Graphic Packaging Holding Company · NYSE:GPK

Graphic Packaging — Investor Day (September 2019)

51 slides from Graphic Packaging's investor day presentation, Sep 26, 2019

  1. Slide 1: Investor Day September 26, 2019

    Investor Day September 26, 2019 Michael P. Doss Stephen R. Scherger Joseph P. Yost President and Executive Vice President & Executive Vice President & Chief Executive Officer Chief Financial Officer President, Americas Inspired Packaging. A World of Difference.

  2. Slide 2: Today's Attendees

    TODAY’S ATTENDEES Michael P. Doss Stephen R. Scherger Joseph P. Yost Alex Ovshey Melanie S. Skijus President & Executive Vice President & Executive Vice President & Vice President, Financial Vice President, Chief Executive Officer Chief Financial Officer President, Americas Planning and Analysis Inv

  3. Slide 3: Forward Looking Statements

    FORWARD LOOKING STATEMENTS CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS Any statements of the Company’s expectations in these slides, including, but not limited to, updated 2019 guidance regarding sales, year-end net debt leverage ratio and capital expenditures; 2020 Adjusted EBITDA, Ca

  4. Slide 4: Agenda

    AGENDA Graphic Packaging Today 2019–2020 Financial Update Vision 2025 Sustainability Supported, Organic Growth Productivity Driven Margin Improvement Financial Flexibility ©2019 Graphic Packaging International 4

  5. Slide 5: Graphic Packaging: Investment Case

    GRAPHIC PACKAGING: INVESTMENT CASE • REDEFINING INDUSTRY LEADERSHIP WITH VISION 2025 • CAPTURING SUSTAINABILITY SUPPORTED ORGANIC GROWTH • CLEAR PATH TO DELIVER PRODUCTIVITY DRIVEN MARGIN IMPROVEMENT • STRONG FINANCIAL FLEXIBLITY TO ACHIEVE VISION 2025 • BALANCED CAPITAL ALLOCATION MAXIMIZING SHAREH

  6. Slide 6: Paperboard Packaging Leader

    FOOD, BEVERAGE, FOODSERVICE & CONSUMER PRODUCTS PAPERBOARD PACKAGING LEADER ESTIMATED 2019 SALES MARKETS $6.2B 37% 23% Food Foodservice 85% 12% 3% Americas Europe ROW 20% 20% 9 65 3.75M Paperboard Mills Converting Tons Beverage Consumer Plants Produced ©2019 Graphic Packaging International 6

  7. Slide 7: Key Customers Across Food, Beverage, Foodservice & Consumer Products

    KEY CUSTOMERS ACROSS FOOD, BEVERAGE, FOODSERVICE & CONSUMER PRODUCTS MARKETS ©2019 Graphic Packaging International 7

  8. Slide 8: Sustained Market Leadership

    SUSTAINED MARKET LEADERSHIP #1 CRB Producer 49% 2.1M ton U.S. market #1 CUK Producer 37% % % of all folding cartons 30 56 of all paper cups in the U.S. in North America 2.7M ton U.S. market #2 SBS Producer 21% 5.7M ton U.S. market Source: PPC, RISI, GPI estimates ©2019 Graphic Packaging Internationa

  9. Slide 9: Powerful, Vertically Integrated Business Model

    POWERFUL, VERTICALLY INTEGRATED BUSINESS MODEL LOW COST, HIGH QUALITY HIGHLY EFFICIENT CONVERTING & PRODUCTS WE USE EVERYDAY PAPERBOARD MILLS PACKAGING MACHINERY 68% vertical integration results in best-in-class EBITDA margins; significant opportunities to drive integration rates higher ©2019 Graphi

  10. Slide 10: Vertically Integrated Model Offers Tremendous Operating Leverage

    VERTICALLY INTEGRATED BUSINESS MODEL OFFERS TREMENDOUS OPERATING LEVERAGE Grow converting volume • Sustainability supported organic growth • Targeted share gains/acquisitions Invest in the mills Fill the mills • Add incremental capacity for growth • Increase integration across all (when clearly requ

