Detlef Winckelmann

Detlef Winkelmann asked about the change in North America's commercial improvements guidance, noting a shift from approximately $300 million in Q3 to $100 million year-on-year. He also requested a breakdown of the $5 billion EBITDA target for 2027 between the European and North American segments.

Answer

SVP and CFO Lance Loeffler clarified that the $100 million commercial improvement in North America is a net figure, accounting for trade-offs such as exiting the export business and the Savannah closure. Chairman and CEO Andy Silvernail provided a general breakdown for the 2027 $5 billion EBITDA target, indicating approximately $3.5 billion from North America and $1.5 billion from Europe.

Detlef Winckelmann asked about the discrepancy between the $100 million commercial improvements guided for North America year-on-year and the $300 million figure from the Q3 bridge. He also inquired about Europe's contribution to the $5 billion EBITDA target for 2027, given previous demand and pricing adjustments.

Answer

SVP and CFO Lance Loeffler and Chairman and CEO Andy Silvernail clarified that the $100 million commercial improvement for North America is a net figure, accounting for trade-offs such as exiting the export business and the Savannah closure. Regarding the 2027 EBITDA target, Mr. Silvernail stated that it generally comprises $3.5 billion from North America and $1.5 billion from Europe.

Detlef Winckelmann of JPMorgan Chase & Co. questioned why the Q3 EBITDA bridge did not include a positive impact from recent linerboard price increases and asked for clarification on the synergy realization cadence, which seemed to imply a slowdown in the second half.

Answer

EVP & Group CFO Ken Bowles explained that the Q3 guidance is based on the most certain factors, like downtime and cost relief, with some conservatism on price and volume which are yet to play out. Regarding synergies, he stated that realization is not linear and occurs at a different pace for each initiative, emphasizing the focus is on achieving the full run-rate target by the end of 2025 rather than a constant quarterly achievement.

Detlef Winckelmann asked for clarification on the $100 million of economic downtime planned for Q2, seeking to understand if this represents a permanent reduction in output for the year or if it is a temporary measure contained only to the second quarter.

Answer

CEO Tony Smurfit confirmed that the planned downtime is a 'one-off' issue specific to Q2. He explained that in Q3 and Q4, the system will be rebalanced by the permanent removal of capacity from the recently announced mill closures, making the Q2 economic downtime a temporary measure.

Detlef Winckelmann of JPMorgan Chase & Co. questioned why the Q3 EBITDA bridge did not seem to include a positive impact from recent linerboard price increases. He also asked for clarification on the synergy realization cadence, noting that the full-year target implied a slowdown in H2 compared to H1.

Answer

EVP & Group CFO Ken Bowles explained that the Q3 guidance is based on the most certain factors, primarily lower downtime ($50M) and cost relief ($50M), with conservatism built in around price and volume. Regarding synergies, he stated that realization is not linear and occurs at a different pace for various initiatives, but the company remains confident in hitting its full run-rate target by the end of 2025.