GPK - Earnings call transcript Q2 2019 | Graphic Packaging Holding Company

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Operator

Good morning. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Graphic Packaging Quarterly Earnings Call. [Operator Instructions]

I would now like to turn the call over to Mr. of President Vice Ovshey, Investor Relations. Alex ahead. go Please

Alex Ovshey

Graphic Thanks, Conference Company’s Results. to Second Michelle. morning and Good Packaging Call XXXX Holding Quarter welcome to our discuss

on and CFO. the Mike and Speaking Scherger, will and Steve President President CEO Doss, Vice Executive call the Company’s be

follow help you with along To call. today’s

accessed at link have Investors on be which section provided www.graphicpkg.com. the on of presentation, slide clicking We website the Webcasts a our can by and Presentations

and estimates regarding I of to our would [Technical remind statements plans, like Difficulty] that everyone expectations, beliefs

Operator

me our resume will conference shortly. Excuse

Alex Ovshey

undertakes by no it you. obligation as to update such law. over statements, except required turn Mike, I’ll to

Mike Doss

Thank margin performance, you, strong our Good and XXX execution to year-over-year increased reported as EBITDA results second our joining strong on thank you pricing, quarter Alex. basis and to $XXX of points initiatives, discuss us ahead We Adjusted million morning was XXXX XX.X%. expectations in EBITDA results. of by synergies. adjusted quarter driven growth the for our

million in reflecting the year-over-year $XX quarter pricing initiatives. We improvement of the Pricing adjusted improved $XX during benefits reported of by million EBITDA.

cost performance pricing Overall, was in commodity quarter well we input million million in relationship and our Importantly, million operated a positive year-to-date. $XX generating the improvements. the quarter to in $XX $XX

continued and commodity U.S., be These benefit the well cost regions. as specifically driven The inflation exchange. in input benefits labor State by weather Southeast, and offset to were increased partially by wood elevated and inflation, wet cost wood, as Gulf unfavorable foreign

million As of pricing we quarter. I positive mentioned, generated during $XX the

of $XXX expect pricing to XXXX approximately continue We million.

on months provides to our important to reduction in better market report pricing commercial milestone months previously. an year customer reduce This average reflect to times adjust been compared as to have eight our successful pleased are it per two opportunity that to We lags conditions. pricing the to six is negotiations teams

values the packaging. intrinsic shares to value $XX we we of at QX, In graphic of repurchased estimate million be below

shares of in of share XX%. of share by $XXX successfully three program have our have count Since last we we quarters, successfully Over a February reducing meaningful XXXX, repurchased by million repurchase the inception share count reduced X%. our our

discuss financial XXXX Artistic we me guidance Let in Carton current company morning. this briefly the announced acquisition our

adjusted billion billion the million of be to in our a XXXX to to expect guidance. reflects execution EBITDA cost $X.XX the $X.XX compared more up continued pricing of and range We environment. previous favorable $XX The increase commodity input strong will midpoint

business be approximately to We will generated XXXX.Shifting Auburn, of approximately ended to continue June million located capacity million two includes White converting one production Illinois. annual with Pigeon, in XX, facilities XX,XXX $XX The Michigan Elgin, and business the during XX-month XXXX the compared mill $XXX in revenue to expect tons cash the in in flow and period XXXX. Indiana million CRB Carton acquisition, $XXX Artistic located

diversification and generate We our Moreover, annualized in months. approximately provide anticipated XX end in will enhance for next mill platforms expect $XX opportunities drive million compelling the to market XX North converting converting EBITDA The will and growth to including optimization converting acquisition the America. synergies and platform. paperboard our over acquisition

paperboard synergies converting We integration, supply deliver manufacturing efficiencies. and driven significant by expect optimization, to mill chain and

transaction expect XXXX. the of the We quarter third in complete to

quarter. acquisitions. in organic points several the Volume the me into Encouragingly, consumer modestly position plastics wins quarter the let detail the operational from away XXX second shift half customer volume XXXX. provide business for basis up paperboard was by Moreover, see paperboard of a from our of in for growth key benefits solutions. the packaging the customized to more we Now, trends our continue on second business in second global driven new

discuss efforts. our briefly product Let development me now new

last solution we remains high. very packaging beverage As KeelClip highlighted in the interest quarter, customer

demand large several over customers building We packaging years. actively drive for KeelClip machinery the we next will are new that expect

categories the our perform Nielsen data, plastic trays. prepared press In are According market categories. meal well, food from bowls paperboard and entrée breakfast, and across share the to the food to prepared are innovating continue actively the categories, proprietary winning customers

SBS a Customers plastic multiple in trays new Packaging’s mean solutions paperboard increasingly the launches for trays I the There offering. quarter numerous are over for cooking Graphic are customers categories sustainable solutions viewed more operations. paperboard proprietary consumer the incorporating microwave as superior choosing were also product are Moreover, experiences. across as

in SBS from completed boiler upgrade Augusta systems mills significant of ran electrical the XXXX. during rebuild of Our mechanical we quarter. assets and benefiting and expensive the the and which converting well to mill recovery QX The is mill's the

for QX, a reported XX%. at healthy for rates XX% operating five-plus CUK. CUK Packaging's of and AF&PA SBS. XXXX rate The CRB for Backlogs weeks remain XX% operating Graphic over CRB, and was

reminder, our for these grades. produce a platform CUK our integrated mill As of operations are CRB the converting highly and XX% approximately consuming paperboard we with

