This audio is auto-generated. Please let us know if you have feedback.
By the numbers: Q4 and full-year 2024
Q4 net sales: $2.1B
Down 6.8% year over year
Full-year net sales: $8.8B
Down 6.6% year over year
Q4 net income: $138M
Down 29.6% year over year
Full-year net income: $658M
Down 9% year over year
- Overview: “2024 was a challenging year for consumer product and quick-service restaurant customers,” but despite those and other headwinds, Graphic Packaging International was able to return to growth in the second half of the year, said CEO Mike Doss during the company’s fourth-quarter and full-year 2024 earnings call Tuesday. Q4 net sales fell partly because of a $103 million negative impact from the May sale of its bleached paperboard manufacturing facility in Augusta, Georgia, to Clearwater Paper. Results were relatively steady in food service, beverage and household, while results were down in food and mixed in health and beauty.
- Tariff impact: The tariffs that U.S. President Donald Trump proposed this week for Canada and Mexico, which are on pause for 30 days, likely present a modest tailwind for GPI, executives said. The company has operations in all three countries, making production within “reasonable proximity” to local customers, Scherger said. Cross-border purchasing for those two countries represents only 3% of GPI’s sales, so executives said they don’t expect a significant impact overall — plus, “We really don't have exposure to China in a material way at all,” Doss said, referencing tariffs affecting imports from that country. As the dynamic tariff situation further solidifies, the company can shift production to other areas if necessary. “Every one of our customers has got a war room set up trying to game theory this thing out,” Doss said.
- Consumer trends: In Q4, cost-conscious consumers continued to prioritize value options, resulting in growth for private label and club store segments. Consumers are visiting more stores but spending less at each, Doss said. CPG and food service customers’ promotional activity didn’t result in market growth, but rather it shifted business from one customer to another, Doss said.
- Innovation: Customers’ desire for fiber-based products to replace plastics drove growth via innovation in 2024, Doss said, and plastic elimination regulations in Europe are expected to do the same “for several years to come.” Certain recent innovations are tied to customers altering their product offerings in responses to the GLP-1 weight loss drug craze. “That creates opportunities for us anytime there’s a change,” Doss said. Food service, which represented 21% of GPI’s 2024 packaging sales, is another area of opportunity for growth through innovation.
- New index progress: Executives shared an update on the company’s work to eliminate its use of third-party pricing indexes, specifically Fastmarkets RISI’s, as a factor in paperboard customer contracts — a move announced on the company’s October earnings call. GPI is “very pleased” so far with the customer negotiations, said CFO Stephen Scherger, although he wouldn’t say how far along the company is in the process; about 5% of GPI’s business is in open-market contracts, and Fastmarkets RISI’s index only covers the open market. “We’re putting in place our internal, newly developed index for price changes with our long-term customers, who are all multiyear contracts. Overall interest and receptivity has been high,” he said. “There's a general recognition that having a transparent price change mechanism that works with our customers is something that they want as well.”
- Waco update: The recycled paperboard mill under construction in Waco, Texas, still is on track to start up in the fourth quarter. GPI accelerated its equipment purchases for the facility, and all the major equipment now is on site. Doss reiterated that the company will likely close a plant in Ohio once Waco opens. To accommodate that transition between facilities, GPI has built up some inventories to avoid customer interruptions, Doss explained.
- Outlook: The company expects continued growth in the food service space this year, Doss said, citing recent work with McDonald’s on new fiber-based containers for McFlurry frozen treats. Having accelerated capital expenditures in 2024, GPI now targets about $700 million in capex for 2025 — down about $100 million from the company’s previous estimates. 2025 marks the beginning of a multiyear cash flow expansion cycle, Scherger said.
