Graphic Packaging at Wells Fargo Conference: Strategic Growth and Challenges

On Wednesday, 11 June 2025, Graphic Packaging (NYSE:GPK) participated in the Wells Fargo Industrials & Materials Conference 2025. The company outlined its strategic transition to a consumer packaging focus, highlighting both growth opportunities and current challenges. While the completion of the Waco facility promises future cash flow, short-term consumer trends present hurdles.

Key Takeaways

• Graphic Packaging is transitioning to a consumer packaging company, emphasizing margin stability and cash flow.
• The Waco, Texas facility is expected to boost cash flow significantly starting in 2026.
• Industry capacity dynamics are shifting, with closures creating a favorable supply-demand environment.
• Vision 2030 targets low-single-digit organic growth, mid-single-digit EBITDA growth, and high-single-digit EPS growth.
• Share repurchase remains a priority for shareholder returns.

Financial Results

• Full Year Guidance: No changes; expectations remain steady.
• Q2 2024 (through May): Volume exceeds expectations, with inflation slightly lower than anticipated. EBITDA is expected to be in the $330 million to $340 million range.
• Vision 2030: Aims for low-single-digit top-line growth, mid-single-digit EBITDA growth, and high-single-digit EPS growth.
• Waco Facility Impact: Anticipated $160 million EBITDA improvement in 2026 and 2027, with $100 million from cost reductions.
• Cash Flow: Significant generation expected from 2026 onward.
• Leverage: Year-end target of 3.5x, supporting share repurchase plans.

Operational Updates

• Capacity Changes: Middletown facility closing; East Angus closure removes 100,000 tons; Waco to add 550,000 tons over several years.
• Volume Trends: Exceeding expectations, running flat compared to previous projections.
• Production Adjustments: Reducing production to manage inventory; 25,000 tons cut this month.
• Business Segments: Food packaging represents 40% of operations; beverage packaging accounts for one-fourth.
• Innovation Market: Addressable market for innovation valued at $15 billion.
• Shutdowns: Recent closures remove 390,000 tons of coated recycled paperboard capacity.
• Pricing Strategy: $40 per ton price increase for two grades, effective from May 15.

Future Outlook

• Vision 2030 Goals: Focus on organic growth, EBITDA, and EPS improvements.
• Waco Ramp-Up: Full capacity of 550,000 tons expected within 12 to 18 months post-completion.
• Market Dynamics: Anticipated balanced supply-demand environment.
• Capacity Forecast: Reduced capacity expected for 1-2 years before stabilizing as Waco becomes fully operational.
• Financial Targets: 2026 outcomes projected to be around $800 million.

Q&A Highlights

• Waco Facility: Confidence in startup due to trained team from Kalamazoo.
• Competitive Edge: Aiming for cost and quality advantages in paperboard production.
• Sector Performance: Growth in beverage and foodservice; unevenness in core food and consumer categories.
• Tariff Impacts: Currently modest, but future effects are being monitored.
• Pricing Mechanisms: Developing a transparent index for price changes with customers.
• Share Repurchase: Focused on buybacks as the main strategy for shareholder returns.

For further insights, please refer to the full conference call transcript below.

Full transcript - Wells Fargo Industrials & Materials Conference 2025:

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: All right. I guess we’re top of the two fifteen here. Good afternoon. I’m Gabe Haiti, the Senior Packaging and Containers Analyst here at Wells Fargo. The meeting right now is Graphic Packaging.

We’re joined by Steve Serter, EVP and CFO, as well as Mark Conley, who’s joined us in the audience, I think SVP of Investor Strategy and Development. GPK is one of the world’s largest folding carton and boxboard manufacturers serving food and beverage market. This is intended to be kind of interactive. So to the extent people have questions, please don’t hesitate to raise your hand. We actually did have one question from the audience last time.

And with that, Steve, I think you have a couple of prepared remarks.

Steve Serter, EVP and CFO, Graphic Packaging: Yeah. And thanks, Gabe. Appreciate it. Thanks for everybody joining here and those that are joining online via other mechanisms. Appreciate it.