Our assets in SBS the completion our rate from we increased SBS to successfully backlogs are XX%. currently and combination SBS foodservice approximately XXXX, early Since XX% three of of weeks. have the integration the

improvement the to synergies operated performance, and benefits on and $XX generated performance. well to quarter. capital on of emphasis Shifting We continued projects strong from net variable have million efficiencies operating cost and execution initiatives, performance in

cost costs XXXX input net we tariffs States by impact The Moving on structure to costs during resulting input United year-to-date. elevated cost commodity enacted our on quarter. in inflationary impact has in and costs, of higher wood a $XX inflation paper the the the incurred from had external million limited

XXXX a result, us SBS all grades. three executing our assets. And the addition efficiencies has for foodservice converting paperboard we as Let we and me how integrating on optimize focus on the company. for of enabled across in the to production SBS meaningful are driving are strategy The and mill foodservice now assets early

opportunities executing innovative also and growth foodservice on in into the shift We to positive are tied paperboard solutions. trends to

a from related have synergies high away million the to these on confidence to of level highly growth and finally, integration in of XXXX. we plastic-based our remains deliver acquisition end clamshells, cups, Specifically to is by Letica of supportive acquisition trays And $XX and in the track shift continue of initiatives. ability

Steve? And turn call Financial our the I with that, Steve will Scherger, over Chief Officer.

Steve Scherger

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

net to Second table are million of quarter XXXX earnings of measures that reconciliation the attached by special non-GAAP charges financial in detailed was release. income $X.X impacted the

When share. to adjusting million income for per per $XX.X these adjusted charges, adjusted $X.XX net million net the quarter income was for $XX.X compares quarter XXXX $X.XX of share. or diluted or This second diluted second

one Focusing sales, X% by offset million on quarter foreign exchange. primarily benefits These by and volume acquisitions. million higher net partially related pricing revenue driven increased of of $XX were million $XX second favorable $XX

$XX by second The $XXX million inflation benefits of adjusted and was million benefits, unfavorable cost and million quarter commodity million input of increase $XX to million $X foreign exchange, inflation of partially EBITDA. $X offset and primarily labor pricing million million mix. of to by unfavorable primarily driven wood. were of $XX These to $XX other performance. $XX Turning positive million volume

GPIP We a $XX $X.X over invested repurchase liquidity of million decreased ended billion million net and in the of $X made shares, $X with capital, $XX paid net in million we the the debt $XX Total our billion second partner. quarter of second $XXX debt. and quarter. distribution during quarter, to global million dividends, In million

times net our times be net to We leverage at pro times of QX. to leverage our of cash flow remain X.X quarter to compared EBITDA long-term X.XX at and into generation. year-end this end ratio was target X.XX forma expect range committed well reflecting Second X adjusted the times to strong

million will adjusted as now EBITDA to guidance. increase to expect Turning relationship. be in to compared full of our referenced, The full Mike up input year favorable midpoint year pricing commodity $XX $X.XX our billion reflects billion, of more the XXXX we to the range guidance, cost previous $X.XX

favorable positive The million. commodity We XXXX of inflation million wood of $XXX costs approximately pricing $XX expect outlook partially energy by of reflects anticipate to input input costs. reduction compared recycled fiber, million. to and continue offset cost freight higher-than-expected our previous $XX more We

to $XXX of driver decline range. We maintenance The timing adjusted quarter $XXX EBITDA the schedule. annual expect QX the related is be QX of the will third to million from million our key EBITDA sequential to and adjusted outage in

have mill. maintenance we Specifically, SBS our Texarkana at extended scheduled outage an planned

mill, addition their boiler. the recovery replace at routine In will will the we the to tube of annual section perform bottom work we

We expect in and safety of improved will mill. this the result work reliability additional

flow, remainder of to The in to expect on guidance Turning our our we $XXX approximately continue cash contained the XXXX. cash million flow last website. on will the is be presentation of page

turn Mike? Thank call you this for morning and your to time back I'll the Mike.

Mike Doss

the results the in strong of half first by are year. We encouraged our

are We is delivering that highly a growth substrates. strategy three building of integrated all packaging our paperboard profitable company across executing on

in labor we excess through our growth, productivity and to cost synergy inflation. benefit well-positioned will benefits are anticipate initiatives our of be We drive that and

for effective cash actions focus XXXX robust creating continue our on believe allocation. capital generate beyond. these XXXX We flow value shareholder to We expect in create will stakeholders all we to and value to in and will

And call I turn questions. the will now operator for to back the

Operator

[Operator Staphos George comes Instructions] from Your from of Bank question first America.

is line Your open.

