Graphic Packaging Holding Company (NYSE:GPK) Q2 2023 Earnings Call Transcript

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Steve Scherger: Yes, Michael, it’s Steve. I think to reiterate Mike’s point, of course, those are levers that are available. But as we see a return to organic sales growth and coming out of ‘23 and into ‘24 consistent with our expectations, we would have an expectation that we would need those tons to meet demand. But we will obviously only produce to the demand that we have for our products.

Mike Roxland: Got it. And then just one quick question on imports, one of your global competitors just finished adding capacity at Sweden mill as it’s now the most efficient and largest folding box board plant in Europe. I just want to get your thoughts around increasing exports to the U.S. and any initiatives that you can take to offset increasing your box per capacity?

Mike Doss: Look, I think, Michael, actually, if you look at the data, imports are down almost 20% year-on-year, so of FBB into the North American market. And as you’ve probably seen and was well chronicled by the European producers that have already announced the results here in the quarter, their wood costs are up substantially year-on-year as a structural cost would inflect higher – structurally higher it would seem relative to not having the imports of European pulp – and Russian pulp into the Nordic countries there. So I actually don’t believe that, that supply chain is one that we can compete with. I believe that we can absolutely compete with imports of FBB into the North American market with our embedded mills in the locations where they are at. And so that’s how we look at that.

Mike Roxland: Got it. Thank you very much.

Operator: We now turn to Adam Samuelson with Goldman Sachs. Your line is open.

Adam Samuelson: Yes, thank you. Good morning, everyone. Maybe, Steve, just a clarifying question, just how you frame the third quarter. I think, obviously, the organic volume – organic sales and volume mix down year-on-year, but I wasn’t entirely clear when you said the third quarter looks like the second quarter, if you were referring to sequential EBITDA dollars year-on-year growth. Just can you just clarify what you’re trying to – what the point on the third quarter was?

Steve Scherger: Yes, Adam, Steve, the statement was just purely about organic sales growth. We’re currently assuming very modestly down in Q3 and then up in Q4. And hence, that results in the full year guide of between 0% and minus 2%, which implies that the second half of the year is somewhere around plus or minus 2%, right? That’s the math that gets you to a full year, either at minus 2%, which would say that minus 2% in the second half of the year would be within that range, we’re assuming better than that as we would have modestly down and then modestly up if you kind of look at it organically. We are not providing, as you know, quarterly guidance on EBITDA. Generally, we’re nearly halfway to our midpoint of our EBITDA.

I think planning expectation of that being pretty consistent Q3, Q4 is probably reasonable, mostly because we have less planned maintenance downtime in Q4 this year, which is kind of going to kind of play itself out over the coming two quarters. But we’re pleased with where we’re positioned halfway through the year, $937 million, the midpoint of $1.9 million, it’s in the $960s million as you kind of work your way into the second half with a guide towards the midpoint.

Adam Samuelson: Okay. No that’s – that color is really helpful. And then just as we think about the demand side, any – color you have on maybe if there is any difference in trends between your European business and North America? And especially as we think about the benefits of some of the price cost benefits that have kind of been stickier. Is there any of that disproportionate in Europe as some of the European benchmark indices where you are not integrated, have fallen?

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