Gabe Hajde

Gabe Hajde asked about potential anti-dumping interventions and countermeasures in South America, changes in the competitive landscape, and the impact of customer mergers or partnerships on Magnera's business. He also inquired about the impact of recent weather events on North American operations, clarification on 'improved operations and oversold platforms,' and the company's demand seasonality and synergy realization targets.

Answer

CEO Curt Begle indicated that anti-dumping legislation in Brazil is expected by May, potentially expanding to nonwoven materials. He noted stabilization in customer discussions, a pivot to premium applications, and a significant ramp-up in adult incontinence adoption rates in South America, now comprising 20% of the regional portfolio, with expectations for a 50/50 split in 3-5 years. Begle views customer mergers as positive, enhancing innovation and supply chain efficiencies due to Magnera's global scale. Regarding weather, Begle stated that North American facilities were impacted, affecting about 10% of shipping days, but pre-planning minimized long-term demand changes. He clarified 'oversold platforms' refer to maximizing production from existing assets through operational excellence, material innovation, and capital-light technology upgrades. For seasonality, Begle outlined demand as Q3, Q2, Q4, Q1 (Q4 and Q1 being softer). He confirmed $25 million in realized synergies for 2026, with the balance in 2027.

Gabe Hajde asked about the timing and impact of potential anti-dumping measures in South America, changes in the competitive landscape, the effect of customer mergers and partnerships, the growth of adult incontinence in the South American portfolio, the operational impact of recent weather events, Magnera's demand seasonality, and the progress on synergy realization targets.

Answer

Curt Begle (CEO, Magnera) indicated a May timeframe for anti-dumping proposals in Brazil, expanding to nonwoven materials, and noted stabilized customer dialogue. He highlighted a pivot to premium applications and increased adult incontinence adoption in South America, now 20% of the portfolio, projecting a 50/50 split with baby products in 3-5 years. Customer mergers are seen as a positive opportunity due to Magnera's global scale. Regarding weather, North American facilities were impacted, affecting about 10% of shipping days, but pre-planning mitigated long-term demand changes. He outlined fiscal demand seasonality as Q3, Q2, Q4, Q1 and confirmed $25 million in realized synergies for 2026, with the remainder in 2027.

Gabe Hajde from Wells Fargo inquired about the wide range in the full-year EBITDA guidance and recent volume trends. He also asked for more detail on Project CORE's regional focus, particularly in Latin America, and sought to quantify new business wins and the free cash flow outlook for fiscal 2026.

Answer

CFO Jim Till clarified that Q4 EBITDA is expected to be around $90 million, placing the full-year results at the lower end of the guided range, and confirmed the free cash flow guidance. CEO Kurt Begley explained that Project CORE initiatives are global, not confined to one region. Both executives deferred providing specific 2026 guidance on revenue wins or cash flow, stating it would be part of the full 2026 outlook.

Gabe Hajde asked how Silgan's go-to-market strategy, relationships, and contracts are impacted by the current volatile environment, characterized by mixed messaging, population trends, affordability concerns, GLP-1s, and CPG strategy changes. He questioned if this environment presents an opportunity for Silgan to help customers reduce costs and complexity in the supply chain, and how this is incorporated into the 2026 guidance. He also inquired about higher-margin product growth opportunities beyond fragrance in the dispensing business, specifically mentioning unidose products and the contributions from Weener and Unicep acquisitions.

Answer

CEO Adam Greenlee acknowledged the volatility of 2025 and stated that Silgan's consumer staples-focused portfolio is advantaged in such an environment, with products like food cans offering low-cost nutrition. He confirmed that cost reduction and sustainability initiatives with customers present opportunities. For 2026 guidance, Mr. Greenlee noted a broader, more conservative view of unknown risks like population trends and GLP-1s. Regarding higher-margin products, he identified healthcare and pharma as the next logical growth area, with a margin profile and growth rates similar to or stronger than fragrance and beauty. He mentioned a rapidly growing pharma healthcare business, significantly boosted by Weener's assets, with a strong multi-year development pipeline, aiming to double its size in the next three to five years.

Gabe Hajde asked how the current volatile environment, characterized by mixed messaging, population trends, affordability concerns, GLP-1 impacts, and CPG strategy changes, presents opportunities for Silgan and how this is incorporated into the 2026 guidance. He also inquired about growth opportunities in higher-margin products beyond fragrance within the dispensing business, specifically mentioning Unicep and unidose products in healthcare and pharma.

Answer

Adam Greenlee, President and CEO, acknowledged 2025 volatility but asserted Silgan's consumer staples portfolio is advantaged, seeing opportunities in customer relationships, product portfolio, and sustainability initiatives. He noted 2026 guidance takes a broader, more conservative view of risks like GLP-1s and affordability. Mr. Greenlee identified healthcare and pharma as a key growth area with strong margin profiles, rapidly growing from a smaller base, complemented by the Weener acquisition. He expects to double the healthcare business in 3-5 years through a strong internal pipeline and secured contractual obligations.

Gabe Hajde sought to reconcile the expectation of increased 2026 free cash flow despite current inventory reductions, asking about the levers for cash flow growth. He also inquired about additional strategies to instill confidence in Silgan's repositioning of the Dispensing and Specialty Closures business and the company's capital redeployment plans, given leverage considerations.

Answer

Adam Greenlee, President and CEO, Silgan Holdings, indicated that continued improvements in working capital and incremental programs would drive 2026 cash flow growth. He emphasized that performance and delivery on expectations are key to confidence, noting DSC's continued growth, Metal Containers' expected performance, and Custom Containers' record year. Greenlee mentioned Silgan repurchased $60 million in shares in Q3 due to market dislocation and has flexibility for M&A or share repurchases as leverage returns to the midpoint.

Gabe Hajde probed for the potential worst-case EBITDA impact from the customer bankruptcy, given the market's reaction. He also asked for an explanation of the significant working capital outflow during the quarter and the company's confidence in its recovery by year-end.

