그래픽 패키징(GPK) 2026년 3분기 실적 발표 전화회의: 마진 회복

그래픽 패키징 홀딩 컴퍼니(NYSE: GPK)는 2026년 3분기에 전년 동기 대비 완만한 매출 성장을 기록했으나, 조정 EBITDA는 전년 수준을 하회했습니다. 구조적 비용 절감과 생산성 향상이 지속적인 투입 원가 인플레이션을 상쇄하는 데 기여하면서 순차적 수익성은 개선되었습니다.

핵심 요약

• 순매출은 22억 달러를 기록했으며, 경영진이 전체 시장이 감소했다고 판단했음에도 불구하고 약 1%의 판매량 성장이 이를 뒷받침했습니다.
• 조정 EBITDA는 전년 동기의 3억 8,300만 달러에서 2억 8,900만 달러로 감소했습니다. 조정 EBITDA 마진율은 13.2%를 기록해 전 분기 대비 190bp 확대되며 2분기 연속 상승세를 이어갔습니다.
• 연초 대비 누적 조정 현금흐름은 6억 4,600만 달러 증가한 3억 1,400만 달러를 기록했습니다. 순부채는 2025년 말 대비 1억 4,800만 달러 감소한 52억 달러로 집계되었습니다.
• 그래픽 패키징은 순매출 약 86억 달러, 조정 EBITDA 약 10억 5,000만 달러, 조정 EPS 0.65달러라는 연간 전망치를 유지했습니다.
• 경영진은 2026년 투입 원가 인플레이션 예상치를 기존 1억 5,000만 달러에서 약 1억 7,000만 달러로 상향 조정했으나, 구조적 비용 절감 목표치도 약 9,000만 달러로 높였습니다.
• 웨이코 공장의 미코팅 재생 판지(URB) 양산 진행률은 당초 기대를 상회하고 있습니다. 경영진은 판매량이 2026년에 2만 톤 이상, 2027년에는 10만 톤 이상에 달할 것으로 예상하고 있습니다.

주요 재무 데이터

그래픽 패키징은 해당 분기 동안 물류, 화학물질, 수지, 고지, 인건비 상승으로 인해 약 8,300만 달러의 원자재 투입 및 운영 비용 인플레이션을 기록했습니다. 경영진은 이 중 5,500만 달러를 3분기 추가 발생 인플레이션으로 파악했습니다.

회사는 해당 분기 동안 약 3,000만 달러의 구조적 비용 절감을 이뤄냈습니다. 유지보수 비용 증가가 전년 동기 대비 약 1,200만 달러의 역풍으로 작용했으며, 재고 감축 조치 또한 수익성에 영향을 미쳤습니다.

사업 및 운영 실적

식품 부문은 그래픽 패키징의 가장 크고 견조한 최종 시장으로 남아 3분기 연속 전년 동기 대비 성장을 달성했습니다. 북미 수요는 바 제품, 제과, 스낵, 냉동 및 상온 즉석식품에서 가장 강세를 보였습니다. 글로벌 시장에서는 건조 즉석식품이 호조를 보인 반면, 시리얼과 신선 단백질 제품은 여전히 압박을 받았습니다.

글로벌 음료 사업은 안정적이었습니다. 에너지 음료 및 신흥 음료 카테고리가 상대적 강세를 보인 반면, 탄산음료는 약세를 나타냈습니다. 그래픽 패키징은 올해 현재까지 위탁 포장업체에 12대의 장비를 판매했으며, 현재 해당 네트워크 전반에 95대 이상의 장비가 설치되어 있습니다.

헬스 및 뷰티 부문의 실적은 엇갈렸습니다. 럭셔리 향수와 스킨케어는 견조한 수요와 재고 보충에 힘입어 이익을 얻은 반면, 일반의약품(OTC) 헬스케어는 회복세를 보였습니다. 매스마켓 뷰티는 계속해서 어려움을 겪었습니다. 외식업 및 가정용 패키징은 패스트푸드점 컵 수요 둔화를 포함해 소비 구매력 관련 압박을 지속적으로 받았습니다.

웨이코 공장의 URB 양산 확대는 경영진의 기대를 뛰어넘는 속도로 진행되고 있습니다. 현재 이 시설은 접이식 상자, 라미네이션, 저강도 튜브 및 코어를 생산할 수 있습니다. 경영진은 추가 자본 투자가 필요한 고강도 튜브 및 코어 생산 검토를 진행 중이나, 구체적인 투자 금액은 밝히지 않았습니다.

회사는 인공지능(AI) 또한 선별적으로 도입하고 있습니다. 재고 관리, 주문 처리, 비용 절감을 지원하기 위해 판지 지종 전반에 2개의 AI 에이전트를 도입했습니다. 상업 및 조달 계약 프로세스를 위한 초기 단계의 애플리케이션도 개발 중입니다.

경영진 실적 전망

경영진은 4분기 실적이 가격 인상 조치, 계약상 원가 전가, 구조적 절감, 웨이코 공장 가동률 개선의 혜택을 볼 것으로 기대하고 있습니다. 지속적인 투입 원가 인플레이션이 주요 상쇄 요인으로 남아 있습니다.

