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By the numbers: Q1 2025

Net sales: $2.12B

Down 6.2% year over year

Net income: $127M

Down 23% year over year

Consumer drag: Graphic Packaging International faced “considerable pressure as already-stretched consumers pulled back further” in the first quarter of 2025, said CEO Mike Doss on Thursday’s earnings call. “Results were significantly below our expectations.” Volume shifts: While sales volumes in the Americas were down 1%, the international business was up about 3%; however, GPI is starting to see consumer pullback in those geographies, too. Two key markets — food as well as health and beauty — showed slight sequential volume improvements, while food service and household products were flat. Coffee and tea segments showed gains as consumers shift to making the beverages at home instead of visiting coffee shops. Similarly, value-seeking consumers helped to boost growth in private label. Little help from customer promotions: The beverage segment, which represents 25% of GPI’s sales, was down for the first time in two years, despite higher promotional activity, Doss said. Overall, customers’ promotional activity in Q1 didn’t drive meaningful volume improvement, including for consumer packaged goods and at quick-service restaurants, Doss said. He noted that GPI customer McDonald’s reported a Q1 sales slump in its earnings release Thursday, with U.S. same-store sales shrinking 3.6% — the QSR’s largest dip since the COVID-19 pandemic-driven plunge of 8.7% in Q2 2020. The “vast majority” of GPI’s customers experienced 3% to 4% declines in Q1, Doss said. Waco and other investments: The new recycled paperboard mill in Waco, Texas, still is on track to open in the fourth quarter. After that, GPI intends to spend less on such projects. For 2025, the company anticipates $700 million in total capital expenditures, while holding capital spending levels to about 5% of sales in 2026 and subsequent years, said CFO Stephen Scherger. GPI said its capital spending peaked in 2024 at $1.2 billion. Reworked closure timing: GPI is re-examining the timing for closing its recycled paperboard plant in East Angus, Quebec, due to trade uncertainty. “It might just change modestly, depending on trade and tariffs there. We need to make sure that we take care of our customers, our Canadian customers,” Doss said. Previously, GPI had said it would close East Angus and a coated recycled paperboard manufacturing facility in Middletown, Ohio, upon Waco’s opening. However, it announced last month that it would close Middletown by June 1, affecting 130 employees. Outlook: GPI adjusted its 2025 outlook to account for increased economic uncertainty, input cost inflation and consumer pullbacks. It now anticipates volumes will be flat to down 4%, compared with the previous assumption of up 1% to 3%. Adjusted earnings before interest, taxes, depreciation and amortization for 2025 is now projected to be $1.4 billion to $1.6 billion, down from a previous projection of $1.66 billion to $1.76 billion. The $1.4 billion low end is the least likely scenario and would reflect a 4% decline in volumes, which “would be a truly unique environment not seen before, where we might have both a combination of inflation and significant volume erosion — kind of a deep recessionary, stagflation-type scenario,” Scherger said.

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