Michael Roxland

Michael Roxland questioned the free cash flow trajectory to reach the 2027 target given the lower 2025 EBITDA base. He also asked for the volume assumptions underlying the incremental EBITDA expected from the Waco facility.

Answer

CFO Stephen Scherger stated the long-term cash flow trajectory remains intact, driven by a significant, 'undeniable' reduction in CapEx after this year. CEO Michael Doss added that of the incremental Waco EBITDA, nearly $100 million comes from fixed cost removal from closing older mills, with the remaining $60 million from incremental volume, which he feels confident in due to recent competitor capacity removals balancing the market.

Michael Roxland asked about expediting cost takeout in the European market given persistent demand and price weakness, demand trends in North America and Europe for September/October/November, and the strategic rationale and margin uplift for transferring $100 million of CRB business to SBS and CUK.

Answer

CEO Tony Smurfit stated that European capacity is largely optimized, with the company operating as a low-cost producer and expecting more mill closures in the market. He noted no significant demand uptick in October, attributing volume declines to the strategic exit of uneconomic legacy WestRock business, with a strong pipeline for new, high-quality customer wins. Regarding consumer packaging, Smurfit explained that SBS has become competitive with CRB due to lower pricing, offering advantages in brightness, caliper, and machine runability, while CUK offers benefits for frozen products.

Michael Roxland asked about strategies to expedite cost takeout in the European market given persistent weakness, demand trends in North America and Europe for September and October with a November outlook, and the rationale behind transferring $100 million of CRB business to SBS and CUK, including potential margin uplift.

Answer

CEO Tony Smurfit explained that Europe's capacity is largely optimized, but they continue to trim assets and implement active cost takeout programs to mitigate wage inflation. He noted the market is challenging, with more mill closures expected. Regarding demand, Tony indicated no uptick in October and discussed the impact of shedding uneconomic Legacy WestRock business, expecting a strong pipeline of new, high-quality business to materialize. For the consumer business, Tony detailed that SBS has become competitive with CRB due to price, brightness, caliper, printability, and machine efficiency, while CUK offers benefits for frozen products, leading to advantageous transfers.

Michael Roxland from Truist Securities inquired about the specifics of the 40% reduction in loss-making North American corrugated operations and the outlook for the European market, questioning the basis for management's confidence that it has reached a low point.

Answer

CEO Tony Smurfit clarified that the 40% improvement refers to both the number of plants moving from loss to profit and the overall reduction in losses. He explained this was achieved by systematically exiting uneconomic contracts, a process that is ongoing with about 60% of loss-makers still to be addressed. Regarding Europe, he stated that current paper pricing is unsustainable for non-integrated players, leading to competitor capacity closures, which supports the view that the market is near a bottom.

Michael Roxland followed up on the demand outlook, asking for the specific trajectory assumed in the full-year guidance. He also requested details on the planned $100 million of Q2 downtime, including its location and product mix, and questioned the timing of synergy realization, which is now guided at $350 million for 2025 with a $400 million exit run rate.

Answer

CEO Tony Smurfit clarified the 2H demand assumption is for performance to be 'somewhat similar with a little bit of upside.' CFO Ken Bowles explained the synergy timing is consistent, with some benefits realized in late 2024, leading to the $350 million in-year figure for 2025 while still achieving the $400 million run rate. He noted the Q2 downtime will be taken 'across the system generally' rather than in one specific area.

Michael Roxland from Truist Securities inquired about the specifics of the 40% reduction in loss-making North American corrugated operations and the remaining scope for improvement. He also asked for the rationale behind management's view that the European market is near a bottom despite pricing pressures.

Answer

CEO Tony Smurfit explained the 40% improvement refers to both the number of plants moving from loss to profit and the overall reduction in losses, driven by systematically exiting uneconomic contracts. He noted about 60% of the loss-making plants still present an opportunity. Regarding Europe, Smurfit stated that current paper pricing levels are unsustainable for non-integrated players, leading to capacity closures which will stabilize the market.

Michael Roxland inquired about the volume growth assumptions embedded in the fiscal 2026 EPS guidance and the expected impact of elevated costs in the North American Beverage business throughout the year.

Answer

CFO Michael Casamento stated that the fiscal 2026 guidance is prudently based on an assumption of broadly flat volumes. Regarding the beverage business, he confirmed that while elevated costs are expected to persist in Q1, the overall base business earnings should be in line with the prior year, with synergy delivery driving growth.

Michael Roxland asked how Amcor will achieve significant procurement savings given the complementary resin buys and also requested a review of the synergy vetting process.