Unidentified Analyst

want paperboard elaborate second then on how what just also in to this It’s out you customer talked your you volumes actually half? I shift - me gives outlook for also to just about [John bit for could earlier to and start line George. you Babcock] the new wins a on but the is and impacting your the just plastics add volume solutions - from confidence let

Mike Doss

business. really as about paper as wins, seeing and about business, Europe KeelClip I polystyrene acceleration from shrink cups, earlier kind of products Those transitions of beverage away trays, types areas. in what wins terms the of translate out year, our other clamshells. our in on in we talked specifically on that part So film wrap well food this continued we're customer into We of talked of here and the would service as move new into characterize as

got we year. up type our the beverage the business see of XXX of and that's high year, confidence tends hold economy of that XX% to in second And bps of guide. stable a during we’ve so any degree second really that half in outline our all in we here food pretty our half this being the and So contained on

Unidentified Analyst

are And then also CRB SBS. a current still talk the CUK in in this in pullback strong about and you quite market looks little like bit Could grade? but backlogs dynamics

Mike Doss

Sure, happy to do that.

solid know in both operating rates and you as are CRB. CUK So

entrant that fully that's are SBS by the they little that as there's of bit AF&PA come were range. they market now announced into a and contained in fact XX% actual out. the our is new side capacity take to going the really quarter, a in That's numbers actually the we one driven And On posting. that's the in the competitors the saw down

net-net things basis kind XXXX. of into and a up of be We'd So of expect net those moves. kind as if rates you of into moving with plays the net, QX little both operating here at to results look it two the bit of a those out on

Unidentified Analyst

I last it then question And turn before over.

of transaction is to of see with upper this Just and benefits talk regards the CRB. then fits at kind the CRB from And looks cost in mill also end about acquisition and their how Could plant you this existing into mill you curve or network? the the Artistic of like just Carton.

So to this out efficiencies what drive are of opportunities there facility?

Mike Doss

So a of going you here questions to I'm there. answer got number them in order.

excited in of we’re not and and side what see Artistic in that to we're things customer the segments business. doing diversify a acquisition, side the of mix. of the They're business. terms about good continue In converting talked goal we past to the really the They’re diversification portfolio our the need in on of terms product about retail in, number we’ve and on of our

markets They're certain in that also we interesting. find industrial

things that's and CRB reasonably on to where opportunity a synergies efficiencies CRB - in we for So see And side, being the got biggest sizable to the supply do business, there of be leverage us. drive synergies. the some opportunity big think going and some really we we regards can a a we've chain we

Operator

Your Mark from BMO comes question next Capital from Wilde Markets.

line Your open. is

Mark Wilde

service questions a going we on I to European little would John's I food bit And this another talk have priorities? add timing carton for of capital Artistic about also synergies wondered the there. use which but could growing just just business a little say higher acquisition the back would which both versus around be or the the business - the on one guessed growing of

Mike Doss

to pretty into the for find the so, are look we've at some about, around moves term verticals talked think expectations that And space. that us, still opportunities the for shareholders. I those our good example we it in. at us as unique make and that and the look is not is good long this Yes to create look in value that valuation have Mark, of multiples we we a that we over - think is is one we're And sure it and through high way

going priority standpoint, prioritized that You be our are integration that drive for SBS reasons. to from we can right a anything is to up do those

But driving towards that past. you valuations the side on we on have make in of discussed still sure billion the converting get deals right interested that platform we've we Europe, in a well. as those that to kind with we're $X

our to the so because beverage indexed business well pretty convenience well we're market that But and holding is business. both up

We’re of going North side that to America there a are levels cautious and our that probably ahead look little more you the drive SBS we be can up as prioritize anything integration and on bit specifically that. at

Steve Scherger

Steve. it’s Mark,

pre clear of apply line overall and and I an multiples allocation acquisition. on sight think to of when one capital we that we the very aspire can we that post to decision relatively one take its capital of kind a to see of to it’s the things modest to

Mark Wilde

And then synergies? the just and synergies Okay. of timing

Steve Scherger

mentioned to the On us we the for look to a as XXXX. would of synergy post $XX million which majority majority that one is be this expect we out available we as of EBITDA would number of XXXX

fair get we'll look of So the very quarter. modest some Obviously, as upon out. as number dependent improvement a this that's a that we close maybe year think

understand of $XX Typically, drive through primary then we those work well we expect that months that million. operate as early case, would In and this sure hard XXXX the making to spend efficiencies. we line those the sight to and business

Mark Wilde

may I struck deck. the was if slide I just then when I just at follow-on. looked And

coating and issue? And You're polyethylene. having the still terms just foodservice products to in curious easily cup I'm buying complicates than the with you're at coming up make XXX pounds about coatings alternative polyethylene of million the recyclable kind rather where really of of that for them more which paper

Mike Doss

on materials you a It it It effective trial focus past, top I’ve are does priority cost density and is And the about is food is and we're relative us that pretty in customers to different that footprint. side. question. service bio-based as polyethylene, strategic We've new commented innovation thanks our for with for would numerous our product our for the know that thing properties the that high. got Mark, low working that its reduce The are as business. variable

optimized pretty a specification. against up we're so, And

that that ultimately consumers over with those a to up sustainability things as XX innovations options point, through we to it's months. your marketplace of the But these one new come from the months standpoint and believe we will hold and next XX

XXX We million that expect progress make to pounds. on

to is with of the that The other thing I that materials. mentioned we're working collection you our customers on those around we're working

to a fiber to, the And is and get able good mills and really the to be in to behind the back probably others we're our use because little them there ability U.S.

