George Staphos

George Staphos followed up on the Q4 cash flow statement, asking about the drivers behind the build in working capital and other balance sheet item changes, and how maintenance projects in the closures segment fell behind.

Answer

CFO Vanessa Kanu explained that the $64 million year-over-year decline in free cash flow was primarily due to the timing of tax payments ($44 million) and pension contributions ($10 million), with the balance from net working capital changes that showed no significant concerns. President and CEO Stephan Tanda attributed the closures maintenance issue to a specific site in North America where large equipment was taken offline and did not return to service as expected.

George Staphos followed up on the drivers of the working capital build in Q4 and asked for an explanation regarding getting behind on maintenance projects in the closures segment.

Answer

CFO Vanessa Kanu attributed most of the $64 million year-over-year free cash flow decline to timing of tax payments ($44 million) and pension contributions ($10 million), with the balance from net working capital changes, noting no significant concerns with working capital quality. CEO Stephan Tanda explained the maintenance issue was localized to one North American site where large equipment was taken offline and did not return as expected.

In a follow-up, George Staphos of Bank of America Merrill Lynch asked about the recent acquisition in New Jersey, its strategic purpose, and whether Aptar was losing share in the Beauty sampling market.

Answer

President, CEO & Executive Director Stephan Tanda clarified the acquisition expands early-stage clinical trial services (Phase 1 & 2) to accelerate its device pipeline, not to enter contract filling. Regarding Beauty, he stated that performance is a factor of customer and geographic mix, as Aptar is more focused on the prestige market, rather than an indication of market share loss in sampling.

George Staphos of Bank of America inquired about order patterns and inventory levels, particularly the inflection point for Pharma's Consumer Health Care. He also asked about the impact of GLP-1s on Injectables, the second-half tax rate, consumer pressure on product design, and the outlook for tooling activity.

Answer

President and CEO Stephan Tanda noted a reacceleration into Q2, except for cough and cold products outside the U.S., which still face destocking. He confirmed strong GLP-1 demand is a capacity ramp-up story and that tooling activity is increasing in Q2. Executive Vice President and CFO Vanessa Kanu projected a 22% to 24% tax rate for the second half of the year, excluding a one-time Q2 benefit. Tanda added that Aptar is resilient to consumer pressure due to its essential product portfolio.

George Staphos asked about the substance behind the 'green shoots' in China's beauty market and their potential impact on 2025, and also questioned if 2025 EPS could grow despite significant currency and tax headwinds.

Answer

President and CFO Stephan Tanda explained that China's growth is being driven by local brands and a solid '11/11' shopping festival, which should benefit Aptar's skincare business. Executive Vice President and CFO Vanessa Kanu added that when normalizing for tax and FX headwinds, the company is cautiously optimistic about achieving double-digit EPS growth in 2025, driven by cost reduction initiatives.

George Staphos of Bank of America inquired about the Beauty segment's path to a 15% margin in 2025, the extent of the weakness in the China Beauty market, and the nature of inventory issues affecting the Q4 outlook for cough/cold and Beauty. He also asked a follow-up question about the potential of nasally delivered treatments targeting the brain.

Answer

CEO Stephan Tanda explained that Beauty's progress is being held back by tough comparisons in fragrance after a significant pipeline fill, but noted North America is recovering. He characterized the China issue as a lack of a strong rebound rather than a decline, with consumer confidence still cautious. For Q4 inventory, he described it as seasonal rightsizing by customers in cough/cold and a "fragrance hangover" in Beauty. Regarding brain-targeted nasal delivery, Tanda clarified this refers to drugs crossing the blood-brain barrier, a key growth area offering life cycle management for pharma clients and representing a highly profitable segment for Aptar.

George Staphos inquired about Crown Holdings' 2026 outlook for America's beverage EBIT, considering North American volume growth, inflation, and startup costs. He also asked for expected European volume growth and specific market drivers like the World Cup. Additionally, Staphos questioned the sustainability and growth potential of future free cash flow beyond the $1 billion target, factoring in capital expenditure.

Answer

Tim Donahue, Chairman, President and CEO, stated that America's beverage income is expected to be 'down a touch' due to inflation and Brazil startup costs, offsetting North American volume gains of 2-3%. For European beverage, he suggested penciling in 4-5% volume growth, noting strong market conditions. Kevin Clothier, Senior Vice President and Chief Financial Officer, highlighted strong demand drivers in Europe (beer growth, glass-to-can conversion) and North America (energy, flavored alcohols, sparkling water), with the World Cup expected to be a significant event. Donahue and Clothier agreed that $1 billion is a reasonable and sustainable free cash flow number for the future, with potential for growth if CapEx remains moderate.

George Staphos asked about the 2026 outlook for America's Beverage EBIT, specifically if it would be flat, up, or down, considering North American volume growth, inflation, and startup costs. He also inquired about the expected European volume growth for 2026 and the specific end-markets or events driving volume growth in both regions. Finally, he questioned the future trajectory of free cash flow, asking if it could grow in line with volume or if it had reached a plateau due to investment needs.

Answer

Tim Donahue, Chairman, President and CEO, indicated that America's Beverage segment income is expected to be 'down a touch' in 2026 due to ongoing inflationary impacts and startup costs in Brazil, offsetting North American volume gains of 2%-3%. For European beverage volume growth, he suggested penciling in 4%-5% for 2026, expressing bullishness for the region. Kevin Clothier, SVP and CFO, added that European growth is driven by beer conversion from glass to cans and accelerated can demand across almost all products, while in the US, energy, flavored alcohols, and sparkling water are strong, with the World Cup expected to be a significant driver. Regarding free cash flow, Tim Donahue stated that $1 billion appears to be a 'reasonable and sustainable' number for the future, with moderately reduced capital spending, and growth off that level is expected with volume increases.

George Staphos asked about the drivers of European beverage volume growth, potential pre-buying, and the sustainability of historical growth rates. He also inquired about the Americas EBIT outlook, the profit impact from Mexico and Brazil, and whether the 'other' segment's performance was driven by spread or cost reduction/volume.

Answer

President and CEO Tim Donahue clarified that European growth was driven by underlying demand and substitution, not pre-buying, and reiterated a long-term growth rate of 4-5%. He confirmed the $1 billion Americas EBIT target is achievable and detailed the specific profit impacts from Mexico and Brazil on minority interest and segment income. Tim Donahue also stated there was no significant steel spread benefit in the 'other' segment during Q3.

George Staphos asked about the drivers of 12% European volume growth, specifically if pre-buying was a factor, and the sustainability of this growth rate compared to historical trends. He also inquired about the outlook for Americas EBIT, the impact of Mexico and Brazil on Q3 profits, and whether the 'other' segment performance benefited from metal/steel spreads.

Answer

President and CEO Tim Donahue clarified that the 12% European growth was not due to pre-buying but rather underlying growth and substitution, emphasizing that historical growth rates for the can business are typically 4-5%. He confirmed that the aspirational $1 billion Americas EBIT target is likely to be met this year, noting that Brazil's impact was over $20 million and Mexico's was $5-6 million in Q3. Donahue stated there was no significant spread benefit from steel in Q3 for the 'other' segment.

George Staphos posed three questions: first, for details on the quarter's restructuring charge; second, on the likelihood of the Transit (Signode) segment maintaining its current EBIT level through the second half; and third, whether European beverage can volumes show any signs of deceleration or destocking due to tariff risks subsiding.

Answer

President & CEO Timothy Donahue explained the restructuring charge was primarily for an asset write-down in a Chinese plant and severance costs in the Transit segment. He expressed hope that Transit could hold its Q2 performance level in Q3 but noted significant tariff uncertainty for Q4. Regarding Europe, Donahue confirmed no signs of destocking or direct tariff impact, but highlighted a longer-term concern about contracting industrial economies potentially affecting consumer confidence, though the can business remains well-positioned.

George Staphos asked about potential changes in customer behavior, such as pre-buying ahead of the peak season, and whether increased retail promotions were driving food can volumes. He also inquired about the impact of previously expected margin compression from PPIs in Europe.

Answer

CEO Timothy Donahue stated there has been no significant pre-buying in beverage cans due to just-in-time supply chains, though there may have been a minor amount in food cans. He attributed strong food can performance to customer mix, particularly in pet food, rather than promotions. For Europe, Donahue explained that strong volume growth and an accelerating substrate shift to aluminum cans have 'overwhelmed' any margin headwinds from PPIs, leading to an expected tight supply situation in the summer.

George Staphos of Bank of America asked for more detail on the European volume outlook, the potential impact of tariffs, and whether the company sees opportunities for capital allocation beyond its normal spending. He later followed up with modeling questions on FX and pension benefits, and a question on innovation in the alcoholic beverage space.