  11. Slide 11: Capital Allocation Priorities

    CAPITAL ALLOCATION PRIORITIES PURSUE TARGETED RETURN CAPITAL TO INVEST IN THE BUSINESS ACQUISITIONS SHAREHOLDERS • Invest to drive 100-200 basis • Expand geographic reach and • Dividends points of organic growth per participation in growth niches year for paperboard packaging – $0.30/share • Drive p

  12. Slide 12: Balanced Approach to Capital Allocation

    BALANCED APPROACH TO CAPITAL ALLOCATION FROM 2015 TO 2019, AN ESTIMATED ~$3.4B IN OPERATING CASH FLOW CAPITAL INVESTMENTS & PRODUCTIVITY(1) TARGETED ACQUISITIONS Invested $1.5B in capital Acquired 13 businesses for ~$900M at compelling post synergy valuations ~6% of sales driving $365M in productivi

  13. Slide 13: Poised for Sales, Volume, Margin & Cash Generation Growth

    POISED FOR SALES, VOLUME, MARGIN & CASH GENERATION GROWTH 100-200 BPS / YEAR NET ORGANIC PRICE / COST PRICE LAGS REDUCED GROWTH MATERIALIZING RECOVERY OCCURRING $120 Price Cost Cost Price ($8) ($50) From 9 to 6 months ($124) 2016-18 2019 Est. 13

  14. Slide 14: Agenda

    AGENDA Graphic Packaging Today 2019–2020 Financial Update Vision 2025 Sustainability Supported, Organic Growth Productivity Driven Margin Improvement Financial Flexibility ©2019 Graphic Packaging International 14

  15. Slide 15: Increasing 2019 Guidance

    INCREASING 2019 GUIDANCE ADJ EBITDA RANGE INCREASED TO $1.02B - $1.04B FROM $1.01B - $1.03B ADJ EBITDA ($M) Cash Flow Guidance $525M Year-end leverage ratio 2.5-2.6x NOTE: Guidance assumes no additional acquisitions or share repurchases Cash Flow = ADJ EBITDA - Interest Expense - Cash Taxes - Pensio

  16. Slide 16: Share Repurchase Program

    SHARE REPURCHASE PROGRAM AT VALUES BELOW THE INTRINSIC VALUE OF GPK Share Count at End of Period $535M $126M (Millions) repurchased (1) repurchased (1) 340 since inception 2019 YTD $245M (1) $78M $48M 320 repurchased repurchased (1) 327 repurchased since 4Q’18 in 1H’19 300 3Q QTD 300 294 280 290 ~80

  17. Slide 17: Establishing Initial 2020 Guidance

    ESTABLISHING INITIAL 2020 GUIDANCE $ 2019 ADJ EBITDA Guidance 1,020 – 1,040M Maintain significant financial flexibility: $ Positive Volume, Price, Commodity Cost 10 – 30M $ Positive Performance, Synergies, Labor Cost, Other 10 – 30M • Share repurchases $ • Targeted acquisitions 2020 Initial ADJ EBIT

  18. Slide 18: Agenda

    AGENDA Graphic Packaging Today 2019–2020 Financial Update Vision 2025 Sustainability Supported, Organic Growth Productivity Driven Margin Improvement Financial Flexibility ©2019 Graphic Packaging International 18

  19. Slide 19: Vision 2025

    VISION 2025 Partners GROW WITH THE BEST CUSTOMERS IN THE BEST MARKETS Profit GENERATE SUPERIOR RETURNS Planet LEVERAGE SUSTAINABILITY PROFILE & REDUCE ENVIRONMENTAL IMPACT People ENGAGE EMPLOYEES IN A HIGH-PERFORMANCE CULTURE ©2019 Graphic Packaging International 19

  20. Slide 20: Vision 2025: Partners

    VISION 2025 Partners Grow with the best customers in the #1 paperboard market 100 – 200 bps/year $400M – $700M net new best markets share in North America & sustainability supported, product sales 2020-2025 Europe organic growth included in organic growth $400M – $500M in Strategic, productivity 202

  21. Slide 21: Vision 2025: Profit

    VISION 2025 Profit 2019 Est. Vision 2025 Paperboard Integration Generate superior 68% 80 – 90% returns Sales ~$6.2B ~$10B ADJ EBITDA Margins ~16.6% 18 – 20% ROIC ~8% 10 – 12% ADJ EPS $0.85 $2.00+ Normalized Capex (% Sales) 5% 5% ©2019 Graphic Packaging International 21