Answer

President & CEO Adam Greenlee pushed back on a suggested $20-25M EBITDA hit as too high, reiterating that Silgan's on-site facilities are competitively advantaged regardless of the asset owner. He explained the large working capital outflow was a strategic decision to procure raw materials in advance of tariffs to mitigate customer cost increases, and confirmed this is a timing issue that will reverse by year-end. SVP & CFO Kim Ulmer added that free cash flow levels will normalize.

Gabe Hajde asked about the potential upside from tariffs on imported Chinese food for Silgan's U.S. business, the company's exposure to the e-commerce channel for pet food, and the reason for elevated corporate expenses in the first quarter.

Answer

CEO Adam Greenlee acknowledged a potential upside from tariffs on imported foods but noted no concrete impact yet. He estimated e-commerce represents about 25% of the pet food market and believes Silgan is well-represented in that channel. CFO Kimberly Ulmer clarified that the Q1 corporate expense was higher due to corporate development activity, but the full-year forecast of $45 million remains unchanged.

Gabe Hajde requested a detailed bridge for the 2025 free cash flow forecast, seeking to understand all cash components from EBITDA down to the final number. He also asked about capacity constraints in the DSC segment and how associated start-up costs for new capacity are managed.

Answer

CEO Adam Greenlee and CFO Kimberly Ulmer confirmed the main components of the free cash flow bridge, including higher interest, taxes, and CapEx, and noted a working capital benefit is expected. Regarding capacity, Adam Greenlee explained that incremental additions in dispensing are ongoing and that related start-up costs are absorbed as a normal part of business operations.

Gabe Hajde asked about seasonal working capital changes and inventory reduction efforts, noting that production cuts will primarily impact the first half and that historically cash is consumed in Q1, potentially leading to higher leverage. He also inquired if the company anticipates continued underproduction and inventory unlocking in 2027, and if there's an order of magnitude for inventory reduction beyond 2026.

Answer

Chuck Lischer, SVP and Interim CFO, confirmed that cash flow is historically strongest in Q4 and is expected to follow this pattern in 2026, though the impact in 2026 should be significantly moderated compared to 2025 due to reduced Waco spend. He stated cash flow will follow EBITDA but remain back-end weighted. Lischer declined to provide 2027 guidance but reiterated the commitment to bringing inventory down to the 15%-16% target, preferably through demand rather than downtime.

Gabe Hajde asked about working capital and cash flow for next year, specifically inquiring about AR factoring/reverse factoring and its management into 2026. He also sought further clarification on the $65-$75 million start-up costs for Waco, asking if they include capitalized interest or 'wasted tons,' and if the phasing (two-thirds this year, one-third next) implies a net positive of $30 million, and if this is separate from the $80 million contribution.

Answer

Steve Scherger (EVP and CFO, Graphic Packaging) clarified that there would be no material changes in AR financing year-over-year, and it's not an enabler for 2026 cash flow. He reiterated that 2026 cash flow will be driven by reduced CapEx ($850 million this year to $450 million next, a $400 million delta), reduced inventory, and SG&A management. Mike Doss (President and CEO, Graphic Packaging) explained that the $80 million EBITDA is a run rate for next year, separate from the $65-$75 million one-time cash costs. Chuck Leisher (SVP and Chief Accounting Officer, Graphic Packaging) detailed that the start-up costs are mostly operating costs for training and facility readiness, not capitalized, and capitalized interest will cease once the asset is in service.

Gabe Hajde inquired about working capital and cash flow for the next year, specifically asking for details on AR factoring or reverse factoring programs and how they will be managed into 2026. He also sought clarification on Waco start-up costs, their breakdown, and if they are separate from the $80 million contribution.

Answer

EVP and CFO Steve Scherger stated that there would be no material year-over-year changes in AR financing programs, emphasizing that these are not key enablers for 2026 cash flow. President and CEO Mike Doss clarified that the $80 million is an EBITDA run rate, while the $65 million to $75 million are one-time cash costs. SVP and Chief Accounting Officer Chuck Leisher explained these are mostly operating costs prior to start-up, not capitalized, and that capitalized interest would cease.

Gabe Hajde sought clarification on the components of the under-absorbed fixed overhead costs from the first half and asked if 2025 maintenance levels are normalized, while also inquiring about beverage customer inventory levels.

Answer

EVP & CFO Stephen Scherger clarified that the second-half performance improvement is a combination of significantly less planned maintenance downtime and less market-related downtime, not solely from inventory reduction costs. He also confirmed 2025 maintenance levels are expected to be normal going forward. CEO Michael Doss added that the beverage season has been solid with strong demand, and they have no indications of a customer inventory-driven slowdown.

Gabe Hajde inquired about the competitive landscape, asking if the company is seeing more pricing pressure as competitors stabilize. He also asked if impacts from SNAP/Maha policy changes are already being felt and about the accounting for Waco start-up costs.

Answer

CEO Michael Doss stated that potential SNAP/Maha impacts are factored into the cautious guide but are not yet visible. He asserted that Graphic Packaging remains 'on offense' competitively, leveraging its low-cost, well-invested asset base. CFO Stephen Scherger clarified that the $65-75 million in Waco start-up costs are cash costs that will be booked mostly below the line and are already factored into the adjusted EBITDA guidance.

Gabe Hajde questioned the rise in inventory days, asking if it was intentional, and inquired about 2025 cost assumptions, particularly regarding labor and indirect costs versus direct input costs.

Answer

President and CEO Michael Doss explained that the inventory increase was partly to rebuild stocks and, more significantly, to prepare for the Waco facility startup, which requires building inventory to ensure customer supply during the transition. EVP and CFO Stephen Scherger stated that while labor and benefits inflation persists, the company's productivity initiatives are expected to more than offset these costs, ensuring continued margin stability.

