Lars Kjellberg

Lars Kjellberg from Stifel questioned Mativ's Q1 2026 guidance for 15-20% EBITDA growth against an easy prior-year comparison, noting a perceived slowing in top-line progress. He sought clarification on underlying market conditions, whether Q1 represents a low point, and how performance is expected to build throughout 2026. He also followed up on the commercial pipeline, asking how it's viewed and expected to perform relative to the underlying market.

Answer

CEO Shruti Singhal acknowledged Q1 demand weakness in SAS but pointed to strong performance in other categories and FAM, expecting continued positive trends despite European automotive challenges, driven by pipeline development. CFO Scott Minder emphasized that while top-line volume growth might be low single-digit, the 15-20% EBITDA growth is supported by $15-20 million in cost savings initiatives. Shruti Singhal further elaborated on a 'surgical' commercial pipeline approach, focusing on realistic opportunities, lead time/quality improvements in films, and successful wins in HVAC, air pollution control, and water filtration.

Lars Kjellberg asked for clarification on Mativ's Q1 2026 guidance for 15%-20% EBITDA growth, questioning if Q1 represents a low point in underlying market conditions and how progress is expected to build throughout the year. He also inquired about the commercial pipeline and Mativ's expected performance relative to the underlying market in key segments.

Answer

CEO Shruti Singhal acknowledged top-line demand weakness in SAS and European automotive filtration for Q1 but expressed optimism for overall performance due to pipeline building and commercialization efforts. CFO Scott Minder added that while top-line volume growth would be low single-digit, the 15%-20% EBITDA growth would be driven by operational cost reductions and SG&A savings, improving earnings power despite soft demand. Shruti further elaborated on a surgical, focused commercial pipeline approach, citing examples of success in films and filtration.

Lars Kjellberg from Stifel Institutional asked about the drivers of the Q2 outperformance, questioning which self-help initiatives materialized ahead of schedule. He also sought insight into the company's confidence in driving further improvements amid market uncertainty and inquired about the status of the strategic review, specifically if any business lines have been identified for potential separation.

Answer

President, CEO & Director Shruti Singhal attributed the outperformance to an increased pace of execution, organizational delayering for faster decisions, and strong commercial discipline, rather than early initiative completion. She expressed confidence in H2 performance based on these controllable factors and an updated cost-savings target of $35-40 million by 2026. Regarding the strategic review, she stated that while progress is being made, no specific assets have been earmarked for separation yet.

Lars Kjellberg from Stifel Institutional asked about the specific self-help initiatives that drove Q2 outperformance beyond market trends and sought details on the controllables giving management confidence for H2 growth. He also inquired about the progress of the strategic review and whether any business lines have been identified for potential separation.

Answer

President, CEO & Director Shruti Singhal attributed the Q2 outperformance to internal factors like faster decision-making, disciplined execution, and share gains in key categories, which also provide confidence for H2. She highlighted the increased cost reduction target of $35-40 million by 2026 as a key driver of profitability. Regarding the strategic review, she noted that while the process is progressing well, no specific assets have been identified for divestiture at this time.

Lars Kjellberg from Stifel inquired about the root causes for the significant margin contraction since the merger, questioning if it was due to business complexity or a lack of scale. He also asked why the company continues to pay a dividend while prioritizing deleveraging.

Answer

CFO Greg Weitzel attributed the margin pressure to Q1 seasonality, the impact of the films business within the FAM segment, and the mix effect from the EP divestiture, while reiterating a 15% margin target. He noted that cost reductions and pricing actions should drive improvement. CEO Shruti Singhal stated that after discussions with the board, the company plans to continue with the dividend at this time.

Lars Kjellberg from Stifel Institutional asked if the operational and commercial improvement benefits, separate from synergies, are already being realized and questioned the financial impact of the recent Fitch credit rating upgrade.

Answer

CEO Tony Smurfit confirmed that benefits from operational improvements, particularly in the U.S. corrugated box system, are already reflected in the current numbers and have contributed to margin growth. EVP & Group CFO Ken Bowles stated that while the Fitch upgrade to BBB+ is positive, its direct economic impact is minimal as the company's bonds were already pricing at that level, resulting in only small savings on its revolver and commercial paper programs.

Lars Kjellberg questioned the impact of trade tariffs on customer business, particularly for cross-border trade between the U.S., Mexico, and Europe. He also asked about the expected timeline and benefits from the 'Quick Win' self-help projects, and how they contribute to performance improvements in 2026 and 2027 beyond the initial synergy targets.

Answer

CEO Tony Smurfit stated that while the direct annualized cost of tariffs could be around $100 million without offsets, the larger, unknown risk is the potential impact on consumer confidence and demand. CFO Ken Bowles explained that the 'Quick Win' projects are designed to deliver returns within 18-24 months, contributing to cost take-outs in the current high-cost environment. Tony Smurfit added these are just a selection of many available cost-reduction opportunities.

Lars Kjellberg from Stifel asked for the expected timeline to achieve the $400 million in 'hard' synergies and for more details on the potential for an equal or greater amount from operational and commercial improvements. He also asked why the 2025 CapEx forecast was lower than initially anticipated.

Answer

CFO Ken Bowles stated the $400 million in hard synergies are on track to be fully captured by the end of 2025. He noted the additional operational improvements would likely take longer, over an 18-24 month timeframe. CEO Tony Smurfit added that the lower 2025 CapEx reflects a measured approach, with capital being shifted to well-maintained legacy Westrock assets, and that legacy Smurfit Kappa is already well-invested.

Lars Kjellberg from Stifel Institutional followed up on the potential $800M-$1.2B profit opportunity in the box system, asking if the separate $400M+ operational improvement benefit is already flowing through. He also inquired about the financial impact of the recent Fitch credit rating upgrade.

Answer

CEO Tony Smurfit confirmed that benefits from the operational improvements are already being realized and are reflected in the margin growth in the U.S., driven by both synergies and corrugated system enhancements. EVP & Group CFO Ken Bowles added that while the Fitch upgrade to BBB+ is positive, its direct economic impact is minimal as the company's bonds already priced at that level.

Lars Kjellberg of Stifel asked for color on the Q3 volume shortfall, specifically which geographies and end markets underperformed and the drivers behind the September slowdown and subsequent October recovery. He also questioned the source of the company's confidence in sustainable packaging innovation as a long-term growth driver.

Answer

CEO Mike Doss explained that Q3 started strong in July but was muted in September, as customer promotional plans did not translate into expected sales volumes, a trend seen across CPGs. CFO Steve Scherger noted that Europe continued to show positive volume growth driven by innovation. Regarding the innovation pipeline, Doss expressed confidence based on a four-year track record of hitting targets and a growing addressable market of nearly $15 billion. He cited the recent McFlurry cup redesign as an example of a quick-turnaround project, underscoring the high customer engagement and diverse project pipeline.