Answer

President and CEO Timothy Donahue confirmed the potential for mid-single-digit growth in Europe and stated that existing capacity is sufficient for the next couple of years. He sees tariff impacts as largely indirect, affecting consumer purchasing power. On the follow-up, Executive Kevin Clothier quantified the FX headwind at about $0.10 per share and the pension annuitization benefit at around $0.08. Donahue added that innovation in energy and alcoholic drinks, which are largely offered in cans, continues to be a positive driver.

George Staphos questioned the company's capacity runway for beverage cans across its regions and asked what the biggest driver of operating profit improvement would be over the next two years.

Answer

President and CEO Timothy Donahue explained that income growth is largely dependent on volume, but the company does not anticipate needing to install new capacity for the next two years to meet expected market growth. He projected 2025 capital spending would be no more than $450 million, similar to 2024. Donahue identified volume growth as the primary profit driver, with potential upside from a recovery in the Transit Packaging business if industrial markets improve. He also noted that the invested capital base should not expand significantly.

George Staphos asked if customer acquisition costs might dilute the margin impact of high-value categories and if there are any concerns regarding paper supply for 2026, given capacity changes in the market.

Answer

Greg Lovins, SVP and CFO, stated that no increase in customer acquisition costs is anticipated, as go-to-market teams are prepared and mechanisms are sharpened, thus expecting no impact on margins. Regarding paper supply, the company has multiple, geographically centered sources for paper glassine and tray stock, with a strategic procurement approach ensuring capacity certainty.

George Staphos followed up on customer acquisition costs for high-value categories, asking if they might dilute margin/mix impact, and inquired about any concerns regarding paper supply for 2026 given market capacity changes.

Answer

President and CEO Deon Stander stated that customer acquisition costs are not expected to increase, as go-to-market teams are prepared and leveraging sharpened mechanisms and automation, thus having no real impact on margins. He added that the company has made progress in balancing paper supply risk, with multiple sources for key materials like glassine and tray stock, and a strategic procurement approach ensuring capacity certainty.

In a follow-up, George Staphos of Bank of America Merrill Lynch asked for the volume exit rates for the Materials business heading into Q3. He also sought a timeline for the expected volume improvement in Embellix and inquired about innovation efforts for the large apparel and retail segment of the Intelligent Labels business.

Answer

President & CEO Deon Stander addressed the questions, stating that for Intelligent Labels in apparel, innovation is focused on a proprietary loss detection suite, improving inlay design, and enabling self-checkout. For Embellix, he expects growth to resume in Q4 2025, contingent on a stable apparel market. Regarding Materials Group, he noted that volume exit rates in July were similar to June's, which he characterized as 'relatively flat overall.'

George Staphos from Bank of America Merrill Lynch asked if the setting of tariffs in Vietnam led to a specific pickup in orders and questioned the year-on-year apparel order trend into July, seeking to clarify if it had turned positive. In a follow-up, he asked about Materials business exit rates, the timing for Embellix volume improvement, and innovation in the apparel segment of Intelligent Labels.

Answer

President & CEO Deon Stander confirmed some volume shifted to Vietnam but within an overall muted apparel environment. He characterized year-to-date apparel orders as 'roughly flat.' In his follow-up, Stander noted Materials exit rates were relatively flat, expects Embellix growth to begin in Q4, and detailed Intelligent Labels innovation in apparel, including a proprietary loss-detection suite with Inditex, improved read-rate efficacy, and technology enabling self-checkout.

In a follow-up, George Staphos of Bank of America Merrill Lynch asked for the volume exit rates for the Materials business, the expected timing for an improvement in Embellix volumes ahead of the 2026 World Cup, and details on innovation within the apparel segment of Intelligent Labels (IL).

Answer

President & CEO Deon Stander responded that Materials Group exit rates in July were relatively flat, similar to June. He expects Embellix to see growth starting in Q4, assuming no further deterioration in the apparel market. For IL apparel innovation, he highlighted the proprietary loss detection suite developed with Inditex, improved inlay designs, and process innovations to maintain cost leadership.

George Staphos asked if the company has sufficient capacity in other regions to satisfy apparel volume shifting from China without leakage. He also requested an updated outlook for Intelligent Labels (IL) growth, which was previously guided at 10-15% for the year, given the recent volatility.

Answer

CEO Deon Stander affirmed that the company has a robust global network with ample capacity to manage apparel sourcing shifts. On Intelligent Labels, he stated that while the underlying programs like the Kroger rollout are on track, the uncertainty related to apparel tariffs makes the previous 10-15% growth forecast more difficult to predict, especially the 5% portion tied to new program rollouts.

In a follow-up, George Staphos asked for a breakdown of the growth drivers within high-value categories, questioning how the growth math for Embelex and Vestcom reconciled with the overall guidance. He also requested a specific growth outlook for Vestcom.

Answer

President and CEO Deon Stander clarified the growth expectations, projecting high-single to low-double-digit growth for both Embelex and Vestcom in 2025. He detailed that Embelex growth is driven by fan engagement and new contracts, while Vestcom's growth is fueled by a new major customer rollout and media solutions. He noted that the upper end of the company's guidance, which implies 12% EPS growth, accounts for this strong performance.

George Staphos requested more detail on the Kroger deal, including the initial number of stores and implementation specifics. He also asked about the reasons for the slowdown in the Vestcom business and its earnings impact.

Answer

President and CEO Deon Stander explained the Kroger rollout will initially focus on the bakery department, ramping up to nearly 2,800 stores over the next six quarters. He attributed the Vestcom slowdown to drugstore channel softness (including a customer emerging from bankruptcy) and a temporary hurricane-related price freeze on food items. Stander anticipates Vestcom will return to growth in Q4 and sees significant future opportunities in the drugstore channel.

George Staphos inquired about the first quarter 2026 outlook for the Dispensing and Specialty Closures (DSC) segment, including specific puts and takes, and how the operational dynamics of the DSC business differ from traditional Silgan segments. He also asked about the key volume and margin considerations embedded at the low end of the company's guidance.

Answer

Sean Fabry, EVP and CFO, detailed low-to-mid single-digit volumes for DSC in Q1 2026, noting a headwind from low-cost inventory in Q1 2025. Adam Greenlee, President and CEO, explained that DSC, now the largest business, operates differently with co-located facilities and deeper customer integration, emphasizing learnings from 2025 led to a broader view of macro risks and more conservative guidance. For the low end of guidance, Mr. Greenlee pointed to broader market conditions influencing customer demand as a primary factor.

George Staphos asked for more details on the first quarter outlook for the Dispensing and Specialty Closures (DSC) segment, including any pre-buy impact. He also inquired about how Silgan manages the DSC business's order patterns, operations, and forecasts, given its new status as the largest business, contrasting it with traditional Silgan operations. Additionally, he questioned the key volume and margin considerations embedded at the low end of Silgan's guidance.

Answer

CFO Sean Fabry explained that the DSC segment expects low-to-mid-single-digit volumes in Q1, facing a headwind from selling through low-cost inventory from Q1 2025. CEO Adam Greenlee elaborated on the DSC business's evolution, noting its difference from historic food can operations, and highlighted learnings from 2025, including taking a broader view of macro influences and incorporating unknown risks into guidance. Regarding the low end of guidance, Mr. Greenlee pointed to broader market conditions influencing customer demand as a primary factor, while emphasizing a broad approach to risk consideration in the guidance range.

George Staphos questioned why the Dispensing and Specialty Closures (DSC) segment missed its mid-to-high 20% revenue growth guidance for the quarter and why a guidance reduction or pre-announcement wasn't made earlier given late September softening. He also sought clarification on the $25 million pre-tax impact, specifically the split between volume and overhead absorption across DSC and Custom Containers, and asked for key performance indicators for investors to track in Q4 and Q1 2026.

Answer

Adam Greenlee, President and CEO, Silgan Holdings, explained that DSC's revenue miss was due to late September pressure in personal care and home care, with full forecast clarity not available until early-to-mid October, precluding an earlier announcement. He detailed the $25 million impact as roughly $20 million in DSC and $5 million in Custom Containers, split evenly between volume and proactive cost/inventory reductions. Greenlee emphasized delivering Q4 guidance, free cash flow, and deleveraging as key markers, declining to provide Q1 2026 outlook.

George Staphos pressed for details on the organic growth rate of the legacy dispensing business, excluding beverage closures. He also questioned the lack of increased promotional activity from customers in the hot-fill beverage market and asked for the outlook on soup container volumes for the second half of the year.

Answer

President & CEO Adam Greenlee confirmed that legacy dispensing products are growing at a mid-to-high single-digit rate, in line with expectations. He explained that hot-fill beverage customers built inventory before the season and are now working through it due to lower consumption, making a 2025 recovery unlikely. He stated that soup volumes are expected to be stable in the second half, with the first-half variance being purely a matter of timing.

George Staphos asked for reassurance on Silgan's full-year volume guidance given economic uncertainty and seasonal weighting, and inquired if customers were altering purchasing patterns due to tariff risks. He also asked for key learnings from the Weener acquisition.