And yeah, I’ve just got a couple of slides I thought I’d walk through just to kind of set the context for who we are as Graphic Packaging, provide a little bit of an update on the quarter, a little bit of some activities from an industry perspective. And just by way of reminder, Graphic Packaging, we’re a consumer packaging company. Everything that we do is making the actual packages that we as consumers interact with in our day to day lives, where we’re eating, where we’re drinking, whether it’s at home or on the go. We really are a sustainable consumer packaging business, 95 of everything we do being making the end package that we interact with. We do so by making the raw materials, the paperboard Gabe that you mentioned as a major raw material for our packages.

But everything that we’ve built over the last decade particularly is about becoming that consumer packaging company that’s in your life every day. If you went back a decade when we were roughly a $4,000,000,000 business, we really were that center of the store food and beverage packager. We had great customers. They were the big customers like the Anheuser Busch’s and Kellogg’s and Kraft Heinz and others. But we really were about cereal boxes and 12 packs.

And if you kind of fast forward to our business today, we literally are a bit everywhere when it comes to food, beverage, food service, consumer, packaging both here in North America and around the world, a very large business in Europe as an example. We’ve been highly acquisitive. We’ve been a consolidator. And today, wherever you’re eating and drinking, whether it’s at home, going through a drive through, whether you prefer branded products, whether you’re a private label consumer, whether you’re going through the drive through multiple times a week or you’re shopping for the next month or you’re buying tonight’s meal, you’re feeding your pet, brushing your teeth, we’re going to be a part of your life on a day to day basis. And as such, obviously, we’re in products in the hands of millions of consumers.

We literally make billions of actual packages around the world. We produce those. We make the raw material. We actually create the package itself, deliver it to our customers and they of course turn it into the actual product that you as a consumer and we as a consumer take home. You can see the mix of business, about 40% of the company food packaging, about onefour of it beverage packaging, so think six packs, 12 packs basically carrying home, the beverages of choice.

Foodservice is basically the drive through, the QSR business, so think about that as Chick fil A, McDonald’s, Dunkin’ Donuts and others. The household, that’s the day to day life of feeding your pet, changing your air filters, the at home consumption patterns that we all have. And then we’ve got a nice health and beauty business that came with an acquisition we completed in Europe AR Packaging. Margin stability has been critical, really through a unique set of times over the last couple of years, positive volumes, some negative volumes, some stability, some instability that all of us have been managing through. We’ve really constructed a business that has a very high level of margin stability and as such has cash flow stability as well.

And it’s something that has really been a big part of the transition to becoming a consumer packaging company over the last decade. Growth is critical. Innovation is critical. We now have what we’ve identified as a $15,000,000,000 addressable market for innovation, for bringing new packages into the marketplace that are in other alternatives. Most of it is replacing plastic or foam or other resin based solutions.

That’s where we see a lot of our growth, whether it’s moving out of a foam or a plastic cup into one of our cups or it’s moving out of another resin based solution into our fiber based because they are preferred by consumers. Recyclability, renewability is really at the forefront of everything we do is making a package that we can make one time, then have it be recovered in our natural recycling capabilities and then make that product another six, eight, 10 times, a real true example of actually operating in the circular economy. We developed Vision 2030 after really executing on Vision 2025 several years back, where we really focused on having an algorithm for the business where we grow over time our top line low single digits organically through our innovation efforts through the day to day life of the consumer, have that leverage into mid single digit EBITDA growth and then obviously leverage into high single digit EPS growth. And we’ll talk a little bit about where we’re at in that given some of the unique environments that we’re in today with a pretty stretched consumer and how some of our customers are managing their volume expectations with us and with all of you.

And our cash flow engine is substantial. We’re in the middle of and nearing the end of a capital investment expansion time for us, bringing the world’s low cost, high quality coated recycled paperboard facility to life in Waco, Texas. We’ll complete that later this year and inflect towards very substantial cash flow generation in 2026 and beyond, given the margin stability, given the business that we’ve created as a consumer packaging company. And so we’re excited about that. We’ve got great opportunities to allocate cash flow both now and as we look out over the next several years.