Answer

CEO Peter Konieczny explained that the complementary resin portfolio is an advantage, as it allows the combined entity to harmonize terms to match the more favorable terms of the larger buyer in each category. CFO Michael Casamento detailed the robust synergy vetting process, which included external consultants, benchmarking, and stress-testing by dedicated integration teams.

Michael Roxland inquired if any unexpected upsides or downsides have emerged during the Berry due diligence process and asked what cost actions Amcor is taking to improve profitability as volumes recover.

Answer

CEO Peter Konieczny stated there have been no surprises during due diligence and that everything is proceeding as expected, with growing confidence in the synergy targets. CFO Michael Casamento addressed the cost question, explaining that the company continues to focus on operational efficiency, managing labor and shift patterns, and is still realizing benefits from prior restructuring programs, with another $7 million expected in the second half. These actions are factored into the full-year guidance.

Michael Roxland asked if Amcor's historical annual margin improvement target of 20-30 basis points has shifted higher in the near term due to a leaner cost structure.

Answer

CFO Michael Casamento acknowledged that near-term margin improvement could exceed the historical algorithm but affirmed that 20-30 basis points remains the appropriate long-term target. He explained that while the cost base is flexible, factors like portfolio mix, product innovation, and sustainable structures will continue to drive margin performance over the cycle, which can fluctuate from year to year.

Michael Roxland of Truist Securities inquired about Pacific Northwest timber pricing, asking if it was beginning to reflect the upcoming Canadian duties. He also asked about Rayonier's post-transformation growth strategy and capital allocation priorities, particularly the balance between timberland acquisitions and share repurchases.

Answer

EVP & Chief Resource Officer Douglas Long confirmed improved pricing in the Pacific Northwest, attributing it to anticipation of duties and a better quality residual portfolio, a point echoed by President & CEO Mark McHugh. Long noted a lag is expected before the full price impact of duties is felt. McHugh detailed the capital allocation strategy, emphasizing a nimble, opportunistic approach focused on long-term value. He stated that given the current stock price, share repurchases are the most compelling use of capital, with over $500 million available for deployment while maintaining a leverage target below 3x net debt to EBITDA.

Michael Roxland of Truist Securities inquired if the corporate realignment was complete, asked about potential benefits from a U.S. Gypsum project in Texas, and questioned the potential risks to land-based solutions from a new political administration.

Answer

SVP & CFO April Tice stated that while recent realignment actions are done, scrutinizing expenses is a continuous effort. EVP & Chief Resource Officer Douglas Long noted it's too early to assess the U.S. Gypsum project's impact. On political risk, Mr. Long expressed confidence in the durability of initiatives like CCS and solar, citing bipartisan support and strong underlying demand drivers independent of the IRA.

Michael Roxland from Truist Securities asked for details on the specific cost control measures in the OSB segment that led to its EBITDA outperformance. He also inquired about the potential implications of shrinking average home sizes on the long-term demand for Siding.

Answer

CEO Brad Southern attributed the OSB segment's strong cost performance to two main factors: outstanding operational efficiency (OEE) and aggressive cost containment initiatives implemented as the market weakened. Regarding home sizes, he stated that while smaller homes are a slight headwind, the significant market share opportunities for Siding are expected to overwhelmingly offset this trend.

Michael Roxland from Truist Securities asked for specifics on the cost control measures in the OSB segment that led to better-than-expected EBITDA. He also questioned the potential impact of shrinking average home sizes on the Siding business.

Answer

CEO Brad Southern attributed the strong OSB performance to outstanding operational efficiency (OEE) and aggressive cost containment actions. On the topic of home sizes, Southern acknowledged it as a slight headwind but expressed confidence that market share gains in both new construction and repair/remodel would overwhelmingly offset any negative impact.

Michael Roxland inquired about the expected progression of Siding margins through the second half of 2025 and into 2026, especially considering the Houlton facility expansion. He also asked for LP's perspective on the competitive dynamics in the OSB market amid new capacity additions.

Answer

CFO Alan J. Haughie stated that the company's forecast is typically conservative and that he sees potential upside to second-half margin guidance, as previously feared inflationary costs have not materialized. He anticipates margin expansion in 2026 since the financial impact of new capacity won't occur until at least 2027. CEO William Southern added that while the OSB market is currently absorbing new capacity, he remains bullish on the business long-term.

Michael Roxland of Truist Securities asked for an update on the Lennar partnership's volume pull-through and inquired if LP has shifted more production from commodity OSB to higher-margin Structural Solutions amid market weakness.

