Earnings call transcript Q1 2023

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Operator

Hello and welcome to today's Graphic Packaging First Quarter 2023 Earnings Call. My name is Bailey, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. [Operator Instructions].

I would now like to pass the call over to our host, Melanie Skijus, Head of Investor relations. ahead. go please Melanie,

Melanie Skijus

welcome Call. Packaging and Quarter Company's XXXX Earnings to morning, Holding Graphic First Good

on call Executive us and CFO. Joining our CEO company's Doss, and President the Steve Scherger Vice and today President are Mike

help investor referencing first accessed section website be through of To we webcast, and can www.graphicpkg.com. presentation our follow our today's quarter along call, you also will which the earnings be with on at the

the today's presentations to over by Mike, me press call release forward the that and securities litigation include defined turn I executives XXXX. Reform Before as Act in made private remind our let statements of you looking the

but These statements the factors not in actual our cause materially and limited the are could identified from our in Commission. release Securities subject include, to expectations the and uncertainties risks filings are that to Exchange These with differ and to results projections. and risks uncertainties and

over me that, Mike. the to call With turn let

Michael Doss

today. on is Good start you XXXX. call thank Melanie. morning, to great off the and you, Thank everyone, a joining Graphic for us Packaging

advance build our we running different around a proven packaging. centered strategy as to fiber-based leadership race in our continue consumer We

consumer long-term Our differentiated strategic enhancing by strategy growth customers, capabilities. partnerships and expertise executing with focused while and investments is innovation capital on expanding packaging driving

positioning During while on the strong enabled business the the team the customers execution deliver shareholders first for quarter, us strategy, for to by global our and create value future.

the slide growing business for challenging performance as three. with This during and recyclable growth consumer a testament first backdrop, expansion on our start model, the drove fiber-based key renewable a organic Amid the highlights is of well continued sales margin packaging. demand Let's strong to and this quarters as we macroeconomic net resiliency quarter.

capabilities strategy, differentiated driving capitalize continue and by our innovation. new building on this of to clear consumer preference part investing As we

mill expectations in competitive is to As our new discuss paperboard advantage our build Waco, upon distinctive we are exceeding investment in further progress in we with and recycled will Kalamazoo detail, Texas. making

brands not recognize for we're consumer investing innovations new and ones to trend consumer and and manufacturers the response the our preference in Leading this capabilities solution, provide. can only Importantly, packaging. sustainable more the

pleased double us new cups are potential their service to fiber-based this within today as food Chick-fil-A, insulated the long-term our is for highly month of better beverage is going the with wall solution the We a to This announce significant program. latest example space. that opportunity for mark

the as Given by our EBITDA are and the to strong start and year of other midpoint guidance updating metrics we at to range in year our $XXX the guidance ahead, full confidence the million billion path $X.X result. raising a

we established XXXX, our In goals. XXXX original Vision

we the of to goals York. With achieve are we in have financial targets a the XXXX two clear enhanced for Investor meet in XXXX early Vision on-track are XXXX today providing at our years we and original to those increase path February Day outlook announced New

margin our over at pricing captures financial grew four pace increased basis XX%. our $XXX of expanded sales and first organic driven for metrics and the Sales sales Adjusted by key million faster to by positive $X.X EBITDA XXX points a Slide growth. billion as primarily quarter. X%

for This provides achieving and financial adjusted represents a high our goals. Vision new confidence EBITDA XXXX further in margin

an EBITDA prior sales performance increase to Taken per adjusted quarter. lead of share XX% and strong earnings together our $X.XX, year the versus of

in on is making five. invest platform in are we financial detailed future. Most strong on near optimization, term on As the we goals, progress new on the are build capabilities our performance slide to which we our deliver continuing considerable to CRB notably,

we've on recycled machine made largest early life Our highest came Kalamazoo production in successfully XXXX in capital Packaging KX cost, Graphic results lowest date coated we The as paperboard investment ramped new operating to KX to in world's production the mill. the quality machine.

capability the of ramped, we expectations that exceeding KX several fully our is Now ways. in are

quality. is First

We and moment. grade CRB in I the network that are expands meaningfully will higher overall. producing opportunities substrate of for development quality this innovative our a exciting now new elaborate capable a more on

We annual tons we expect tons had production KX yield. investment XXX,XXX of finally, EBITDA the of would announced benefits. to XXX,XXX only million we $XXX two reach approximately year to of ahead Second deliver compared And financial of I'm previously improvement incremental expect over the target now schedule. report previously years. three is to We in drive years to announced. now full that annual pleased that

execution of to the a team. is of great Kalamazoo and outstanding the testament The our KX work ramp dedication

to with expertise of provides success continue the to we as the are the doing redefine consumer packaging Waco. to and invest landscape, confidence Additionally, strategically us investment in fiber-based the

first three ago previously announced remain quarter excavating months foundation meaningful than of in startup we our Waco progress the recruiting the the investment the timeline, the made already key XXXX. equipment, communicated have the completing We and on-track meet machine of site, less and ordering to including employees. We

increased us optimize expanding mills, us cost competitors. the an for investments demand strategically over further Waco these closing to by our in allow together, meet unmatched will network while investments capacity at to time. in Taken helped still Kalamazoo, our compared The CRB cost higher

to our the Due Tama, decided has production previously the mills, highest the had quarter, and recycled capacity cash we during production from per Among smallest earlier paperboard the anticipated. Tama we than to in our ton. KX, Iowa close CRB than costs expected better have second mill

today our line currently expanding in optimized lowering mill As to both well strategically closure with than net plan our proximately with capacity will our closures, mill demand. in network more network flexibility cost. capacity strategy advances paperboard Factoring X% simplify and and we Waco have adjust to capacity

