Anthony Pettinari

Anthony Pettinari sought more context on the mid-single-digit cost inflation drivers and its expected cadence, and asked for clarification on data center project timelines and visibility, specifically regarding the pace of construction.

Answer

CFO Robyn Bradbury identified facilities, fleet, and medical costs as the primary drivers of mid-single-digit inflation, expecting it to continue into Q4 and moderate around Q2 of next year. CEO Mark Witkowski clarified that data center projects are characterized by a *fast pace* of construction, requiring operational excellence, but can last several years with good visibility typically extending a year out, often with additional phases.

Anthony Pettinari inquired about the sentiment of municipal customers regarding spending for the upcoming fiscal year, given the policy environment. He also asked about the competitive landscape for M&A in the waterworks distribution space.

Answer

CFO Robyn Bradbury described municipal funding as healthy and resilient, supported by IIJA funds, state programs, and local utility revenues. CEO Mark Witkowski stated there have been no significant changes in the M&A competitive landscape, noting the industry is niche and Core & Main is often viewed as the acquirer of choice with a very healthy deal pipeline.

Anthony Pettinari inquired about the M&A pipeline for 2025, including competition and valuations, and asked about the company's comfort with its net leverage ratio of 2.7x, which is above its long-term target.

Answer

CEO Steve LeClair described the M&A pipeline as 'very strong' for 2025, with many sole-sourced deals at traditional multiples. CFO Mark Witkowski expressed confidence in maintaining a conservative balance sheet, noting strong expected Q4 cash flow and their commitment to staying within their stated 1.5x to 3.0x net leverage target range.

Anthony Pettinari asked about the funding environment and spending appetite among municipalities and requested an update on the private label penetration rate and its potential for acceleration.

Answer

CEO Stephen LeClair stated that municipal demand remains strong, with softness being weather-related and projects likely pushed into 2025, noting IIJA funds are not yet a major factor but could be a future tailwind. CFO Mark Witkowski reported that private label penetration is just over 2% of COGS, with a good runway for acceleration in the second half of the year.

Anthony Pettinari inquired about the volume performance of the high-growth focus categories highlighted on slide 11, asking if they were experiencing positive growth or facing similar challenges as conventional CPG and food service categories, given the overall 2% volume decline.

Answer

CEO Peter Konieczny (PK) stated that the focus categories generally performed better than the overall business. He detailed that healthcare was in line with the prior year, beauty and wellness saw low single-digit declines (reflecting value-oriented consumers), pet care showed strong growth, and dairy had low single-digit growth. Meat, food service, and liquids, however, experienced some weakness.

Anthony Pettinari asked for a generalization of the volume performance of Amcor's six high-growth focus categories compared to the overall company's 2% volume decline, and if healthcare, beauty, and wellness faced similar challenges to conventional CPG/food service.

Answer

Peter Konieczny, CEO of Amcor, stated that the focus categories generally performed better than the overall business. He detailed that healthcare volumes were in line with the prior year, beauty and wellness were down low single digits, pet care showed strong growth, dairy had low single-digit growth, while meat, food service, and liquids were weaker.

Anthony Pettinari requested more detail on the approximately $1 billion in businesses under strategic review, separate from the North American Beverage unit, asking about their geographic or product characteristics.

Answer

CEO Peter Konieczny explained that the $1 billion comprises about 10 businesses from both legacy Amcor and Berry portfolios. These units were identified as non-core because they have less attractive growth or margin profiles, operate in industries with low barriers to entry, or lack a clear path for Amcor to achieve a leading market position at scale.

Anthony Pettinari questioned the underlying organic growth assumptions for fiscal '26 and the company's confidence in achieving merger synergies in a challenging macro environment.

Answer

CEO Peter Konieczny stated that while they are not providing FY'26 guidance yet, the projected 12% EPS growth is a 'self-help' opportunity driven by $260 million in synergies that are not dependent on the macro environment. CFO Michael Casamento added that the early deal closure allows them to 'hit the ground running' on synergy execution.

Anthony Pettinari inquired about potential portfolio divestitures following the Berry Global merger, asking if they could affect synergy targets or timelines and whether the opportunity is larger than initially anticipated.

Answer

CEO Peter Konieczny explained that portfolio pruning is a key lever to orient the combined business toward stronger organic growth and higher-quality margins. He stated that the entire combined portfolio is being evaluated based on intrinsic growth and margin quality. Konieczny noted it's too early to specify outcomes but clarified the focus is on improving the business's organic growth profile rather than accelerating synergies.

Anthony Pettinari asked for directional guidance on CapEx for 2026, an update on the Millersburg, Oregon plant, and details regarding the North Carolina plant. He also followed up on the million-dollar operating cost headwind mentioned in Q2 for North America, asking if it repeated or stepped down in Q3.

Answer

Daniel Fisher, CEO, confirmed the Oregon plant is on time for a second-half 2026 startup, which will improve supply chain efficiency despite initial startup costs. He noted that the Concord, North Carolina plant is further out and dependent on market growth. Daniel Rabbitt, SVP and Interim CFO, indicated that 2026 CapEx is expected to be more in line with or slightly above depreciation. Mr. Fisher stated that Ball continues to manage through like-for-like inefficiencies from tariffs, but the suddenness of volume shifts is largely past.

Anthony Pettinari of Citigroup requested a breakdown of the previously mentioned $10 million in North American inefficiencies between operational costs and tariffs. He also asked about the financial performance of the recently acquired Florida can asset during the second quarter.

Answer

CEO Daniel Fisher specified that tariffs accounted for approximately $2-3 million of the $10 million impact. He added that the Florida can asset had a negative profitability impact of $1-2 million in Q2 but is on track to reach breakeven by Q4 2025 and become accretive in 2026.

Anthony Pettinari requested a breakdown of the $10 million in North American operational inefficiencies and asked about the potential impact of tax law changes on the company.

Answer

Chairman & CEO Daniel Fisher specified that tariffs accounted for $2-3 million of the $10 million impact, with the Florida can asset contributing a $1-2 million loss. Interim CFO Daniel Rabbitt addressed the tax question, stating they do not expect proposed changes to significantly alter the company's effective tax rate trajectory.

Anthony Pettinari requested a breakdown of the $10 million in North American operational inefficiencies, including the impact from tariffs and the Florida can acquisition. He also asked about the potential effects of recent tax legislation on the company.

Answer

CEO Daniel Fisher specified that tariffs accounted for $2-3 million of the $10 million impact, while the Florida can asset had a $1-2 million negative effect. Interim CFO Daniel Rabbitt addressed the tax question, stating they do not expect significant changes to their effective tax rate trajectory, with primary benefits coming from accelerated depreciation.

Anthony Pettinari questioned the promotional environment in major markets and its effect on volumes, and requested an update on the recently acquired Florida can facility and its strategic fit.

Answer

CEO Daniel Fisher noted that constructive pricing and innovation are driving volume in the energy and non-alcoholic segments. He anticipates more promotional activity from beer customers during the peak season. Regarding the Florida can acquisition, he confirmed the asset is fully integrated and the capacity will be crucial to meet demand for specific can sizes during the upcoming peak season.

Anthony Pettinari asked why EBIT leverage faltered in Q4 despite prior success without volume growth, and inquired about system utilization rates in Europe and any related CapEx plans.

Answer

CEO Daniel Fisher explained that in North America, the company has lapped the major cost-saving initiatives and is now running at historical utilization rates, making volume growth more critical for leverage. In Europe, he noted the system is getting 'quite tight' after absorbing capacity from two new plants, and the company may need to consider further investment for the 2027-28 timeframe.

Anthony Pettinari asked about the current operating rate in EMEA and the region's ability to meet long-term growth targets without new greenfield projects. He also inquired if consumer weakness in North America is causing a mix-down from specialty to standard cans.