Gabe Hajde sought to reconcile North America's low-end 2026 growth guide with 2025's 4.8% (organic vs. Florida Can), asked about evidence of customer pull-forward, the ability to tap latent capacity south of the border, and whether the 2026 NCA guide factors in World Cup/beer recovery. He also inquired about the Oregon facility's contribution (volume, earnings, timing) and potential for flat NCA operating earnings in 2026 with acceleration in 2027.

Answer

CEO Ron Lewis clarified that Florida Can contributed a small, but not immaterial, element to North America's 4.8% volume growth in 2025, which was not entirely organic. He saw no evidence of customer pull-forward in Q4 2025. Tapping latent capacity south of the border is prohibitive due to tariffs. The lower end of the 2026 volume range reflects capacity constraints until Millersburg is fully operational. He confirmed the Oregon facility (a one-line plant) will have relatively immaterial volume and no earnings contribution in 2026 due to startup costs, with significant contribution and acceleration expected in 2027.

Gabe Hajde with Wells Fargo sought to reconcile North America's 2026 low-end growth target (1%-3%) with 2025's 4.8% growth, asking if the latter was organic or included Florida Can. He also asked about evidence of customer pull-forward in 2025 due to aluminum costs, and if the 2026 NACA guide accounts for World Cup benefits, beer recovery, or latent capacity south of the border.

Answer

CEO Ron Lewis clarified that Florida Can contributed a small, but not immaterial, element to the 4.8% growth in 2025, which was not entirely organic. He stated there was no evidence of pull-forward in Q4 2025, with the can market continuing to grow. He dismissed using south-of-the-border capacity due to prohibitive tariffs, explaining that the lower 2026 volume range for North America is due to capacity constraints until the one-line Millersburg plant (expected to produce ~1 billion cans) ramps up, with significant contribution likely in 2027.

Gabe Hajde questioned the sudden January demand upturn despite muted 2025 box demand, asking if it's PCA-specific or durable, and if destocking played a role. He also asked about Greif acquisition integration, the 'impromptu mill rebuild,' expected EPS accretion, and the directional trend of CapEx for 2027.

Answer

President Tom Hassfurther attributed the demand upturn to low customer inventories and a positive market vibe from cleared uncertainties. Chairman and CEO Mark Kowlzan explained the Massillon Mill rebuild was an accelerated, immediate corrective action post-acquisition. Tom Hassfurther projected Greif to be slightly accretive in Q1 and improve. He stated the goal is to bring CapEx below $800 million after 2026, emphasizing disciplined spending.

Gabe Hajde from Wells Fargo Securities questioned the durability of the recent demand upturn, asking if it was specific to PCA's initiatives or a broader market shift, and if inventory jockeying was still a factor. He also inquired about the progress and EPS accretion timeline for the Greif acquisition, particularly regarding the Massillon mill rebuild, and provided preliminary thoughts on CapEx direction for 2027.

Answer

President Tom Hassfurther attributed the demand upturn to incredibly low customer inventories and a more positive market vibe, with less uncertainty than the previous year. Chairman and CEO Mark Kowlzan explained that the Massillon Mill underwent an accelerated, extensive rebuild post-acquisition, addressing issues that would normally take years. Tom Hassfurther added that the Greif acquisition was forecasted to be slightly accretive in Q1 and improve thereafter. Regarding CapEx, Tom Hassfurther indicated a goal to bring the number down below $800 million after 2026, depending on opportunities.

Gabe Hajde asked about the $0.33 per share increase in operating costs this quarter, annualizing to $170 million, questioning if this 'frictional inflation treadmill' was particularly elevated or a new run rate, citing labor, insurance, and energy costs. He also inquired if PCA's energy projects involved biogenic carbon capture or gas turbine technology, and asked about customer sensitivity to corrugated price increases and the impact of lightweighting on volumes.

Answer

CEO Mark Kowlzan identified energy costs, particularly electricity rates (up 50-75% for some facilities), as the biggest factor. He announced plans for three mills to become electricity independent within 2.5 years using gas turbine technology for combined cycle thermal efficiency. CFO Kent Pflederer added that labor inflation, chemicals, supplies, insurance, and rent were also contributing to rising costs. President Tom Hassfurther declined to discuss forward pricing but emphasized PCA's proprietary lightweighting technology as a competitive advantage, offering solutions to customers in an inflationary environment.

Gabe Hajde questioned whether the $0.33 per share impact from higher operating costs this quarter, annualizing to $170 million, represents an elevated or sustainable run rate for frictional inflation (labor, insurance, etc.) for the combined entity or legacy PCA. He also asked about the outlook for electricity rate increases and whether PCA's energy projects involve biogenic carbon capture or other technologies. Lastly, he inquired about customer sensitivity to price increases and the impact of lightweighting on volumes.

Answer

CEO Mark Kowlzan identified energy costs, particularly electricity rates (up 50-75% for some facilities), as a significant factor in operating cost increases. CFO Kent Pflederer added that labor inflation, chemicals, supplies, insurance, and rent also contributed. Mark Kowlzan does not foresee electricity costs flattening due to data center demand, explaining that PCA's energy projects involve gas turbine technology to achieve electricity independence for three more mills, not biogenic carbon capture. President Tom Hassfurther declined to discuss forward pricing but highlighted PCA's proprietary lightweighting technology as a competitive advantage in helping customers manage costs in an inflationary environment.

Gabe Hajde of Wells Fargo Securities sought to clarify the comparison period for the Q3 bookings growth figure, asked about potential cash tax advantages from the Greif acquisition, and inquired about customer bidding activity, particularly from large e-commerce players.

Answer

President Thomas Hassfurther confirmed the Q3 bookings comparison was against Q3 2024 and that the trend was clearly up from Q2 2025. EVP & CFO Kent Pflederer explained the Greif deal would be structured as an asset acquisition, providing a depreciation shield, and that the company could also benefit from bonus depreciation. Hassfurther stated that customer bidding was 'business as usual' and that recent industry supply rationalization has brought supply more in line with demand.