회사는 연말 재고가 매출액의 약 19%에 달할 것으로 예상합니다. 재고 감축과 관련된 2026년 가동 중단 비용 추정치는 기존 9,000만 달러에서 약 7,500만 달러로 하향 조정되었습니다.

경영진은 그래픽 패키징이 2027년에 전년 대비 조정 EBITDA 성장, 마진 확대, 강력한 EBITDA 대비 현금흐름 전환율을 달성할 수 있는 기반을 마련했다고 밝혔습니다. 그러나 회사는 2027년에 대한 공식 가이던스나 구체적인 EBITDA 브리지를 제공하지는 않았습니다.

리스크 및 주시 항목

• 연간 추가 투입 원가 인플레이션은 회사의 기존 추정치보다 2,000만 달러 늘어난 약 1억 7,000만 달러에 달할 것으로 예상됩니다.
• 소비자의 구매력 부담은 특히 외식업, 가정용품, 시리얼, 신선 단백질, 매스마켓 뷰티 부문에서 지속적인 제약 요인으로 작용하고 있습니다.
• 역사적으로 가격 결정 메커니즘이 주로 판지 지수에 연동되어 있어, 비판지 인플레이션 위험 및 시차에 노출되어 있습니다.
• 순레버리지 비율은 4.8배로 높은 수준을 유지했습니다. 그래픽 패키징은 리스크 완화 조치로 약 10bp의 비용을 들여 신용 약정을 수정했습니다.
• 4분기 현금흐름 달성은 부분적으로 계절적 운전자본 개선에 의존합니다. 회사는 현금 이니셔티브의 일환으로 매출채권 매각 프로그램을 확대했습니다.
• 관세, 물류비 및 무역 흐름 변화가 지역별 수급 조건과 운영 비용에 지속적으로 영향을 미치고 있습니다.

애널리스트 Q&A 주요 내용

경영진은 2026년 인플레이션 중 약 9,000만 달러가 2027년으로 이월될 것으로 보이지만, 가격 반영 이월 효과가 이 금액을 대체로 상쇄할 것으로 기대하고 있습니다. 구조적 비용 절감 조치로 약 1,500만 달러의 추가 이월 혜택이 발생할 것으로 예상됩니다. 변동 성과급 충당금도 회사의 당초 예상치를 하회하고 있습니다.

그래픽 패키징은 당해 연도 가격 인상 조치를 통해 약 6,000만 달러의 성과를 창출했으며, 이는 연환산 시 약 1억 5,000만 달러 규모입니다. 여기에는 계약상의 원가 전가와 회사가 가격 결정 유연성을 가진 약 10억 달러 매출에 대한 가격 인상이 포함됩니다. 경영진은 갱신되는 고객 계약의 대부분을 반기별 조정에서 분기별 조정으로 전환하고, 비판지 인플레이션에 대비해 생산자물가지수(PPI) 기반 메커니즘을 추가하는 방안을 추진 중입니다.

매년 전체 고객 계약의 약 3분의 1이 갱신되며, 계약 기간은 보통 3년입니다. 경영진은 분기별 조정으로 이미 전환된 계약 건수는 공개하지 않았습니다.

현금흐름과 관련해 경영진은 역사적으로 4분기가 운전자본 회수 기간이라고 말했습니다. 회사는 연간 2억 7,500만 달러에서 3억 2,500만 달러의 운전자본 개선을 예상하고 있으며, 3분기 실적 호조 덕분에 4분기에 필요한 금액이 전년도보다 적다고 밝혔습니다.

경영진은 또한 타이트해진 판지 수급 상황과 전년보다 강력해진 수주 잔고에 대해 설명했습니다. 그래픽 패키징은 10월에 표백 판지에 대해 세 번째 가격 인상을 발표했으며, 미표백 지종에 대해서는 시장에서 두 차례의 가격 인상을 진행 중입니다.

실적 발표 설명회 녹취록 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Good day, ladies and gentlemen, and welcome to the Graphic Packaging Holding Company's Third Quarter 2026 Conference Call. [Operator Instructions] And please note, this conference is being recorded.

I will now turn the conference over to your host, Melanie Skijus, Vice President of Investor Relations. Ma'am, the floor is yours.

Melanie Skijus

Good morning. Thank you for joining Graphic Packaging's Third Quarter 2026 Earnings Results Conference Call. Today's presentation will 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 today's press release and in our SEC filings.

We have with us today Robbert Rietbroek, President and Chief Executive Officer; and Chuck Lischer, Senior Vice President and Interim Chief Financial Officer.

During this call, we will reference our third quarter 2026 earnings presentation, which can be found in the Investor Relations section of our website and through the webcast.

I will turn the call over now to Robbert.

Robbert Rietbroek

Thank you, Melanie, and good morning, everyone. Our third quarter performance demonstrates continued progress against the near-term strategic priorities established earlier this year. We delivered revenue and volume growth year-over-year, expanded adjusted EBITDA margin sequentially for the second consecutive quarter and continued to generate meaningful cost savings despite an operating environment that remains dynamic and inflationary.

