GPK - Earnings call transcript Q1 2021 | Graphic Packaging Holding Company

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Operator

Good day and thank you for standing by. Welcome to the Graphic Packaging First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question and answer session. [Operator Instructions]. to conference like speaker to now Ms. today, would hand over the your I President Relations. of Vice Skijus, Melanie Investor Thank you. Please go ahead, ma'am.

Melanie Skijus

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

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

Mike Doss

be the on unique pleased call report to to XXXX, what Thank start you, morning joining described truly webcast and a Melanie. Good as I'm today. environment. everyone can the operating to solid us and

produce are packages new packaging our lines from new results. and our and intent for products growing we will Vision successful fiber-based traction deliver Global for packaging driving world. are benefits innovative omnichannel Carton. of acquisitions, including markets Americraft to provide We shipping in our that container our remain by solutions multi-pack commerce, Aligned food today provide for organic PaperSeal seeing by are growing opportunities on and examples to customers paperboard real foods proposed of and continue our the paperboard stakeholders. will and transaction are supported beverages, sales and innovative acquire integrity solutions, customers, history for is our food packaging solutions. our The to XXXX additional adoption encouraged growth markets around Packaging and shortly. KeelClip with capturing all this the on We pack announcing trays, employees, we I development new with details

let the highlights me strong increasing X% to quarter a XXXX, first X%. organic of high-level Turning Growth Slide was X year-over-year. financial follows update first continued quarter. the a in net with organic operational XXXX, net quarter sales you where this of growth on very sales Notably, for and

options the conversions Over consumer growth sales net fiber-based organic beverage, sustainable growth. markets. delivering packaging Stronger more ongoing XX of to food, sales months, last we've goods forecasted the X% result exceeded is across and targets, foodservice than our our

increased from at-home consumption. benefited In has addition, our business

strengthening points Importantly, organic year-over-year in Achieving annual growth continue XXX to confidence alternatives. organic supported we sales net packaging XXX have is growth XXXX. consistent with basis more goal to by points Vision basis trend established our sales the to sustainable for global

storm innovation associated in will our range. point million points Adjusted end of of we growth sales of year XXXX net Yuri. million our our basis in to to the incurred with at specifically out expect look costs XXX to EBITDA met at quarter $XXX $XX pipeline, XXX expectations before the the basis growth winter the we anticipated return coupled we foodservice, with the high As volume be from organic

as of resins logistics, some During return categories such and of a chemicals. our input see recycled quarter, we across fibers, inflation did cost the commodity

multiple environment. inflationary with are We to executing current our customers the recover initiatives fully price

costs integration to Vision commitment model XXXX for value our goal of quarter, of at our pillar stakeholders. creation the price to XX% of first in Also further overall the XXXX input paperboard remains we We a consolidated from business. offsetting year on made commodity XX% improving in of quarter XX%, and progress full Our exited during the XXXX. across achieving the XX% XX% XXXX

year meaningful We paperboard expect start our as CRB Kalamazoo to benefit the later in down increase machine portion up supply new agreements. of a we the rate this from integration while in winding paperboard existing a

volumes will addition, drive and acquisitions. both rate we In integration through paperboard converting grow organically our we as higher

International acquired wind with XX% down reducing as partnership initial X% their the held from partnership. at quarter the million during of of inception to to minority partnership interest, Paper Our the the we continued $XXX another interest

In Slide existing path to a closely global on with production areas an investment addition, provide allocation in where to Kalamazoo supply consolidation capital time Canada efforts demand. to platform very This capacity our match discussion, on budget. continues CUK I demand schedule, overview with announced Tex to of more advances of CRB for quarter. producing capable set work the will Continuing acquire to begin convert increased Carton. and paperboard the in KX on our SBS intent project new to CUK tracking meet our ahead an let's Planning of also move efficient X, represents and related the Americraft of further to recently to our strengthening machine machine in is fourth

in a great the approximately million. operating in $XX next close synergies $XXX to high-quality is Americraft The close. of company into and business additional months points been in annual opportunity $XX and million million basis substrates have with has XXX reputation expect We EBITDA. converting paperboard and XX the few The X of entered expected generates over in XXX agreement remaining all well-capitalized years of across for company see following The acquire annual is over facilities. one We integration $XXX approximately months. Carton of largest X an has with customers, transaction to over converters for sales, America, independent an million North the

Turning this and a morning plastics comments X new will and growth are now we a projects focus markets work X discussion and our targeting, investable my X total to opportunity. market underway of $X.X substitution in on platform, with of product Slide I innovation billion growth development.

store. you categories of We in the and past have calls discussed beverage in into of ongoing is paperboard food for around significant the An with conversions to area us seeing are we additional our solutions prior grocery foodservice. expansion

on We details Slide have resources and X, I targeted in innovation. opportunities. biggest our as categories to align our success innovation PaperSeal new seeing established frameworks we are and the On execute provide on will global have

the store launch foam in opportunity found we Seal trays departments XXXX, the world. a targeted wrap billion the grocery addressable the Paper shrink of market in around meat commonly With and alternatives $X to replace

