Greetings. Welcome to the Graphic Packaging Holding Company Fourth Quarter and Full Year 2024 Conference Call. At this time, all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Melanie Skijus, Vice President of Investor Relations. You may begin.

Good morning and welcome to Graphic Packaging Holding Company's fourth quarter and full year 2024 earnings call. We have with us on the call today, Mike Doss, the company's President and Chief Executive Officer; and Steve Scherger, Executive Vice President and Chief Financial Officer. On today's call, we'll be referencing our fourth quarter and full year 2024 earnings presentation, which you can access through the webcast and also on the Investors section of our website at www.graphicpkg.com. Today's beliefs and the presentations made by our Executives include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and in our filings with the Securities and Exchange Commission. Now, let me turn the call over to Mike.

Thank you, Melanie. Good morning everyone and thank you for joining our call today. Graphic Packaging is a global leader in sustainable consumer packaging. In 2024, we demonstrated the strength of our business model, delivering strong and steady margins and challenging market conditions. We are well-positioned for 2025 and to meet our Vision 30 aspirations in the years ahead. For the full year 2024, Graphic Packaging sales were $8.8 billion, adjusted EBITDA of $1.7 billion, margins were 19.1%, and adjusted EPS was $2.49. In the fourth quarter, Graphic Packaging sales were $2.1 billion, adjusted EBITDA was $404 million, margins were 19.3%, and adjusted EPS was $0.59. Turning to Slide 3, 2024 marked the start of our Vision 2025 Transformation Plan to Vision 2030, and which we presented at our Investor Day last February. Our transformation to a leading consumer packaging company will be largely complete later this year. I will come back to Vision 2030 later in my remarks. In May of 2024, we divested our Augusta Georgia bleached paperboard manufacturing facility, along with most of our open market bleached paperboard sales exposure. Augusta was a high-quality asset with a strong team, but did not have the level of competitive advantage we believe was required to support ongoing capital investment. We elected to put the capital to better use for our stockholders. After the divestiture, 95% of our sales come from high-value consumer packaging. We made a number of moves during 2024 to improve our environmental footprint, including the execution of a virtual power purchase agreement, which significantly increases renewable energy use in our European operations, minimizing our environmental footprint and helping our customers minimize theirs despite the mantle [ph] to our mission. During the second quarter, we applied $200 million of the Augusta divestiture proceeds to repurchase approximately 2%…

Thank you, Mike. Turning to Slide 12. Sales for the full year 2024 were $8.8 billion. Fourth quarter sales were $2.1 billion. Volumes, which turned positive in the third quarter, were up 1% in the fourth quarter. Full year volumes were down 1%, a modest decline given the challenging market environment. Price declines remained steady and relatively modest at about 2%, consistent with the second and third quarters. Prices are stable as we begin 2025. The divestiture of Augusta and lower open market bleached paperboard sales reduced reported sales by $389 million for the year and by $103 million for the quarter. Other M&A, excluding Augusta a $27 million positive for the year and a $14 million negative for the fourth quarter. The fourth quarter of two months of sales impact from the Russia divestiture, which took place in November 2023. Recent currency movement has been noteworthy following the November election in the United States. Foreign exchange was a $15 million sales headwind in the fourth quarter, taking the full year to an approximately $24 million headwind. I'll come back to the implications that a strong U.S. dollar could have on our 2025 results in just a few minutes. Adjusted EBITDA for the full year was $1.7 billion and $404 million for the fourth quarter. Adjusted EBITDA margins remained strong and steady at 19.1% for the full year and 19.3% for the fourth quarter. Net performance was an outstanding $270 million for the full year and $80 million for the fourth quarter, offsetting lower pricing and inflation. The adjusted EBITDA impact of the Augusta divestiture and lower bleached paperboard sales was a negative $164 million for the full year and a negative $39 million in the fourth quarter. Power issues in the third quarter and the decision to accelerate digester…

Certainly. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question for today is from Lewis Merrick with BNP Paribas Exane.