advantages, economics. superior recycled technology, with CRB deliver recycled grade the we us of new don't utilizing mentioned well they performance enable an moment make coated new KX characteristics produce By investments entirely simply enhanced our to cost appearance ago, grade as state-of-the-art can highest I paperboard available. and the quality As a and production paperboard as

served for such substrates, or packaging as opportunities CRB-based historically that our of to by new breadth only virgin markets end FBB other the expands materials. SBS quality improved consumer The or been have

illustrates to more of see We're expect to In CRB the few and short products where examples experiences. we six Slide and we in consumer CRB early play a time. expect over are of forward We and the coming trials currently as of look innings ongoing in innovation CRB quality sharing grades. year opportunities our to on part our conducting these more story. higher

capacity certain as adoption a important CRB without applications virgin global The historically frees optimization will other in growing for substrate the of capital continued This up demand require our for network. packaging additional across need mills mill enable to investments. is our capture it virgin fiber

running race. great examples different clear paperboard in are mean of investments CRB Our innovation by what I a

ourselves in customers been deploy performance. that our to packaging possible of consumer our not options the depth opportunities is creating but past. and our in places for and the fiber-based a are customer where relationships, only factor driving in for This growth key We simply hasn't also

enormous a of packaging not and virgin our fiber-based packaging. to recycled the opportunity great example from is at created non-renewable resources substrates innovation seven Slide replace as widely as

double-wall Illustrated is cup the proprietary alternative an highly outstanding as developed insulated on slide solution fiber-based this cup. our to foam

boasts properties, result cup the more the providing quick-service are set consumers number restaurants new at durable a consumer. that dual The apart delivering less, others solution sustainability a improved from experience enhanced and available is for it Our that insulation consumers has features. features appeal is sweats cup added better a to of beverage

United are Graphic customer. Maryland. restaurant is chicken largest with cup chain States we the relationship Today, the innovation that expansion of an and an existing Packaging the from our in Chick-fil-A, in to Chick-fil-A, announcing launch locations proprietary quick-service of California

for customer's brands of is of be both to and how toward we effectively sustainable work transition on that innovation launch hot the beverage great XX% Chick-fil-A industry the investing Stage focused packaging how Driving is with in restaurant long-term a including partnering are like approximately are our beverages. manage solution them ability can that cold innovation potential Chick-fil-A solutions and leaders program, one Over transition. time, footprint. with to more to example leading a

While less to each calling XX of plastic, and away Consumers these environment has billion change foam been year. still and progress ways. cups roughly made for transition are use Americans from

looking Our customers us help. are for to

potential put win market market in terms, tons XXX,XXX has demand. of cup roughly our innovation a paperboard and SBS equates insulated opportunity addressable plastic we billion To $X new and the foam addressable that what our cup believe to different billion is estimate tremendous We in U.S. $X to

customers We to service positioned to are call our demand consumers. uniquely meet from this as by our integrated platform leveraging

and Our circular economy. increased provide enhanced project and enhanced with Chick-fil-A underway its recycling cup cup recycling Waco, a move forward to will CRB look to mill separation programs in on QSR more support cleaning like customers system We partnering with capabilities. of

the turn with to And more financials. to detail Steve over quarters call on provide that, I'll the

Stephen Scherger

Thanks, Mike and morning. good

first the the financial Turning to for slide and key eight, quarter. highlights

X% open increased paperboard a As start partially organic Mike and it pricing sales $X.X positive year-over-year over driven in was market year. and sales by billion impact. great execution by offset the to to planned exchange lower foreign X% Net growth, sales mentioned,

you the side the diversity sales see our of performance As benefited slide, can from of on our the portfolio. right

of which sales Our X% approximately portfolio represent XX% beverage our consumer food, and markets, increase year-over-year. together

of million which by EBITDA grew prior to portfolio last up The over million, was foodservice year. market, XX% QX represents our the compared year $XXX approximately Adjusted XX% $XXX period.

to continued year-over-year for XX% our Adjusted increase $X.XX. consistent see performance. growing to net price during was EBITDA nearly and XX% quarter XX% very growth the expand margins to goal XXXX. sales year-over-year We're The at by driven pleased EPS organic adjusted execution, with Vision

reminder, sales strong EBITDA billion. reference Liquidity at and our the $X.X over appendix presentation. remains in a As today's very for available of are waterfalls

during the basis Our period. paperboard integration rate increased to year XXX prior quarter, points up the from XX%

remain Meanwhile, we backlogs rates operating are that healthy. pleased our and

six to is exceptional slightly and Our supports growth, substrates. line while with our to historic service more in us This norms provide down to allowing backlogs weeks were all customers. our across level

remained business the the across quarter. mid rates in first in Operating the high XXs

return approach. balanced cash consistent shareholders capital to continue to allocation with our We

share During dividend we million. the totaling quarterly a $X.XX $XX per quarter, of paid

compensation. of repurchase to related also long-term to We offset $XX incentive dilution million shares

current nine for XXXX. our Slide guidance targets features

the EBITDA range. midpoint our XXXX at Given balance by $XXX be strong guidance for in in pleased guidance our billion adjusted million of increase for to our to position to outlook the year, a start we're the of $X.X

at As expectations our by EPS also increased a and to times. updated a X.X year be $X.XX range net adjusted to to below or for $X.XX $X.XX, result, ratio leverage of target end we've

pay down guidance our business. the business Robust and will reiterating cash of providing debt continued flow result flexibility year cash further also We're in from investment generated our while sales for this flow. for

slide to XX. Turning

original XXXX goals You can announcing we've progress substantial since XXXX. the Vision see made in our

are already As goals we the provided We the announcing improved original early. last our our years ahead financial and financial to Vision remain noted, track in two today enhanced goals year. guidance Mike confident us ability achieve on path puts XXXX our XXXX achieve XXXX Vision to

the question-and-answer your the Thank Operator? call time you to for operator that, begin session. With turn let's this to back the morning.

