Graphic Packaging Q4 Earnings Call Highlights
by Sarita Garza · The Markets DailyGraphic Packaging (NYSE:GPK) used its fourth-quarter and full-year 2025 earnings call to outline a strategy reset under new President and CEO Robbert Rietbroek, who said the company has launched a “comprehensive operational and business review” spanning its footprint, systems, organization, selective portfolio assets, and financial performance. Rietbroek, who joined the role at the beginning of the year, said his early focus areas include cost structure alignment, inventory reduction, improved capital discipline, faster innovation commercialization, and a renewed emphasis on free cash flow generation and deleveraging.
New CEO outlines review and near-term priorities
Rietbroek said he has spent his first month visiting facilities, meeting with customers and shareholders, and implementing initial organizational and reporting changes intended to “enhance transparency and accountability.” The company has established a transformation office led by a new Chief Transformation Officer to drive operational improvements, productivity, and cost savings “without disrupting customer service,” and has engaged external expertise to support profitability and growth initiatives.
He described the near-term environment as “challenged,” pointing to overcapacity in commodity bleached paperboard markets and uneven consumer staples demand tied to affordability and macroeconomic uncertainty. He also said a combination of softer demand and pre-startup inventory building for the Waco facility left paperboard and finished goods inventories “higher than what we currently require,” prompting immediate actions to reduce inventory and “right-size” costs.
Waco investment, capex reset, and inventory reduction
Management highlighted Waco and Kalamazoo as “world-class assets” and described Waco as substantially complete and already producing “top-quality recycled paperboard” for the company’s packaging system. Rietbroek said the Waco facility’s net impact on market capacity is “quite small” after the company closed two older, higher-cost facilities and other industry capacity exited, but he emphasized the project’s expected impact on the company’s cost position as “substantial.”
At the same time, executives acknowledged that the cost to complete the Waco project was higher than anticipated. Total 2025 capital spending was $935 million, above targets. Total estimated project spend for Waco is now $1.67 billion including about $80 million of capitalized interest, with $1.58 billion spent through the end of 2025. Rietbroek said a root-cause review is underway and “appropriate corrective actions will be taken” to prevent similar outcomes.
Looking ahead, the company expects capital spending to drop by about $485 million in 2026, with total 2026 capex projected at roughly $450 million. Rietbroek said capex is expected to remain “at or below 5% of sales for the next several years,” alongside a higher bar for approvals.
Inventory reduction is another central lever. Rietbroek said year-end inventory stood at about 20% of sales versus a 15%-16% goal, and management plans to reduce inventory across recycled, bleached, and cup stock, as well as certain finished goods where demand fell short. He emphasized customer service would not be disrupted. Chuck Lischer, senior vice president and interim CFO, said the company plans to remove about $260 million of paperboard and finished goods inventory during 2026, which is expected to generate cash flow but temporarily depress EBITDA due to production curtailments.
2025 results: flat Q4 sales, softer full-year revenue and margin pressure
In the fourth quarter, net sales were $2.1 billion, “basically flat” year-over-year. Lischer said volume and pricing were each down slightly less than 1%, offset by a $40 million foreign exchange benefit. Adjusted EBITDA was $311 million, reflecting approximately $40 million of headwind from “unusual competitive pricing” and softer packaging volumes versus the prior-year quarter, with additional pressure from commodity and operating cost inflation and production curtailments used to manage inventory. FX provided an $8 million tailwind.
For the full year, net sales were $8.6 billion, down about 2%. Lischer attributed $150 million of the $190 million decline to the Augusta divestiture. Pricing was an approximately 1% headwind, volumes were “basically flat,” and FX was a $57 million tailwind. Full-year adjusted EBITDA was approximately $1.4 billion. Price and volume combined for a $174 million headwind, commodity input and operating cost inflation was about $150 million, and net performance contributions of $59 million were “not enough” to offset the broader pressures. The Augusta divestiture reduced adjusted EBITDA by $30 million, and FX was a $13 million tailwind.