Morning Mike, morning Steve. Thank you for taking my questions. Just to start, I was wondering if you could give us a bit of a flavor for how you're thinking through the impacts from any possible tariffs that have mentioned from President Trump both for yourselves and the wider industry? And if there are any potential second order effects that might entail? And now I've just got a quick follow-up.

Yes. Thank you, Lewis. I'll start with some of the macro on that and I'll turn it over to Steve to make some commentary perhaps on the financial side of that. I guess if you just speak for a minute around what was announced here at the end of last week in terms of Canada and Mexico, kind of high level, we manufacture products largely for customers in those geographies and the facilities we have, both in Mexico and in Canada. If you look at kind of the cross border in North America, we would estimate that around $300 million of paperboard in some cases that's flowing in and some cartons that would flow out of the U.S. and into Canada as an example. So, it's relatively small. I think about 3% of our total sales. We really don't have exposure to China in a material way at all. And so as you kind of look through that, the biggest impact we've seen so far has really been on the translational impact on the strengthening of these currencies. And Steve gave a pretty good explanation of what that looks like. For these tariffs are now on hold for 30 days. So, like everybody else, we're going to have to wait and kind of see how that plays off and certainly, that's Canada and Mexico. But that's how we're thinking about it. We do have some actions as things get clearer where we could shift some production to probably minimize some of those things once we have clear line of sight, if, in fact, something does go in and we need to respond.

Perfect. Thank you. And then just focusing a bit more on the volumes. Clearly, we returned to positive volumes in the second half of 2024. Have you seen that trajectory sort of continue as you -- as that played out in January?

Yes. Thanks for the question. If you kind of look macro 2024, the first half we were down 2%. The second half, we were up on 1%. We delivered $205 million of innovation sales. I'm really proud of that. Our funnel for innovation remains very strong and our confidence level. We continue at that kind of pace with what you see on Page 8 and 9 of our debt remains very, very high. So, as we look at 2025, we've given you a guide of 1% to 2%. It's early in the year. But if you look at January, we saw -- it's our weakest quarter, as you can see on Slide 7 relative to kind of how the timing plays out with our customers. But we actually expect growth here in Q1, and that's consistent with what we saw here in January.

Great. Thank you. I'll pass it over.

Thank you.

Your next question is from Anthony Pettinari with Citi.

Good morning.

Morning.

Hey. Mike, could you talk a little bit about kind of the relative strength in the different substrates that you produce maybe kind of industry operating rates and how your system is operating, obviously, post-divestiture with Augusta?

Our system is operating very well, as you saw from the performance that we generated on a year-over-year basis. And I guess the relevancy of operating rates for us is a bit diminished as you know, Anthony, relative to how we think about the business. Specifically, what I'm talking about on our solid bleached paperboard that's mid folding cartons and are unbleached, once our bleached uncoated paperboard that we use for cup-stock, that's almost 100% integrated into our own operations. So, it's really not as relevant for us anymore. We get a ton of questions on imports. The reality of it is, as I've told you guys in the past, it really doesn't make my list of things that keeps me up at night because it doesn't impact our overall business. Relative to CRP, coated recycled paperboard and the unbleached paperboard, those grades continue to be strong and in demand. We're investing heavily in coated recycled paperboard, as you know, and what we're doing in Waco. And ultimately, we publicly said that the ultimate, most likely result is, we will close or smaller undercapitalized facilities in Ohio and Pac once that machine is up and running, we expect to be making commercial paper board on it in Q4 this year. So, when you kind of think about what where that positions us, we're going to have five incredibly well-capitalized assets that are making the paperboard that we need and that flow through our 120 converting facilities spread around the globe. That's the business we're running, really selling packaging, we're selling cups. And that's why you've seen our disclosures really make more of a shift towards end-use markets, what's the consumer doing, how we're performing in those markets because it's really more relevant for how we're running the company and how we think investors should be looking at us.