Europe certainly as that for that's are Asia of in us We and opportunity an are well. parts regard and

Operator

The Mark next Stephens question comes Inc. from Connelly,

is line open. Your

Unidentified Analyst

Rider] This Mark. on [John is actually for

assume your we price to to from actions other six months pass-through address or response the represents the of eight cost to future? the so the question reduction first gap is, there price significant you're are should that majority taking So that in the addressing our in

Mike Doss

John was So multiyear years. for undertaking the yes, significant us couple last over a that in of

So, to wind we we're that believe going months six up is that where on

Unidentified Analyst

comp of so as the to that, ways you just a that can inflation? so risk mitigate And are there follow-up other

Steve Scherger

Yes John, it's Steve.

around horizon, years As which I initiative actions us the think addition several also the couple to has we've we've critical taken last in for compressing pricing. talked before, for a time been other of

throughs ways to cost, addressing for like areas at example, pass any sure like. that the and leakage, we're freight So make potential looking of

the to commit year-over-year. to approach So, multi-dimensional it's improvement which been of pricing has allowed really kind us a

million, of business. compression areas might it's other Last the $XXX or down this during year’s year’s initiatives $XX either as a those well time negotiations combination and the of the as million where course of price in leakage have lags lock negotiations normal you to

Unidentified Analyst

cost also if about had you so question some in we productivity, saw could a last here and OCC. second talk the high quarter, low you've now improvement we wood just And but is, unusually good mill know guys bit

just could you overall efforts into perspective. your us If help put productivity

Mike Doss

do John. to happy Sure that,

you're seeing and West section that's of substantially that now in mills up XXXX there. into do West from the year-over-year right we through productivity basis. Monroe made the is really, a productivity all we put levels XXXX, curtain Monroe, making the So pressing kind in lot in coming benefit CUK specifically into pretty what that of coaters our investments with terms on of a We see and

In a question Well, - the actual season. to we terms cost it going need of XXXX. is and cost, the We're expect here States. wood your relates elevated remain better for Southeast wood we to the that in to regards behind stockpiles OCC in Gulf and the rainy wood as into building little our in weather

So, expect others back assume effort get those would I historic of you'll patterns by in see of more once normalization of regions. do we we those here QX into we course can the a lot because weather wet while ourselves is to build piles patterns which and

to expected supply what It terms They and up down. to a regards you to respect we and down looks see demand. like. move OCC, as what see are in So, in that We'd it commodity. is of

demand basis. down on little now a bit a is right And global

data example. and think saw as exports I recent June I the X.X% were in most AF&PA down an

of kind we're how that’s it. thinking about So,

offset our year-on-year fiber driven costs net, a it's secondary and degree. up net by are But by wood fiber primarily to

Steve Scherger

in those by benefits Mike from of combination chemicals, offset continuation inflation and fiber, recycled the as on guide of natural are wood spray, some mentioned. partially the the things, John million And revised $XX

Operator

Research. Vertical from Dillon Chip from comes question next Your

open. is line Your

Chip Dillon

for Yes. Well, the thanks details.

create pricing. seen And I pretty point some well believe not still more the get in have price of a grades some one notice down come material or on First white back the And looking at of the in but question tied let's any some as only to say sort just XXXX early I is down sharply. your substitute we've stuff, kind come you OCC that amount pricing going costs. of one to or know at we'll of or see in last recently in pulp that is any contracts just future.

Steve Scherger

Steve. models. be our consideration Yes, offset be costs in by would dynamics. it’s cost Those also inflationary taken other But would those into Chip,

in and inflation net them. modest some total, about experience So think in they our business if still in overall, apply where cost you would have inflation still we the models so

Yes, on side if customer at some you elsewhere cost that might on just benefit. CUK purely for on are may the get or a CRB offset example the as the They'll side you models and SBS. be virgin apply

Overall, where pricing about in line about will we'll later. we that now we future about into in sight something in will And out but that it's net QX. positive, look talk we a as talk QX we'll into of the kind XXXX, Currently later. be the XXXX would something it of that expect we'll be have talk

Chip Dillon

just I one. of would up a a be guess I have follow kind And broad

is with differential more kind distilled in an something because market, I do so that's aluminum SPS didn't but a the at there's great. often, it. and think use talk single everything if notice know beverage an I that of with package has in the about total sort more, can I there there's water And water than niche cost the notice, are of if companies of not in can the very this as And it, or more Looking water, plastic you on situation is one - not the type cans else. fact water of as probably for serve much water bottles

or compares to about SPS versus where can an the package plastic. want also might PET the an whether, aluminum to You talk water

Mike Doss

particular We've package of around mean, seeing to not - cans. large higher terms water relates read to I aluminum is the being total it going amount than announcements cost. same of water substantially the and as that types to of you're be in in Yes. and SBS aluminum SBS. in can high referring We're that a growth vertical

up get paperboard a pickup package I likely area end-use likely because probably currently trend. the putting that the that some And a that those could something in would in we think that example, it if customers in as kind area of that and probably we we they that's do participate more be ended more for an

Chip Dillon

the mean You carrier? beverage

Mike Doss

Yes. That's two boxes.

Chip Dillon

Got cans? individual to Compared you.

Operator

Citi. The Anthony question next comes from Pettinari from

open. is line Your

Anthony Pettinari

you you to on Just months of or from the to following legacy goal months, all this for like kind and that allowed to quarter boxboard there Is or something progress significant do quarter. us is the move past your those or shrink now. number what of lags a is trying seems It just grades CRB give then, to meaningfully this environment about lags years after any a really large of on the businesses? had CUK made up can a contract color eight lags there on years those closing of you market the it? six renewal so And you

Steve Scherger

that So, grades couple all contracts, we aggregates of been that customers lags. we movement. that to to was that tell the and our experienced it's went last a our months will, has average we big Anthony, for all that for of renewals those out as had focus shorten you with six and to It and into if paperboard strategic us XXXX years, impetus I'll the in packaging an part XXXX a you that of inflation

strategic it so, did. We And where made negotiations, and on up ended progress those focus we a of we was it.