Answer

CEO Daniel Fisher stated that Ball does not see a need for a new greenfield plant in mainland Europe for the next 2-3 years, as growth can be met by adding lines to existing facilities and debottlenecking. Regarding North American mix, he explained that while the overall consumer is weak, the issue is less about a mix-down and more about softness in specific channels like C-stores for energy drinks, which predominantly use specialty cans.

Anthony Pettinari asked about Martin Marietta's volume cadence throughout the third quarter and into October/November, and any anticipated impact from a potential government shutdown.

Answer

Chairman and CEO Ward Nye stated that the company saw good, steady performance throughout Q3 and was not disappointed with October's performance, despite a strong comparable last year. SVP and CFO Michael Petro elaborated that volume trends played out consistently with expectations, with September showing the highest daily shipment trend. Ward Nye confirmed that the business is highly resilient to government shutdowns due to stable funding for federal DOT projects and strong state budgets.

Anthony Pettinari asked about the volume cadence throughout the third quarter and into October/November, and any potential impact from a government shutdown.

Answer

Ward Nye, Chairman and CEO, reported good, steady performance throughout the quarter, noting October was not disappointing despite a strong prior-year comparison. Michael Petro, SVP and CFO, elaborated on weather comps, indicating September had the highest daily shipment trend. Ward Nye emphasized the business's resilience to government shutdowns due to stable federal and state funding for infrastructure projects.

Anthony Pettinari inquired about the strategic fit and quality of the aggregates assets being acquired from Quikrete, particularly the entry into the Pacific Northwest via British Columbia.

Answer

CEO C. Howard Nye explained that the transaction adds approximately 1.3 billion tons of mostly high-quality crushed stone and aligns perfectly with the SOAR 2025 strategic plan by establishing a presence in Virginia and the Pacific Northwest. He emphasized the deal is tax-efficient and reinforces the company's aggregates-led focus.

Anthony Pettinari of Citigroup Inc. asked for a reminder of the magnitude of the weather impact in North Texas during Q2 of the previous year. He sought to better understand the potential for gross profit per ton growth in the upcoming quarter given the easy comparison.

Answer

Chair and CEO Ward Nye confirmed the weather impact in North Texas in Q2 of last year was 'notable' and that he expects an attractive Q2 this year with a nice sequential build. He added that another tailwind for Q2 and Q3 will be the conclusion of the inventory drawdown, which created a $28 million headwind in Q1. The absence of both the severe weather and the inventory headwind should support strong performance.

Anthony Pettinari requested a more precise quantification of the volume benefit expected from recent acquisitions in 2025, either in tons or as a percentage.

Answer

CEO Ward Nye provided a direct estimate, stating that if looking at organic volume growth, it would likely be up around 1%, with the balance of the guided 4% growth being largely driven by acquisitions.

Anthony Pettinari inquired about backlog trends by end market and geography, and whether the significant weather disruptions in 2024 increase confidence in a volume rebound for 2025.

Answer

CEO C. Nye confirmed that the weather-delayed projects do increase confidence for a 2025 volume rebound. He reported that backlogs are currently up mid-single digits year-over-year and sequentially. Nye sees durable, multi-year demand supported by under-spent IIJA funds, a bottoming in warehouse construction, AI-related projects, and an eventual residential recovery, suggesting the company's initial 2025 volume outlook is cautious.

Anthony Pettinari asked for more details on Dispensing and Specialty Closures customers' outlook for personal care and home care, specifically if they expect volume growth in 2026 or are adjusting strategies, and whether the current weakness is a speed bump or longer-duration. He also inquired about dialogue with metal containers customers regarding rising metal costs, potential push-outs of buying into 2026, or anticipation of tariff changes.

Answer

Adam Greenlee, President and CEO, Silgan Holdings, clarified that the weakness in personal care and home care is an adjustment to growth expectations (low-to-mid single-digit for 2026) rather than a decline, with customers still growing. He confirmed daily dialogue with metal container customers on costs, noting no push-out from Q3 to Q4. Greenlee stated that potential tariff changes and expected sizable raw material increases for steel in 2026 are driving pre-buy conversations, not order push-outs.

Anthony Pettinari asked about the impact of steel and aluminum tariffs on the competitive landscape and customer behavior. He also inquired about the likelihood of the hot-fill closure headwind continuing into 2026 and whether any substrate share shift away from PET contributed to the weak volumes.

Answer

President & CEO Adam Greenlee stated that tariffs have a minimal impact (e.g., ~5¢ per food can) that is passed through contractually and is unlikely to change consumer behavior. He expressed confidence that the hot-fill headwind is a 2025 issue and will normalize in 2026 as customers must rebuild inventory. He dismissed substrate shift as a factor, noting that reclosable sports drink packages are differentiated from beverage cans.

Bryan Burgmeier, on behalf of Anthony Pettinari, asked about Silgan's earnings sensitivity to foreign exchange rates following the Weener acquisition and inquired about the M&A landscape amid current economic uncertainty.

Answer

CEO Adam Greenlee explained that FX sensitivity is limited due to a natural hedge strategy of holding local debt in local currencies. On M&A, both Mr. Greenlee and EVP of Corporate Development Robert Lewis expressed strong optimism, stating the opportunity pipeline is robust and that Silgan is well-advantaged and prepared to act on strategic opportunities as they arise.

Anthony Pettinari inquired about the performance of Masco's premium plumbing brands (Brizo, Hansgrohe) relative to other categories, and the performance and growth opportunities (organic/inorganic) in the sauna/wellness category (Watkins Wellness).

Answer

President and CEO Jon Nudi stated that Masco's upper premium and luxury plumbing brands (Brizo, Newport Brass, Axor) are performing well and growing fastest, driven by resilient upper-income consumers. Hansgrohe is performing strongly globally, gaining share in most markets, with China being the main soft spot. For Watkins Wellness, Jon Nudi expressed excitement for long-term growth, citing low household penetration for hot tubs (5-6%) and saunas (1%), cultural buzz around wellness, and Masco's market leadership, seeing tremendous upside.

Anthony Pettinari asked about the performance of Masco's best plumbing brands, specifically Brizo and Hansgrohe, and if they are still outperforming. He also inquired about the performance of the Watkins Wellness category in a tough market and whether the growth opportunity there, organically or inorganically, has changed compared to 6-12 months ago.

Answer

Jon Nudi, President and CEO, reported strong performance for Masco's upper premium and luxury plumbing brands (Brizo, Newport Brass, Axor), noting they are growing fastest as upper-income consumers hold up well. He also highlighted Hansgrohe's strong performance globally, particularly in Germany, despite China being a soft spot. For Watkins Wellness, he expressed excitement for long-term opportunities due to wellness trends and low household penetration for hot tubs (5-6%) and saunas (1%), seeing tremendous upside for the business.

Anthony Pettinari from Citigroup Inc. inquired about the performance of Masco's plumbing brands across the good (Peerless), better (Delta), and best (Brizo) tiers, and asked for a price versus volume breakdown for the full-year plumbing sales guidance.

Answer

CEO John Nudi stated that the upper premium and luxury brands are performing strongly, with some minor trade-down observed in mid-tier brands. CFO Rick Westenberg clarified that the full-year plumbing sales guidance of up low-single digits is composed of positive pricing partially offset by lower volumes.

Anthony Pettinari inquired about Masco's current sourcing footprint strategy, how it compares to efforts during previous tariff periods, and whether the easiest resourcing moves have already been made. He also asked if there was a noticeable pullback in demand immediately following the recent tariff announcements.

Answer

CFO Richard Westenberg explained that Masco has been on a "sourcing footprint journey" since 2018, reducing China exposure by 45%, and is now accelerating these efforts. He noted the company has a strong U.S. manufacturing footprint but will continue diversifying its international supply chain. Westenberg and CEO Keith Allman stated they have not seen a significant inflection point or inventory change post-tariff announcement, with recent volume trends being consistent with year-to-date performance.