Got it. Got it, that’s very helpful. And then you talked about volume assumptions for 2025. I'm just wondering if you could talk a little bit about pricing assumptions -- or at least the pricing environment as you start the year, both in terms of just kind of the strength of the market, but also your efforts to move customers off of the RISI index?

Yes, Anthony, it's Steve. Good morning. Just a couple of things there. Overall, in our guide, as Mike just said, we're assuming continued modest volume growth kind of in that 2% range, consistent with our innovation engine year-over-year. Right now, pricing heading into 2025 is pretty neutral, the 2% price declines that we managed through in 2024 are fundamentally behind us. So, we've got relative price neutrality heading into 2025, and that's pretty consistent with what we're seeing on the input cost side as well, which is pretty neutral on a year-over-year basis. And actually, we've been very pleased, Mike and I were talking about it this morning with the progress we're making with our customer negotiations, where we're putting in place our internal duly-developed index for price changes with our long-term customers who are all multiyear contracts. And so overall, interested receptivity has been high, and we're executing on those on a proprietary business with our customers. So, we're actually very pleased with the movement on that front.

Okay, that’s helpful. I'll turn it over.

Thank you.

Thanks Anthony.

Your next question for today is from Phil Ng with Jefferies.

Hey guys. I was curious to get your latest thoughts on the quarter itself is a little softer than we expected. A little noise with some of the movements. Can you kind of help us flesh out whether it was productivity or just how Augusta kind of shook out? Just give us a little more color and how that kind of plays into 2025?

Phil, it's Steve. You broke up a little. You're referring to Q4?

Yes, Q4. I mean I thought volumes in price was largely in line. EBITDA is relative to consensus was a little lighter, help us think through were there any big surprises in the quarter that we should be -- a loss?

Yes. Thanks Phil. Really two things, first, our expectations. One, volume came in at 1% and we had kind of guided for the quarter inherently in the 1% to 3%. So, volume was a little bit lighter than we expected, a little bit less promotional, activity and volume from our customers. So, about 1% was volume-driven. At 1% of the top line, of course, that flows through our EBITDA and then really was FX. This move post the election was kind of an $8 million to $10 million hit for us relative to what we expected it to be when we last chatted and put out our guidance. So, really, it's those two things, Phil, nothing operationally of any substance margin overall at very high at 19.3%. So, little bit of a late FX move and 1% volume versus an expectation of modestly higher were the two things caused a little bit of shortfall versus our expectations in Q4.

Okay. And when we think about 2025, your 1% and 3% volume growth, that's kind of largely assuming the markets are still pretty muted and a lot of that's innovation. Is that the right way to think about it, Steve? And I guess the reason why I'm asking is where are you seeing some of the biggest wins on the innovation side of things? Some of the CPG companies that have called, talked about maybe dialing back on those sustainability ambitions of consumers dealing with inflation. So, just kind of give us a little more perspective? Where are some of the wins, where are you super excited? And in any way to kind of quantify perhaps any wins you've picked up on the Rainier side just because it's a low cost, really high-quality product?

Yes. Why don't I start, Phil, and then Mike can bring some additional context. You summarized it well. In 2025, our primary assumption is that the 2% innovation growth will be the primary driver of volume growth for the year, which assumes pretty margin -- market-neutral, so market neutrality. Now, keep in mind, 2024, we were down 1% on volume, we were inside of that up 2% innovation, minus 3% on the market. So the market goes from kind of a minus 3% to pretty neutral on a year-over-year basis, hence the 2% volume growth on the top line price relative stability. So, that's kind of the content around that. Mike laid it out in his commentary extremely well. The portfolio of innovation is quite wide. And it's dozens and dozens of categories and they fall across the portfolio, which is good to see a lot of singles and doubles in baseball terms. And I'll let Mike talk about Rainier, where we're actually really quite good about the testing and the momentum on that front.

I appreciate the question on that, Phil. I guess from our standpoint, our progress for Rainier continues to accelerate. We're very pleased with what we've seen. We've got commercial sales on that import grade, primarily in the Health and Beauty segment that are in place, our trial activity remains quite high in interest around this high-quality coated recycled paperboard that beat with bleached paperboard continues to accelerate. We'll continue to give everybody an update on that. We're just not going to break it out every quarter. We kind of see this is one of the innovations that -- as part of what Steve just referenced.