Net sales were $2.2 billion, up modestly from the prior year. Volumes increased approximately 1%, outperforming a declining broader markets. Adjusted EBITDA was $289 million, adjusted EBITDA margin was 13.2% and adjusted EPS was $0.23. Adjusted cash flow for the 9-month period ending September 30 was $314 million, an increase of $646 million versus the first 9 months of 2025. Quarter-over-quarter adjusted EBITDA increased $42 million and adjusted EBITDA margin expanded by 190 basis points. This performance resulted from decisive actions taken this year, including the execution of structural cost reductions and successful commercial efforts by our team.

While we're still early in our transformation journey, margin recovery is especially encouraging to see given the heightened inflationary environment experienced in 2026. The resilience in our top line performance reflects the breadth of our packaging solutions across markets and customers, our integrated manufacturing network and the disciplined execution of our teams. We partner with large and small branded and private label customers across food, beverage, food service, household and health and beauty. Our innovative packaging satisfies different functional and price point requirements and positions us with a comprehensive set of solutions to support customers across a wide range of economic conditions and consumer preferences.

The business environment for global consumer packaging providers remains dynamic. Generally, consumers remain value-oriented and selective as widespread inflation has created affordability challenges and shaped consumption behavior. Broader adoption of GLP-1 medications has reinforced consumer preferences for protein and fiber reduced portion sizes, less sugar, alongside a greater focus on health. Consumers are making deliberate choices about where value matters the most, while continuing to spend on convenience, wellness or an attainable premium experience.

Unabated inflation across the entire supply chain continues to drive up cost of production while intra-contract pricing adjustments in our industry remain largely tied to paperboard market dynamics. Supply demand conditions vary across regions and substrates, and tariffs and higher logistics costs are influencing global trade flows. Amid these industry dynamics, we remain focused on the company's specific levers within our control and delivering to our commitments. The breadth of our packaging portfolio and market reach enabled us to serve the full spectrum of consumer demand from value-oriented solutions to premium packaging and respond as customer and consumer preferences evolve.

We are executing structural cost reductions and productivity initiatives to enhance margins while implementing best practices and standardizing processes across the organization. As a result, we are improving outcomes and strengthening the long-term sustainability of our business. We are taking price increases to mitigate impacts of inflation and strengthening inflation recovery mechanisms within our multiyear agreements with customers. The latter will improve the responsiveness of our customer contracts to changes in our cost base.

As part of our commercially led revenue growth management initiatives, we are adding PPI-based price change mechanisms to customer agreements to capture non-board inflation and utilizing other recovery escalators. We are also moving from semiannual to quarterly pricing openers, as contracts renew to ensure a more responsive and balanced framework with customers.

Graphic Packaging's global leadership position, together with the strong progress made against our strategic priorities this year, sets us on a clear path to return to profitable growth. We are leaning into the areas where we have competitive advantages, our broad and diverse portfolio, leading positions in unbleached and recycled paperboard, differentiated innovative packaging and machinery capabilities and deep customer relationships.

With greater spending discipline across our platform of well-invested mill assets, we are focused on delivering our committed cash flow generation targets. Our cash-generative business provides a clear path to reducing depth and returning significant capital to shareholders over time.

Turning to our end markets. Food delivered another quarter of growth and remain our strongest and largest markets. In North America, center of store categories performed well with strengths in bars, confectionery, sweet and savory snacks and frozen and shelf-stable prepared meals. These categories fit how consumers manage their budgets today, offering convenience, controlled portions and a more affordable alternative to fresh ingredients or eating-away-from-home.

End market performance towards more nuanced in our international business. Select convenience categories like dry prepared meals performed well in the quarter. While cereal and fresh protein remained under pressure, given significant inflation and widening price gaps versus private label. Consumer preferences for protein, healthier choices and favorite brands remain but macro pressures are driving some consumption toward lower-cost formats and substitutes. Our customers have had to adapt to a bifurcated consumer demand environment, innovation and consumer engagement strategies, including new product formats, different pack sizes and occasion-based promotions remain important tools for brands to increase shelf appeal and drive volumes.

During the third quarter, our global beverage segment was stable with stronger relative performance in energy drinks, and certain emerging beverage categories. Across our beverage segment, customers broadly continue to focus on driving volume through consumer engagement strategies and expansion in new categories.

As emerging and traditional brands gain traction and accelerate growth in new categories from wellness beverages to ready-to-drink cocktail offerings, many are turning to CUK bankers for packaging and fulfillment. This trend is supporting growth in our beverage machinery business and expanding our relationships with strategic co-packing partners. Year-to-date, we have sold 12 machines to co-packers and now have more than 95 installed across the co-packer network. Performance in our health and beauty segment, which is largely a European business for us today, was mixed during the third quarter. Luxury fragrance and skin care benefited from resilient demand and benefits of restocking and over-the-counter health care showed some signs of recovery.

Mass market beauty categories, however, remain challenged. Our food service and household businesses experienced similar pressures as last quarter from consumer affordability and continued trade-offs consumers are making to manage their budgets. The diverse set of markets and customers we serve remains an important portfolio advantage for Graphic Packaging. Our broad market and customer reach, coupled with the breadth of capabilities we offer allow us to capture opportunities whether consumption occurs at home or away from home in large-scale formats or smaller pack architectures in value-oriented or premium ends of the market.

