By the numbers
Q1 net income: $207M
Up 93% year over year
Anticipated adjusted EBITDA for 2023: $1.8B to $2B
Raised guidance by $100M
Anticipated adjusted cash flow for 2023: $600M to $800M
- Driven by diversification: During a Tuesday earnings call, Graphic Packaging International executives touted the “strong” quarterly results, especially at a time when many other fiber-based manufacturers are trending in the other direction. They credit, in part, the diversity of their end use market portfolio for resilience amid the Q1 demand dips that many fiber sectors faced. About 80% of GPI’s portfolio is comprised of food, beverage and consumer products markets; food service represents about 20%. “What you have to remember: for most of the products that we we package, they've got an expiration date ... so we’re not quite as exposed as maybe some of the industrial segments,” said CEO Michael Doss during the call. Demand in April so far has reportedly been similar to Q1.
- Product partnership launch: Executives introduced a newly expanded food service sector opportunity on the earnings call: a proprietary insulated, double-walled fiber cup that will be available at Chick-fil-A locations across the U.S. later this month. Stage one will focus on 10% of Chick-fil-A’s restaurant footprint, and over time this product could expand to be a long-term solution for more hot and cold beverages.
- Expansion potential: Doss said this presents a fiber alternative to a plastic foam cup and shows how brands are investing in partnerships with packaging companies for more sustainable options. Doss noted that GPI currently has opportunities to expand its cup business capacity, but additional investment would be needed if Chick-fil-A decides to significantly expand the use of the cups beyond the initial 10%.
- Coated recycled board investments: Two coated recycled board facility investments — a newly launched machine in Kalamazoo, Michigan, and an upcoming facility in Waco, Texas — “enable us to make an entirely new grade of the highest quality coated recycled paperboard available ... at an unmatched cost compared to our competitors,” Doss said. They will help GPI meet increased CRB demand and serve new end markets that previously only consumed virgin substrates, he said.
- Facility details: The Kalamazoo machine is exceeding quality and yield expectations, and annual production estimates have increased from 500,000 tons to 550,000 tons. Construction has begun on the $1 billion Waco CRB facility, which is expected to begin operations in 2026. The investments and better-than-expected production allow GPI to increase its capacity by roughly 5%, or about 200,000 tons, over current levels. It will continue with plans to close higher-cost mills, including one in Iowa that execs announced will now close this quarter, ahead of schedule.
- Economic outlook: GPI is on track to achieve the “Vision 2025” financial goals it set in 2019, such as achieving $10 billion in sales by 2025, two years early. Execs therefore announced enhanced Vision 2025 goals — such as expanding the 2025 sales goal to $10 billion to $12 billion. They predict strong productivity again in 2024.
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