GPK - Earnings call transcript Q3 2021 | Graphic Packaging Holding Company

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Operator

Hello everyone. And welcome to the Graphic Packaging Third Quarter 2021 Earnings Call. My name is Harry, and I'll be your operator today. [Operator Instructions] I'll now hand the call over to your host, Vice President of Investor Relations, Melanie Skijus. Melanie, please go ahead.

Melanie Skijus

to Holding welcome XXXX third and call. earnings morning Graphic Company’s Packaging quarter Good

our our Investors are quarter webcast Vice and call company's on be through along us Joining today the we call, which section CEO; To you in website will Steve also can with CFO. accessed today's President our at Mike slides and Scherger, presentation www.graphicpkg.com. and via Executive third of self-directed President referencing help the follow earnings and the Doss, be

that the I to me the materially Reform actual limited executives our projections. and Litigation in Before risks uncertainties made and to include, remind could defined you and expectations call Securities uncertainties subject in our differ turn not over the filings Act Mike, but the of risks and that are include our by release identified as Private let belief to forward-looking XXXX. These statements factors today’s These results press exchange from the and commission. are to presentations statements securities in with the and cause and

Now, to turn call the let Mike. me over

Mike Doss

was our approvals, of morning, necessary everyone to completion AR performance our you, webcast for raised Good and Packaging on regulatory in CRB a We inflation. strides acquisition project. this required towards supply where prices made successfully the We offset accelerated cost Thank the labor Melanie. platform commodity the received and significant optimization input call transformational us joining environment. We navigated to morning quarter complex strong. and our chain

evolution commitments and options supportive world. more focus Demand we include practice for by pledges have our is that footprints. for The the waste recyclability, increase meet long-term business. ongoing sustainable XXXX all to by packaging examples increasing aspirations environmentally around new to globally. continues accomplishments the us vision and and more or All responsible evidenced proactive are to on of accelerate to made The these with the of promote corporations with lowering behaviors exceed of goals to aligned carbon the on the circular number by track global announcements eliminate and retailers establish

provide the minimize are Along that we of immense are with a and promote continued are packaging service to role on are levels, through that of Vision they've pride. we in packaging in solutions organic with September known environment. today's real consumers their very very that supply companies We in responding challenging with sustainable circular Consumers and shows an provide our making developing, our them our time. XXXX preferences development established and planet. demonstrated since growth XXXX, innovation to serving to to providing our and Moving has play impact fiber-based product This packaging employees choices a labor more customers initiatives. we economy, in sense the pivot new and

net by in XXXX. organic on sales XX% delayed approximately EBITDA year-over-year. declined points is We're been X, growth of sales realization labor for strong fiber-based growth and million, million in driven third and the additional unprecedented $XXX highlights demand of we quarter. expect million in cover in we and adjusted time positive our Momentum We growing with from the focus constraints growth packaging XXXX when and $XX On packaging markets. top successful at experienced deliver current input materializing inflation, with costs opportunities commodity are capturing strong that environment the new QX a all labor on markets in environment market offset growth me basis exceeding bottlenecks ramping company in global was we of $XX delivered quarter. existing goals Slide for performance high from deterring very $XX of favorable X% the price organic unprecedented capture experiencing meeting at third ones generated Vision While of turns in the in The is this challenges. the chain sustainable of up or estimate annual with quarter, positioning inflation XXX supply still are end XXXX new our we've in supply million, XXX, target the slightly. customers. not organic We We those the us EBITDA $XX million in let which twists consumer and to solutions demand growth up resulted solutions. sales

to tirelessly all are backlogs elevated or working remain supply substrates. Our dedicated keep customers across in teams paperboard our

result recover any the As costs swift to that to year. inflation are we commodity costs, actions would input We continued the taken price offset that dislocation and committed pricing you a input this have and over of dislocation price be experiencing commodity short-lived. time, cost we would

We on promise. are delivering that

several initiatives in and as report reduce We customers, the the experiencing in invest progress number to we We in to implemented end recognized do. operations modifications across quarters, ESG circular and innovation and history the customer more innovation the product million in and published the $XXX initiatives and implemented As terms. we continue outline positive a recovery migration and promote to intend had further to a other latest, this over be we to have comprehensive XXXX you to negotiating with recently support past sustainability the legs, XXXX drive with mind. development horizon. Approximately many business underway we time inflation books, one pricing sustainability we we our we been have of will would the economy. By been said are have of for year discussed the were doing pricing and over what initiatives

Packaging we pleased of required towards that are approvals have I'm in acquisition And month. Just year. little the we have AR final November earlier, report we been the close. pursuing regulatory announced necessarily approvals working the this may received for this to the we regulatory Xst

a project recycled for production track optimization the our coated paperboard our fourth remains startup machine on CRB KX quarter. on of in In addition, platform

cost City, the the create, Slide Turning of to at converting you across Europe Packaging significant large global twenty-five now extends for service Packaging the combination around AR efficiency We to reach, that Western AR distributed expands completion X, will will of powerhouse benefits. and intend our and is facilities acquisition scale Eastern customers footprint solutions transformational innovation full see for investor and our will to AR our this packaging The the advances offerings growth do of commitment sustainable our world. we share look New hosting this to York providing When those meeting and XXXX forward results, need a an also who on and you with report for in many and milestones you of Vision to we of on Packaging in along where remotely. of quarter February attend update integration will our year we fourth person XXth webcast an at XXXX. plans

and Slide extremely second, strategic impactful, and X Turning a to well-timed initiative.

