"Graphic Packaging Holding Company" Q2 2026 Earnings Call - Cash Flow Surge and Pricing Power Offset Inflation as Portfolio Simplification Accelerates

Operator: Greetings. Welcome to the Graphic Packaging Holding Company’s second quarter 2026 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Melanie Skajus, Vice President, Investor Relations. You may begin.

Melanie Skajus, Vice President, Investor Relations, Graphic Packaging Holding Company: Good morning. Thank you for joining Graphic Packaging’s second quarter 2026 earnings results conference call. Today’s presentation will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in today’s press release and in our SEC filings. We have with us today Robbert Rietbroek, President and Chief Executive Officer, and Chuck Lischer, Senior Vice President and Interim Chief Financial Officer. During this call, we will reference our second quarter 2026 earnings presentation that can be found in the investor relations section of our website at www.graphicpkg.com and company-directed slides if you are participating today through the webcast. Let me turn the call over to Robert.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Thank you, Melanie, and good morning, everyone. Our second quarter performance reflects the disciplined execution of our global teams and the resilience of our business model. In a consumer environment that remains challenged and uneven, we delivered results that were in line to modestly above expectations. Our competitive advantages continue to set us apart, including the strength of our diversified portfolio, the breadth of our capabilities, our industry-leading assets and global integrated packaging network, and our longstanding partnerships with the world’s leading brands, QSRs, and retailers. For the quarter, net sales were $2.2 billion. Adjusted EBITDA was $247 million. Adjusted EPS was $0.14, and adjusted cash flow was $138 million. Volumes were steady year-over-year, despite the impact of higher gas prices on consumer consumption behavior.

Importantly, adjusted EBITDA landed at the top of our guidance range, with margins expanding sequentially to 11.3%, a direct reflection of stronger cost discipline, operational improvements, and agility in the organization we’ve been building throughout the year. These actions are generating meaningful savings that help us navigate the current inflationary environment with confidence. Adjusted cash flow showed strong improvement from the prior year periods, increasing $55 million. Across our end markets, we continued to see strength in food and health and beauty. Outperformance in the food segment was driven by steady demand for center-of-the-store staples, where dry cereal, pasta, and snack bars remain affordable choices for value-focused consumers. Within our international business, dry tea sales experienced growth, benefiting from continued consumer interest in wellness-oriented trends. Ready-made grocery meals grew across our domestic and international markets, offering convenience-driven consumers a more affordable alternative to quick-service restaurants.

The strength of demand for these products, despite being priced at a premium to center aisle staples, demonstrates the value consumers place on quick, high-quality meal options. Consumers view these ready-to-eat meals as a premium experience, where the value proposition extends beyond the product itself to the time saved on meal preparation, cooking, and cleanup. Health and beauty also remained a bright spot. This business, largely internationally driven for us today, experienced continued strength in the quarter with higher demand for premium personal care products. Strength in food and health and beauty segments was offset by declines in household and food service, with many consumers delaying purchases of discretionary household goods and shifting their consumption preferences to more meals at home. Our household segment remained soft as purchases of facial tissue, laundry detergent, food wrapping, and storage were pushed out.

Pet food was an exception within the segment, and we achieved year-over-year growth for the second consecutive quarter. Whether supporting premium categories like protein, fresh produce, and personal care, or value-oriented staples like dry mixes, rice, and pasta, our competitive cost position, global scale, and technical capabilities enable us to work effectively with customers across the full spectrum of consumer demand. Importantly, we are refining and enhancing our approach to capture sustained growth in the marketplace, directing our focus towards opportunities where Graphic Packaging is best suited to win long term, aligning our growth strategy with our operating footprint. We are in the process of conducting a comprehensive market study that will deliver insights to shape our strategy as we strengthen our leadership position.

The coordinated effort across our company is designed to ensure future investments, both time and resources, are concentrated on the highest growth and highest return markets, where we can leverage our competitive advantages and help our customers win in the market. As we continue to advance this work, we are confident it will improve our alignment between strategy, investments, and market opportunity. These important insights will help guide our long-term growth priorities. We look forward to sharing additional details on our strategic plans later this year. We have accomplished a great deal so far in 2026. The significant progress achieved in our near-term strategic priorities is encouraging and demonstrates our resolve to build a stronger business. Our near-term priorities include, first, capturing organic growth while providing exceptional customer service. Second, driving profitability improvements through cost initiatives, operational efficiencies, and select pricing actions.

Third, optimizing operations, footprint, and portfolio mix to better focus on core competencies. Fourth is a focus on increasing free cash flow generation, supported by inventory rationalization initiatives and capital spending discipline. Finally, utilizing this increased free cash flow to pay down debt and return capital to shareholders. On the cost side, tangible actions have been implemented to improve our cost structure and streamline our processes. With heightened inflation now projected upwards of $150 million for the year, we focused on productivity improvement and cost reduction initiatives. Our hard work is paying off, with in-year cost savings now reaching roughly $85 million, which will come through COGS and SG&A lines. These savings are additive to our continuous improvement programs our teams pursue on an annual basis as part of normal business.