Operator

first Panjabi you. Our of from Thank Please the go Baird. ahead. Ghansham line comes [Operator Instructions] from question today

Your line is now open.

Ghansham Panjabi

major Could more two And Yes. Thank giving morning, start there's just because detail saw everybody. foodservice, the you asking just that between what Good on. beverage? there's you, food, have so a lot exactly towards destocking with on us exposure divergence across also by verticals breakdown you you operator. any major inventory packaged and geographies? I'm notable on across if your going off

Stephen Scherger

Steve. Yes. Ghansham, good morning,

and I that our foodservice you innovation the in beverage decline we consumer by start platform. think Europe, in we engine which organic Americas. that growth by sales partially that, X%, slight in to there. again Just sales kind organic growth, the was was all growth offset saw at look We driven our in very businesses of have continued core the a saw if food, the And

we're we've positives, the to. the places of Those in held obviously, portfolio as slight Americas food, for very and then and as immune up consumer. to some mentioned, well, not a the destocking you beverage some and past, seen, So, decline the in small extremely

Ghansham Panjabi

despite year outlook my an And very, But it's question, from earnings know we I expect think our about XXXX, despite And vicinity standpoint. foresee to year? at earnings for very strong as point, be for Got growth it. what path a And you're of for Perfect. projecting second XXXX, obviously, in what comparison? do this we difficult productivity the then you to incredibly earnings this a XXXX early. a very to will be up, in be in should

Stephen Scherger

we add some organic it's Yes. you model forward. We Ghansham, we we the quarter. would see it -- strong But out points would XXX said finished sales to early. first as expect we've Yes, well, look We'll in noteworthy, Then would Mike can productivity, Obviously, we XXXX, in of And have of of we unplanned would million expect sight expect $XX on. can I'll to color. and is it, first less, additional the our both productivity always expect have unplanned expect to advance million would very we to very year. $XX well that start. both normal our again, next we continue XXX have that growth basis year, XXXX. earn less planned look we've here of next had to some in the but downtime would line downtime downtime too, as we it based maintenance at upon planned as that as quarter,

your to be And on costs continue anything productivity the Obviously, down overall, end the strategic sheet our So will drives norms. if place, great of that that? or will EPS, balance want move would add question, high to do be to to be in a that in relative yes, down, then should interest And we optionality. spot. the sheet a Mike, historical to take balance you

Michael Doss

right. that we or benefits that's end think ratio amount at and optionality while tremendous in We've X.X having deploy shareholders below guidance I year, on Waco. to to debt-to-EBITDA XXXX look you got continue fine if of we at the a go we're capital way put investing the a of customers. in times point into Ghansham, down the Yes, as

Ghansham Panjabi

you. congrats Chick-fil-A And lunch fantastic. as the well. Thank Okay, on

Michael Doss

Ghansham. Thank you,

Operator

Thank from next the today from comes line Rueckert Cleveland question Please you. ahead. go The of UBS.

Your open. is now line

Cleveland Rueckert

my Good morning, taking question. for everybody. Thanks

take is the guidance? a maybe up. that in point. couple give I at on driving didn't the ones because You can million brief color what's some this more me, guess $XXX pretty revenues from of Just us story EBITDA, of increase midpoint start, you clear

So something as change? that input margin. of productivity there? Is KX out the that just really of of cost kind sort you're the of on there's the getting What's driving

Stephen Scherger

that. Yes. Cleveland, do its Steve. I'll to be glad

guidance, million. of midpoint look $XX incremental million the inflation midpoint price took kind the Overall And we up the driven execution, by our an you of of guide If down is the to $XXX through took improvement. million. our that we primarily $XX

the at West of driving by those Kalamazoo offset $XXX downtime the is It overall, incremental negate to million zero. net So unplanned had that out roughly quarter was first the productivity. we positive is the Monroe, that two

net overall cost. is the price in improvement a improvement So

Cleveland Rueckert

Got it.

clear. the guess, on the longer that Okay. integration I up of following Vision And quickly then That's side. some on to area is do sort term maybe just the the work very got XXXX. in

options XX% if Or an a curious you with get discussing can the terms level sort would existing that in door of plus your opened you if that second ago, to be integration area downstream Just be integration? platform? to the strategic of of focus

Michael Doss

Cleve, thanks question. for the

back it go this announced integration you XXXX, our XX%. and over finished XX%. paper, bps was if that time acquired quarter look where rate last basis at think And really year, the consumer we at increased international packaging business I now XXX combined to on that at we combined just we we we're when

tuck along into acquisitions And is combination the done, inorganic, stack So our which in some under five was years been roughly we both this as growth, years organic the as quarter. three that's continue those know, well you really lines. as made tremendous grow coming last a year here XX%. we progress of to over we've And that

towards it's XX% those end we head to a year end you unwind, by combination But be of year that both the So agreements just in at things. of XXXX. of about going we'll supply as wind of we this of the pushing be talked clock as kind last forward the into if

and XX% our heading years. be the that couple over that So towards in is high confidence will next range of be

Cleveland Rueckert

it that. over. for much I'll very Thanks it. hand Got

Michael Doss

Got it.