Answer

CEO William Southern confirmed the Lennar agreement is performing at or above expectations and is fully ramped. He also stated that LP's strategy is to pivot towards margin-accretive Structural Solutions when commodity OSB pricing is soft, and the company plans to grow this segment further in 2025.

Michael Roxland inquired about the competitive response from fiber cement and vinyl to SmartSide's market share gains and asked about the current and expected operating rates for mills like Sagola and Houlton.

Answer

CEO Brad Southern characterized the competitive environment as 'normal,' emphasizing that LP is winning based on the SmartSide value proposition rather than pricing concessions. Executive Aaron Howald added that overall Siding mill utilization was in the high 70s to 80% range in Q3, which supports the decision to add future capacity.

Michael Roxland from Truist Securities inquired about the next steps for the 80/20 deployment in Europe, including potential mill closures or headcount reductions, and asked about employee receptiveness. He also questioned the European pricing assumptions embedded in the 2027 EBITDA targets.

Answer

CEO & Chairman Andrew Silvernail noted that structural changes in Europe require a formal consultation process but affirmed a commitment to making tough decisions to build a strong business. He said the team is excited to win, though the changes are difficult for impacted employees. On pricing, he clarified that financial assumptions are based on the first price increase of the year holding, with no contribution assumed from a potential second increase.

Michael Roxland asked for more detail on market share gains in local North American markets and the actions driving them. He also inquired about current operating rates and whether market weakness presents an opportunity for further portfolio rightsizing.

Answer

Executive Andrew Silvernail explained that share gains are occurring in the local customer segment, driven by significant investments in service and reliability, which improved on-time delivery from the high 80s to the high 90s. He noted that while current market weakness allows them to pull forward some planned footprint optimizations, the company's long-term strategic plan remains intact, as he does not foresee a permanent structural change in demand.

Michael Roxland asked for details on the company's strategy for balancing capacity with demand and how management is handling potential internal resistance to the rapid and significant cultural changes being implemented.

Answer

Executive Andrew Silvernail detailed a strategy of focusing investment on profitable customers, products, and assets while divesting or closing underperforming ones, guided by an 80/20 principle. Regarding culture, he stated there was enormous pent-up demand for change and that the team is capable and eager to win but was previously held back by bureaucracy, which he is now addressing to 'take the handcuffs off'.

Michael Roxland inquired about the 20-30% productivity improvement from box plant pilots, asking what this translates to for EBITDA, the timeline for a broader rollout, and if the methodology can be applied to the mill system. He also asked about the potential for further portfolio optimization at the mill level.

Answer

Chairman and CEO Andy Silvernail explained that the productivity gains drive over 60% incremental contribution margins, which enables reinvestment. He confirmed the philosophy can be applied to the mill system, citing examples like improving winder safety and efficiency. Silvernail announced plans for 'lighthouse' pilot programs in 2025 for both box plants and mills. Regarding portfolio optimization, he stated that the company is evaluating its entire portfolio to de-emphasize commoditized, capital-intensive businesses and reduce earnings volatility.

Michael Roxland asked for the EBITDA impact of the 20-30% productivity gains from box plant pilots, the timeline for a broader rollout, and whether the methodology could be applied to the mill system. He also inquired about the potential for further portfolio optimization at the mill level.

Answer

Chairman and CEO Andy Silvernail advised focusing on the 60%+ incremental contribution margins from productivity gains, which will be reinvested, rather than specific box plant EBITDA. He confirmed the methodology applies to mills, citing technology improvements at winders as an example. For 2025, IP will create 'lighthouses'—best-in-class examples at select mills and plants—to guide the rollout. Regarding portfolio optimization, Silvernail stated they are looking across the entire portfolio to deemphasize commoditized, capital-intensive businesses and create a more integrated, less volatile company.

Michael Roxland questioned if other customers in the food can business are facing similar financial headwinds and whether Silgan could have preempted the issue with the bankrupt customer. He also asked if this event represents a structural rebasing of the Metal Containers business's profitability.

Answer

President & CEO Adam Greenlee clarified the bankruptcy is a 'very discreet item' specific to one long-term requirements customer, and the balance of the pack business is performing well. He stated with pride that the team had been preparing for this possibility for years and successfully mitigated any direct financial loss from the filing. He asserted this is not a rebasing of the business's EBITDA, as Silgan would either fill the low-cost assets with other volume or take out costs if necessary.

Michael Roxland asked for real-time color on volume trends in April and order books for May. He also requested more detail on new business wins in the Dispensing and Specialty Closures (DSC) segment that are set to ramp up later in the year.

