Graphic Packaging Holding Company Reports First Quarter 2024 Financial Results

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

First Quarter 2024 Highlights

• Vision 2030 introduced at Investor Day in February
• Agreement to sell Augusta, Georgia paperboard manufacturing facility to Clearwater Paper
• Sales growth from innovation of $37 million, in line with expectations

First Quarter 2024 Financial Results versus First Quarter 2023

• Net Sales $2,259 million, versus $2,438 million in 2023
• Net Income $165 million, versus $207 million in 2023
• Adjusted EBITDA $443 million, versus $484 million in 2023
• Adjusted EBITDA Margin 19.6%, versus 19.9% in 2023
• Earnings per Diluted Share $0.53, versus $0.67 in 2023
• Adjusted Earnings per Diluted Share $0.66, versus $0.77 in 2023
• Net leverage 3.0x, versus 3.1x in 2023

Net Income was $165 million, or $0.53 per share, based upon 309.1 million weighted average diluted shares. This compares to first quarter 2023 Net Income of $207 million, or $0.67 per share, based upon 309.7 million weighted average diluted shares. The first quarters of 2024 and 2023 were impacted by a net $22 million and $14 million of special charges, respectively. When adjusting for special charges and amortization of purchased intangibles, Adjusted Net Income for the first quarter of 2024 was $203 million, or $0.66 per diluted share. This compares to first quarter 2023 Adjusted Net Income of $237 million, or $0.77 per diluted share.

Michael Doss, the Company’s President and CEO said, “During the first quarter, our diverse consumer packaging portfolio performed broadly as expected. Sales improved sequentially compared to the fourth quarter of 2023, and we generated a solid 19.6% Adjusted EBITDA margin while choosing to significantly reduce bleached paperboard production to match supply with demand. We expect volumes to improve further in the second quarter, and, excluding the impact of the Augusta bleached paperboard sale, expect to generate positive sales growth in 2024, as we partner with customers to deliver the more circular, more functional, and more convenient packaging that consumers prefer.

“We unveiled Vision 2030 in February, setting ambitious new goals that reflect our transformation to a global consumer packaging leader. The addressable market opportunity we see across five global innovation platforms increased to $15 billion and we remain on track to achieve 2% sales growth from innovation in 2024. We are investing in our exceptional team and advancing plans to achieve the emissions reduction goals approved by the Science Based Targets Initiative. Construction at the Waco, Texas recycled paperboard manufacturing facility is on schedule and hitting all milestones. Capital spending will peak in 2024. We expect cash flow to increase in 2025 and in subsequent years, and our opportunities for value-creating capital deployment are clear and compelling” continued Mr. Doss.

Operating Results

Net Sales

Net Sales decreased 7% to $2,259 million in the first quarter of 2024, compared to $2,438 million in the prior year period. The decline was driven by lower open market sales of paperboard (~4%), fewer shipping days (~2%), input cost pass through in Europe (~1%), and lower days-adjusted sales (~1%).  Net acquisitions and divestitures had a $15 million favorable impact on sales in the quarter, while foreign exchange had a $3 million favorable impact. Sales growth in Foodservice and Beverage markets was offset by weakness in Food and Household markets.

EBITDA

EBITDA for the first quarter of 2024 was $426 million, $43 million less than the first quarter of 2023.  After adjusting both periods for business combinations and other special charges, Adjusted EBITDA was $443 million in the first quarter of 2024 versus $484 million in the first quarter of 2023. The $41 million decline was driven by lower production and open market sales of paperboard. Adjusted EBITDA Margin was 19.6%, versus 19.9% in the year ago quarter.

Other Results and Commentary

Total Debt increased $160 million to $5,708 million, and total debt, net of cash and cash equivalents increased $137 million to $5,572 million, compared to the prior year first quarter. The Company’s first quarter 2024 Net Leverage Ratio was 3.0x compared to 3.1x in the prior year quarter.

Capital expenditures in the quarter were $331 million, versus $196 million in the first quarter of 2023 reflecting an acceleration in project spend for the Waco, Texas recycled paperboard manufacturing facility.

The Company returned $31 million to stockholders through dividends in the first quarter. There were no share repurchases during the quarter.

The sale of the Company’s Augusta, Georgia bleached paperboard manufacturing facility to Clearwater Paper is expected to close May 1, 2024, with net proceeds of approximately $550 million.

2024 Annual Guidance

The Company updated 2024 financial guidance to reflect the expected contribution from the Augusta, Georgia bleached paperboard manufacturing facility and related bleached paperboard sales through the end of April. The midpoint of the guidance range has not changed except to reflect four months of Augusta contribution rather than twelve.

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

Innovation Sales Growth 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. 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, Total Net Debt and Net Leverage is attached to this release.

For full results click here.

About Graphic Packaging Holding Company

Graphic Packaging Holding Company (NYSE: GPK), headquartered in Atlanta, Georgia, is committed to providing consumer packaging that makes a world of difference. The Company is a leading provider of sustainable fiber-based packaging solutions to the world’s most widely-recognized food, beverage, foodservice and other consumer products companies and brands. The Company operates on a global basis, is one of the largest producers of folding cartons and fiber-based foodservice products in the United States and Europe, and holds leading market positions in coated recycled paperboard, coated unbleached kraft paperboard and solid bleached sulfate paperboard. Additional information about Graphic Packaging, its business and its products is available at www.graphicpkg.com.

Source: Graphic Packaging Holding Company