Adjusted EPS for 2025 was $1.80. The company ended the year with net leverage of 3.8x, which Lischer said reflected EBITDA headwinds, Waco investment spending, and the repurchase of more than 2% of shares outstanding during 2025.
On Waco startup costs, Lischer said the company incurred about $40 million in 2025, below prior expectations due to what he called a “really strong startup.” He added the company does not expect startup costs to continue into 2026 and clarified those costs were excluded from adjusted EBITDA.
2026 outlook: lower EBITDA range but sharply higher free cash flow
Graphic Packaging guided 2026 net sales of $8.4 billion to $8.6 billion, assuming volumes ranging from down 1% to up 1%. The company expects innovation sales growth of about 2% of sales, implying market volumes down roughly 2% at the midpoint due to continued inflationary pressure and affordability challenges in consumer staples. While the company did not provide explicit pricing guidance, Lischer said the outlook assumes similar competitive pressure as in the fourth quarter and includes the impact of recent third-party announcements, which together represent a $150 million headwind at the midpoint.
Adjusted EBITDA is expected to be $1.15 billion to $1.25 billion on a reported basis, with a pro forma range of $1.2 billion to $1.4 billion excluding the temporary impact of 2026 production curtailments tied to inventory reduction. The guidance also assumes restoration of incentive compensation programs after awards were “effectively zero” in 2025, which Lischer said is important for retention and recruiting. Adjusted EPS is expected to be $0.75 to $1.15.
Management said several discrete items will shape quarterly progression, including heavier scheduled maintenance in the first half (about $15 million, mostly in the second quarter) and approximately $10 million in the fourth quarter. Production curtailments are expected to be heaviest in the first half, with a midpoint impact of about $45 million in the first quarter and about $40 million in the second quarter. The company also estimated severe weather impacts to first-quarter adjusted EBITDA of $20 million to $30 million, resulting in first-quarter adjusted EBITDA guidance of $200 million to $240 million.
Despite the lower EBITDA outlook, the company expects adjusted free cash flow to “inflect sharply upward” to $700 million to $800 million in 2026, driven by lower capex, working capital benefits from inventory reduction, and profitability improvement efforts. Rietbroek said the company is targeting adjusted free cash flow of $700 million plus incremental EBITDA growth beyond the near term, while also noting that 2026 and 2027 projections include one-time items, particularly related to inventory reduction and cash taxes.
Capital allocation: debt reduction first, shareholder returns over time
Rietbroek said the company’s highest near-term capital allocation priority is deleveraging, with a goal of achieving an investment-grade credit rating by 2030 as part of Vision 2030 commitments. Management expects to pay down about $500 million of debt in 2026, though Lischer noted the leverage ratio could remain elevated due to the impact of inventory reduction actions on adjusted EBITDA.
Executives reiterated a commitment to returning capital through dividends and “opportunistic” share repurchases, with Rietbroek saying repurchase activity is expected to increase as leverage declines. In Q&A, management said it had not committed to a dividend change in 2026 and emphasized the focus on debt paydown given current leverage.
During the Q&A, Rietbroek also discussed industry paperboard dynamics, saying recycled and unbleached markets are “in good balance,” while the company’s smaller bleached paperboard exposure faces an oversupplied market with new capacity and a demand outlook “trending down.” He said the company has not lost volume but acknowledged that bleached producers seeking volume can pressure packaging pricing and margins. Over the long run, he said he expects EBITDA margins to be restored to “the higher teens level” through restored demand and cost management and productivity, though he said it is too early to specify timing.
About Graphic Packaging (NYSE:GPK)
Graphic Packaging Holding Company is a leading provider of sustainable paperboard packaging solutions, offering a broad portfolio of products designed for food, beverage and other consumer goods markets. The company specializes in the manufacture of containerboard, folding cartons and engineered fill materials, as well as beverage packaging systems including paperboard cups, carriers and related components.
Through a network of manufacturing facilities across North America, Europe and Latin America, Graphic Packaging serves a diverse customer base that includes major consumer packaged goods companies, quick-service restaurants and retail chains.