Anthony Pettinari inquired about the cost inflation and offsetting pricing assumptions within the 2025 guidance for both the Plumbing and Decorative Architectural segments. He also asked if the scale of cost savings initiatives in 2025 would be comparable to 2024.

Answer

CFO Rick Westenberg projected low single-digit inflation in Plumbing, which is expected to be more than offset by pricing for a positive price-cost dynamic. For Decorative Architectural, he anticipates a price-cost flat dynamic. He confirmed that driving operational efficiencies and cost savings remains a key priority to achieve margin expansion in 2025.

Anthony Pettinari requested an update on Smurfit Westrock's full-year EBITDA bridge, specifically on pricing expectations mid-year versus current projections. He also asked for a recap of current energy projects, particularly in North America, and the company's outlook on energy opportunities given rising electricity demand from AI/data centers.

Answer

CFO Ken Bowles updated pricing expectations for the full year to $830-$840 million, slightly down from $900 million mid-year due to Q4 demand and potential price weakness. CEO Tony Smurfit highlighted a recently approved large energy project at the Covington mill to convert from coal to natural gas, with an IRR of 20-50%, and mentioned a biomass project in Colombia for next year. He noted no significant impact from AI/data centers on mill energy costs. Ken Bowles added that kraft systems are generally well-served by their own power plants and that energy projects also yield CO2 reduction benefits.

Anthony Pettinari asked for an update on the full-year EBITDA bridge, specifically regarding pricing, and sought information on current energy projects, including any impact from AI and data center demand, and future opportunities at their mills.

Answer

CFO Ken Bowles updated the pricing outlook, expecting it to be $830 million-$840 million for the full year, slightly down from the half-year estimate. CEO Tony Smurfit highlighted a large energy project at the Covington mill transitioning from coal to natural gas with high projected returns, and a biomass project in Colombia. He noted no major cost increases from AI/data centers affecting their mill systems. Ken Bowles added that kraft systems are generally well-served from a power plant perspective and that energy projects also contribute to CO2 reduction.

Anthony Pettinari from Citigroup asked for the company's current integration rates in corrugated and consumer packaging, how the carton converting system compares to corrugated in terms of opportunity, and for details on volume underperformance in Mexico.

Answer

EVP & Group CFO Ken Bowles stated the integration rate is now about 90% in containerboard and 60% in consumer packaging. CEO Tony Smurfit expressed that he is very impressed with the carton business, noting it is a well-rationalized system with strong market positions and growth potential. He explained that poor volumes in Mexico were self-inflicted, resulting from exiting highly unprofitable legacy contracts to improve plant-level profitability.

Anthony Pettinari from Citigroup asked for a comparison of the North American corrugated and consumer businesses and for impressions of the consumer segment. He also inquired about the 'value over volume' strategy and how long it might take to manage customer churn.

Answer

CEO Tony Smurfit expressed a very positive view of the consumer business, calling it well-run with good assets, though noting a strategic question around SBS. For corrugated, he sees opportunity to bring Smurfit Kappa's innovation to the US. On the 'value over volume' strategy, he explained the goal is to replace poor-margin business with better business, a process he believes can happen within a year without major disruption.

Anthony Pettinari from Citigroup asked for the company's current integration rates in corrugated and consumer packaging. He also inquired how the opportunity in the carton converting system compares to the box system and asked for reasons behind volume underperformance in Mexico.

Answer

EVP & Group CFO Ken Bowles stated the integration rate is now about 90% in containerboard and 60% in consumer packaging. CEO Tony Smurfit expressed that he is very impressed with the carton system, noting it is a good business to invest in. He explained that the poor volume in Mexico was self-inflicted, resulting from a strategic decision to exit a very large, highly unprofitable customer contract, which has since significantly improved the plant's profitability.

Anthony Pettinari questioned the $2.5 billion share repurchase guide for 2026, which is significantly lower than 2025 despite similar cash generation, asking if it reflects caution or a shift in capital allocation priorities, such as increased land purchase or development. He also requested additional color on the Southeast region's relatively weaker sales order growth, including specific MSAs, inventory challenges, and visibility into an inflection point.

Answer

CFO Bill Wheat explained that the $4.3 billion repurchases in fiscal 2025 were due to unique circumstances, including higher liquidity, being below leverage targets, and stock price dislocation. The $2.5 billion guide for 2026 is a baseline governed by the expected $3 billion cash flow, with adjustments based on market conditions and cash generation. COO Mike Murray attributed Southeast weakness primarily to Florida, specifically Jacksonville and Southwest Florida, which have experienced excess inventory and slower demand absorption.

Anthony Pettinari questioned why D.R. Horton's fiscal 2026 repurchase guide of $2.5 billion is significantly lower than the $4.3 billion in fiscal 2025, despite potentially similar cash generation, and asked about broader capital allocation priorities for 2026. He also sought additional color on the Southeast region, where sales order growth was relatively weaker, asking about specific MSAs, inventory challenges, or visibility into an inflection.

Answer

Bill Wheat, CFO, explained that fiscal 2025 had unique circumstances, including higher liquidity and being below leverage targets, which allowed for increased repurchases at a lower stock price. The $2.5 billion guide for 2026 represents a baseline, with repurchases and dividends governed by cash flow, and will be adjusted as market conditions dictate. Mike Murray, COO, attributed the Southeast's performance to Florida, a large component of the region, where some markets like Jacksonville and Southwest Florida have struggled with excess inventory and slower demand absorption.

Anthony Pettinari of Citigroup asked about the drivers behind the year-over-year closings growth in the North and East regions and inquired about the current labor inflation and availability environment.

Answer

EVP and COO Michael Murray attributed the regional growth to historically supply-constrained markets with strong underlying demand. Executive Jessica Hansen added that the North region has also seen a higher increase in community count. On the labor front, Michael Murray stated that they assume costs will remain relatively flat, as they have a good labor base that has contributed to improved cycle times.

Anthony Pettinari from Citigroup inquired about trends in consumer debt levels and mortgage qualification, and whether first-time or move-up buyers are performing better. He also asked how the returns profile of smaller-format homes compares to traditional offerings.

Answer

President and CEO Paul Romanowski noted no significant change in the credit makeup of buyers, with 59% being first-time homebuyers, though move-up buyers found it slightly easier to finalize sales last quarter. COO Michael Murray stated that the margin and returns profile for smaller-format products like townhomes is very similar to detached homes when the product is well-positioned in its market.

Anthony Pettinari inquired about the trend for stick and brick costs heading into fiscal Q1 and asked for the company's perspective on key issues to watch for in the upcoming election that could impact the housing industry.

Answer

EVP Jessica Hansen confirmed that stick and brick costs are not a major driver of margin changes and are expected to be relatively flat in fiscal 2025. EVP & COO Michael Murray commented on the election, suggesting that its conclusion would be positive for buyer sentiment by removing uncertainty.

Anthony Pettinari asked about the drivers of the 'bad year' for beer in Europe, questioning if it's a secular shift or due to factors like weather and consumer weakness, and the outlook for beer into next year. He also inquired if aluminum conversion cost headwinds in Europe are expected to continue into next year or if savings are anticipated.

Answer

Oliver Graham (CEO) stated it's too early to call a secular shift in European beer, attributing weakness to poor weather and consumer weakness, and expects brewers to implement strategies to reverse trends in 2026. He noted that European aluminum conversion cost headwinds will moderate significantly in 2026, with no major savings opportunity but also no major headwind.

Anthony Pettinari asked for more detail on the drivers of Europe's weak beer year, including consumer behavior and weather, and whether there was a parallel to North America's secular pressure on beer. He also inquired if aluminum conversion cost headwinds in Europe would continue into next year or if savings were expected.