Australia packaging traction producers opportunities. offers and in for new adopting PaperSeal products. & Europe of brand Aldi, We’ve and significantly poultry meat the Our Marks retailers, retailers increased and and Spencer food innovation enhanced Little, packaging including ESDA, our seen as list recyclability trade well with Woolworths as ECA,

barrier packaging we be We Slice paper tests expansion in of have on the Building product underway are in on to and PaperSeal momentum America early XXXX. cheese on format with launch Wedge. lines. characteristics recyclable packaging executing design line PaperSeal, a are commercial in and PaperSeal and packaging enhanced high-speed The that shelf region meats the North of the benefits categories. The the insures meets The branding same allows alternatives. life ease food offers use sustainability match existing and and requirements for now manufacturing hygienic and for for sliced deli track

X. Slide to Turning

variety fiber-based the found targeting of are fresh and offering at a distributor, leading Harvest, in Pack ProducePack alternatives. recently Chris perimeter expanding offers for and switched versus solutions line, in to category Fuji, response preserving significant and apple produce. to store, shelf-ready Gala preference branding also an container vegetables. Bell another We consumer for Michigan fully fruit ProducePack packaging. of advantages in its and sustainable With our we eco-friendly Apples are Honey protecting existing the The for Produce

expanding of the berries line size new are new like tray offerings categories With to snacking and our vegetables. our launch we punnet

winning in our discussions sustainability today's a focused our on go-to-market of working Sustainability global market. and to Our members is are team key and development marketing, product new closely innovation central sales in every and together strategies. part is

external about our in the product conscious consumers place a include that and market is move recyclability evolving will enhancements carbon development we new moving preferences, engaging XXX% consumer the We environmentally road with reduced direction key and more are learn to footprint to for the society, map stakeholders forward. providing packaging be product

what comments at made Slide me of XXXX. end in an the conclude Let incredible was year revisiting X, my on

us. employees our investments and infrastructure We are mil we simply race. advance with our converting differentiate and creating XXXX. optimize a capabilities, made to have value our Vision leadership put, engage The different we are running To through

have sustainability in our leaders are We on because we business built it.

wood fiber based wood and solutions from can our sustainably-managed are primarily made the states packaging baskets United in renewable Our from of vast the today. majority fiber recycled be packaging

As a the flow meet to of we demand back continued consumer strong and capital result preferences. and into generation, service improving business offering management enhance invested have global to our cash it and

product and achieving a delivering We sustainability opportunities our development are new for supported goals. customers growth

our integration. acquisition outlook, and are greater adding proposed to while of paperboard further customers strengthen new the end positioned growth Americraft, markets, With we driving

XXXX. high and to basis at points in in expect annual end net us points confident XXX pipeline basis the of are XXX that be growth range to sales of of We the in front achieve organic to

help reduce environmental their Steve, through their to and continued improvements expanding growth. and it turn driving to customers over brands opportunities and impact ability innovation now is packaging Our elevate and you. I'll

Steve Scherger

and morning. Thanks, Mike, good

quarter from sales X billion year storm year X% $XX the Slide in net declined million costs focused Moving by sales and primarily associated the Adjusted winter of acquisitions. with growth to increased to Yuri maintenance key Net downtime. financial from first organic in prior and highlights EBITDA driven quarter, XXXX. the on X% to $X.XX related prior

$X.XX earnings to were first adjusted As result, Total remained per share XXXX. liquidity $X.XX at significant quarter billion. the a in of compared $X.XX as

be can detail market Slide XX. found and financial Additional on

sales Partially Solid increased offsetting the this prior performance declined continued versus sales markets, where before by our food, X%. performance consumer strength period. and acquisitions where sales XX% business, beverage foodservice year was driven was

and $X as million as $XX Slides $XX year-over-year by offset the $XX anniversary the On as rolled in sales million from to of performance Adjusted to we in compared Importantly, other month-to-date and selling volume by flat in days improved year-over-year to driven see the are of of $XX costs as of partially a volume COVID-XX by prior million XXXX. consumption, our impacted first million growth of improved cost million foreign organic productivity million pandemic. EBITDA sales we is a observed first Net when foodservice exchange. inflecting $XX acquisitions, expected, favorable year of beginning decreased return $XXX from year was million sales and encouraging and $XX revenue the $XX XX unfavorably favorable million the resulting and of foreign winter positive pricing, for of exchange. the EBITDA net out as inflation, you'll XXXX, in unfavorable and to largely input $X quarter fewer in as waterfall. $X Adjusted from of away-from-home month quarter EBITDA the storm and of commodity leap March year. are related and X% vaccinations quarter to versus of more XX, million combination million benefited inflation prior $XX mix, well Yuri. EBITDA million This improved of April million increased see mix,

our EBITDA adjusted was with expectations. costs, storm-related $XXX million, consistent Excluding

As remained in backlogs Back quarter, and you initiatives paperboard are commodity that his will strong higher we multiple all the across Mike substrates. first during elevated categories of successfully Slide price certain rates inflation we to see inflation. executing are on X, and mentioned industry operating remarks, experienced offset quite across our

at AF&PA first industry inventory below with XX%, and AF&PA CRB quarter for were end historical significantly declines SBS In in rates of X-year reflects QX respectively. and the levels addition, balances XX% average. industry data operating

the over net at end operating weeks and from quarter with in and in leverage oversubscribed We as weeks X-plus last CUK CRB X.X XX%, Backlog Our times. of was SBS the quarter CUK the we rate ended we’re quarter. environment. X-plus increased and remain at an in

times the are our While and strengthened rates have back What very in arrangements. to secured to the interest we X.X and XXXX, XXXX and transactions of and times leverage profiles highlights the XXXX long-term million quarter. cash interest flow flow X the notes beginning annual level in Referring maturity at notable the issued times sheet, through confident We XXXX. times, borrowing debt is effective X generation is generation to and these balance $XXX our notes X.X%. above our of we cash X commitments rate our in about remain Slide X.X% senior in offerings. notes at XXXX expected of X increase targeted X.X in of Since target

rate system attractive We also notably we $XXX an retired interest April month, higher the level. extended amend XXXX by million to with completed the and January an to under earlier from facility, $XXX domestic increased extend million. of date which And credit credit maturity of and bonds, maturing this line availability farm our the revolving credit XXXX bank