And so that’s just a brief snapshot of the company. Let me just take a minute, Gabe, and I know probably we’ll match up with some of the questions as well. But just a couple of things that I wouldn’t mind spending a couple of minutes on. Typically, we won’t talk about industry structure much, but because of some of the activities in coated recycled paperboard, I thought I’d take just a moment and kind of describe the current capacity supply demand environment for coated recycled paperboard. We’re making our investment in Waco.

We had our Kalamazoo investment to develop differentiation in coated recycled paperboard here. And one of the things, just to kind of provide some context, because I’m not sure it is well understood, is the coated recycled paperboard market in North America is about a 2,700,000 ton market from a capacity perspective. Over the last ninety days, there’s been three closures announced within the industry. One, we are closing our Middletown coated recycled paperboard facility ahead of starting up Waco, and two competitors are closing their manufacturing, some of their manufacturing for coated recycled paperboard as well. It accumulates up to about 390,000 tons of coated recycled paperboard capacity that’s coming out of the market and will fundamentally be out by the end of this quarter.

That represents 14% of the capacity of that 2,700,000 tons. So there’s a very substantial capacity coming out that certainly given the demand consistency that we have should be driving operating rates, backlogs, etcetera and I would expect to see that over the coming quarters. We’ll then be bringing to life our Waco facility over a twelve to twenty four month period of time, and we’ll be closing our East Angus facility. So we’ll close at East Angus about 100,000 tons, so 490,000 tons of capacity coming out of this 2,700,000 ton market, and we’ll be adding about 550,000 tons over a multiyear basis. And I’m sharing all that with you because we’re going through a period of time where I think there’s a kind of a thought that Wauwaco just comes up and there’s capacity being added and the like.

The reality is the supply demand dynamic will actually have less capacity probably for the next one point years, two years and then equalize out as we bring Waco to life. And I wanted to just provide some context there because it’s a bit unusual for that much capacity to come out of a market, ahead of capacity coming into that market. And I think it bleeds to a very constructive industry dynamic as I’m sure we can talk about. Just briefly on the quarter, we’ve now gotten through two of the three months of the quarter. Just in terms of our full year guide, no change today to the guidance that we have, so no change to the full year expectations.

As we’re watching Q2 play out through May, overall volume is exceeding our expectations a bit. We’re running a little more flat on volumes through the two months of the year. We’ve seen a little bit of promotional activity taking place, probably well chronicled I know by you and others on the beverage side through the Memorial Day holiday. So volumes are exceeding our expectations a bit, more flattish as opposed to the minus 2% that we had talked about with our guide coming out of Q1 results. Inflation, probably a little bit modestly less than what we expected as well.

So on that side, a little better volume than expected, inflation modestly below the expectations that we had. We are being very aggressive this quarter in taking production out of our infrastructure, to drive inventory out of the company. And as you know, we had our maintenance annual outage at our Texarkana facility. On the bleached side, we’re taking advantage of that to take about 25,000 tons of capacity production out during the month to drive inventory levels to where we want them to be in that business. We’re closing our Middletown facility as I mentioned.

And so we’re being very aggressive to take inventory out of the business, match have our production be at or below our demand such that our expectation we typically don’t we don’t guide for the quarter, but our expectation for the quarter EBITDA in the $330,000,000 to $340,000,000 range, well positioned on inventory reductions such that we’ll be able to run actually quite full with the majority of our maintenance downtime behind us in the first half, and in a position to drive inventory out of the business for the remainder of the year with Middletown closure behind us and be able to run quite full for the rest of the year, which gives us confidence in our full year guide. So I just wanted to provide a little bit of an update for you on kind of the mid. And then just in kind of conclusion, we’re looking forward obviously the business that we’ve built and executing on it, but the cash flow inflection that we shared with you and the Vision 2030 aspirations, seeing that come to life, particularly as we exit out running quite full in the half of the year would be our expectation and then leading into bringing Waco to life, and beginning to see that $160,000,000 of EBITDA improvement coming in, in twenty twenty six and twenty twenty seven, roughly $80,000,000 a year.

So, I tried to fill up a little bit of there to get after some of the things I know that we’ll talk about. And with that, I’ll be glad to jump into questions.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: Thank you for all that. There’s a lot of moving parts there, Steve. Guess and this is look, I mean, it’s kind of seven years in the making. You guys have been hard at work. Like you said, there’s Vision 2025, excuse me.