Answer

CEO Oliver Graham stated it was too early to call a secular shift in European beer, attributing weakness to a poor year, consumer weakness, and weather. He expects brewers to implement strategies to reverse trends in 2026. Regarding European aluminum conversion costs, he anticipates the significant step-up from this year to moderate, with no major savings but also no major headwind, as the market remains tight.

Anthony Pettinari asked about April's business trends following tariff announcements, the potential impact of consumer inflation on beverage can demand, and whether the North American energy drink market has recovered.

Answer

CEO Oliver Graham stated that April's momentum continued, supporting a guidance upgrade, and that he does not anticipate a material impact from tariffs due to hedging and offsetting LME price declines. He expressed confidence that the energy drink category has 'turned the corner,' citing broad-based growth across customers, though he noted some of the current strength is related to inventory building for the summer season.

Anthony Pettinari from Citi inquired about projected 2025 capacity utilization rates in North America and Europe and the overall supply/demand balance in those regions. He also asked about the key drivers behind glass-to-metal substitution in Europe.

Answer

CEO Oliver Graham projected North American utilization in the mid-90s, describing the market as "quite tight." He noted Europe also feels tight, especially on the continent, with ongoing regional shortages. Graham identified several drivers for glass-to-metal substitution, including the can's price competitiveness, its clear decarbonization roadmap, and the significant impact of higher energy costs on glass production, which has created a favorable price differential for cans.

Anthony Pettinari asked for clarification on the revised, lower volume outlook for the Americas and inquired about the long-term sustainability and drivers of the strong beverage can demand seen in Europe.

Answer

CEO Oliver Graham confirmed the Americas volume outlook was lowered due to softness in the U.S. energy drink category and a specific customer's brewery downtime in Brazil. For Europe, he expressed confidence in sustained long-term growth, citing ongoing substrate shifts from plastic and glass, the German market's recovery, and an expected improvement in consumer sentiment. He added that AMP's 2024 European growth was slightly constrained by capacity for certain can sizes.

Anthony Pettinari asked about the estimated tons of OCC PCA might purchase with the Greif assets and whether recycled demand is expected to grow faster or slower than Kraft-Weiner in the next three to five years. He also inquired about the CapEx spend for box plant projects from 2025 to 2026, and whether any PCA mills currently sell meaningful amounts of electricity back to the grid, or if this is an opportunity for future energy projects.

Answer

CEO Mark Kowlzan views the Greif mills as an opportunity to produce more medium, which PCA needs, combining well with high-performance liner grades. President Tom Hassfurther emphasized using the best solution for each end market. CFO Kent Pflederer stated that PCA's OCC furnish, previously in the low 20s, would increase by about 10% to around 30% with Greif. Mark Kowlzan indicated that CapEx would remain relatively flat as current large projects conclude, with Greif's CoreChoice minimizing the need for new plants. He highlighted upcoming energy projects as the next major capital focus, with high returns and short paybacks. He clarified that no PCA facilities currently sell electricity back to the grid, though one is 100% independent.

Anthony Pettinari asked about the expected increase in PCA's recycled mix with GRIF, inquiring about the potential tons of OCC PCA might purchase. He also questioned whether recycled demand would grow faster or slower than Kraft-Weiner over the next three to five years. Regarding CapEx, he asked if the spend for current box plant projects would be similar, ramp down, or ramp up in 2026. Lastly, he asked if any PCA mills currently sell meaningful amounts of electricity back to the grid and if this could be a future opportunity.

Answer

CEO Mark Kowlzan viewed GRIF as an opportunity to produce more recycled medium, which is needed and performs well with PCA's high-performance liner grades. President Tom Hassfurther affirmed the need for 100% recycled medium and PCA's strategy to offer the best solution for each end market. CFO Kent Pflederer quantified that PCA's furnish OCC would increase by about 10% to roughly 30% with GRIF. Mark Kowlzan stated that while current major box plant projects would conclude next year, CapEx would remain relatively flat, with GRIF's converting assets mitigating the need for new major plants for a couple of years. He highlighted future high-return energy projects as the next big capital focus. He confirmed PCA mills do not currently sell electricity back to the grid, though one facility is 100% independent.

Anthony Pettinari from Citigroup inquired about PCA's recycled fiber mix before and after the Greif acquisition and whether Greif's capabilities would open new markets. He also asked about the impact of recent competitor plant closures on PCA's business.

Answer

Chairman and CEO Mark Kowlzan stated that PCA's recycled mix will increase from around 20% to approximately 30% post-acquisition. President Thomas Hassfurther added that the acquisition provides better opportunities, citing the strategic location of Greif's Massillon mill near PCA plants. Regarding competitor closures, Hassfurther noted it reflects a limited outside market for containerboard and is a positive for supply-demand balance.

Anthony Pettinari inquired about the potential impact of tariffs on cost categories like steel and equipment, whether inflation is affecting project timelines, and how the new Glendale plant compares to the system average in terms of productivity and cost.

Answer

CEO Mark Kowlzan stated there have been no substantial cost impacts from tariffs yet, but the situation is being monitored, and project timelines are unaffected. He and President Tom Hassfurther explained that the new Glendale plant offers higher output at a lower labor cost, reflecting a broader, multi-year strategy of recapitalizing and modernizing the entire converting system to improve efficiency.

Anthony Pettinari asked for the approximate percentage of customers that have moved off RISI indexing and the timeline for this transition, and requested a breakdown of the 2025 CapEx budget, specifically the amount allocated to the four major box plant projects.

Answer

EVP Thomas Hassfurther stated that the process of moving customers off RISI indexing began about a year ago and will 'take some time' due to long-term contracts, declining to provide specific percentages. CEO Mark Kowlzan estimated that approximately $250 million of the 2025 capital budget is allocated to the major box plant projects, with another discrete $70 million project also planned.

Anthony Pettinari inquired if new e-commerce business wins were more recycled-based and if PCA's strategic view on virgin versus recycled mix was evolving. He also asked whether the failure to build inventory in Q3 was due to demand strength or operational issues.

Answer

Executive Vice President Thomas Hassfurther responded that PCA focuses on meeting customer performance needs, leveraging its versatile mill system to provide a competitive advantage, rather than pushing a specific fiber type. Chairman and CEO Mark Kowlzan confirmed the inventory shortfall was entirely driven by stronger-than-anticipated demand, not any operational shortfalls.

Anthony Pettinari followed up on CapEx, asking about the specific amount for 2026 given the lowered 2025 figure and the full capacity in North America and Europe. He also inquired about transit demand in Q3 relative to expectations and the outlook for Q4 and 2026.

Answer

President and CEO Tim Donahue indicated that CapEx for 2026 is expected to be in the $450 million-$500 million range, up from the revised $400 million for 2025, reflecting full but responsible capacity utilization. For transit, Donahue noted that commodity-side demand (steel/plastic strap, film) held up better than anticipated in Q3, especially in India and the U.S., offsetting lower, higher-margin equipment and tool sales impacted by tariffs. He suggested overall demand was in line with or slightly better than expected.

Anthony Pettinari inquired about the CapEx outlook for 2026, specifically if it includes deferred spending from 2025, and the capacity utilization in North America and Europe. He also asked about the performance of transit demand in Q3 relative to expectations and the outlook for Q4.

Answer

President and CEO Tim Donahue stated that systems in North America and Europe are 'full enough' for good margins and estimated 2026 CapEx at $450 million to $500 million. For transit, he noted that commodity-side demand (steel, plastic strap, film) held up better than anticipated in India and the U.S., offsetting lower equipment and tool sales, resulting in performance that was in line or slightly better than expected.

Anthony Pettinari inquired about the drivers behind the flat year-over-year Q3 EPS guidance, seeking segment-level expectations, particularly for Americas Beverage given its challenging comps. He also asked about the significant strength in the non-reportable segment, questioning the role of vegetable volumes, potential tariff-related pull-forwards, and the outlook for the second half.

