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GRAPHIC PACKAGING HOLDING CO (GPK)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 missed internal expectations and consensus: Net Sales $2.12B (-6% y/y), Adjusted EBITDA $365M (17.2% margin) and Adjusted EPS $0.51; management cited input cost inflation, weaker Americas volumes, FX and Augusta divestiture impacts .
  • Estimates context: Adjusted EPS $0.51 vs S&P Global consensus Primary EPS ~$0.58*, and Net Sales $2.12B vs ~$2.13B*, modest miss on both; 9 EPS and 8 revenue estimates contributed*.
  • Guidance cut: FY25 Net Sales lowered to $8.2–$8.5B (from $8.6–$8.8B incl. FX), Adjusted EBITDA to $1.4–$1.6B (from $1.66–$1.76B incl. FX), Adjusted EPS to $1.75–$2.25 (from $2.48–$2.73), citing -2% volume base case and ~$80M input cost inflation .
  • Capital return catalyst: New $1.5B repurchase authorization (total available $1.865B) and a 10% dividend increase to $0.11; management emphasized near-term buyback optionality given balance sheet and cash flow trajectory .

What Went Well and What Went Wrong

What Went Well

  • International volumes +3% with continued innovation wins (Boardio, PaperSeal), contributing to $44M Innovation Sales Growth in the quarter .
  • Strong capital returns framework: $1.5B new buyback authorization and dividend raised 10% (to $0.11), signaling confidence in multi-year free cash flow expansion post-Waco .
  • Waco recycled paperboard project remains on track for Q4 2025 start-up; hiring/training underway, leveraging Kalamazoo’s proven platform and anticipated $80M EBITDA in each of 2026 and 2027 .

Management quotes:

  • “First quarter results fell short of our expectations… We continue to gain market position as we partner with customers in a rapidly changing market.”
  • “On April 15, we announced a $40 price increase on all of our recycled and unbleached paperboard grades…”
  • “Our Board approved a new $1.5 billion share repurchase authorization… We expect to return substantial cash to stockholders…”

What Went Wrong

  • Americas volumes down 1% and broad-based input cost inflation ($20M in Q1 across energy/chemicals/logistics, expected ~$80M for FY25) pressured margins, with adjusted EBITDA margin falling to 17.2% (from 19.6% y/y) .
  • Pricing/volume/mix combined headwind ($34M) and FX (-$27M to Net Sales; -$6M to EBITDA) compounded Augusta divestiture (-$110M Net Sales; -$25M EBITDA) impacts .
  • FY25 guidance widened and lowered (volume now -4% to flat range; EBITDA margin 17–19% vs prior 19–21%) reflecting uncertainty in consumer demand and inflation persistence; Q2 flagged as heavy maintenance and modestly below Q1 margins .

Financial Results

MetricQ1 2024Q4 2024Q1 2025Q1 2025 Consensus
Net Sales ($USD Billions)$2.259 $2.095 $2.120 $2.135*
Diluted EPS (GAAP) ($)$0.53 $0.46 $0.42 $0.576*
Adjusted EPS ($)$0.66 $0.59 $0.51 —
Adjusted EBITDA ($USD Millions)$443 $404 $365 —
Adjusted EBITDA Margin (%)19.6% 19.3% 17.2% —

Notes: Consensus (Primary EPS, Revenue) from S&P Global; values marked with * are from S&P Global.

Segment/Operational KPIs:

KPIQ1 2024Q4 2024Q1 2025
Americas Packaging Volumes (y/y)——-1%
International Packaging Volumes (y/y)——+3%
Innovation Sales Growth ($USD Millions)——$44
FX impact (Net Sales, $USD Millions)——-$27
Augusta divestiture impact (Net Sales, $USD Millions)——-$110
Price/Volume/Mix headwind (EBITDA, $USD Millions)——-$34
Total Debt ($USD Millions)—$5,209 $5,735
Net Debt ($USD Millions)—$5,052 $5,606
Net Leverage (x)—3.0x 3.5x
Capex ($USD Millions)$331 $310 $313
Cash & Equivalents ($USD Millions)$136 $157 $129

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 2025$8.6–$8.8 incl. FX headwind $8.2–$8.5 incl. FX impact Lowered
Adjusted EBITDA ($USD Billions)FY 2025$1.66–$1.76 incl. FX $1.4–$1.6 Lowered
Adjusted EPS ($)FY 2025$2.48–$2.73 incl. FX $1.75–$2.25 Lowered
Adjusted EBITDA Margin (%)FY 202519–21 (implied) 17–19 (implied) Lowered
Capex ($USD Millions)FY 2025~$700 ~$700 Maintained
Net Leverage (x)YE 2025~<3.0 (prior cadence) Target <3.5x Raised tolerance
Price Actions2025Neutral/Modest negative (prior) $40/ton R/UB price increase effective 5/15; ~$100M pricing actions in flight New actions
Capital Returns2025+Buybacks opportunistic; dividend increased New $1.5B buyback (total $1.865B); dividend $0.11 Expanded