Answer

CEO Adam Greenlee confirmed the company's confidence in its mid-single-digit volume growth forecast for all segments, citing strong performance in dispensing products, sustained demand in pet food, and new business wins. He stated there has been no unusual buying activity related to tariffs due to Silgan's localized supply chain. Regarding the Weener acquisition, he noted it is performing well and has validated the company's growth thesis for the dispensing market.

George Staphos asked about the initial learnings from the Weener acquisition, details on the cost reduction program, the rationale for the Q4 tax rate, the strategic implications of hiring a new COO with international experience, and how the growing pet food business is changing the management and risk profile of the Metal Containers segment.

Answer

CEO Adam Greenlee highlighted unexpected commercial opportunities with Weener and confirmed the $30 million cost savings target for 2025. He noted the new COO, Philippe Chevrier, strengthens the executive office's collaborative model. Greenlee also explained that the growth in pet food has led to a diversification of the aluminum supply chain. CFO Kimberly Ulmer clarified the low Q4 tax rate was due to a one-time foreign tax restructuring.

George Staphos asked about the volume exit rate from fiscal Q2 into Q3 for Amcor's focus categories and flexible segment, and the mix effect of declining volume in Q2 for flexibles, given the muted operating leverage.

Answer

CEO Peter Konieczny stated that focus categories collectively outperformed the core business (which was down 1.5%), being 50-100 basis points better. He highlighted strong performance in pet care (high single-digit growth) and meat protein (low single-digit growth), while healthcare was slightly down due to a weaker U.S. flu season. CFO Steve Scherger clarified that the flexible segment's EBIT was up 1% with only $10 million in synergy capture, indicating the core flexible business performed nearly flat despite volume declines. The rigid segment saw more significant synergy capture ($30 million of the $50 million total).

George Staphos from Bank of America asked about the volume exit rate from fiscal Q2 into Q3 for Amcor's focus categories and flexibles, identifying areas of acceleration or decline, and the mix effect of declining volume in Q2 for flexibles given muted operating leverage.

Answer

CEO Peter Konieczny noted that focus categories collectively outperformed the core business (down 1.5%) by 50-100 basis points in Q2. He highlighted strong performance in pet care (gaining share) and low single-digit growth in meat protein, while dairy was softer. Healthcare volumes were slightly weaker due to a milder U.S. flu season and potential phasing. CFO Steve Scherger added that the flexible segment's volumes were down 2%, with EBIT up 1%, and only $10 million of the $50 million EBIT synergies captured in flexibles. The core flexible business performed close to flat. The rigid segment (excluding non-core) saw a 15% EBIT increase, capturing $30 million of the $50 million EBIT synergies.

George Staphos asked for more details on the broader synergy realization, specifically how the combination of LatAm and specialty containers with Legacy Berry was progressing, including growth insights, and requested more color on the food service award as a revenue synergy example.

Answer

CEO Peter Konieczny (PK) emphasized the strong synergy momentum, with Q1 synergies at the upper end of guidance and a clear line of sight to at least $260 million for the year. He explained that the LatAm combination aims for more efficient regional market addressal. He cited a beauty and wellness win in Latin America, leveraging a combined footprint and an Amcor rigid container with a Berry closure, and a North American food service award that combined Amcor's relationship and Berry's manufacturing capabilities.

George Staphos asked for more details on the synergy benefits from combining Latin America operations and specialty containers with Legacy Berry, including growth rates, and further color on the food service award as a revenue synergy.

Answer

Peter Konieczny, CEO of Amcor, emphasized the strong synergy momentum and confidence in achieving at least $260 million in synergies for the year. He explained that combining Latin America operations allows for more efficient and effective regional addressing with a broader product suite. He cited a beauty and wellness win in Latin America, leveraging a combined footprint for contingency and a systems solution (Amcor rigid container with Berry closure), and mentioned a food service award in North America.

George Staphos questioned why volume trends remain weak in stable markets despite reported share gains and asked about the opportunity to apply Amcor's value-based pricing strategy to the legacy Berry portfolio.

Answer

CEO Peter Konieczny attributed the volume weakness to softer consumer sentiment in North America rather than market share issues. He confirmed that applying Amcor's value-based pricing methodology across the legacy Berry portfolio is a significant opportunity they are actively pursuing as part of their commercial synergy plans.

George Staphos asked how macro volatility is impacting demand from their customers who sell consumer staples, and whether a weaker growth outlook could affect achieving synergy targets.

Answer

CEO Peter Konieczny explained that consumer value-seeking behavior is creating forecasting volatility for their customers. However, he stressed that the $650 million synergy target is a 'self-help' measure that is not dependent on the operating environment. He noted that internal pipelines suggest potential upside to the target but declined to raise expectations at this time.

George Staphos questioned the momentum in Flexible Packaging, asking about the impact of incentives or FX on EBIT conversion, whether EBIT was in line with forecasts, and the volume and conversion exit rate heading into Q3.

Answer

CEO Peter Konieczny confirmed that first-half volumes were within the low to mid-single-digit guidance range and he expects this to continue. CFO Michael Casamento added that the segment's profit was in line with expectations, with good leverage from volume improvement despite negative mix from healthcare. He noted that while cost focus continues, the company is lapping a difficult comp from the prior year and has added back some labor to meet demand. FX and incentives were not material factors.

George Staphos asked for an update on the growth of newer sustainable product lines like AmFiber and AmPrima, and how Amcor is positioned for future packaging waste regulations.

Answer

CEO Peter Konieczny stated that Amcor supports regulations that drive circularity and has developed platforms like AmFiber and AmPrima to meet these needs. He explained that AmFiber, a paper-based solution, is recyclable at scale today but has limited applications due to its porous nature. In contrast, AmPrima is a sizable and growing recyclable plastic-based product. He noted both platforms are key to helping customers transition their packaging portfolios.

George Staphos inquired about the emphasis on 'profitable growth,' the outlook for North and Central America EBIT growth in 2026 given startup costs, the reasons for not achieving 2x operating leverage in Q4 North and Central America, and key volume drivers for 2026.

Answer

CEO Ron Lewis emphasized 'profitable growth' to ensure focus on achieving the 2x operating leverage needed for the 10%+ EPS algorithm, driven by strategic execution and the Ball Business System. SVP and CFO Dan Rabbitt confirmed North America EBIT could be flattish to down in 2026 due to $35 million in ramp-up costs (Millersburg startup, ends production domestication). Ron Lewis noted Q4 North America operating earnings were 12% on high single-digit volume, just shy of 2x due to incremental tariff costs. He highlighted World Cup and America's 250th birthday as potential 2026 volume drivers.

George Staphos with Bank of America asked why Ball is emphasizing 'doubling down on profitable growth,' if North and Central America EBIT growth could be flat to down in 2026 due to startup costs, and what prevented operating leverage in Q4 North America despite volume growth, along with 2026 volume drivers.

Answer

CEO Ron Lewis explained that emphasizing 'doubling down on profitable growth' is a rallying cry to focus on executing strategy, achieving 2x operating leverage, and driving the substrate shift. SVP and CFO Dan Rabbitt confirmed that North America EBIT could be flat to down in 2026 due to approximately $35 million in ramp-up costs. Ron Lewis clarified that Q4 North America operating leverage was near 2x, slightly missed due to minor incremental tariff costs, and cited World Cup and America's 250th birthday as potential 2026 volume drivers.

George Staphos asked how current tariff situations and aluminum strategies are affecting volume patterns and what this might mean for 2026, including any potential volume loading ahead of tariffs or the impact of a tariff reversal. He also inquired if customers are contemplating shifts to non-aluminum packaging due to costs, particularly in South America with refillable glass, and the implications of a large customer promoting mini cans in convenience stores.

Answer

Daniel Fisher, CEO, stated that a tariff reversal would ease demand and be a healthy COGS move for customers, noting that Ball is currently passing through a 25%-30% price increase. He indicated that cans continue to win, and while tariffs impact the broader substrate, Ball's favorable customer portfolio helps. Mr. Fisher confirmed that customers are committed to cans and haven't seen a shift to returnable glass in South America, though inflation is monitored. He expressed excitement about the promotion of mini cans, viewing it as a value proposition for consumers and an incremental lift for Ball.

George Staphos from Bank of America Merrill Lynch asked how much of the North American growth forecast depends on the current customer mix and sought clarification on the term 'connected promotion.' He also questioned when customers' hedged aluminum prices might converge with spot prices and the potential impact.

Answer

CEO Daniel Fisher clarified that 'connected promotion' refers to consumers concentrating their buying during promotional windows, not an increase in promotions. He stated that for growth to surpass the high end of the forecast, the beer category would need to rebound. Regarding aluminum prices, Fisher estimated the impact of hedges rolling off at about a quarter per 12-pack, which he believes will lead to lumpier buying patterns rather than a dramatic demand shift, as cans remain price-advantaged.

George Staphos asked for clarification on 'connected promotions,' the drivers of the North American growth outlook, and the potential impact of customers' aluminum hedge positions expiring.

