Graphic Packaging Holding Company Reports Second Quarter 2024 Financial Results

Delivered strong EBITDA and margin performance, in line with expectations

Generated Innovation Sales Growth of $51 million

Divested Augusta, Georgia bleached paperboard manufacturing facility

Repurchased approximately 2.4% of Graphic Packaging Holding Company common shares outstanding

Graphic Packaging Holding Company (the “Company”), a leader in sustainable consumer packaging, today reported second quarter 2024 results.

Second Quarter 2024 Financial Results

• Net Sales $2,237 million, versus $2,392 million in 2023
• Net Income $190 million, versus $150 million in 2023
• Adjusted EBITDA $402 million, versus $453 million in 2023
• Adjusted EBITDA Margin 18.0%, versus 18.9% in 2023
• Earnings per Diluted Share $0.62 versus $0.49 in 2023
• Adjusted Earnings per Diluted Share $0.60, versus $0.66 in 2023
• Net Leverage 2.9x, versus 3.0x in second quarter 2023

Net Income was $190 million, or $0.62 per share, based upon 306.9 million weighted average diluted shares. This compares to second quarter 2023 Net Income of $150 million, or $0.49 per share, based upon 309.1 million weighted average diluted shares. The second quarter of 2024 was impacted by a net gain from special items of $22 million and the second quarter of 2023 was impacted by a net charge from special items of $37 million. When adjusting for special items and amortization of purchased intangibles, Adjusted Net Income for the second quarter of 2024 was $183 million, or $0.60 per diluted share. This compares to second quarter 2023 Adjusted Net Income of $203 million, or $0.66 per diluted share.

Michael Doss, the Company’s President and CEO said, “Second quarter played out largely as expected, with continued strength in Foodservice and Beverage results, and strong execution driving solid Adjusted EBITDA. Consumers are responding to higher prices by shifting their purchasing patterns, and our portfolio, designed to move with the consumer, is doing just that. Graphic Packaging’s innovation leadership was on full display in the quarter with a big win for Paperseal™ Shape at one of the UK’s largest food retailers. We are delivering the sustainable packaging solutions consumers prefer and are on track to reach $200 million in Innovation Sales Growth during 2024.

“On May 1st, we divested the Augusta bleached paperboard manufacturing facility, eliminating most of our open market bleached paperboard sales and removing a significant source of earnings volatility. We used a portion of the proceeds to repurchase approximately 2.4% of our outstanding common shares and will continue to return substantial cash to stockholders through dividends and share repurchase over the next several years as sales and cash flow grow.”

Operating Results

Net Sales

Net Sales decreased 6% or $155 million to $2,237 million in the second quarter of 2024, compared to $2,392 million in the prior year period. The decline was driven by the divestiture of the Augusta, GA bleached paperboard manufacturing facility and reduced open market sales participation of $83 million and a net decline in sales from packaging operations of $73 million, primarily price and mix. Other acquisitions and divestitures (excluding Augusta) had a $16 million favorable impact on sales in the quarter, while foreign exchange had a $15 million unfavorable impact.

EBITDA

EBITDA for the second quarter of 2024 was $458 million, $24 million higher than the second quarter of 2023. After adjusting both periods for business combinations and other special items, Adjusted EBITDA was $402 million in the second quarter of 2024 versus $453 million in the second quarter of 2023. The $51 million decline in Adjusted EBITDA was driven primarily by the divestiture of the Augusta, GA bleached paperboard manufacturing facility, related bleached paperboard price and volume declines, and incremental planned maintenance expense (totaling $47 million), in line with expectations. Excluding those items, the negative impact of lower sales and modest cost inflation were offset by Net Performance. Other acquisitions and divestitures (excluding Augusta) had a $4 million favorable impact on EBITDA in the quarter, while foreign exchange had an $8 million unfavorable impact. Adjusted EBITDA Margin including the negative impact of maintenance, the divestiture, and reduced open market paperboard participation was 18.0% versus 18.9% in the prior year quarter.

Other Results and Commentary

Total Debt decreased $250 million to $5,285 million, and Net Debt decreased $250 million to $5,160 million, compared to the prior year second quarter. The Company’s second quarter 2024 Net Leverage Ratio was 2.9x compared to 3.0x in the prior year quarter. During the quarter, the Company issued $500 million of 6.375% Senior Notes due 2032 and amended the approximately $2.8 billion Senior Secured Credit Facility to, along with other adjustments, extend the maturity from April 2026 to June 2029.

Capital expenditures in the quarter were $249 million, versus $189 million in the second quarter of 2023, primarily reflecting an acceleration in the timing of equipment purchases for the Waco, Texas recycled paperboard manufacturing facility.

The divestiture of the Company’s Augusta, Georgia bleached paperboard manufacturing facility was completed on May 1, 2024.

The Company returned approximately $261 million to stockholders during first half of 2024 through dividends and share repurchase activity. During the second quarter, the Company repurchased approximately 2.4%, or approximately 7.2 million shares of its common stock outstanding, for $200 million. Regular dividends of approximately $31 million and $30 million were paid in the first and second quarter, respectively.

2024 Annual Guidance

The Company is reiterating 2024 financial guidance:

• Adjusted EBITDA: $1.73 billion to $1.83 billion
• Adjusted Earnings per Diluted Share: $2.65 to $2.85

Innovation Sales Growth, Net Performance, and Non-GAAP Reconciliations

Innovation Sales Growth is defined as incremental sales of a product that delivers a significant change in materials used, package functionality, or design to a new or existing customer. Net Performance is defined as the impact of cost and productivity initiatives, production efficiencies and/or disruptions, and other operating impacts. A tabular reconciliation of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS, Adjusted Net Cash Provided by Operating Activities, Adjusted Cash Flow, Net Debt and Net Leverage is attached to this release.

For the full second quarter results, click here.

About Graphic Packaging Holding Company

Graphic Packaging Holding Company (NYSE: GPK), headquartered in Atlanta, Georgia, designs and produces consumer packaging made primarily from renewable or recycled materials. An industry leader in innovation, the Company is committed to reducing the environmental footprint of consumer packaging. Graphic Packaging operates a global network of design and manufacturing facilities serving the world’s most widely recognized brands in food, beverage, foodservice, household, and other consumer products. Learn more at www.graphicpkg.com.

Source: Graphic Packaging Holding Company