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GRAPHIC PACKAGING HOLDING CO (GPK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered resilient margins amid softer sales: Net Sales $2.095B (-6.9% YoY), GAAP EPS $0.46, Adjusted EPS $0.59, Adjusted EBITDA $404M, Adjusted EBITDA margin 19.3% vs 20.3% YoY .
  • Sequentially, sales declined vs Q3 on price pressure and Augusta divestiture; margins held strong (Q3 margin 19.5%, Q4 19.3%) due to net performance and disciplined execution .
  • 2025 guidance introduced: Net Sales $8.7–$8.9B (ex-FX), Adjusted EBITDA $1.68–$1.78B, Adjusted EPS $2.53–$2.78; including FX headwinds, $8.6–$8.8B, $1.66–$1.76B, $2.48–$2.73; Capex to fall to ~$700M as Waco nears completion .
  • Capital returns accelerating: 10% dividend increase to $0.11 and ~$322M returned in 2024; net leverage at 3.0x, net debt $5.052B exiting Q4 .

What Went Well and What Went Wrong

What Went Well

  • Margin resilience: Adjusted EBITDA margin 19.3% despite price declines and Augusta divestiture; net performance offset lower sales and modest inflation .
  • Innovation momentum: $205M innovation sales in 2024 and Q4 innovation sales growth of $63M, driving private label and convenience channel gains; volume turned positive (+1%) in Q4 .
  • Strategic capital allocation: Dividend raised 10% to $0.11, share count reduced ~2% in 2024, Capex to step down materially in 2025 as Waco completes; “We will deploy excess cash to create substantial value for our stockholders” – CEO Doss .

What Went Wrong

  • Top-line pressure: Q4 Net Sales down 7% YoY to $2.095B, driven by Augusta divestiture ($103M impact), bleached paperboard price/volume declines, FX (-$15M) .
  • EBITDA headwinds: Q4 Adjusted EBITDA down $53M YoY to $404M on Augusta/bleached board (-$39M) and accelerated maintenance (-$5M); FX also a $5M headwind .
  • Volume trajectory softer than hoped: Q4 volumes +1% vs guided 1–3%; FX volatility post-election reduced EBITDA by ~$8–$10M vs internal expectations, per CFO commentary .

Financial Results

Quarterly Comparison – Sequential (Q2 → Q3 → Q4 2024)

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Billions)$2.2 $2.216 $2.095
Diluted EPS (GAAP, $)$0.60 (Adjusted EPS referenced) $0.55 $0.46
Adjusted EPS (Diluted, $)$0.60 $0.64 $0.59
Adjusted EBITDA ($USD Millions)$402 $433 $404
Adjusted EBITDA Margin (%)N/A19.5% 19.3%

Quarterly Comparison – YoY (Q4 2023 → Q4 2024)

MetricQ4 2023Q4 2024
Net Sales ($USD Billions)$2.249 $2.095
Diluted EPS (GAAP, $)$0.64 $0.46
Adjusted EPS (Diluted, $)$0.75 $0.59
Adjusted EBITDA ($USD Millions)$457 $404
Adjusted EBITDA Margin (%)20.3% 19.3%

KPIs and Balance Sheet Highlights

KPIQ4 2024
Net Debt ($USD Billions)$5.052
Net Leverage (x)3.0x
Capex ($USD Millions, Q4)$310
Weighted Avg Diluted Shares (Millions)302.7
Dividend per Share (Declared 1Q25)$0.11

End-Market Trends (Qualitative)

End MarketQ2 2024Q3 2024Q4 2024Trend
Food“Dramatically better YoY” with value products (pasta, rice, mac & cheese); prepared meals mixed Improvement across categories; frozen/refrigerated prepared weaker; private label gains Food modestly weaker; pasta/mac & cheese strength; frozen/refrigerated prepared weak Mixed → Slightly softer
BeverageStrong performance; hot weather tailwind Uneven; soft drinks outperform; EU growth aided by plastic regulation changes Modest improvement; EU growth continues; regulation supports demand Stable to improving
FoodserviceOutperforming; near 10th consecutive 5%+ quarter Promotional volumes increased; strong comps Stable vs strong prior year; continued QSR value focus Stable high base
HouseholdRecovering slowly; selective strength (filters, storage); tissue weak Improved in tissue, pet care, storage Generally flat; Europe improving in tissue/pet care Gradual improvement
Health & BeautySmall, slower recovery; NA opportunity via Rainier recycled board Slow improvement; EU beauty better; healthcare weak Mixed; high-end cosmetics challenged; value segments improving Mixed but improving