Anthony Pettinari

substitution And Europe. you moving if U.S. the been then the learnings and into driven Europe is pace on if already just maybe in for could sustainability than there you pace Is U.S. paperboard? wondering around of are market market. the picked. as I’m compare what seeing the are some of - low-hanging then And the opportunity substitution in the maybe in of in fruit sustainability it faster or sustainability, that polystyrene

Mike Doss

we the Yes. be tend as the a in we Europe to would elimination sized good America. XX you really that tell here the XX there in I like Thanks around in about plastic Europe We've got business is to question. to operating packaging things - for high. is of you see what know. trends pretty activity one very very, that ahead of use continues be the And it of North single months And

so in would to things things and here that North of and translate we'll those in them trends America would we and that With expect see we're expect that our see. global continue do seeing we Europe. customers And that to see already many operate

so the And as operate in well. they U.S.

as for translates And seen specific multiyear enacted goals goals. into Anthony that usage targets you've time. out they're putting sustainability reduction and into the That over periods they've of of certain materials

So, I quite expect remain high. to that activity

Steve Scherger

And, of in a Mike's we're the secondary other seeing in more long base shift like those little of history point, substrates for packages Anthony a because substrates. being beverages to packaging assertive Europe film in probably paperboard in

Whereas in with as long we're America primary also commensurate and end mentioned of moving trays probably the product. for there's conversion that the cups runway seeing like an in we for and what Those U.S. more were awful Europe. talking are proximity Michael's packages North to have

Operator

The comes Panjabi next question Baird. from Ghansham from

open. is Your line

Matt Krieger

Krieger is This Ghansham. Matt in for actually sitting

Just wanted maintenance to during that manage third we inventory XXXX? operational ask, with an any And more know taking risk so are associated average than that how perspective there you're schedule or the unique do actions active from intend the management about? execution quarter to of should the you

Mike Doss

and on our SBS. have we built both CUK is inventories answer The

basis. You that can grades. X% are up X% those year-over-year in to terms on see Those of a

care we've we manufactured to in take board for customers. these sure many to these So, things We serve can customers. the got plan prepositioned make we advance we and of so need the in that material quarters got

a normal downtime in the I'll Macon. of terms - the In we're actually annual taking, outage what this or call that the is usual

because one a and like is couple we're of year. last this So, slightly actually the done curtain coater we every we've installing in do Macon. done less in This we've not that complicated each outages

in about did of then doing Augusta outage talked we year that in our actually in extensive. QX we're lower with is with what last Texarkana, tube significantly which the less but line work And we

work accordingly. excellent of that and did to got same an that's year that manage for we've to job that doing us QX vendor be in the able we So, outage last expect

got dislocation management And we actually thing you it's versus our through, take the of inventory because know a skills add think I those project in sometimes mills, happen two outages. we've the question build care little what is to So, And that spots. how care to run inventory. on where why it right of bit day that take got that other We since is. an produce in both month positioned we And we you of customers. asked good the to individual is of I'd basis it business see and that of on terms have in plays actually order with we've SBS

Matt Krieger

to shrink you with Particularly a reduce of your you. sense, customers side give of the have gap? and to makes that base? one year up a customers the customer That generally then what lags lot you contracts as own have helpful, of anything pricing their flip retail given thank kind the during negotiated did on and kind pricing that's And the quarter model to if that prior to pricing that,

Mike Doss

because it’s depending there, we part a a the want. that things have on variable going the But components say pricing contract. They not get actual wide in range the I I'm into with just individual of So, it's normal to them. they negotiation would have

We wound that that's And things up. need. have where we we

Operator

from Brian Goldman Maguire Your comes next Sachs. from question

line is open. Your

Brian Maguire

to XXX points question, multipart could much much to directly, the as you're organic to a Just hard gains? acceleration color year expecting answer to the out at think next of or be how as tied or in year market half of XQ. least on plastics directly growth volumes, of trend end basis annualize into share versus end market those contracts. How first but get going shift the the to at sustainability ends is doesn't the is question and that volume normal some or hoping continue we any think probably that just until it’s And reasons you on you this that

those of large kind I there getting is at volume I'm some guess of know of You any infill on like what upfront

we any XQ is contracts a one And like or of or along so late just the have year think activity or Thanks. far should to to I either you've tied last seen in kind guess lines taking annualize. those is destocking about volume it in XQ. customer

Mike Doss

Sure.

