Graphic Packaging Holding Co Q2 FY2024 Earnings Call

Greetings. Welcome to the Graphic Packaging Holding Company Second Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Melanie Skijus. You may begin.

Good morning and welcome to Graphic Packaging Holding Company's second quarter 2024 earnings call. Joining us on our call today are Mike Doss, the company's President and CEO; and Steve Scherger, Executive Vice President and CFO. To help you follow along with today's report, we will be referencing our second quarter earnings presentation, which can be accessed through the webcast and also in the Investors section of our website at www.graphicpkg.com. Before I turn the call over to Mike, let me remind you that today's press release and the presentations made by our executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and in our filings with the Securities and Exchange Commission. With that, let me turn the call over to Mike.

Thank you, Melanie. Good morning everyone and thank you for joining us on our call today. Graphic Packaging is a global leader in sustainable consumer packaging. We spent the last eight years developing a stronger, more diverse packaging portfolio capable of delivering consistent results, solid growth, and substantial cash flow across a range of economic conditions. The benefits of that portfolio transformation and the commitment and talent of the Graphic Packaging team were clearly evident in our second quarter results. In the second quarter, Graphic Packaging sales were $2.2 billion. Adjusted EBITDA was $402 million, and adjusted EPS was $0.60. Our reported sales were $155 million below year-ago levels. Excluding the impact of the adjusted divestiture and related bleached paperboard sales, net sales from our packaging business were down $73 million or about 3%. Overall volumes were flat, in line with our expectation of flat to slightly positive, and both price and mix were a small negative, as Steve will discuss shortly. We ran our operations extremely well, and our margins were strong despite the significant planned maintenance expense we incurred during the quarter. This positions us well for the second half. Innovation sales growth and customer promotional activity are both expected to increase in the third and fourth quarters. On Slide 3, we closed on the sale of the Augusta bleached paperboard manufacturing facility on May 1st, eliminating most of our open-market bleached paperboard sales. Today, 95% of our sales come from sustainable consumer packaging solutions. Excellence in consumer packaging design, innovation, and execution drives our sales, consistency, and growth. We produce our own paper, which drives significantly higher return on invested capital and helps us deliver more consistent results for customers and stockholders. This was the impetus for the Augusta divestiture and the strategic logic behind our Waco recycled paperboard manufacturing project. Construction progress at Waco has been excellent. Recent storm activity in Texas caused very little disruption. We remain on schedule, and when we begin production in late 2025, we will extend our competitive advantage in recycled paperboard in both economics and product quality across North America. The investments we are making in our global network packaging facilities, while smaller in dollar terms, are equally important to our strategy and success. Last quarter, we highlighted the new beverage packaging facility and innovation center in the U.K. Today, I want to highlight two important investments we've made in North America. Our Heidelberg 3D printing press, one of the most productive in the world, reached its target productivity at our Winnipeg food packaging facility in the second quarter. This state-of-the-art press replaces two older presses and allows us to offer seven colors or finishes rather than six, alongside a wider range of print and design options. It also provides greater flexibility in layouts and higher speeds, which reduces costs and increases productivity. I am very proud of the work our Winnipeg team has done bringing this new investment to its full potential so quickly. In Perry, Georgia, we completed the automation of finished goods handling at one of our largest beverage packaging facilities. Product handling in a packaging plant has historically been labor-intensive and is the point in the manufacturing process with the greatest risk of product damage. The automation project helped us debottleneck, reduce labor costs and handling risk, and drive improved service levels. We have a deep pipeline of projects like these, most of which are relatively low in capital costs with high returns. Turning to our packaging results. While volumes are recovering slowly overall, I am encouraged by what is happening inside our portfolio. Our foodservice results are outperforming the industry, beverage remains strong, and our food, our largest market, improved dramatically year-over-year compared to the first quarter. More shoppers are buying groceries at mass retailers and superstores, including both private label and branded products. We are certainly participating in that shift. The Boardio coffee canister we discussed last quarter with Mother Parker, the biggest U.S. coffee supplier to mass retail and private label, is a good example of that commitment. Innovation sales growth was $51 million in the quarter, and we are on track to deliver $200 million for the full year. I was particularly pleased to see a solid contribution from strength packaging, including coffee K-Cup and snack multipacks for club stores. We again saw encouraging contributions from both food and beverage categories. Europe, although less than a quarter of our overall sales, contributed roughly half of our innovation sales growth in the quarter. European consumers are among the most sustainably conscious in the world, making Europe the center of global packaging innovation. Our investment to build Europe's best innovation platform is delivering results that we leverage globally. Our packaging operations ran well, and modest price and inflation headwinds were fully offset by strong net performance. This is a testament to the quality of the Graphic Packaging team and our commitment to delivering consistent results. Slide 4 will be a regular feature in our presentations, as the breadth and depth of our packaging portfolio is the foundation for Graphic Packaging's consistency and growth. We serve five markets: food is the largest, followed by beverage and foodservice; we see significant opportunities to grow in both household products and health and beauty. There’s a good chance you’ve held more than one of our products in your hands in the past 24 hours and will do so again within the next 24 hours. Now, let's look at our sales in more detail on Slide 5. Consumer consumption trends are reflected in our results. Food markets, which represent 40% of our sales, experienced a significantly smaller year-over-year decline. With people returning to office, consumers have less time to cook, driving better results in categories like frozen pizza and frozen entrées. Consumers are also trying to cut costs where they cook, resulting in increased demand for pasta, rice, and packaged cheese, which have lower price points. In dry food, private label is gaining share, which is also true in our portfolio. Beverage continues to show strong performance after over two years of positive