Operator

ahead. Staphos today Please you. of George comes Bank go the from line question America. The from Thank next of

Your is open. now line

George Staphos

this that the get contact application food so you sustainability that on broadening had and first progress from including explain anything how you Good morning. you're Thanks away I that market. of follow congratulations And Can question, and food packet? the year. and and substrate? recycled getting on. can to Hi, CRB details, CRB far Is the the material would for the with take there the around that I ultimately guess a on need issues add everyone. the some into

Michael Doss

reason to put a [ph] materials bit in that there. going the appreciate Yes. opportunity talk we're little Thanks, which call we're the to about the the new paper properties grade, the that graded that George. renoir trading, at way, look grade. to the you smoothness appearance we brightness by of I and as And substantially for manufacture, are that going if particular is we're the SBS to similar

compete area pharmaceuticals, that of the how in for been bottle it'll food So, But that's going we can we're about a real think the beauty pack the operating for grade, of some applications, historically, marketplace, some carton, and in blister that we health kind we that here position that in encapsulated sure, when those and believe both Canada. was products. has with a anything or push have to

they definition, of now appearance quite that a we're going But that's and time were there, some over that continue a we to SBS, with can find patched the there CRB by in well. so, with properties we've compete sheets And CRB that we did that see to that compete can ways got that penetrate. large to lane as

grades grades making We've more And that to to to with to going our focus places. that trying dough, freezers, we've can really sizing point in in make what really work package going slide that is make beverage, ability more you're so, is Kalamazoo that's high that some in particular and we're out, where got the see to have grade. that that was CRB that's got able other well be

SBS couple you advantage at is. what it on over $XXX And of look it's it, a when

lot a And of appearance give if can customers there. imagine there's interest you can so, the capabilities, they

heavy in the in in quarter So, a we'll way. trials pretty second be here

as Steve cost, with early. saying paper on million prepared remarks, you that, Your one we're track heard year focus to in we $XXX we EBITDA that though, Kalamazoo would deliver the his committed do of improvement initially on

do now unique capabilities really is except advantage them capabilities, which front North coding our and a for end focus Waco formation, very in And our and we what as else back here. we've in how of to got of So have one has take and the machine, for no calendaring our turned Kalamazoo in America end, us well.

we're what that's doing. So

George Staphos

on couple I for for that offline. I follow-ons But I a other Mike. say the other question the guess, of I'll Thanks had that. had.

is there to else back years And tougher whether next dealing the relatedly, and you playbook what had many XXX math, track organic X.X%, our X.X% from not Thank of to little points, little kind bit for under prepare there but go guys. couple a there. I out think been XQ in that basis little organic key end was lot said growth going were of Having out in to you of as you'd you a that we rate a you're your were a nothing bit of terms of to through at So are anything not in what sneeze the quarter. far maybe least put whether bit that, so companies or again, companies this relative question. revenue that at, that we X%, environment Can revenue any Ghansham's exit rolling below you that volume uncertainty a variances the to that talk to Is markets bit this sort surprising targeting. a obviously with? your in a it's about recession, up of XXX we're

Michael Doss

Yes.

strategies we we diversified When really kind growth. world, we the saying, pleased testament it's built start use with of our of company. positive against we've on of showed the volume. performance our market packaging relates and grown how look, And to rest that to compare as the really it a I'll were QX you by participation So

grew. about heard You Europe Food strong, be services people mobility foodservice expect talk convenience. at you'd quite and Steve X.X%. it wanting unemployment And to and both with and

of in continue to we're business, There not Americas was said, as case. a We you little that to the that. side expect be the the immune to destocking

most date. for the got But they've to packaged, born a remember expiration on They've of what that an you got date. products have we

period of those time. And used within to be have so pretty things a defined

as segments lines. we're not some as industrial as along maybe So, those quite exposed are

we actually medium confidence in that substantially and long-term. to you QX, I'd So over us And to the we XXX exited we'll at find points gives similar to saw continue QX. to say look that QX it's basis out XXX how to ways grind if what

George Staphos

Thank Okay. I turn you. it will over.

Michael Doss

George. Thanks,

Operator

de from question from you. Thank Kieran today The next line Mizuho. go Brun the comes ahead. Please of

Your line now is open.

Michael Doss

Hey. Kieran.

Operator

are you unmuted ensure Please locally.

Kieran de Brun

apologize. I Sorry about that. I was Good on mute. morning.

Michael Doss

good morning. Hey

Kieran de Brun

even coming like seems is prices better, commodity pricing trending It down. actually are still though

relationship but subside and a the bit about that we the about think So, half XXXX? And preliminary, I further back how of that into can how [ph] into see more it's we year? little just if how, know you we talked raw think should about maybe

Stephen Scherger

step the mean, it's don't You given get pricing be roll you was kind touched overall some with would through established and have incremental down because it that QX in $XXX the into wouldn't very contractual increases step our the and million, it, Kieran, XXXX, and we've lot conditions terms customers Obviously, see Yes. Steve, of under in then as that realized. very ones long-term. the substances path we committed as a would have most the million relationships the marketplace, into that to roll $XXX down you execution the good, changes to you'll on $XXX any towards into we've short, new of price in medium been obviously million and of expect I on and down will got

net input inflation, expectations the said, than still overall of are year, inflation, being the the we cost beginning That at established original inflationary. commodity lower while

so, And pretty terms portfolio. across of implications pricing that it's of in neutral the the overall

offset as it of needed as if we price of to business. making the see inflation be to and question extremely XXXX inflation continue roll mindful through your we'll it to monitoring kind in we And continue come so, to adjustments

we as part into that be So expect the XXXX of wouldn't marched model and changed through XXXX. at to all