Okay, appreciate all the color guys. Thank you.

Your next question is from Gabe Hajde with Wells Fargo Securities.

Mike, Steve, good morning.

Good morning Gabe.

I had a question about inventory levels. And I'm looking at inventory days that have kind of jumped up since 2018. And I suspect part of that might be related to the cups business maybe in a little bit more inventory for QSR to make sure that they have what they need. But it also kicked up a little bit in 2023 and 2024. I'm just curious if there's anything that's intentional, number one? And then number two, on the production side, the paper side or maybe folding cartons, I don't suspect you guys are holding a whole lot of inventory there. What that might imply for your own operating rates in 2025, meaning it matched up with what you expect to be kind of 2%-ish volume rates?

Yes, you read is good. I appreciate the question you're asking there. I mean, in some cases, we did have inventories that were a bit depleted coming out of the rush through the pandemic, if you will. And so our customers wanted us to get those back to the traffic levels, which we've done. The biggest impact on a year-over-year basis to give some of the planning we're already doing to get ready for the Waco start up as you can appreciate, we've got a couple of paperboard manufacturing facilities that we need to take down and what we need to start up. So, we have to make sure we protect our customers during that process. You'll see that wash through pretty quickly as Waco comes online, we expect to harvest that working capital. It's something we've got an ion, we want to normalize our paperboard and the levels that we have. But when you're going through a startup like that, you've got to make sure that you cover for some of the contingencies, that's what we're doing. There's stuff more with that.

Got it. Okay. And then maybe, Steve, you talked about kind of -- it sounded like price cost neutrality and maybe that includes productivity. We've only heard from a couple of companies thus far. But seems like labor and some of these indirect costs are still rising. And so I'm curious what made assumption you have for the more visible direct implementation that we can track in the outside world versus maybe where you guys are doing better on the indirect side?

Yes. Okay, you're spot on there. You summarized it well. Overall, our pricing, as we mentioned, pretty stable heading into 2025, along with the accumulation of our input costs, the input commodity costs. We continue to have labor and benefits and other inflation. It's in that the 3%, 4% range as we've seen in the past, maybe a little lower than -- historical. But it's in that $100 million range for us on a total basis. And as such, our confidence that our productivity initiatives will more than offset that again in 2025 remains high given the productivity initiatives that we have in place. So, those fundamentals remain intact, which is why margin stability remains extremely high. And then, of course, we'd expect to earn on the volume growth that we've shared with you. So, no those overall fundamental components of the business all around very high levels of margin stability as we head out of 2024 into 2025 really remain intact.

Got it. Thank you.

Thank you.

Your next question is from Ghansham Panjabi with Baird.

Yes, hey guys. Good morning. I'm kind of thinking back to 2024, it's clear that you made your customers started ramping promotional activity higher, but frankly, it just was not enough to move volume velocity in a material way. Do you sense any shift in terms of what they may do different in 2025, if anything, maybe in terms of packaging mix or lower price point architecture, et cetera?

Yes. Well, we certainly heard it in my prepared remarks that we're seeing a lot of activity around new products and trying to position things. Some of that is tied to the GLP-1 drug set there that our customers are reacting to and that creates opportunities for us. Anytime there's a change, as you know, Ghansham, that's an opportunity for us to have a conversation with our customers. And we are seeking those, but you read is right to promotional activity, what we really saw in 2024 was 1 customer in a category promoted, the overall segment of the category didn't really grow, it shifted that producer or that promoter actually won that at the expense of somebody else, but didn't really expand category. We saw it on food service, too. where some of those promotions were really high, the $5 value meal as an example, where you saw mix that improved, but then a portion of the mix actually declined. And so it was really just prioritizing mix as opposed to growing the overall pie. So, I guess, 2025 -- you say we've got a pretty neutral market assumption there. I am used by the amount of activity we see the engagement we have with customers, our confidence level is high in our innovation pipeline. So I guess, got to kind of play out here over the next quarter or two, but that's kind of how we're thinking about it and what we saw last year.

