GPK - Earnings call transcript Q1 2018 | Graphic Packaging Holding Company

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Operator

Good morning. My name is Lindsey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Graphic Packaging Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Mr. President Relations, Vice your may conference. of Ovshey, you Investor begin Alex

Alex Ovshey

morning Graphic results. welcome conference Lindsey. and Thanks, Good to discuss first call our Packaging quarter XXXX to Company's Holding

Doss, clicking Speaking as website call to actual can to such cause Commission. such filings be slide and the to the speak at forward-looking present obligation and should Steve Senior call, follow on President subject on Vice presentation the company's undertakes we remind on be in events that on presentations future statements our are statements the results on Undue you statements Information the available to Such and various CFO. like of uncertainties section regarding help risks with placed uncertainties company's and materially and by Exchange will required and these are I'll performance the on Mike, statements. Mike which I turn risks Investors Securities as from contained expectations. Scherger, made to it currently no which only www.graphicpkg.com. To the of date information as except they everyone and not statements law. and you. could reliance are and the our along CEO; link would expectations, beliefs webcast and company's statements be company is with differ of update periodic that have over forward-looking based and by President plans, accessed today's a constitutes estimates regarding provided

Michael Doss

quarter thank discuss and XXXX results. morning you for Good first to Alex. joining our you, us Thank

new positive to quarter. with the quarter following and very business combination the productivity mill We're we by foodservice also start our first and volume in the the seen the performance in pleased assets. converting with momentum have are encouraged SBS We our second

results line and $XX of improvement mill from adjusted foodservice and EBITDA. year-over-year of was The our converting EBITDA in the quarter solid. The with generated assets million million the mill EBITDA. adjusted of $XX $XXX assets were million SBS expectations converting adjusted in First SBS reported foodservice and business

Our CRB improved improvement. exchange. by pricing were partially and pricing input and million tuck-under the labor XXXX the foreign freight generated and benefits inflation, $XX benefit $XX quarter, of reflecting We commodity assets increased of inflation. positive driven The specifically converting costs, was acquisitions offset during by and strong benefits and and generated million improvement mills $X million chemical pricing, These CUK global productivity, from benefits positive the initiatives. of

The in impacting mid-XXXX, input since record. million. focused our We with offsetting on exceeded will begin commodity the negative input first cost which incurred we recovering second XXXX. cost track during is commodity $XX our consistent expect the improve we from We pricing market XXXX paperboard and per into And ton implemented will as continue the through move $XX open XXXX. to price increase quarter first we successfully a to per realized for increases increases has the pricing positively initiatives have We during relationship increase long-term important an and our SBS market the of our March quarter. grades CRB implemented pricing $XX open $XXX our and ton April. of with paperboard execution price into these XXXX These in for inflation grades step half CUK price to remain results and

We quarter. the turn positive expect cost second relationship in price to to input our commodity

of financial our details like the discuss XXXX to guidance. I Before I'd discuss quarter, current

assets and of XXXX. EBITDA continue plan. least $X billion is and expect to in integration of million flow to SBS $XXX The We mill cash and at converting to performance of the generate tracking foodservice

not cost assets OCC materially. are added subsided. inflation Since Freight February, first million we commodities chemical spoke EBITDA costs of synergies. year expect these generate input in continue while has down inflation, to in to experience year-over-year $XXX significant newly and continue commodity input We will on cost including several

our initial this and due of it costs. our and not at variability full-year do to outlook. late-year converting the are across potential assets foodservice We some to to commodity of high XXXX SBS time drive in guidance upside modifying input new as mill for the is integration price realization level our see early our We

of have We expect QX to picture results. following a clear this potential

day packaging shipping first me organic Now, modestly the one the down in very from trends the day, quarter, for Core the reported Easter Volume less X.X% our on Holiday, global timing we let by consistent more volume negatively XXXX. increase trending was quarter. key quarter. April the in operational of first in paperboard provide in shipping Adjusting also was business is which the organic up resulted positive. in impacted the modestly slightly detail the core currently volume quarter. in volume converting with was

development reflecting product organic new core success market by the continues Nielsen, Our converting our outperform volume reported of trend AC to trends pipeline. ongoing as the

beverage the beer global Our first big despite in America. continued on relatively pressure remained in quarter, market North healthy brands

low-single-digits and in quarter. North as well America volume by water was craft as beer sparkling global driven markets. The beer our categories Our the growth up in in was international and flavored

volume efforts organic drive points As basis in per past, we our for the development approximately new we expect discussed growth annum. to product XXX

one product highlight quarter. commercialization the new important Let in me

Natural facility. Integraflex product and Council's new Paperboard Expo. packaging the Year specifically single-serve oatmeal. at our Portland the from Products innovation NEXTY, growing an also it which Integraflex categories a of substrates comprised snacks wood-fiber our paper-based and Bar be paper our SUS cup. award like a and distinctly two The liner growth growing won flexible renewable. package: and a leading won for and innovative lamination XXXX markets, North of the collapsible Integraflex Integraflex will business Award. It regional supplying Innovation utilizes is the best compelling package Company, The paperboard Packaging is technology create to makes targets Free Packaging natural XXX% different food to based, paperboard health-oriented profile. cup converting Gluten with Integraflex We

Turning demand of closure well to ran our our healthy reflecting mill. CUK at Santa and Clara five-plus our the for backlogs remain and weeks mills modestly and CRB, operations, improved

well mill As a the converting The Clara are and Santa executed all difficult quarter and our platform, quite benefits January, the impacted mill we with of recognizing operations by these in but weather reminder, closure consuming are our of well. produce the mills was highly negatively grades. CUK we SBS running approximately were paperboard of for The finished the this integrated XX% CRB winter decision.