But maybe just a point of clarification on bringing up five fifty. I feel like what I’m hearing from you is Kalamazoo, you installed a new machine in an existing facility. This is a brand new greenfield. I think initially kind of two part question. I think initially kind of had a billion ish dollar price tag.

You talked about maybe $1,000,000,000 on the Q1 call. So just any adjustments there? And then two, I feel like what you want to leave us with is just because it’s nameplate capacity five fifty doesn’t mean you turn the switch on and all of sudden you’re going get all the production day one. And then obviously you’re going to be running to demand even let’s assume that we’ve got this value seeking behavior, in 2026 for whatever reason. That doesn’t mean that it’s all going to hit in 2026 either.

Steve Serter, EVP and CFO, Graphic Packaging: Yes. That’s critical, and thank you for asking that. I mean, the 550,000 tons of eventual capacity will be it will take twelve to eighteen months to kind of ramp up to that. So we’ll get to that as we’re kind of exiting out of 2026 into 2027. So you don’t flip a switch and have 550,000 come in.

And while that’s happening, the 490,000 tons of closures will take place. So the opportunity for the supply demand dynamic to play out in a relatively balanced way is actually quite high and quite favorable in that regard. And so we will absolutely only produce to the demand that is there. It’s one of the reasons we’re driving inventory out of the business so aggressively this year, so that we can ramp up nicely, as we’re servicing our customers. And all of this is in the context of servicing our customers with excellence throughout that, so that they don’t miss a beat, in terms of their packaging needs.

And I think one of the things too, you touched on it, with Kalamazoo it was more of a brownfield investment, meaning we’re adding to an existing facility. With Waco, it is a greenfield. One of the things we’re very fortunate to have is the entire team that we’ve hired who are now on board are actually in Kalamazoo, learning to run the facility on-site and it’s the same basic facility that we’re bringing to life in Waco. So we’re very fortunate to be able to kind of replicate the training, the preparation, the team, the hands on, which gives us very high confidence in the start up of that. But we’ll do it on a metered basis.

We’ll do it based upon the demand that we have. But overall, no, we couldn’t be more excited and positive about how Waco is coming to life. We’re also equally, and it was positive on CapEx inflection back down to a 5% of sales as we kind of look out to 2026 and beyond.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: Okay. I won’t pretend to understand what may happen with inventories in the short term and people selling out as they close facilities and all that stuff. But maybe just high level, I think I know the answer to this, but your competitors choosing to close some facilities maybe ahead of that factory ramping up even. Can you talk about competitive positioning of Graphic relative to the composition in your kind of key grades?

Steve Serter, EVP and CFO, Graphic Packaging: Yes, I think in coated recycled paperboard, we’ve made significant investment decisions as you know. And so we believe that long term coated recycled paperboard in packaging will be a good strong growth engine for us, where we will be cost and quality advantaged. I think the competitive moves you’re referencing tend to be decisions made around cost quality and integration. And I think those tend to be decisions around is there a long term viable return from the investments or the assets that competitors have. I think for us, how we’re focused on it is, is we want to make paperboard the raw material for our packaging where we see cost and quality advantage.

And so in coated recycled paperboard, we’ll have a very large market position in that with cost and quality advantage to make the packages, to actually make the packages. In unbleached paperboard, where we have a very large market position as well, same. We’ve got two world class facilities in coated recycled paperboard, two world class facilities in unbleached, two world class facilities in a market that is growing globally, mostly for beverage packaging, where we can see growth for years to come on a quality and cost advantaged or competitively consistent basis with the primary competitor. And then in bleached paperboard, as you know, we really elected to have just one asset in Texarkana heavily focused on supporting our cup, bowl and tray business. And we exited from the Augusta facility because we just didn’t see for us competitive advantage in making just the paperboard.

We wanted it we want our business to be focused on consumer packaging, making the end package. And as such, have one facility that supports our primarily our cup business. And as you know, we make about 40% of the paper cups in The U. S. And so that again is a decision.