Gabe Hajde questioned if PCA is seeing competitors push 'value over volume' strategies and how PCA is responding. He also asked for color on recent rail freight increases and an update on the full-year capital expenditure forecast.

Answer

President Tom Hassfurther stated that PCA already leads in offering customers value and innovation but accepts the market reality of shifting demand. CFO Bob Mundy clarified that freight costs are rising due to three rail contract rate increases in Q1 and three more expected in Q2. CEO Mark Kowlzan confirmed that the full-year CapEx forecast remains on track at around $800 million.

Gabe Hajde questioned the implied unfavorable mix from 2024 price realization calculations, asked for clarity on whether Q1 guidance includes box price increases, and sought details on the higher-than-expected 2025 capital expenditure budget.

Answer

CFO Robert Mundy clarified that price realization was in the mid-$50s per ton, consistent with expectations when accounting for a prior year price drop and various mix factors. He confirmed Q1 guidance includes a conservative estimate for the new price increases. CEO Mark Kowlzan explained the higher CapEx is driven by major box plant projects, including a new facility in Newark, Ohio, and that maintenance spending is higher due to more extensive planned mill outages compared to the prior year.

Gabe Hajde asked for details on the lighter maintenance outage schedule for the first half of 2025, its potential production impact, and the company's strategy for sourcing containerboard given tight inventories. He also questioned capital allocation priorities, specifically regarding share repurchases versus investments.

Answer

Chairman and CEO Mark Kowlzan explained that the 2025 outage schedule is lighter due to the absence of a massive project like the 2024 Jackson mill rebuild, and he expressed confidence in the company's long-term containerboard supply plan. He and CFO Robert Mundy affirmed that prioritizing high-return, accretive capital projects, such as the nearly $700 million planned for 2024, remains the best use of cash over share repurchases.

Gabe Hajde inquired about Greif's fiscal Q1 2026 volume performance, asking if customer inventory management played a role, and sought insights into fiscal Q2 2026 trends given the expectation for a back-half volume ramp. He also asked about OCC (Old Corrugated Containers) trends and specific geographies or areas for growth CapEx in small format plastics.

Answer

CEO Ole Rosgaard stated that demand conditions remained muted, particularly in fiber and steel, reflecting pressure in industrial and chemical end markets, but noted some seasonality expected to pick up in Q2. He emphasized aggressive commercial execution and capital deployment for organic growth. CFO Larry Hilsheimer added that small plastics volumes started Q2 positively and agreed with expectations for flat OCC prices in H1 2026. Ole Rosgaard specified growth CapEx in Europe, Africa (mining sector), and India/Singapore for specific customers.

Gabe Hajde asked about the company's volume performance in fiscal Q1, noting it was below expectations despite better costs, and inquired about customer inventory management and Q2 trends. He also sought insights on OCC costs and specific geographies for CapEx growth projects in small format plastics.

Answer

CEO Ole Rosgaard stated that demand conditions remain muted, especially in fiber and steel, reflecting industrial and chemical market pressures, but some seasonality will lead to a Q2 pickup. He emphasized Greif's aggressive commercial execution and capital deployment for organic growth. CFO Larry Hilsheimer added that small plastics volumes started Q2 positively and agreed with flat OCC expectations for H1 2026. Ole Rosgaard detailed CapEx deployment in Europe, Africa (mining sector), India, and Singapore for specific customers.

Gabe Hajde of Wells Fargo sought to clarify the correct starting point for calculating 2026 EBITDA after accounting for divestitures. He also asked about a $40 million cash outflow for a non-controlling interest and inquired about the current M&A pipeline and market conditions.

Answer

EVP & CFO Larry Hilsheimer confirmed the methodology for adjusting the 2025 EBITDA guidance to establish a 2026 baseline. He explained the $40 million cash use was to buy out the remaining 20% of Greif's North American IBC recycling business. President, CEO & Director Ole Rosgaard described the M&A pipeline as solid, with a continued focus on polymer businesses that meet strict margin and cash flow criteria.

Gabe Hajde of Wells Fargo sought clarification on the price and volume impacts within the Metals segment and the potential tailwind from rising steel prices. He also asked about the company's integration level and strategy in the URB business.

Answer

EVP & CFO Larry Hilsheimer explained that the Metals segment experienced a positive price/cost mix but negative volumes, primarily due to industrial softness in North America. He confirmed the potential steel price tailwind was factored into the updated guidance. Regarding URB, Hilsheimer stated that deep integration is not critical in that market, the company's current level is over 50%, and they are satisfied with this position, only pursuing high-margin integration opportunities as they arise.

Gabe Hajde questioned if the $100 million savings plan would limit the ability to monetize under-absorbed overhead, asked about potential structural demand shifts, and sought clarification on Ipackchem's EBITDA contribution.

Answer

Management confirmed the savings plan would not impede the monetization of the ~$160 million in under-absorbed overhead. CFO Larry Hilsheimer addressed structural concerns, noting that housing has significant pent-up demand and that lubricant demand is primarily industrial, not automotive. He then clarified the Ipackchem math, stating the fiscal 2025 low-end guidance includes a run rate of about $42 million (for 11 months), which is still below the original business plan due to current demand weakness.

Gabe Hajde asked for clarification on several items impacting the fiscal 2025 outlook, including the annualized EBITDA from the divested Delta Petroleum business, the flow-through from announced price increases, and any one-time compensation items. He also inquired about economic downtime in the paper system and the company's M&A appetite given its current leverage.

