Mike Roxland

Mike Roxland sought reconciliation for the projected $700 million to $800 million free cash flow in 2026, considering the year-to-date negative adjusted free cash flow, the $400 million CapEx step-down, and the impact of higher working capital, cash taxes, and interest mentioned in the previous quarter. He also questioned the comfort level in bringing 550,000 tons of Waco capacity online in a depressed market, or the flexibility to push out if SBS/folding cartons do not improve.

Answer

SVP and Chief Accounting Officer Chuck Leisher highlighted that Q4 is typically a strong cash quarter. He outlined the bridge to 2026 free cash flow, including the $400 million CapEx reduction, cost controls (SG&A, plant, discretionary spending), inventory reduction, and favorable federal cash taxes, which are expected to be near zero. President and CEO Mike Doss stated they will ramp Waco as fast as possible as it's their lowest cost/highest quality mill, using the K1 machine to match supply/demand, which will help compete in new markets and protect margins.

Mike Roxland asked for Adam Greenlee's rationale for remaining in the North America hot fill beverage market, given its recent issues and a peer's exit. He also sought confirmation on the double-digit decline in hot fill sports drink volumes in Q3 and an update on the metal containers customer undergoing bankruptcy, including the $10 million EBIT impact for 2H and potential 2026 implications.

Answer

Adam Greenlee, President and CEO, Silgan Holdings, defended the North America hot fill beverage market as historically stable and growing, offering technologically advanced closure solutions. He confirmed the 10% decline in hot fill sports drink volumes in Q3 was in line with expectations, attributing it to isolated weather challenges. Regarding the bankruptcy, Greenlee stated no new update, with resolution expected around year-end. He noted the customer performed as expected in Q3 and reiterated a potential $10 million cost reduction opportunity over the next couple of years if volumes remain at current levels, suggesting a new owner might grow the business.

Mike Roxland followed up on the 1-2% lost growth in Europe due to inability to pivot to smaller formats, asking how the company plans to become more nimble to capture growth categories and minimize beer exposure. He also asked if new lines would be built with flexibility and about the risk of North America's metal supply issues persisting into 2026.

Answer

CEO Oliver Graham explained that projects are underway in Q4/Q1 to convert lines and add flexibility for specialty sizes in Europe, which will improve agility for Q2/Q3 next year. He confirmed new capacity would be built with flexibility. For North America, he expressed confidence that metal supply issues would not impact 2026 volumes, citing new mills, supplier fixes, and diversified supply chains.

Mike Roxland followed up on the 1-2% growth lost in Europe due to inability to pivot to smaller formats, asking how AMP plans to become more nimble and shift its mix away from beer in Q4 and early 2026. He also inquired if new lines would be built with greater flexibility and about the risk of North America metal supply issues persisting into 2026.

Answer

Oliver Graham (CEO) explained that AMP is undertaking projects in Q4 and Q1 to convert lines and add flexibility for specialty sizes in Europe, and future new capacity will incorporate this flexibility. He expressed confidence that there is no risk to North America's metal supply in 2026, citing new mills ramping up, Novelis's operational issues being resolved, and diversified sourcing strategies.

Mike Roxland followed up on the projected GRIF EBITDA and synergy numbers, asking if there was potential upside after six weeks of ownership. He also requested comments on efficiency and cost improvements at the Massillon mill, specifically the benefits from its extended five-week maintenance outage. Additionally, he questioned if GRIF's lower-than-expected EBITDA for the first month was due to outages or economic downtime, and asked for initial thoughts on 2026 capital expenditures.

Answer

CEO Mark Kowlzan stated PCA would remain conservative with projections but acknowledged potential upside depending on market conditions. He detailed extensive PCA personnel involvement in Massillon's comprehensive refurbishment, leading to a 50% improvement in quality metrics post-startup. He projected capital spending for GRIF mill improvements to be in the tens of millions over the next couple of years, not hundreds of millions. CFO Kent Pflederer clarified that GRIF's initial lower EBITDA was primarily due to outages and revenue recognition timing, not economic downtime. Mark Kowlzan mentioned 2026 CapEx plans would be updated in January, highlighting ongoing major projects in Ohio and New York, and future energy opportunities.

Mike Roxland asked about potential upside to Greif's projected $240 million EBITDA and $60 million synergies. He also sought details on the benefits derived from the extended five-week maintenance outage at the Massillon mill and whether the lower-than-expected Greif EBITDA for the first month of ownership was due to outages, economic downtime, or inventory management. Additionally, he inquired about initial thoughts on 2026 capital expenditures.

Answer

CEO Mark Kowlzan stated that PCA is sticking with current Greif projections but sees daily positive results, with upside dependent on market conditions. He detailed extensive work by PCA personnel at Massillon, covering cleaning, inspection, and equipment upgrades, expecting tens of millions in CapEx over the next couple of years for improvements, not half a billion like previous acquisitions. He noted a 50% quality improvement at Massillon post-outage. CFO Kent Pflederer clarified that the lower Greif EBITDA was primarily due to outages and revenue/profit recognition timing, not economic downtime. Mark Kowlzan added that 2026 CapEx plans would be updated in January, highlighting ongoing large converting projects and future energy projects aimed at making three mills electricity independent.

Mike Roxland asked about the capital allocation strategy for 2026, given strong growth, increased free cash flow, and achieving the targeted leverage level. He sought clarity on potential share repurchase amounts and details on the $450-$500 million CapEx for 2026, including specific projects and the possibility of higher spending.

Answer

President and CEO Tim Donahue and SVP and CFO Kevin Clothier reiterated exceptional cash flow and balance sheet strength, allowing flexibility for opportunistic share repurchases or debt paydown while maintaining the 2.5x leverage target, though no specific buyback number was provided. Tim Donahue confirmed the 2026 CapEx includes new lines in Greece, the German plant modernization, and a third line in Brazil, with potential for one additional unannounced project.

Mike Roxland asked about Crown Holdings' capital allocation strategy for 2026, specifically regarding share repurchases, given strong growth, increased free cash flow, and achieving the targeted leverage level. He also inquired if the $450 million-$500 million CapEx for 2026 includes only the Greece lines and Brazil plant, or if other projects could increase that number.

Answer

President and CEO Tim Donahue stated that with exceptional cash flow expected in 2026 and leverage around 2.5x, the company has significant flexibility for capital allocation, including opportunistic share repurchases, without committing to a specific number. He confirmed that the CapEx guidance for 2026 includes the two new lines in Greece, the modernization of the German plant, and a third line in Brazil, noting there might be one other unannounced opportunity that could potentially increase the CapEx.