Regardless of whether our packaging is used on the go or in the home, 2 themes are increasingly clear. First, value does not always translate to the lowest price. Consumers continue to pay for convenience, wellness benefits, smaller portion packaging formats and differentiated experiences when the value proposition is clear. Second, our customers need packaging partners that help them move quickly, manage complexity and maintain reliable supply. Those demand aligned directly with Graphic Packaging scale, innovation capabilities and elevated focus on customer service.

We strive to be the packaging partner of choice and we're honored to receive packaging accolades during the third quarter, including 3 AmeriStar awards for achievements in packaging design, sustainability and a People's Choice Award, and 3 Paperboard Packaging Council awards. Also, in the third quarter, we were the recipient of the Global Supplier Co-creation Award by Asahi and the Innovation Leadership Award from Portillo's.

More recently, during the month of October, we received customer acknowledgments for outstanding service. Notably, our Canadian foodservice team was honored with the Customer Hero Award for outstanding support of Yum! Brands and the unified purchasing group of Canada. Additionally, we were proud to be named among America's leading corporate citizens. We were awarded the top 5 ranking overall and achieved the best ranking in the materials sector of 3 BL's 2026 100 Best Corporate Citizens list.

Progress against our 5 near-term strategic priorities continued in the quarter. As shared with you earlier in the year, our first priority is to deliver disciplined organic growth by focusing our resources on the markets and applications where we have the strongest right to win. Our second priority is profitability enhancements, and we now expect approximately $90 million of structural cost reductions for the year. This reflects an incremental improvement of 6% over the 2026 savings we guided last quarter.

Our third priority is the optimization of our operations, footprint and portfolio. The pivot to produce URB in addition to CRB at Waco, leverages our best-in-class recycled platform and drives new growth opportunities for us with existing and new customers. You will see us continue to strengthen strategic capabilities and lean into our core as we target the highest return markets. Finally, we are tracking to deliver adjusted cash flow of $600 million to $700 million. Our discipline this year in capital spending and improvements in working capital generated $314 million of positive adjusted cash flow year-to-date with net debt now lower than year-end 2025. Debt reduction remains our highest priority. The significant trajectory in cash generation we see provides the foundation to reduce leverage and increase financial flexibility over time.

Our objective at Graphic Packaging is straightforward, strengthened partnerships with our customers to help them win with consumers. That means helping customers address consumer affordability pressures through price pack architecture, optimizing formats and offering a range of price points while also creating premium experiences that strengthen brand equity and shelf impact. Two recent examples illustrate the breadth of our packaging capabilities.

We partnered with Brami to produce club store and retail packaging for its protein pasta portfolio, supporting the customers' continued growth. This collaboration was driven by increasing consumer demand for protein-focused products, strong traffic and value-oriented channels and Brami's preference for a local packaging partner capable, providing scale, service and surety of supply.

We also partnered with Tudor Drinks to create a premium four-pack for Harry Brompton's Peach Iced Tea using our EnviroClip Beam solution. This innovative glue free paperboard package combines strong shelf impact with a more sustainable packaging approach while providing flexibility to scale. This is a great example of how our innovation and design capabilities can elevate brands, enable growth and deliver more sustainable packaging solutions.

Turning to an operational update. AI is being carefully deployed into functions of our business. Two agents were set up across our paperboard grades to optimize inventory management and fulfillment and support cost avoidance. Additionally, we are in the early stages of embedding AI into commercial and procurement contract processes to reduce manual work and improve consistency and elevate insights. We will provide updates as automation technology drive material productivity improvements across our global operations.

Within our recycle platform, we benefit from durable production and quality advantages. The ability to optimize production across both CRB and URB enables us to serve a broad range of consumer and industrial applications, while maximizing the performance and utilization of our industry-leading asset base. Our recycled platform will serve as a competitive advantage to service a broad range of customers for years to come.

The ramp of uncoated recycled paperboard at Waco is ahead of expectations. Today, we can serve folding carton, lamination and low-strength tubes and cores applications. The market opportunity available in tubes and cores requiring minimal capital investment is a more recent development. URB production in Waco is generating high interest and broadening demand from industrial customers. We see numerous potential growth avenues as we move forward. We expect to sell in excess of 20,000 tons of URB in 2026 and more than 100,000 tons in 2027.

Coated recycled paperboard continues to see strong interest from customers given unique circularity and sustainability characteristics. Our coated recycled paperboard produced on new machines with the latest technology, provides recycled packaging of the highest quality, brightness and printability. More recent commercializations include private label butter packaging and certain strength packaging for food items. Over time, we anticipate more movements to our recycled solutions as brands and retailers seek high-quality circular packaging options that minimize impact to the environment and appeal to consumers on the shelf.

With that, I will now turn the call over to Chuck.

Charles Lischer

Thank you, Robbert, and good morning, everyone. Our third quarter results reflect improved sequential profitability, disciplined execution and continued progress on cost and productivity initiatives offset by elevated inflation and higher maintenance expense.