Kieran de Brun

this was before, discussed cash. bit maybe strong then, and clearly up, Great. you're one but a quick follow Thank And little generating you. just

You very position. liquidity strong have a

Is as So, along see to to if or think M&A we capital priorities maybe how or I some that? discussed, I or where were there into deployment about any and places health on about think XXXX? in like go lines, there's is of do mean, was areas you it those think we it specifically, further any other a focused want you integration? little have bit where beauty where geographic less growth, Are terms you and exposure? investments

Michael Doss

Thanks, Yes. Kieran.

focus our about prepared X.X that is look, or So, XXXX the lever make his at times in we below are to sure really talked in years at you've remarks.

this So that's our focus year.

continue there. the run a to balanced that And in a levers XXXX, the we'll been for for year capital we're years. we've to above can down. to to in we're we like of really to that generating allocation And to value. variety have For as we last go order maximize that those with doing to continue a pull In in us balances do is five do seven be doing able And shareholder debt able of with news process cash we're what Waco. do good even going to lot terms of what we're there's

about we're it. excited So quite

Kieran de Brun

turn Great. Thank it you very over. much. I'll

Operator

Please The you. ahead. Seaport from line Weintraub Thank the today go from question next Mark of comes Research.

Your line is open. now

Mark Weintraub

Thank One quick just you. clarification.

there. raised $XXX nice EBITDA obviously also guidance million, the So you've you raise EPS by

adjusted the to flow. an But no You didn't if make adjustment I why adjustment I it. apologize missed there? cash

Stephen Scherger

Mark, Yes. Steve. it's

on to next primarily billion focused the got flexibility, a is We've dollars the are outstanding invest over project with years. off We good three ourselves an to start. Waco, providing really just

remarks, As and we're in Mike prepared mentioned running. his off

the flexibility more EBITDA the on-track, The just that little ourselves we're if a and state, little more taxes. that So of we us giving CapEx high bit that would can there cash in a earn, we got take project keep some there. might to steady end we've range be of

flexibility. So, appropriate we're around just really being

flexibility good. has that ourselves Obviously, mid liked give two down will Waco. drive off we're to just trying start, the on this a fours year. a We on below we're leverage debt to, job the one investing, on is and debt we're roughly times. balance, which But some really weather half path the into pay been We're

we're of investment flexibility so And timing giving on the there. ourselves potential cash the just

a of change around start nothing So, to in to off substance a good positive Waco. than other

Mark Weintraub

Got it.

And Waco just be spend forward. so, moving would that not be you'd more. It's on spend the it's the

Stephen Scherger

as the Yes, change we to Mike correct. That's timing mentioned spend. the It's $X about billion. on are no and track, just

Mark Weintraub

little in on just that in that of versus you a wanted a currently of on bit I that terrific much focusing that organic really growth, And are your just there. And open And strategy sales. realized on But you're bit maybe Right. your job market the to us doing hone give is -- the a And volume business just part on more how what's tactically in color business. export that domestic? your going of through part how environment facing? is are working we the and

Michael Doss

market open good very, From standpoint, export small. sales are our question. morning. very our and Appreciate Thanks, Mark, the Yes.

open do our that. own with your those continues run we And a we're the because is last, to that strategic your grow. market, of market, start really, doing years to seen open retreat really over segments, you've we'll from need certain So, five parts paperboard, as American your us businesses the systematically North

on QX waterfalls And in was see again you'll quarter saw In the it that there. last so, because likelihood, anything was that pretty, you QX sold. two, quarters, all pretty year basically, strong and available were

in long-term we've focused take got to our on you're income of that And customers And -- ultimately and of standpoint, being we the own converting so, they're us market grow we're use terms business thoughtful those care side. really help open how very from our tons.

So that's we're doing. what

Mark Weintraub

it. appreciate Okay,

Operator

Truist Securities. Please ahead. Thank you. The next Roxland line go question Mike today the of comes from from

is now line open. Your

Mike Roxland

very Thank quarter. a Congrats Steve you. Thanks, good Mike, and in Melanie.

Michael Doss

you. Thank

Mike Roxland

of you of Mike sense, a on get your Kalamazoo to think want I about obviously, you, portfolio a out built from basis? So going how forward terms do in you expectations. ahead

this basis? now. forward you then basically So ongoing? after -- another that expect keep something Is efficient that's CRB maybe you similarly, you we build doing go Waco, from respect and done you're building expect cost that Waco both spend out be with low a we period SBS any to And expect CUK? there's with significant You're should all right mill, out that enhancements to to capital got should where we and are there should another on

Michael Doss

repeat you I sure can have the I make Mike, last it. the part of want question? to

Mike Roxland

Sure.

want in to other of Sorry doing from I know, CUK? just about that. SBS guys in CRB you're expect any addition terms hazards we on optimization, significant are you Mike. there what and should to

Michael Doss

is really at No, about kind here [ph] you to thanks talked of comments, question. appreciate the the have prepared I it. next next calling Got We're to the world my Graphic to and in thanks, to as I I CRB, Waco and access class mills next CUK, excited the what it SBS. is startup. we're when the for about we going out six

we've can the got we they very very redundancy, got on complexes do, like are cost there. the we well large, They and focused capitalized what leadership build structure So like. we've we've got strong teams

adding call across ton Waco, I have network. X% In X.X, in the billion tons million tons, as said, X.X allows so additional net comments, we'll roughly XXX,XXX on my it us to

help six-mill really So you our shift to kind business. of within we're about what around us that think substrates we're able excited going is the within about to system really that, to substrates grow be

tons order the we're side. CRB able we SBS so, mills, actually, CapEx out to because up actually will to additional that be those requirements And and balance in to open CUK, be the into the last, the believe, mills going

that of because in up it cones we one did frees those reasons able then use. really did we the be to why too, will So, Waco that's what

out going input we'll that need what those business. so, grow run to we projects and already the have it tons cost to reduction that look And take costs, and out carbon, to structure we're operate is mills do take to because our in