Once complete with Waco, we’ll have five world class paperboard manufacturing facilities that will have the appropriate advantages so that we can generate above cost of capital returns when we turn that paperboard into a package.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: I thought that’s what the

Steve Serter, EVP and CFO, Graphic Packaging: answer was, but thank you for that. Should add you answer. No.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: The last five years have been anything but normal. We’ve kind of right? We had pre pandemic, had a spike in demand, we had post COVID burn off, etcetera. It seems like CPGs right now are trying to strike an equilibrium between price and volume. I don’t want the question to be too necessarily near term sighted, but you mentioned volumes being a little bit better here in the second quarter.

Q1 was maybe a little bit disappointing. Can you elaborate a little bit, this CPGs being living hand to mouth a little bit with inventories and maybe their choices around promotions? And you talked about even planning coming into 2025, again, Q1 a little bit disappointing. They said, hey, listen, we think we’re going to have growth of 23%. Now maybe it’s going be closer to flattish.

And maybe it’s just more a response to the consumer.

Steve Serter, EVP and CFO, Graphic Packaging: Yes. No, there’s a lot there, and I’ll try to touch on it a bit. I mean, overall, as you said, I mean our expectations around promotion and growth kind of starting at the back half of last year working with our customers is that most of them expected to pivot towards some promotional growth Q3, Q4 last year into Q1. What almost across the board with our customers they’ve elected to do is to maintain their pricing stability, which has been price increase over the last several years and to be willing to have volumes be modestly down. And I think one of the things we observed back half of this year, first half, first quarter of this year is that broadly the level of promotional activity was very low.

And as such, across our entire network of CPGs, QSRs, we saw volumes down 2%, three four percent very consistently, which is one of the reasons we elected at Q1 to say, listen, let’s make that the working model and the working assumption for the business. If it’s better than that, great. But let’s make that how we run the business, drive the production down, drive inventory out, get prepared for a future state. And it’s been interesting because in core like food markets, a lot of the center of the store, big CPGs, promotional activity has stayed actually quite low. And so there we haven’t seen some of the positives we were just chatting about.

Where we saw pockets of promotional activity, well chronicled, was on the nonalcoholic side of beverage over the Memorial Day holiday, some more pervasive, I’ll call it, promotional activity. Now whether that’s driving volume or not is more of a TBD for the year because you see the promotional activity in the May timeframe, whether that will lead through to volume gains will depend upon kind of June, July and how the summer plays itself out. But it was at least a pocket of promotional activity that’s allowed for a modest acceleration of volumes beyond where we had kind of it’s within the range of what we guided, but a little bit more towards the positive side of that. I think what’s going to be interesting to watch is there’s so much uncertainty for the CPGs and QSRs right now when it comes to tariffs, when it comes to MAHA implications, relative to their products, whether it’s SNAP implications. And that uncertainty, while not having an impact on their volumes necessarily, may be having an impact on how they’re thinking about promotions.

Because if their products are going to cost more to produce eventually because of changing out of materials or ingredients, is now the time to promote. So we’re seeing pockets, but it’s been more limited than we expect, which is why we’re choosing to kind of run the business to the volume that we’re seeing. But it is unusual to have volume declines for a couple of years across the CPGs, and that is the unusual part that you’re referencing, which is you had post COVID issues, you had supply chain issues, both those got in the way of volumes and then you had inflation. And now you’ve got a stretched consumer and the consumer is in fact stretched. So overall, over time between CPGs and all the private label producers and the like, I have every expectation, we have every expectation that volume for us eating and drinking will stay relatively stable And then we’ll win with our innovation efforts as you kind of look out over time.

And that’s why we haven’t moved off of our Vision 2030 aspirations, recognizing though that in the short term we’re not at those aspirations. And that’s relevant for us and that’s why we’ve got to obviously stay focused on our innovation efforts close to our customers, so that the algorithm for margin stability and growth stays in place and the inflection to cash flow.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: I don’t want to drill too deep on volumes, but maybe by category, and I’m trying to remember the arrows that you gave us on Q1. But maybe some of the are we seeing any divergence, if you will, by category for, I’ll call it, some of the more semi discretionary, I’m thinking pet food, like, hey, I’ll just feed them dry food in a bag instead of getting them the dog treats this month or whatever. Anything in that regard that you’d call out that you’re seeing? I think

Steve Serter, EVP and CFO, Graphic Packaging: what we’d call out is what we were just chatting about a little bit. Think in our 25% of the company, the beverage side of the business, there’s more of a global growth momentum. There’s a nice move there broadly out of plastic rings, out of resin based packaging, etcetera. So the actual growth profile globally for beverage has good stability to it and then the promotional activity is obviously modestly favorable. Foodservice in many ways, 20% of the company has similar characteristics because you still have we still see conversions net from foam, from plastic into cups, into bowls, into trays, through the drive thru, through the QSR.