Answer

Chairman & CEO Daniel Fisher clarified that 'connected promotion' refers to consumers concentrating purchases during promotional windows, not an increase in promotions. He stated that while customer hedges will begin to roll off, the primary driver for can demand is its lower price point relative to other substrates for a price-sensitive consumer, rather than temporary hedge benefits.

George Staphos asked about the drivers of the North American growth forecast and the meaning of 'connected promotion.' He also inquired about customers' embedded aluminum price relative to the spot market and when their hedges might expire.

Answer

CEO Daniel Fisher clarified that 'connected promotion' refers to consumers concentrating their multi-pack purchases during promotional windows, not an increase in promotions. On aluminum pricing, he stated that the impact of hedges rolling off will be felt in the second half of the year and into 2026, but he does not expect a dramatic shift in demand as cans remain a cost-effective packaging option.

George Staphos sought clarification on what management meant by "activating initiatives," how the company could be confident about minimal pre-buy activity, and what supported their optimism about increased promotions from beer customers.

Answer

CEO Daniel Fisher clarified that "activating initiatives" refers to the ongoing rollout of the Ball Business System, not a new program. He explained that the minimal pre-buy assessment is based on customer conversations and inventory analysis. His optimism on beer promotions stems from discussions with large brewers who have indicated plans for more concentrated marketing efforts during peak season, which typically includes an affordability component.

George Staphos asked about the potential impact of tariffs on guidance and the aluminum supply chain, and whether the new investments in Oregon and Florida are necessary to achieve growth targets or are additive.

Answer

CEO Daniel Fisher explained that a major tariff issue from China has been mitigated to a nominal impact, but a potential 25% tariff from Mexico is a concern for end-consumer demand. He clarified the new investments are additive to goals in 2026, with the Oregon plant aligning with a key customer and the Florida plant being a value acquisition. CFO Howard Yu added the investments are within the existing CapEx envelope.

George Staphos asked about the tangible results and future catalysts from Ball's operational excellence programs, how the company will manage capacity in Brazil for the upcoming summer season, and its long-term strategy for the U.S. mass beer portfolio.

Answer

CEO Daniel Fisher explained that operational excellence aims for 2-3% of cost structure in annual productivity gains, driven by better planning and efficiency. He stated that Brazil's Q3 capacity tightness was a short-term issue caused by a rapid demand spike, which has been addressed by uncurtailing lines. For the mass beer portfolio, Fisher noted the focus is on partnering with innovative winners in the broader alcohol category and that rebalancing the portfolio is a gradual process.

George Staphos asked about the factors contributing to the strong mix benefits in Southern Timberlands during Q4, including fiber log sales and India exports, and why these benefits are not expected to continue into Q1. He also questioned why EWP pricing is projected to decline slightly in Q1 despite a pickup in dimensional lumber markets, and his outlook for the EWP market.

Answer

CEO Devin Stockfish attributed Southern Timberlands' Q4 mix to Weyerhaeuser's scale and customer diversity, explaining that Q1's slight mix change is due to more thinning activity and minor shipping schedule fluctuations for India exports. He noted EWP pricing pressure from four consecutive years of declining housing starts and a lack of significant curtailments in the sector, but remains positive on the business.

George Staphos inquired about the factors contributing to Weyerhaeuser's strong Southern Timberlands mix in Q4, including fiber log sales and India exports, and why this mix benefit is not expected to continue into Q1. He also asked why EWP pricing is signaling a modest sequential decline into Q1, despite some pickup in dimensional lumber markets and expectations for stable or better construction activity in 2026.

Answer

CEO Devin Stockfish attributed the Southern mix performance to the company's scale and customer diversity, explaining that Q1's slightly lower mix is due to more thinning activity and pulpwood, and minor fluctuations in India export shipping schedules, not a material change in operations. He explained that EWP is primarily driven by single-family housing, which has seen four consecutive down years, putting pressure on EWP. Unlike lumber/OSB, EWP hasn't seen significant curtailments, but Weyerhaeuser maintains strong relative performance and market share efforts.

George Staphos asked if the softer start to the building season prompted any changes to the full-year harvest plan, sought details on the Occidental Petroleum CCS agreement's financial milestones and cash flow timing, and inquired about the current impact of tariffs on lumber pricing.

Answer

CEO Devin Stockfish confirmed that the full-year harvest plan remains unchanged, as it is set for long-term sustainability. Regarding the CCS agreement, he stated that cash flows are expected to appear on the P&L starting in 2029, but specific deal economics are being withheld to maintain leverage in future negotiations. He also opined that tariffs are not having a meaningful impact on lumber pricing at present, though that could change closer to implementation dates depending on market demand.

George Staphos of Bank of America questioned why lumber pricing wasn't stronger given lean inventories and potential tariffs. He also asked about capital allocation priorities, the ability to staff the new Timberstrand facility, and the project's CapEx cadence and its exclusion from FAD calculations.

Answer

CEO Devin Stockfish attributed the lack of a significant lumber price uplift to recent weather impacts and market skepticism that tariffs will be implemented. He also expressed confidence in staffing the new Arkansas facility with top internal talent. CFO David Wold addressed capital allocation, affirming the company's framework supports dividend growth and strategic investments. He explained the Timberstrand project's $500M CapEx will ramp up in 2026 and is excluded from adjusted FAD as it is treated like a strategic growth investment, thereby not reducing cash returned to shareholders.

George Staphos inquired about the outlook for Western timberland exports in the first half of 2025 and whether the lumber business could achieve breakeven EBITDA in 2025 without market improvement.

Answer

CEO Devin Stockfish projected that the Japan export market should improve in 2025 as European lumber imports decrease, while China remains a wildcard dependent on its real estate market. Regarding lumber profitability, he expressed optimism for 2025, citing recent capacity reductions as unsustainable for the industry. CFO David Wold added that at current prices, the lumber business would be EBITDA positive. Devin Stockfish also confirmed the directional outlook for OSB (up) and EWP (down) sequentially.

George Staphos inquired about the assumptions underlying the $300 million to $500 million Free Cash Flow guidance, specifically regarding price inclusion and the recent price letter. He also asked if the planned spin-off would prompt a review of the dividend policy, given the Free Cash Flow guidance does not cover the current dividend.

Answer

Chairman and CEO Andy Silvernail confirmed a price letter was issued earlier in the week, and no incremental price is included in the current guidance, noting that each $10 price increase translates to approximately $90 million in price realization. Regarding the dividend, Mr. Silvernail stated that covering the dividend requires $3.6 billion to $3.7 billion of EBITDA, and while 2026 includes substantial restructuring and one-time costs, the dividend policy will be maintained through 2026 and reviewed post-spin in conjunction with shareholders.

George Staphos inquired about the assumptions embedded in International Paper's Free Cash Flow guidance of $300 million-$500 million, specifically whether price increases are included. He also asked if the planned spin-off presents an opportunity to review the company's dividend policy.

Answer

Chairman and CEO Andy Silvernail confirmed that a price letter was issued earlier in the week and that no incremental price is included in the current guidance, noting that each $10 per ton price increase translates to approximately $90 million in annualized EBITDA. He stated that the dividend policy would be maintained through 2026 and would be reviewed post-spin in conjunction with shareholders, reiterating that $3.6 billion-$3.7 billion of EBITDA is the breakeven for covering the dividend.

George Staphos from Bank of America Merrill Lynch asked about the significant projected earnings jump from Q2 to Q3, questioning the relative confidence in controllable North American operational improvements versus market-dependent European commercial conditions. He also sought clarity on the EBITDA outlook for the EMEA and GCF segments.

Answer

CEO & Chairman Andrew Silvernail expressed higher confidence in the North American outlook due to controllable factors like commercial wins and 80/20 implementation, while acknowledging the mill system is an earlier-stage journey. He noted Europe's improvement is more subject to market volatility but affirmed the team is moving quickly on restructuring. He confirmed they are holding the previously stated EBITDA range for Europe and reiterated the goal of becoming a pure-play packaging company post-GCF review.

George Staphos asked for clarification on the sequential EBITDA contribution from DS Smith in Europe. He also posed a question about managing priorities in North America, specifically the risk to volume as the company focuses on value and targets smaller accounts in a potentially weakening environment.

Answer

Executives Andrew Silvernail and Lance Loeffler clarified that the Q2 DS Smith EBITDA figure on the chart represented the incremental contribution of the third month, not a sequential decline for the full quarter. Silvernail addressed the strategy question by stating the focus is on '80 customers' of all sizes, not just small ones, and that improved service levels allow them to be competitive on price without chasing volume. He expressed confidence in closing the volume gap to the market by year-end.

George Staphos from Bank of America Securities inquired about the expected increase in cost per ton for the containerboard business from Q1 to Q2, the impact of recent winter storms on Q1 guidance, and the resolution of reliability issues at the Massillon Mill, along with the cause of inventory mismatches at acquired facilities.