  22. Slide 22: Vision 2025: Planet

    VISION 2025 Planet Leverage industry leading sustainability profile, reducing Reduce water Reduce energy Reduce green house impact on the usage by 15% consumption by 15% gases by 15% environment 4 Reduce LDPE usage GPI products by 40% 100% recyclable ©2019 Graphic Packaging International 22

  23. Slide 23: Vision 2025: People

    VISION 2025 People Engage employees in a high-performance Top quartile Reduce LTIR from Play on a winning team culture engagement scores 0.3 to 0.2 (Safety) GPI University Attract and retain the right 30 hours of training per talent employee, per year ©2019 Graphic Packaging International 23

  24. Slide 24: Agenda

    AGENDA Graphic Packaging Today 2019–2020 Financial Update Vision 2025 Sustainability Supported, Organic Growth Productivity Driven Margin Improvement Financial Flexibility ©2019 Graphic Packaging International 24

  25. Slide 25: Sustainability Has Become a Global Phenomenon & Mandate

    SUSTAINABILITY HAS BECOME A GLOBAL PHENOMENON & MANDATE WHAT BRANDS ARE SAYING…. Starbucks is aiming to double the “Tackling plastic waste is one of my recycled content in [their] cup by The Kellogg Company is expanding top priorities and I take this 2022. It’s also testing more than 12 its global s

  26. Slide 26: GPI Sustainability Initiatives Support Customer Aspirations

    GPI SUSTAINABILITY INITIATIVES SUPPORT CUSTOMER ASPIRATIONS Reusable / Recyclable / Compostable / Biodegradable Recyclable Packaging 100% by 2030 100% by 2025 Recycled Content Renewable / Recyclable Sources Recycled Content Recyclable Products 50% by 2030 100% by 2025 30% by 2025 100% by 2025 Water

  27. Slide 27: Paperboard Packaging Will Emerge as a Winner

    PAPERBOARD PACKAGING WILL EMERGE AS A WINNER AMONG THE SOLUTIONS PREFERRED BY CONSUMERS Paperboard Packaging 27 ©2019 Graphic Packaging International

  28. Slide 28: $5 Billion Addressable Market for Paperboard Conversions

    LARGE $5 BILLION ADDRESSABLE MARKET ESTIMATED IN NORTH AMERICA AND EUROPE FOR PAPERBOARD CONVERSIONS CURRENT MARKET OFFERING Foam Cups Plastic Cups Foam Containers $ $ $ 1B 1B 1B Beverage Packaging CPET Trays, Bowls Stand-up Pouches $ $ $ 1B 500M 250M ©2019 Graphic Packaging International 28

  29. Slide 29: GPI Paperboard Packaging Solutions Positioned to Capture Conversions

    GPI PAPERBOARD PACKAGING SOLUTIONS ATTRACTIVELY POSITIONED TO CAPTURE MARKET CONVERSION OPPORTUNITIES GPI SUSTAINABLE SOLUTIONS Foam Cups Plastic Cups Foam Containers $ 1B $1B $1B Beverage Packaging CPET Trays, Bowls Stand-up Pouches $1B $500M $250M ©2019 Graphic Packaging International 29

  30. Slide 30: Targeting 100-200 Basis Points of Net Organic Growth Per Year

    TARGETING 100-200 BASIS POINTS OF NET ORGANIC GROWTH PER YEAR (10-15% OF ADDRESSABLE MARKET FROM 2020 TO 2025) TARGETED, INNOVATIVE SOLUTIONS Insulated Paperboard paperboard cups bowls Packaging (hot & cold) machinery & Microwave beverage cooking carriers solutions PE-free cups Food containers Packa

  31. Slide 31: GPI Will Sell a PE-Free Cup in 2020

    GPI WILL SELL A PE-FREE CUP IN 2020 THAT IS COMMERCIALLY VIABLE FOR THE MARKETPLACE 2013 2019 2020 Major customers announced exits from foam Next gen plant-based lined cup; now more cost effective Foam Cups PE Coated Paperboard Cups PE-Free Cups (100% Plant-Based) Renewable 90% Renewable 90% Renewab

