Stephen Scherger: Ghansham, it’s Steve. Just one thing to add that we mentioned in the prepared remarks, is also with the drum pulping the ability to also recycle up to 15 million cups a day. And so it’s really an incredible investment in the circular economy, the ability to capture more fiber in better ways and we’re looking forward to advancing that over the next couple of years as well. So it just kind of rounded out some of the net positive benefits of the investment.
Michael Doss: And maybe one final thing that I would share, Ghansham, since you went there. I mean if you really take a step back and think about what we’re doing here over the next three years, we’re really building a moat around our business. We’re simplifying our mill structure, we’re going to be the lowest cost by far. As you saw in our prepared comments and again, our track record would support this, we’re going to be over 90% integrated. We get a lot of questions around other paperboard that’s being added globally, primarily and a little bit here in North America. On the virgin grades, we’re the only one investing on the recycled side, and we see the end-use consumer really appreciating that much more. They like the materials that are recycled.
They get the benefit of seeing their work when they put in a recycling bin or have some other container that’s going to go back. I mean recovery rates for paper and paper packaging in the U.S. last year were almost 68%, much higher than almost any other substrate, with the exception of maybe aluminum. So if you look at that, it’s right at the center of it, and you’re going to see CRB in more applications. We have low caliber rates that we can run now that we have the capability on these modern machines to be able to do it. We can do freeze grade boards and beverage boards. And so as both Steve and I said in our prepared comments, it allows us to really optimize our whole system. And you have to remember, we buy million tons on the external market.
So now we will not be able to have to buy that many as we optimize that system because between what we’ve got and the new investment in Waco and our emerging mills will be able to optimize things. So our confidence in the $160 million is very high and largely within our control.
Ghansham Panjabi: Thanks so much.
Michael Doss: Thanks so much.
Operator: Our next question comes from Mark Weintraub from Seaport. Your line is open.
Mark Weintraub: Thank you. A few, I’ll keep them really quick though. Run rate for price costs, the spread as we look at it today, recognizing, of course, your guidance is going to be factoring possibilities for changes in costs, et cetera. But I think like last quarter, the midpoint had been about $2.25. If we were to just look at the midpoint today, what would it be?
Stephen Scherger: Yes, Mark, it’s Steve. Glad to take that on. The range we provided in the $100 million to $400 million, we think is a good, prudent range just given the volatility that we’ve seen over the last couple of years. So it feels like a very appropriate range for us. Obviously, we’ve got some commodities moving up and down right now of paperboard that we buy chemicals that we buy down fiber, obviously, energy and some logistics. On a mark-to-market basis, sitting here today, it would be at the low end of the range, so closer to the low end of the $100 million to $400 million but it’s also in February. And so obviously, we’ll continue to refine as the year plays out. There’s certainly dialogue around some acceleration of costs in the second half of the year that could occur. So we’re trying to keep a range that makes good sense. But the mark-to-market currently would be closer to the low end of the range, $100 million to $400 million.
Mark Weintraub: Okay. Appreciate that. And then just a follow-up on the organic sales growth. The 1% to 2% for 2023 understood. In curiosity, as you’re looking at the first quarter, are you expecting to be in that type of range? Or are you thinking that it’s perhaps a little weaker at the start of the year and you make up ground, later in the year against easier comps?
Stephen Scherger: Yes, Mark. I’ll start it and Mike can add any color. I think, one of the positives sitting here on the call today is we’ve got a good view into January. We’re off to the kind of start we expected to be in line with that 100 to 200 basis points. So as we talked, we saw some almost across the board, all packagers slow down in December for us, things to cycle back order patterns to where we expected them to be. So no, we would expect Q1 to be in line with those kind of expectations as we move into the year. Obviously, a lot of that is supported by the new product development activities that have been commercialized. Maybe the only Mark is that that confidence in January was broad based. It was really all geographies. So we’re seeing it really across our business.
Mark Weintraub: Okay. I have a few more. Yes, I’ll get back in queue though because I realize others have questions.
Michael Doss: Thank you, Mark.
Stephen Scherger: Thank you.
Operator: Our next question comes from George Staphos from Bank of America. Your line is open.
George Staphos: Hi, everyone. Good morning. Thanks for all the details. Congratulations on a good end to the year. I wanted to turn back to Waco. And you mentioned the comment, Mike, building a moat around your business. And certainly, that’s been one of the things you’ve talked about a lot, we’ve talked about. Is one way to think about this as well that you obviously have had very strong results the last year? And it looks like given your guidance, you’re expecting that in 2023. And so the prudent thing to do ahead of potentially additional supply and competition is build the return, build the ability to grow your earnings ahead of when that capacity hits in 2025 and 2026? You’ll have potentially pulp plays out as you expect, a lot of tools at your disposal in 2025 and 2026, you use cash for buybacks, you’ll have growth off this new machine in terms of EBITDA. Is that one way to look at this or would you totally disagree with that and why, why not?
Michael Doss: It’s the absolute right way to look at it, George. And again, just building on some of the comments, that I made earlier to Ghansham’s question. I mean, the part of that we really liked is simplified build structure, six, well capitalized, low cost high-quality mills and the substrates that we need driving towards 90% vertical integration between our organic growth and just kind of some additional growth that we anticipate that we’ll see here over that time. If you just do the math on the 100 to 200 basis points. So it positions us very well for 25, 26 regardless of kind of what those outcomes look like. And what I’d also say, George, and you’ve seen this, you’ve done this a long time, we’ll have to kind of watch and see what others are doing there because our experience in this industry, and it’s quite a bit for Steve and I is that over time, low-cost wins, high-cost loses.
And I’d expect that to be similar to this go-around. But the great thing about how we’re positioned in Graphic Packaging is not only are we low cost on the middle side, but our converting systems largely tied into that. And of course, we spent over the years to create capability there, too, which is really supporting our growth. So you’re thinking about the absolute right way.