also backlogs performance. to SBS Shifting at stand Our weeks. five-plus

majority contributed well the emphasis quarter, in Continued assets. on initiatives, $XX of and the to of cost savings this net performance first generated improvement the and SBS mill benefits operating million We realized efficiencies operate excluding the the costs converting and variable quarter. foodservice from

from inflation fiber quarter. input benefited chemical freight incurred input during lower input Moving on costs, to commodity and cost, cost, resulting in the escalating of while cost OCC we $XX we million

costs expect balance chemical input will for and XXXX. freight continue of We elevated the

Let is are and to me progressing mill The progressing plan. foodservice new assets. now how discuss we integration our converting on integrating SBS

the As converting earlier, the SBS mills the business in noted in Core X.X% I finished year-over-year foodservice up well. quarter was quarter. running volume

end on achieve by of synergy the We to target yearend the we expect are by the year - in $XX three. that million executing

in integration the significant SG&A Specifically on reduction in initiatives. quarter, the progress paperboard we made

our adjusted in for $XXX and assets line is in expectations I noted outlook first SBS mill full million tracking earlier, As XXXX. the the and our with from EBITDA quarter foodservice met year converting

over continuing Steve I'll are in at We America to to turn with further integration look call to Financial our to Europe increase Scherger, Steve? plant opportunities acquisition the converting that, and North mill actively And SBS Chief Officer. our levels.

Stephen Scherger

share per Thanks, share, diluted quarter Mike, down first $X.XX and XXXX. good morning. We earnings to in of quarter $X.XX reported compared first of the per

a per adjusted million, quarter net net First quarter share. compares adjusted non-GAAP million in the special $XX.X or diluted are $XX.X financial first the reconciliation XXXX per of table. adjusting these negatively to net $X.XX share. of income charges, that million detailed impacted charges first XXXX quarter was income measures When $XX.X net was This for by diluted income for of $X.XX or

revenue XX%, positive was mill million first on the in up sales, acquisitions, million from from $X.X volume QX. foreign from in other increased and million to $X Focusing benefit $XXX primarily $XX related converting Price SBS million net new foodservice the of quarter, million and revenue driven assets, by a of primarily exchange. quarter $XX

first commodity benefit. million the SBS to ended in partially of input cost offset of $XX $X increase benefits million labor million and $XX quarter mill of EBITDA, inflation, quarter $XXX Turning of to $X benefits. We of converting primarily solid million and EBITDA $XX million million other performance and from net inflation with foodservice XXXX the million Total negative exchange foreign billion programs. Cash first receivables, GAAP positive assets, and of $XXX with as flow converting of by debt million, foodservice operations $X.X by million we driven with a These new and $X pricing cash and million, liquidity reflects debt $XX reflecting of payments $XXX assumed and our guideline debt. global the primarily of sale to securitization receipts certain SBS the classification over the increased assets. and of related the net mill and $XXX we billion was combined associated million $X were

classification a As cash have new the guidance, these of statement result payments these changed the flows. of we on of

$XXX from reclassified classification and million from the previously we'll $XX for Specifically, reported million $XX via operating the flow cash reported dividends, capital cash and $XX shareholders acquisitions, statements certain were flow return change cash on use in prior to operations period the debt The our guidance, for that will cash the million on repayment. classification cash no quarter. Adjusted guidelines. or flow cash cash in from impact dividend. change, activities, a We've have was be We've receipts invested new of now the million activities. investing in reflect to available

ratio target We end committed cash our long-term to our pro reflecting the first to X range at X.X generation. times to times, was this of in expect to adjusted quarter leverage XXXX. of by strong flow X.XX net leverage EBITDA forma The and be year-end net times X.XX compared remain

price $X of full-year we paperboard fiber upside pricing costs, OCC our flat of from announced higher at previously potential our Mike increase. relatively communicated implementation XXXX. guidance, as The lower-than-expected XXXX to referenced, pricing input We recently inflation Turning could see commodity and/or materialize will guidance the expect to input be to the EBITDA given least potential upside cost billion. in

consistent all to our continue be in volume, $XX expect and XXXX, On the from outperforming to on the range. and performance excluding targeted market the $XX prior again be and in well last performance, to expected inflation positioned Shifting foodservice to customer we million $XX will We expect with consistent mill we're the converting $XX million million the in range, new million remain benefits volume to SBS through geographic relatively $XX labor substrate flat million achieve over with development, focused We our several expansion and assets. core substitution years. to years. product synergies

expect million from including SBS assets converting $XXX targeted foodservice year one EBITDA mill synergies. We in new million the the and $XX of

We be expect million to would million second in the quarter range. $XXX EBITDA $XXX

cash Finally, flow. turning to

from be bridge contributions EBITDA of million Mike. million. $XXX on $XXX to of our morning. $XX We to for $XXX you billion turn interest a $XX least the $XX expect $X million million taxes $XX to I'll the presentation at cash million, now cash will capital the expenditures of Thank to capital guidance least million positive last $X The $XX this pension of on page website. is at Mike? and of contained of flow remainder $XXX expense of million joining of million, call working million, reflects back our to million,