Answer

President & CEO Timothy Donahue acknowledged the exceptionally strong second half of the prior year, especially in Americas Beverage. He projected continued improvement in European Beverage and North American Food for Q3, with Americas Beverage likely performing near the prior year's level. For the non-reportable segment, Donahue attributed the strength to investments in the North American food business, easy comps, and a potential shift to at-home consumption, along with early signs of recovery in the beverage can equipment business.

Anthony Pettinari asked about debottlenecking efforts to manage the tight supply situation and where future capacity additions might be needed. He also inquired about the potential impact of tariffs on the company's businesses in Mexico and Canada.

Answer

CEO Timothy Donahue explained that debottlenecking is difficult during the peak season but will be addressed in the offseason. He noted that due to the substrate shift in Europe, more capacity may be needed, with some already being added in Greece. Donahue sees minimal direct tariff impact in Mexico, as cans are sold domestically, but is watchful of indirect effects on consumer demand. For Canada, he believes a consumer shift to domestic beer would be a net benefit.

Anthony Pettinari of Citigroup asked about substrate substitution trends, specifically the runway for glass-to-can conversion in Europe versus the Americas. He also inquired about the potential impact of tariffs on the Transit Packaging business.

Answer

President and CEO Timothy Donahue confirmed the primary substitution in Europe is glass-to-can. He views the glass-to-can transition in the U.S. as substantially complete but sees a long runway for conversion in Mexico and for soft drinks in Brazil. Regarding tariffs, he noted an opportunity for them to protect the domestic transit, food can, and aerosol businesses from Chinese imports, particularly filled goods that circumvent existing tinplate tariffs.

Anthony Pettinari inquired about the contribution of the Helvetia acquisition to European growth and its operational status. He also asked about any changes in beverage can pricing dynamics or contract structures.

Answer

President and CEO Timothy Donahue stated the Helvetia acquisition contributed about 1-1.5% to European growth. He explained that significant effort is being spent retraining the workforce and upgrading the equipment, noting that many small, one-line operations are poorly run. On pricing, Donahue described the market as always competitive but mentioned no major shifts or large contract cliffs in the next two years, though some larger industry contracts are due heading into 2027. He believes customers will continue to favor reliable, quality suppliers.

Anthony Pettinari asked for clarification on the bridge between the current Q4 gross margin guide (25.5%-26%) and the prior guide (26%-26.5%), specifically the impact of lower mortgage rates on buy-downs and other offsets. He also inquired if a government shutdown would hinder PulteGroup's ability to offer mortgages or impact closings.

Answer

David Carrier (SVP of Finance, PulteGroup Inc.) explained that mortgage buy-downs have minimal impact due to slight rate movements. The revised Q4 gross margin guide reflects a combination of factors, including backlog, current sales floor incentives, and the need to move speculative inventory in competitive markets. Ryan Marshall (President and CEO, PulteGroup Inc.) stated that, to date, PulteGroup has not been impacted by a government shutdown, as their primary loan programs remain unaffected.

Anthony Pettinari asked for clarification on the bridge between the current Q4 gross margin guide and the prior guidance, specifically the impact of lower mortgage rates on buy-downs, and whether a government shutdown would affect PulteGroup's mortgage offerings or closings.

Answer

David Carrier, Senior Vice President of Finance, explained that lower mortgage rates have minimal impact on buy-downs. The revised Q4 gross margin guide reflects assumptions about moving spec inventory and competitive market dynamics. Ryan Marshall, President and CEO, stated that a government shutdown has not impacted PulteGroup's mortgage offerings or closings to date, given the specific loan programs they utilize.

Anthony Pettinari of Citigroup inquired about labor availability and cost trends for the full year compared to initial expectations. He also asked about the performance of the ICG off-site manufacturing business and any key learnings from its operation in a more volatile market.

Answer

President & CEO Ryan Marshall stated that labor remains available, with no change to their cost assumptions from the beginning of the year. Regarding ICG, he highlighted consistent benefits in cycle time, product quality, and purchasing efficiencies. He noted these learnings are consistent with past cycles and that the company looks forward to expanding this part of the business.

Anthony Pettinari asked about trends in stick and brick costs for Q3 and Q4, including the lag effect of lumber prices. He also inquired about resale inventory levels in key markets outside of Florida, such as Texas.

Answer

An unnamed executive stated that vertical costs have seen minimal inflation, holding steady around $80 per square foot. President and CEO Ryan Marshall added that lumber is typically bought on a 13-week trailing average to lock in margin. Regarding other markets, Marshall highlighted Texas as being 'choppier' and more competitive, with some markets like Austin still undergoing price normalization after significant appreciation, but did not flag other regions with inventory issues.

Anthony Pettinari asked about the company's margin outlook, specifically if the anticipated modest inflation includes any tariff-related price increases, or if tariffs are already largely reflected in current prices.

Answer

Kevin Murphy, President, CEO & Director, Ferguson, reiterated expectations for modest overall inflation (2% in the quarter) to continue, acknowledging the uncertain environment. He noted that manufacturers reacted quickly to initial tariff announcements, then pulled back, and have since taken a more cautious, wait-and-see approach. Murphy emphasized that product cost is secondary to labor cost, and Ferguson focuses on driving construction productivity, leveraging its scale and diverse supplier base to ensure competitive pricing and timely project completion.

Anthony Pettinari followed up on M&A, asking about the general outlook for the pipeline, valuations, seller expectations, and any increased competition for assets in water and air from new parties. He also inquired about margin and inflation, specifically whether expected inflation anticipates any specific tariff-related price increases or if tariffs are essentially already priced in.

Answer

Bill Brundage (CFO) stated no significant changes in the M&A landscape, which remains competitive in water and air, with valuations still towards the upper end of the typical 7-10x enterprise value to EBITDA range. He described the pipeline as healthy, consisting of small to medium-sized competitors, consistent with the industry's fragmented nature, and reiterated the strategy of consolidating these markets. Kevin Murphy (CEO) explained that earlier expectations for annual price increases and additional increases due to various factors have occurred, offset by commodity deflation (PVC). He described the 2% inflation in Q4 as modest and expects it to continue, noting the uncertain environment. He mentioned manufacturers' quick reaction to reciprocals, followed by a slower, wait-and-see approach, emphasizing Ferguson's focus on driving construction productivity and leveraging scale.

Anthony Pettinari followed up on the inflation outlook, asking if the anticipated modest inflation for the next few quarters includes specific tariff-related price increases or if tariffs are already largely reflected in current prices.

Answer

CEO Kevin Murphy explained that modest overall inflation (2% in the quarter) is expected to continue, influenced by annual price increases and commodity deflation (PVC). He noted manufacturers reacted quickly to initial tariff announcements but have since taken a more wait-and-see approach, leading to continued uncertainty. Ferguson focuses on leveraging scale and diverse sourcing to manage pricing.

Anthony Pettinari asked about the surprising strength in residential new build bidding activity and whether it was driven by demand or share gains. He also inquired about the market reception of the newly launched Ferguson Home brand.

Answer

CEO Kevin Murphy clarified the bidding strength was in Waterworks for single-family projects and expressed cautious optimism. Regarding Ferguson Home, he described the launch as a successful, multi-year effort to integrate the company's digital platform and physical showrooms, which has been well-received and is creating a seamless omnichannel experience for customers.

Anthony Pettinari from Citigroup Inc. asked about the progress and growth of Ferguson's owned brand or private label products in fiscal 2024 and inquired about the reason for the higher tax rate guidance for fiscal 2025.