Stephen Scherger

at and X% assets modeling, back growth. XXX the we've just And time, once very three beyond can us moving maintain to to Steve, talked in that, as see down of level similar that to of range the modeling to we basis allows to CapEx year it's historical a that add we points that support type perspective, Mike, that period from a into sale high are long-term over year Waco XXX

Mike Roxland

April April, the the of appreciate respect one demand day and But on trends Thank there. post clear and anything in you. XQ? in to can of far on terms second and thus now what terms question color you Got anything May. just to anything you're And seeing with of quick it. trends, comment Very goes --

Michael Doss

what Substantially, saw similar QX. in to we

Mike Roxland

Got it. Thank you. Great.

Michael Doss

Thanks Mike.

Operator

the Thank next question from from comes The today you. Samuelson Adam line Sachs. Please of ahead. go Goldman

line Your now open. is

Adam Samuelson

morning, Yes. everyone. Good Thank you.

Michael Doss

morning. Good

Adam Samuelson

morning. Good

the in the want in quarter sure just kind where So it its on you fourth to guess of a that the If back seemed frame -- of the actually, like that gas positive price in the properly February to clarification. at you think first results. that and costs first key of to moving be to surprise through quarter calibrated were quarter? make realized the was I that natural such time that just in we're just was you'd I the question And February. first you really benefit help fell drove mid us kind back above I go a what It is want considerably weak the of source what about quarter? pieces was Or

Stephen Scherger

execution range our year then Steve. pricing Adam, quarter guidance execution inflation our of overall expectations. commitments. down. below by was the in in expectations commercial overall, the yes, the because exceeded Price a And Hence, just modestly it's of Yes. move and performance strong bit full

net we you We've that being offset etc. chemicals. most moving some apart. pieces on up on the yes, so costs that that it by is touched items like things purchase some got still, acquire And fronts are gap, commodity paperboard like and are well moving the logistics down But the chronicled

moved of range. relative current would the million down of seen be movements. range that lower range on with conversations commodity down and asking to the The the to of so, inflation And mark-to-market $XXX that end the $XXX were consistent of that the just mix about to cost you kind million we've we've

Adam Samuelson

Okay.

allowed you But further that's Tama as how of and second about make think in and that you've this as KX kind about you really output, helpful. capacity Waco, you get of of design And the actions a were? Now and Waco, the of you along how its on kind than partially exceeding addressed EBITDA does exceed with earlier. then returns could implications KX for kind of think where continues to thinking question got kind terms earlier. to still the the But benefits case plan informing you potential earlier investment investment KX the as Waco that it from reach is Think or and about to some and network how that thought, it upside for of come how optimization you of case?

Michael Doss

when in $XXX I us, the of project. And in Kalamazoo, that our productivity execute confidence guess by start announced of to Waco success do overall we're seeing project. for Thanks in a the delivers announced continues we saying, in EBITDA increased I'll terms that here improved to we give question. way so the ability Adam, million the

do just an the in forward as that What tons outlined consistent us ramping XXXX important EBITDA here closure well. that's up $XX It Waco that XXX,XXX comments. Kalamazoo million we the announced what we Steve really in really machine to that. a allows to we with annually to we on later of announced on which prepared does that do is were aspect So deliver in pull going additional and his process of would

goes, there. So, the going large XXX,XXX existing We're questions net us operational we balance game. a tonnage six said Once and couple to our of out that about I to plan. lot ahead ramp that's as little of talked the fully a gives And earlier, our across with speed. system. one of tons got we're that of we X% mill weight you're just still, have optionality

Adam Samuelson

Yes.

right. That's All it I'll helpful Okay. all color. pass on.

Michael Doss

Thank you.

Operator

Arun comes Markets. Thank the you. go from you. ahead. Please Capital next from of Viswanathan line The RBC today Thank question

open. now is line Your

Arun Viswanathan

really guess, price quarter just Great. Hope drill costs. Thanks taking are their on for good I I down so well. and wanted guys my on progress you question. back a far. to Congrats

So maybe stop will that appreciating that. that And that with bit. I drove the well? you and so, of side Or Thank categories bigger wood energy were some did kind of and as what the the little chemicals that? -- a bring down cost Was you.

Stephen Scherger

mostly well why original Arun, of when And for chronicle, are range. down, to well the I known, necessarily yes, a which environment, not we million it's a of to down logistics was put that took to pretty had Steve. XXX OCC, end seen and original million is It's it's because the items yet of items XXX occurring guide And inflation, some from the we which that nat of together. top some we pretty think the guide costs kind XXX. XXX re-inflationary gas, the are original

And mentioned of our what million around we the here I a $XXX basket at So be million input are to we inflation. moment just commodities, repeating would the sit it. $XXX of expectations items commodity ago, mark-to-market, cost those look the as the of annual as on today end as lower

Arun Viswanathan

environment the industrial. words bit doing side, than have than been containerboard? consumer categories seems are also some just And holding Thanks. holding And pricing why is a doesn't And seeing maybe great. you and Could better of it may then, relatively three there you. the appear a looseness then, that on is perspective? us like as the the little well. better it's does demand Okay, some what but up CRB walk tell appear from Thanks. just affecting because it also grades follow-up It that you're up a maybe supply through box that's