Michael Doss

from Steve. integrating pricing and on foodservice executing SBS generating XXXX, we the through are assets. the and focused keenly mill on cost Thanks, input inflation commodity synergies and In targeted recovering

the planning substitution development are volume. product flat consistent targeted to is plan new And place and prior if years. with markets outperform with We for in substrate

is to of to positioned that well and in I excess the well be our operator labor turn call questions. inflation. to continue the benefit We productivity cost will back now for generate

Operator

of of the Bank America. [Operator Instructions] comes first from Staphos line with George Our question

Your line open. is now

George Leon Staphos

begin, reflecting just to price least at fair and the EBITDA recall am Good morning. quick that now I terminologies from potential approximately if anything Thanks commentary the I guidance And prior so flat it's correctly billion. just or the for one, slide earlier. everyone. changing upside guys? Maybe for for a Hi, there, quarter be was and Would missing is $X slight in the cost from billion approximately last $X clarification/confirmation details. the the

Stephen Scherger

George, It's Steve. morning. Yeah. good

George Leon Staphos

Hi, Steve.

Stephen Scherger

correct. that's Now,

year in I upon is though price of have some and level realization, for to the increased in And think the it's upside for what remainder conviction relative billion that relative we All of freight some converting of early as do us the that obviously from late comments as OCC, and guidance the executed assets. the we year. see - where inflation potential that increases you're as ongoing context talked obviously of the the out days integration hearing from as we seeing, SBS $XXX $X from some depending us potential for well plays we full and on successfully million. to mill the been converting discussed that the we're price

George Leon Staphos

case. decline then, XQ you. Okay. pre-buying at do Thanks we the reason last, the first you is in inflating any or or for in couple sometime there they of same the wanted out the look what turn are believe Steve. either of you half suggesting Are there assets second I quarter, It you've with like seeing or the And you've it will year? A year? as what is will that. then the suppliers being those figures? stop key and I doesn't IP decelerate to your actually are, and that rest kind of others Thank any or observations the sound opportunity had seen that's the numbers to either rate confirm one freight that, where your the or think But And backlogs in two over.

Michael Doss

This George. is morning, Good Mike.

George Leon Staphos

Michael. Hey,

Michael Doss

that trends see QX for balance regards I we saw as of year. the expect In to we would the freight, to in say similar

million started we'll to a level we're inflation But with really $XX freight entire million freight freight know in as planning year, roughly inflation assets. which similar foodservice mind, the $XXX start as a after seeing year. we hurricanes see comp you saw SBS on Now, here is consistent which about the with QX, first of well would be lap now keep high-single-digits of span quarter we the easier an for us, in the in for combined last and on inflation to of

something planning So remained planning have of to pretty isn't to backlogs it that. Santa we're And how mean, pretty here that's In steady time all. regards If it closure up storing] as at some to the assets, after of SBS now. not combination, in really is, investment our of that facility. nature. seen continues In newly we we've our modest with really at right our factoring the that our on completing on some some now [ph] for pre-buy, for is year-on-year Clara we've there consistent the the growth around it's process regards store we're the X-plus into in look, which the faster initial than manufactured. X.X%, combined why of thesis center [perimeter foodservice that with historically observations were grow business foodservice and the interested volumes side were so I products

it's So the thesis playing one say with and line anticipated investment out I'd it really it's quarter our way in we and for planned that would. through

George Leon Staphos

over. turn it I'll you. Thank

Michael Doss

Thank you.

Stephen Scherger

George. Thanks,

Operator

Anthony of line the from Pettinari comes question with next Our Citibank.

open. Your line is now

Anthony Pettinari

Good morning.

Stephen Scherger

Anthony. Hi,

Anthony Pettinari

then OCC? running from think Is the inflation put then up finer called OCC? million where you question OCC date for full input And for of chemicals year to maybe year kind what from and can on it is remind $XX and your been on us kind the assumption you've to of possible benefit following I out George's cost a the inflation, freight. you on point on the Just a

Stephen Scherger

Sure, Anthony. It's Steve.

it input Just freight. million to $XX million of put the was cost of $XX inflation,

caustic $X Europe. As then inflation, Mike CIOX. in chemical mentioned, million we buy cost saw paperboard paperboard, like purchased we things about of [ph] And like

in here about We million was $X have been buying America. North well. That SBS as

only OCC fiber the were million costs are $X the up. And movement in recycled So down then or those quarter. primary

kind increase February/March the the year. last occurred of in of much remember, will timeframe you As

to we had an about was I year full at we $X deflation think estimates talked, the time from Relative the So million that saw. last average our for OCC. $XXX that were of we

of the remainder certainly our it you is the the year, that between that if for current, million flat-line the totality there flat-lined If guidance, difference it of our year. and stay average you assume $XX the $XX were was assumption today necessarily. If be for roughly. wouldn't But, to

Anthony Pettinari

And in headlines environmental business. a have over Okay. restrictions That's very we've regulatory scrutiny a about single-use few helpful. plastics, Europe pretty UK. and sizeable and the months, seen of especially you And lot past then on just European

potentially have favor sort of gotten enquiries you that just And single-use of stages? customers, that? a seen of a of products that little of the could out in falling terms what some may In of it from way then, you plastics be be you've in make understanding seem to meaningful that pickup maybe bit there any size Is early opportunity, that to Europe? substitute kind kind

Michael Doss

Mike. on comment that. Yeah, will It's I Anthony.

beer packages I some wrap growth on seen, high think of basis, and in part at really the of a Europe and we've shrink of coming expense global the the particularly is in cone films.