Our flexibility sheet flow significant strength a the economy. balance strong liquidity, source generation and cash of remains of

have We executing Mike a to detailed allocation. approach excellent as are capital And for we optionality. balanced you,

Turning fiber-based remains XX packaging solutions our now demand Slides for to and on guidance Underlying XX. strong.

XXX basis to high we be target mentioned, at of the XXX to basis our range. sales Mike organic net points points end As expect growth XXXX

growing achieving Vision steadfastly products growth remain we goals organically. are and We the established demand,, We in introducing on meeting focused new XXXX.

multiple commodity input offset inflation. executing cost are to initiatives price We

expect to expectations end continue net to related as earn our and winter performance our in performance expectations that on of execute at our will offset mix we the and growth for Yuri with storm We costs. line year, volume the high countermeasures organic be sales original

remainder adjusted throughout of changed While billion the committed the our XXXX $X.XX volume $X.XX due managing, adjusted beginning environment at unchanged year operating are are provided executing and pricing, of billion remains we successfully given year. we EBITDA some the initiatives guidance components to have to numerous range productivity the to the full of of EBITDA

EBITDA second of the half which performance will stronger in in XXXX. adjusted of result All

As I questions. change our for this Thank full you guidance morning. such, for the flow range. your turn also there's to cash back call now no time the year will operator to

Operator

from Your Connelly Stephens. Mark first ahead. comes [Operator Please Instructions] from question go

is line Your open.

Mark Connelly

customers. then replacement how categories: represents and than sustainable business newer new customers; rather Mike, first, existing X -- much of on new packaging your second, with

Mike Doss

Yes.

product of and mix I customer customers of look example, outlined, selling to. what some that's with new most existing an part. fruit So the of for you the if a those at to represent, some protein cases, many will both of it's in you think today things. those new new we've a as clip mean that products about if And we're profiling packaging we're that packaging an

we So new of that on it's to product said, and think almost points high should half to see year, basis XXX we're going I again, about we already this at XXX basis be commitments development half. the based -- what and our the pipeline end have points, as It's in range we from customers. and

Mark Connelly

of And consumption. Steve, the headwinds away-from-home? That's any mentioned lot from I'm to you're the if more a shutdown in organic But able that percentage. the businesses to too to coming benefited curious, on that curious great. return early position for be you growth to quantify Nice you've at I'm just you And Clearly, got away-from-home than yet a offsetting. it see is headwinds. is

Steve Scherger

Yes. Thanks, Mark.

that you material. with a We really we Obviously, teasers we the even seen in around What have we'd characterize flat us about work ongoing the growth the you that's of material materializing post trends foodservice business haven't where the indications to consumption overall we're gives in about good from terms some seen anything range kind April. in confidence seen talked the environment, is consumption. the of we of previously. haven't remarks, shared of March yet in at-home positive we've the the as that mentioned to the around end conveying we effect haven't we high past. people from the to of at-home we a away that volume moving that talked from in and of something anything in some As some seen pivot But of

couple in Our customers to remain Mike? the quite as quarters. confident look that, of -- their through next certainly volumes they kind Anything add the through to of

Mike Doss

No.

substrates. paperboard if the backlogs it of the got across and adds Steve down statistics. talked mean that AF&PA about the X are due what really to to rates I are the the just you terms you’ve the to you X-year you according all I normalize in for to that historical Backlogs at highs think, on against upper substantially outages Mark, to that all averages. the in incurred relative average mid inventories XXs February -- storm, the you've mid-XXs, actually saw up operating X-year side.

creates And so for that a very us. operating favorable environment

Operator

next Please Your from from question ahead. comes Staphos George America. Bank of go

open. line Your is

George Staphos

question first for I first question have use Americraft. want -- to to the the

of rough very But talk might different seems end like a the weightings the where does be to trying business what relative have or is numbers? to retention than little calculations, to realizations So comparable of doing it Packaging. market you business should What into model be we do some yours? in bit it mix loss could retention you yours? expect mix that kind Graphic somewhat about you pretty kind expect our of And do

Mike Doss

Yes.

question. would more see packaging. tends business. way. regional business. a So thanks of won't existing we this expectations virtually for characterize overlap very customer as a matter It's and food set, little are our of our And little material bit fact. just be of the It that it none to with loss There's focus book I a consumer

George Staphos

putting have guidance? point the the then there mentioned. But are announced in in so price forecasts, emphasis makes or the know your left are pricing have happens particular in are have productivity way size And announced increases that some we relatedly, that one to want how back your are comfortable possible, about things considering guidance. that multiple that you're announced to X you guidance? out our been you mentioned that that increases on price increases, any or what X and to ultimately And things actions. your applying could the maintaining you to forecast I to what And additional another. you, the I come not you may based had if been in guidance just And can in are your you've that talk in extent market you