our You CRB the picture machine. KX see can new of state-of-the-art

Our machine And for team is Kalamazoo, executing the track component build-out paperwork the in Michigan a we in the startup significant paperwork to platform largest the our investment KX capabilities, are of quarter. is and of project. optimization fourth begin on production CRB in our

operational readiness phase. the into well are We

the bringing customers over to the the completing investments with solutions to company's We're returns. look We and quality history. our world-class their our quarters, we're to effort recycled CRB generating lower committed have coming working We this in like to extensive grow higher in most forward place teams the commitment training fiber-based cost, our platform, achieving. will

offset X. to for the pricing high historically Slide positive have cost a to on input and Turning the I will momentum additional inflation. we few remarks provide current environment commodity

the through of fully experiencing actions inflation fourth horizon. in initiatives. actions and pricing $XX are has approximately costs. targeting the $XX quarter, across wide In we and have over nine we're price $XXX the to over this We of we to at the first million based XXXX. realize are input positive of executed point, And currently intended of price $XXX flowed of to business XXXX in recognized that probably pricing array a positive months on price XXXX expect execute total implemented offset The during pricing XXXX, the million expect that million commodity time we

continues and on me As share substrates fiber-based the value time. paperboard to global On for X, I’ve steady of over packaging touch solutions nature let earned grow. today, consistent the have demand Slide

XX can the growth steady, the you a the attributed be for can and underlying but This year existing new markets. in substrates. to solutions, paperboard period and paperboard driving required see packaging captured to at demand here, new customer our levels increasing Over introduction of demand supply pricing healthy addressable for solutions, meet

the organic a targeted the conversions a I minute for and growth over generated to to to packaging year growth Before reflects reflect to this delivering We we goal at the XXXX, consistent the growth in-depth is surpassed is tells in XXXX in growth XXXX. the since expectations our high to goal organic I’d basis XXXX. as to our of two XXX the on strong we This the compared organic points in organic Slide X on experienced XXX of basis business more see picture XXX same net X% top call year’s since Steve of XXXX we sales Net period the of sales expected growth take end fiber-based slide approximately and like X%. very financials growth turn sales annual for growth organic Notably, guidance, story. compounded we’ve trajectory year. expect net our solutions. year-to-date drove of discussion for points same our growth to X% with rate deliver continue on on to The and growth this the organic have

of machine closing capture so forward focused turn industry. year. and priorities Simply our strategic and week the Steve. a The We years in redefining and in we Packaging accomplished leadership we the deal far quarter. of to acquisition AR in we’re that, to the have in a I our the the are positioned now start-up look have the We are call the will different KX this next company opportunities ahead, executing put, the growth great With running race. to fourth over on

Steve Scherger

morning. good and Mike Thanks,

a increased highlights. on the sales Moving to share. EBITDA million year million in increase The prior resulting XX% key Slide sales of Net to in improved the pricing to driven Adjusted grew year-over-year and $XXX to share $X.XX higher XX% per focused $XX period X EBITDA from billion. adjusted acquisitions. or earnings by X% XX.X%. Adjusted flowing $X.X increased business was financial margin through

in internalize paperboard into or Adjusted sales to our revenue the waterfalls. Slides EBITDA XX, quarter financial $XXX mix On and unfavorably in increase year-over-year $XX EBITDA commodity labor, price, The million inflation prior increased continue in The increased third XX% million $XX XX% to million higher and quarter. rate we and and net in operations. accelerated inflation and $XX growth input driven input converting million of was was our foreign XX improved you’ll commodity see the $X versus million $XX and Finally, year all integration drivers volume as were million productivity. favorable our X% in notable, of detail. pricing, in mix year-over-year of million million increase volume exchange. cost $XX EBITDA $XX and to million period. impacted materialized by of given $XX of million the is Adjusted in cost market Adjusted EBITDA by additional $XX

supply third was pointed declines availability growth Service and as beverage quarter. our areas supply sales the none from operating million industry business AF&PA of we to acquisitions. improved sales constraints strong up year, last XX%, challenges SBS in year-over-year, flat while ramp at sales, the from quarter of delayed bottlenecks chain would experienced labor production Without in CRB the rates business, sales for Mike in line continued recover including the $XX the it continued again improved XX% to with delayed the labor our were more the during any our from consumer while these X% and have was XXXX. end in sequentially, been expectations. business Service of quarter. All market Food impacted and growing all specific Our were to resulting XX% chain food, Food to quarter.

at be strong ended well operating weeks are eight X.XXx. cash and generation weeks shortly. above Backlogs third declines multi-year for will environment demand I CUK with our in quarter lows. rates across plus data also levels inventory continued operating UK CRB discuss XX%. industry of the SBS. the AF&PA six continued Our plus the quarter net showed balances elevated with rates reflect with We to These and you expectations leverage a in at paperboard.

financing in We the $X.X XXXX, end clear Global for leverage sight have third to AR bring peaks of liquidity or of the quarter. X.Xx down at fourth the line lower due to Packaging to the was leverage quarter, end after at billion the of acquisition.

