Graphic Packaging Q2 Earnings Call Highlights

Key Points

• Second-quarter results were broadly in line with expectations: Net sales fell 1% year over year to $2.2 billion, while adjusted EBITDA declined $89 million to $247 million. Cost reductions and operational improvements helped lift the EBITDA margin sequentially to 11.3%.
• Higher inflation led to a more cautious outlook: Graphic Packaging raised its estimated 2026 incremental input-cost inflation to approximately $150 million from $60 million-$65 million previously and expects full-year adjusted EBITDA near the low end of its $1.05 billion-$1.25 billion range. The company also lowered its adjusted cash-flow outlook to $600 million-$700 million.
• Debt reduction and portfolio optimization remain priorities: Net debt fell $100 million to $5.5 billion, and the company plans to repay $400 million-$500 million in 2026. Plant closures, the Croatia divestiture and potential expansion of recycled paperboard production at Waco are intended to improve efficiency and support future growth.

Graphic Packaging NYSE: GPK reported second-quarter 2026 results that management said were in line to modestly above expectations, as cost-reduction initiatives and operational improvements helped offset elevated inflation and uneven consumer demand.

Net sales declined 1% from a year earlier to $2.2 billion, while adjusted EBITDA totaled $247 million, down $89 million year over year. Adjusted EBITDA margin improved sequentially by 50 basis points to 11.3%. Adjusted earnings per share were $0.14, and adjusted cash flow was $138 million, up $55 million from the prior-year quarter.

“Our second quarter performance reflects the disciplined execution of our global teams and the resilience of our business model,” President and Chief Executive Officer Robbert Rietbroek said. He said volumes were steady year over year despite higher gas prices affecting consumer behavior.

Inflation pressures prompt revised outlook

Senior Vice President and Interim Chief Financial Officer Chuck Lischer said the quarter’s EBITDA decline was driven largely by $60 million of commodity input and operating-cost inflation, including logistics, resins, labor, secondary fiber and chemicals. The inflation total was $10 million higher than management had expected entering the quarter.

The company now expects full-year incremental input-cost inflation of about $150 million, compared with its prior estimate of $60 million to $65 million. It consequently expects full-year adjusted EBITDA at the low end of its previously stated $1.05 billion to $1.25 billion guidance range.

Graphic Packaging expects third-quarter adjusted EBITDA of $280 million to $300 million. The company maintained its full-year and third-quarter volume outlook of a 1% decline to 1% growth year over year, while forecasting that foreign exchange and other factors will reduce results by about $20 million in each of the third and fourth quarters.

Management said pricing actions should support results. The company expects favorable pricing to add about $60 million to full-year 2026 sales and EBITDA, with a greater benefit in the fourth quarter than the third. Those actions are expected to produce an annualized run rate of about $145 million.

• Third-party recognition in July of a $60-per-ton price increase for bleached cupstock and a $40-per-ton increase for bleached folding carton is expected to contribute about $5 million in 2026, with most of the benefit coming in 2027.
• The company has also announced further price increases for bleached cupstock, folding carton, recycled paperboard and unbleached paperboard.
• Lischer said additional pricing actions, if fully recognized, could represent more than $200 million of additional annualized pricing, though they are not expected to materially affect 2026 results because of timing.

Cash flow, debt reduction and inventory plans

Graphic Packaging lowered its 2026 adjusted cash flow outlook to $600 million to $700 million, citing reduced EBITDA expectations and inventory-reduction goals that have shifted partly into 2027. The midpoint of $650 million would still represent a substantial increase from $169 million in 2025, according to Rietbroek.

The company reduced inventory by approximately $75 million in the first half and cut capital expenditures by about $320 million compared with the first half of 2025. It now expects 2026 capital expenditures below $450 million.

Inventory optimization was affected by an elongated mill maintenance cycle established in 2025 and production issues in unbleached paperboard, which created higher costs and board-supply challenges during the 2026 beverage season. Management said it expects to finish the year with inventory equal to 18% to 19% of sales, with the additional inventory intended to help avoid supply-demand mismatches and maintain customer service.

Net debt declined by $100 million during the quarter to $5.5 billion, with net leverage at 4.7 times. The company plans to pay down $400 million to $500 million of debt in 2026 and expects year-end net leverage of approximately 4.6 times. Lischer said the company’s covenant remains at 5 times through the end of the second quarter of 2027, before returning to 4.25 times in the third quarter of 2027.

Demand trends and portfolio actions

Management cited continued demand strength in food and health and beauty, including center-of-the-store staples such as dry cereal, pasta and snack bars. Ready-made grocery meals grew in domestic and international markets, while international dry tea and premium personal-care categories also performed well.

Those gains were offset by weakness in household products and food service. Rietbroek said consumers deferred purchases of items such as facial tissue, laundry detergent, food wrapping and storage products, while shifting more meal consumption toward home preparation. Pet food was an exception, posting year-over-year growth for a second consecutive quarter.

The company recorded $40 million in innovation sales growth during the quarter, with Americas growth led by strength solutions and cups and containers, and international growth led by multi-packs and food trays and bowls.

Graphic Packaging also completed the divestiture of its Croatia facility, announced a proposed closure of its Lebanon, Tennessee, plant, and is evaluating a potential closure of its Winsford, U.K., facility. Management said the actions are intended to simplify its footprint, consolidate volumes and improve cost efficiency, with divestiture proceeds earmarked for debt reduction.

Waco expansion and recycled board opportunity

The company is pursuing additional demand at its Waco, Texas, recycled paperboard facility through its newly launched PaceSetter Ridgeline uncoated recycled paperboard, or URB, product. Rietbroek said the company had received initial orders totaling a few thousand tons and had qualified the grade with several additional customers.

Graphic Packaging estimates an addressable URB market of more than 1 million tons across folding cartons, lamination and related applications, with a potential company opportunity exceeding 100,000 tons over time. Management said Waco can produce the material to industry specifications without incremental capital spending and can flex production between coated and uncoated recycled grades.

Rietbroek said the company is conducting a broader market study to refine its long-term strategy and expects to share further details later in 2026.

About Graphic Packaging (NYSE:GPK)

Graphic Packaging Holding Company is a leading provider of sustainable paperboard packaging solutions, offering a broad portfolio of products designed for food, beverage and other consumer goods markets. The company specializes in the manufacture of containerboard, folding cartons and engineered fill materials, as well as beverage packaging systems including paperboard cups, carriers and related components.

Through a network of manufacturing facilities across North America, Europe and Latin America, Graphic Packaging serves a diverse customer base that includes major consumer packaged goods companies, quick-service restaurants and retail chains.

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