comparisons. Soft drink growth outpaced beer during the quarter, while sparkling water and juice both showed strong year-over-year performance. In foodservice, after nine consecutive quarters of over 5% year-over-year growth, we saw significantly lower results; however, despite some challenges faced by our quick-service restaurant customers, we came close to our 10th consecutive quarter with over 5% growth. This reflects the strength of our innovation and our ongoing investment in capabilities and execution. Household products and health and beauty are recovering more slowly compared to our other markets. In household categories like filter frames, food storage, and detergents, we have seen improvement, while tissue and cleansers remain relatively weak. Several major producers have signaled plans for increased promotional activity in the second half. Keep in mind that health and beauty is a small segment for us, but it has substantial growth potential in North America over the next several years. If you turn to Slide 6, the seasonality chart shows typical seasonal patterns for each of our five markets. Second quarter tends to be average overall, with food normally modestly lower than other quarters and beverage showing strength. These seasonal differences are small, just a couple of percent of the annual total, reflecting underlying behavior patterns that follow summer and winter weather and holiday activities. There were no unusually strong or weak months in the second quarter, but we experienced a weaker March due to the timing of Easter, which led to a rebound in April. While overall consumer packaging volume was flat, we saw volume improvement in Europe each month of the second quarter, whereas North America volumes were uneven. You often hear me talk about the benefits of our European business regarding innovation, but this quarter reminds us that Europe contributes significantly to our ability to deliver consistent results as well. Promotional activity by our large branded customers is ramping up in North America, but that trend was not as pronounced in our orders during the second quarter as we expect it will be in the second half. I previously mentioned the strength in mass retail and superstore channels and overall private label performance. We are managing some pricing headwinds, but the impact on our margins has been limited, as Steve will discuss. We are executing price increases across most of our North American business to address price pressure. In Europe, prices are mostly pass-through-based, and paperboard prices appear to be rising again. Looking ahead, the third quarter brings more hot weather and back-to-school season. As shown in our seasonality chart for a typical year, the third quarter usually tends to be the strongest overall. July is starting well across a broad product range and customers. However, consumers have become more sensitive to prices and value, prompting brand owners to respond with higher promotional activity. Meanwhile, value promotions are gaining traction in quick-service restaurants (QSRs), which is reflected in our order books. Mass retail and superstores benefit from consumers seeking better value through multipacks. Back-to-school means the end of vacation season, which leads to less time outdoors and more meals prepared at home. We expect a positive impact on categories like prepared foods and snacks. Simultaneously, fewer remote jobs result in less time for cooking, which tends to boost growth in foodservice, prepared meals, and ready-to-heat options. We are observing meaningful growth in our European convenience business currently and expect to see similar strength in North America in the second half. Slide 7 outlines our five innovation platforms, and we are experiencing strong engagement with customers across all of them. Some of you have asked if the destocking we encountered last year has caused any delays in new product launches. Generally, we have noticed some delays as customers adjust the timing and pace of their launches in response to market conditions; however, we typically have good visibility at least six to nine months out. The $15 billion potential in sales presented only includes opportunities where we have product solutions that are either commercialized or will be very soon. This isn’t a total addressable market (TAM) in a traditional top-down sense; rather, it’s based on specific target markets and plans already in place. Most of our large customers are committed to more sustainable packaging. In Europe, many are aiming to meet new standards earlier than required. Their interest in environmentally friendly, functional, and convenient packaging continuously rises, and the investments we have made to become the global innovation leader in sustainable consumer packaging are paying off. I previously highlighted our Boardio paperboard canister, which now helps reduce plastic consumption in the U.S. coffee market. Today, I want to discuss another innovation that originated in our European business: PaperSeal Shape on Slide 8. PaperSeal was developed with our partner, G. Mondini, as a replacement for plastic trays and other difficult-to-recycle products. PaperSeal started with rectangular trays, and PaperSeal Shape allows us to offer a much wider range of shapes and sizes, including the eight-sided salsa bowl. PaperSeal Shape can also be designed with multiple compartments for holding dips and crackers. The PaperSeal product line delivers outstanding barrier properties and extended shelf life compared to some plastic alternatives, ultimately reducing both cost and waste. It also improves the brand's messaging visibility. Our first PaperSeal Shape customer in the United Kingdom is Sainsbury’s, one of the top food retailers in the U.K., for their private label breaded chicken line. We, along with Mondini, have closely collaborated with Sainsbury and Moy Park, one of Europe’s leading co-packers. Our trays were designed to run on Moy Park's existing lines, which also manage plastic trays for other customers. This ability to operate on existing lines without expensive modifications is crucial for new product commercialization. PaperSeal reduces plastic content in a tray or bowl by over 70%, and the lid and liner separate easily from the paperboard for recycling, which is especially significant for European recycling programs. This implementation will cut plastic consumption by approximately 300 metric tons per year, benefiting Sainsbury, U.K. consumers, Graphic Packaging, Mondini, Moy Park, and, importantly, our planet. PaperSeal Shape exemplifies our success in creating packaging solutions that are more circular, functional, and convenient. Finally, before I turn it over to Steve, I'd like to remind you that our Vision 2030 is more than just a set of financial targets. Slide 9 outlines our strategy's four pillars, describing our goals and aspirations. Innovation lies at the core of what we do, as better, more sustainable packaging is what customers seek and what consumers prefer. We have an exceptional team working relentlessly to strengthen our position. We have clear plans—not just targets. We're committed to reducing our environmental footprint through our packaging innovations, helping customers meet their own sustainability goals. We know how to execute and measure our performance against clear objectives. Now, let me turn it over to Steve for a review of our financials and operations.