after Packaging our with remain global fund approximately billion acquisition, Importantly, will and complete liquidity the AR available. substantial we $X

projected full to to our inflation, actions, business reflect input We’ve net the EBITDA part of accelerated guidance commodity XXXX guidance AR cost X. Packaging billion. of the the now guidance is XXXX billion XX. Turning EBITDA updated cost on the performance to range to XXXX. a effective price in be Slide assumption input adjusted year $X.XX half and commodity second as The November inflation higher component is and $X.XX additional occurring change higher in

mentioned, strategic flow $XXX be the and XX, offset price time. actions labor to wrap XXXX. We anticipate million my up raw critical of taking a across inflation projects Capital look inflation. this by will of million increased to required with I into Mike driven we the range on cash a are modestly increased to has As prepared Slide complete actively $XXX materials level On year. necessary spending for will the in remarks

be We the provided plus $X.X to confident billion EBITDA range. in continue adjusted the quarter very in for guardrails last we

this walk the synergies the growth and respectively. to before contribute are on slide, Packaging AR driving $XX and the and million we to next year. Americraft can EBITDA be estimated will expected million components $XXX Importantly, see you substantial

reasonable mix traditional other at least and of million offsetting benefits, For is and from than labor, performance volume the more business our inflation assume to EBITDA net base FX. it $XX drivers

year, million forward from projections us material growth or of XXXX We plus price minimum dislocation provide EBITDA when EBITDA cost commitment and adjusted at million operator capital to of now questions. in generation step change $XXX lower. EBITDA our more the in growth line your of in a provides I’ll turn of expected $X.X a end following recovery call and XXXX. give clear XXXX you $XX project meaningfully detailed significant first project The flow hire generation. lower cash you time billion in to Thank Kalamazoo with next incremental of large results significant Kalamazoo our EBITDA expenditures sight for you The coupled with to look morning. The with year X.Xx for to the XXXX to meet at cash we flow guidance the this leverage February. back to capital

Operator

now of line comes if question. your [Operator Wilde you. your of to your Instructions] now line from if with proceed question. And question like you’d our Thank Mark your with Mark Mark, you’d proceed first is Bank Montreal. is open open, like to

Mark to We is Wilde Partners. your is Research proceed with are connection now question, open from Weintraub next like on question. some having if Mark, your Mark you’d there. I’ll our issues to Seaport with which move line from

Mark Weintraub

to have impact Last point to million $XX million you. from quarter correctly. that you $XX Thank I you the indicated at believe rollover inflation had if in I that time would at XXXX, remember roughly gauged

would that to stand? it you where If update today were number

Steve Scherger

we’ve the million range, Yes, morning. in obviously is now the Good is. inflation million $XXX Steve. rollover as updated $XXX year, the effect stays million midpoint of and to everything its $XXX Mark Hey, for assuming this

is So you two $XXX the shared Obviously year we to with cumulative time cumulative same you of today. we price the million now activity today that million that the with over inflation is $XXX period in that shared our million right $XXX range.

Mark Weintraub

Okay, great.

understand fully I to sure just that. so And make

go. So get trying I think here to you had to – side, just we

$XXX recognizing are talked certainly lot be for we or side inflation about you from So where million more the not a pricing there can that XXXX on today.

be to starting to the and and again, cost, missing take can price fair? recognizing million $XXX today, the get we inflation for $XXX I more we about Is subtract fixed things that million a think we $XXX number here. XXXX, that am were the something? be if if would million can Or So that

Steve Scherger

known year to make clear three based to That’s about models. across next Well, have I you ton pricing activities. very the upon $XXX recognized and it Mark a substrate think primary the million of is way want our with $XXX you cost of we think million along roughly line sure sight

got course, to leading inflation, the million $XXX year so on then this Xs. million if to million you’ve into of flow-through the another year, next $XXX that, compare you And $XXX low

committed to, on that this dislocation billion plus year would comes the next is million in $X.X we need place of Does – be over year, today. slide million inflation as first to well. we’ll to give obviously we we plans it recover million to with is and So have the $XXX all carry to what recover whatever the you and $XXX then that specifically? $XXX to that The the known

Mark Weintraub

you Thank much. you. very Thank does. That

lastly just bringing $XXX achieve about level pricing, bottom in if is at that How much confidence investors established? to of confidence of that numbers to could. What Okay, needed on great. pretty line? the this I million is contractually have And should Level getting those work that point?

Mike Doss

of They so those Mark. Mike. of morning, an of have execution Good These contracts, the It’s it’s multi-year through agreements. high Yes. contractual a confidence flowing this is driven. should are contractually and level terms

Mark Weintraub

Super. Appreciate it.

Steve Scherger

Thanks, Mark.

