GRAPHIC PACKAGING HOLDING CO Q3 FY2024 earnings call

• Graphic Packaging is a global leader in sustainable consumer packaging. Q3 sales were $2.2 billion, adjusted EBITDA $433 million, adjusted EPS $0.64. Volume up 1%, price down 2%, adjusted EBITDA margin 19.5%.
• Waco, Texas recycled paperboard facility on track for Q4 2025 startup, hiring underway. Poznan, Poland packaging facility commissioned with new press enhancing European health and beauty market position.
• Virtual power purchase agreement with Zelestra to reduce Scope 1 and 2 GHG emissions by 50.4% by 2032, aiming for 70% renewable electricity in Europe.
• After Augusta divestiture, consumer packaging ~95% of sales. Transitioning customer contracts to transparent price mechanisms, ending new open market paperboard sales with third-party price change mechanisms from Q1 2025.
• Packaging results: volume growth, solid beverage and food service, improvement in food, household, health and beauty. Mass retail and superstores gaining share. Innovation sales $54M in Q3, on track for $200M full year.
• Food service innovation: McDonald's McFlurry packaging with less plastic, wider opening, open top design. Vision 2030 progress, focusing on innovation, people, sustainability.

In the third quarter, Graphic Packaging's sales were $2.2 billion. Adjusted EBITDA was $433 million, and adjusted EPS was $0.64. Volume grew by 1% during the quarter, with price down 2%. Consumer packaging makes up approximately 95% of sales, and paperboard accounts for about 5%. Beverage and food service results were solid, with improvement in food, household, and health and beauty categories. Mass retail and superstores continued to gain share in the grocery category. Innovation sales in the third quarter were $54 million, on track to reach $200 million for the full year. Revenue contribution: consumer packaging ~95%, paperboard ~5%.

• Q3 volume growth 1%, demand recovery gradual. Now expects second half volume growth 1%-2% (down from 3%-4%).
• Full-year 2024 adjusted EBITDA $1.68B-$1.73B, adjusted EPS $2.49-$2.61. Weather and power disruptions and softer September sales impacted results.
• 2025 financial performance: low-single-digit sales growth, mid-single-digit adjusted EBITDA growth, high single-digit adjusted EPS growth. 2024 is peak CapEx, 2025 CapEx expected to decline by ~$300M.

• Weather and power disruptions in Q3 reduced adjusted EBITDA by $25M.
• Soft September sales left volumes below expectations.
• Import dynamics and third-party index discrepancies could impact pricing and market assessment.
• Bridge items like digester reversal in 2025 and power outage issues in Q3 could affect operations.

Q: On sales guide into 2025, bridging volume expectations by end market, price change mechanisms.

A: Steve and Mike discuss innovation driving growth, price change mechanisms transitioning from third-party indexes, impact on 2025.

Q: Competitive landscape shift between bleached and recycled products.

A: Mike and Steve talk about sale of Augusta mill, focus on coated bleached and recycled paperboard, competitive advantage of facilities.

Q: Q3 volumes below expectations, geography and end markets.

A: Michael Doss and Steve discuss July strong, August average, September muted, fourth quarter expected growth.

Q: Sustainable packaging visibility, innovation sales.

A: Michael Doss talks about innovation sales on track, large addressable market, McFlurry example.

Q: Transitioning customers from risk indexes, contract structures.

A: Steve discusses half of business on new pricing models, development of new index, multi-year journey.

Q: Leverage guidance change, working capital.

A: Steve says no unusual items, combination of EBITDA guide and CapEx changes.

Q: Pricing outlook, imports, supply/demand.

A: Michael Doss talks about small import impact, cost economics, integration and third-party indexes.

Q: 2025 base case, promotional activity.

A: Steve and Michael Doss discuss innovation driving low-single-digit growth, promotional activity mix changes.

Q: Promotional activity, customer pricing, 2025 analysis.

A: Michael Doss and Steve talk about promotional mix changes, high fixed cost business, transparency and fairness in customer relationships.

Q: 2025 pricing, bridge items.

A: Steve says pricing neutral, traditional inflation factors.