Answer

Chairman and CEO Mark Kowlzan noted typical seasonal weather impacts and inflationary concerns for Q1 costs, while President Tom Hassfurther added that the full impact of the winter storms on unshipped orders was still being assessed. EVP and CFO Kent Pflederer quantified the mill cost line increase at about $15 million total, or $10 a ton, excluding freight. Mark Kowlzan explained that the Massillon Mill underwent extensive rebuilding post-acquisition, significantly improving operational efficiency, and Tom Hassfurther clarified that the inventory mismatch was due to absorbing Greif's existing purchase and trade commitments and lower-than-forecasted shipment volume.

George Staphos asked about the expected sequential increase in containerboard cost per ton from Q1 to Q2, the qualitative impact of recent winter storms on Q1 guidance, and the company's confidence in resolving Massillon Mill reliability issues and inventory mismatches at acquired facilities.

Answer

Chairman and CEO Mark Kowlzan noted seasonal weather and inflationary concerns impacting costs, while President Tom Hassfurther highlighted the difficulty in quantifying storm impacts on unshipped orders. CFO Kent Pflederer specified a $15 million ($10/ton) mill cost line impact. Mark Kowlzan detailed a significant post-acquisition rebuild at Massillon Mill, improving operational efficiency by 15%. Kent Pflederer and Tom Hassfurther explained the inventory mismatch was due to purchase commitments and absorbing Greif's trade commitments.

George Staphos inquired about current bookings and billings trends for the fourth quarter on a per-workday basis, noting tough comparisons. He also asked about specific end-market strengths or challenges, particularly regarding beef and building materials. Additionally, he sought insights into initial findings and maintenance expectations for the acquired GRIF business, including the reasonableness of a $300 million combined EBITDA and the strategy for reducing GRIF's inventory levels.

Answer

President Tom Hassfurther reported bookings and billings were slightly over 1% up, acknowledging tough comparisons. He identified beef (due to 70-year low cattle herds) and building materials (affected by housing starts) as challenging segments, while other markets performed well. CEO Mark Kowlzan highlighted that GRIF's converting side was well-capitalized, and PCA personnel were actively improving the acquired mills. He noted significant operational improvements at Riverville and a comprehensive refurbishment at Massillon. CFO Kent Pflederer stated GRIF's historical EBITDA was $240 million annually, with $60 million in synergies projected after the second year, targeting $20 million by Q2 next year. Mark Kowlzan confirmed inventory reduction efforts for GRIF were underway.

George Staphos inquired about Q4 bookings and billings on a per-workday basis, current end market strengths and challenges, particularly regarding tough comparisons through Q1 2026. He also asked for insights into the Greif acquisition, including findings relative to the deal model, maintenance outlook, and the potential for $300 million in combined EBITDA, as well as the inventory strategy for the Greif system and expected tons reduction.

Answer

President Tom Hassfurther reported Q4 bookings and billings were slightly over 1% up, noting tough comparisons. He identified beef (due to 70-year low cattle herds) and building materials (due to housing starts) as challenging segments, while other segments performed well. CEO Mark Kowlzan stated that the CoreChoice converting side of Greif was well-capitalized, and PCA personnel were actively improving operations at the Massillon and Riverville mills, with Riverville showing immediate improvements in efficiency and quality. CFO Kent Pflederer clarified that Greif's historical EBITDA was $240 million, with $60 million in projected synergies, targeting $20 million by Q2 next year. Mark Kowlzan added that inventory management for the Greif system would take time to align with PCA's strategy, with mix also being a factor.

George Staphos of Bank of America Merrill Lynch inquired about current quarter-to-date bookings and billings, the specific drivers behind the Q2 operational outperformance, and whether the increase in revenue and EBITDA per ton was due to mix or other factors.

Answer

President Thomas Hassfurther reported that Q3 bookings were trending up sequentially against tough year-over-year comps. Chairman and CEO Mark Kowlzan attributed the Q2 operational beat to high efficiency (99% uptime) despite running to demand. Hassfurther clarified that improved revenue and EBITDA per ton were a function of their 'total price increase mode' and lower-margin export sales being down.

George Staphos asked about the drivers behind the cautious Q2 guidance, early Q2 booking trends, and the rationale for reducing containerboard production while box volumes are rising. He also inquired about Q1 profit per ton mix versus expectations and long-term containerboard supply.

Answer

CEO Mark Kowlzan explained that guidance reflects customer prudence amid tariff uncertainty. PCA is running mills to match demand, taking downtime on smaller machines, and pulling an outage forward into Q2 to prepare for stronger second-half demand. President Tom Hassfurther noted Q2 bookings started up 4.1% and that basis weights continue to trend down. CFO Bob Mundy added that Q1's outperformance was due to better-than-expected price realization that was initially anticipated for Q2.

George Staphos inquired about early Q1 bookings and billings, potential operational inefficiencies from high volume, sequential cost pressures from Q4 to Q1, and the company's strategy for implementing price increases not yet recognized by industry benchmarks like RISI.

Answer

EVP Thomas Hassfurther confirmed January bookings and billings were up 8%. CEO Mark Kowlzan acknowledged short-term disruptions from capital projects but framed them as a necessary 'growth engine.' CFO Robert Mundy detailed Q1 cost headwinds of $0.50-$0.60 per share, primarily from weather and timing, noting about 70% should reverse. Hassfurther added that PCA is successfully invoicing and collecting on its announced containerboard price increases, and the company is actively moving customer contracts away from the RISI index due to its perceived inaccuracies.

George Staphos asked for an update on Q4 bookings and billings, performance details across end markets like e-commerce, and the impact of brown market growth on product mix. He also inquired about the volume impact from recent crop damage and future investment needs for 2025.

Answer

Executive Vice President Thomas Hassfurther reported that Q4 bookings and billings were up over 8% year-over-year, driven by strong e-commerce demand, while graphics-related products remained flat. He noted that crop damage in Florida would likely shift some volume from Q4 into Q1 2025. Chairman and CEO Mark Kowlzan emphasized PCA's ongoing capital investment strategy, highlighting major projects and plans for new plants to support continued growth.

George Staphos asked for more color on metal volumes, specifically identifying areas of strength or weakness within end markets, and inquired about the impact of housing market trends on Greif's business. He also asked about the timing of fiber price-cost anniversarying and the drivers behind weaker polymer margins in Q1.

Answer

CEO Ole Rosgaard explained that the largest segment for metal is chemicals, tied to housing, where no pickup has been seen, but noted the mining sector in Southern Africa as a potential area for metal container demand. CFO Larry Hilsheimer elaborated on the housing market's decimated state, noting existing home sales are at 1982 levels on a population-adjusted basis. He confirmed fiber price-cost benefits would annualize in the later part of the second half of the year. For polymers, he attributed weaker margins to a product mix issue, with lower volumes in higher-margin small and large plastic drums, and higher manufacturing costs.

George Staphos inquired about volume trends in the metal segment, specifically strengths or weaknesses in end markets, and the impact of housing-related markets. He also asked when the Fiber price-cost spread would anniversary and the drivers behind weaker Polymer margins in Q1.

Answer

CEO Ole Rosgaard explained that the largest end segment for Metal is chemicals, which includes housing, where no pickup has been observed. He noted the mining sector's potential importance for metal containers. CFO Larry Hilsheimer elaborated on housing, stating existing home sales are at 1995 levels and population-adjusted 1982 levels, indicating significant upside when it turns. Larry Hilsheimer confirmed Fiber price-cost would annualize in the later part of the second half, primarily in the last quarter due due to contractual pass-throughs. He attributed Polymer margin weakness to product mix, with lower volumes in higher-margin small and large plastics, and higher manufacturing costs, which Ole Rosgaard confirmed the company is actively addressing.

George Staphos of Bank of America Securities Inc. asked about the impact of the containerboard business on the revised guidance, price-cost trends for metals heading into Q4, and the drivers of weakness in the Intermediate Bulk Container (IBC) segment within Polymers.

Answer

EVP & CFO Larry Hilsheimer clarified that the guidance increase was driven by SG&A cost reductions, not containerboard performance, and noted that steel costs have been relatively flat. President, CEO & Director Ole Rosgaard added that weakness in IBCs and large drums is tied to softness in the bulk chemical markets, particularly in North America, while targeted growth markets like agrochemicals and food & beverage continue to perform well.

George Staphos from Bank of America Merrill Lynch asked about the ultimate impact of the LA and Austell mill closures on cost per ton and operations. He also inquired about the progress and nature of the cost-out program and, in a follow-up, sought clarity on the downside volume assumptions in the new guidance and the status of the URB price hike.

Answer

EVP & CFO Larry Hilsheimer stated the mill closures will yield a positive $10 million annual EBITDA impact from fiscal 2026 onward. On the cost-out program, he noted the $10 million run-rate savings achieved so far are from operational and SG&A reductions. CEO Ole Rosgaard added there are over 70 workstreams in motion. Hilsheimer confirmed the guidance incorporates a cautious volume outlook but that the company is still actively pursuing the full URB price increase in the market, a point reinforced by Rosgaard who noted backlogs are at a two-year high.