Operator

Thank your will question. Panjabi Ghansham question line open is [Baird]. proceed you’d you, And Mark. be next from coming your now, like to Ghansham with if our

Ghansham Panjabi

Good you. Thank everybody. Yes. morning,

a OCC with are velocity versus various kind and point, for can a as Just shots granular this Mark’s plateauing starting are on sequentially? impacting other of the you’re with on get you like at at But current going see that that you as to China comment lot the of question, seeing constituents? inflation a there’s I follow-up labor know you random industries. curtailments the to

Steve Scherger

and Ghansham. can is on. This Steve start. Yes. I’ll add Good morning, Mike

more half the during opportunity occasions $XXX we is what the more and I a it the on in we quarter acceleration had incremental of And flowed throughout all chemicals, it we relative chronicled widespread, we where to think when up. to action inflation, pretty an about talked saw do spoke. mean the we so that the as quarter moving we of inflation inflation. well through pricing was saw million last took kind million, certainly of I it time the And from $XXX was resin energy, of

just We well And logistics also saw million. ongoing on of another significant rates rail OCC the move the That truck, challenges terms of course, as $XXX front ocean. then the of up. as was for part in

we’re the of move of want kind here. seeing obviously And it to add from QX is hypothesize today. they’ll we’re try $XXX guiding moved whether all through anything what that? at up or down million So Mike, for that we don’t to to representative you

Mike Doss

No.

you’ve what OCC think in I up of went kind XX the a last months row seen is peaked. it’s like an couple Ghansham it’s kind of that and months of in

And things. kinds we to is so watched what said, of difficult pretty Steve to going those forecast as inflation to it’s do. out But try

it every challenged. seems know, commodity somehow you month there’s As like new a gets that

year, and think so over the offset call, we the we inflation, at should go pricing with really in additional could And outlined those incur. see will when develops actions, investors how carry And more inflation to demonstrated that we’ve as take that is we pricing with our into relative we’re point both here I inflation since next Steve as quarter And terms spot of a dealing actions look in we’ve things. we’re we we’ll second as here more good that. taken,

Ghansham Panjabi

do packaging size inflation question, you you more And also for very How playing my is lightweighting in see cycle you much. every decontenting a to XXXX? magnitude? helpful. current packaging the risk much by so consumers you as the second to do And Thanks extent. increases and size trying in out cycle, severe That’s price then see shift the that that. for inflation Thank and material reducing which dynamic to some in volume Okay. mitigate customers for

Steve Scherger

I that for it. Thanks Yes. appreciate question.

different packaging of I think across at look if rates. in a packaging they’re inflating you mediums, general all wide relatively swath similar at

see piece how be substitution the so, it. is minimal on based going And to pretty we of that

side. those And lightweighting time. on all are that the some the things the we actually of particularly packaging opportunities optimization for our fiber-based creates deal and terms with it us, In customers

a actually we probably threat see So forward. opportunity more that of as than going would an

Ghansham Panjabi

Okay, great. Thanks much. so

Steve Scherger

Ghansham. Thanks,

Operator

Ghansham. you, Thank

from question open your next now, America. Our George, question. line from comes George Bank your to like proceed of be with will would if Staphos you

George Staphos

two Thanks Kalamazoo. Hi, and morning. wanted much. very to – guys. some for the volume Thanks then Good I questions, generally hit on details. on the one all other

service. talk what I with moderate of aside particular the in will of pretty And in revenue. you volume, you food expected terms of do affecting one a third supply changes service, affecting can here the effect in the you from products, that So plastic. should such about is quarter, from paper that where have major where Mike. recently you’re moving you issues issues volume documented chain were that bit seeing A lost that some food labor back of comfort and for quarter? you What seen hitting I’ve as especially in ask fourth well your content coated the the that that terms the you to new be cup lot was And strength products, poly partly QSR in a

do where your of with cup? a stand PLA you So, coated defense that with

Mike Doss

Yes.

So thanks George. for that,

volumes a we’d of good little on in it’s we recall, spend basis think we’d and a prepared you our bit little as time the of XXX points. comments, to bit board. it be if outlined back reiterated our we through point time saw too. step end X% that at And of the I kind XXX of up to take second you a at that in this but our quarter, across high the kind Year-to-date

There quarter. Steve really quarter organic being in the of in little QX hit down the to relative we mentioned us on things and a are we actually to gave the that bit that in coming the as X%. this his guide So anticipated relative four saw comments, volumes second

obviously don’t this box. if don’t already a some our you’ve have having our number we customers chains. And customers seen and were package, of that sell from they First a challenges make with a released, supply their

some going was there of so that on. And

on people markets in well. the as our if add And well use chronicled. service hit, ramp when the XXX of back. we just Some And food had food That’s – we over pretty business we and in it. did happen like as actually strong them environment. way the had second in quarter, here in quick then a saw easy a that and real we many of adding been the fire to our a is isn’t volumes back think the people side right-size fashion you rapid about service end pandemic comes But third availability that just case, this in to labor

labor our of issues impact discreet see are business. our our service food across Yes, in So fairly But really in in have it food on would we business. service it platform. the been terms the volumes,

the quarter So our into third the getting as quarter. we in actually can we’ve execute. people so is made fourth we the some have we there And demand, issue go progress the

part you that’s comfort the So from of me. hear that

lost Europe of and we the little of get a and flooded sales got of in months part quarter. all us also Hurricane some We facility lastly, became we move in cases. around, costs the out difficult open to market It that for in that that buy bit some so the to And Ida. in just two paperboard had Northeast about just as volume the then

door. the And in need issue little in out them get actually demand. European process to so of that down that the the we getting is us platform. them have slowed we The a plenty bit order materials Again, and

towards points I fourth we XXX together in you and the debating part we’re that of is, put and XXX some here quarter mentioned those higher see finish all expect that to basis year to things that of the So strong. we return when as more