Following two years of suppressed cash flow generation in the business, we have committed to delivering a significant increase in adjusted cash flow in 2026. We are unlocking cash in the business through working capital efficiency improvements and disciplined spending measures, supplementing the cash available from operations that in recent years has been tied up in a substantial capital spend cycle. In the first half of the year, we reduced inventory by approximately $75 million and lowered capital expenditures by roughly $320 million compared to the first half of 2025. Since the beginning of the year, we have emphasized a more disciplined approach to capital allocation, and I am pleased with the progress we have already made in reshaping our approach to project prioritization and capital spend approval. We’re tracking better than original capital reduction targets and now expect capital expenditures below $450 million in 2026.

While we continue to make meaningful progress on our working capital initiatives, a portion of the inventory reduction originally targeted for 2026 is now expected to be realized in 2027. This timing shift is primarily related to inventory impacts from an elongated maintenance cycle put in place in 2025. Chuck will elaborate further on this in his remarks. Given higher than anticipated inflation this year and its impact to adjusted EBITDA, along with unfavorable inventory impacts from maintenance timing in the unbleached, adjusted cash flow for 2026 is now projected in the range of $600 million-$700 million. The midpoint at $650 million represents a significant increase from $169 million in 2025 and a use of cash in 2024 of $27 million. We are confident we have the right initiatives in place and the breadth of scope to deliver improved profitability and cash flow generation.

Increased discipline in spending and the concerted push by our teams towards greater operational efficiencies will result in higher EBITDA to cash flow conversion rates in the future. Our transformation agenda is focused on the optimization of our operational footprint. During the quarter, we completed the divestiture of our facility in Croatia, and we recently announced the proposed closure of our Lebanon, Tennessee facility, which would consolidate volumes across fewer facilities. Additionally, in alignment with regulatory and consultation requirements, we are evaluating a potential closure of our facility in Winsford, U.K. These strategic decisions simplify our footprint and improve cost efficiency, while proceeds from divestitures will be used to reduce debt. Commercially, we are elevating how we partner with customers. Packaging has become a strategic lever for brands, influencing sustainability outcomes, operational flexibility, and consumer choice.

Our teams are working closely with procurement, sustainability, and executives across our CPGs, QSRs, and retailers to help them navigate shifting consumer preferences and execute winning price pack architectures. Over the past decade, the consumer packaging industry has experienced meaningful and accelerated transformation. We have seen notable variations of packaging formats in response to changing consumer trends, consumption behaviors, and a broad realization that packaging is a differentiator on the shelf. Packaging drives consumer choice. It also accommodates the entire range of price point preferences. At Graphic, we optimize packaging formats and execute winning price pack architectures for customers. Our functional and attractive packaging solutions elevate brand appeal of customers with graphics and other design elements. As we shared last quarter, our commercial teams are energized, spending time with customers and strengthening partnerships. Recent packaging wins highlight our capabilities and strong service delivery.

We are proud to support Polar Beverages with their mini can multi-packs. Mini cans have gained popularity in the market and are aligned with increased preferences for smaller portion sizes and less food waste. The 10-pack mini can solution showcases our ability to help customers adapt packaging architecture to evolving consumer preferences. As we partner with customers to navigate changing consumer behaviors, we support their timelines and desire to bring differentiated products to market quickly and effectively. A notable promotional collaboration with Heineken launched during the second quarter. Our team worked closely with the Heineken team to develop a highly differentiated promotional package for the UEFA Champions League in the South African market. The leading beer brand required a quick six-week turnaround time for the promotion launch. Partnering closely with the customer, we created a unique carton shaped like a soccer ball.

It featured a commemorative glass and eight bottles of beer. Our commercial innovation delivered both premium shelf presence and durable product protection and was a big success in the market. Our commitment to customer service and ability to hit rapid turn deadlines showcased to Heineken why we are the partner of choice. During the quarter, we were also proud to support promotions and packaging in celebration of the World Cup with 24 of our customers. Our commitment to innovation remains central to long-term growth. In the quarter, we filed 24 new patents, strengthening our portfolio of over 3,000 issued patents worldwide. Patents filed in the second quarter were primarily comprised of new packaging features in tray technology and food service, as well as enhancements to our packaging machine technology.

Our unique portfolio of intellectual property, combined with our long history in packaging innovation, provides the tools to address a rapidly evolving regulatory environment. Over the last decade, innovation and demand for more sustainable consumer packaging solutions have remained constant priorities for global CPG and food service companies. Additionally, new restrictions on single-use plastics and growing concerns around microplastics are gaining momentum. We are both confident in and excited by the growth opportunities in front of us as regulatory tailwinds and ongoing enhancements in recycling and collection infrastructure strengthen our competitive position and increase demand for innovative paperboard-based packaging solutions. Consumer and market studies reflect global preferences that fuel support of the ongoing paperization trend in packaging. A recent global data study of more than 22,000 consumers across 42 countries found that 73% view recyclable packaging as either essential or desirable, reinforcing growth and demand for paperboard-based solutions.