Answer

CEO Adam Greenlee confirmed that the positive momentum from Q1 continued into April, with the quarter starting as expected and May order books looking strong. He clarified that while Silgan is winning new business across all DSC segments, a specific large win previously mentioned is in a beverage application. The capacity for this win will come online late in 2025, with the volume benefits primarily impacting 2026.

Michael Roxland inquired about the long-term (5-year) evolution of Silgan's portfolio, particularly the Dispensing and Specialty Closures (DSC) segment's contribution to EBITDA, and asked for an update on the competitive landscape in metal cans.

Answer

CEO Adam Greenlee and EVP Bob Lewis emphasized that the high-margin, high-growth DSC segment remains a priority for capital allocation, with healthcare being a key focus area. Regarding metal cans, Adam Greenlee stated that with approximately 90% of the business under long-term contracts and a recent extension with its largest customer, the company is largely insulated from market volatility and sees no significant change in competitive dynamics.

Michael Roxland of Truist Securities inquired about the order book outlook for August, given the weaker shipments reported in July. He also requested more specific details on the progress and returns generated from the Total Organization Effectiveness (TOE) program at the initial 15 facilities.

Answer

CEO Gordon Hardie indicated that the Americas order book looks strong and parts of Europe are showing signs of recovery. He detailed a mixed demand environment, with weakness in European spirits and U.S. beer but strength in non-alcoholic beverages and food. Regarding TOE, Hardie explained the program systematically identifies and eliminates top sources of waste and inefficiency in plants, leading to significant productivity gains, and he expressed high satisfaction with the progress and team adoption.

Michael Roxland requested a breakdown of volume performance by end market (beer, wine, spirits, NAB) and an update on order books. He also asked about the rationale for streamlining French operations.

Answer

CEO Gordon Hardie reported strong Q1 volumes across most categories in both the Americas and Europe, with notable strength in beer, food, and spirits. He stated that while order books are good, tariff uncertainty persists. Regarding France, he explained the operational review is part of a strategy to align assets with market opportunities, specifically by focusing on the growing premium wine and spirits segments.

On behalf of Michael Roxland of Truist Securities, an associate questioned the timeline for achieving normalized mid-teens segment profit margins and asked why O-I's margins lag a key European peer. He also inquired if retrofitting furnaces with MAGMA technology plays a role in deciding which plants to close.

Answer

CFO John Haudrich clarified that mid-teens segment profit margins (high-teens to 20% EBITDA margin) are a medium-term target, with the high end of that range achievable by 2027. CEO Gordon Hardie noted that SG&A reduction alone accounts for a significant part of the margin gap with peers. Regarding closures, Hardie explained that while MAGMA could offer future flexibility, the current focus is on proving its industrial scale and economic returns at the new Bowling Green plant, which will inform future network configuration decisions.

Michael Roxland asked for the expected Q3 operating rate for Engineered Wood Products (EWP) and sought to quantify the potential sequential decline in Q3 Wood Products EBITDA based on current commodity prices.

Answer

CEO Devin Stockfish confirmed EWP operating rates would be lower in Q3 due to market conditions but could be increased if demand improves. He declined to give a specific EBITDA forecast, instead directing the analyst to the company's provided price sensitivities for lumber and OSB, and noted that prices are not expected to remain at unprofitable levels long-term.

Michael Roxland asked about the drivers behind the recent uptick in EWP order files, the segment's Q1 operating rate, the scale of the CCS opportunity, and whether CCS represents the highest-margin business within Natural Climate Solutions.

Answer

CEO Devin Stockfish attributed the EWP order uptick to normal seasonality, with Q1 operating rates in the low 70% range. He reiterated that the long-term CCS opportunity remains significant, though the timeline has been extended. He described CCS margins as 'incredible,' clarifying it is a lease of subsurface pore space with very low costs for Weyerhaeuser, representing nearly pure upside and making it a high-margin opportunity.

Michael Roxland of Truist Securities asked about potential risks to the Natural Climate Solutions business from the new administration's policies, the testing of Southern Yellow Pine for the new TimberStrand facility, and Q1 EWP operating rate expectations.

Answer

CEO Devin Stockfish expressed confidence that the long-term momentum for renewables and carbon solutions will continue despite potential policy shifts, noting that a full repeal of the IRA is unlikely. Regarding the new facility, he confirmed that extensive in-house testing on using Southern Yellow Pine for TimberStrand has been successful. He also stated that EWP operating rates are expected to increase in Q1 from the low-70% range seen in Q4.