Answer

CFO Larry Hilsheimer clarified the Delta divestiture was at an 8.5x multiple on approximately $90 million in proceeds and provided details on the monthly financial impact of recent URB and containerboard price increases. He noted the containerboard business is running full out with only minor economic downtime in URB. CEO Ole Rosgaard added that while the M&A pipeline remains robust, the immediate priority is paying down debt to return to the target leverage ratio of 2.0-2.5x.

Gabe Hajde asked about the healthcare business, specifically its trajectory, the expectation for a return to growth in the second half of fiscal year 2025, and the prospects for fiscal year 2026.

Answer

CEO Peter Konieczny (PK) reiterated that healthcare is a 'gem' in the portfolio. He noted regional differences, with strong performance in North America (medical-focused) and improving but weaker performance in Europe (pharma exposure), resulting in an overall flat healthcare business. He expects continued improvement into calendar 2026 and the second half of fiscal year 2026.

Gabe Hajde asked about the healthcare business, specifically its expected return to growth in the back half of 2025, its current trajectory, and prospects for 2026.

Answer

Peter Konieczny, CEO of Amcor, reiterated that healthcare is a 'gem' in the portfolio. He noted strong performance in North America (medical-focused) offsetting weaker performance in Europe (pharma exposure), resulting in an overall flat healthcare business. He expects continued improvement into calendar 2026 and the back half of fiscal year 2026.

Gabe Hajde asked if the 2026 CapEx guidance reflects a strategic focus on cash flow over EBITDA, and sought color on European market performance, including geographic and end-use market strengths, and the expected flow-through of recent pricing changes to margins.

Answer

CFO Ken Bowles clarified that the CapEx guidance of $2.4 billion-$2.5 billion is not a trade-off but reflects the capital needed for system improvement and growth, emphasizing a disciplined, returns-focused approach. CEO Tony Smurfit noted that in Europe, Germany remains a laggard, UK and Benelux are flat, while Eastern Europe and the Iberian Peninsula show strong growth. Ken Bowles added that Q3 European pricing was moderately ahead year-over-year, and future pricing depends on demand, with current paper prices being uneconomic for many producers.

Gabe Hajde asked if Smurfit Westrock's 2026 CapEx guidance reflects a strategic focus on cash flow over EBITDA, and sought details on European market performance, specifically geographic and end-use market strengths, and the timing of pricing flow-through impacts (Q4 2025 vs. H1 2026).

Answer

CFO Ken Bowles clarified that CapEx is disciplined and returns-focused, not prioritizing cash flow over EBITDA, aiming for a 20% IRR and mid-teens ROCI, with the $2.4-$2.5 billion CapEx for 2026 reflecting necessary investment for growth and improvement. CEO Tony Smurfit noted Germany as a laggard in Europe, with flat demand in the UK/Benelux and strong growth in Eastern Europe/Iberian Peninsula. Ken Bowles added that Q3 European pricing was up 0.5%, with future pricing dependent on demand, likely impacting Q2/Q3 2026. Tony Smurfit highlighted that current paper prices are uneconomic for 75% of the business, benefiting integrated players.

Gabe Hajde of Wells Fargo requested more detail on the underlying assumptions for the second-half guidance, particularly volume expectations, and asked for an update on the strategic opportunities within the consumer packaging business.

Answer

CEO Tony Smurfit indicated that the second-half forecast assumes flat volumes compared to the first half, without factoring in a significant seasonal pickup yet. EVP & Group CFO Ken Bowles added that the Q3 EBITDA improvement is driven by lower maintenance downtime and cost relief. Regarding consumer packaging, Tony Smurfit expressed confidence in the business, highlighting strong market positions and cross-selling opportunities, while noting plans to address the long position in SBS will be shared later.

Gabe Hajde asked about the European market dynamics, including the expected second-half performance given recent price increases and the competitive impact of new machines starting up. He also sought clarification on the financial impact of the announced mill closures, asking if the savings were aggregate and for more detail on the additional $400 million in performance improvements.

Answer

CEO Tony Smurfit described the European outlook as less robust than the U.S. due to new capacity but expressed confidence in their integrated system's high returns. CFO Ken Bowles noted that paper price hikes take 3-6 months to flow through to box prices. He confirmed the $50-60 million in savings from closures is an aggregate figure, and the separate $400 million target relates to longer-term operational and commercial opportunities beyond initial synergies.

Gabe Hajde of Wells Fargo noted that legacy Smurfit Kappa's performance appeared slightly below expectations and asked about the price realization cadence. He also sought a directional confirmation for a 2025 EBITDA model based on H2 2024 performance plus synergies.

Answer

CEO Tony Smurfit attributed the slight underperformance primarily to disappointing volume recovery in the German market. CFO Ken Bowles added that corrugated pricing did improve sequentially from Q2 to Q3. Regarding 2025, both executives agreed that while the budget isn't final, the analyst's directional thinking was not 'off the mark' given the sequential improvements seen in 2024.

Gabe Hajde of Wells Fargo sought clarification on the underlying volume assumptions for the second-half guidance, particularly whether the -4.5% decline rate in North America would persist. He also requested an update on the strategy and opportunity set for the consumer packaging business.

Answer

CEO Tony Smurfit indicated that the second-half forecast assumes basically flat volumes from current levels, without expecting significant deterioration or improvement. EVP & Group CFO Ken Bowles added that the Q3 EBITDA improvement is driven by lower maintenance downtime and cost relief, not volume growth. Regarding consumer packaging, Smurfit expressed confidence in the business, highlighting strong market positions and cross-selling opportunities, while acknowledging the need to address the company's long position in SBS.

Gabe Hajde asked about customer negotiation talking points, particularly regarding 2026 changes and factors like proximity, price, service, and quality. He also questioned the impact of rising all-in aluminum costs on shelf pricing and promotional activity, and the implications of new North American rolling capacity and European scrap exports on aluminum costs.