Let me take at cut a that.

terms back out of don't than to for year out, see relative visibility last high it's over the of I'd basis want growth But that. points think XXX in to a difficult of know. as just few visibility sustainability beyond to organic that. years, if we you us have a aspect So, because real correlation seen very of that the our haven't a growth, terms And Brian about we to you there's what of you in go further I if look say lot really

believe to film the the stuff. selling that the products we're and trade it's of that a the high tend beverage be talked I correlation conversions so the and about, rings types I've are clamshells, And ones shrink that of cups to out that packages high that kind into of got paper going and

question, in part of can repeat So, your second that highly the please. And regard. correlated you

Brian Maguire

XQ. customer more infill then get run build or just less inventory in separately a space growth happening asking late make in half. - got guess have for in I just second seen far in that the in on basis. any destocking you've the XQ in X% a the that volume of And wanted you so a to the some into Yes. coffee would number normalized business rate interested through I some there, new was I particular. that I know

Mike Doss

QX the consistent growth major of acceleration I this or we saw QX. that already. volume talked we've of to some can't QX with any the we point entered about organic in destocking is QX that experienced our with into as what speak in we To

of don't I see So, Brian. that, a lot

Steve Scherger

a nice I think point. it's

in pull haven't driven if it actual of substrates kind shift several We about for To that to a our kind new other by been that you core point, flattish into we've Brian, has by seen, product customers solutions. seen years this mostly which activities. from Mike's our of convert development underlying the decisions paperboard-based think offset from volume, as is

Brian Maguire

in purchase particularly the Any way rough other in gears assets? then, thoughts you obviously And within with to expected issues a three for of even Carton it one CRB. assets. Artistic interest - mill? to other those options give And a CRB, price Any remaining their market those kind to just possible any there's of just related do shift the DOJ already or consolidation the be some And get of to players something some I to the would cut know that acquisition, strategic think along there's exploring done lines?

Steve Scherger

done the in Brian, just the terms a if we transaction regards expect purchase post, but on can that the we've haven't six that of multiple categories to be and pre-acquisition post. five, valuation, will price, disclosed fits this it before you just a times with

transacting to sense that we are the past. have multiple. the think where Very, give where in businesses acquired a we I can relative consistent for you very with

Mike Doss

range that year-to-date wide business, in build for things in then here on is, a look, of marketplace, of the question your the think year way all be may XXXX. in those making I of And capital to just of at three some around that to answer we've the sale second And our would returning routinely part acquisitions, assets the allocation decisions, we look shareholders. done tuck-under cash investing I

us before the it. or did is sense marketplace things won't to at for we and speculate do we'll though evaluate So, on What that what makes we do continue won’t we opportunities. look would in

Operator

Adam question from Your KeyBanc. from comes next Josephson

is open. Your line

Adam Josephson

a Just one, two-part Steve.

on missed I Just me - your forgive this. if

million assumptions the What $XX $XX what you considering On to the lines $XX million the there’d of is now commodity you the quarters? first those two the inflation. increase? thought cost guidance down just by So, your relative saying come know went in basket, happened year million about into be I what along

Steve Scherger

we to that When the is change, Adam. the million. look at moved $XX we've million $XX It Yes.

As had still puts we of We've mentioned the That's and known seen case. we before $XX million at $XX QX, sight to generally to million takes. of line some about inflation.

in just little terms freight fiber, So, of those cores we've but by seen continuation than a of across as it's lower recycled offset chemicals inflation wood. been mentioned we’ve and more the

freight million the on $XX million fiber, And in think the essence, our $XX the is net the, million impact guidance. So, of increase EBITDA go $XX is chemicals of in $XX reduction primarily to that recycled million.

Adam Josephson

by prices. year, producers raising and a experienced to on And cost significant last obviously, so matter, you related other inflation you responded which just

follow Now over costs that have as relationship would just there's suit costs between they everyone, falling. after a went prices to are obviously because time think your or reason for prices Do clear costs up you rose, costs. and

Mike Doss

Like there's around relationship rates. actually operating a clearer

is third You to are bit, And it's and a plus. mill on I some comes and grades basis, that there XX% know on the mentioned three both, some Adam a but if are terms as or to in are of you away, and take in. operating happen you’re a look historical capacity structure some going at changes rates one capacity go going down little that two the on

environment a I operating for So, grades. three pretty balanced paperboard the see we think overall,

Adam Josephson

just that cash your that your approximate if expectation closely taxes come still happens? cash you Steve, XXXX book taxes longer be Is will last it one than one or or don’t approximate taxes could And your on until mind. that

Steve Scherger

I current XXXX. in think under come it will be, it will our in to start structure

modeling. uptick more in in long there cash if rate up range wouldn’t and will basis XX% our be all doing that modest be XXXX some probably points the hundred way of couple you’re It to So and a XXXX. mirror tax below probably full

Operator

come next question Your D.A. Davidson. from Chercover will Steve from

Your open. line is

Steve Chercover

But factors to actually Texarkana loss in the into anticipated So, guidance, XXX. that than I going guess that declines production I days it’s guess four the longer to somehow QX. XX your days total you I noticed by take

maintenance associated to guys, has EBITDA would that guide. I I'm just and might how year So that thought a with you have the be there's of impacted your full more would wondering be benefit anything if

Mike Doss

say really wouldn't I that. No.

with the think you use find to to plans as we ways the down gets here, as to work I accomplish what year we're time happens in to go course any of continue that outage. know to always what a less closer outage we particular as we need of to set into to it trying and Steve, fine-tune

of we them to your planning. where net-net, And for where going to actually we've and Texarkana, we're faster, But we days to and of down do be, able couple that normal the on. were added thought so, a from actually process kind we got that's use we that a point we're few

Steve Chercover

up there associated should with expenses your by the new second start-up are product that And X%? half drive any Sure. volume growth launches

Mike Doss

guide. Yes. Nothing the that in isn't

Steve Scherger

real ongoing I you going be easy reconsider I inventories? make one, despite weather carrying Okay. higher suspect, would forward And procurement better mean, an is last, does going headwind, clearly, but perhaps in your to the Southeast it

Mike Doss

time spending about been We've some Yes. talking that.

in there are a bit terms having to wetter strategies look some we'll more the inventory particularly of weather that there think go little investigate we I as into season.

here we've as The from going efficiently do what because and pull we're QX basin to so to and elevated into that's to operate got is we expect and why back, shift to build cases have further to we be to first thing in that's season. those back well in able QX, do build reserves it some that wet the we a during to effectively get our wider can and be mills

Operator

next Viswanathan comes Capital Markets. RBC Arun from from question Your

Your line is open.