Thank you, Mike. Turning to Slide 10. In the second quarter, we executed very well, generating strong margins and adjusted EBITDA, just as we did in the first quarter. Our reported sales were down $155 million, more than half of that decline represented the impact of the Augusta divestiture and the dramatic reduction in our participation in bleached paperboard sales. Sales from our packaging business declined by approximately $73 million. Volume was flat, in line with the expectations we shared last quarter. Price created a small headwind of about 2%, and there was a minor negative mix impact of approximately 1% in our European business. Our European business has a significant and profitable health and beauty segment, but unit prices tend to be significantly higher than our average, which also impacted parts of our European household products business. Both segments performed worse in the second quarter. The decline in higher price unit sales drove some negative mix. Mix was not a meaningful factor in the first quarter in Europe and was not significant in our Americas results in either quarter. Keep in mind that our European business mainly operates on a price pass-through model, so the mix impact we observed in second quarter sales did not materially affect EBITDA or margins. Sales impact from other M&A, excluding Augusta and foreign exchange, roughly balanced each other. Graphic Packaging delivered adjusted EBITDA of $402 million, in line with our guidance. The $47 million decline in reported adjusted EBITDA was due to the Augusta divestiture, the impact of lower paperboard volumes and prices, and incremental planned maintenance expense we flagged last quarter, which came in broadly as expected. Excluding these items, EBITDA headwinds from lower sales—primarily price and some modest cost inflation—were fully offset by strong net performance. For consistent results, we must manage all of our sales and cost headwinds, regardless of where they originate. Both the first and second quarters reflected that commitment. The EBITDA impact from other M&A, excluding Augusta and foreign exchange, was a $4 million headwind. Turning to our balance sheet and liquidity. As long as our debt levels are reasonable, we compare every potential capital use against share repurchase. Based on that analysis, we allocated $200 million of the Augusta divestiture proceeds to repurchase GPK shares during the quarter. We also addressed upcoming debt maturities, issuing $500 million of senior notes at a spread of 188 basis points over treasuries—our tightest spread to date. We also extended our bank debt to 2029. Currently, we have no significant debt maturities until 2026. We ended the quarter with net leverage of approximately 2.9 times and expect to conclude the year at around 2.7 times. Our average cost of debt is running at 4.6%. Turning to operations and capital investments on Slide 11. The Augusta divestiture occurred on May 1st, and by the end of the second quarter, we completed the re-optimization of our Texarkana bleached paperboard manufacturing facility. As you will recall, we sold some open market business produced at Texarkana and filled that gap with internal production, previously made at Augusta prior to the sale. The transitions were well-planned and executed smoothly. As of today, Texarkana is running at full capacity, producing the necessary paperboard mix to serve our customers. As Mike noted, Waco is progressing very well, with nearly 1,000 contractors on site this month. The finished goods warehouse is substantially complete, two pulpers have been installed, and the boiler and drum pulper were recently delivered and are ready for installation. We are moving quickly with the Waco project and have accelerated spending on equipment. We now expect total capital spending for 2024 to be approximately $1 billion, up from $950 million. We are on track with our recovered board and recovered paper sourcing plans and continue to expect to achieve incremental EBITDA of $80 million in each of 2026 and 2027, a portion of which reflects our strategy to shut down two older, smaller recycled paperboard manufacturing facilities. After these closures, we will be left with five modern and well-invested paperboard manufacturing facilities in our portfolio. Mike shared details about the projects underway within our global packaging network, and these investments are providing the targeted productivity gains. Each project offers unique benefits, but they all share rapid financial payback and enhanced product capabilities or increased productivity, greater reliability, and improved customer service. These projects range from a few million dollars to the low tens of millions and will be included in our planned capital spending