So those two actually continue to have a natural momentum towards modest growth. It’s in the categories you’re just referencing mostly on the food kind of core center of the store food side and some of the core consumer pet food, laundry detergent, filter frames, etcetera, where you’ve seen less promotional activity, a stretched consumer and kind of more unevenness, if you will, relative to volume. So pockets of natural favorability, pockets of uneven, which is why we guided to where we were kind of in that some of the pressures we were seeing through the CPGs to the customers. But that’s how I’d characterize the big pockets. Health and Beauty, 4% of the company, mostly in Europe, a little uneven there too, better on the health side, a little less on the beauty side where you’ve got a little less you have more discretionary spend.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: Okay. It wouldn’t be 2025 if we didn’t ask about So maybe just other than the uncertainty as it relates to the consumer, direct impacts for Graphic and then what you’re seeing kind of you have a pretty sizable European business. Any implications?

Steve Serter, EVP and CFO, Graphic Packaging: Yes. Direct impacts today just because you’ve got a fair amount of things being pushed and the like. So the actual true direct impact is measured in low millions of dollars and it tends to be a little more just inflationary based upon certain supply lines and the like. So I’d characterize the true direct impact as relatively modest. The potential impacts that are still kind of in motion to your point will primarily be how does tariffs both directions play out mostly to Europe, because on the one side, let’s just assume there were reciprocal tariffs going both directions, 10% range or what have you, that that’s where this lands.

Again, that’s just all hypothetical. But if that were where this was going, there’d be a headwindtailwind inside of that. On the tailwind side, it would probably have impact on the importation of paperboard from places like Europe, Finland, Sweden, etcetera, into The United States. That would be a natural potential tailwind for imports. It doesn’t really impact our business materially today, but more broadly relative to paperboard.

It would then have some implications for the paperboard we send to ourselves in Europe primarily to service our beverage packaging business. So those are the things that we’re monitoring. I don’t expect those to have material impacts on the company. We’re fortunate that our business is pretty regional, and it’s the nature of it. So while we’re not completely insulated from tariffs, the implications compared to other businesses I’d characterize as relatively modest.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: Okay. On the price side, again, I’d kind of be remiss if I didn’t ask the question. You guys announced a $40 a ton price increase for two grades back in April. I think it was for May 15 implementation date. I think on the positive side, and we’ve talked about this quite frankly at length, you all have done a good job of migrating away from some recent index or indices for your customers.

So I’m assuming those conversations are being had. They understand where the price increases are coming from. It hasn’t been reflected in the index. Is that I don’t want give you the answer, but perhaps a function of OCC continues or recycled fiber continues to be a little bit maybe demand isn’t where the market expected it to be. Just maybe from your vantage point what your observations are?

Steve Serter, EVP and CFO, Graphic Packaging: Yes, think at the broader level, you’re right. We continue to work with our customers to put in place a new index that we’ve developed for price change mechanisms when we earn our business with our customers that our customers are finding quite appealing. It’s very transparent. It’s a known set of commodities. It’s a known set of the relationship on how that correlates to our costs over time.

And as such, we’ve got good momentum. But that’s a multiyear initiative. And that initiative just is in the early stages, but will really be over the next several years, we will move to that as a transparent price change mechanism. To the increases though that are relevant to us, as you know, on what we’ve announced, there’s not traction on those at this point. So what we don’t have in our hands today is a little bit of the positive price momentum that we want to have on that front on the It can be a series of activities as you just said as I was providing in the update.

There’s a lot of moving parts in coated recycled paperboard right now with capacity closures occurring. You’ve got activities within the construct of that that’s occurring. OCC obviously maybe to a lesser degree is modestly down. I think there, I think allow the next three to six months to play out relative to industry backlogs, operating rates. It’s interesting.