George Staphos asked about the performance variance of the Ipackchem acquisition relative to the deal model, pressed for more detail on the cadence of the $100 million cost plan, and inquired about the potential impact of tariffs and the expected earnings ramp in fiscal 2025.

Answer

CEO Ole Rosgaard and CFO Larry Hilsheimer attributed the Ipackchem variance to a post-acquisition contraction in the agrochemical market but affirmed long-term confidence. They reiterated the cost plan is a three-year goal without a specific annual breakdown yet. Rosgaard noted tariffs would likely be a net positive due to local sourcing. Hilsheimer projected a slower Q1, typical for the company, with some margin pressure in metals, followed by improvement through the year.

George Staphos questioned Greif's ability to continue outperforming the sluggish European market and asked about volume exit trends for its major businesses at the end of the quarter, with a particular interest in CorrChoice. He also sought commentary on why the broader corrugated market recovery appears muted despite easy comparisons.

Answer

CEO Ole Rosgaard expressed confidence in continuing to outperform in Europe, citing the company's value-over-volume strategy that wins back business and a strategic focus on growing in less cyclical segments like food and pharma. He noted CorrChoice volumes were up nearly 10% sequentially. He described the overall Q3 exit trend as 'choppy' but positive. CFO Larry Hilsheimer added that customer feedback on the market is a 'mixed bag,' with sentiment often tied to the outlook for interest rates, which impacts consumer spending and industrial production.

George Staphos asked about opportunities for further productivity improvements, their importance for Waco's commercial success amidst market challenges, and if additional cost reductions (SG&A) would be required or additive to the $80 million target. He also inquired about trends in the food service market, particularly fast casual versus quick service, and the outlook for food service growth in the next year.

Answer

Mike Doss (President and CEO, Graphic Packaging) reiterated high confidence in Waco's $80 million ramp-up, noting its faster-than-expected startup. He emphasized focusing on controllable levers: CapEx reverting to 5% or below (generating over $350 million free cash flow), scrutinizing all costs (SG&A, plant costs) without impacting customer service, and further inventory reduction (expecting another $20 million in Q4). He confirmed the ability to toggle the K1 machine for supply-demand management. Regarding food service, he acknowledged pressure on fast casual and a shift to grocery stores, but noted Graphic Packaging's portfolio allows them to move with the consumer. He expressed hope for food service growth next year, primarily driven by innovation, but found demand difficult to predict.

George Staphos inquired about opportunities for productivity improvement, its significance for Waco's commercial success amidst market challenges, and the extent to which additional cost reductions, including SG&A, would contribute to or be required for the projected $80 million EBITDA uplift. He also asked about trends in food service, its outlook for Q4 and next year, and its margin profile.

Answer

President and CEO Mike Doss expressed high confidence in Waco's $80 million ramp-up, emphasizing the focus on controllable levers such as CapEx reduction, SG&A and plant cost reviews, inventory reduction, and the flexibility to toggle the K1 machine. He noted that fast casual food service is under pressure while QSR is picking up, and while difficult to predict 2026 growth, it would likely be driven by innovation. CapEx is expected to revert to 5% or below, generating over $350 million in free cash flow.

George Staphos asked for the key drivers supporting the company's second-half margin forecast and which of those are sustainable, and also questioned the primary EBITDA drivers for 2026 and beyond, particularly regarding volume growth.

Answer

EVP & CFO Stephen Scherger detailed the second-half margin improvement, attributing it to a smaller pricing headwind and significant benefits from less planned maintenance and the non-recurrence of first-half inventory reduction downtime. CEO Michael Doss added that the long-term growth algorithm relies on a return to low single-digit volume growth as their CPG customers work through current market challenges, with the $80 million annual benefit from the Waco facility being a key catalyst in 2026.

George Staphos sought clarification on the timing of share repurchases, asking if they are contingent on a customer volume recovery. He also asked what factors would help improve year-over-year performance in the remainder of the year, given the worsening volume outlook.

Answer

CFO Stephen Scherger confirmed that the company does not need to wait for a volume inflection to be opportunistic with share buybacks. He explained that performance should improve as the year progresses because the first half has heavier planned maintenance downtime, leading to more efficient operations and higher margins in the second half. CEO Michael Doss added that a potential moderation in inflation in H2 could also provide a tailwind.

George Staphos asked about the biggest risk factors in the 2025 guidance, whether a pickup in foodservice volume has been observed, and how cash flow from the Waco facility will support earnings in 2025.

Answer

EVP and CFO Stephen Scherger identified consumer-driven volume variability as the primary risk to 2025 guidance. He noted the Waco startup is a key catalyst for future cash flow and margin enhancement, supporting capital allocation like the recent dividend increase. President and CEO Michael Doss added that he anticipates continued growth in the foodservice segment in 2025, driven by innovation.

George Staphos of Bank of America questioned how Graphic Packaging can influence its customers' promotional strategies and how its contracts handle situations where customers do not meet forecasted volumes. He also asked for clarification on 2025 bridge items and whether pricing would be a net positive or negative next year.

Answer

CEO Mike Doss explained that while they actively share market trends and ideas with their CPG customers, the customers are ultimately responsible for their own marketing strategies. Regarding contracts, he noted that since it's a high-fixed-cost business, pricing mechanisms do account for volume fluctuations to ensure fairness for both parties, though he did not detail specifics. CFO Steve Scherger added that for 2025, both pricing and traditional commodity inflation are expected to be 'pretty neutral' on a mark-to-market basis, with performance improvement driven by volume growth and productivity.

George Staphos asked for clarification on the "70% profitable" metric for North American corrugated operations, how it's determined, and what further steps are needed. He also inquired about the drivers for customers switching from CRB to SBS, beyond just price, and how potential tariff rollbacks might influence the attractiveness of SBS versus FBB.

Answer

CEO Tony Smurfit explained that the shift to SBS is driven by brightness, lower caliper for similar performance, and improved printability/machine efficiency, with SBS now price-competitive with CRB. He noted the closure of a CRB mill created capacity for SBS/CUK. For North American corrugated, Smurfit attributed the 70% profitability to the owner-operator model, empowering local managers to focus on P&L and exit uneconomic business, reducing loss-making units by 50%. He stated that tariff rollbacks are not a primary factor in SBS strategy, emphasizing the grade's versatility and the company's focus on developing new, profitable SBS applications.

George Staphos inquired about the North American corrugated operations, specifically how the 70% profitability ratio is determined and what further steps are needed. He also asked about the box board business, the factors driving customer shifts from CRB to SBS/CUK, and whether potential tariff rollbacks might alter the attractiveness of SBS.

Answer

CEO Tony Smurfit explained that the 70% profitability in North American corrugated reflects the success of the owner-operator model, empowering local managers with accurate P&Ls to address unprofitable accounts, leading to a 50% reduction in loss-making units. For box board, Tony highlighted SBS advantages like brightness, caliper, printability, and machine efficiency, making it competitive with CRB, especially with current SBS pricing. He dismissed tariffs as a primary factor, emphasizing the diversity of SBS grades and the company's ability to develop new, profitable business.

George Staphos focused on the Consumer Board business, asking about key learnings from combining consumer and corrugated packaging sales, and how capital allocation strategies might differ between the two. He also asked what the recent CRB capacity closure signals about the long-term strategic view of that business.

Answer

CEO Tony Smurfit described the Consumer Packaging business as strong, with great people and assets, though the market is 'a little bit tougher' than first anticipated. He affirmed that capital will be allocated based on the best returns across all business lines. He stated that specific strategies for CRB, SBS, and CUK are actively being developed and the company is 'not a million miles away' from communicating them, indicating the CRB closure is part of this ongoing strategic refinement.

George Staphos asked about the effects of demand elasticity and higher aluminum pricing on can sales in North America and Brazil, particularly if Brazil's volume weakness indicated a pack shift. He also inquired about the Q4 guidance for can sheet supply and ongoing operational challenges.

Answer

CEO Oliver Graham stated that significant demand elasticity impacts from higher aluminum prices were not yet observed, but 2026 posed more risk as hedges roll. He noted Brazil's weakness was general liquid volume decline, not a pack shift. For Q4, he expressed cautious optimism about managing can sheet supply, citing new mills and alternative sources, and mentioned Q3 growth was impacted by 1-2% due to operational issues.

George Staphos asked about the effects of demand elasticity and higher aluminum pricing on can demand in North America and Brazil, particularly regarding Brazil's 17% volume decline and potential pack shifts. He also inquired about the Q4 guidance, the 2026 can sheet outlook, and how operational challenges are being managed.

Answer

Oliver Graham (CEO) stated that significant demand elasticity from higher aluminum prices is not yet evident, but 2026 poses more risk as hedges roll. He attributed Brazil's weakness to general liquid volume decline and weak consumer backdrop, not a major pack shift. For Q4, he expressed cautious optimism regarding can sheet supply, noting that new mills and diversified sourcing are helping to manage disruptions, with Q3 operational issues costing 1-2% growth.