Preferences of global consumers are driving the adoption to more sustainable packaging alternatives. It has been encouraging to see broad-based infrastructure improvements beginning to take shape. Advancements including cup collection and recycling and expanded residential access and updated industry specifications reinforce the attractive long-term positioning and circularity benefits of our recycled paperboard platform. Approximately 20% of the U.S. population has access to residential recycling for both single and double-sided paper cups today. This is a significant increase from 11% access in 2022 and only 5% access in 2017. With the substantial increase in collections that have occurred in less than 10 years’ time, we expect momentum will continue. 35 North American mills now accept paper cups, including both our Waco and Kalamazoo facilities, expanding the opportunities to recover and recycle valuable fiber into new packaging.

This follows last year’s move by the Recycled Materials Association, which officially added paper cups to the inbound residential single-stream and dual-stream material specifications. These positive industry developments are enabling our mills and the broader industry to accelerate collection programs and recover valuable fiber. In food service, we most recently partnered with a leading Southern-inspired QSR chain to support its conversion from plastic to paper cups for cold drinks. The new cup is currently being rolled out to all stores across the U.S. The move to paper cups advances the customer’s sustainability objectives and increases its use of renewable materials in packaging. We are proud to help customers transition from plastic to paper and to advance recycling and circularity education in the communities we serve. We are actively doing this through RENEW, our social impact program.

During the second quarter, we were honored to receive the Asahi Global Supplier Co-Creation Award, recognizing Graphic Packaging as a preferred innovation partner. In addition, we received seven gold medals across multiple categories at Pride In Print in New Zealand. These achievements reinforce the strength of our world-class innovation platform and our ability to deliver differentiated solutions for leading global customers. Operationally, our teams continue to execute with discipline. We are driving structural cost improvements, realigning our workforce and maximizing productivity across functions. Our recycled paperboard system, consisting of Waco and Kalamazoo locations in the Southern and Midwest U.S., will continue to ramp toward full capacity over time. Following our PaceSetter Ridgeline launch announcement last month, we are engaged with existing and new customers and focused on successful ramps in demand for both coated and uncoated recycled grades.

Waco’s flexibility of production positions us to serve both consumer and industrial applications while improving profitability across our recycled system. The launch reflects our pragmatic entrepreneurial approach to unlocking new sources of demand and maximizing performance of our industry-leading assets. We have identified an addressable URB market of more than 1 million tons across folding carton, lamination, and other applications that we can serve immediately. This new incremental demand represents over 100,000 ton opportunity for us over time. Our Waco facility is capable of producing to industry specifications today with no incremental capital required. Expanding into uncoated recycled paperboard broadens our offering, opens doors with new customers, and improves utilization and profitability across our recycled platform. It is another example of the agility and execution capabilities that differentiate us.

Separately, in the second quarter, we released our 2025 impact report highlighting continued progress we are making on commitments that matter to our customers, our employees and our communities, as well as areas where we need to continue our investment. A central theme of the impact report is our partnerships with customers and the support we provide to meet their recyclability and waste reduction goals. Our paperboard-based solutions and ability to provide packaging that is both functional and a more sustainable option to plastic reinforces our role as a partner of choice. I’m pleased to report our 2025 safety metrics came in better than paperboard and packaging industry averages. Safety is a cornerstone of our culture. We will continue to be unwavering in our commitment to the safety of our employees and will invest accordingly in the resources, training, and capabilities to maintain a safe and responsible working environment.

As I reflect on the quarter, I’m excited by the strength of our foundation and the enthusiasm we continue to hear from customers about our differentiated capabilities. Looking ahead, we remain focused on deepening customer engagement, elevating our commercial and operational execution, improving profitability and maintaining disciplined capital allocation. This strategic reset will position Graphic Packaging for its next phase of growth and long-term value creation. With that, I’ll turn it over to Chuck.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Thank you, Robbert, good morning, everyone. Our performance in the second quarter highlights the resilience of our portfolio and disciplined execution of cost and productivity initiatives to offset higher inflation in the quarter. The momentum we have with cost reduction and productivity initiatives, along with the pricing improvement that I’ll discuss, gives us confidence that we’ll see margin improvement in the business going forward. Net sales decreased 1% year-over-year to $2.2 billion. Unfavorable pricing impacted sales by $27 million, or 1%, as last year’s third-party change on bleached paperboard flowed through the business, along with more competitive packaging pricing. Volume mix was flat or down $2 million, and foreign exchange and other was favorable by $13 million. Innovation sales growth added $40 million in the quarter, reflecting our strong customer partnerships and their continued interest in innovative, sustainable paperboard packaging.

Innovation sales spanned multiple packaging formats. New innovations with customers were evenly distributed across Americas and International. In Americas, innovation was led by strength solutions and cups and containers while International experienced growth in multi-packs and food trays and bowls. Adjusted EBITDA in the second quarter was $247 million, down $89 million from the same quarter in 2025. This decline was largely due to $60 million of commodity input and operating cost inflation, which is $10 million more than we expected at the beginning of the quarter. Inflation was broad-based across logistics, resins, labor, secondary fiber, and chemicals. Combined price volume and mix accounted for a $35 million headwind. Positively, net performance was a favorable $9 million in the quarter. Foreign exchange had an unfavorable impact of $3 million. Adjusted EBITDA margin was 11.3%, an increase of 50 basis points from the first quarter.