Michael Doss

Arun, it's Mike.

facts transcript. customers allows said, six what to have the saw about need probably it a we released went extremely year weeks, way customers about service three high well at the just ability back average, as we weeks nine we off Look, a take that best to just backlog And is we as our that at to XX talked healthy and substrates with we backlog care to as that's and your us well, a actually on over working it's ago really EPA on talked now, question. So, very our the roughly answer to. here all our you across Friday I don't looked level, of

we wildly pleased to customers them important. by know. the in be and of of that And processes, you needs consumer, so pretty they and it's respond as our Because manufacturing now the just to to time which do, run are able changed really need many

total going But publicly goes that'll of the that a is of be up was mill and divergent is So, for they was foodservice General XX% a it rate at XX.X% that's because little away, know tons capacity XX. the was XX%. removing a announced one in solid. healthy. very system, from also at operating which terms X.X% SBS folding our liquid competitors down at The quarter, we for actual of bit CRB for packaging, were of that XXX,XXX away.

then kind unplanned grade, that, with it's you if given into the we somewhat And the [ph] housing other as mid combined wall downtime the in of is just wall we some factored So that clearly normalized XXs, and obviously well. was pacing for which on it, presumably market. had and and also chicks chicks based,

So that's how about. we're thinking

that since maybe and trying because that operating mistake it, guess I making to look to think want fact, we this got and call, on for material ability, got to our system kind market do as at high to that actually continue in just that few we've just have we do really high company minutes forward. backlogs of door I that level here integration a convert raw a as talk about make the rates, we've to level what packaging system. a me of define opened to And that's happens given And we're Graphic you run the we're it, going the the will saying a to spend Packaging we we And at I demand. that in the us

which us growth terms cup of opinion, we the and the more have for package really you Steve, it's was raw positive in made. you think we about and make my guys for happen in quarter. to driving, material in So then growth, how we're relevant us And that and to overall

over focus two are, relevant, myopic sometimes I it's they on they're things. that statistics but those because those are an not So just think

ask you think I'd you're the going you consider company as about forward. So guys of to that kind

Arun Viswanathan

lot. a Thanks Great. Okay.

Operator

Wells Thank comes you. of Please Fargo Gabe today ahead. Hajde the The from line from Securities. next question go

Your line open. is now

Gabe Hajde

just I'm good But are, Steve, that nameplate of guys I'm And curious, not paper kind think you really KX. capacity few on pretty like or morning. to out that I a maker. I months great exceeding guess productivity months for the Mike, Appreciating early for we that a exceeded something extrapolate seems or maybe it of that. size okay, project it's maybe a fact six

I the permanent adjustment a question and bit keep maybe system, guess take fact back pocket is opposed if little in of as buying slow, to this the system when Tama strategy that that. not to after across and of keep behind more your shortly not So, mill? in CRB the your take do EDT the things kind why why

Michael Doss

Yes. they still very, do existing is We where internally assets need business The thing I customers material our the have confidence here, have discussions in to within just incredibly appreciate that want to have we we higher, we last put the question, the the momentum that we just don't is lot is do situation they business. have those a Gabe. very run do would solid. And their it. that. And and wouldn't that we our level service can line we look, the bottom optionality is had the we've of the

those look, So got and lens we covered. to here, it, we've cautious do have what I think a on contingencies we've relative done

that of announcement lot going that okay. have we're a confidence making, we're be we to So, can that make

Gabe Hajde

To bells but you different right. the is not I four start then, the I do don't the off, am want all? internally we running I backlogs that the terms question. spend weeks. those quarter half and of, but alarm are factor, When backlogs advise to, and of be us make -- at when compress? tell maybe too a not maybe say I that And you kind the roll just focusing the time determining that's I'll kind business of Or in appreciate to start second end forward on us ask statistics. much go guess you All in to these assuming extent just decisions

Michael Doss

Graphic why a thing integration high look, run got we're and we've is in her course. going us growth that's top I so is and normal our to how it be it's very working how do of think I expect line a of we're all relevant thoughtful And the got here. we're as given bunch look, of the and type our that terms great to operating the in And a in bunch for business stick ability inventory look paperboard operating The is can at you are the a you very, just you do we in business relative we the be in where And it's up makes of that cartons all It outlook. we run packager and earlier, that to demand. matter capital. very own a rates thing to well. that's to participate to And as holding And last And cups a which of the markets you happen can mentioned into that understand business. the material.

think And so, that covered best I've I yes, as topic I as can.

Gabe Hajde

Appreciate it, thank you.

Michael Doss

it. Got

Operator

Thank you.

of Our Deutsche go Bank. Please White from comes from ahead. Kyle line next the question

open. now is line Your

Kyle White

the I and what situation focus the could take you shift advantage cup addressable fiber-based XXX Hi, maintain opportunity? good U.S. foodservice holding question. Does base here that to market market mix to just to of this versus convert the on stock you the you can from folding your ton while to the in and cups opportunity capacity asset capacity your you opportunity? highlighted maybe and constant? plastic taking that Thanks And to improved ensure would you morning. do this partner for allow foam Or wanted need share for

Michael Doss

system. and would the that XXX,XXX machine that existing make in be, highly for everybody step Thanks have question. integrated It's cup it our runs stock back uncoated vast makes a of remind Mike. a to we in Kyle, almost it's Canada. through take the tons Texas just Yes we answer The majority

have we of [ph], this you're cups August the already business make order stock and in ability have, in service care do and to to kind of XXXX, We year and take we our in customers.