commitment post-Waco, set at 5% of sales. Finally, the Bell packaging tuck-under acquisition we completed last September is fully integrated and we have achieved targeted synergies of approximately $10 million. Bell has expanded our foodservice platform, offering significant opportunities for further volume growth without substantial new investment. Slide 12 summarizes our recent dividend and repurchase activities. In the second quarter, we returned approximately $230 million to shareholders through dividends and share repurchasing. We bought back roughly 7.2 million shares, representing about 2.4% of our outstanding shares, for a total consideration of $200 million at an average price of $27.61 per share. For modeling purposes, we ended the quarter with approximately 300 million common shares outstanding or about 301.2 million on a fully diluted basis. Turning to Slide 13 for our outlook. As Mike mentioned earlier, July is off to a strong start in both North America and Europe, with high levels of customer engagement across all markets. We continue to expect 3% to 4% volume mix growth in the second half, and excluding the impact of the Augusta divestiture, we continue to anticipate modestly positive full-year volume mix even though current price headwinds may offset that positive impact in 2024. We expect to return to low single-digit sales growth in 2025. We are on track to achieve $200 million in innovation sales growth in 2024. As stated last quarter, we anticipate full-year 2024 adjusted EBITDA margins in the 19% to 20% range, and we expect to deliver adjusted EBITDA between $1.73 billion and $1.83 billion. Our adjusted EPS guidance remains unchanged. We indicated last quarter that 2024 would feature a pronounced first-half, second-half pattern, which is quite unusual for Graphic Packaging. After delivering adjusted EBITDA of $845 million in the first half, our midpoint guidance for the second half equates to $935 million of adjusted EBITDA. This translates to a $90 million increase in the second half compared to the first half. Keep in mind that approximately $50 million of this improvement stems from decreasing planned maintenance expenses. The remaining amount is expected to derive from the 3% to 4% volume mix growth previously referenced and the continuation of the strong execution and net performance from the first half. Slide 14 summarizes our Vision 2030 financial metrics and capital allocation priorities presented during Investor Day in February. We aim for low single-digit top-line growth driven by innovation and execution, mid-single-digit adjusted EBITDA growth reflecting the leverage in our financial model and anticipated returns from the Waco investment, along with ongoing productivity initiatives. We also expect high single-digit EPS growth, comprising higher pre-tax earnings, reduced leverage over time, and a lowered share count. Once the Waco recycled paperboard manufacturing investment is complete in late 2025, we'll contain capital spending at 5% of sales to sustain growth and drive net performance. We are set to generate cash flow well beyond our needs over the next seven years, and our cash deployment priorities are clear. After completing the Waco investment, our capital focus will first be on maintaining and strengthening our leadership in sustainable consumer packaging. Following reinvestment, returning capital to shareholders via a growing dividend and share repurchase becomes our next priority. We will measure every possible cash use against share repurchase as fundamental financial discipline. While we plan to gradually reduce leverage, we are currently comfortable with our debt levels and are satisfied with our maturity schedule and overall cost of debt. We anticipate leverage will decline over the next few years, and we will pursue an investment-grade debt rating at an appropriate time. We possess the assets, capabilities, and team necessary to fulfill our Vision 2030 objectives. We will also continue assessing tuck-under acquisitions where they can accelerate our growth while generating even higher returns. Last year, Bell acquisition exemplified this point. Slide 15 is taken from our Investor Day presentation. We expect to generate about $5 billion in cash flow over the next several years, with 2024 being our peak CapEx year. In 2025, we expect CapEx to decrease by at least $200 million compared to 2024 and in 2026 and 2027, we expect to see healthy returns from the Waco investment while generating substantially higher cash flow that can be used to drive value creation further. On Slide 17, supplemental information might be useful for modeling purposes. That concludes our prepared remarks this morning. We will turn the call back to the operator to begin Q&A.