Okay. And then my second question as it relates to -- you made some comments on tariffs and the direct impact on you, but if we kind of zoom out on the supply chain, including your customers, et cetera. Just in terms of your conversations with them, is there any consideration to change the network of production in any way to offset what looks like is going to be a secular issue in terms of tariffs?

Yes, I think, look, every one of our customers has got a war room set up trying try this thing out because as you well know, we're pretty quickly. And so I think they're all trying to get a pretty good beat on what kind of the path is going to be and what it looks like. Again, I mentioned, and we know there's a 30-day reprieve now for both Canada and Mexico, but to your point, it's something that we're -- going to have to deal with. There are a fair amount of consumer goods applications at the U.S. And any of that stuff that would be made domestically ultimately benefits us. And so I think that we look at that I already kind of mentioned imports, paperboard, something, I guess, we get asked on what does that mean to you? You heard my explanation in terms of how we can in the marketplace, but it's probably a modest tailwind for us that actually happened. So, we're trying to through all that stuff, leveraging a large platform that we have in North America. And again, we've got 85 converting facilities across North America. That gives us a lot more options than most packaging companies and we'll obviously work really hard with our customers to mine our supply chain. And there is two, once we've got a clear line of sight in terms of how it all it gets implemented and plays out assuming it does.

Yes, Ghansham, it's Steve. Just to add to Mike's commentary. I think the modest potential tailwind is just a little more of a localization, if you will, of raw material production and ability to produce packaging and our 20 facility network is nicely positioned to be, as you know, close to those customers and in reasonable property and the vast majority of the paperboard that we produce for our own packages are for consumption year quite locally as well.

Perfect. Thank you guys.

You bet.

Your next question is from Matt Roberts with Raymond James.

Hey, Mike, Steve, good morning. Steve, you talked this a little bit earlier, but I want to dig into the ongoing conduct initial just a bit more. So last quarter, you announced you did address the remaining 5% of open market contracts. And so the open market portion is now a direct. Is there some type of natural price benefit we should see in 2025 from that? And being at the contract resets in the consumer pack products, I believe you've noted that 50% are still tied to the index. Are you able to provide more color in terms of how many contracts have come up since the initiatives was undertaken? What is the conversion rate of those been or when we should start to see more of a material benefit flow through from that initiative?

Yes, Matt, it's Steve. I think we might take a little different take on what you're asking. I mean, as you know, we've been on a five-year journey of really being compensated appropriately for the value of our patches, and we've made a lot of progress in that regard and hence, the market stability of the business. On the open market, 5% of the company, yes, we've made those transitions and we're being compensated appropriately for paperboard at market rates and we'll have other mechanisms in place if there is a need to move that pricing with those that small section of the customers. And as we've talked, we're in a step-by-step renegotiation of all of our natural packaging customer contracts. And we don't really have plans to kind of put that out in percentage terms and the like because this is a journey that we've been on, and we're going to stay on. What we like is that receptivity is high. There's a general recognition that having a transparent price change mechanism that works with our customers is something that they want as well. So, I think, overall, I would just put it into the context of the consumer packaging company that we've become in our ability to be compensated appropriately for the packages we produce and maintain those long-standing relationships with our customers.

And I think, Matt, one other thing I'd point out on that on Slide 13, you can really see the material benefit that we're already experiencing from that effort that Steve just referenced over the last five years, the stability of our margins in out of quarters. And if you look back in five years before we started that process, there was a lot more variation in that process. So, it's clear it's working, and our investors are benefiting from that.

No, it's all very helpful, and it certainly makes sense. And maybe holistically, if I could ask another question on the unbleached side of the business. Maybe can you talk about how your share has trended over time? Is that market relatively stable? And given the structure, are there any differences in the contracts there versus either bleached or recycled? Or any color you could give on kind of the different dynamics that would be helpful. Thank you again for taking the questions.