Answer

CEO Kevin Murphy stated that owned brands represent just under 10% of revenue and are part of a broader product strategy, with faster growth currently in the residential business. CFO Bill Brundage explained that the adjusted effective tax rate is guided to approximately 26% for FY25, an increase reflecting the company's move to a U.S. domicile, which aligns with the U.S. federal corporate rate plus state taxes.

Anthony Pettinari of Citigroup requested more detail on the impact of the 'One Big Beautiful Bill Act' on the solar end market and Rayonier's conversations with partners. He also asked if the 100% bonus depreciation provision would affect project timelines.

Answer

EVP & Chief Resource Officer Douglas Long responded that despite legislative uncertainty, the solar development pipeline remains robust with new projects being negotiated. He noted that while a modest number of options expired, they were offset by new ones, and the growth outlook remains above pre-IRA levels. President & CEO Mark McHugh indicated that the key impacts of the legislation were covered in the prepared remarks, primarily affecting the land-based solutions business.

Anthony Pettinari from Citigroup asked if sawmill customers are taking concrete steps to ramp up production in response to anticipated Canadian lumber duties and requested more detail on the negative geographic and product mix shift within the Southern Timber segment.

Answer

Douglas Long, EVP & Chief Resource Officer, stated that while sentiment is positive, sawmills are currently expanding existing shifts rather than adding new ones, with most momentum seen in the U.S. South. He and President & CEO Mark McHugh detailed that the mix shift was driven by a glut of post-hurricane salvage logs in the high-value Atlantic region, which prompted a deliberate shift in harvest activity to the lower-priced Gulf region to avoid oversupplying the impacted markets. They expect this dynamic to reverse in the second half of the year, potentially leading to a sharp price recovery.

Anthony Pettinari from Citigroup questioned the Pacific Northwest guidance, which shows flat EBITDA despite lower harvest volumes, and asked about the potential impact of new tariffs on Canadian lumber.

Answer

President & CEO Mark McHugh and EVP & Chief Resource Officer Douglas Long explained the stable PNW EBITDA guidance is due to expectations for improved pricing and lower operating costs following the disposition of higher-cost timberlands. Regarding tariffs, Mr. McHugh noted that while there is no direct impact, higher duties on Canadian lumber would likely be a net positive for U.S. timberland owners by boosting domestic lumber prices and production.

Anthony Pettinari inquired about the primary drivers for the full-year guidance increase and how the underlying assumptions have shifted since the previous quarter.

Answer

CEO Jim Mintern attributed the guidance raise to a strong Q2 performance, robust infrastructure and non-residential demand, and healthy backlogs, noting a significant volume recovery in July. CFO Nancy Buese added that the guidance now includes a $340 million contribution from bolt-on M&A for the year, an increase from the prior forecast, but excludes the pending EcoMaterial acquisition.

Anthony Pettinari asked whether CRH has observed any project delays or cancellations, particularly in the private non-residential commercial sector, due to recent macroeconomic uncertainty.

Answer

Executive Jim Mintern stated that the company is not seeing any project cancellations or delays at this time. He emphasized that backlogs remain positive and that CRH continues to see positive momentum in key private non-residential categories like data centers and high-spec manufacturing, which have significant knock-on effects for broader infrastructure needs.

Anthony Pettinari asked for additional details on the key drivers and moving parts within the 2025 financial outlook, and whether the forecast has changed since preliminary guidance was issued.

Answer

CEO Jim Mintern expressed a positive outlook for 2025, citing a strong market backdrop, particularly in U.S. infrastructure fueled by IIJA funding. An executive, likely CFO Alan Connolly, detailed the financial bridge to the 2025 guidance, noting a net positive contribution of approximately $280 million from M&A activity, a $50 million headwind from currency exchange rates, and an expected normalization of gains from land asset sales compared to the higher levels seen in 2024.

Anthony Pettinari of Citigroup inquired about the key drivers of CRH's Q3 performance relative to expectations, given weather challenges, and asked for additional details on the reaffirmed 2024 guidance, including the puts and takes compared to three months ago.

Answer

CEO Albert Manifold attributed the strong quarterly performance to CRH's differentiated and resilient solutions strategy, which provides geographic and end-market diversity, making the business less impacted by weather and cycles. Executive Jim Mintern added that the reaffirmed guidance reflects continued positive momentum, with minimal net M&A impact expected in the current year and strong asset sales that were already factored into previous expectations.

Anthony Pettinari inquired about the non-residential and European insulation businesses, asking for the expected magnitude of Q3 revenue growth and the price-cost dynamics in those specific markets.

Answer

CFO Todd Fister guided to modest Q3 revenue growth in both markets. He highlighted that in North American non-residential, strength in high-value end-markets like data centers is driving demand, and more stable pricing is typical for these specified products. For Europe, he noted 'green shoots' of recovery from a low base, with the company well-positioned to capture incremental margins as the market improves.

Anthony Pettinari inquired about the potential financial impact of tariffs on Owens Corning and the company's strategies to mitigate these costs.

Answer

Chief Financial Officer Todd Fister explained that Owens Corning's exposure is limited as it operates on a 'local for local' model. He quantified the potential impact at 5% or less of total enterprise cost, primarily affecting the Doors and Insulation segments due to their integrated North American supply chains. Fister emphasized the company's proven ability to manage dynamic market conditions and offset such costs over time.

Anthony Pettinari from Citigroup inquired about the underlying demand trends for the Doors business since the acquisition, seeking details on performance versus expectations and prospects for volume and price improvement in 2025.

Answer

CEO Brian Chambers reported that the Doors business performed in line with expectations despite challenging market conditions in both new construction and R&R. He noted that volume declines were consistent across interior and exterior doors. Looking to 2025, he anticipates a more favorable demand environment and confirmed the company is on track to deliver its $125 million cost synergy target from the Masonite integration.

Anthony Pettinari from Citigroup requested a more detailed breakdown of the full-year EBITDA bridge, focusing on the expected total cost savings versus the net price impact.

Answer

President, CEO & Director Dustin Semach provided a detailed bridge, outlining a ~$44 million negative impact from volume, a ~$65 million negative impact from net price realization, offset by ~$106 million in cost take-out and productivity savings. He also noted a ~$20 million benefit from compensation program changes and a ~$3 million drag from FX, leading to the forecasted year-over-year result.

Anthony Pettinari inquired about the Sealed Air's Protective segment, asking which specific product lines are dragging on volumes and if any are showing signs of inflection. He also asked about the company's sensitivity to potential new tariffs, particularly concerning cross-border trade with Mexico, Canada, Europe, and China.

Answer

CEO Dustin Semach explained that the fulfillment portfolio, particularly poly void-fill and poly mailers, continued to see pressure, similar to 2024 trends, while APS and shrink films were bright spots. He noted the first half of 2025 would be impacted by wrapping on large customer churn from the prior year. Regarding tariffs, Semach stated that most business is domestic, minimizing holistic impact, but the most pronounced potential effect would be on trade with Mexico and Canada, which the company plans to mitigate through supply chain shifts and potential cost pass-throughs.

Anthony Pettinari inquired about the Protective segment's volume performance, asking which specific product lines are expected to be the largest drag in the first half of 2025 and if any areas are already showing signs of a positive inflection. He also asked about the company's sensitivity to potential new tariffs, particularly concerning cross-border trade with Mexico, Canada, Europe, and China.

Answer

CEO Dustin Semach explained that the first-half weakness in Protective is due to lapping significant customer churn from the prior year, notably the loss of Fill-Air business from Amazon. He noted that industrial portfolios were down mid-single digits while fulfillment was down high-single digits. Regarding tariffs, Semach stated that most of the business is domestic production for domestic consumption, minimizing broad risk. The most pronounced potential impact would be on trade with Mexico and Canada, which the company plans to mitigate through supply chain adjustments and, if necessary, price pass-throughs.

Anthony Pettinari inquired about the timeline for achieving flat year-over-year volumes in the Protective segment and when automation comps might become less challenging.