Thank you. At this time, we will be conducting a question-and-answer session. Your first question is from George Staphos with Bank of America.

Hi everyone. Good morning. Thanks for the details. My first question is on volume and the second one is on margin. In terms of volume, gentlemen, can you talk a bit about what you're seeing? You mentioned that July is off to an encouraging start. What are you observing early in the quarter, and which end markets give you the most confidence in achieving that 3% to 4% adjusted growth rate for the second half of the year? Relatedly, how much is the trend towards more promotion, changed commercial strategies, etc., from your customers driving that? And I had a margin question.

Morning George, thanks for the question. As July has progressed, we've continued to see strength in our European business, which was evident every month in the second quarter and has carried over into Q3. We are also seeing encouraging signs in the Americas, particularly in the food sector, which, as you know, is our largest market. It’s early in the quarter, so I want to temper expectations, but we are pleased with what we have observed so far. Coupled with recent results from our large customers, who are increasing promotional activity, we expect strong performance in beverage and foodservice moving forward. Regarding the comparison, we expect the back half of the year will see a much stronger recovery than the previous year, where Q3 and Q4 were down 5% to 6%. Our confidence level in achieving that 3% to 4% growth is quite high based on these factors.

Thanks, Steve. Thanks, Mike. My second question on margin is somewhat similar. What gives you the confidence that you can hit the 19% to 20% margin target this year, considering you were below 19% in the first half? I understand that maintenance played a role, but what other elements are driving that margin goal, and why did the mix turn negative in the first half?

Thanks, George, it's Steve. To clarify the first half versus the second half, we delivered $845 million of EBITDA with 19% margins in the first half. We expect $935 million in the second half, meaning a $90 million increase. Of that, $50 million comes from less planned maintenance expense, as the second quarter was particularly heavy for us. Additionally, we expect to see modest growth in the second half and continued strong net performance across our operations. Last year we took a lot of market-related downtime, so we are optimistic about improved operational efficiency.

I'll turn it over. Thank you.

Thanks, George.

Morning Mike, morning Steve, and thanks for taking my questions. Two, if I may. Good to hear the strong performance in Europe regarding innovation sales. Can you give more detail about how your European operations are performing relative to the U.S. market, and how does that business fit within the overall portfolio? Just any color you could provide would be appreciated. And I have one follow-up after that. Thanks.

Yes. Thank you, Lewis, I appreciate the question. We're pleased that over half of our innovation sales were derived from Europe this year. As we have noted, European consumers are the most sustainably conscious globally. This makes the acquisition of ANR and subsequently scaling our innovation activities in Europe essential for our business. We can capitalize on emerging trends early and adapt them globally to our North American operations. Our European business is outperforming the broader market due to our innovative strategies. Our team has effectively identified opportunities. The Sainsbury project with PaperSeal Shape and growth in trays and containers are just several examples. We are confident about our pipeline and expect consistent growth from this region.

Okay. Thank you. Building on George's question, can you share insights on the volume exit rate in June? Has there been any acceleration through the quarter?

Yes, Lewis, it's Steve. Throughout the quarter, we experienced flat to modest growth. We ended the second quarter at flat volume. In July, we are seeing consistent growth aligned with our expectations for the second half of 2024, supporting our 3% to 4% volume growth target.