An associate on behalf of Michael Roxland asked for a follow-up on the outlook for Engineered Wood Products (EWP) operating rates for Q4 and into Q1 2025, given seasonal demand patterns.

Answer

CEO Devin Stockfish clarified that EWP operating rates would be up slightly in Q4 from the Q3 mid-60s level. He then stated that he would expect rates to ramp back up in Q1 to a more normal operating posture in the high 70s to low 80s range, in line with the typical start of the spring building season.

Michael Roxland from Truist Securities asked about the cause of fading box shipments in June, sought clarification on Q3 booking trends, and questioned if weakness in auto and building products was a recent development. He also inquired about capital avoidance from the Greif acquisition.

Answer

President Thomas Hassfurther attributed the Q2 volume fade to customer caution amid global tariff uncertainty and weakness in segments like auto and building products, which he noted have been struggling for some time. He confirmed Q3 bookings were up about 10% versus the last month of Q2. Regarding the Greif deal, Hassfurther and CEO Mark Kowlzan highlighted significant capital avoidance, citing the ability to expand in the Dallas market without building a new plant from scratch.

Michael Roxland asked for more detail on the Q1 earnings beat, specifically what drove the higher-than-expected pricing in the Packaging segment. He also inquired about the growth drivers and margin profile of the e-commerce business.

Answer

CEO Mark Kowlzan attributed the beat to excellent operational execution and effective price increase implementation. President Tom Hassfurther elaborated that the company successfully implemented announced price increases for liner, medium, and non-contract boxes, with contractual increases continuing into Q2. He stated that e-commerce growth comes from existing customers and that PCA does not pursue volume at the expense of margins, adapting its mix to market trends.

Michael Roxland asked about Packaging Corporation of America's current system operating rates, the potential timeline and capacity additions from projects at the Counce and Valdosta mills, and the expected volume cadence for 2025.

Answer

CEO Mark Kowlzan stated the system is 'running hard' with flexibility to optimize grade mix and find more tons, rather than being completely 'full out.' He noted that potential major projects at Counce and Valdosta are being studied for the 'next couple of years' but are not yet approved. EVP Thomas Hassfurther added that while year-over-year volume growth percentages will moderate against tougher comps later in 2025, he expects continued steady growth throughout the year.

Michael Roxland inquired about the timeline for PCA's outsized volume growth to normalize relative to the industry and asked for any preliminary details on the new plants the company plans to build over the next few years.

Answer

Executive Vice President Thomas Hassfurther stated that PCA will continue to pursue profitable growth opportunities and is focused on customer demand rather than comparing performance to competitors, acknowledging that year-over-year comparisons will become more challenging. Chairman and CEO Mark Kowlzan added that PCA has a long history of outgrowing the market and deferred providing specific details on new plant construction until the January 2025 earnings call.

Michael Roxland sought clarification on whether the SMP EMEA business would achieve the previously mentioned $430M EBITDA level for the year and asked for a bridge explaining why EPS guidance was lowered while EBITDA guidance was maintained.

Answer

COO Rodger Fuller reiterated that SMP EMEA's EBITDA would be up year-over-year but did not confirm a specific figure, expressing long-term confidence. CFO Paul Joachimczyk explained that the EPS guidance was lowered to the low end of the range primarily due to higher-than-expected interest expense in H1, while strong North American performance supports the maintained EBITDA range.

Michael Roxland inquired about opportunities for optimizing Sonoco's global manufacturing network, the conservatism in the Eviosys EBITDA guidance, and measures taken to retain the Eviosys leadership team.

Answer

COO Rodger Fuller explained that network optimization focuses on the global metal can business to find the lowest-cost production locations. President and CEO Howard Coker described the Eviosys guidance as conservative. Fuller also detailed the successful integration efforts, noting the new team is pleased with a strategic buyer and that retention discussions are going well, supported by Sonoco's culture. He also raised the 2025 synergy run-rate target to $40 million.

Michael Roxland of Truist Securities asked for more detail on the company's plans to improve its European paper business and requested an update on the Eviosys integration, including any surprises and potential upside to the synergy target.

Answer

COO Rodger Fuller explained that the strategy for Europe mirrors the successful North American playbook: investing in low-cost mills while rationalizing high-cost capacity. On integration, Fuller reported it is proceeding 'great,' with a strong cultural fit and focus on sharing best practices and leveraging global procurement. He expressed confidence in achieving the $100 million synergy target by the end of 2026, despite a late start due to regulatory delays.

Michael Roxland from Truist Securities asked about the Intelligent Labels (IL) growth in the food segment, specifically how Kroger's plan to close 60 stores might impact the current IL deployment in baked goods and any future rollouts in categories like protein.

