Core Insights - Graphic Packaging Holding Company reported a decline in Q3 results due to reduced prices and volumes, with net income falling to $142 million from $165 million year-on-year [1] - Adjusted net income also decreased to $172 million compared to $194 million a year earlier, and earnings per diluted share dropped to $0.48 from $0.55 [1][2] Financial Performance - Quarterly net sales decreased by 1% year-on-year to $2.19 billion from $2.22 billion, influenced by lower pricing and demand in the Americas, partially offset by moderate international growth and a favorable foreign exchange impact of $24 million [2] - EBITDA fell by 13% to $361 million from $417 million, with adjusted EBITDA at $383 million, down from $433 million in the prior-year quarter [2][3] - The adjusted EBITDA margin narrowed to 17.5% from 19.5% a year ago [3] Debt and Capital Expenditure - Total debt increased to $5.94 billion from $5.21 billion at the end of 2024 [3] - Capital expenditure was $267 million, compared to $313 million in the same quarter of 2024 [3] Shareholder Returns - In the first nine months of 2025, the company returned $248 million to shareholders through dividends and share buybacks, including the repurchase of approximately 1.8 million shares for $39 million in Q3 [3] Year-to-Date Performance and Outlook - For the nine months ended September 30, net income totaled $373 million, down from $520 million a year earlier, with adjusted EBITDA at $1.08 billion compared to $1.28 billion a year ago [4] - The company expects full-year net sales between $8.4 billion and $8.6 billion, adjusted EBITDA of $1.40 billion to $1.45 billion, and adjusted earnings per share in the range of $1.80 to $2.00 [4] - The outlook reflects year-to-date performance and efforts to align production with orders, with noted high volume and market uncertainty due to weakened consumer confidence [5] Future Production and Efficiency - The company anticipates reaching full production in 12 to 18 months, with the Waco facility expected to become the world's most efficient producer of recycled paperboard [6]

Financial Data and Key Metrics Changes - Graphic Packaging's sales for Q3 2025 were $2.2 billion, with adjusted EBITDA of $383 million and an adjusted EBITDA margin of 17.5% [5][10] - Adjusted EPS for the quarter was reported at $0.58 [5] - Year-on-year volume was down 2%, but the company outperformed most markets served [10][14] Business Line Data and Key Metrics Changes - The innovation platform contributed approximately $52 million, roughly 2% of sales, helping to outperform challenges in volumetric performance [35] - Food and household products remained steady, while beverage and food service showed weakness [13][18] - Health and beauty, primarily a European business, continued to perform solidly [13] Market Data and Key Metrics Changes - The consumer market has bifurcated, with upper-income consumers spending differently and lower-income consumers cutting back due to rising food prices [9][10] - Grocery volumes have been impacted, with CPG customers timing purchases to manage cash, leading to less predictable order flows [10][14] - The recycled and unbleached packaging markets are in good balance, but there is unusual competitive pressure from bleached packaging producers [10][11] Company Strategy and Development Direction - The Waco facility is a critical investment that enhances supply chain efficiency and reduces waste, expected to provide a competitive advantage for decades [7][8] - The company is transitioning from Vision 2025 to Vision 2030, focusing on free cash flow generation [5][8] - Graphic Packaging aims to leverage its innovation capabilities to open new markets and maintain a strong position in the packaging industry [19][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the Waco facility's ramp-up, expecting it to contribute $80 million to EBITDA in 2026 [37][90] - The company is focused on controlling costs and inventory to protect margins amid a challenging consumer packaging environment [24][25] - Management acknowledged the unpredictability of demand but emphasized the strength of their business model and competitive advantages [28][29] Other Important Information - The company repurchased approximately 6.8 million shares year-to-date, reducing shares outstanding by 2.3% in 2025 [23] - Capital spending is expected to decline significantly to approximately 5% of sales, which will drive cash flow inflection [27][28] Q&A Session Summary Question: Did the end markets track as expected in Q3? - Management clarified that there was no share loss; customer purchasing patterns affected volumetric performance, with innovation helping to outperform challenges [35][36] Question: Confidence in Waco's EBITDA contribution for next year? - Management expressed high confidence in Waco's ramp-up delivering the expected $80 million contribution [37] Question: Opportunities for productivity improvement? - Management highlighted the focus on controlling costs and optimizing operations to enhance productivity and efficiency [41][46] Question: Trends in the food service market? - Management noted that fast casual dining is under pressure, while quick service restaurants are performing better, with innovation expected to drive growth [50][51] Question: Impact of competitive price pressure on SBS and CUK? - Management stated that they have not lost market share and emphasized the cost advantages of coated recycled paperboard over bleached alternatives [60][61] Question: Clarification on Waco's start-up costs? - Management indicated that the start-up costs of $65 million-$75 million are primarily operating costs incurred during the ramp-up phase, with a portion expected to carry into 2026 [67][80]