  32. Slide 32: Insulated Paperboard Cup and Bowl Growth Is Accelerating

    INSULATED PAPERBOARD CUP AND BOWL GROWTH IS ACCELERATING VALUE DRIVERS GROWTH PLAN (CUSTOMER COMMITTED) • Consumer’s negative ~$50M perception of foam and $130M Conversion from foam plastic food containers ~$10M • Lowest cost option with $100M Plastic bowl conversion similar functional characteristi

  33. Slide 33: Beverage Packaging Growth in Europe Is Accelerating

    BEVERAGE PACKAGING GROWTH IN EUROPE IS ACCELERATING VALUE DRIVERS GROWTH PLAN (CUSTOMER COMMITTED) • Beverage brands focused on $90M eliminating plastic & waste • Improved sustainability profile $70M • Enhanced premium impact / brand messaging $50M $50M • Efficient high-speed machinery solutions $30

  34. Slide 34: Agenda

    AGENDA Graphic Packaging Today 2019–2020 Financial Update Vision 2025 Sustainability Supported, Organic Growth Productivity Driven Margin Improvement Financial Flexibility ©2019 Graphic Packaging International 34

  35. Slide 35: Two Major Sources of Productivity Improvement and Margin Growth

    TWO MAJOR SOURCES OF SIGNIFICANT PRODUCTIVITY IMPROVEMENT AND MARGIN GROWTH TRACK RECORD OF ONGOING PRODUCTIVITY CRB MILL CONSOLIDATION Kalamazoo Battle 480kT Creek K1: 360kT 210kT East Angus Mill Curtain Coaters Automation K3: 120kT 90kT White ~1,020kT Pigeon 70kT Total CRB capacity Middletown 170k

  36. Slide 36: Ongoing Commitment to Generating $50-70M in Productivity Every Year

    TRACK RECORD OF ONGOING PRODUCTIVITY ONGOING COMMITMENT TO GENERATING $50-70M IN PRODUCTIVITY EVERY YEAR SNEEK FACILITY MONROE FACILITY CURTAIN COATERS • Invested Capital: $25M • Invested Capital: $180M • Invested Capital: ~$115M • Most productive and flexible folding carton • State Of The Art Fully

  37. Slide 37: CRB Mill Consolidation

    CRB MILL CONSOLIDATION CONSOLIDATE FROM 5 TO 3 CRB MILLS, RETAIN OPTIONALITY FOR FURTHER CONSOLIDATION OR GROWTH CURRENT CRB MILL SYSTEM POST CRB MILL CONSOLIDATED SYSTEM Kalamazoo Battle East Angus Kalamazoo East Angus 480kT Creek 90kT 860kT 90kT K1: 360kT 210kT K1: 360kT K3: 120kT K2: 500kT White

  38. Slide 38: CRB Mill Consolidation: Strategic Opportunity to Invest in CRB Platform

    CRB MILL CONSOLIDATION HIGHLY STRATEGIC AND UNIQUE OPPORTUNITY TO INVEST IN OUR CRB PLATFORM AN INVESTMENT MORE FOCUSED, SIMPLIFIED HIGHEST QUALITY IN THE CORE “FUTURE-PROOF” OPERATIONS PRODUCT • Rare opportunity for a • World-class paperboard • Operating one large and • Lowest basis weight and larg

  39. Slide 39: $100M Reduction in Annual Fixed and Variable Costs

    CRB MILL CONSOLIDATION $100M REDUCTION IN ANNUAL FIXED AND VARIABLE COSTS ANNUAL FIXED COSTS ~$70M VARIABLE COSTS ~$30M Cost Savings Cost Savings ©2019 Graphic Packaging International 39

  40. Slide 40: Unmatched CRB Cost Structure Post Investment

    CRB MILL CONSOLIDATION UNMATCHED CRB COST STRUCTURE POST INVESTMENT GPI Mills Competitor Mills Competitors (Avg) $532/ton ~$130/ton advantage GPI $400/ton GPI East Angus GPI East GPI WhitePigeon GPI Kalamazoo Production = ~2.1M tons Source: RISI ©2019 Graphic Packaging International 40