Answer

President & CEO Deon Stander clarified that the planned store closures would have no real impact on the Kroger rollout, which is on track and has reached approximately 700 stores. He noted that given the strong ROI being demonstrated, discussions are underway with Kroger to potentially accelerate the expansion of IL into other categories, such as proteins.

Michael Roxland from Truist Securities asked about the Intelligent Labels (IL) deployment at Kroger, specifically questioning the impact of Kroger's recently announced plan to close 60 stores on the rollouts for baked goods and future protein applications.

Answer

President & CEO Deon Stander stated that the planned store closures are viewed as normal real estate management and will have 'no real impact' on the Kroger rollout, which has reached about 700 stores. He added that due to the strong ROI being realized, discussions are underway with Kroger to potentially accelerate the expansion into other categories, such as proteins.

Michael Roxland of Truist Securities asked about the potential impact of Kroger's recently announced store closures on Avery Dennison's Intelligent Labels (IL) deployment for baked goods and future rollouts in categories like protein.

Answer

President & CEO Deon Stander stated that the closures are viewed as normal real estate management and will have no real impact on the IL rollout, which continues on track and has reached approximately 700 stores. He added that due to the strong ROI being demonstrated, discussions are underway with Kroger to potentially accelerate expansion into other categories, including proteins.

Michael Roxland inquired about the company's strategy to mitigate potential share erosion in the competitive logistics vertical for Intelligent Labels. He also asked for more details on the potential for new logistics deployments in 2026.

Answer

CEO Deon Stander outlined that the company maintains its leadership in Intelligent Labels through innovation, process engineering, and its ability to support large-scale rollouts. He noted that while the company is engaged with all large logistics providers and pilots are progressing well, any new large-scale rollouts are more likely to be a 2026 event rather than 2025.

Michael Roxland questioned the company's confidence in the logistics customer's committed 2025 volumes given past choppiness, and asked for an update on customer deployments that were delayed from 2024 to 2025.

Answer

President and CEO Deon Stander expressed high confidence in the logistics volumes based on significant learnings from the initial rollout. Regarding delays, he explained that timing shifts of 1-2 quarters are not atypical for new programs and are factored into the 10-15% IL growth guidance range. He also emphasized the multiple growth levers the company has beyond IL.

Michael Roxland asked for the specific growth rate of Intelligent Labels in Q3 and questioned if the weakness in the drugstore channel impacting Vestcom could be a permanent shift due to announced store closures by major chains.

Answer

President and CEO Deon Stander clarified that year-to-date Intelligent Labels growth moderated from mid-to-high teens after H1 to mid-teens after Q3, due to the logistics softness. Regarding the drugstore channel, he characterized the issues as largely temporary (hurricane impact, customer bankruptcy recovery) and expressed confidence in long-term growth, citing significant 'white space' opportunities with other large drugstore players and the value of Vestcom's labor efficiency solutions.

Michael Roxland questioned the sustainability of the recent "step change" in earnings and the high North American beverage can margins, referencing comments from a peer and the pressures facing CPG customers.

Answer

President & CEO Timothy Donahue defended the current margin levels, arguing that past returns were unacceptably low. He stated that given the significant capital and operational expertise required to run plants at high efficiency, it is incumbent upon Crown to achieve an adequate return for its shareholders. He suggested that current margins are only now beginning to approach what they should be, regardless of historical levels.

Michael Roxland of Truist Securities inquired about the drivers behind the improved performance in North American food cans and whether those positive trends are expected to persist.

Answer

President and CEO Timothy Donahue clarified that the non-reportable segment includes food cans, aerosol cans, and equipment. He noted that food can performance has been stable to up, benefiting from a well-balanced portfolio with significant presence in pet food and vegetables, which did well in the quarter. This was a recovery from a soft prior-year quarter. The improvement was partially offset by a downturn in beverage can equipment orders and subdued aerosol can demand.

Michael Roxland from Truist Securities questioned the drivers behind elevated SG&A expenses and the company's long-term targets. He also asked about the potential EBITDA and margin impact from achieving the full URB price increase and the possibility of further CRB capacity rationalization.

Answer

EVP & CFO Larry Hilsheimer attributed higher SG&A to increased incentive compensation, the IPAC Chem acquisition, and currency effects, stating a long-term goal of getting SG&A below 10% of sales. He quantified that a $10/ton change in URB pricing impacts EBITDA by about $530,000 per month. Regarding CRB, Hilsheimer explained the remaining machine is a swing machine, and CEO Ole Rosgaard added they will continue to optimize paper grades for the highest return.