No, I appreciate the question. I think on the unbleached paperboard side, there's been a lot of risky about weakness there, and we just haven't seen that. I mean our overall beverage business, as you saw, has performed quite well. It's a global business. The vast majority of that material flows through our own converting facilities. We saw very little of that into the open market, and it's a very good grade paperboard. So, and of course, you know what we think about coated recycled paperboard, we've made two very large-scale investments, one in Michigan and one in Texas to increase our capabilities to quality where we able to generate and ultimately, the cost position that our customers are always looking for. So, those two grades. That's grades of paperboard and we'll continue to sell them through our converting facilities to customers.

Thanks Mike. Appreciate it.

Thanks Matt.

Your next question for today is from George Staphos with Bank of America.

Hi, good morning everyone. Thanks for the details and taking the question guys. I guess I had three questions, I'll ask them in sequence. So, first of all, as we do the guidance for the year, and the fact that this juncture ex-FX will be a little bit below your normal target of mid-single digit. What would be the biggest sort of risk factor you see in guidance and sort of the variance there? Is it just the fact that we're stepping off at a lower point from 2024 because all the risks from the consumer, are there other factors at work as well? And that's question number one. Question number two, food service obviously up against a tough comp and you were flat. The industry data shows some pickup in foodservice volume recognizing production, not consumption. Have you seen any pickup in your data looking out into 2025 on the food service side because that's been somewhat encouraging? And then last, help us understand how you'll be able to use cash flow and maybe the beginning of Waco and its production to support earnings perhaps in 2025? Thanks guys and good luck in the quarter.

So, I'm going to ask Steve to do one and three, and I'll handle two there, Steve.

Thanks Mike.

So, George, on one, on risk in terms of the -- if you will, the closer control I mean, overall, of course, volume will be vertical there. And we're assuming some modest volume growth that has a market assumption that is pretty neutral as we talked earlier. And as we've described here, that just requires our customers to have some commitments to promotion and to managing through that day-to-day life of a really stretched consumer. So, I think really kind of there evolves around volume. Our productivity, the initiatives we have in place, we have a lot of confidence in our innovation pipeline, a lot of confidence in price and margin stability, contract negotiations are kind of in front of us. On FX, George, it can move, and that's mostly just a translation activity, which is the reason we kind of called it out for you here.

I understand. I was asking before foreign exchange, but it's -- basically, it's the volume and the consumer variability that's in the guide that you're calling out.

That’s correct George, yes, thank you.

Thanks Steve.

Yes. And then obviously, FX is separate. And then your question on cash flow is an important one. And one, our confidence in the cash flow inflection for the business is very high, particularly given the catalyst that it will provide for margin enhancement as we move out of 2025 and into 2026 as we bring Waco to life and really inflect on the cash flow front. And that is enabler for earnings capacity as well as cash flow duration. We're looking forward to the start of Waco. Obviously, the difficult decisions to close down other facilities as part of that, but that is in motion. And as Mike talked earlier to Gabe's question, we're doing some building on the inventory front in prep, and we're looking forward to having that capacity for doing so and for that being a significant enabler for earning cash flow generation. And it also related to capital allocation, I mean, it's allowing us to have confidence in how we allocate capital. Today's announcement to increase the dividend, a good, steady, growing dividend, an important part of our capital allocation priorities. And then obviously, the other priorities that we've spoken about. So, yes, they're all related in terms of EBITDA improvement, cash flow improvement, and how we allocate capital going forward.

In regards to foodservice growth, George, and you referenced is right, we have outperformed in that space pretty dramatically. So, we do enough comps that we have to meet. But having said that, we're investing heavily in innovation, we profiled on our last earnings call, one really great one that we put in place with McDonald's that actually -- I really like it because it's, of course, it's on a paperboard application. But for them, it ultimately eliminated two SKUs and made it into one. We got a couple of sizes out there. We've seen the roll through of that. McFlurry out there, and we've got a number of other things we're working on this year. So, I anticipate we're going to continue to grow in the foodservice space and that's our expectation as we go into 2025.