Positive net performance in the quarter was a result of strong operational productivity and cost management. Performance included approximately $25 million of savings from our cost reduction and productivity initiatives and $6 million in lower mill maintenance outage expenses versus the year-ago period. This was partially offset by ongoing inventory reduction initiatives through downtime. Adjusted EPS in the second quarter was $0.14, including a tax rate benefit in the quarter relating to a $6 million release of reserves for uncertain tax positions. We continue to expect a full-year tax rate to be approximately 25%. Second quarter adjusted cash flow was $138 million, an increase of $55 million from the second quarter a year ago. We expect increases in cash flow in the second half of the year over first half, consistent with the historical seasonality of our working capital and cash flow.

During the quarter, we reduced net debt by $100 million, ending with $5.5 billion of net debt and net leverage of 4.7 times. In July, we were pleased to see third-party recognition of our $60 per ton price increase for Bleached Cupstock and $40 per ton for Bleached Folding Carton. The contractual flow through of these changes will have an approximately $5 million positive impact on 2026 results, with the majority of the improvements in price coming through our business in 2027. 2026 pricing will also be favorably impacted by other commodity input cost recovery mechanisms embedded in our contracts. Given the continued inflation we’re experiencing, we are also taking pricing actions on the approximately $1 billion of our revenue where pricing is not determined by a contract.

Altogether, we expect positive pricing momentum to favorably impact 2026 full-year sales and EBITDA by approximately $60 million, with fourth quarter benefiting more than third quarter. Pricing actions implemented and recognized will yield an annual run rate of approximately $145 million. We recently announced an additional price increase for both Bleached Cupstock and Folding Carton. Yesterday we announced an increase in the price of recycled paperboard and our second increase on unbleached paperboard. Looking ahead to the rest of the year, we are tracking to achieve full-year net sales at the high end of our guidance range, primarily related to the favorable pricing actions. From a volume standpoint, our expectation for full year and the third quarter is consistent with our previous range of down 1% to an increase of 1% year-over-year.

We expect the foreign exchange and other bucket to be unfavorable by approximately $20 million in each of the third and fourth quarters. We are seeing a broadening of inflation across other categories such as coatings, adhesives, and other materials used in our mills and packaging plants. Now anticipate inflation and operating input costs to stay elevated in the second half of this year versus our prior expectations for a moderating trend. Accordingly, we now estimate incremental input cost inflation for the full year totaling approximately $150 million versus our previous estimate of $60 million-$65 million. As mentioned earlier, we drove better-than-expected savings from our cost reduction and efficiency initiatives in the quarter. Now expect to deliver approximately $85 million in 2026 versus our previous expectations of $60 million.

We now expect full-year adjusted EBITDA to be at the low end of our guidance range of $1.05 billion-$1.25 billion, primarily related to the higher-than-expected and prolonged inflation. In terms of the improvement that we see in the second half versus the first half of 2026, we expect the incremental inflation in the second half to be mostly offset by the pricing improvements that I discussed, an improved mix of the business. We do not anticipate a repeat of the downtime caused by the weather that we experienced in the first quarter, expect lower cost of maintenance outages. As discussed earlier, our cost savings will also deliver more benefit in the second half. We expect other operational and cost improvements. We expect Q3 adjusted EBITDA will be in the range of $280 million-$300 million.

Third quarter tax rate is expected to be modestly higher than the full-year tax rate. We have updated our full-year cash flow outlook to a range of $600 million-$700 million. This change is a result of updated expectations for full-year adjusted EBITDA and headwinds to our stated inventory reduction goals for 2026. As Robbert alluded to in his remarks, some of the inventory optimization we had projected for 2026 has been pushed into 2027, and that we now expect inventory be between 18%-19% of sales. The largest driver of the change is in unbleached paperboard, where a combination of the timing of a mill maintenance cycle put in place in 2025 and other production issues resulted in inefficiencies, higher operating costs, and challenges with board supply during the 2026 beverage season. We now expect to end the year with relatively higher inventory.

While a headwind to cash flow, the buffer inventory will ensure supply-demand mismatches do not recur and that we maintain exceptional customer service. We now expect capital expenditures to be below $450 million following the comprehensive review of our investment plans. As a reminder, cash flow generation is back-end weighted, consistent with the seasonality of our business, timing of capital expenditures, pricing, and inflationary cost recoveries. Interest expense is now expected to be approximately $275 million, and as a result, we have revised our adjusted EPS range to $0.65-$0.90. We are focused on the continued reduction of debt and intend to pay down between $400 million-$500 million of debt in 2026. Accordingly, net leverage is expected to be approximately 4.6x at year-end. To summarize, we are gaining positive momentum that will benefit our financial results.

The actions we are taking to drive disciplined organic growth, expand profitability with pricing actions and productivity will generate improved free cash flow and result in long-term value creation. 2026 is an important year in our journey as we strengthen the business and position Graphic Packaging for sustainable growth and margin improvement. I will now turn the call back to Robbert.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Thank you, Chuck. We are confident in our future and the long-term strategy in development that will drive sustainable value creation for shareholders. While the macro environment remains dynamic, we are concentrating on items within our control. We are executing with discipline, strengthening customer relationships, driving structural cost reductions, and improving the balance sheet. We are positioned to capture greater upside as market conditions improve. I want to thank our employees around the world for their continued dedication, commitment, and outstanding execution. Their efforts are the foundation of our accomplishments this quarter and give me great confidence in the opportunities ahead. With that, operator, let’s open the line for questions.