Steve Scherger

color. any Steve. take on, George. Yes. we add that additional Thanks, can I'll It's and

executing into well pricing I have upon changes any in marketplace, XXXX. the Most the the guide. sight to think execute based in recognized in $XX specific to in on initiatives over known million year to of pursuing, obviously But pricing the And and vast in be guide the million to way price/cost price that which things later inherent which would we're relative lines that this pricing really very terms which million year, I'll that speaks that, million the in inflation, known $XXX we adds is a the spread, that that a and to see pricing price enter fact, We're as year and time moment, there's benefit to up XXXX. what's $XX we of in of shallower. second recognized the of on and pricing, front, the and done of about that's talk line recognized. pursuing the that the shorter we've and guide, compress and will able keeps dislocations half that, on for as of in $XX majority, the in guide, of the this in

$XX inflation input in the million On cost of spend. we front, commodity a the quarter inflation over little X% of our saw

$XXX or X% in of million million X% inflation. the roughly range $XXX that guide, Our continuing as to to

we price/cost so the provided in guidance. that the spread modest that's to the And change -- hence,

results, in $XX maintenance half, incurred $XX inflation, $XX plus will On half off plus go just second we million this $XXX under year, million repeating weather-related pursuing $XX downtime to that in so million half, which and pricing of million of a the positive hence, almost In $XXX first the half, million million, to $XX to million first first pretty pricing financials. So second similar, $XX costs the modest almost upwards we're second of million of known inflection in that that to million. price, of a George, the million. to very in finish half X% that just X%, significant $XXX half $XX the

So again, a $XX million type inflection.

provide to you in specifics very to what we're executing our what's on guide. regards and the not are with those So in

Operator

Wilde Your next go ahead. question from comes Mark from of Bank Montreal. Please

Your is open. line

Mark Wilde

see if of out more into opportunities And and wondered Americraft, us some you whether sense could First color what were Americraft's the providing question, facility sense give is, little coming of I any this. some who rationalization quality, a going kind just of for percentage Board asset process? of seller you you on of the

Mike Doss

that. for Thanks Yes.

points. those cover I'll So

First walked paperboard. XX,XXX incredible off, a forward and a who sales. their to company out of of The built joining the time. through the basic statistics for are business. just ours We're here. million had have solid the be long script, owners very tons They've business able have to this and shout we in it's of over pleased an as in been Johnsons We we $XXX a that. There's go little XXX,XXX about to

was it markets got kind in SBS facilities split attractive of in CUK So and They've a us bit of CRB quite there. little across frankly, locations. all grades. are and attractive that, for X the There's well-capitalized

nice company. $XX But that the out, bolt-on. if this we really savings, time. just over to every it, optimize and scale best go our enhance trying always it are anything, as to look, at decisions you footprint. these to Americraft our given how make actually facilities we board -- know, them going excited of size and footprint Mark, pointed through that, million, And this we're around asset we the really, that's synergies we'll So straightforward. is integrations But largely looking have tuck-under we into a The part to have. into relatively procurement work look as utilize and joining the that to is and that year, We're

Mark Wilde

Okay. That's helpful.

Europe, follow-up, lot barrier that's a recyclable. of this for is particularly, can And of this I'm proposition I'm -- this they come aren't just the like with with briefly U.K. some over have with Mike, laminated what aware I about the if wondering the here got can I'm of of a sort you same very because packaging paperboard just issue products we've under wondered paperboard some in whether fire as some film. talk that sustainability plastic. laminated composite and of the Just

Mike Doss

certainly want concerns is relative referencing same eliminating there. again, got the low-density good is way inside Mark, why making of issue, what coatings on our polyethylene And in we're unless on to so we It of which as we're our some you're of cups, Yes. customers, really institutional the you've recycling, the water-based which on pursuing our progress example, focused here very the an because coatings, with that's to find actively to way position we're on still the that's what ways the provide. business to with spoken. all do increasingly recyclable. that's the become more the that in readily To consumer provide your is team. to something has new really products end-use And environmentally functional appreciate mean packaging. development our we conscious They barriers we time product fiber-based with those point, working a I have

Operator

question from go Fargo. next comes Your from Please ahead. Wells Gabe Hajde

open. line is Your

Gabe Hajde

talked transitioning kind and in expecting part volume guess, commentary a towards volume from housekeeping. then first kind quite into had tonnage upper of end odds. it the might what what of seemingly But discussing that I maybe I I shifting you away was of you're mean of reported or know figures. kind quarter, absolute the the organic be it's about at frankly, And and coming question of about, I year. the

the that year then revisiting your prior can guess, of If I maybe us that any days, the leap kind us. the in you outlook? with gives us And in the help on commentary again, will on Steve, perspective volume the shipping confidence maybe, volumes impacts the us share days you that customer can from volumes, from anything year from give

Steve Scherger

question. start, the Yes. Mike just you're and on half yes, can with of back your add me correct. then Gabe, let But

look from keep of closed it raw We that on of at year-over-year, corrugated White small the mill. you did. a things the to volume some basis, couple Pigeon a we mind exited If quarter-to-quarter, tonnage in we

comes the winter XX,XXX that So XX,XXX associated company. those out quarter kind in tons from days. production XX,XXX, factor was leap got that volume realities of Yuri. of you year, had of production -- less storm importantly, almost of the with in But the you've the impact also When taken we tons true

were And so open as that's sales sell. we tons the to one of market that down our didn't the have reasons