Speaking on behalf of Michael Roxland, an analyst asked for an update on demand trends in boxboard, especially given the recent mill closure announcements. They also inquired whether more mills fall into the 'divest or close' category under Greif's strategic quadrant analysis.

Answer

CEO Ole Rosgaard reported that total boxboard demand is flat year-over-year, with the URB ad protection segment being the softest while tube and core products are up. He stated that a significant demand driver is unlikely until the broader paper market sees an inflection. CFO Lawrence Hilsheimer declined to comment on future potential mill closures, stating that the company is reviewing its entire footprint but will not speculate on specific locations due to the impact on employees.

An associate on behalf of Michael Roxland asked if the guidance assumes the full implementation of the containerboard price increase, inquired about the outlook for URB pricing, and questioned if there were discussions about moving away from index-based pricing.

Answer

CFO Larry Hilsheimer stated the guidance does not include the announced containerboard price increase. He noted that while URB demand is stable, it has not seen a significant pickup, and the company does not comment on future pricing. CEO Ole Rosgaard added that as a smaller player in containerboard, Greif is not involved in any discussions to change the industry's index-based pricing model.

Michael Roxland inquired if the portfolio transformation and new operating model would require additional headcount. He also asked what factors are driving Greif's outperformance in Global Industrial Packaging relative to a challenged market, particularly in Europe. Lastly, he sought to clarify the percentage of non-indexed customers in the PPS business and the success rate of recent price increases with them.

Answer

CEO Ole Rosgaard clarified the reorganization is not designed to reduce headcount but to operate more effectively, allowing for volume growth without adding staff. He attributed GIP's outperformance to a long-term focus on 'legendary customer service' and superior product quality, which builds lasting customer relationships. CFO Larry Hilsheimer stated that approximately 35% of URB customers are non-indexed and confirmed the company has had 'great success,' close to 100%, in implementing price increases with that customer base.

On behalf of Michael Roxland, Niko Pasini asked about the sustainability of high North American margins given CPG pressures and trends in the specialty versus standard can mix.

Answer

CEO Daniel Fisher acknowledged that North American margins are at a "high-water mark" and the goal is to maintain them through efficiency gains while partnering with customers on affordability. He noted that while specialty cans are growing, the focus on affordability could increase the role of standard 12-ounce cans, particularly in the beer segment.

Michael Roxland asked about the competitive environment and pricing risk in North America, particularly in the Midwest, and questioned when beer demand might finally see a positive inflection.

Answer

CEO Daniel Fisher stated that current contract pricing is healthy and better than it has been for most of the last 20 years, despite some regional overcapacity. On beer, he was uncertain of the exact timing for an inflection but expects aggressive marketing in the peak season and believes partners with a balanced portfolio of beer and other beverages will succeed.

Michael Roxland asked about the shipment cadence in North America during Q3 and into October. He also sought clarification on the customer realignment strategy, asking if it involves diversifying beyond beer or just focusing on winning brands within the alcohol space.

Answer

CEO Daniel Fisher described North American shipments as okay in August but slowing in September, a trend that continued into the start of Q4. He clarified the portfolio strategy is not just about beer, but about the broader alcohol category and partnering with companies that have the best overall portfolios. He reiterated that historically, beer has offered better margins, and the substrate shift from glass to cans still provides a growth runway within that category.

Michael Roxland asked for a clearer timeframe on the Protective segment's turnaround, given the dual messaging of urgency and it taking time. He also inquired about the feasibility of divesting non-core portfolios within Protective.

Answer

President and CEO Dustin Semach clarified that urgency is demonstrated by accelerating transformation programs, such as expanding go-to-market strategies globally and enhancing leadership. He pointed to sequential volume improvements and EMEA's best quarter since 2021 as proof of progress. Regarding divestitures, Semach stated that the company does not see large portfolio shifts at this time, emphasizing that the breadth of the portfolio is a key competitive advantage with distributors.

Michael Roxland asked about the company's cultural shift to empower employees and push down decision-making, noting that progress seemed more muted in the Protective segment compared to Food and asking what hindered progress in Protective.

Answer

CEO Dustin Semach clarified that the difference in progress was not intentional but a result of the Food segment's structure being established more quickly. He attributed the slower pace in Protective to its inherent complexity, with multiple portfolios across many geographies. He highlighted the recent North American go-to-market transformation in Protective as a positive step, acknowledging that more work is needed to cascade the changes through the complex organization.