some really of outside seeing And we're tailwinds So into paperboard driving international beer associated with growth. our the conversions U.S. that's

on terms other in a have XXX% type seeing, not. on we actually with a based. the That paperboard of products. been that those example kinds case, carton could profiled a it's today traction the inside. of In a the we're It's wrap got I good one paper plastic this think seeing some narrative lot products flexible you of In We're of the is collapsible fiber package. where

trays trays, on the last call, CPET our mentioned grow. to As specifically conversions around SBS into I backlogs paperboard pressed paperboard continue pressed

the expect very to we see healthy would our that continue our backlog, those development So along balance XXXX. for lines new and backlog product of

Anthony Pettinari

over. turn I'll helpful. That's Okay. it

Michael Doss

you. Thank

Operator

Dillon comes Vertical. of line Chip the Our from next question with

Your open. now line is

Chip Dillon

morning. Yes, of questions. couple I have a good

mentioned statement. to changes mentioned you the you First your I I $XX Will to how for a $XX items, cash listed changes receivables million of interest. $XX numbers those as separate deal that also be And of selling with also probably being in one, million on the involved separate? of the $XX guess, two is benefit two with flow And working sort you a that beneficial one net net of that million. some But or - is a capital see - more Steve. housekeeping of is million

Stephen Scherger

Chip. that's the for information to provided We of disclosures asking to our Steve. flow of It's supplemental relative financial in non-GAAP question. reconciliation Thanks No, kind you, reconcile for cash the measures some that today. separate,

actually that to for But cash, the through year. That is So was - cost all of and was kind of that million last slight million positive $XX to slight a walk more compared generation of than separate deal But specifically, related related we most to we use we're for $XX glad cash year. the to expect that. see to quarter, the flow you incurred. from deal improvement working that capital very our

as the For that's Santa we Clara improvements as about out exited of by true There's flow basis. receivables at levels and less we for across opportunities assumed positive of movements talked on year-over-year executing from the cash no on carry to securitization in positive that system looked entire driven accounts us, inventory that our last mill in of the inventory end year a are some some payable. Chip, as the well we

Chip Dillon

to ambitious the And the about of this SBS you've talked in pretty I love when level integration, color on seems be see a business. is one Okay. we'd but issue to - that - some like forward know you'd what then, before,

five I talk integrated we about, or I talk it more where have that carton at will folding to you number. if that's didn't it XX% more U.S. And bit driven so three in it is guess, ways is look there's from could cups? where Will being do years. than slide, little you and more to is, much or I than But going a And a it. it driven? to guess, be know On you one internationally come, two the about currently think come

Michael Doss

next up and few Mike. our we've Hey, as it's business to goal, consistent you years, operate seven driven a an that integrated and ambitious said it well. as Chip, we CRB quite with really is listen, bit five at over the five CUK to which we go how know XX% now it's back three years,

able cups, it's type being really to it and centric. experience in and terms of how would it look is folding U.S. we come that cartons, And it, the foodservice applications both so where got do we've of it's those. and So from, at Europe

combination is foodservice as I'll a folding be that to acquisition as well of level, going pipeline to it's to So you tell traditional our carton strong. get that

along hard I working outlined those both opportunities, that and just are is We record very to verticals track solid in our those find lines. pretty

they talking people us are well. as that ideas to So around have

So on of will do going the integration to tons that effort, that's XXX,XXX some impact on it, have take roughly mentioned look, we business. it's but call, we a meaningful first required is and it a as number, significant when it's our

So it. we're that's why focused on

Stephen Scherger

comments. to context just Chip, Yeah, Mike's add some on

the some before, tons, that as some of growth and As that roughly time billion earlier towards for from the in XX% of seen probably business, horizon, products it's other addition integration come five-year XX%, to we over out good the will support example Mike from organic some moving we've that cup paper-based. of talked to of movements $X talked XXX,XXX consistent growth. organic to specifically But acquisition level it foam a

Chip Dillon

quickly, plus the next mean embedded it way? XX% What that the at to to or in it to quarter look it rate. around quarters, is million say million That's And interest per $XX was business? I that that does minus? three tax get run average income the business we the very net above quarter bleach-board there really And is the fair of And to for XX% that about know happens that is on XX% adjusted non-controlling the to also, helpful. you'll in going first as $XX

Stephen Scherger

it's Chip, Yeah, Steve.

just But little provide think end range more year, end mill we'll provide a the about the to XX% to in the bit towards QX, with provide bit to converting of we that positive to we I our took little be is rate provided low we an SBS that XX% towards a where pickup resulted and state update that range as actually of had rate for we'll taxes may as likely mix of that We the across million we we at suggested. - quarter continue at a the you. on new update benefit from assets the believe relative tax end you Just looked to $X the on full down, you taxes, move an the of to and the the the that. lower reside

Because Specifically to is the to about going pre-tax for will that be interest look that going XX.X%, to lower. just generally and There's your relative generally modeling or minority be rate like basis shift more a federal number, a actual basis a XX.X% purposes. to the tax partners for because generally, on the point you'll our it's little between XXX on and actually most what generally minority partnership - for federal state convey what expected you'll rates. pre-tax and certainly basis, see see the we interest tax interest the most partnership, for for as to tax

Chip Dillon

you. Thank helpful. Very

Michael Doss

Chip. Thanks,

Operator

Capital the from BMO of Wilde Markets. comes Our Mark question next with line

now Your line is open.