Yes, hey guys, good morning. On Slide 5, where you have all the end markets nicely broken out, food, beverage, etc. What drove the outperformance in beverage that you called out as a positive for Q2? Additionally, how do you anticipate these trends evolving in Q3 and Q4?

Yes. To answer the first part, our beverage growth can be attributed to innovation and strong demand. Along with this, the market was favorable. We're anticipating positive trends to continue in beverage and foodservice, which were also strong in the second quarter.

Yes, Ghansham. As you consider our projection of 3% to 4% volume growth, bear in mind that this figure incorporates sales and price, so some headwind is anticipated. That being said, we expect positive trends across foodservice and beverage, and anticipate incremental improvements across our overall portfolio in Q3 and Q4.

Thank you. So, if we compare 2023 to 2024, with 2023 affected by aggressive inventory destocking and consumer affordability issues, is the lack of substantial increases in volume due to persistent consumer weakness and low customer inventory levels?

You've captured it well. Consumer behavior is changing due to pricing pressures, but we also see stability in our broad portfolio across different categories. Our customers have been cautious about inventory levels, which has affected overall volume. Nevertheless, we're confident in our backlog and anticipate a return to growth in volume during the second half.

Thank you for taking my question. I wanted to clarify the expected volume growth for the second half. Clearly, you have an easier comparable, but how should we assess this in sequential terms?

Yes, Lars, it's Steve. We expect positive sequential growth in the second half compared to the first half, with our guidance indicating 3% to 4% growth year-on-year, compared to last year's performance.

Understood. Given this recovery phase, how should we approach the incremental margins associated with the anticipated sales increase?

The incremental margins will indeed be higher than our average EBITDA margin of 19% to 20% as we leverage our fixed costs, which enhances profitability. We expect strong absorption as sales increase in the second half.

That’s a great question, Lars. Our paperboard manufacturing facilities will run full without incurring the major costs associated with last year’s downtime, which will significantly positively impact our margins.

Thank you for the insights. Regarding the expected sales increase for the second half, you're projecting 3.5% to 4.5% growth. Could we assess that against incremental margins?

Yes, that’s a fair assessment, Mark. As illustrated, we expect an incremental margin of approximately 25% to 30% on that growth due to better leverage and operational efficiencies.

Additionally, as indicated, the reduction of Augusta contributes favorably to our operational performance.

Good morning. Can you discuss the inflation you're currently experiencing across key cost categories? What assumptions are you using for the second half?

Currently, we see modest inflation, with decreases in certain costs like wood and energy. However, we remain watchful, particularly for logistics and labor costs. Thus far, we do not anticipate any significant shifts in the second half.

Thanks for that insight. With the recent price hikes in North America, how are they being received? Do you anticipate their benefits showing up primarily in 2025?

We are actively executing the price increases across various substrates. While I can’t make specific predictions, we are indeed working diligently to recover those costs and expect advantages to become evident in 2025.

Thanks for taking my question. Regarding Q4 outlook, with last year's elevated downtime factored in, how should we think about your EBITDA range as you progress into 2025?

As we consider the second half of this year, we anticipate our paperboard facilities will run at full capacity. This is key to sustaining our customer service and overall production yield. It's still early to provide firm projections for 2025.

Overall, we assess future growth aiming for low single-digit growth in 2025, consistent with our strategic initiatives.

Our focus remains on innovation and capturing market opportunities, which will ultimately contribute to our growth trajectory as articulated in our Vision 2030.

Thank you for the clarity. Just a point of confusion regarding pricing in the quarter, was the negative pricing solely attributed to indexing or other factors?

Yes, the negative price was primarily driven by index changes, with half of it resulting from pass-throughs of reduced paperboard costs in Europe, while the other half reflected broader portfolio pricing.

Overall, I'm proud of our team’s performance and pleased with the full operational recovery we expect in the upcoming quarters.

We have an ongoing commitment to enhancing our performance at all levels of operation and look forward to driving ongoing improvements.

We have reached the end of the question-and-answer session. I will now turn the call over to Mike Doss for closing remarks.

Thank you, operator. I want to express my gratitude to everyone for joining our earnings call today. I'm proud of the results our team is achieving, excited about our innovation pipeline, and optimistic about our growth outlook. Graphic Packaging is paving the way in sustainable consumer packaging. Our Vision 2030 focuses on execution and delivering results across various economic conditions, and we are demonstrating that we can achieve this successfully. Thank you, and have a great day.