Arun Viswanathan

cost the going So, situation. back and I to understand to commodity about pricing just wanted

the little a bit up give situation did You SBS. price in a of

were QX strong. commodity You little a the offset quite that bit costs and are was lower performance able now The CUK. to with

conservatism the anything? you Any to confirm, energy the So, is because and wood And on element I if so, in or just paper an provide side recycled outlook? there or I side cost of guess is it commodity detail guess, is of and Thanks. the that can that? chemicals

Steve Scherger

around Arun. appropriate believe And a the the of is, seen Overall, a talked that lot a one. as now, guide It’s we've $XX year-to-date. little $XX million it here, million over quite Steve. bit We've wood. we is Yes,

seen step yet. wood haven't We back

we would much rebuild have we have pressure that inventory said, longer Mike may than to some As keep up anticipated earlier.

basket And of, as have role billion is that cost, real know, as we as then the it look characterize dollars’ a just of buy. through you a would all net Woods of a $XX million. of worth we I couple playing So, there.

Arun Viswanathan

side, the on volume on wins. getting then congratulations And the

I just like to markets. just thoughts is on side. in The I think least on - relatively get that's robust encouraging. It some there foodservice. your at the end just can wanted I'm beverage markets looks are And overall growth

to think point So, to some your should start most organic flat there is get see or could base a one of as structured just you case. if expectation that forward Thanks. or points of and growth still this be that curious if reasonable kind the you going maybe thoughts at two

Steve Scherger

I base think case the remains.

where already we're We a we to to expect break flat volumes relative be going to bit. out have, what able little

always of that product we've bps XXX work. done know, around new development As you

carbonated to last certain some or soft over flow years the decline And secular cereal. that cases like many buttress categories in few drinks went up in

inflecting being of to product back new a little able and organic So, XXX we're here what we're really is saying bit development bps growth. that bring to

that's And so change.

Operator

from question Global. Your Mark Seaport next comes from Weintraub

Your line is open.

Mark Weintraub

to On indexes. change eight six those curious months. of to it the a pricing of pricing ties in there lag, getting congrats, push down I'm versus makeup any cost was successful from negotiations consequence as the

Steve Scherger

Not meaningful.

Mark Weintraub

Okay.

Steve fair the in more to driven And more cost that index. price I CRB put middle. and primarily that guess SBS still - say is is would so push still and is And it the coated

Steve Scherger

fair a be statement. That’d

Mark Weintraub

it’s the I cash Super. getting congrats operations from that’s just we come first optics recognize of in I you’ve way factoring. to but Is also there assume on contracts more lots Okay. a Are with rewritten on in And consequence done positive now is quarters. and then correct time change that that that? that of regard?

Mike Doss

Thanks our that associated Mark. for those moved, investing the raising language in been address were Yes, it. effectively program. was Yes, that. changes in down appreciate QX. it had We contractual line If receivable in we and we've accounts to the able with

perspective. the be you'll see a from basis, that an more business flows on operating representative of of so, go-forward cash the And

we had now remainder completed. this we the the the completed QX, work For that majority not of have of year,

there be So, a will in QX. little a of bit hangover

relative will that. As all-in into year, to be next it you roll

on last to year. $XX free in million we continue with We year-to-date, $XX million provide which where well flow the as reconciliation are cash you is

of up So, how basis the seeing million $XX for in net note accounted thank on in now that It you change for. we're but adjusted that is that's terms resulted accounting being change.

Mark Weintraub

million vague-ish more or missed or it may one, what it's you non-recurring, of some it my understood specifics but a I million quick real I of just provide little way apologize Can in $X.X language I properly bit that $X if apologize. saw kind about not last one was. have having I just it And

Mike Doss

activities. in normal -- of recent of couple SG&A acquisitions unusual the No, figure them, primary nothing terms in that quarter. synergy the business-related there with A it’s course for and our them those couple associated A of are just in the really capture was related. of

Operator

Daniel from Jefferies. from Your next Rizzo comes question

Your open. line is

Daniel Rizzo

Just one question. quick

interesting within they of mentioned the what were, and for room to acquisition if reasons seems market? was acquisitions some for there is more you’re the because doing that was that good looking end additional like industrial wondering You one that what be at I of exactly market.