Our But customers We come inventory the had of removed obviously tons we from materially. all down actual effectively. production service of levels have our XX,XXX quarter.

we for land you're those through of modest seeing what, X kind an things as X% level our the of you of will particular give sense are platform, referencing on kind that there's that why up down. which said, added and is our a What slide So all you you conveyed to rates we that integration actual that on today. look we're volume was the integrated in some

Mike Doss

momentum Maybe, little to a bit on the build that, Gabe, just talk about here.

to over higher the to [Audio right us our selling allocate I Graphic. actually and paperboard paperboard internally both end do we've XXX,XXX our in as tons, in sold inventories plants that's got more And the externally, given tons very range. that thoughtful of we is now, We're we more are It's As mentioned, terms now down, had now. too. profile could high. market have Gap] being converting Steve as mean to be to of demand in more caused if right good how the would the tons, to having then have said, be could very some we trucking have And more in quarter, cases, year-over-year relative that right I of confidence we a this and for

again, for rates least backlogs data. the us according you've the to for got mid but -- in to carton folding are the in inventory, I that upper adjusted as the ATA at growth the here, operating for only mentioned I and sector. your earlier, in of function are a As And storm clarified XXs. not down overall that's And industry, the are the growing,

now. very a healthy it's growing So market right and

Gabe Hajde

should you X-part not year-over-year be into of that you of come a guidance. Yuri kind we in as guys will a for there the in are for thinking would that hit it call the would anything know I kind think of a $XX of of But better second little else outage? similar the and directionally about be basis implied of million business adjust follow-up. question million guys providing in QX missing? And quarterly a range account level directionally of that expect QX in, as of of XX, you then you that And taking favorable maintenance price, a think directionally X kind Or or have kind bit XX is I I I say, if were little quarter. or to I'm such what's range be

Steve Scherger

a Yes, provide think QX the last modestly correct. mean year's basis, may it parts of I like more the on Gabe. better. I will look quarterly you've QX, got We And and maintenance don't downtime, then price most earn as as execution relative that the benefits the we about to as run most inflection will of well X. strategies QX but spoke in we talked, actual

Operator

comes Adam from question next from Goldman Please Sachs. Samuelson go Your ahead.

line is Your open.

Adam Samuelson

levels more a relative to talked continue foodservice, we over remarks, versus in as we feel above was foodservice normalize channels, months back the world think demand wonky or channels. of of about how to think continuing to improving And forward. baseline on side. consumer normal comps next the I lot as cases? Maybe kind kind really of given the the maybe are hoping moving And year-ago questioning I in appropriate know XXXX of different some some your about normal talk on you we to the key of get few a on like kind April it's the I prepared about in environment. your far

Steve Scherger

back that just for very with a sitting Adam. pleased us here where Steve. April that sense good you what of back inflecting were are What kind on into line. are give Yes, is don't have I levels business is to that we're of that in It's seeing. trend a XXXX terms front It's But in foodservice question. we a the that. to in very, we moving of approaching of kind back in

back, look-through, in of lot true doing in we're are relative organic innovation-oriented their multiyear with things 'XX. the not to there, business the packaging returned you're XXXX seeing traditional obviously, the if consumer around all products into is So We're we're to that positive And norm. beverage and pleased making growth what's way a market April. as here haven't way through completely that a food, what

driven So you. organic those we've the with actual growth be up, sales naturally would shared by that

through 'XX, net of organic in new you'd sales by and innovation driven look 'XX a If from into efforts you have developments. growth kind step-up product

Adam Samuelson

sure just helpful. I made over That's in of you underway. want terms really was got Okay. to are of are And with direct scope sight pricing discussion? that that contractual understand to pass-through? with are material I of that outside a clarifying Or $XX the that on there's customers you of a the that you've that XXX contracts the Does have of base actions include comments at I the million think that. that make customers and more raw our the then so contractual that actions line it question

Steve Scherger

time. at ones It's And all-inclusive includes Adam. on. so price the have number, you, executing that are these that any in Thank and known it point actions Yes. underway we're an we the multiple initiatives

would we the RISI modifying. noncontract we're was customers. would terms year recognized be playing cost have and would prices be with conditions increase openers freight we're to a go that and it models out that X. initiatives actions how rather So X It pricing. than It be our are with It to taking known be would customers. other It to

terms is announced other in $XX of what then either was the that we're an we that not things ahead guide. So we're are of be or but And know would pursuing lies in initiatives on. all-inclusive -- the $XXX that us executing million million

Operator

next Your ahead. Please Global. Seaport go from Mark Weintraub comes from question

open. is line Your

Mark Weintraub

Just in how of you million even where So have $XXX pass-through? Can motion where have might to this really pretty of sense cost give much as following can last you the actions question. be on certainty a up degree us point. a high the at you

Mike Doss

goes guess, I based Mark, effect is that largely in Well, what into on May.

been April. follow scored other would what through it increases algorithm and so to been that And a have we've similar we've on seeing these done

be given what out doing providing high outlined, the do our the think and we're recovering we're And that to number to to that what that that said order the here. business here at we're these and that, we're is risk. I that's is customers. is with leverage really that initiatives willing across it if that inflation in out pricing we're And of there. as we're about I that, you We've getting how occasions going paid what have relates we've you we got making good you demand a input cost relative put look market, business know fact, Steve works. market. this and sure really in actually would And because So for couple of the to times Graphic value it. board to is the a at this at come pricing seeing a And guess through as add here, to I And is customers some got doing profile need how to I've think paperboard just seeing

million $XX because a mentioned, The well into that, strong and kind but million. as not will be. we've of head as environment Steve already majority the So mentioned, XXXX, of of the QX initiatives we’ll got late knowing see, momentum of we've over got recognized, be we he inflationary we lag vast what $XXX that as

the we're and we in really that business of getting front So way good time. a for feel period multiyear over in positioning a success of out