Net sales were $2.2 billion, up slightly from the third quarter of 2025. Volumes increased 1% or $19 million while price was a headwind of 1% or $15 million. Innovation sales growth contributed $42 million and foreign exchange and other had a $2 million unfavorable impact. Adjusted EBITDA was $289 million compared with $383 million in the prior year period. Adjusted EBITDA margin was 13.2%, an improvement of 190 basis points quarter-over-quarter and the second sequential improvement. Adjusted EPS was $0.23.

Net performance was modestly favorable, reflecting benefits of structural cost savings and productivity improvements largely offset by costs related to inventory reduction actions and approximately $12 million of higher maintenance expense compared with the prior year period.

Commodity input and operating cost inflation was $83 million in the quarter, driven by logistics, chemicals, resins, secondary fiber and labor expense. These expenses were approximately $5 million higher than our previous expectations and totaled $55 million of incremental inflation in the third quarter. We executed roughly $30 million of structural cost reductions during the quarter and now expect full year savings of approximately $90 million, $5 million higher than what we expected last quarter. The benefits remain broadly distributed across cost of goods sold and SG&A and reflect structural actions and productivity and process improvements.

Year-to-date adjusted cash flow was $314 million, a $646 million increase versus the same period in 2025. Our expectation for full year adjusted cash flow remains in the $600 million to $700 million range. We ended the third quarter with net debt of $5.2 billion which is $148 million reduction from year-end 2025 and a net leverage ratio of 4.8x. As a reminder, the net leverage ratio under our credit agreement is lower than our reported net leverage ratio because of calculation differences. We expect to pay down between $400 million to $500 million of debt this year and end 2026 with net leverage of approximately 4.7x.

While we see sufficient room with the net leverage ratio threshold in our existing credit agreement, we weighed the current dynamic macro environment and decided to take a prudent approach with our covenant structure. We expect the modified covenants to provide adequate cushion through the remaining life of the agreement and view this as a risk mitigation measure. Importantly, this amendment to our credit agreement has no bearing on our priorities for cash flow. As we have shared, we intend to use our cash flow to pay down debt and improve our leverage ratio.

For full year 2026, interest expense is estimated at $275 million. Of note, approximately 70% of our debt is fixed and only 30% is floating. At the end of the third quarter, we had $1.9 billion in total liquidity. We intend to use cash flow to pay down the revolver in 2026. As we move into 2027, cash flow generated in the business, along with our revolver, will address our bank term loan and unsecured notes maturing next year.

Our capital allocation framework is disciplined, invest prudently in safety, regulatory requirements and high-return projects, reduce debt and expand the capacity to return capital to shareholders as leverage declines. We remain committed to our existing dividend while working simultaneously to bring down leverage and strengthen the balance sheet as capital return is important to many of our shareholders.

Turning to our outlook. We continue to expect full year net sales of approximately $8.6 billion. Fourth quarter volumes are expected to be in the range of down 1% to up 1%, while full year 2026 volumes are expected to be flat to up 1% from 2025. Pricing trends are improving, and we expect a sequential increase for the fourth quarter. We expect full year 2026 adjusted EBITDA of approximately $1.05 billion and adjusted EPS of approximately $0.65.

Our full year adjusted EBITDA guidance incorporates the increasingly challenged inflationary environment this year and includes an incremental $20 million of input cost headwinds versus our expectations last quarter. Accordingly, we now estimate incremental input cost inflation for the full year totaling approximately $170 million versus our previous estimate of $150 million. The rigor and discipline we are applying to project prioritization and capital spending, we'll keep capital expenditures below $450 million in 2026.

During the third quarter, we were pleased to conclude the testing of controls implemented to successfully remediate the previously identified material weakness. Our fourth quarter financial results will reflect continued progress on our strategic initiatives and will benefit from pricing actions taken earlier in the year, contractual pass-throughs, structural cost reductions and improving utilization at Waco. Offsetting these positives is the continued impact of well-chronicled input cost inflation.

With traction in URB above expectations, we now expect to end the year with inventory of approximately 19% of sales. Expected total downtime costs related to inventory reduction efforts this year moved to approximately $75 million, a decrease from our previous assumption of $90 million. Our effective tax rate is now expected to fall within a 25% to 26% range.

As Robbert related earlier, we are positioned to drive an inflection in financial results in 2027 and a pivot to year-over-year EBITDA growth, expansion of margins and strong EBITDA to cash flow conversion. Our company-specific levers enable positive price carryover, continued operational improvements and organic growth with customers.

In summary, we are continuing to build positive momentum. Results in the third quarter demonstrated the turnaround we are driving in the business. We remain focused on delivering on our commitments and creating long-term value for our shareholders.

I will now turn the call back to Robbert.

Robbert Rietbroek

Thank you, Chuck. I want to thank our employees around the world for their dedication, hard work and continued focus on customer service. Since the beginning of the year, we continue to strengthen our leadership team, sharpen our focus on commercial and operational excellence and advanced cost reductions and productivity initiatives. I am proud of what our team has accomplished in a short period of time.