  41. Slide 41: Quantified Benefits and Financial Returns

    CRB MILL CONSOLIDATION HIGHLY STRATEGIC AND UNIQUE OPPORTUNITY TO INVEST IN OUR CRB PLATFORM QUANTIFIED BENEFITS FINANCIAL RETURNS Unlevered Free Cash Flow from CRB Mills Fixed Cost Variable Cost $250 Reduction Reduction $200 $150 $100 • ~$70M, versus today’s • ~$30M, at today’s $50 footprint volume

  42. Slide 42: Compelling Positive Environmental Impact

    CRB MILL CONSOLIDATION COMPELLING POSITIVE ENVIRONMENTAL IMPACT ANNUAL CRB PROFILE Current Future % Change Green House Gases (Metric Tons) 497K 419K - 16% Water Usage (Gallons/Ton) 916 614 - 33% Purchased Energy (KWH/Ton) 1,901 1,562 - 18% *Information based on Legacy GPI / Source: Schneider Electri

  43. Slide 43: Agenda

    AGENDA Graphic Packaging Today 2019–2020 Financial Update Vision 2025 Sustainability Supported, Organic Growth Productivity Driven Margin Improvement Financial Flexibility ©2019 Graphic Packaging International 43

  44. Slide 44: Significant Financial Flexibility to Achieve Vision 2025

    SIGNIFICANT FINANCIAL FLEXIBILITY TO ACHIEVE VISION 2025 EXECUTING A BALANCED APPROACH TO CAPITAL ALLOCATION 2015–2019 EST. OPERATING 2020–2024 EST. OPERATING CASH FLOW ~$3.4B CASH FLOW ~$4.6B(1) Dividends, Dividends(2), $0.4B, 13% $0.5B, 12% Share Capital, Repurchases, $1.5B, 45% Capital(3), $0.5B,

  45. Slide 45: Financial Flexibility: Various Scenarios

    SIGNIFICANT FINANCIAL FLEXIBILITY TO ACHIEVE VISION 2025 EXECUTING A BALANCED APPROACH TO CAPITAL ALLOCATION (VARIOUS SCENARIOS) 2019 Est. 2025 Est. 2025 Est. 2025 Est. Repurchase 80M IP partnership Organic volume growth Repurchase 80M IP partnership Our business today units(1), acquire $350M of EBI

  46. Slide 46: Graphic Packaging Summary

    GRAPHIC PACKAGING • REDEFINING INDUSTRY LEADERSHIP WITH VISION 2025 • CAPTURING SUSTAINABILITY SUPPORTED ORGANIC GROWTH • CLEAR PATH TO DELIVER PRODUCTIVITY DRIVEN MARGIN IMPROVEMENT • STRONG FINANCIAL FLEXIBLITY TO ACHIEVE VISION 2025 • BALANCED CAPITAL ALLOCATION MAXIMIZING SHAREHOLDER RETURNS ©20

  47. Slide 47: Appendix

    APPENDIX ©2019 Graphic Packaging International

  48. Slide 48: 2019 Guidance

    2019 GUIDANCE July 2019 Sep 2019 Guidance Guidance Cash Flow available for Net Debt Reduction, Dividends & ~$525M ~$525M Share Repurchase (before M&A/Capital Markets activity) Capital Expenditures $325M $350M Cash Pension Contributions $10M $10M Pension Expense/(Income) $15M $15M (includes pension a

  49. Slide 49: Vision 2025

    VISION 2025 GROW WITH THE BEST CUSTOMERS IN THE BEST GENERATE SUPERIOR RETURNS MARKETS 2019 Est. Vision 2025 Paperboard Integration 68% 80% – 90% Sales ~$6.2B ~$10B ADJ EBITDA Margin ~16.6% 18% – 20% #1 paperboard 100 - 200 $400M - $700M Strategic, high $400M - $500M in ROIC market share in bps/year

  50. Slide 50: Reconciliation of Non-GAAP Financial Measures

    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES For the year ended December 31, In millions 2018 2017 2016 Consolidated Net Sales $ 6,023.0 $ 4,403.7 $ 4,298.1 Net Income Attributable to Graphic Packaging Holding Company $ 221.1 $ 300.2 $ 228.0 Add (Subtract): Net (Loss) Income Attributable to Noncont

  51. Slide 51: %, Graphic

    ZZ2 %, Graphic Y Packaging

Graphic Packaging Holding — Investor Day (September 2019) on 6ix