Answer

CEO Oliver Graham identified footprint issues as the dominant factor in 2026 softness, with customers moving to closer plants. He acknowledged the risk of inflation from higher aluminum prices impacting volumes but noted customers have pricing power. He highlighted new North American mills as positive for supply and long-term cost structure, and while European scrap exports to the U.S. were not helpful, they weren't significantly changing Europe's aluminum cost situation.

Gabe Hajde asked about customer talking points in North America contract negotiations, focusing on factors like footprint, price, and service. He also inquired about the impact of aluminum cost inflation, customer hedging, and promotional activity on 2026 volume dynamics, noting that other substrates are not immune. Finally, he asked if Europe's export of scrap to the U.S. is affecting European aluminum costs.

Answer

Oliver Graham (CEO) identified footprint as the dominant factor in North America contract resets, noting a normally competitive market and high service ratings. He acknowledged the risk of inflation from higher aluminum prices impacting volumes but highlighted customers' ability to use promotions. He emphasized that cans continue to outperform other substrates due to sustainability, energy costs, and efficiency. New North America mills are positive for supply and long-term cost structure, and while Europe's scrap export is not helpful, it's not significantly changing European aluminum costs.

Gabe Hajde pointed out that the volume guidance implies a second-half deceleration and asked if this was due to conservatism. He also sought clarification on the increased CapEx budget and whether new factories might be needed in North America or Brazil.

Answer

CEO Oliver Graham confirmed the implied deceleration is due to conservatism, citing past market volatility and the need to get through the critical summer season. He clarified that the 2025 growth CapEx is now $70 million, with a future run rate of $50-$60 million. He stated that Europe is the current focus for capacity investment, while North America and Brazil have sufficient infrastructure for near-term growth without needing new factories.

Gabe Hajde from Wells Fargo Securities asked about customer dialogue on potential CSD reformulation, the geographic source of PPI and metal conversion cost headwinds, the drivers of Europe's strong Q4, and sought confirmation on the 2025 leverage outlook.

Answer

CEO Oliver Graham confirmed no significant customer dialogue on reformulation. He specified that both the PPI headwinds and higher aluminum conversion costs are primarily European issues, driven by labor cost dynamics and a tighter coil market. He attributed Europe's strong Q4 to robust demand and improved fixed cost absorption, not a pull-forward of orders. CFO Stefan Schellinger confirmed the analyst's leverage calculation was in the right ballpark, expecting leverage to remain steady year-over-year.

Speaking on behalf of Gabe Hajde, an analyst asked if European volume growth is sustainable in 2025 without the high promotional activity seen in 2024, and how the company is preparing for customers potentially seeking more favorable pricing next year.

Answer

CEO Oliver Graham asserted that Europe's growth is not dependent on elevated promotions and is driven by fundamental factors like pack mix shifts. He noted that while customers always seek better terms, AMP has robust contractual structures and pass-through mechanisms to manage pricing, particularly in the Americas, and various levers to handle potential headwinds in Europe.

Gabe Hajde of Wells Fargo Securities sought to quantify the expected decline in Oregon, asked for details on the $650 million in new backlog, and requested clarification on growth capital spending.

Answer

CEO Brian Gray reiterated that over 50% of the $55 million guidance reduction was due to Oregon but did not provide a state-specific forecast. He confirmed the $650 million in new Q2 backlog included contributions from Strata and large projects in Texas and Idaho. CFO Nathan Ring clarified the year-to-date growth spend was $620 million, with a full-year plan of $670 million, and stated leverage should end the year below the 2.5x target.

Gabe Hajde asked for more context on the $6 million in M&A-related SG&A, current deal price expectations, and clarification on whether the full EBITDA guidance increase was due to the Strata acquisition.

Answer

CFO Nathan Ring confirmed the $6 million in Q1 costs were mostly for the Strata deal and that full-year M&A-related expenses are factored into guidance. President and CEO Brian Gray stated the M&A pipeline remains full of non-brokered, relationship-based deals in the mid-to-high single-digit multiple range. Gray also confirmed that the entire $45 million midpoint increase in the 2025 EBITDA guidance is attributable to the Strata acquisition.

Gabe Hajde of Wells Fargo & Company asked for more details on the strategy of using external partners in the Protective segment to accelerate time-to-market and reduce capital intensity, including any potential cost savings.

Answer

President, CEO & Director Dustin Semach explained this is a strategic shift away from vertical integration towards leveraging external partners for R&D and manufacturing technology, which speeds up innovation and scaling. He cited this approach as a key reason for lowering the full-year CapEx outlook to ~$200 million, down significantly from prior years, while simultaneously improving returns on investment.

Gabe Hajde focused on the Food segment's strong margin performance, asking if it was in line with long-term expectations and whether any unusual factors in Q1 might make that level unsustainable.

Answer

President and CEO Dustin Semach affirmed that the Food business is expected to operate within a 23% adjusted EBITDA margin range, consistent with Q1's performance and the full-year outlook. He stated there was nothing peculiar in the quarter's results and that the focus for the segment is now more on driving above-market growth rather than significant further margin expansion. The narrowing of negative net price realization also supports margin stability.

Gabe Hajde asked two questions. First, he inquired about the competitive landscape after a large e-commerce player invested in a fiber-based competitor, and if this changes Sealed Air's strategy for the Protective segment. Second, he sought clarification on the cost-out program, asking where the upside is coming from relative to the original targets.

Answer

CEO Dustin Semach responded that the competitor deal does not change Sealed Air's strategy, as their focus is on fiber mailers and Autobagging, not the in-the-box void fill involved in the deal. He suggested it could even create opportunities with other customers. Interim CFO Veronika Johnson clarified the cost savings, explaining that the 2025 outlook includes $90 million in savings, which is comprised of $65 million from the ongoing cost takeout program and $25 million in new productivity efficiencies. This will bring the total CTO program savings to the high end of the original $140-$160 million target.