The progress made is tangible. We've delivered 2 consecutive quarters of sequential margin expansion, increased our in-year cost savings, achieved strengthening cash flow performance and taken pragmatic actions to improve utilization and returns across our asset base. Importantly, we are creating alignment between our strategy, investments and the market opportunities for Graphic Packaging has the strongest right to win. We remain focused on restoring profitable growth, generating sustained adjusted cash flow and creating long-term value for our shareholders. We are acting on the levers within our control and we are building the commercial, operational and financial capabilities required to perform with greater consistency.

Operator, let's open the line for questions.

Operator

[Operator Instructions] Our first question today is coming from Mark Weintraub with Seaport Research Partners.

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Mark Weintraub

Great. So obviously, it's a more difficult cost environment. And you're obviously taking measures to manage through that and you retain guidance for this year. And so I mean it sounded like one of the factors is that with the URB production, you have less inventory reduction. So maybe if you could sort of walk through some of the puts and takes, what has been -- what the negatives are? You sort of quantify that for us as well? And what the positive drivers are? And what implications, if anything, they might have as we think into 2027, for instance, with the inventory reduction, does that mean we're going to have more EBITDA degradation because of more inventory reduction, while it's still better for free cash flow? Or is that not necessarily the case anymore given changes in your business dynamics?

And also just kind of one -- a little color on employee stock if you would, which I know was going to be a pretty big drag -- at the start of the year [indiscernible] as much as $100 million. What's sort of your updated view on what it's going to be for this year, given where things stand today?

Robbert Rietbroek

Yes. Mark, and thank you for the question. I'll address each of the points around cost or inventory, the incentive. But overall, I think you've seen the results, quarter was strong, our business is resilient, and we have been managing decisively through the incremental inflation this quarter. Our top line was strong and resilient. We met expectations. It was slightly up versus a year ago, 1% volume, a little bit of negative pricing impact on the revenue and our EBITDA did well within guidance range. And it was the second sequential increase in adjusted EBITDA margin. And that is, in fact, a very -- a result of the very decisive actions we've taken to manage productivity and cost this year.

You've probably also seen our adjusted cash flow results. They were very, very strong year-to-date, $314 million. In Q3 alone, $359 million and an improvement of $332 million versus a year ago with capital spend at $287 million. But it is true that the inflation is at the high end of the expected range. Crude oil moved up quite a bit and was above $100 a barrel several days in September. OCC went up in September as well. So on your first point, we do continue to focus on driving cost reductions and driving efficiency throughout the business to improve the margin and to generate cash flow and pay down debt.

With regards to URB, we are surprised by the excitement in the market. It is significantly better than we expected, and we now anticipate to sell about 20,000 tons in 2026 and over 100,000 tons in 2027. And it is, in fact, true that we had to build up some inventory for URB, which is reflected in the updated inventory number. And we want to continue to participate in both CRB and URB and we have flexibility between these 2 grades to capture growth opportunities and deliver the expected returns on Waco. You've probably seen that we are now entering into higher strength -- sorry, in the tubes and cores market, we can only produce currently low strength tubes and cores, but we have a lot of growth opportunities available to us with minimal additional capital spend.

With regards to incentives, I'll let Chuck explain the impact of next year and also maybe go on about the inventory a little bit.

Charles Lischer

Right. Mark, this is Chuck. So let me just start by hitting on a couple of the points on 2027, and I think that will wrap up or include a couple of the items that you're asking about as well. So the latest on 2027, we, of course, in 2026, started seeing a significant amount of inflation after the Middle East conflict and to offset that, we've been aggressively taking price and both taking cost out as well. So not giving a formal guide for 2027 or an EBITDA bridge today. But at a high level, I'll talk you through some of the -- both carryover items as a result of the inflation and the pricing and then also a few of the nonrecurring items, you asked about the inventory reductions a few of the nonrecurring items and how those will all impact 2027.

So the -- first of all, on the inflation, what we see in 2026 is, of course, the $170 million of inflation that we've called out. That has a carryover impact into next year of around $90 million, and that will offset the carryover impact of the pricing that we see as well. So think of those pricing and the cost, the carryover impact of that going into next year as basically offsetting each other.

From a cost action standpoint, we have aggressively been taking cost out of the business to also offset the inflation that we see in 2026. That's $90 million in 2026 and flows into 2027 to be about a $15 million carryover. So the carryover impact of those items is around $15 million. And then I previously talked about about $135 million of nonrecurring items -- the buckets are the same, the inventory reduction downtime, the weather from Q1 and the onetime items, about $40 million and the unbleached system inefficiencies -- the one item you asked about this was the inventory reduction downtime. That's now at $75 million. So that's slightly down from earlier in the year and really is just as we are seeking to end the year with more inventory due to the URB built.

On variable incentives, yes, those were accruing less on those than we had originally laid out earlier in the year as a result of the current performance so that is a factor to consider as well.

Mark Weintraub

Very helpful. And congrats on the progress.

Operator

Our next question is coming from Ghansham Panjabi with Baird.

Unknown Analyst

This is actually Josh [ Westley ] on for Ghansham. Maybe Robbert, if we can just start at a high level and just kind of focusing on the volume trend line, at least on a directional basis going forward. Obviously, a lot of CPGs kind of entered the year, maybe more focused on volumes that seems to have shifted lately just with input costs rising and whatnot. So just curious about your high-level view of how volumes should trend for Graphic and then the broader industry into 4Q and then possibly into 2027?