Michael Roxland focused on the company's cultural transformation, noting that commentary suggested progress was more advanced in the Food segment than in Protective. He asked why progress in Protective was more muted and what steps are being taken to address this.

Answer

CEO Dustin Semach explained that the difference in progress was not intentional but a result of the Protective segment's greater complexity, with multiple portfolios across many geographies. He stated that the structural changes in Food were implemented more quickly. However, he highlighted the recent North American go-to-market transformation in Protective as a material step forward that has received positive feedback, acknowledging that more work remains to fully embed the changes throughout the organization.

Michael Roxland asked how the two new verticals would be separated to minimize dis-synergies in a potential spinoff and questioned what drove the Food segment's strong 22.9% margin in Q3 and its outlook for Q4.

Answer

CEO Patrick Kivits stated the reorganization is focused on operational effectiveness but provides future optionality. President and CFO Dustin Semach attributed the strong Food margin to higher volume growth and network utilization. He expects the segment to continue operating in the "low 20s" margin range, with potential for reinvestment of any outperformance.

Michael Roxland asked about the drivers behind the strong Southern harvest volumes, the ultimate potential acreage for solar development and its timeline, and how to reconcile increased lumber production with management's commentary on tepid demand.

Answer

President and CEO Eric Cremers clarified that the Q1 Southern harvest outperformance was due to favorable weather and strong stumpage demand, not hurricane salvage. He estimated the immediate potential for solar is 70,000-75,000 acres, with a timeline stretched by grid operator backlogs. He reconciled production and demand by explaining that while demand isn't growing rapidly, it is stable and expected to grow slightly, and PotlatchDeltic's efficient new capacity will find a home by displacing higher-cost competitors.

Michael Roxland questioned the drivers behind the significant North American volume swing from the previous quarter, asking about potential share gains. He also sought commentary on the competitive landscape and pricing outlook ahead of major contract renewals in 2026 and 2027.

Answer

CEO Oliver Graham explained the volume improvement was largely due to being on the 'right side' of a favorable customer mix and a broader recovery in the energy drink category. Regarding future contracts, he stated that discussions are progressing well with no material risk anticipated to volumes or margins. He believes the market remains rational and noted that standard can pricing did not increase dramatically during the pandemic, limiting customers' incentive to seek significant price reductions.

Speaking on behalf of Michael Roxland, an analyst asked about promotional activity trends in North America and the cadence of shipments throughout the third quarter.

Answer

CEO Oliver Graham stated that North American promotional activity is comparable to last year but still below pre-pandemic levels, yet CSDs in cans continue to show growth. He described the quarterly shipment cadence as a strong July, a weaker August against a tough prior-year comparable, and a September that was in between, with October trending similarly.

Michael Roxland from Truist Securities asked for an explanation of the drivers behind the strong Q4 Building Materials Distribution (BMD) EBITDA margin, which was better than seasonal expectations. He also sought guidance on Q1 BMD margins and the reasons for the significant 11% year-over-year growth in LVL volumes.

Answer

CFO Kelly Hibbs attributed the strong Q4 BMD margin to increased warehouse sales driven by market uncertainty and tailwinds from a commodity price run-up in the first half of the quarter. He guided that Q1 margins will see erosion due to a slower sales pace and the absence of similar tailwinds. Regarding LVL volume growth, Hibbs credited the strong execution and combined efforts of the Wood Products and BMD sales teams. CEO Nate Jorgensen added that growing home design complexity supports steady demand for LVL in beam and header applications.

Michael Roxland inquired about the sales progression in the Building Materials Distribution (BMD) segment during the quarter, customer feedback on demand and inventory, and whether low lumber prices caused a market share shift from Engineered Wood Products (EWP) to traditional lumber.

Answer

CFO Kelly Hibbs stated that BMD's daily sales pace was steady throughout the quarter, with September's lower total sales attributed to fewer sales days. Jeff Strom, Head of BMD, noted that dealers are proceeding cautiously and will lean on distribution amid seasonality. CEO Nate Jorgensen explained that there has been no significant shift from EWP to lumber, as builders prioritize the cycle time and simplicity benefits offered by EWP systems.

Questioned the updated EBITDA guidance, the feasibility of the Q4 free cash flow target, and strategies for the Flexibles division's weaker markets.

Answer

The company clarified that the EBITDA guidance was narrowed, not lowered, primarily due to the timing of resin price pass-throughs. The $1 billion Q4 free cash flow target is considered achievable and in line with historical seasonality. They stated the North American Flexibles business is outperforming the market, and the noted weakness is more limited to Europe, which is recovering slowly.