Operator: Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. We do ask to please limit yourself to one question and one follow-up. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question for today is from Anthony Pettinari with Citi.

Anthony Pettinari, Analyst, Citi: Good morning. You indicated that Waco is ready to produce URB. I’m wondering if your full-year guidance assumes any URB sales in 2026, and if so, how much? Then just kind of any thoughts on how that business could ramp into 2027.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Hi, Anthony. Thank you for your question. It does assume a modest, a small amount. We have our first orders in, a couple thousand tons, and we have qualified URB for several other customers, and we’re waiting for more orders. URB allows us to enter a large and attractive market. We have an immediate addressable opportunity in folding carton laminations and related applications, such as edge protection, folding carton applications, slip sheets, dividers, laminations. We’ve just launched PaceSetter Ridgeline, which is made from 100% recycled fiber. We do believe there is some meaningful growth potential. 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. We see strong interest from the customer. It’s early days. Our engagement and qualification efforts are progressing well.

The market receptivity is really supported by very tight industry supply conditions. Also lamination qualifications that are expected to conclude in the fall. As I said, we have a couple thousand tons of orders filled so far, and it is a natural extension of our recycled platform. We have available capacity, and we have the operational flexibility to serve both CRB and URB. This will help our production mix at Waco. It will be driven by market demand, return optimization, and allows us to balance service levels for the existing CRB customers and capture the growth in URB.

Anthony Pettinari, Analyst, Citi: Okay. That’s very helpful. Just shifting gears, I think in inflation expectations, you said we’re going from $60 million to $150 million. I’m just wondering if you’re assuming any further inflation in OCC, and/or freight, or do you just kind of assume those levels hold flat through year-end?

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yeah, this is Chuck. I’ll take that. Overall, the way we approach our inflation forecast is, of course, we look at published indexes, forward curves, and other market pricing. We do look at all of that. As we talked about in Q1 and looked at inflation in Q1, we had expected more of a moderating based on those trends, and now we expect inflation to stay higher for the rest of the year. The silver lining in all that is, of course, the surety of supply conversations that have now started with our customers, and they’re much more receptive to pricing. They do see the inflation that we’re seeing, and that’s in the areas of logistics, converting materials, secondary fiber, and that’s all items that are easily visible in the industry.

Anthony Pettinari, Analyst, Citi: Okay. That’s helpful. I’ll turn it over.

Operator: Your next question is from Mark Weintraub with Seaport Research Partners.

Mark Weintraub, Analyst, Seaport Research Partners: Thank you very much. I was hoping to maybe just get a little bit more clarity on the pricing, which you went through pretty quickly. Chuck, I think you referenced $145 million at one point, if I heard correctly. Could you re-explain what that was and how this all breaks down? I’m really trying to get a little trying to understand what’s included for this year and sort of what our starting point going into next year would be if we just take into account, what you’re expecting to have in place through the balance of this year.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yeah. The $145 million is really just the annualized view of the $60 million that we expect to see in 2026. That includes a few things. That includes the recognized $40 a ton on Bleached Folding Carton, the $60 a ton on cup stock, the contractual price recoveries, and then the $1 billion of business that we have where pricing is not determined by a contract. That’s the flow-through of all of that. As I mentioned, we have other pricing in the marketplace, and that’s all embedded within the forecast, the outlook, and that’s in the $145. We have other pricing in the marketplace as I went through in the prepared remarks, and if all of that were recognized, that would be over $200 million of additional annualized. Based on timing of likely recognition, not expected to have a significant impact on 2026.

Mark Weintraub, Analyst, Seaport Research Partners: Super. Basically, if I understand correctly, we got all the actions in place, $60 million this year, then another $85 essentially would show up in next year to get us to the $145. 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.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: You got it.

Mark Weintraub, Analyst, Seaport Research Partners: Right?

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yes. You got it. Exactly.

Mark Weintraub, Analyst, Seaport Research Partners: Okay, great. That’s very helpful. Maybe just if I could on this. Certainly we’ve heard others in the market out there on FBF. Are you, to your knowledge, the first and actually on URB as well, but are you the first and only right now, to your knowledge, on the URB and on CRB?

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: On recycled, we just went out yesterday, and I haven’t heard that anyone else is out yet. On the majority of unbleached, yes, we’re the first out with that as well. There was the uncoated unbleached, somebody was out with that previously, but the majority of the unbleached were the first out with that as well. For the second round.

Mark Weintraub, Analyst, Seaport Research Partners: Super. Got you. Appreciate the help. Thanks.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yep.

Operator: Your next question for today is from Detlef Winckelmann with JPMorgan.

Detlef Winckelmann, Analyst, JPMorgan: Morning, everyone. Maybe just to follow up, just to make sure I understand. I got the impression that some of the production curtailments had potentially been moved from 2026 into 2027. Firstly, did I understand that and hear that correctly? kind of secondly on that, can you quantify that?

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yeah. Yes. Detlef, this is Chuck, I’ll take that. I think the way to think about it is we adjusted our inventory expectations and then the downtime expectations as well. The downtime expectations we now expect to be around $90 million.