Mark Wilde

Mike. morning, Steve. Good Good morning,

Michael Doss

Mark. Hey,

Mark Wilde

But couple of am or if foodservice? is Just could kind think wonder Mike, it kind of European think carton deployment year. that of for that, Then of capital top us the kind just it have I follow-up. that list. of to would businesses? I start beyond out. this to you of Is a speak production kind about is priorities sure Steve you we I have that? how if just

Michael Doss

how million, run at was CapEx guides that terms core entity. the around QX of $XXX capital in year, of we've on $XXX to looking end the Yeah. our and pro at we around question. our I basis as the talked we're forma combined - the million got about Thanks projects for

got to out putting strategic we the one year, Augusta work is capital well drive $XX big which time roughly costs over about as and that we at projects this So with million. boiler you know, some are a recovery

we've couple little our as over capital projects reduction got higher last some time. to expand that of done years we've of margins allocation these cost in the So a

synergies We and and the convinced are mentioned, will, right as utilize find there. opportunities are Steve

move do sheet XX% integration to tuck-in flow prepare our and we've on the is to relates over decides business months here cash getting to what side balance our next optionality drive three XX to acquisitions, target to specifically of the for XX the the want debt said, you there next out are mind do. And our of IP that that as years. to of as in we Some to established over top reduction the they SBS at levels it line five towards

Mark Wilde

That's all right. Okay, helpful.

proceeds Just get via out know a how Gaandi at could the right kind on I are Clara, Santa how states, of kind capture other as couple growth share of any to guys growth [ph]. lot in ones. talk least sort you Mexicans in stands your competitor beer its One, the you wonder possible exporting that of Mexican to portion more it like beer of position baked pickup net just Mexican And The of you to Then of I that know a main volume of if that in beer has market. growth. update now? also is it about I sort

Michael Doss

Constellation beer so great in story notes part I growth I'm - addition as it's others Mark. know. been just Yeah, a and we of the participated down a very done making to in key our to have in regards Mexico. you In been mean, growing Mexican here, that, market, couple also, of that's well,

to to of we've some in portion is with products growth you it now we also But to provide well a it right at in very a that position interest we won't on that to it. customer kind We've into of able in indicated I'd not In come grow, have property, able And to little that facilities and of continues on well. actively that quite here Clara, capitalized answer any we better But Santa way. now, really economy outcome going to that the three Steve in are a quarter, But to at that end our a the right. big that. we're have lot read good provide been how look beer. we question as So are expect second if Mexico yet are had consumer XXXX. without guidance is Mexico, getting strategies, we'll drive on be hopefully service able individual regards be here, growth this in that of a marketing

Mark Wilde

Okay. one. And then, one other just

of think, the might Just how capacity might a at us sense you about just or I you ago, that years extra some take shutdown pulp mean, can seven you help mill Can mill six us Augusta? think advantage IP give down you how pulping about capacity. has I over leverage latent on time?

Michael Doss

as we're it's time profitably operation. export Savannah. of board they with making question. steam we XX away various know, capability a what European a out. Yeah, CUK has XXX,XXX recovery of external options suppliers you business. part pulp boilers, in to our as of in actually us mean, number thanks for to right of And sure our are To the thoughtful of being what that's buy. XXX,XXX sell looking from of the so We're different that, tons a supply include of Augusta rebuild reminder, By scale now paperboard over FBB excess time for that in tons over the in doing from the international very our Europe, miles tons of generation a and with our purchasing expand larger percentage operations, our way allow way of position those to I Port would to Mark, that we at we

be to to over could paperboard able do thing think about, the with reach SBS So it's for time. we not same us

optionality us And most those on different at there. number options is scenarios, is, So what reads sense what have the assets capture of with and there and we're seeing looking how we the makes that for bought. we value to early those

Mark Wilde

Okay. Thanks, Very good. Mike.

Operator

next Stephens. of Mark comes the question from Connelly line Our with

now line Your open. is

Mark Connelly

changing and year. be the you you price market risk? might that think in related about second are four Mike. question, price we to on Probably Thank is concentrated getting the do half most a we that did the you, it common is deterioration business become these Do hike that, takes why when so your the to days see see How success, carton much three this to side. if implement of relationship of hike, quarters

Michael Doss

Mark. in on work so. for that's chair I issue understand the continue Having in as said lag pass-through, contractual to play you that, got actively an and terms suppliers do of that question, that thanks, that to We don't historical know, a negotiations, we we're ourselves. Yeah, pricing integrated to we've level empty for whenever the particularly and we'll obviously way there.

competitors. have We

the And to with time the for to our to through. your pricing the have to provide pricing that customers. In ability actually inflation relates as regards our it down it contractually the started way flows way lag mid-XXXX. and to the is second we is as around driven pricing. contracts and Most of the of as actively we negotiations something arrangements are so it models we tighter of and on and/or question our up that the to the certainly pass-through is a But have our list cost part there risk multiyear impact win on the that on improve working it's case in that it get that the function in

going you on those be the of increases said will easy - as contracts that be achieve new is three no actively never price prices we're an after, to vast on we're have difference. we we Having So that, process, and to those the and expect majority on going know, increases. implementing raising and business to grades this expect all

add go year-over-year. side. quarter the paperboard year, teams the of CRB CRB might little is that is our with might story. I think ironically in competitors through is I And we the keep When might context quarter. interesting XX,XXX continue Clara all data and of to that's guess, that, course, [ph] SBS our one backlog focused tons. post the it's provide up mills, at a where an from on one enough tons that commercial look XX,XXX closed less this you a on are helpful actual done that kraft first unbleached tells that's two production year. for closed here APA that base down and be X.X that to we'll down Santa million down the ton So flat, how through I one on goes as that's essentially being that you we and thing And