Answer

CEO Patrick Kivits highlighted a recent win with Best Buy as a positive sign for their fiber-based offerings. President and CFO Dustin Semach added that comps for void-fill products will improve in the coming year as they lap a significant customer loss. He also noted that the automation book-to-bill ratio has been 1:1, suggesting a better backlog and starting point for 2025.

Anthony Pettinari of Citigroup questioned the July box volume trends in North America and Europe and asked about the likelihood of customer inventory restocking in the second half. He also requested details on the nature of recent commercial wins, such as customer type and size.

Answer

CEO & Chairman Andrew Silvernail characterized the market as relatively flat, linked to a soft goods economy, and stated he sees no signs of a major inventory restocking, as customers are more disciplined post-COVID. He noted the commercial wins represent a critical pivot and are a mix of large national accounts, who value service and quality, as well as local customers.

Anthony Pettinari sought confirmation on European pricing assumptions for the second half and asked for more detail on the drivers of the steep earnings ramp in Europe. He also inquired about how CEO Andrew Silvernail is allocating his time and strategic focus between the North American and EMEA businesses.

Answer

Executive Andrew Silvernail confirmed the first European price increase is included in the second-half forecast, but the second is not. The improvement is expected from that price increase and cost-out initiatives via the 80/20 system. Silvernail stated his primary focus is on building his senior team and deploying the 80/20 system, noting he spent significant time in Europe in Q1 to launch the DS Smith integration and is now balancing his attention between both regions.

Anthony Pettinari from Citigroup inquired whether project timelines are still extending or if customer confidence is improving, specifically regarding the conversion of project bids into firm bookings.

Answer

J. Thomas Hill, Chair & CEO, confirmed that the trend has turned positive. He stated that projects are now being greenlit and are moving forward, which is accelerating the company's booking pace and building its backlog across all end markets except for single-family residential.

Anthony Pettinari requested details about the recently announced acquisition of Wake Stone Corporation, including its business profile, asset profitability, and annual tonnage.

Answer

Chairman and CEO James Hill described Wake Stone as a leading aggregates supplier in the high-growth Raleigh-Durham-Chapel Hill market of North Carolina. He shared that the business has historically produced 8 to 9 million tons per year. While deferring comments on specific profitability until the deal closes, he expressed high confidence in the acquisition's value creation potential and the quality of the Wake Stone team.

Anthony Pettinari asked about the drivers behind strong aggregates and fly ash volume growth, which outpaced weaker cement and ready mix, and inquired about the impact of import tariffs on the cement business.

Answer

CFO Larry Wilt attributed the strong aggregates performance to new capacity from recent investments and noted fly ash volumes were growing from a low base. CEO Bill Zarkalis added that the new capacity complements their integrated business model. Regarding tariffs, Mr. Wilt quantified the P&L impact in the second quarter at approximately $1.0 million to $1.2 million.

Anthony Pettinari inquired about the 2025 revenue guidance, seeking a breakdown between price and volume, and asked for a directional outlook on performance differences between the Florida and Mid-Atlantic segments. He also questioned the potential business impact of cement tariffs.

Answer

CFO Lawrence Wilt expressed confidence in growth across both the Mid-Atlantic and Florida regions. CEO Vassilios Zarkalis added that positive pricing momentum is expected to continue in 2025, with revenue growth driven primarily by infrastructure and commercial projects offsetting softness in residential. Regarding tariffs, Zarkalis stated that Titan America's current import sources are not affected, and the company's multiple sourcing options provide flexibility. He suggested that broader tariffs could have a positive knock-on effect on industry pricing power.

Anthony Pettinari asked for the rationale behind expecting a potential Section 232 tariff on lumber, the impact of a higher taxable REIT subsidiary (TRS) threshold, and whether recent legislative changes pose a risk to the company's solar option portfolio.

Answer

President & CEO Eric Cremers clarified that his view on a potential Section 232 tariff is "pure speculation" based on the administration's past actions on other commodities. VP & CFO Wayne Wasechek noted the higher TRS threshold provides "modest expansion opportunities" for the Wood Products business. Cremers added that the solar outlook remains strong, citing a new 9,000-acre option being finalized which will bring the total portfolio to 43,000 acres, and that recent legislative changes have not negatively impacted developer interest.

Anthony Pettinari asked about the impact of recent tariff announcements on the company's order book and customer demand, and what would happen to Canadian lumber volumes if duties were to increase to the 34-35% range.

Answer

President and CEO Eric Cremers explained that the tariff announcements did not significantly alter end-consumer demand, although there was some speculative ordering of SPF lumber that subsequently had to be unwound. Regarding a potential 34-35% duty on Canadian lumber, he anticipates a mixed impact, where larger integrated producers might absorb some costs, but smaller independent Canadian mills would face significant pressure, likely leading to more curtailments or closures.

Anthony Pettinari from Citigroup inquired about the drivers behind the recent uptick in lumber prices, asking if it was supply or demand-driven. He also asked about the new cost support level for high-cost Canadian producers and the long-term outlook for Southern sawlog prices, which have remained flat despite inflation.

Answer

President and CEO Eric Cremers stated the lumber price increase is primarily supply-driven, citing 4-5 billion board feet of capacity curtailments and hurricane impacts, with future demand optimism fueled by Federal Reserve rate cuts. He identified the breakeven for a median British Columbia mill at around $400, which he expects to rise with future duty increases. Executive Wayne Wasechek added that Southern log prices are tied to lumber markets and are expected to improve in 2025, particularly in the Southeast, as market tension increases.

Anthony Pettinari inquired about the flow-through impact of increased 2025 capital expenditures on free cash flow for 2026 and 2027, and asked for details on the drivers of the Waco project cost overruns.

Answer

EVP & CFO Stephen Scherger clarified that the 2025 CapEx increase is offset by lower cash taxes and working capital, leaving 2025 free cash flow unchanged. He noted the 2026 free cash flow guidance was updated based on the 2025 EBITDA starting point. CEO Michael Doss added that the Waco cost overruns were driven by higher labor costs for skilled trades like electricians and evolving permitting requirements, but the project remains on schedule and its expected returns are strong.

Anthony Pettinari inquired about the relative strength and operating rates of different paperboard substrates post-divestiture and asked about the pricing environment for 2025, including efforts to move customers off the RISI index.

Answer

President and CEO Michael Doss stated that operating rates are less relevant for Graphic Packaging due to its high integration, especially in cupstock, and downplayed the impact of imports. EVP and CFO Stephen Scherger added that pricing is expected to be neutral in 2025, as the price declines from 2024 are now in the past. He also noted that customer receptivity to the company's internally developed pricing index has been high.

Anthony Pettinari of Citigroup asked about the monthly cadence of cement volumes during the quarter, the outlook into July, and any notable regional or state-level demand dynamics.

Answer

EVP & CFO Craig Kesler described the volume cadence as consistent throughout the quarter, supported by infrastructure spending. CEO Michael Haack added that demand was stable across all of the company's markets, with no significant regional deviations to report, even with weather challenges in certain areas like Oklahoma.

Anthony Pettinari asked about the impact of recent tax legislation on the Natural Climate Solutions business, particularly for renewable projects, and questioned the drivers behind the recent stabilization in lumber prices.

Answer

CEO Devin Stockfish described the legislation as a net positive, noting that while renewable project incentive deadlines were pulled forward, the long-term demand for renewables remains strong. He explained that lumber price stabilization was bifurcated, with SPF pricing influenced by anticipated duties and Southern Yellow Pine pricing finding a floor near cash-flow breakeven levels for the industry.

Anthony Pettinari asked about potential drivers for improvement in the U.S. South Timberlands business in 2025 and requested an estimate of the recent hurricanes' impact on operations and wood products demand.