For the full year. The inventory expectations, we also adjusted as a result of the unbleached issues that we talked about, where the planned maintenance was in the quarter, and then also the January weather impact and the other operational issues that are causing us to take a different strategy towards unbleached at the end of 2026. A couple of things really going on in the inventory guide, but the downtime is lowered to about $90 million for the full year.

Detlef Winckelmann, Analyst, JPMorgan: Cool. Thanks very much.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yep.

Operator: Your next question is from Ghansham Panjabi with Baird.

Ghansham Panjabi, Analyst, Baird: Yeah. Hi, everyone. Good morning. Robbert, as you look out to the back half of this year, do you anticipate any change in how your customers are approaching their focus on price versus volume? Just given the step up in inflation year-to-date with energy costs and pretty much everything else. I know you maintained your volume outlook for the year, but just in terms of conversations with customers, do you sense any change coming?

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yeah, Ghansham, let me give you high-level customer, then I’d like to, if you’re okay with that, go into quickly into sub-category level. With regards to the overall, we do see the overarching theme remains a strong focus on driving volume and share recovery for the branded players, given the private label growth. The secondary theme, though, that we are starting to see is pricing to offset higher commodity inflation in the second half of 2026 and into 2027. Our customers continue to simultaneously invest in promotions to drive traffic and share. We do see a focus shifting a little bit from volume growth to profitable growth. What we heard, and I want to refer to a couple of the calls that were just done, earnings calls.

We heard a very strategic intent to return categories to volume growth, moving from heavy investment in value price points to a focus on innovation-driven mix for the next 12 months. From one of the largest F&B players, we heard leveraging a sophisticated price spec architecture to balance must-buy promotional frequency with a variety of pack sizes as well from another one. It’s a little bit of a combination. When you go to the category level, we do see pretty stable demand signals with some pockets of strength. We’re seeing select growth across large customers and key segments, particularly in the center of store staples. Food, health and beauty remain growth drivers. We saw a pretty resilient demand for value-oriented staples like cereal, pasta, rice, and snack bars. We saw strength in ready-made meals, and we saw strength in premium personal care products.

We also saw some growth in the international markets. We saw that with dry tea and premium health and beauty categories. We see a continued wellness and personal care trend. We also see challenges. Household remains challenged. Food service remains challenged as consumers shift more consumption towards meals prepared at home. One of the bright spots was pet food. We saw a year-over-year growth for the second consecutive quarter, despite some softness across other household categories.

Ghansham Panjabi, Analyst, Baird: Great. Thanks for that. Then, Chuck, I’m sorry if I missed this, what are you now assuming for working capital benefit in 2026 relative to your revised free cash flow?

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: That’s helping us bridge to get to the current cash flow range. The cash flow is, of course, negatively impacted by the EBITDA, driven by the inflation and then also the lower inventory. We are working other working capital initiatives around payment terms and around receivables to be able to offset that.

Ghansham Panjabi, Analyst, Baird: Okay. Thanks very much.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yeah.

Operator: Your next question is from Gabe Hajde with Wells Fargo.

Gabe Hajde, Analyst, Wells Fargo: Good morning, Robbert, Chuck. Thanks for taking the question. I’m curious, as you look at the URB opportunity, I don’t know, from a margin perspective or maybe, EBITDA per ton, can you talk about maybe what that looks like? Our math maybe suggests something in the $200-$225 a ton range, but just curious how you guys are looking at it. Then any sort of early read on potential, I guess, impacts from the new distribution partner that one of your peers has for recycled board in North America?

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yeah. Let me take those one at a time, if you’re okay with that. Gabe, thanks again for inviting us to your conference. We had a great time. With regards to the margin expectations, we believe that our incremental demand for uncoated recycled board and the rising utilization at the Waco mill will result in higher EBITDA overall. It’ll drive better margins and faster returns on the investment, and it’ll drive stronger margins for the recycled platform overall. Really what it is about, it’s balancing the system to maximize profits. When you look at the decision we made to get into URB again, remember, we used to make URB at Middletown. The decision really reflects a pragmatic approach to accelerate value creation through flexibility. The flexing between the production of these grades will allow us to maximize both earnings and cash flow as well.

We maintain the long-term value of the asset. The production of CRB and URB are very straightforward, and we have a long-standing experience making URB at Middletown. We can do both, and it’ll drive profitability at the system level. It’s very low on CapEx. For what we’re doing right now, there was no material CapEx required for these folding carton trials. Over time, we could probably expand to other applications like tubes and cores that would require some capital investment. With regards to the additional volume coming into the market, we tend not to comment on competitors, but this is existing volume that’s been in the market that’s just looking for a new distribution channel. We don’t think it’s going to affect the markets in a major way.

Gabe Hajde, Analyst, Wells Fargo: Okay. Thank you. Slide four. The one thing that kind of jumps out at me was I would’ve expected food service in the second quarter of 2026 to be pretty strong given the on-premise trend that we saw with World Cup. I understand household, but that was the one that went more negative. I don’t know if this is related to the CUK issue. I don’t think it should be. Maybe just sort of expectations for the second half in food service specifically.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yeah. It’s an excellent question. We had hoped for a stronger quarter on food service overall for the industry. We do see a shift back to meals prepared at home that tends to be driven by inflation and overall pressure on the wallet. As we look forward, customers, we believe, will continue to run promotions in food service and limited time offers to drive volume. There is this consumer affordability element to the QSR space. The way we look at it is we have to play in both food and food service because of these portfolio shifts. We’ve seen that before over the last five years. We need to be able to grow or at least maintain volumes in both of these scenarios.

