Despite “unabated inflation,” mainly stemming from tariffs and the war with Iran, Graphic Packaging International continued its transformation efforts, said CEO Robbert Rietbroek during Tuesday’s third-quarter earnings call.
Volumes were up 1%. The food sector was the leading performer in Q3, including bars, snacks, and frozen and shelf-stable prepared meals. Executives described widening price gaps between brand names and private labels. They noted bifurcated consumer demand as cost pressures push consumers to seek better value. There was softness in the household and food service sectors, especially for quick-service restaurant cups.
GPI cut costs by $30 million in Q3 and expects $90 million in reductions in 2026, which is $5 million higher than prior expectations.
“We are positioned to drive an inflection in financial results in 2027,” said Chuck Lischer, interim CFO.
Reworking contracts
GPI has started restructuring customer contracts to charge higher prices and pass through inflationary costs. It’s about midway through the process.
This will “improve the responsiveness of our customer contracts to changes in our cost base,” Rietbroek said. “We are also moving from semi-annual to quarterly pricing openers as contracts renew to ensure a more responsive and balanced framework with customers.”
Each year, the company typically renews about one-third of its contracts, and the agreements generally last for three years, Rietbroek explained.
Many contracts now have pricing clauses that took effect Oct. 1
“Really, we have multiple levers to take price; it's not just all tied to a third-party index. And that's critical,” Lischer said. “That's how we've been able to generate $60 million of in-year pricing with $150 million as a run rate.”
The company also is in the early stages of embedding artificial intelligence into its commercial and procurement contract processes “to reduce manual work, improve consistency, and elevate insights,” Rietbroek said. In addition, “two agents were set up across our paperboard grades to optimize inventory management and fulfillment, and support cost avoidance.”
Scaling URB production
GPI announced in July that it was entering the uncoated recycled paperboard market and would manufacture that grade at its mill in Waco, Texas. The mill began commercial production of coated recycled paperboard in October 2025, and now produces both grades. The company expects to sell more than 20,000 tons of URB in 2026, primarily in the fourth quarter, and more than 100,000 tons in 2027.
“With regards to URB, we are surprised by the excitement in the market. It is significantly better than we expected,” Rietbroek said. “The reason we are entering in URB is not only to tap into the market, but to fully leverage our recycled platform and to use utilize the available capacity and absorb fixed costs.”
Currently, the company can serve URB customers seeking folding cartons, lamination and low-strength tubes and cores. High-strength tubes and cores are an area of opportunity.
Although GPI has spent this year reducing its overall inventory, it had to build up its URB inventory. “We are seeking to end the year with more inventory due to the URB build,” Lischer said.
Outlook
GPI is maintaining its full-year guidance, which it lowered last quarter. Full-year adjusted earnings before interest, taxes, depreciation and amortization is expected to be $1.05 billion, the low end of a range that stretches to $1.25 billion.
The company anticipates full-year volumes will be flat to up 1% year over year. Full-year cost inflation is now expected to be $170 million, up from a previous estimate of $150 million. GPI anticipates adjusted cash flow of $600 million to $700 million.