Robbert Rietbroek

Yes. Thank you, Josh. Great question. When we look at demand in the markets, we think it's stable with certain buckets of strength we're seeing select growth, particularly in center of store staples. We do see some softness in foodservice, primarily QSR cups and households based on affordability concerns. And overall, we see what we refer to as a bifurcated consumer demand. So there is a very strong focus on value orientation and simultaneously premium product consumption. If you look at the subcategories, food is the best performer for us that drove higher sales performance. We see demand for value-oriented staples like bars, confectionery, snacks. We see demand for frozen and shelf-stable prepared meals.

If you look at the international markets, we see growth in dry prepared meals, also luxury fragrance and skin care. With beverage, it's relatively stable. We see growth in energy drinks and emerging brands. And household and foodservice remain challenged. We see consumers budgeting in that space. If you look at the quarter, we're pleased with our volume up about 1% in Q3, despite that uneven consumer market and continued affordability headwinds. Of course, I said food is our largest end market, and food continues to show year-over-year growth for the third consecutive quarter. And we do see a little bit of a decline in traffic in QSR.

And what we're hearing from our customers right now is a continued strong focus on driving volume and share recovery. But there is a secondary theme emerging, which is that they need to start taking pricing to offset higher commodity inflation in 2026 in Q4 and '27. So we continue to see them invest in promotions to drive traffic and share but there is a more balanced approach now to pricing and volume, given the excessive inflation that we're experiencing. So there's an intent to return the categories to volume growth from what I call a heavy investment in value price points to now a focus on innovation-driven mix for the next 12 months, which leverages sophisticated price pack architectures and at the same time, must buy promotional frequency with a wider variety of pack sizes.

Unknown Analyst

Great. Great. That's super helpful. And then maybe for my second question. I think last you talked about some competitive pricing activity, just specific packaging pricing. Just curious how that kind of trended through the quarter. And out of the $15 million in pricing headwinds, how much was that versus maybe some flow-through of third-party index pricing?

Charles Lischer

Yes. This is Chuck. I'll take that. So yes, I think what you're referring to is earlier in the year, some of the negative pricing that we were -- that was flowing through was the competitive packaging pricing, that's still flowing through somewhat, but a good piece of the negative in the quarter is as well the $100 a ton on bleach that was recognized last year. So the key to that, though, is we are seeing significant improvement in -- throughout the year in our pricing, and you will see additional improvement going into Q4 with our -- many of our contracts have openers starting on October 1, so that will really be the first significant opportunity for the contract openers to kick in.

And before that, what you've seen and the improvements that you've seen and also will continue into Q4 is really the pass-through of costs that show up in our contracts that we have currently and are pushing more through our commercial excellence efforts, and then also we've talked about the $1 billion of pricing -- I mean, of revenue that -- where we can take price -- the pricing is done on a contractual basis.

So really, we have multiple levers to take price. It's not just all tied to a third-party index, and that's critical, and that's how we've been able to generate $60 million of in-year pricing with $150 million as a run rate.

Operator

Our next question is coming from Hillary Cacanando with Deutsche Bank.

Hillary Cacanando

Just on the special item add-backs, the magnitude of add-backs seemed kind of pretty meaningful this year versus the last couple of years. Can you just talk about what is driving the increase? And how much of the 2026 add-backs you would consider genuinely nonrecurring? And as we think about leverage, what would leverage look like excluding those adjustments?

Charles Lischer

Yes. Hillary, this is Chuck. I'll take that. The 2026 add-backs, we would, of course, consider all of those nonrecurring. We talked about some pretty significant ones earlier in the year, the biggest of which was the write-off that we had as we stop the automated roll warehouse project that was a $40 million impact and was going to cost us a couple of hundred million dollars of additional CapEx over the next few years. So we put the brakes on that project.

You also see all of the impact of the severance that we've paid this year in order to have the head count reductions, as Robbert has talked about, over 500 roles that we reduce. So severance is a big piece of that. Really, what you see showing up in the third quarter is, we have pushed even harder for cost reductions. There are a couple of floors and some of our administrative office buildings that we've consolidated and that resulted in a write-off of future lease assets and continued severance payments in Q3 as well.

Hillary Cacanando

Got it. And then like what would the leverage, how would that have looked without the adjustments?

Charles Lischer

Well, I mean, of course, it would have been higher, but our credit agreement allows us to add-back items such as that, that are nonrecurring just as we do in the printed number that we show to you.

Hillary Cacanando

Okay. Got it. And then you mentioned tubes and cores as a new opportunity for URB from Waco, but that would require some minimal capital investment. Can you quantify the incremental CapEx required to serve the market? And then is that investment already contemplated within your current CapEx guidance?

Robbert Rietbroek

So we will evaluate downstream applications, which will include expanding into the higher strength tubes and cores. The margins there are even higher and stronger than they are in the lower strength tubes and cores that we're playing in now. But remember that 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 -- to utilize the available capacity and absorb fixed costs, and it gives us stronger margins for the overall recycled platform, balancing system to maximize the profits. We don't disclose the CapEx that would be required to get into the higher strength of course. But we've made some minimal investments already to be able to play in a -- what we believe is a very attractive space of the URB market.