Steve Scherger

cheeses convergence, overall I quite globally point over of Those the meats front. to on to innovation basis And confidence we’ve will the growth it’s a the traction momentum gaining the activities. Europe, last or give experienced solution George, XXX over cups into significant add continuing XXX store foam we’ve KeelClip that of as solutions just PaperSeal organic in around convert points items, perimeter years to bit fiber-based and momentum other that our or talked continue and us to around fiber-based for the mean, Mike’s we whether move solutions two XXXX. kind as expanding

George Staphos

was Steve, if had hoping a update you Okay. maybe I guess, PLA coded on I cups. quick

of in it your Kalamazoo been If earlier, being initial on There’s have, the on maybe Kalamazoo reaction discussion in coming benefits budgeting community in second and quickly, the reports than up then how getting aware the presentation being congratulations just some you’ll my you well, also growth you, guidance. terms track been February. and will the tax Thank you should guys. that Can of we you’re anything going and about growth how return project project. that facility, comment be for for And question your received community? you’re about quickly, drive to some There’s in save frankly, of forward. Graphic the analyst with the that the that

Mike Doss

Yes.

I’ll in project. we’re deal on here I’ll mention terms of schedule. with question. actually on we’re our our – So for Kalamazoo Yes, the – thanks original

got expect online. our customers out need come to around do Relative quarter. make normal we reports of that some it’s tonnage complaints, as some course. lot paperboard to And actually of that of the coming in those the kind because the in here end QX what of I a – We’ve for the need I’d demand paperboard the you’re characterize think business. referencing. odor of to we is absolutely we that We operate towards that important

million. investing We’re return we’re $XXX well dealing project, a with on there’s And over from through standpoint the channels. those really normal

we be and And when a production the citizen it’s have community. in additional that to and to we committed great state-of-the-art As started. ultimately capability you know, facility jobs a that drive the

Steve Scherger

going when specifically innovation that’s February the into efforts And I’m you overall trialing like XXXX. cycle, briefly that we at talk share momentum George, we’re around describe more we good sure when with our very together customer off embark of that we kind the about We’ve on. we’ll got as we’ll XX.

George Staphos

guys. Sounds Thanks good. Good luck the in quarter.

Steve Scherger

George. you, Thank

Operator

Thank you, George.

question you’d of is Mark, Montreal. to Wilde from proceed your your like now open, next line Our from with Mark is if Bank question.

Mark Wilde

Steve. morning, Yes. Mike. morning, Good Good

Mike Doss

Mark. Hey

Mark Wilde

want on market start, just sharp over just to very it’s help market. six in the if in turn gone really three us to I a unpack the you last Mike, here cardboard months, what’s the been because could

how get trying it, CRB maybe bringing of kind or sense difficulties to against of imported some the board you the Just market. into understand bleach domestic demand, imported some pickup perhaps, in set

Mike Doss

Yes. Thanks Mark. for that,

I answered out and XXXX, add, the capacity some of as think know, of I XXXX would it. you taken you’ve market. was also in there part early

paperboard with one in conjunction We take SPS One got competitors our a at I strong at our look a machine you’ve obviously project demand. another down. time, shut And demand. shut of paper Kalamazoo. an shut mean, mill in small down, our same a recycled mill the down

X% got you compounded know, a two period approaching XX%. up that volumes as We’re of high year we’ve market share over on time,

cases, Backlogs and And prepared to at and shipping so as importers grades. really mentioned that a thus three the of about dislocations at domestic production have challenges and comments had real the his industry across multi-year desire XX%. when in created all some some for in the operating Steve that down deal some of you look with rates being XX% highs inventories, has

tons have lowest CRB their meet we some in see couldn’t the of will of start-up the is going to tons customers dynamic demand timing And able really the our is mill help that’ll be we’ll the better cost there, our highest of because the quality, again, just And out be so relative so on. why that’s to be world. it these And in strategic, our objectives. Kalamazoo that

we it. when like than it. announced today we we did better We liked we project when them announced that So

So gives we on think little what I color see here. you a that

Mark Wilde

a machine year couple had Okay. Europe. delayed questions Last And you some just then placements. around

impact And about European spikes on well curious AR the either the as business, I’m your that. these on existing then as of energy you price on how sit So business.

Mike Doss

that, Yes. Mark. Thanks for

operational. that’s there baskets paperboard. In that top terms able well, auto do placed placements, we’re of growing up XX to our and and just into think the the other side, KeelClip machines technicians wraps And plastics they’re side, machine are that on I along on and the movement on now, and we’ve we’re almost of general installed to get in our machines beverage

for converting this with as know, us Packaging, regards even growth year. over only AR converting a they’re been we’re to you that’s rates In So of energy source only. there, in real Europe,

the on that have of increases actual gas operations the Obviously, fire contracts, the to surcharges of producers we that material. our take And buy increases. by along impact gone pass the is of relatively and you’ve small. European off in seen rapid be will nat So we on that direct on those paperboard bunch our way kind

of tend who about we with make shorter more the be and talked are we to because AR, majority have the folding duration in those Europe As cartons deal openers when frequent non-integrated. vast people tenders a announced

Mark Wilde

over. Okay. That’s helpful. it Thanks, Mike. turn I’ll

Mike Doss

Thanks, Mark.