Gabe Hajde, Analyst, Wells Fargo: Thank you.

Operator: Your next question for today is from Hillary Cacanando with Deutsche Bank.

Hillary Cacanando, Analyst, Deutsche Bank: Hi. Thank you for taking my question. Just looking at your leverage ratio of 4.7 times, it looks like it’s getting close to the covenant. Am I right in that your covenant steps down to 4.75 times, I guess, after December? I guess with that getting just close to covenant, how you plan to address that?

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yep. A couple of points on that. First of all, our covenant leverage ratio is usually about 25 or 30 basis points better or lower than our printed leverage ratio, just the way the calculation works. There’s some natural headroom there. Just to clarify what the amendment did, we have a 5 times covenant until the end of second quarter 2027. It actually goes out into 2027.

Hillary Cacanando, Analyst, Deutsche Bank: Oh, got it. Okay. I thought it was up until December. Okay. After that, in the middle of 2027, it goes down to what, 4.7, 4.75?

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: 4.25 back in Q3, that’ll of course be after we pay down all the debt we expect to pay down this year, then drive the 2027 EBITDA.

Hillary Cacanando, Analyst, Deutsche Bank: Okay. Got it. Then just going back to URB, I know you said that the volume, it’s really existing volume. It’s not really going to impact the market. At some point, do you plan on getting much bigger in this space where it could have an impact on the volume?

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yeah. The reference to the volume coming into the market was a reference to Mexican volume on coated recycled board that is going to be distributed by one of our competitors.

Hillary Cacanando, Analyst, Deutsche Bank: Oh, got it. Okay.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: That we usually do not provide commentary on. On URB, there is some tightness in the market, and we are entering with our grades to take advantage of the growth in that segment.

Hillary Cacanando, Analyst, Deutsche Bank: Got it. Okay, great. Thank you very much.

Operator: Your next question for today is from George Staphos with Bank of America.

George Staphos, Analyst, Bank of America: Hi, everyone. Good morning. Thanks for the details. I had two questions. The first is really a bridge to the second half, and the second one is a question on Waco and where it sits in the industry. In terms of the bridge, Chuck or Robert, and appreciate your comments earlier, can you talk a little bit about what the big buckets will be in terms of the step-up, if you can quantify them at all, from the first half to the required second half EBITDA that you are targeting? In that regard, can you talk a little bit about how much productivity will add to that and what the mix effect might be, either positive or negative, in terms of your end market trends? The reason I bring it up is food service traditionally, I recall being pretty high margin for you.

relative to center of store. I’m wondering if that is a drag or not that big of a deal. The second question is with Waco, when the mill came on, obviously it was positioned as really a primary packaging grade mill and substrate producer. We understand why you want to use some of the capacity for URB. Where would Waco sit on the cost curve relative to the rest of the capacities out there for URB? Are the trim widths off that machine good, optimal for what the converters require? Or how would you have to optimize over time? Thank you very much, and good luck in the quarter.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Hey, George, it’s Chuck. I’ll take the first part and then maybe Robbert take the Waco part. On the bridge from first half to second half, yeah, as you mentioned, we covered that in the prepared remarks. I’ll just build a little bit more and try to give you some quantification. First of all, several items that are favorably impacting the second half versus the first half. We don’t expect a repeat of the downtime due to weather that we had in Q1.

George Staphos, Analyst, Bank of America: Right.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: We also had some other non-recurring items in the first half, that all totals about $40 million. The pricing, as I talked about, would improve. We’ve quantified that at $60 million. We also, as you said, expect favorable mix. Foodservice is a part of that driver, just back half mix will overall improve as well. Of course, we’ll continue to push for more pricing given that we see continued inflation into the business. The $85 million of cost savings that we talked about, that adds about $15 million in the second half versus the first half. As you saw us do in Q2, we’ll of course, push for additional cost savings, including procurement opportunities. Maintenance outages are favorable in the second half by about $10 million. Then other operating improvements, including, I know Robbert’s going to comment on Waco.

Waco’s one of it, then are just some of our normal continuous improvement initiatives. Those are all, of course, offset by the additional inflation, about $75 million of inflation first half to second half, then the lower volumes due to seasonality. Lots of moving parts and pieces, where I think you’ll really see it show up in our financials and our bridge is in the performance line.

George Staphos, Analyst, Bank of America: Okay.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yeah.

George Staphos, Analyst, Bank of America: Point of clarification, mix will be positive even with foodservice being weak. Would that be right?

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Well, yes. We expect that. Foodservice hot cup season kicks in in the back half. Maybe weaker than last year, but mix still is positive first half to second half.

George Staphos, Analyst, Bank of America: Got you. Thank you, Chuck.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Hey, George.