CUK our manufactured more when been of there case, that substrates shifting the are into some the essentially majority where of drove grades. has we So in

And little be that over If that to you figure, inflation generated shift. operate. stable, a we're year, a into standpoint of given Santa half from that more Clara a course, that we over we're of tons tends a gets XXX,XXX substrate baskets wood the and in, where

right is that's tons. mills up, backlogs and in operating markets because those that producing us, fairly now, there and are think we are less So ways, helping positive some actually

Mark Connelly

Sure. That's helpful.

these question, One challenging it's there that and out a competition. lot pretty overall other keep it of think, to easy to are just I overlook simple. markets

to versus priority The Now got changed Has you your of returns you're familiar you've international are on starting two? IP, place. much, domestic differently think view between tax the in acquisitions your made that or more get law changes relative about the there.

Stephen Scherger

stand Steve. have our think, their they impacted on I to it's don't - Mike, but materially do they stand own. priorities, it's

the And of relative that can come invested after-tax the the But basis returns potential U.S. positives had good an our have to strategy. on so we in relative we a acquisition to - we've from in at our implications strong and potential there. certainly positive look tax based the Europe changes North law success that America

particularly Mike the you billion terms relevant believe there opportunity us what $X in we home, markets, we to heard is terms top on to still line that a converting to you got invest towards is be more scale. move of think, of that platform of see North the to good side Europe, But for in I if specifically. will in priorities we've from generally mature closer very will, earlier very America

tax some looking that changed critical example. profile, to hasn't our assessing view latest the we about the it materially Mike for at we're account, the strategic relative investments things of certainly return into but considerations of take earlier when like So Augusta talked

Mark Connelly

you Very helpful. both. Thank

Stephen Scherger

you. Thank

Michael Doss

Thanks, Mark.

Operator

from of Ghansham Robert next Baird. comes W. with Our the Panjabi line question

open. Your line now is

Mehul Dalia

Mehul good actually sitting are Dalia for How morning. doing? in you Ghansham. Hi, It's

Michael Doss

morning. good Mehul, Hi,

Mehul Dalia

Great.

kind commentary. implemented give been obviously P&L, can so is just pricing given what you the you're And what's back expecting lag any your us there far? long the reads early to on going contributions pricing in Just times of from that XXXX, to sit in

Michael Doss

annualized substrates, we last the that along $XX with Yeah, we $XX for an into that up, pricing $XX QX, - CRB Mehul, from SBS commentary bringing and price for the $XXX set We'll and spoke that and that's around thanks across on models million. with executing cost and of as time, some in opportunity CUK, benefit the mentioned total we're start QX. from to see the

kind the the than XX, of year, of out as as and on in range basis, inform categories. more XX, across XX four million importantly range though it's exit a $XX executed no probably with $XXX the we that So in million fully XX, the

Mehul Dalia

X.X% Was volume great. the outlook guess, you. the better than the And up quarter. for for during And strong the the expecting Thank what's of for you're what business? Okay, seems business, that SBS then, for at I the that year rest quarter?

Michael Doss

combination. that's for announce it look, center was when grown, thesis But communicated the behind out our historically activities, Yeah, solid investment that markets sure. and those the a and have as we quarter we actually combination store

build QX. see expected continue we away it consistent to in nice expect to happen, to momentum, that largely that with those with is XXXX. continue And was So work what occur to we to in to it was on line we it expectation

Mehul Dalia

you an was Okay, due How great. much you impact there to mentioned for And weather one. just business, is that in first think that? there weather? impact I one, the In one of quantify last business the quarter. Can

Stephen Scherger

about Steve. In within SBS it's the January impact during is January $X timeframe. million the mills Mehul,

Mehul Dalia

you Okay, great. so much. Thank

Stephen Scherger

Thank you.

Operator

from comes of line question Goldman next Maguire Sachs. Brian with Our the

Your line is now open.

Brian Maguire

Good guys. morning,

Michael Doss

Brian. morning, Good

Brian Maguire

I Just commentary if at levels. roughly would guess, following on be the to million current made billion But confirm said point? I it stay that to not back the $X OCC, billion pricing guiding the relative just clear upside, the just were wanted guidance? the level the you benefit, at just wanted $XX I that the of you million doesn't potential guidance, make $XX sort last to those to question. that's another in current that probably the stays on both $X And

Michael Doss

Let's fiber make comment the pricing, on the brand. Steve and handle I the

Stephen Scherger

about the costs, those the is pricing moment, $XX execute all that's opposed about talked to in potential Brian, correct really opposed our as now on through in $XX recycle million just terms OCC of it's remainder on something Michael fiber And as as the year impact, we year. for Yeah, actions of million $XX as XXX,XXX tons as is reason of that's to this OCC million price roughly the higher only there. a to the the

to correct. relative that's your are question, those So

Michael Doss

million fiber. just high as we of Brian, And build you X know, levels on, secondary about buy really tons

at stated, OCC level As Steve materially. and continues it be it double-lined down mentioned, he another $XX that is of which about if the is generate, just kraft, XXX,XXX million. will to as $XX And

our subs we actually generate because have compete the of used CRB. the pulp when the flat up, you tons top - they are cases with least some tissue. Within principally, have remaining about that manufacture are portion XXX,XXX Those pulp on gone high will tons, XXX,XXX of of in layer grades if year-over-year. we at - In or that

not going all so, it's And down.

secondary distinction to you here just call I out important as fiber. that's an think about think