SBS do the can capabilities. do already lot opportunities stated of we that have and got us have to is cup for stock. about folding drive positioned ship rates that's grow And makes kind integration we those able continue we've of talking And which that So, to as a business, we're we the will platform to our into were strategy, a to It you we uniquely cup to up. ability leverage cartons because that. sense absolutely be to general our

talked If are investment it's be that Chick-fil-A there there take national needs we'll company to on operate launches will of roughly again, that of of currently our Steve CapEx because deploy the beyond in. got make about. the sure And growing. a needed just care their stores, to their in we're X% we've the sales all XX% CapEx wide where distribution, profile capacity we that's they that's within that with where all But number

long organic really confidence that So term. supports just the from the no bps XXX a in to medium change lot we've XXX got that over of of standpoint, really feel here modeling growth to

Stephen Scherger

add Kyle, Mike's that point. Yes. to just to

the plant. SBS have side capability to capacity the the capital X.X the would requirements million which tons converting only plant needs, and be the can We cup service those within growing making on we do by

that's excellent of several points so next of really over it's the And organic to an growth support the years. XXX basis And in optionality. XXX

Kyle White

-- Got you. benefits sorry, inflation ago. labor when twice it That makes years sense. as two ahead the on, running And on labor is was then and

Or for a using is on kind of rate it's sizable the to normal pretty new obviously, there still increase. inflation opportunities Are going Packaging it but reduce forward? bigger acquisition, of Now, automation? with a headwind kind just AR labor face this

Stephen Scherger

Steve. it's Kyle, Yes.

norm. new the generally it's briefly, Just

around of automation. a ongoing However, our lot to be tends capital

got good year And spending has benefits a become also within skilled where lower it other. labor our expectations. to capital labor, long-term, And multi the strategy so sense and taking big labor do, out do that makes to we've a

other category up. don't and commodity and insurance that the taxes are fundamentally property things So fall into

stabilized new of commandments higher And over same about so, that as the in more in escalated rate need might more footprint, the or overall overall that the to think of above inflation labor probably but up, at numbers norm means all at our productivity, back, that's talked time, AR but which we it terms moved beginning I of the category that be call. as which and we because modestly came yes, of we're attacking obviously

Kyle White

over. it turn I'll you. Thank you. Got

Operator

today Thank ahead. Phil the line from from Jefferies. Please of question you. comes Ng go The next

is open. now line Your

Unidentified Analyst

to John go morning, second. morning, This details Thank Steve. for a is the Mike. Good for to Good I on quarter. want you all back good Tama quickly Phil. congrats mill for the and the just on

second any closing the there quarter in closing with cash about Are talked You mill? the costs here. that associated

Stephen Scherger

They mind. cash there with to John, are for that longer-term programs relative But modest. the cost a nothing We it's place substance no, team of Steve. characterized as the had there's in in incentive we've there.

Michael Doss

And as I mill we're announced. think going that to the shut down, we

So it was just a move forward.

Unidentified Analyst

Right.

second the just there jump But Monroe running. from And back lingering if Okay. are quarter. impacts could in It's that quarter? West the second I to up quickly any and in already

Michael Doss

No.

Unidentified Analyst

Great. one squeeze And could just I if more. then,

from any During financial from Can Fort help Packaging implication there Graphic nature Print I reported had the the understand was understand nature press exactly that Bulgaria. the it release quarter, with partnership? of a didn't partnership that that? new the in really maybe what us partnership But you that of And was? the

Michael Doss

just there businesses. we in can converting It's facility. converting No. that own In that have an opportunity some with with partner our grow help area Europe some capabilities our unique us an don't

that John, overall impact that's growing So on but of segment for its small important of in pretty it's the terms corporation, Europe.

Stephen Scherger

assets investment, that on cash help as cash converting grow relationship it's don't said, investment. but who have us And John, marketplace no Steve. No just Mike ground, we the there's that's the the in with partner, that can with

Unidentified Analyst

it And turn Got it. guys Understood. over. very Thank I'll you much.

Michael Doss

John. Thanks,

Operator

you. Thank

question line from Our ahead. final from the Citi. Anthony comes of Pettinari today Please go

now is line open. Your

Anthony Pettinari

quarters perspective, don't for Understanding earnings And second over about through should thanks we that to the we tough one. flow volume of guidance, is outages keep you for I of in weighted. the comps way mind how of just cadence the of any squeezing maybe in. from think in year, a year quarterly particular maybe of sort might terms me Hey, modeling had the think half the as about being there a quick purposes? remaining course give three a little there are a or

Stephen Scherger

Steve. it's Anthony, Yes.

half executed of downtime our we're this the year. of about maintenance here briefly, on in XX% first Just

the from it's earnings cadence it's So, planned. second towards an perspective, downtime all edging you're correct Maintenance But applications. half. slightly

in the little stared for sense maintenance cost the quarterly to where in of guidance and we And a we've some a provide in you're pick million headwind second planned, can year's headwinds XXX guidance, up range a the half, would reduced that last second we heading. I half in correct, from of our think in in the kind the details net downtime the in you get see don't our those of You'll maintenance about that being $XX QX with give EBITDA for of good through bit sense price you details be chronicled first. downtime

Anthony Pettinari

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

Operator

today's That concludes answer session. Thank question you. and

So the I'd Michael to for call closing like to pass Doss any remarks. over

Michael Doss

Thank you second August for us to for Thank Graphic and to we you you our joining in your when today results. talking interest have a look We Packaging. again great forward in quarter and day. report

Operator

your all you call. conference today's concludes Thank participation. This for

You may disconnect now your line.

Graphic Packaging Holding (GPK) 2 May 232023 Q1 Earnings call transcript