Gabe Hajde asked two questions: First, about the impact of a competitor (Ranpak) receiving an investment from a major e-commerce player (Amazon) and if it changes Sealed Air's strategy for the Protective segment. Second, he sought clarification on the cost-out savings program, questioning the source of upside that brings the total near the high end of the initial target.

Answer

CEO Dustin Semach stated the Amazon/Ranpak deal doesn't change Sealed Air's strategy, as the company's focus is on mailers and auto-bagging, not the paper void-fill involved in the deal, and it could create opportunities with other customers. Interim CFO Veronika Johnson clarified the cost savings, explaining that the $90 million in 2025 guidance includes $65 million from the ongoing cost-takeout program (bringing the total to the high end of the $140-$160M target) and $25 million from separate productivity efficiencies like plant optimization.

Gabe Hajde asked for quantification of any discrete Q4 impacts from Hurricane Helene and sought clarity on the wide free cash flow guidance range and the future stability of working capital.

Answer

CEO Patrick Kivits and President/CFO Dustin Semach confirmed the hurricane's impact was not material and is factored into guidance. Semach explained that working capital is now largely normalized, though some inventory opportunity remains. He noted a $30M step-up in compensation expense is factored into the outlook but affirmed their commitment to high cash conversion and deleveraging targets.

In a follow-up question, Gabe Hajde from Wells Fargo inquired about the progress and potential opportunity for Aptar's active packaging solution for an oral solid dose GLP-1 drug.

Answer

President, CEO & Executive Director Stephan Tanda explained that the company's active material technology enhances drug stability for oral solid doses. He noted that the specific GLP-1 drug utilizing this technology is now in Phase 3 clinical trials, which serves as a significant proof point for the technology's effectiveness and potential.

Gabe Hajde from Wells Fargo asked for clarification on the size of the Consumer Healthcare business outside the U.S. and sought assurance that no major hurdles exist for achieving the long-term Pharma growth target once current destocking noise subsides.

Answer

President and CEO Stephan Tanda estimated the U.S. share of Consumer Healthcare is at or below the 30% company average. While declining to guide for the next 12-18 months, he expressed comfort with long-term targets, noting that the strongly growing Prescription business is a much larger part of Pharma than the temporarily soft Consumer Healthcare division. Executive Vice President and CFO Vanessa Kanu added that specific Injectables volume was not disclosed.

Gabe Hajde inquired about capital allocation, asking what internal investments are planned now that major projects are complete. He also asked about the Beauty segment's restructuring, questioning if more footprint reductions are planned after closing 10 facilities.

Answer

Executive Vice President and CFO Vanessa Kanu confirmed a continued balanced capital allocation strategy across organic investments, M&A, dividends, and buybacks. President and CFO Stephan Tanda added that future CapEx involves smaller, gradual capacity 'creep' investments. He clarified that the Beauty segment *reduced* its plant count by 10 and, while productivity efforts are ongoing, no further major footprint changes are imminent.

Gabe Hajde from Wells Fargo asked about the opportunity for the new Sudafed nasal rinse product in the U.S. market. He also sought more detail on the Pharma pipeline that gives management confidence in future growth and inquired about any specific expense considerations, like stock-based compensation, for Q1 2025.

Answer

CEO Stephan Tanda clarified the Sudafed launch is a nice brand win for an existing nasal rinse product, noting the U.S. is gradually catching up to European adoption of nasal sprays. He detailed the robust Pharma pipeline, including combination allergy products, CNS therapies, ophthalmic dispensers, and high-value upgrades in Injectables. CFO Robert Kuhn confirmed that Q1 typically has higher stock-based compensation expense due to vesting rules but noted no other unusual material items to consider for the start of 2025.

Gabe Hajde of Wells Fargo Securities asked for clarification on the updated full-year guidance, noting that positive drivers like FX, price/cost, and Fit to Win seemed to outweigh the modest guidance increase. He also inquired about potential opportunities from new brewery investments in Mexico and product reformulations in North America.

Answer

CFO John Haudrich explained that while there are several positive drivers, the guidance increase is tempered by higher expected interest expense and a provision for more temporary downtime in Europe later in the year. CEO Gordon Hardie addressed the market opportunities, stating that O-I Glass is in constant dialogue with customers and sees Mexico as a strong long-term growth market for beer. He affirmed that efficiencies gained from the TOE program will position the company to support customers looking to expand their use of glass packaging.

Gabe Hajde sought confirmation of no production curtailments in the Americas and asked about market tightness. He also inquired about the key swing factors for the Q4 earnings guidance.

Answer

CFO John Haudrich confirmed no significant curtailments in the Americas, describing the market as very balanced. CEO Gordon Hardie added that demand is good, capacity is tight, and pricing is stable in the region. Regarding guidance, Haudrich identified Q4 as the biggest variable due to seasonality. He suggested that if tariff impacts do not materialize, Q4 could perform better than currently forecast, with tax rates also being a potential swing factor.

Gabe Hajde asked for an estimate of the remaining under-absorbed fixed overhead in the system and inquired about the cash intensity of Phase B of 'Fit to Win' and the expected restructuring spend in 2026.

Answer

CFO John Haudrich explained that the cumulative $250 million fixed cost absorption impact from 2024 is expected to be halved to about $125 million in 2025, driven by permanent plant closures. He noted that 2025 will likely be the peak year for restructuring cash spend at $120-$150 million, covering Phase A and the start of Phase B, with some of that activity carrying over into 2026.

On behalf of Gabe Hajde from Wells Fargo, an associate asked for more detail on the cautious 2025 sales volume outlook, seeking to understand areas of confidence versus concern. He also inquired about the company's visibility into 2025 pricing and the percentage of contracts already signed.

Answer

CEO Gordon Hardie identified strength in Latin America and flat-to-up trends in North America, but expressed caution for Europe due to softness in spirits and wine, which are impacted by weaker export markets. CFO John Haudrich detailed that 55% of global business is under long-term agreements (70% in Americas, 33% in Europe). He noted the biggest open market negotiations are in Europe and typically begin in November, so visibility is still developing.