Mark Weintraub

And can, I Right. I fully sure make if one. understand, just to

you highly So the full take million, million? if various even that initiatives, million if number. $XXX And all success to where even be you inflationary bigger $XXX have this a think on it's price/cost we're we million about to that be Is can $XX then you're it would having amount, even the and if spread were it? to way to such another as less year favorable inflation this expect $XXX to assuming year suggesting

Steve Scherger

if would through we've that it to. about, that been cost inflation the to the talked over obviously, moves time, on I mean, we've would inflation from of pass then models lags X% Mark. kind referring that Well, reduced up materially X% the

other along price way. the other business, as that And the take the have the so with incremental would in actions we saw we then continue move across things we obviously, market-based And inflation mechanisms well. to models of substance continuing

time actually in is that then trying see this to you. inflation to point provide specifically variates it based depending over that And we is obviously, the all relative quarters. variable coming we're on or know a we upon what to So

Mark Weintraub

one, And if Understood. quick could. one I other

Now obviously, all the customers see the coming. increases price

Can bit a one to, I'm are they do able the inventory? much really build be should that? is color? sure imagine that way they so you And time, customers to little increase of same of extent to want carrying in would inventory. the cannot I the do ahead converted of not provide Or do there trying were to inventory not time. At would that thinking and/or Or that they

Mike Doss

happens of as reality winter we to component a truth. you small I if it to the lost Mark, It's the And Yuri. it tell tons it, all, mentioned, due storm XX,XXX at is, of

supply low. and disrupted that, And internally of result to and Our both tons external a I to actually having our chains allocate inventories are mentioned, are as as customers. we're

building. this see inventory So as there's don't we --

Operator

Please from from comes go ahead. Your next Citi. Anthony question Pettinari

Your line is open.

Anthony Pettinari

talked are of And had X-plus couple CUK, if end could markets categories weeks, conversion, swing of strength year. then talk or really be you talked versus continued in you’ll you XXX,XXX production machine which that able a backlogs, to wondering on next earlier the think remarkable. about Texarkana On driving pretty about I about XQ ton SBS. I'm if that you there's is

go how that today, if you CUK? could asset. just use you'll had capability that able I'm to about you wondering that be If to would talk all

Mike Doss

it's It's like our plastic paperboard, on Europe just appreciate very growth our fiber-based movement with good around fully global and basis Anthony. of also the CUK, the what's a beverage. enclosed, this And not it's to in question, but and really of globe. kind driving Relative to things one. I the a here, global largely solutions replace solutions,

we on over And run to our last call, what need. sure various buying we we're this to globally so our suppliers mentioned from year, business we as tons -- have at the make XX,XXX

we'd we investment, make having Texarkana yes, wanted on would So the rig, that had to be we that really relative capable as what mill, excellent. CUK that a And fit machine to and have, on we we here. of that's we're doing that why going mentioned if track, be optionality

to it We in is QX year. done Our major have of the components. next plan ordered

what Our able our work between the circa excited the order. But and it are to able Monroe. be on be up swing and SBS We're West back to with I'm finishing making, CUK that really sizing optionality making to will engineering to us capability doing be we're We'll in investments parity with we're about on to that. our bests coater forth unique be give coated have have. in to we going It's with CUK. and able cost -- the

quite that we're in, And So investment. of these the those between demand we investments that like doing what given capital look markets, fortuitous.

Steve Scherger

just add to that. to Anthony, on And

we've As owing XXX,XXX converted CUK we well, shared other conversations of as from runrate tons about to SBS.

this most into so of would back part that swing likely. And CUK converted be machine, too

when I it convertible we that half as purchases, could and upon the the And think so is easily probably think machine the of you of between complete work.

Anthony Pettinari

Coast a around your if winter adhesives material and Okay. haven't give Gulf perspective, impact from wondering glue. a to those That's things lost materials you some raw the And suppliers? there's able a just there kind to from XQ? in any been procure sales very there? highlighted risk of tons. impact that Have helpful. Is other because storm the lingering can you of you I'm color Is then you specifically from like

Mike Doss

it. Yes. do Happy to

any actually ensure to in adhesives operational. in manage substitute inability And all company, said materials and had again, in latex customers being West chains for our we we Monroe. were So and Texarkana again, the did up get in that to incur and other was, our keep operate a not converting they some Having adhesive downtime needed. and certain tons storm. order And global on and side to to of to mills to got for that we adhesive able the an directly to bring related that, more XX,XXX supply get than what the plants to the Europe

outlined we forward. X, as existing As material albeit storm, in our vast are the of supply meaning the getting from prices, at of higher May restored, in the chains suppliers inflation to the prior comments majority the we're

So the on lose side to related sales didn't material that. we converting

tons, As for we would have paperboard XX,XXX sure. had could if sales Steve add mentioned, more external we the

Operator

question go Please Ghansham Baird. next Panjabi Your comes from from ahead.