As you know, we don’t talk a lot about backlogs and operating rates as much as we may have a decade ago. Sure. But actually, backlogs interestingly enough for coated recycled paperboard and unbleached paperboard are at the highest they’ve been in two plus years. And so that’s the current environment, a lot of what we were just chatting about in terms of how this is playing itself out. So I think that’s relevant to this pricing environment because it’s important.

Right now, and it’s one of the things we’re intensely focused on, we’re getting some of the pricing through our cost models and the like, but we must pivot to a modestly positive price environment. We are in a modestly negative. And it’s modest, minus 1% needs to be plus 1%, plus 2%, given bits of inflation that are still existing in the business. But it’s a critical priority for us in order for our margins to be in that 19 plus percent range before we kind of bring the benefits on of Waco.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: I was going to shift to Waco Vision 02/1930. When you look at the arc of the cash flow generation, guys obviously had to cut guidance this year, maybe starting a little bit behind. Just as you embed in the $80,000,000 and I’m not asking for guidance next year, but you embed in the $80,000,000 of benefit from Waco, two part question. One, is there some volume contingency in there maybe until the $80,000,000 in 2027 that we’ve to look out to. And then obviously the CapEx is pretty easy.

We’re not building a plant, we’re not spending the capital. That will inflect. But just I think the $800,000,000 kind of bogey for next year, thinking about cash taxes, working capital, maybe that’s why you’re being aggressive this year to drive inventories down. Just think about the moving pieces and the arc of the cash flow.

Steve Serter, EVP and CFO, Graphic Packaging: Yes. No, and you saw it in the materials on our the arrow chart, if you And you’re absolutely right. EBITDA is modestly behind the expectations that we established with Vision 02/1930. We can still see 2026 progression inside of the range of outcomes that are there, probably more in the $800,000,000 range versus the $1,000,000,000 So just because of where the EBITDA is, we can see the path to EBITDA improvement next year. What’s good about Waco is of the $160,000,000 of EBITDA improvement, dollars 80,000,000 next year, 80,000,000 the year after.

Dollars 100,000,000 of that is purely cost takeout and lower cost to produce. So we get the $100,000,000 on just bringing the facility to life, closing other facilities. The final $60,000,000 does rely on a reasonable volume environment matching up with the supply demand that you were chatting and we were chatting about earlier. So that’s important. It’s an imperative for us and that’s why this inflection just modest stability at the consumer level, modest organic volume growth will be an enabler for the return profile there.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: I’ll squeeze in one last one. We’ve about a minute left. You talked about leverage, I think, being 3.5 for 2025. Investors are really excited, again, about the cash flow inflection, shareholder friendly return. Are you guys being a little bit opportunistic now?

You talked about kind of maybe pulling some levers on share repo to kind of balance between what you think is the long term kind of intrinsic value. And then obviously, as you look forward, just to be clear for everyone, Mark and I were talking about it before, share repo is kind of like the primary lever that you see as shareholder return over the next three to five years.

Steve Serter, EVP and CFO, Graphic Packaging: We do. We do. And we announced a $1,500,000,000 share repurchase authorization. We have $1,800,000,000 of firepower for share repurchase. That is the next major investment in the company back into the company.

We don’t need to make another large scale capital investment. That’s great. We elected to in our guide take our year end leverage to 3.5 times really to allow for some capacity for share repurchase this year. We won’t stay at 3.5 times. We won’t go above 3.5 times.

But if you look kind of down the midpoint of our guide at 3.5 times, there’s some room to begin the share repurchase activities, particularly given the valuation of the company relative to our expectations going forward. So yes, very high prioritization around that. Still long term investment grade is going to make sense for the business given all the cash flow, but that’s kind of a down the road. We of course make those trade offs between debt reduction and share repurchase based upon the valuation of the enterprise, but we’ve got room to maneuver now inside of that.

Gabe Haiti, Senior Packaging and Containers Analyst, Wells Fargo: Excellent. Thank you. I think that concludes the

Steve Serter, EVP and CFO, Graphic Packaging: day. Thanks everybody. Appreciate the time.

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