George Staphos, Analyst, Bank of America: Robbert. Hey, Robbert.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Just want to talk a bit about Waco and your question. Just a quick reminder. We closed Middletown and East Angus. We took about 280,000 tons out of the market. We had already closed Tama and K3 at Kalamazoo. That was another 200,000 tons we took out. When we built Waco, we added 270,000 tons of capacity versus the system that we had in 2025. That’s just a quick reminder of the capacity. We are very flexible, as I said, in Waco. With regards to URB, our caliper is 14 to 30 points. We call it PaceSetter Ridgeline. It is 100% recycled, and it’s got at least 45% of post-consumer recycled content.

That particular grade is really usable due to the caliper profile and the surface appearance, as well as the compression to things like edge protection, folding carton applications, slip sheets, dividers in beverage containers, and lamination. That is a relatively sizable addressable market that we can go into without any major capital investments and that we are currently already producing. As I said, we have a couple thousand orders already on the books.

George Staphos, Analyst, Bank of America: Okay, I’ll turn it over. Thank you.

Operator: Your next question is from Phil Ng with Jefferies.

Phil Ng, Analyst, Jefferies: Hey, guys. I guess first, to kick things off, the incremental price increases you guys have announced for, I believe, CUK, CRB, one, can you give any color in terms of the magnitude of the increases? Two, have you seen orders, backlogs, or any supply-demand dynamics that gives you perhaps more confidence this go around? Just because early in the year, you certainly got traction on SBS, but CUK was, at least the publications didn’t pick up on it.

Robbert Rietbroek, President and Chief Executive Officer, Graphic Packaging Holding Company: Yeah. Hey, Phil. This is Robert. We do see a tighter market than before, and we see as a result, the industry fundamentals are improving, and that’s resulting in price rolling through and catching up. We see in the recent AF&PA report that there are more and more backlogs across grades, which really increasing. We’ve recently announced our second price increase on Bleached Cupstock and Folding Carton and unbleached, and now we’ve raised prices about 120 tons on each. We’ve also announced yesterday a 50-ton price increase on recycled paperboard. With the situation that we faced, it does warrant price increases and also obviously reflection of the inflation.

Phil Ng, Analyst, Jefferies: Okay. Helpful color, Robert. There’s certainly Section 338 tariffs. We’ll see how that all shakes out. Do you guys have any in-house view in terms of what potential impact it had in terms of trade flow and how impactful it could be for different grades, at least First flush, it could be impactful for SBS, unclear on CRB, but any more color you guys are comfortable sharing would be helpful.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yeah. Our researchers show that that’s about 200,000 tons of primarily FBB coming in. The impact of it, we’ll of course see as time plays out. I think that’s the size of potential impact.

Phil Ng, Analyst, Jefferies: Any impact on CRB, Chuck? Is this just more of a FBB SBS dynamic, you think?

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yeah. There’s just not as much that goes across the border, not a significant impact.

Phil Ng, Analyst, Jefferies: Okay. Thank you for the call.

Operator: Our last question comes from Arun Viswanathan with RBC Capital. Arun, your line is live. Arun, if your line is on mute, please unmute it. We’re unable to hear you. Our last question for today comes from Matt Roberts with Raymond James.

Matt Roberts, Analyst, Raymond James: Hey, Robert, Chuck, Melanie, good morning. Last question. Let’s see. Chuck, could you just clarify the debt covenant? I thought it was 475 through June 30th, but please correct me if I’m wrong. I know that you’re not putting out a guide for free cash flow in 2027. You did talk about some of the EBIT drivers from incremental price, but are there any other early considerations for 2027 free cash flow? Maybe how much of a benefit from that inventory shift? I believe working capital is usually a drag in first half, as you said, given seasonality. Any other puts and takes we should think about for 2027 that provides headroom to that leverage target or any other meaningful divestitures you all are considering? Thank you for taking the question.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yeah. The covenant is five times and has adjusted to that. In terms of the cash flows, 2027, of course, we’re not giving a guide. I’ll just give you a couple of items to think about. 2026 EBIT, of course, has a significant number of one-time items, and then there’s some carryover impact from the pricing net of the inflation and the cost savings. Think about that all as $175 million of combination of the one-time items in 2026. Again, not guiding the EBIT or cash flow, but we do have the $90 million of inventory reduction downtime, $40 million of weather, and other one-time items that I talked about. We also talked about the unbleached inefficiencies, and that’s about $20 million.

Of course, the pricing, if the carryover there is about $85 million, the carryover inflation’s about $75 million, and the carryover, the cost savings is about $15 million. There’s some potential tailwinds for 2027 from all that as well. Of course, 2027 will benefit from lower interest cost, we’ll keep pushing on capital spending, and the cash taxes will continue to be lower in 2027. There’ll be the potential for additional inventory takeout, inventory reduction, really, as we leverage tools, technology, and really take our inventory reduction to the next level. Lot of items to consider and develop, and we’ll come back to you with a 2027 guide.

Matt Roberts, Analyst, Raymond James: Thorough early read. Thank you very much, Chuck.

Chuck Lischer, Senior Vice President and Interim Chief Financial Officer, Graphic Packaging Holding Company: Yep.

Operator: This concludes the Graphic Packaging Holding Company’s second quarter 2026 conference call. You may disconnect your lines at this time. Thank you for your participation.