Answer

CEO Devin Stockfish explained that overall Timberlands performance is largely tied to Western log prices, which follow lumber. For the South, he noted that some harvest volume was deferred due to weather and will be captured later, while new mill capacity and growing export opportunities should eventually support pricing. He stated the hurricane impact on Weyerhaeuser's timberlands was minimal, causing a slight volume deferral but no significant damage. The market impact is mixed, with some mill downtime offset by future reconstruction demand.

Anthony Pettinari asked about the potential impact of tariffs on steel costs and customer behavior, the timing of flow-through from the recent URB price increase, and the drivers behind strength in the wire and cable reels business.

Answer

President and CEO Howard Coker stated that while tariffs can be passed through, they create uncertainty for customers. He noted the URB price benefit will build through Q3 and Q4. He attributed the strength in reels to high demand from fiber optics and energy infrastructure projects. Interim CFO Jerry Cheatham added that tariff impacts are expected to be recovered on the P&L.

Anthony Pettinari questioned the decision-making process for exiting single-use plastics, asking if it was a purely financial decision or influenced by sustainability trends. He also asked about the drivers of strong performance in the Metal Packaging segment and the state of customer inventories.

Answer

CEO Howard Coker clarified that the portfolio simplification strategy was a financial and strategic decision made years ago to focus on markets where Sonoco could be #1 or #2, and was not primarily driven by sustainability. Regarding Metal Packaging, he explained that performance was driven by a good customer mix, some share gains, a return to normal demand in aerosols post-destocking, and a competitor exiting the market.

Anthony Pettinari of Citigroup asked for more detail on the CEO's expressed dissatisfaction with Intelligent Labels' (IL) growth trajectory, specifically regarding efforts to improve network efficiency and innovation. He also inquired about competitive intensity and whether the IL slowdown is an industry-wide phenomenon.

Answer

President & CEO Deon Stander explained that network efficiency initiatives are focused on improving resilience to tariff-related manufacturing shifts. On the innovation front, he highlighted new products like microwavable and recyclable tags for the food sector. He stated that competitive intensity is unchanged and that Avery Dennison, as the market leader, expects to gain share. He believes the slowdown is industry-wide, given the sector's high exposure to apparel, but remains confident in the long-term adoption pipeline, especially in food and logistics.

Anthony Pettinari of Citigroup asked for more detail on management's comment about not being satisfied with Intelligent Labels (IL) growth, inquiring about specific actions to improve network efficiency and innovation, and the overall competitive intensity in the IL market.

Answer

President & CEO Deon Stander elaborated that the company is taking steps to improve the resilience of its global manufacturing network. On innovation, he highlighted new products like microwavable and recyclable tags for the food category. He stated that competitive intensity hasn't changed, and he anticipates Avery Dennison's market share will increase this year, driven by new rollouts and loss-detection solutions with customers like Inditex.

Anthony Pettinari from Citigroup asked for more detail on the CEO's comment about not being satisfied with the Intelligent Labels (IL) growth trajectory, focusing on efforts to improve network efficiency and innovation, and also inquired about the competitive landscape.

Answer

President & CEO Deon Stander explained that the company is enhancing its network resilience and innovating with products like microwavable and recyclable tags for food applications. He stated that competitive intensity is unchanged and that Avery Dennison expects to increase its market share through new rollouts, such as its loss detection solution with Inditex. He reiterated his strong conviction in the platform's long-term growth potential.

Anthony Pettinari sought an update on the net pricing progression, asking if the previously expected stabilization would be altered or delayed by the implementation of new tariff-related surcharges.

Answer

CFO Gregory Lovins explained that while there was price down in Q1 versus the prior year, the sequential pricing environment from Q1 to Q2 would have been relatively stable, excluding tariffs. With the new tariffs, the company will implement surcharges, which should result in a pricing benefit as the second quarter progresses.

Anthony Pettinari asked if the company's label volumes tracked in line with the industry in Q3 and year-to-date, posed the same question for Intelligent Labels, and sought confirmation that the weaker Q3 IL performance was solely due to project timing and comps.

Answer

President and CEO Deon Stander confirmed that label volumes are largely in line with the industry and that the company is maintaining or slightly expanding its share. For Intelligent Labels, he stated performance is generally in line with the market they are creating, despite some volatility. He explicitly confirmed the Q3 IL softness was due to specific customer comps and transition issues previously mentioned, with no other fundamental impact.

Anthony Pettinari asked for a more detailed quarterly cadence of CapEx for the Arkansas facility and a timeline for when the spending would be substantially complete. He also inquired about the company's digital transformation initiatives and their expected benefits.

Answer

CFO Brenda Lovcik explained that with a total project cost of ~$550 million and ~$200 million budgeted for the current year, the vast majority of spending will be completed by year-end, paving the way for significant free cash flow improvement in 2026. She detailed that the digital transformation focuses on process automation, leveraging data for real-time insights, and enhancing the overall customer journey.

Anthony Pettinari asked about the expected cadence of net price and curtailment cost headwinds in Europe throughout 2025 and the market impact of fewer Chinese glass imports in the U.S.

Answer

CFO John Haudrich stated that both headwinds are front-loaded. The net price headwind will lessen in Q2 and be minor in the second half, while curtailment costs peaked in Q1 and should become a tailwind by the second half. CEO Gordon Hardie noted that the impact from fewer Chinese imports is currently muted due to significant pre-buying by distributors, with those inventories expected to deplete by the end of the summer.

Anthony Pettinari asked about the dynamics of substrate substitution between glass and cans across different regions and categories, and whether it poses a headwind or tailwind for 2025.

Answer

CEO Gordon Hardie stated that O-I must become more competitive with cans, noting that glass gains share when its cost is within 15% of can pricing. He explained that the 'Fit to Win' program is designed to address this historical competitive gap. Hardie also highlighted a new growth opportunity in the ready-to-drink (RTD) category, as 12-ounce glass packaging is now available for the first time in over 20 years, opening a market previously inaccessible to glass.

Anthony Pettinari from Citi asked about the specific actions O-I is taking to improve its demand forecasting capabilities. He also sought to understand the potential scale of the planned capacity closures, questioning if the "7% or more" figure could be significantly higher.

Answer

CEO Gordon Hardie attributed past forecasting challenges to post-COVID disruptions and noted the big unknown remains in-home pantry stock, especially for spirits. He said improvements will come from closer collaboration with customers on data sharing and internal investments in AI-powered analytics. CFO John Haudrich clarified that the 7%+ closure target is part of "Phase A" to align supply with demand and eliminate low-profit capacity. He indicated that "Phase B" could involve further closures as productivity gains unlock more capacity.

Anthony Pettinari of Citigroup Inc. asked how Forestar is balancing increased SG&A costs with slowing market demand and whether further cost actions are being considered. He also questioned the potential impact of tariffs on land development costs and requested a characterization of lot demand in key states like Texas and Florida versus the national average.

Answer

CFO James Allen stated the SG&A increase was driven by a 29% rise in headcount to support expansion, noting hiring has since slowed and he expects the SG&A-to-revenue ratio to fall to the high single digits. COO Mark Walker described tariff impacts as 'noise' for now, believing the company's scale will mitigate cost pressures. President and CEO Anthony Oxley noted some weakness in Florida but less in Texas, characterizing the market shift as a change in pace to more normal pre-COVID takedown rates.

Requested more detail on the cadence and segment split for the full-year volume guidance and asked for an update on the strategic review of the Pine Bluff mill.

Answer

The company expects volume growth to be back-half weighted, with a flat first half followed by an inflection driven by promotions and new business. Food & Beverage Merchandising volume growth is expected to be slightly higher than Foodservice for the full year but will dip in H1 before ramping. Regarding Pine Bluff, the strategic review is ongoing, and they continue to invest in the asset to ensure it serves their network and customers.