Steve Scherger

Mark. Thanks,

Operator

open our your you Thank if question. with line from be your Gabe, question very Fargo. proceed you will Hajde Wells much, Mark. now, And next like from Gabe comes would to

Gabe Hajde

heading is increases enhance I Mike you hate and going telling in Good or the guess, next right. clear, are to you. if – say price Steve. but morning, XXX or in the then half, but for the stress maintain the around I margins, sort be All for of I here, to to us terms Thank quarter gave to to of XXX to year. you encouraging. test, be inflation the million the want for point just even second industry fourth us XXX of – assumption fourth pretty harp and XXXX, quarter, that kind second want fourth XXX I even into to on quarter it's in and inflation But efforts half, for the you're

off there's something if next It's then half this of range, back little consistently that given on and was related running are and labor a curious of And things timing bit and the says, harder run today. nearly I'm kind and maybe XXXX. year million that taper labor the So the as that benefit of bucket more big magnitude. maybe just cadence the input in appreciate I markets okay, XX maybe not cost, benefit XX but that as million an to

Steve Scherger

Yes, Steve. Gabe, it’s

acceleration next about at year, commodity is, question, that where inflation if stay you occurred did, input likely this I then prior that wage guardrails are to year. kind but are what sharing half of the given availability is of $XXX be plus second stayed we've forecasting some that been as Just second in to mostly our to talking not occurred we'll a But to talked, cost the of the everything as higher to the second lot of the because XXXX some you've half labor as this we is the you inflation. million that things got and rollover And the to range the provided and that's realities year. think $XXX kind been question, year, acceleration $XXX just true in your at if you're see acceleration, our inflation compare has benefits they answer and of in here the half, second end of most labor million of we've inflation almost relative in the that range, so the the right, point, we're of we million

in would of but first important most so a pressure the of forecast it. terms your carryover Again, testing as in it that's on is And next that's the be year. inflation occurring that of the the not half carryover

Gabe Hajde

for XX% we inflation you as potential then, their kind And And sticking grocery beverage of, inflation, in on about that when mean, elasticity inflation experience this, any terms talk spending and potentially you do is I'm extent the that, consumers for risk the with of XX%, that XXXX? you how I through a products kind hearing potential roll channel, Okay. brand a or net I apologize. demand they've positive might To cetera. this head this and et of this, as they're serve down respond, owners and guess, I consumers the see they inflation dollars food what again, the is guess, when seen in I that trade your

Mike Doss

Yes, Gabe. Thanks for question. question. a the great It's

to I in cost shocks. I uniquely recently. seen a everything seen we've and this relative beverage Graphic amount mean, what inflation, I kind of to the this decades we've input for look, least inflation XX% base. think since positions experience that's think the at food I the marketplace flowing exact you is This couple do can't not of and of tell point through, that we is thing is us that I

have a be There I I we may So those to of physiological trade go downs, store and some maybe instead branded, that you're human to into brand, products. make need go drink, packages of that right. and those eat but it's buying kind kind of

a at-home got relative we've the as and well you diversified and service to So consumption. know, food portfolio

benefit how revenue us gives ability makeup, really of to that and So, a develops going the nice environment be to the balance our it's in it's regardless but to there, definitely inflationary.

there's no doubt about forward, Going it.

Steve Scherger

activities, has comes And reason, Gabe, for on whatever to Mike add inflation to past slower either due occasions as to just the business very the to as other defensive in position to where economy a mentioned. the our that been or

be projects XXXX the to actually there's telling to headwinds level is our And some And what basis. so customers yes, favorable. Gabe, confidence on there XXX a there modest I tend sometimes see and if and and our even down we Vision that goal now XXXX That's quite be line points – on be growing trading true could large a percentage on but overall they Bottom may our can us. based dislocation XXX guess hot right. be the net are summarize consumption, between to is basis of

Gabe Hajde

just Thank remain you, vigilant guys. over here. trying to We're

Steve Scherger

Yes, absolutely.

Mike Doss

Thanks Gabe.

Operator

Thank you, Gabe.

proceed will your if Sachs. Adam Our be you'd now, Goldman next from Adam, your Samuelson question. line question comes from like with open to

Adam Samuelson

Good Yes. morning, everyone. Thank you.

Steve Scherger

Good morning, Adam.