Brian Maguire

your execution recovering be helpful. you And, pricing in mentioned think first very is That's raws. an important going Mike, the the Okay. I of to earlier step that

a will Just wondering on be XXXX entering how if at - will look raw you up inflation of fully as you do it, and the go caught XXXX, that you we be you the kind exiting think XXXX there? you get of do had to have starting XXXX point was to XXXX and in or bit where back on to and pricing you work still little think

Michael Doss

implementing if out that be Steve early XXXX. it pricing you Yes, in will. We'll lapping still comp that And we'll outlined. way the be plays

months that. $XXX do XXXX million. the to that. And XXXX, we're very next we we outlined, that on the doing got setup it's XX as over to So focused But initiative just clawback

Brian Maguire

Okay.

housekeeping last one Steve. Just one for

accounting wasn't change there sure, because was it not just already receivables some I the or was the I offsetting in Just you guidance mentioned that in the free flow factors if guidance. and the think earlier of there. impacting is other kind cash was

Stephen Scherger

and We improvement didn't in we original based don't. any receivable have still our guidance

on that us. capital for working securitization impacting is there is So nothing side the

take the through cash statement. modeling on a And there. different from no flow in we change that it categories but You've seen perspective, you can

to the As and a plan earlier, inventories year improvement on drive to see I going mentioned that are we full basis. payable

Brian Maguire

lot. Thanks it. a got Okay,

Michael Doss

Bye, Brian.

Operator

with Debbie Our Jones line next question Bank. the Deutsche comes of from

line is open. Your

Debbie Jones

Hi, good morning.

talked OCC think like you You maybe up might about typical it that also bit, seasonality. could a substitute move higher. bit being a prices just some pulp seems But

impacts then wanted You a that you're OCC in to It that. how the thoughts have do you seems point. on XX but anything suggest pretty And OCC XX Is that check there up? good optical, have anything? seeing any just move introduction should vantage on I more

Michael Doss

of to the second a Debbie, your It bit. up related was What OCC. part is little broke question? your I question got

Debbie Jones

is asked, optical. impact introduction OCC XX, just any or of that if has I the just it's

Michael Doss

so OCC the between XX got XX, okay, grade it. XX, change to I

terms that seeing think, go of how look, we're seeing it as $XX what level, we're for right we're at of least we at month. in it. stay kind OCC looking I at into now, That's next

impact in which than pricing. more, terms better on change Chinese what you Things yours. whether their no dramatically import contaminate will really is visibility lines will have or our adjust to know along the that, start those levels Beyond they as of and an

XX, I opine we're do what to short-term, think the on be versus the it's business. recycling volatile. I XX not really so in going other in than want And of to don't really the part I guess, that And will other that,

comment that. hard on actually for it's me So to

general think think trend and the as It's here. be products food is cleaner I thing. And you good that's make The going related. are good a fiber I us. to in know largely beverage for we

helps those in us true the the fiber we get, is we destinations. the fiber business And actually and more same our get, so cleaner on international consistent

the think I for trend will short-term. So that continue

Debbie Jones

should business for of then year last forward? of over going kind or more portion gained business was providing a you in helpful. it certain growth. I second number for on basis have is if percentage overall like which is business you and question Thank flattish categories your what something information. two. a That's Thanks. point wondering my opportunities the on as seemed that actually that organic growing some Okay. of you And your Because us we XXX look just

Michael Doss

as we to the in those business businesses as business. on Well, for going example. - side, you're quickest well. needle some grow it both lines. currently we're the of lot Those particularly seeing the the those a beverage in guess, you relates our business of compared I generate as number us split CPET the how on additional And consumer year-on-year see rates or foodservice and on trays to consumer do are opportunities the growth then see beverage growth, as it's at mentioned, and consumer of to interest to along going But a plastic international, is I substitutions.

Stephen Scherger

that, to add and terms that headwinds seen where of Debbie, to just know. have Yeah, we in headwinds, we've you managing areas multiple they're as been for years

yes, to consistent of of now, are scope carbonated us $XXX cereal multiyear tend those enterprise. in modest total to of But $XXX as million business, they've to in both soft-drink business, the so the and totality relative been - in for be which categories size And traditional those, our declines. million the

are them. move that decline have manageable tend the growth So been and for the that higher strategies have be by just in a now, categories that years - size, categories the driven products they in some keeping are overall five into in there to categories, us that mind, for like. last healthier yes, lot to But we've executing good-for-you,

Debbie Jones

based new uptick there work us customers design in that lot sense you the brown, sense do to it brown months, get that, in year. saying, to coming a last that? your six a on is up package? hey, trying versus on in in fiber changed impressions follow a just can around - product and just last packaging please a I What of of If is and that's plastic Just discussion are with your - an there

Michael Doss

Yeah.

brown been know strengthening SBS a have say would that was lines. as CUK. it's on we you with think both have white, and And I because our whether now little backlogs agnostic product we or it those

many And bit about Debbie. it so expect talked trend reasons little direct we're of of sides of relates some virgin see the nature both on we've to as that to of by working driven that we're that ledger. food the for we past continue, manufacturing. products more Definitely So substrate, that in those the

Debbie Jones

over. Okay. turn Thanks. I'll it

Michael Doss

Thank you.

Operator

of next with comes Adam KeyBanc. question from Our line the Josephson

Your line is now open.

Adam Jesse Josephson

Mike and morning. good Steve,

Stephen Scherger

Good morning, Adam.

Michael Doss

Hey, Adam.