line Your open. is

Matt Krueger

in Ghansham. sitting for Great. Matt actually is This Krueger

from particular does perspective fashion sort in on on emphasis any consumer to your supply consumer customers, of will this spending And versus that business branded passing not overall, the but margin do this hikes given -- any how in price shift have private any across across then through category volume a impact label? the a product you of have these own perspective? terms chain does believe your or So footprint, a from impact only

Mike Doss

a on label brand, kind trend for of period underway versus So been time, of well that Matt. it's private

that So continue to look be to for consumers quite as I expect frankly. and would value the case quality,

some be the to I think interesting more you've in. working a beverage. when as that's trend fact to from the watch, working Yes, for going is home work bigger And XX% tailwind it's But people more of from we seen, be return will it be is that is the and expectation again, been for that is there and that us news we do bring back as longer. other food going well home. to really workers view the to chronicled an here, Journal what people and here, and are office agencies in will

that And people would have so that at different than belief saw reasonable we ongoing what there's home, be would before. we demand you could a if are that see

which that, of year as not at low side that other in can But quite seeing really time. back nice the on this our was we mentioned, here be bounce Now last Steve service food there strong. April, watermark some see as a may we're

that's going consumer come because They're Obviously, relative their about versus have it. do take they're price some -- are retailers and But you've to to things store I I'd think brands of to going of have brands. those seen brands think results So already them. consumer seeing out to announced. the you released how

that's -- X will months. next think play to the X over I So that out here

Matt Krueger

next of to volume And I year the with the expectations just mix That's some dig for impact my then wanted question. helpful. Great. into

type impacts consumer nonfood we year improves if expect consider aiming category during you So can about And this product bit particular little year. mobility you how talk full kind the of I'm foodservice versus mix I volumes. there's any throughout by or service volumes should that guess a benefits XXXX? as to at perform

Mike Doss

overall, Yes. the mean, profitability portfolio. our across wouldn't, I have a lot Matt. whole commonality I levels of

So wouldn't see you oriented. I anything expect that to is mix particularly

margins is pretty organic we'll think good have a on that, that, there's consistent along a confidence company. line on, it earn we in I at that growth, at as top we what X% with that comes with earn solid where

it a little earnings have plus, of setting early kind aside there and and we're a that you year-over-year, appropriately, X% if growth this at in QX look of a headwind year. we range $XXX gets earn we it on $XXX into so acquisition-based And you million, in million bit talking little of about the range, bit a

growth on much component. more mix focus wouldn't I too I'd the So component. the organic volume, actual on focus

Operator

Phil ahead. Your go from Jefferies. from next Please question comes Ng

line is Your open.

Phil Ng

M&A going your all leverage and now your the be delever. a higher next prioritize lot end how can the target, used I buybacks cash talk few at of the With But in you to years? excess is about assume you of to

Steve Scherger

It's Phil. Steve. Yes,

strategies. relative commitment a them to front it have take in and us long-term a We balanced here out allocation, we see capital think quarter-to-quarter. those I to decisions And proves approach itself to of as we our

There with intensive when put year way thing been back dividend. returned from we value we've and where share And form then price obviously, material we've dislocated. in are perspective in ways. the pretty of bought believe work. shareholders We the some to a times the to there company are up more are capital to So where the we're work we're right the is that do. investment. a timely We this in Kalamazoo M&A There to and times times finishing like putting

into brought with But in So we'll end X It's probably an this very ability X.X be getting times -- that which range. always X to speak we've around the with cash times to term high, higher ratio of XXXX confidence confidence is the year. to that on over X.X into the flow of this for us. X times the moving to year, generation long our back that in know leverage the forward We're gives us time. -- the probably times We be kind everything we'll do

Mike Doss

add in financing as and it's is particular, kind about, at the to And the other come Phil, control that a very right? we're don't assets and you Steve the quality You profiled over to the little market. thing of efficiently. borrowing quarter look place if you if when took lumpy, I'd think investment year is And well last M&A, money

kind that And to be so strategic opportunity that's core, the we've our move want to to overall where when an of and business. drive presents got flexibility to vision have able itself for we

willing said long quickly -- we up to So types as a delevering very we've those clear before, I think that's bit of as as lever see we we're things, if path Steve outlined. a to see as

So hopefully, that color. helps little you give a

Phil Ng

Mike. great, that's Yes,

like see if M&A. from it -- So a sounds stock the on you and refraining not there's or dislocation you're price, you're not a your good deal already in buybacks table

life? you about your film confidence here, cash looks you equipment? use? today of your free Is given that pretty the run I And existing to it would like profile. customers on Can flow any encouraging talked that's shelf interesting. terms So And drop-off it product agnostic on the in it performance, PaperSeal, guess

Mike Doss

a equipment, needs with but No. important, existing partnered actually got it partner we the make and is We the and we've there can actually our which customer line, run a on that machine.

Phil Ng

I guess didn't have big a if the they capital for it investment Is Okay. customer?

Mike Doss

not. It's No.

Phil Ng

Okay. a like particular? And this much run for you there or to have can anything film product you partner in be then run film from really has a perspective, pretty that

Mike Doss

No. We're agnostic on the film.