Thanks so much.

Your next question is from Arun Viswanathan with RBC Capital Market.

Great. Thanks for taking my questions guys. Hope you guys are well. I guess the first question, going back to the inventory side. So, it looks like you took quite a bit of action over the last half year. So, I know there was some downtime. There was also some downtime a year ago in the second half. So, I guess as it stands, would you say that your inventories are balanced where you want to be? Or is there still some more work to bring those down I think, build some inventory ahead of the Augusta closure? So maybe you can just update us on that first.

Yes. So, as I kind of mentioned there, Arun, I mean, from -- we had some rebuilding we needed to do with our finished goods coming through the pandemic. We've done that. We have to be able to service our customers in a highly variable market. We feel about where we're at. Our on-time delivery is very high, and we're servicing them very well. As I mentioned, we made a decision to build a little bit of paperboard inventory here as we prepare for start of Waco paperboard mill, but as I mentioned earlier in my comments, that will wash you pretty quickly as we bring that mill up and running. So, by and large, we like where we're at with our finished goods. We've got a little work to do on our raw material side. It's a focus for us, but it's a balance to make sure that we're able to respond to customer needs in a highly variable market.

Okay, that's helpful. And then I was just hoping we could address some of the concerns in the market out there around new capacity as well as imports. So, several of us have seen the reports of imports coming in from Europe, given maybe a softer demand environment there. Are you still seeing that? Is that a credible threat to oversupply? And then similarly, there were some announcements of new capacity in CRB. There were conversions from SBS and into the U.K. So, maybe just give us your thoughts on, yes, new capacity as well as import threats?

I think, Arun, and I'll make a few comments on it, but this question is much better for people that are actually in the marketplace selling paperboard, which is not Graphic Packaging, we're selling packages. In particular, I think what you're referencing is some of the FBB board that's coming into the North American market, Europe, which was up, I think, modestly last year as I look at the numbers. But again, as I indicated, it really doesn't impact our business much, if at all. We're integrated into that in our own paperboard facility in manufacturing facility in Texas or Canada. We use almost 100% of our own material. So, the impact on that really falls on others that are participating in that market. It's the biggest market out there. It's over 4.5 million tons. And again, I'd encourage you to ask the major producers of that paperboard grid, what their thoughts are on that. They'll have a more view than me. As it relates to people, converting into coated unbleached scrap, I think you're referencing, we've got that question. Again, as I mentioned, we run a highly integrated process with specifications that are very particular in terms of strength and tear and that's based on decades of experience that we have flowing through our own packaging operations and customer lines that run at incredibly high speeds and are intolerable of any variation that is met. So, I like the way we're positioned on that. We're clearly the low-cost producer of uncoated material here in North America, and that will continue to be the case. And as I mentioned to a question I got earlier, our integration rates continue to go up on that grade. So, that's how we compete there. It's really not a big issue for us.

Yes. And Arun, it's Steve. I think just there are no low-cost alternatives for converting something from a bleached paperboard into an unbleached coated, that is our product category. So, as Mike said, it's highly integrated and there are no low-cost alternatives to do that. It's just an idea.

Great. Thanks.

We have reached the end of the question inter session, and I will now turn the call over to Mike Doss for closing remarks.

Thank you, operator and thank you for joining us on our call today. There is no doubt 2024 was a challenging year for consumer product and quick-service restaurant customers. For Graphic Packaging, it was challenging, but an exciting year. We harvested capital from the business that lack competitive advantage. We delivered significant packaging innovations to new and existing customers, and we made outstanding for Waco. And despite the headwinds, we returned to growth in the second half and delivered exceptional margin stability. Graphic Packaging is demonstrating the strength of its business model. I'm proud of our team, excited about our innovation pipeline, and optimistic about our future. Thank you and have a good day.

This concludes today's conference and you may disconnect your lines at this time. Thank you for participation.