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
Consumer affordability & promotionsVolumes improving but promotions not driving category growth meaningfully Expect modest growth; promotions ramping; stability in margins Promotions continue but drive mix/brand switching, not foot traffic/volume; base case -2% volume Deteriorating demand vs plan
Pricing actions & indicesMoving away from third-party indices; proprietary mechanisms Price neutral entering 2025; progress on new index models $40/ton paperboard increase; ~$100M price actions with lag, recovery by late ’25/’26 Turning positive late ’25/’26
Input cost inflationWeather/power disrupted cost; modest inflation Neutral commodities; labor/benefits inflation offset by productivity Broad-based inflation across energy/chemicals/logistics (~$20M Q1; ~$80M FY) Inflation pressure rising
Waco project & footprintOn track; additional project cost, but upside to EBITDA Peak capex in ’24; step-down in ’25; cadence outlined On track Q4 ’25 start; closures (Middletown June 1) derisk ramp; +$80M EBITDA in ’26/’27 Execution progressing
International momentumEurope innovation drives half of innovation sales International contributing to stability International volumes +3%; FX headwinds Resilient vs Americas
Tariffs/macroDiscussed import dynamics/costs; limited exposure Potential tariff impacts; FX translation headwind quantified Monitoring tariff policy (Canada/Mexico); modest potential localization tailwind Macro uncertainty elevated
Capital returnsBuybacks (Augusta proceeds), dividend uplift 10% dividend raise; optionality on buybacks $1.5B new buyback; short-term opportunistic repurchases possible Strengthened

Management Commentary

  • CEO: “Consumers are redoubling their efforts to find value as food prices continue to rise… promotional activity is driving mix and brand switching, rather than incremental foot traffic and volume gains.”
  • CEO: “We saw an uptick in input cost inflation during the quarter, and responded with a price increase… With Waco… nearing completion… our Board… approved a new $1.5 billion share repurchase authorization.”
  • CFO: “The increases… in energy, chemicals, logistics and transportation… remained elevated throughout the quarter… we announced a $40 per ton price increase… expect those price increases to help bring margins back to more normal levels.”
  • CFO: “Embedded… midpoint… minus 2% volume… about $80+ million of inflation… expect to flip to positive late this year and recover the inflation as we roll into 2026.”
  • CEO (on Waco): “Hiring is effectively complete… operators training our new team members… we announced that our Middletown, Ohio… facility will close on June 1.”

Q&A Highlights

  • Volume outlook and drivers: Management shifted FY25 base case to -2% volumes; promotions not translating to category growth; GLP-1 and regulatory reformulations (e.g., dyes) altering mix and timing; company will “run to demand,” including downtime if necessary .
  • Price-cost timing: ~$100M pricing initiatives underway; expect modest benefit in ’25 and recovery of inflation as they enter ’26; pricing to inflect positive late ’25 .
  • Capacity landscape: Competitor CRB closures >200k tons reduce U.S. supply by ~7–9%; GPK closures (Middletown, East Angus) offset Waco capacity; integrated system supports confidence in +$80M EBITDA in ’26/’27 .
  • Capital returns: Optionality to buy back stock near-term with leverage tolerance (<3.5x target YE); strong multi-year cash generation supports growing dividend and repurchases .
  • Margins cadence: Heavy planned maintenance in H1; expect Q2 margins modestly below Q1, then second-half margins back toward ~19% at guidance midpoint .

Estimates Context

  • Q1 2025 results vs consensus: Adjusted EPS $0.51 vs Primary EPS consensus ~$0.58* (miss), Net Sales $2.12B vs ~$2.13B* (slight miss); 9 EPS and 8 revenue estimates contributed*.
  • Forward quarters: S&P Global Primary EPS and revenue estimates imply Q3 2025 EPS ~$0.57* (actual $0.58) with revenue ~$2.16B* (actual $2.19B), Q4 2025 EPS ~$0.41* and revenue ~$2.04B*, Q1 2026 EPS ~$0.44* and revenue ~$2.10B*.
    Values retrieved from S&P Global.
MetricQ1 2025 ConsensusActual Q1 2025
Primary EPS Consensus Mean ($)0.576*0.51 (Adjusted)
Revenue Consensus Mean ($USD Billions)2.135*2.120
Primary EPS – # of Estimates9*—
Revenue – # of Estimates8*—

Key Takeaways for Investors

  • Near-term headwinds (input inflation, Americas volumes) drove the guide cut; price actions should begin to offset later in ’25 with fuller recovery in ’26, positioning margins back toward ~19–20% longer-term .
  • Capital returns are a support: $1.865B authorized repurchases and higher dividend increase flexibility for opportunistic buybacks while maintaining leverage <3.5x YE’25 .
  • Waco start-up and footprint simplification (Middletown, East Angus closures) should unlock +$80M EBITDA in each of ’26/’27, structurally lowering cost and improving quality/availability .
  • International momentum and innovation (~$44M in Q1; targeted ≥2% of sales in ’25) continue to outpace end-markets, partially offsetting Americas softness .
  • Trading setup: Expect near-term margin compression (Q2 heavy maintenance, H1 pressure), then margin improvement in H2; watch updates on price realization, volume trajectory, and tariff/FX impacts .
  • Risk monitors: Consumer affordability/promotion efficacy, broad-based input inflation, FX headwinds, and pacing of customer reformulations/policy changes (SNAP, tariffs) .
  • Estimate path: Consensus likely to move lower near-term following guidance reset; upside scenarios hinge on quicker price-cost catch-up and stabilization in Americas volumes*.

S&P Global disclaimer: All consensus estimate figures marked with * are from S&P Global.