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025Base model (low single-digit growth) commentary $8.7–$8.9B ex-FX; $8.6–$8.8B incl FX headwind (~$120M) Formal range introduced; FX headwinds quantified
Adjusted EBITDAFY 2025Base model (mid-single-digit growth) commentary $1.68–$1.78B ex-FX; $1.66–$1.76B incl FX (~$20M) Formal range introduced; FX headwinds quantified
Adjusted EPS (Diluted)FY 2025Base model (high-single-digit growth) commentary $2.53–$2.78 ex-FX; $2.48–$2.73 incl FX (~$0.05) Formal range introduced; FX headwinds quantified
CapexFY 2025~$800M prior estimate (implied) ~$700M; -$100M vs prior Lowered
Dividend1Q 2025$0.10 $0.11 Raised (+10%)

Earnings Call Themes & Trends

TopicQ2 2024 (Prev-2)Q3 2024 (Prev-1)Q4 2024 (Current)Trend
Innovation/Plastic Substitution$51M innovation; PaperSeal Shape; Boardio; EU leadership $54M innovation; EU regulation driving wins $205M FY innovation; strong private label/convenience wins Strengthening
Volume TrajectoryFlat; 2H recovery expected +1% pivot; softer than hoped +1%; below 1–3% guide; expecting 1–2% growth in 2025 Gradual improvement
FX/MacroNeutral inflation; price pass-through in EU Neutral-to-benign inflation; updated FY guidance FX headwind quantified ($120M sales, $20M EBITDA); post-election volatility cited FX headwind emerged
Tariffs/TradeLimited direct exposure; integrated supply chain Imports not material; cost structures deter sustained inflows Potential Canada/Mexico tariffs small exposure (~$300M cross-border; ~3% sales); 30-day reprieve noted Watching; limited impact
Waco Project/CapexOn track; 2024 peak Capex; Capex step-down 2025 On track; project cost ↑$100M to $1.1B; benefits to exceed plan On schedule; accelerated equipment; 2025 Capex down to ~$700M Executing; cash inflection ahead

Management Commentary

  • “We delivered strong and steady margins and significant new consumer packaging innovations… In 2025, we will build on that success… As the last of our major asset investments comes to completion in 2025, capital spending will decline significantly, and we will deploy excess cash to create substantial value for our stockholders.” – CEO Michael Doss .
  • “Adjusted EBITDA margins remained strong and steady at 19.1% for the full year and 19.3% for the fourth quarter… Net performance was an outstanding $170M for the full year and $80M for the fourth quarter, offsetting lower pricing and inflation.” – CFO Stephen Scherger .
  • “We are well positioned to achieve our goal of at least 2% innovation sales growth again in 2025… our customers are always [looking for] better, more sustainable packaging solutions.” – CEO Michael Doss .
  • “Foreign exchange is an approximately $120M sales headwind and ~$20M adjusted EBITDA headwind in 2025… Our base financial model and our core guidance exclude foreign currency impact.” – CFO Stephen Scherger .

Q&A Highlights

  • Estimates shortfall vs internal expectations: Q4 volumes came in at +1% vs 1–3% guide; late FX move was a ~$8–$10M EBITDA hit vs expectations .
  • Pricing environment: 2025 starting “pretty neutral”; 2024’s ~2% price declines “fundamentally behind us”; progress transitioning customers to internal index mechanisms .
  • Tariffs: Limited exposure; ~3% of sales cross-border NA; 30-day reprieve; potential modest tailwind via localization; minimal China exposure .
  • Inventory/work capital: Intentional raw material build ahead of Waco startup; expect to harvest working capital as Waco comes online .
  • Product/market dynamics: Food value segments (pasta, mac & cheese) gaining; EU convenience strong; QSR promotions drive mix shifts rather than category growth .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable for Q4 2024 due to SPGI request limits. As a result, beat/miss vs consensus cannot be assessed at this time. We will update when SPGI access is restored.
  • Management noted Q4 EBITDA came in modestly below internal expectations primarily due to FX and slightly softer volumes (+1% vs 1–3% guide) .

Key Takeaways for Investors

  • Margin quality intact: Despite price/FX headwinds and divestiture impacts, Q4 margin held at 19.3% with robust net performance; supports durability of the model into 2025 .
  • Cash flow inflection in 2025: Capex drops to ~$700M; Waco nearing completion sets stage for higher cash generation, dividend growth, opportunistic buybacks, and deleveraging .
  • Innovation as growth engine: $205M FY innovation and reiterated 2%+ innovation sales growth for 2025 underpin low-single-digit top-line algorithm even in neutral markets .
  • FX and tariff watch: 2025 guidance appropriately excludes FX, but quantified headwind is ~$120M sales/$20M EBITDA; tariff exposure modest and potentially a localization tailwind .
  • Pricing stabilization: 2025 starting neutral; multi-year transition to value-based/internal indices enhancing earnings stability; reduces reliance on third-party RISI .
  • Portfolio positioning: Augusta exit reduces open-market SBS exposure; integrated board strategy focuses on advantaged CRB/CUK with Waco/Kalamazoo scale benefits .
  • Near-term trading lens: Dividend hike and formal 2025 ranges are positives; FX/volume cadence remain the swing factors for near-term prints; monitor Q1 trends and EU strength/mix .