Graphic Packaging Holding Company (GPK) Q2 FY26 earnings call: guidance and Q&A

Does full-year guidance assume URB sales in '26, and how will the business ramp into '27? Also, what is the impact of a peer's new distribution partner for recycled board?

Robbert Rietbroek confirmed a modest amount of URB sales in '26, with a couple of thousand tons already ordered and a 100,000+ ton opportunity over time. He emphasized the flexibility of Waco to produce both CRB and URB without major capital investment. He also stated that the peer's new distribution partner for existing volume is not expected to significantly impact the market.

“We're estimating that to be 100,000 tons or above for the company, supported by both internal demand because we also use URB as a company and incremental external market opportunities.”

asked by Anthony Pettinari · answered by Robbert Rietbroek

Are further inflation assumptions for OCC and/or freight included in the revised $150 million full-year estimate, or are those levels assumed flat?

Chuck Lischer explained that the inflation forecast considers published indexes and forward curves. While they initially expected moderating trends, inflation is now anticipated to remain higher across logistics, resins, labor, secondary fiber, and chemicals, which is visible to the industry and makes customers more receptive to pricing.

“Inflation was broad-based across logistics, resins, labor, secondary fiber and chemicals.”

asked by Anthony Pettinari · answered by Charles Lischer

Clarification on the $145 million annualized pricing figure and how it breaks down for 2026 versus 2027, and the potential impact of new price increases.

Chuck Lischer clarified that the $145 million is the annualized run rate of the $60 million expected in 2026, including recognized increases on bleached folding carton and cup stock, contractual recoveries, and actions on non-contractual revenue. He added that new price increases could yield over $200 million additional annualized, but with limited impact in 2026.

“So basically, if I understand correctly, so we got, all the actions in place, $60 million this year, so then another $85 million essentially would show up in next year to get us to the $145 million. And then you have this new set of increases, which if successful would be additive to the tune of up to $200 million on an annualized basis? Yes, you got it. Exactly.”

asked by Mark Weintraub · answered by Charles Lischer

Clarification on whether production curtailments were moved from 2026 to 2027 and quantification of the impact.

Chuck Lischer stated that downtime expectations are now around $90 million for the full year. The inventory guide was adjusted due to unbleached issues, planned maintenance, and January weather impacts, leading to a different strategy for unbleached paperboard at year-end, resulting in higher inventory to ensure supply.

“The downtime expectations, we now expect to be around $90 million for the full year, and the -- but the inventory expectations, we also adjusted as a result of the unbleached issues that we talked about.”

asked by Detlef Winckelmann · answered by Charles Lischer

Clarification on the leverage covenant step-down and how the company plans to address being close to covenants.

Chuck Lischer clarified that the covenant leverage ratio is typically 25-30 basis points lower than the reported ratio, providing headroom. He stated that the 5x covenant is in place until the end of Q2 2027, after which it steps down to 4.25x.

“We have a 5x covenant until the end of second quarter 2027. So it actually goes out into 2027.”

asked by Hillary Cacanando · answered by Charles Lischer

Quantification of the big buckets contributing to the Q2 to H2 EBITDA step-up, including productivity and mix effect, especially given foodservice weakness.

Chuck Lischer outlined several favorable impacts for H2, including $40 million from no repeat of Q1 weather downtime/nonrecurring items, $60 million from pricing, $15 million from cost savings, and $10 million from lower maintenance outages. He confirmed mix would be positive even with foodservice being weaker than last year, as foodservice season kicks in. These are offset by $75 million in additional inflation.

“several items that are favorably impacting the second half versus the first half and that we don't expect a repeat of the downtime due to weather that we had in Q1. And we also had some other nonrecurring items in the first half, and that all totals about $40 million.”

asked by George Staphos · answered by Charles Lischer