Graphic Packaging(US:GPK)2021-10-26 20:48Financial Data and Key Metrics Changes - Net sales increased by 5% or $84 million year-over-year to $1.8 billion, driven by higher pricing and acquisitions [23] - Adjusted EBITDA grew by 14% to $284 million, resulting in an improved adjusted EBITDA margin of 15.9% [23] - Adjusted earnings per share increased by 31% to $0.34 [23] - The company experienced approximately $25 million in delayed sales due to supply chain and labor market constraints [10][26] Business Line Data and Key Metrics Changes - The Food Service business grew by 11% year-over-year, while food, beverage, and consumer sales improved by 3% including acquisitions [25] - Organic sales growth was slightly down in Q3, but the company expects to deliver organic sales growth at the high end of its 100 to 200 basis points target for 2021 [9][20] Market Data and Key Metrics Changes - The company noted strong demand for fiber-based consumer packaging solutions, with operating rates for CRB at 95% and SBS at 96% [27] - Industry inventory levels continued to decline, with backlogs elevated at over eight weeks across the UK and CRB [28] Company Strategy and Development Direction - The company is focused on capturing growth opportunities in sustainable packaging solutions, aligning with its Vision 2025 goals [7][11] - The acquisition of AR Packaging is expected to enhance the company's global reach and service offerings, with a closing date set for November 1, 2021 [14][15] - The K2 CRB machine project is on track for startup in Q4, which is a significant investment in paperboard capabilities [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by unprecedented inflation and supply chain bottlenecks but remains committed to meeting Vision 2025 goals [10][11] - The company expects to recover $170 million of price cost dislocation in 2022, with a projected adjusted EBITDA of $1.4 billion plus [31][32] Other Important Information - The company has implemented approximately $650 million in pricing initiatives to offset commodity input cost inflation over 2021 and 2022 [12][18] - Global liquidity was reported at $1.8 billion at the end of Q3, expected to remain substantial post-acquisition [29] Q&A Session Summary Question: Update on inflation impact for 2022 - Management updated the inflation midpoint to $310 million for 2021, with rollover effects estimated at $100 million to $125 million for 2022 [37] Question: Confidence in achieving pricing targets - Management expressed high confidence in achieving $510 million in pricing for 2022, driven by multi-year contracts [40] Question: Current inflation dynamics and potential volume risks - Management noted that inflation has accelerated but expects to manage it through pricing actions, with lightweighting seen as an opportunity rather than a threat [49] Question: Volume recovery expectations - Management indicated that supply chain and labor issues are expected to moderate, allowing for volume recovery in Q4 [56] Question: Kalamazoo project community reception - Management stated that the Kalamazoo project is on track, with normal community concerns being addressed [62]