George Staphos asked for the primary drivers behind the upgraded guidance, whether growth in key categories is from new or existing products, how European margin pressures are developing, and the rationale for increasing growth CapEx.

Answer

CEO Oliver Graham attributed the guidance raise to strong North American performance in categories like energy and sparkling water, driven by a mix of innovative new labels and strong existing products. He noted that while European margin headwinds persist, Q1 performance was better than expected due to strong cost management. The increased growth CapEx is targeted at high-return projects to add capacity and flexibility in a 'tapped out' European market.

George Staphos of Bank of America Merrill Lynch inquired about the Q3 EBITDA outlook for South America and the full-year outlook for the combined Americas. He later asked about the size and recurrence of Q2 green energy credits and how import volumes in North America and Europe are affecting producer behavior, margins, and pricing power.

Answer

John Sims (SVP & COO) projected continued improvement in Latin America for Q3 due to seasonality and no outages, but noted the combined Americas' full-year earnings might be slightly below the prior year due to pricing pressure in Latin American markets outside of Brazil. Don Devlin (SVP & CFO) specified the green energy credits were a recurring $8 million. John Sims added that while US imports are expected to decrease, the Q2 surge, combined with a competitor's inventory liquidation, did negatively impact a recent price increase initiative.

George Staphos of Bank of America inquired about the specific nature of the operational issues in Q1, the potential size of the order recapture benefit in Q3, and the typical seasonal uplift in Latin America.

Answer

John Sims, Senior Vice President and Chief Operating Officer, explained that the operational issues involved multiple reliability problems at the Ticonderoga and Eastover mills, compounded by lower-than-expected volume from the Riverdale mill. He estimated the Q3 benefit from resolving these issues would be slightly less than $10 million. For seasonality, Sims advised referencing historical regional performance data.

George Staphos asked for details on the Q1 operational issues, the potential Q3 benefit from pushed orders, North American demand dynamics including the impact of imports, and whether operational issues affected the Eastover capital projects.

Answer

SVP & COO John Sims explained that the operational issues were due to multiple reliability problems at the Ticonderoga and Eastover mills, plus lower-than-planned volume from the Riverdale mill, with a potential Q3 benefit of just under $10 million. He confirmed that apparent North American demand is skewed higher by imports that are now in inventory, with underlying demand down 3-4%. Sims also stated the operational issues have not impacted the major Eastover projects, which remain on schedule. Chairman & CEO Jean-Michel Ribiéras added that Sylvamo's order flow remains strong.

George Staphos of Bank of America asked about the Q1 impact of recent price increases, the cause of Q4 volume weakness, European market dynamics including the cost curve and operating rates, the terms of the Eastover woodyard partnership, Q1 free cash flow, the drivers of the higher 2025 tax rate, and the value of one-time benefits in Q4.

Answer

CFO John Sims explained that price increase realization will be minimal in Q1, with a larger impact in Q2. He and CEO Jean-Michel Ribiéras attributed Q4 volume weakness to a slow November in the North American commercial printing market. Sims noted the European cost curve is elevated, supporting prices with operating rates in the mid-80s. He stated the woodyard deal's main benefit is capital avoidance and declined to give specific free cash flow guidance. Sims cited the non-repeat of a tax credit for the higher tax rate and quantified Q4 one-timers at approximately $12 million ($5M insurance, $7M LIFO).

George Staphos of Bank of America sought clarity on the net financial impact of the Georgetown mill closure after mitigation efforts, the reasonableness of a Q4 free cash flow estimate, the outlook for price/mix into 2025, and the 2025 shipment forecast versus demand.

Answer

CFO John Sims confirmed that mitigation efforts are factored into the $40 million gross impact from the Georgetown closure and that Project Horizon savings also help. He indicated a Q4 free cash flow estimate of around $65 million is reasonable and noted that European price pressure may continue into Q1. CEO Jean-Michel Ribiéras added that 2025 shipments are expected to track demand.

George Staphos of Bank of America Merrill Lynch inquired about the Siding segment's Q3 margin outlook, asking if the expected decrease was due to a specific factor or management conservatism. He also asked about early Q3 volume trends and whether the reduction in full-year CapEx guidance would impact Siding growth projects like the Houlton mill conversion.

Answer

EVP & CFO Alan Haughie characterized the Q3 outlook as a balanced approach, noting that Q2 might be the peak quarter this year, unlike last year. He mentioned strong Q2 shed volumes might not persist. CEO Brad Southern added that the Q3 order file has stabilized but is not as strong as it was entering Q2. Alan Haughie confirmed the majority of the CapEx reduction is in the OSB segment, with no significant impact on Siding growth plans.

George Staphos of Bank of America Merrill Lynch inquired about the third-quarter Siding margin guidance, asking if it was intentionally conservative. He also asked about early Q3 volume trends and whether the reduction in capital expenditures would impact Siding growth projects like the Houlton mill conversion.

Answer

CFO Alan Haughie characterized the Q3 guidance as a balanced and safe approach, noting that Q2 might be the peak quarter for the year. CEO Brad Southern added that the Q3 order file has stabilized but is not as strong as it was entering Q2. Regarding CapEx, Haughie confirmed the reduction was primarily in the OSB segment and would not significantly affect Siding growth initiatives.

George Staphos from Bank of America Securities asked if LP's marketing might shift to a national focus, inquired about lead times and inflation for new press capacity, and questioned the margin impact of shed growth and maintenance cadence.

Answer

CEO William Southern stated the marketing focus will remain on effective local and 'boots-on-the-ground' efforts. He noted that pre-buys for long-lead-time equipment have begun and that post-COVID inflation has stabilized. He also clarified that shed growth is not a material drag on margins and that Q4 is the heaviest maintenance quarter.

George Staphos of Bank of America Merrill Lynch asked for specifics on the cost-saving controllables bolstering H2 earnings amid Food segment weakness, and how new CFO Kristin Actis Grande's experience with complex portfolios applies to Sealed Air.

Answer

President, CEO & Director Dustin Semach confirmed they are on track for the $90 million cost takeout target, which is now offsetting volume softness. He cited G&A optimization in Manila and Mexico City as examples. Regarding the new CFO, he highlighted her extensive experience managing complex industrial and international portfolios at companies like Ingersoll Rand and MSC, which is directly applicable to accelerating Sealed Air's transformation.

George Staphos asked about the methods used to measure customer satisfaction improvement, the challenge of balancing this with cost-cutting initiatives, and how the Food and Protective segments are trending relative to initial expectations.

Answer

President and CEO Dustin Semach stated that the company uses both analytical feedback and direct executive engagement with customers to measure satisfaction, which is improving but still has room to grow. He clarified that cost initiatives are focused on efficiency, such as back-office consolidation, which funds investments like expanding the sales force in Protective. Semach concluded that both business segments are performing in line with the company's internal expectations.

George Staphos asked about the Q4 outlook for the Protective segment, its sequential performance, the growth difference between fiber and poly products, the strategic importance of Instapak, and how the shift to fiber impacts pricing dynamics.

Answer

President and CFO Dustin Semach clarified that while Protective volumes are guided to step up sequentially in Q4 due to seasonality, the year-over-year decline is moderating. He noted fiber is a small but growing part of the portfolio. CEO Patrick Kivits added that Instapak remains crucial for industrial applications where fiber is less suitable and that the company aims to be substrate-agnostic, offering customers choices between poly and higher-priced fiber alternatives.

George Staphos of Bank of America Merrill Lynch questioned the rationale for discontinuing the Magma project, asking if it was due to the technology itself, changing customer needs, or if other initiatives like TOE now provide the required agility. He also asked for a regional breakdown of July's volume trends and the drivers behind the softer Q4 earnings outlook.

Answer

CEO Gordon Hardie clarified that customer demand for glass remains strong, with the NPD pipeline up 35%. He stated that while the Magma technology worked, it could not deliver the required financial returns at scale. The company's 'best at both' strategy, enhanced by TOE, provides a more capital-efficient path to high-volume premium production. CFO John Haudrich attributed the softer Q4 outlook to normal seasonality and a provision for potential temporary production downtime in Europe due to extended restructuring negotiations.

George Staphos asked about the volume impact from any pre-buying ahead of tariffs in Europe and for details on the Total Organization Effectiveness (TOE) program's progress at the Toano plant.

Answer

CFO John Haudrich clarified that any pre-buy effect on Q1 volume was minimal, contributing only about $0.01 to $0.02 of the earnings benefit. CEO Gordon Hardie added that April volumes softened slightly due to tariff uncertainty in European export markets. He also confirmed the TOE pilot at the Toano plant was highly successful, validating the approach for a structured rollout across the company's entire network over the next 15-18 months.

George Staphos inquired about the potential volume impact of hypothetical tariffs, the volume dependency of the 'Fit to Win' program, and customer feedback regarding consumer preference for glass packaging.