Adam Jesse Josephson

that if guidance one up were other chemical Steve on pricing, what anything words, there months than to on higher are thought based something, guidance, they just Just - offsetting and million? to anything picked your to benefits XX $XX Are you so and relative OCC you is see freight compared ago, costs about three guidance than on on of on $XX months, price/cost. costs three on three million question that offsetting just clarify one we months? recognized, higher in XX

Stephen Scherger

We're Yeah, beyond of little time seeing Adam, we last spoke. Steve. bit the acceleration it's a

board If about we you is look probably expected. we across expected, freight where about chemicals specifically where

bit there plays up, and think the tick if I we about going activities the to feel But are the extremely movement. year on of that Mike? us side. freight what that zone it's this on at little to lies some any have year opposed early bit on, of inherent in little kind we So your we're very positive And look they're do that kept our is a question forward. which going conviction well efforts, in large to relative integration out as as as we play

Michael Doss

we of we're got, boiler want when think on with at XX recovery down is that the rebuild. that for call days we approximately with out our as And guidance that, Augusta facility that for build to I just the Adam, we mentioned piece XXXX this at gave end the year, to I that rebuild

to the for And them to our properly customers and of we're to got period go get reposition paperboard able during material make that quarter for to both into and service time. sure we where that. So to operations it needs one we're internal

of the planning costs needs to of build But end of have kind it lot where in a expect finalized higher we a reposition warehousing context are of to it QX. by lesser to and some there and cost. particularly degree inventory that that to freight We the incur go,

read quarter to more give of we visibility this into QX largely So make work we'll extra that the a to done little why got wanted clean it, by end sure and that a we that's on have it. the

Adam Jesse Josephson

Sure, thanks on Mike. And for just now longer term. that, one price/cost

take year year you I think to last drag. will a long-term wise. I recover next said price/cost last it earlier was you've big there And been pretty really and this you on what that think become time Obviously expectation? not flat industry price/cost Do a expectation that still might more have think reasonable perhaps lost conditions or flat say over be challenging year. you overtime you such realistic would price/cost a just is

Michael Doss

time Our focus XXXX, and not view, to in started longer as the middle it us XXXX. than we in It's the price/cost has taken past. actually sit because of neutral. here today It's back this just really our is to it get

point out of that's So view.

our line. we've But up of our and offsets that's bottom focus its pricing inflation. time, is consistently that that over show that We execute focus. input now. said got As that over to We next our goes make on our got the go really sure cost quarters to value to couple the

Adam Jesse Josephson

Thank Mike. you,

Michael Doss

you. Thank

Operator

comes line Our next question from the Davidson. with Chercover Steve of

Your line is now open.

Steven Chercover

Thank you morning. and good

Stephen Scherger

Hi, Steve.

Steven Chercover

also is on question schedule. your maintenance My

mills you did Augusta Monroe the that? could in or the hoping maybe QX. And how in do mills plan queue the tell us, an schedule or XX your are also new clearly West year? month So you all and remainder What's of I was you of the even for on

Michael Doss

West some say got little We Augusta did say outage And that some of the case Monroe. a ones we in do the and Yeah, that September Macon, XX machine We've West did in XX, on the a Monroe. machine, months with case got West in did We Augusta. the September. in in quarter, in QX. We'll we machine bit. in is schedules. thanks, mills Steve. Augusta It outage of when one And an We varies QX. one we here we occur which in in second in Monroe annual machine our consistent did will

substantially kind of big we we for the similar expect I'd to recovery that's boiler into as schedule in got the So it now with outage the that go Augusta, be of - right XXXX. and that exception

Steven Chercover

get an for XX is all Is the on mills of month no schedule? feasible? to your that Okay. objective someone reason Or

Michael Doss

that XX. we different It we allows actually us for versus business our got reasons the to live doing run. schedule quite XX we No, well. - We've run

outages. during of with opposed continuous run and digesters how has we to as mill it do those Some to digesters batch the

really schedule materially that So won't' change.

Steven Chercover

you. Thank Understood.

Stephen Scherger

Thanks, Steve.

Operator

RBC comes question line next Viswanathan Markets. Capital with from the Our Arun of

line Your open. is now

Arun Viswanathan

you. Thank morning. Good Great.

Stephen Scherger

Arun. Hi,

Arun Viswanathan

Hi.

a couple of So questions.

off, just wanted So the on first clarify. to guidance I guess, I

right? for increase price, guess, I on And an million around year. the I and benefits for is more OCC So, the be CRB there $XX of the opportunity to on CUK that increases be $XX And guess, recently maybe any price can help Is opportunity be would on for the there us you potential tilted quantify XXXX is towards what realized? way XXXX. the would

Stephen Scherger

Yeah, Arun. Steve. It's

you mentioned, year. of CRB amount to a move towards on where this for roughly think I we're million given kind and CUK, year, That's As six potential we the close this for month lags typically of a for roughly $XX fair of nine SBS. little

think $XX also the this assumption of would is pricing for I year. - of important remainder current million the and That it's on $XX the an OCC. require your

the no as inflation be are But, two will price/cost, yes, figures there as in $XX well from So that million. OCC. those

Arun Viswanathan

Great.

Operator

this the time. questions I'll over remarks. further closing call to at no are queue the back there turn in And for company

Michael Doss

you Thank call. great on you. We for day. to earnings Thank speaking again Have July. a with us forward look in you our joining

Operator

This concludes call. today's conference

You disconnect. may now

Graphic Packaging Holding (GPK) 24 Apr 182018 Q1 Earnings call transcript