Adam Samuelson

that bit bigger I third little to the that you see think talking the bit, the because which labor, productivity the as quarterly around far about million Northeast posted, the back in you've That guess, I maybe repair color could had net performance as have the it's and line rather that dissect in the some So contribution on in, a positive of as get performance benefits. was headway challenges through and remarks earlier, was XX hoping in of I you quarter. little made I quarter, the than one you around a a if more can first results guys more mill

bit just I'm able color been these cost on kind get to how headwinds a little mitigate kind operationally. So to more hoping of some of you've

Steve Scherger

headwinds to. glad be rolled Steve, of terms because the talked it’s Most there. through in mix of the that impacted they the being volume not kind of Adam, Yes, necessarily about we've waterfall, of volume

good downtime in very kind showed overall where pleased the of that's and at million So headwinds productivity That's number, two drivers one We was with in up. you're primary quarter productivity substantial our there, core that our very that a It had year last year, range. very were just those XX expectations. that a basis, right. team's we We much less significantly bit year the exceptionally maintenance year. a this against so well, our And on less had over quarter. over quite then positive for executed in year, And us year.

are those the there. big two So drivers primary of positive

back return relative right business, strong that see for as a to of our core productivity of QX. it but very XX is XX performance time, million in kind to quarter. we look And was overall more You'll range in to normalized out the the million the no, over productivity

Adam Samuelson

discussion call, these sit here chemical of been come future versus the challenging price on and And seeing the as we're or the through cost pockets half we a maybe today to of side really start plateau you specific there's dynamic helpful. on but are down Anything the the Okay. of of where the lot from That's some anything more have markets. progression the quickly kind just year? more that been second of on commodity are evaluating much

Mike Doss

Yes, Mike. Adam, it’s

questions, not but seen comment high grades asked that I seen for row secondary it couple quite fiber up of slightly. mentioned we they peaked it a would So XX couple months months last that's down, so the go I months on a some bit. tick slightly We're polyethylene, year-over-year you down that after has again, we've density at calling a won't as But still we've have they the on appear on that polyethylenes move a are elevated down of basis, the earlier, least buy. some straight seeing higher on March just almost the materially that them low like of gone XXX% now would

things. So watching we're those

into it's on baskets QX inflationary particularly hardwood that's gave expectations is with XXXX. carryover things, you. growing side some for in, inflation, seen the we've guide and consistent of we some that all wood and the but the Steve of both all we're And the in On other outline the

Adam Samuelson

helpful. Okay. on. Thanks. That really I'll pass it color's

Operator

you, Thank Adam.

Our you now, be will proceed question. open next your if question your like is [indiscernible] to from Bank. with would coming line Michael, from Truist

Unidentified Analyst

morning, Steve, very question. Mike, appreciate Good my much. Thanks taking you Melanie. I

Mike Doss

Good morning, Michael.

Unidentified Analyst

service, in touch quickly food And just Just mentioned particularly Mike, on has you now – input discussion try business recovered. being as with I to a to want labor inflation. lot headwind build on from particularly had obviously and layoffs. quickly cost that you you

have vaccine you doing that You Can more what talk build little labor back try has the to company with attract mandates, and that is about a the up. just to impacted rollout the the labor as the actually what have a supply? of get vaccine attraction company's and Just of impacted wanted sense to specifically doing mandates the labor whether well. to of try

Mike Doss

question, Yes. Appreciate Michael. the

of mentioned, offering than we track some those referral folks how doing to people this of suggest need record. and to wage look doing know continue it you our positions we're where big employer are in level take are operate number place those cases, making that a look in in is And them, at some we're at and doing bonuses at we they a different differently actually rates, entry past. difference. for the to particularly a employee communities the that we've types that we've We've community given it I and the And So a to some a to and we attract look of things the choice place for done operate. those things take that we things people, hard talent we're facilities had in because in type on got that hey, pretty bonuses put we're of sign

quarter layoffs, to as magnitude the over the two, combination amount the we'll that most that all that get we of be to we be. staffing So those next We're able be very people us, outline, to a given food staying or ensued to just of service after confident for the it had following pandemic. levels a profound of it our it But I'm really back hire close the back the is will to the need and things. the

Unidentified Analyst

products then it. those I just office EBITDA. Got new incremental commercialization if from could you maybe talk where point sustainable cycle, solutions, [indiscernible] helpful. a on wonder stand paper And product. in commercialization packaging at other revenue terms That’s about quickly this just

packaging, I guiding help think that's you that the your how on can help more focus their share you the business. us sustainable and to what really of with get respect appreciation investors

packaging would be So just helpful. those any sustainable on insights

Mike Doss

No, again, I appreciate that question, Michael.

I think three platforms to our about. it all talked comes growth that we've back big

opportunities, when that when York you in in kind seen of there I of to on giving have a together growth. billion. on going cooking And outline strength enhanced grow. it's Packaging looks New pre-AR we giving products market of around basis faster. in goals. organic show what it's we opportunities your together, we're you XXX together like when update point, examples we'll gives able our we've true we're we'll XXX that of as Steve enhanced and We've you solutions confidence to February, lot plastic So replacement were addressable to that of and big And points kind be an to packaging. City got update And for kind an show and $X.X We've XXXX additional at a that you actually our more got go to Vision

Unidentified Analyst

quarter. luck in Good Thanks. the

Mike Doss

You bet, you. Michael. Thank

Operator

Thank you, Michael.

if Deutsche line now proceed. Our to Bank. comes like White Kyle, from be next will open your you'd from question Kyle

Kyle White

good Hey, taking questions. for Thanks morning. my

it ask this you $XX core Just you next to also expect I do outages possible have? this events that the back grouping year that your wanted and that to year million some weather lap XXXX to productivity and from what know you out then is break how to and bridge you should had go compare year?