Operator

Bank. Kyle comes from next ahead. Your question Deutsche from White go Please

is open. line Your

Kyle White

to $XX During in million came the than and related to storm, the you quarter, million higher it that. pointed headwind the $XX to

what to net that, initial impact that range? on following expectation? drove your up maintain curious the And you $XX then offsetting to your to performance Just is allowing $XX million in is that this increase relative what million guidance

Steve Scherger

Steve. Kyle. Yes, It's

the we We bonds million versus that briefly regards secured had the market in Just the very for $XX million $XXX we With successfully executing to of were were early. on. announce that to to $XX the you. million, with $XX million

event as but early that the material in a conveyed we it So process. very was

that it a And so about needing Mike But as out challenges as earlier of to cost some through up. just as the of such, our it that played function us the was talked be in went overall, work we material as What it. the recovery productivity confidence boiler this pretty may in is gives process with have we early in market the you that knowledge we don't year. overall the on early downtime were us the recall,

away year. have downtime. productivity We for to we less performance to believe the net impact into range but overall million in the we commitment confidence in and quite upside, for million can high. was And our $XX we what $XX why our potential our it's weather year overall Unfortunately, still took was going the felt productivity maintain the that

Kyle White

Or the international we're are the these helpful. on everything you're product That's these new And related, consumer more highlighting brands and from Got first? U.S. on it. And ProducePack, penetration product your kit focused products for market market as might European for deliberately offerings the U.S. to such despite adopt you and you then in hearing sale your then packaging pay be are seeing in why sustainability? slower

Mike Doss

Yes.

a a mix. it's little of So bit

We're end although we of machines to right and you definitely has And global number and thought running, will here already. CUK Europe-centric this We've year. how selling take we'd about learning we that We're CPG installed in a where a are know, Europe in towards optimizing again, got of So to sales track applications companies, this more these performance. as been with point, those lot up got they've in on the place of America XX large be. over those we're North their Kyle, footprint. have beverage

ample markets the producer and market, successful In an Michigan done. we've bring will in seen all to I that some ProducePacks of pun X the that the in look into as that before example. confident in We've they regards the that's other tray here that. U.S., for well. So to an if is mentioned, as here as we're We're highly with packages

together, pointed X base us hits what are It a And a billion so one those out you in used but the of market that's $X.X those of gives being platforms bag. the substitution. lot addressable plastic main to particular that put we confidence in and there, X be really

solid Now in of that's fiber. it's to a be going trade made out

Operator

from comes question RBC Please Markets. go Your Capital next Viswanathan from Arun ahead.

is line open. Your

Arun Viswanathan

XXX million off, cost you I to million of $XX guess, and laid expect commodity X price out that of first the you million the inflation.

have any we X look moderation if And that you are XXX, you forward Is any outlook? So could those in embedded do as the that what's the the in inflated here? expect what your move at components most? components of to

Steve Scherger

Yes.

Just briefly the million. on pretty that. logistics and But the of and as Obviously, buy we're level. to to chemicals, down category basis $XX inherent drove primary to the be mentioned, $XXX the that's consistent for in the for drivers those Mike expect for would we million, fiber, going energy, $XXX secondary quarter, on we that year expect the -- the would a million quarters remainder not

like range, inflection that, hence, categories necessarily, how that's different move things of but we see don't some thinking would that year, about categories can the see but we for maintain we're do some obviously, inside so over logistics the And up that it.

Arun Viswanathan

demand you been dynamic look But that just has Okay. the strength. couple the has like X comment most can I maybe about lags the to you commentary grades, looks you if price if guys know some the you cost given well. operating rates one know years? very shortened you X cost what CRB just you revisit so of I at do and any again, price also But It in substrates. the Have and imagine -- see, mentioned improved over additions And there's price across of them. in you want that the SBS? months. the dynamic of just feel to improved last in feel CUK capacity I just on as I each the But to high SBS.

Mike Doss

Yes.

answer mean, can long at one basket, given Arun, to to as strongest how paperboard I the all this which I'll the time. look need relative So a characterize that remember, I'll I've been as markets substitution that. we around edges, those grades is X I a it of doing the some of

is run time And saw a XXXX I and our really gives and 'XX, the us looks the for big algorithm to so what pricing our mentioned the inflation. different relative of of And than markets. those and relative in we this, to was that in last the pricing strength how Steve confidence lags, in business it mean, substantially

and dislocation. the here, to got pricing as place $XX going As That's better worth Steve year. million it's substantially of second going you're we've here of seeing, in And the part faster. midyear of half take that's the take in it mentioned, just can't to see result the And additional in if what shorter we deal and inflation, a how That's marketplace. again, given those more as predict price. we're again, to our is take And we we're to if we cost shallower with sit on to which best need now going to we'll with We've do. we more here, our right offset X% inflation X% have more, to But these analysis it's what the as because continue today. inflation, markets expecting have of have of those, we'll you And will price. of inflation. we around here our to roughly $XXX COGS push graphic average input we around strength million

Operator

today. We Doss, like call would to CEO, are Graphic to for now closing out remarks. of over I time questions for Packaging's the Mike turn back

Mike Doss

us joining Thank morning. everyone, this for you,

at a improvements solutions strong you. our on And During updating with the speak we the growth fiber-based and Have day. the next organic focused with met shared quarter. we today. remain and performance forward we pricing, to our Thank the captured we you end achieving look good on time growth. you continued first We intensely the demand goals progress quarter, of packaging

Operator

you today's conclude Thank This for call. will participating. your conference

your You may now disconnect lines.

Graphic Packaging Holding (GPK) 27 Apr 212021 Q1 Earnings call transcript