Gabe Hajde asked for commentary on the major drivers for 2026, seeking to bridge 2025 to 2026 EBITDA based on factors like synergies, pricing, and productivity. He also inquired about any potential impacts from recent tax legislation.

Answer

President and CEO Howard Coker expressed bullishness on the company's trajectory, highlighting strong execution and a simplified portfolio. COO Rodger Fuller added that cost reduction from eliminating stranded costs and simplifying support functions will be a key benefit in 2026. Interim CFO Jerry Cheatham stated the full-year tax rate should be ~25% with no significant impact from recent legislation in 2025.

Gabe Hajde sought clarification on organic consumer volume growth, the drivers of strong North American metal can performance, and the financial impact of the URB price increase.

Answer

President and CEO Howard Coker confirmed organic consumer volume was up about 4% in Q1 and detailed the North American metal can strength (food cans +10%, aerosols +25%), stating there was no evidence of customer pre-buying. Interim CFO Jerry Cheatham explained the URB price increase benefit will mostly occur in the second half due to contract resets, noting a $10 index move represents about $6 million in annualized revenue.

Gabe Hajde asked for clarification on commentary about rising TAM bending chip prices and inquired about the historical impact of customer consolidation on Sonoco's business.

Answer

COO Rodger Fuller clarified that they expect TAM bending chip prices to be flat for the balance of the year, especially with OCC costs declining. CEO Howard Coker responded that customer consolidation is viewed as very positive, as it typically leads to increased brand promotion and expanded distribution, and that Sonoco has great relationships with the parties involved.

Gabe Hajde asked why Crown's North American growth of 1% was below the estimated market growth of ~3% and if this was related to preparedness for a stronger-than-expected summer. He also inquired about any abnormal cost inflation besides metals and asked for a performance comparison between Continental Europe and the Middle East.

Answer

President & CEO Timothy Donahue suggested the overall market was likely stronger than anyone anticipated, driven by heavy promotions. He acknowledged Crown's inventory is slightly lower than desired but felt the company was largely where it expected to be. He saw no abnormal cost inflation. Regarding Europe, he noted that while Gulf State factories have higher returns due to depreciation, underlying plant performance is similar across regions, and volume growth was strong in both areas.

Gabe Hajde pointed out the modest sequential EPS increase guided for Q2 compared to prior years and asked for more detail. He also inquired about the process of integrating consolidated customers, working capital assumptions, and the rising cost of building new plants.

Answer

CEO Timothy Donahue declined to provide a detailed Q2 bridge, stating that performance ultimately depends on customer volume pull through the summer. On customer consolidation, he said the integration process varies depending on existing contracts. Executive Kevin Clothier specified a working capital outflow assumption of around $75 million for the year. Donahue confirmed that building new plants is now significantly more expensive, citing a potential cost increase from $170 million to over $250 million for a two-line facility.

Gabe Hajde of Wells Fargo Securities asked about the specifics of North American contract renewals, requesting volume figures for Mexico. He also posed a modeling question regarding the depreciation and amortization forecast and the implied EBITDA from the free cash flow guidance.

Answer

President and CEO Timothy Donahue confirmed that no major contract renewals are due until late 2026 and that the company expects to outperform the market in 2026. He stated that Mexico's volumes were down about 2.5% in Q4. Executive Kevin Clothier clarified that amortization is excluded from the EPS guide, confirmed the ~$1.96 billion EBITDA estimate is within range, and explained the depreciation forecast reflects capital spending exceeding depreciation.

Gabe Hajde asked about the factors informing the low single-digit growth outlook for North America and Europe, the framework for capital allocation between buybacks and debt reduction, and the outlook for tinplate pricing.

Answer

President and CEO Timothy Donahue cited the proliferation of new products and younger consumers' willingness to experiment as positive drivers for cans in North America. In Europe, he pointed to sustainability and glass-to-can conversion. On capital allocation, Donahue emphasized that debt paydown offers 'certainty' and that most of the cash on the balance sheet is earmarked for debt reduction, not acquisitions or buybacks, promising a 'healthy mix' of both. He noted tinplate pricing has been volatile but currently looks to be up a couple of percent for next year.

Gabe Hajde asked about the expected timeline to catch up on historical underinvestment in CapEx and maintenance, and also sought clarification on whether the recent January price increase was included in the Q1 outlook.

Answer

Executive Andrew Silvernail estimated it will take about three years to fully make up for the historical capital spending deficit, stressing the importance of dynamically reallocating resources to strategic assets. He and Mark Nellessen also confirmed that the Q1 outlook for Industrial Packaging does not include any potential impact from the January price increase announcement.

Gabe Hajde asked about the balance between freeing up capacity versus driving productivity gains in a market that is not short on converting capacity. He also asked about potential roadblocks or challenges the company might face during its transformation.

Answer

Chairman and CEO Andy Silvernail explained that while the national market has sufficient capacity, this is not true on a regional basis. The strategy is to exit over-capacitized regions while investing aggressively where IP has strength. As for roadblocks, Silvernail identified changing the company's ingrained work habits and overcoming institutional memory from the previous complex matrix structure as a key challenge. He stressed the importance of realigning the entire organization to be focused on the customer.

Gabe Hajde asked about the strategy of freeing up converting capacity in a market that appears to have no overall shortage. He also inquired about potential roadblocks or challenges the company might face during its transformation.

Answer

Chairman and CEO Andy Silvernail clarified that while the national market has sufficient capacity, this is not true on a 'region by region' basis, with some areas being under-supplied and others over-supplied. The strategy is to invest in strong regions and retrench in weaker ones. As for roadblocks, Silvernail identified the primary challenge as changing how people work and overcoming the institutional memory of the old, complex matrix structure. He stressed the importance of realigning the entire organization to focus on the customer.