Answer

CEO Gordon Hardie and CFO John Haudrich explained that 'Fit to Win' is not volume-dependent and focuses on controllable costs. They estimated direct tariff exposure as manageable ($10-15M) and noted that customer feedback confirms strong consumer preference for glass due to taste and health perceptions, particularly in the food category. Customers are eager for more glass but require it to be more cost-competitive, which is the program's primary goal. Haudrich also clarified that network optimization savings figures were not additive.

On behalf of George Staphos from Bank of America, an associate asked about the expected plant utilization rate by the end of 2025 following capacity closures and inquired about the volume growth assumptions embedded in the company's 2027 EBITDA target.

Answer

CFO John Haudrich explained that of the 13% temporary curtailment in 2024, over half will be addressed by permanent closures, with the remainder being continued temporary curtailment that offers flexibility. He stated the 2027 EBITDA target of $1.45 billion is volume-neutral and not contingent on market recovery. CEO Gordon Hardie added that future growth will come from improving cost competitiveness, particularly against cans, to better capture demand in both mainstream and growing premium segments.

George Staphos requested more detail on the accelerated St. Marys sawmill project, asked if Wood Products EBITDA could rebound to Q1 levels in Q3, and inquired about the state of lumber channel inventories and industry operating rates.

Answer

President & CEO Eric Cremers explained the St. Marys project was accelerated to Q2 to avoid potential tariffs on Canadian machinery, causing a temporary negative impact. He affirmed it was "not at all" a stretch for Wood Products EBITDA to return to Q1 levels in Q3, citing the reversal of one-time costs and projecting a 13% quarter-over-quarter reduction in cash processing costs. Cremers assessed channel inventories as lean and stated that while PotlatchDeltic runs its mills at full capacity, the broader industry is likely operating in the upper 70% range.

George Staphos inquired about the actual EBITDDA contribution from the Waldo sawmill, the state of the Southern real estate market, the reason for a mix shift to smaller diameter logs, and directional guidance for segment EBITDDA in Q2.

Answer

President and CEO Eric Cremers stated that while the Waldo mill is running exceptionally well, its financial contribution is not yet at its pro forma target due to weaker pricing for wider dimensions, which he expects to improve. Executive Wayne Wasechek described the rural real estate market as strong, particularly for smaller tracts, while the larger M&A market is healthy but sees fewer transactions as sellers await clarity on Natural Climate Solutions (NCS) opportunities. Eric Cremers added that the Southern log mix shift was weather-driven and clarified that Wood Products EBITDDA should be up in Q2, with the overall decline driven by seasonality in Timberlands.

George Staphos of Bank of America Securities inquired about the rationale for the 2025 harvest volume forecast being lower than expected, demand trends for softwood pulpwood, and the company's capital allocation strategy regarding share buybacks versus its net asset value (NAV).

Answer

Executive Wayne Wasechek attributed the lower 2025 harvest volume to normal variability and recent premium land sales, while noting stable but regionally varied pulpwood demand. President and CEO Eric Cremers explained that log costs for Wood Products are expected to be flat. Regarding capital allocation, Cremers defended the 'slow and steady' buyback approach as a way to maintain strategic flexibility for future opportunities, despite the stock currently trading below NAV.

George Staphos from Bank of America asked for details on Wood Products manufacturing costs for Q4 and into 2025 following the Waldo mill ramp-up, and whether the segment could reach breakeven EBITDDA. He also questioned the P&L impact of hurricane-related salvage activity and trends in lumber import flows from Europe.

Answer

President and CEO Eric Cremers projected that the Wood Products mills would be profitable in Q4, with processing costs dropping significantly from $185 to $151 per thousand board feet as Waldo start-up costs are now in the past. Executive Wayne Wasechek and Cremers clarified that the financial impact from salvage operations is minimal, involving about 100,000 tons over six months. Cremers added that European lumber imports are down about 10% year-over-year but could return if U.S. prices spike.

George Staphos asked about current volume run rates across Sonoco's businesses, specifically seeking details on the organic volume performance for Sonoco Metal Packaging (SMP) EMEA in Q2 and its outlook for Q3, and questioned the consumer segment's incremental margins.

Answer

President and CEO Howard Coker detailed volume expectations, noting slight growth for paper cans and strong double-digit growth for U.S. metal cans. COO Rodger Fuller explained that SMP EMEA's Q2 organic volume was down mid-single digits due to a delayed European vegetable harvest, which is expected to drive mid-to-upper single-digit growth in Q3. Fuller attributed the softer Q2 consumer margin to this seasonal mix shift.

George Staphos asked for detailed color on volume performance by region and product line, changes in customer purchasing behavior, and Sonoco's strategy for communicating its value proposition to the market.

Answer

President and CEO Howard Coker provided a volume breakdown, noting strength in North American metal cans but softness in European and Southeast Asian rigid paper due to a customer transition. He stated there were no significant changes in customer purchasing behavior. Coker also emphasized the need to better communicate the story of Sonoco's transformation and improved performance to address the stock's valuation. COO Rodger Fuller added that European metal can profitability was up despite lower volumes.

George Staphos of Bank of America inquired about early Q1 2025 business run rates, the performance of the newly acquired Eviosys business relative to initial guidance, the expected Q1 contribution from the divested TFP business, and the Industrial segment's performance in Q4.

Answer

CEO Howard Coker stated that the Eviosys adjusted run rate for 2024 was approximately $390 million, with a planned 10% increase for 2025. Interim CFO Jerry Cheatham added that the TFP business's Q1 2025 performance is expected to be similar to Q4 2024. COO Rodger Fuller explained that while the North American Industrial business was strong, overall segment results were impacted by softness in Europe and Asia, where the company is actively rightsizing capacity.

George Staphos asked about the strategic rationale for acquiring Eviosys while divesting the Thermoformed and Flexible Packaging (TFP) business, questioning the impact on return on capital, growth, and capital intensity. He also requested quantification of these impacts, details on future interest expense, and commentary on industrial market volume trends and boxboard supply.

Answer

CEO Howard Coker explained the strategy as "trading up" in market opportunity and size, as capital demands were too high across too many niches. CFO Rob Dillard quantified that ROIC is expected to improve from ~12% to the teens, with the transactions adding over $200 million in EBITDA with similar or less capital investment. He projected a pro forma cost of debt in the low 4s. COO Rodger Fuller added that industrial volumes have been uneven, with strength in paper and film cores but weakness in textiles, and that the company is not seeing significant pressure from boxboard imports.

George Staphos asked whether competitive pressures in EWP are coming more from other engineered wood players or from alternatives like dimensional lumber and trusses. He also questioned if the strong daily sales momentum from April was continuing and inquired about the door strategy and any supply chain issues related to tariffs.

Answer

CEO Nate Jorgensen stated that competitive challenges are primarily from other EWP producers, not alternative materials. CFO Kelly Hibbs confirmed the strong daily sales pace seen in April continued into early May. COO Jeff Strom commented that the door strategy is progressing well, with both acquisitions and greenfield sites growing. Nate Jorgensen concluded that tariff impacts are modest and manageable, mainly affecting some imported metal products in the general line.

George Staphos from Bank of America Securities questioned how trends like smaller home sizes and material conservation are affecting EWP demand. He also asked about the source of EWP price erosion, the financial impact of the Oakdale mill downtime beyond Q1, and the company's current inventory position in the BMD segment.

Answer

CFO Kelly Hibbs clarified that EWP price erosion stems from competition among EWP products, not from other materials. CEO Nate Jorgensen added that while smaller home footprints might affect I-joist demand, increasing design complexity supports LVL demand for beams and headers. Hibbs confirmed the $7 million negative cost impact from the Oakdale downtime in Q1 and noted a residual impact will continue into Q2 as the mill ramps up to 50% capacity. COO Jeff Strom described the BMD inventory position as good, noting a high reliance from dealers on Boise Cascade's warehouse inventory.

Asked for a detailed bridge to 2025 EBITDA, including savings, growth, and offsets like incentive comp normalization. Also inquired about the strategy of shifting from third-party distributors to direct sales and its financial impact.

Answer

The company confirmed the 2025 EBITDA bridge components: a pro forma base of ~$843M, ~$15M in net savings, and GDP-level volume growth, offset by a ~$7M incentive comp headwind. An EBITDA north of $860M is considered reasonable. The distribution shift is about going direct to customers instead of selling through competing redistributors, which is expected to improve earnings quality in the long run.

Asked for details on the lean transformation pilot, the innovation pipeline for foodservice customers, and the primary strategic drivers for future growth relative to peers.

Answer

The company reported a greater than 20% throughput improvement at its lean pilot site, a model being replicated across other facilities. The innovation pipeline has secured $75 million in new wins, driven by sustainable products and service agility. For future growth, the company stated that innovation will be the primary driver, followed by improved service and consistency from lean initiatives, with direct cost savings being a tertiary benefit.