Mike Doss

mean there that are Yes, we're be to things some filtration relative in, boxes automotive we're retail thank right not so doing Dan. you, and now, to things categories like retail interesting. in largely air find I both to that that that we're and not include we

traditional folding good got shares we're finding And pretty categories as in I've something excited about. we different talked that different can in of market the us into past, that we've options and about is for grow the verticals some carton or

to customer glad we acquisition, that upon. and this have relationships And build now can existing so we're really

Daniel Rizzo

then, just one and other. And

announced, thereabouts. in was XXXX costs With goal and doing end your with is likely year? the or price this the and like you've you -- price enacted, with recover between of goal that's the that hikes where occurred already achieved past to have by what the the and higher with cost wood So, will occur everything other XXXX you of that

Steve Scherger

out and would year talked, three on cost dislocation expect year. that price million that Dan, occurred about as to full it’s of significant XXXX this two is a really in working we And we're as making horizon, No time worth over Steve. what look to and we progress we're $XXX recovery. we've overcome XXXX

to three million. $XXX all return So remains, be year provide of recovering our cover holistically to intent two it to a it'll

Daniel Rizzo

And additional be finally suggest hikes that the would might necessary? that price

Steve Scherger

going to recover Yes, is just to about our to continue to intent inflation. not say other than that forward so we're that talk pricing actions

Operator

will question from from UBS. next come Rodriguez Your Edlain

is open. line Your

Edlain Rodriguez

out the market one otherwise, again, price to quick prices you the because one some reduction, would forward, you prices. that lag if believe going is very Just boxboard on positive higher for have give well-positioned

the tight prices? So, be we that on do constructive to now, as market of think enough is

Mike Doss

year investors guess, So, a Edlain, through. want of I But and you're saying would fact I was that that inflation we our around more reduction, we've we're if there flow the I make it with talked the the what dealing think around that clarification, one in occurs. understand things to that relevant that just is the a really timing sure to it

And opposed it's is now, that to dragging to next or that two openers for how down, as performing, a picture do we some have, to on it's us be Up able average, the year. more business of the allow relevant that into and tighter.

we So, in view that quite positive regard. that as

that off of below as this in that got that as into one our view. those and regard We've are going north are rates head to couple some a rate, drive and the that's data. actions we operating that later will year I've it little And opinion XXXX. AF&PA that's operating of XX% up go the mentioned, that a our happen to one will on with And in

Edlain Rodriguez

Can you volume. growth on this one remind organic quick again us what was volume one And sense. at makes the quarter? That

Steve Scherger

it was Edlain, flat.

So expected. was acquisition organic was we flat. The modest based, growth as

Operator

Mark Wilde, open. your line is

Mark Wilde

organic down wanted just to chase little bit that I a growth Steve, Yes. further.

So, for did the growth have? first you organic half, how much

Steve Scherger

very We well. as years. First half, overall, very, flat in flat basically QX organically, slightly is were down

minus towards it's organically if about basis a organic it and kind the XXX of points. point growth we're that zero at second Mark, that's look at of in to expecting, half you the pivot So, literally X.X

half. kind that’s half second first of So, to

Mark Wilde

just I that pretty big me that's comp widely about one the like of conversion think pretty sounds So, to fair? growth Would that's a second the overall big organic talked on. -you've That half. in going chunk be

Steve Scherger

of to of make gives things XXX are component of it, you the lot net-net are a always able of certainly bps us are It's growth. and of the guide organic things down. there confidence growth But that it positive to as up that be a Mark. know, be And

Mark Wilde

hot there in maybe could could like cold or same cups, picking to you that anything in suggest do up other or cups where niches? leasing I is coffee in And if Mike, Is I service think you're thing food cups. comps the of most

Mike Doss

certainly We're that. on working

are to be on You correct. The point, But is of our of hot cup option still Polystyrene and to as prevalent business. cup to is majority the larger well. big the cold have tend cups this it. a been gains, these side

foam. them to working innovative And to that option solutions paper polystyrene would with on of board use we're as options be and to customers an our several paper so, able provide

Mark Wilde

if careful conference little we And has the about trade to and just a I several get your finally, the that. perspective in but weakness could paper on know be both over last SBS then, CRB. of we a been call, I wonder weeks on want bit pricing in just to pointing and this public

Mike Doss

a that lower the work numbers, the can Mark. the and but particular really on in as on if in does talk were of just example. that -- we're terms down they you can't see, trade things Kalamazoo, look days in on, wasn't of we grades XX The that comment you only reported that in mean, who their I the are solid SBS. off at some seeing, to, a an trade case, they they couple numbers what of said And again, the paper I I what as very process and then and little than

it that to pretty look and really tells of the talked comes -- others, at kind numbers kind through, through actual what a and results the and reported. they certain I you But of that's and AF&PA look it when when and gets story. so, and how come look that people, at the And say when we balanced think they out to

Steve Scherger

that that's today, that operating you to and of here Mark, conveyed the And, was our was was plus. XX% things rate point, CUK which to Yes. one we

which obviously, that, our Mike CUK information operating itself SBS place terms to we'll that's working out a the XX% in this And reiterate bit on plus, there's in XX%. volume provide of out play volume will little here taking of commingled times, to of it some said rates, we're So, because QX. through, in you QX, there, CRB couple as in, this

Mark Wilde

right. All Okay.

year, half luck Sounds the guys. good. in second of the Good

Mike Doss

Yes. Thanks a lot, Mark.

Operator

now have session. back the of over We our end Mike. will to turn reached Q&A I the call

Mike Doss

October. us Thank a quarter great call. Have second on in for day. joining look you talking to We again to forward you our

Operator

This concludes today's call. conference

disconnect. now may You

Graphic Packaging Holding (GPK) 23 Jul 192019 Q2 Earnings call transcript