Steve Scherger

Yes, Kyle, we'll February, you Steve. provide with the details. Obviously it’s in

synergy about we about talked labor offset capture And in our and in headwinds. that more those FX growth talking items a also the will long we've history and benefits inflation prepared be experiencing, got sales any I be remarks, think obviously there'll we that of productivity just there. what's organic there than the will the were is, that we're that

$XX sight of line February. will on feels us, clear million-plus details provide to that current more So to in obviously

as good think into items XXXX of growth, long our is the synergy intent than sales confidence head that I we offsetting other performance, is those here occur history overall high. that capture, more will and organic

Kyle White

then some any we it. up? on rolling line benefit in or associated the with million take Kalamazoo of ramp basis, startup kind flat there Got a And time through begin kind on $XX should to really of and expect XQ that bringing costs project, the up are to

Steve Scherger

There bit Kyle. little will ramping be a of

benefits we're modest. any in looking cost more kind but up. to be QX, costs themselves then in we'll out here or the as as production substance, will think benefits expect And redundancy QX and one-time I and starting to are in we think we QX modest relatively making product up in and But QX. of see be weighted forward high or more production would a if I little there roll quality those ramps call then beyond and the

Kyle White

I'll it it. turn Appreciate over.

Steve Scherger

Kyle. Thanks,

Operator

Thank you, Kyle.

line Our next if Citi. you your to question is from proceed. will from like Anthony Anthony, be would Pettinari open

Anthony Pettinari

just allocation, year. if pursue wondering and you're like kind maybe appetite a have of be AR the soon time us On just is and talk you then ability of year? I'm morning. the next to CapEx you'd additional closing rolls to about now for Good from a leverage cycle next pause acquisitions remind off capital could as or either of sort kind that you you or integrate where natural a perspective AR

Mike Doss

Yes.

you consumer XX our the we've and AR growth million deliver debt at the is over next EBITDA When got at provide color growth So Packaging. couple front we've From years. look for end, at on timing excellent there, at Steve got take going here on, and a that year up, be fiber-based standpoint, to we've $XXX the our we starting leverage XX little a look Kalamazoo the Thanks packaging, catalyst all shot between that got of too, AR of the got XXXX, to take in the of going that with setup we'll question. Packaging, we've into let looks I'll Anthony. us, of elevated love

line should sight you XXXX, I what kind think we've heads of about So focused advantage investments the happen. it's a on needs to of of taking what clear and those. made down got year terms in us in of think delivering us for We've on

As And feel to by on we'll mentioned we times we in that we are comments, X.X when Steve XXXX levered confident end we XXXX, did prepared his you year times. AR, want three at told at be lower. be at

So projects but at our rate, good It's a the at it to I've focused that's stuff go in we've to to CapEx for want give on wouldn't kind of going came and focused things got back up, where but we're to we of outlined shareholders. something And that stay us that front into that to on. you not synergy normalized more on work say if look is least that we XXXX. creation value

Anthony Pettinari

Okay.

the running U.S. Europeans about market, that do more at on question guess Mark dealing it's you shutting I'm position issues. or of SBS thinking year, the of box the import the cost with global pressure to impact some Okay. rates Wilde’s next that do the point market. capacity, the or I That's and down And cost board just or in capacity freight no some of following Chinese case kind helpful. rates improve back significant come And up ocean assuming and then you CRB, this some think it's not maybe these either some longer normalize could maybe in on the or think freight case

curious your kind what of Just take is?

Mike Doss

in as some nature, benefit, that guess down platform really I told wide quarters you, now see the operate and expect how today, built I but said coming and we the first we rates to terms I rail so off, we've our here several structural as Yes, up, congestion and will maybe clean we for the in that move truck materially, both company. don't ocean be of of freight, to ship given

then with on replacing more in And point. the market. Europe in plastics of beverage side, use with consumer even we're that, terms as happening in start of what fiber-based what's seeing mentioned there's single packaging I Europe, that So growth I'd in that

to So higher and costs, shipping you part going those producers first. dislocation that there, freight market want on And to service of that they're answered over particularly with question.

of their in board happening with that You GD what's market of versus version to some virgin compared think the grades. about recycled

$XX approaching prices in MMBTUs. gas natural got You've

a for they'd just fiber degree of market. can market. So want into that here do producers going to we that like, there's sure it be that in move And to lot would of I'm want to demand those domestically. to

market that in you where largest now we're as to the material a mentioned I way, the paper So board. be packaging purchaser in will of

going we we've what's our on for knowledge here. got of company on. And forward like we established brought us So a help And that's good agenda drive the position that to going basis. combined the going

Anthony Pettinari

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

Mike Doss

Thank you very much, Anthony.

Operator

today's concludes to I'll session, for closing that And Anthony. Mike hand you, any Doss back Thank remarks. Q&A

Mike Doss

growth XXth we XXXX outline us results, City, year joining everyone for integration results for we you opportunities. February Thank will York for provide forward quarter to in and fourth and detailed and AR look on update our a you Packaging you full Okay. where many on today, of seeing New outlook

Finally, able discussed day, to and again we a soon. forward XXXX about some to spend the you that to that, you today. talking milestones look be With great Vision talking we time we incorporating want catalyst have our to hope updated

Operator

this you joined and has today, who disconnect the us now everyone, to call lines. you may Thank your concludes

Graphic Packaging Holding (GPK) 26 Oct 212021 Q3 Earnings call transcript