to see a positive price contribution late in 2025, with efforts to recover inflation costs rolling into 2026 [52][95] Question: Supply-demand balance and potential industry actions - Management indicated that they will take rolling market-related downtime to align supply with demand, and noted recent closures by competitors that could help balance the market [58][60] Question: Revised guidance implications - The lower guidance reflects a combination of inflation impacts and volume declines, with a focus on matching supply and demand [84][92] Question: Long-term cash flow trajectory - Management remains confident in the long-term cash flow trajectory, expecting a significant reduction in CapEx in the coming years [100]

Core Viewpoint - Graphic Packaging Holding Company will permanently close its Middletown, Ohio, coated recycled paperboard manufacturing facility around June 1, 2025, as part of a strategy to consolidate production into its Kalamazoo, Michigan, and Waco, Texas facilities, impacting approximately 130 employees [1][2]. Group 1 - The closure is aimed at enhancing the company's competitive advantage in paperboard manufacturing while improving environmental efficiency, including water and energy usage [2][3]. - The investments in Kalamazoo and Waco are critical for delivering high-quality, economically advantageous paperboard in North America, with the Waco facility nearing completion [3]. Group 2 - Graphic Packaging is recognized as a global leader in sustainable consumer packaging, focusing on reducing the environmental footprint through the use of renewable and recycled materials [5]. - The company operates a global network of design and manufacturing facilities, serving well-known brands across various sectors, including food and beverage [5].