Operator

Our next question is coming from Nicolas Sherwood with Bank of America.

Unknown Analyst

This is Nick Sherwood speaking for George Staphos. How much of the volume guidance is impacted by the URB rollout in the fourth quarter?

Charles Lischer

Nick, this is Chuck. I'll take that. It's not significant. I mean the 20,000 tons are predominantly in the fourth quarter, but that's not an overall significant needle mover for us and so...

Robbert Rietbroek

Yes. I think, Nick, what I would say is we are very pleased to see the growth return to Q3. Remember last year, our volume declined in Q3. And we are driving results with our commercial efforts with innovation and we're supporting our customers that look to grow volumes. So if you look at this year's volume growth, the first quarter was up 1%. Second was flat. The third was up 1%. And that's why we are guiding for '26 at flat to plus 1%. And we're very pleased with that given the macro environment we're operating in.

Unknown Analyst

Okay. And I guess as a follow-up, you talked about some of those new contract structures that you're rolling out to get more pricing and push due the cost. Can you talk about how many sort of contracts have been converted over and sort of what that ramp-up will look like as you move from that semiannual to more of a quarterly pricing change?

Charles Lischer

Yes. It's a great question, Nicholas. We talked about the fact that we are at the enterprise level, focused on commercial excellence, operational excellence and procurement. So commercial excellence is a very broad enterprise-wide initiative that involves revenue growth management, commercial terms customer service, it's a big scope that we're really leading forward on. And we're continuing to evolve our contractual clauses. And we do that to ensure more predictable and also more reasonable contract framework that really adjusts for underlying cost inflation, not only paperboard.

So we are currently -- in the middle, we always -- we renew about 1/3 of our contracts every year. They generally last for 3 years. And we're working towards agreements that we feel are mutually beneficial to both parties. So not just us but to accretive for ourselves and for the customer and joint business plans. And we're doing that by implementing commercial discipline we're having, I would say, more realistic discussions with our partners, and we're negotiating agreements that are mutually beneficial, but also responsive to the cost environment and aligned with the long-term nature of these business relationships. We do not disclose what percent of our contracts are specific in quarterly or biannual clauses. But we are -- we're focused on moving the majority of those through quarterly cadence.

Operator

Our next question is coming from Anthony Pettinari with Citi.

Anthony Pettinari

I just had a follow-up question on free cash flow. And if -- I guess, if we look at the EBITDA, CapEx and free cash flow guide and look at 4Q, I mean it seems like 4Q free cash flow would be a lot higher than sort of EBITDA minus CapEx. So I was just wondering if you could speak to that. And I guess, if it's working capital, how are you selling out of inventory? Or what does that represent? I'm just trying to understand a little bit better that at kind of the end of the year?

Charles Lischer

Yes. Anthony, this is Chuck. I'll take that. So Q4 is historically a quarter where we harvest working capital and that is -- while we saw very strong cash flow results in Q3, had $359 million of cash flow in Q3 to give us confidence that we'll be able to deliver the $600 million to $700 million for the full year. We do still expect a significant contribution from working capital in Q4. And so that's really what's driving the variability in the range as many of those initiatives are new initiatives. And so we're working those to ensure that we deliver the free cash flow guide for the full year.

Anthony Pettinari

Okay. That's helpful. And then just switching gears on equipment sales. I don't -- you haven't called that out as much in the past. I'm just wondering what we should take away there? And is there any kind of potential flow-through for consumables or maybe improvement in BEV or just what kind of messages you'd highlight there?

Robbert Rietbroek

I think the headline there was that we are selling more of our equipment to co-packers in the beverage space. A lot of new brands emerging in that space, and we're very pleased with the performance of our machining division. And we haven't really talked much about it in the past, but it's a critical part of our long-term partnerships with our beverage customers. Beverage is a business where our large customers continue to focus on return to volume. And it's not only [ CSDs ], but we are very big in alcohol as well, right, in beer companies. We serve many of the global beer companies and leading beer businesses in the world with baskets.

And we see strength in energy and functional wellness beverages. Those are made by those co-packers as well as ready-to-drink beverages. But we also saw a little bit of weakness in the carbonated soft drink business. And those beverage machine placements that you're referring to were with a growing co-packer network, and they do serve a mix of beer and soft drink. So we're partnering with them and with our bigger global customers to support growth and automation needs.

Operator

Our next question is coming from Phil Ng with Jefferies.

Philip Ng

Chuck, I appreciate the helpful color for 2027 early rate. The commentary you talked about carry-over pricing for next year, does that account for any of the cost-plus type openers kicking in? And then you talked about $1 billion of sales that are not tethered to contracts, you have the ability to take price, is that a lever that's in that number or that provide some optionality when we think about '27 in terms of pricing?

Charles Lischer

Yes Phil, the guide number that I talked about, the $150 million, does include the cost carryovers for the items that have impacted 2026 and how we see that rolling through 2026. We haven't given a full pricing guide on 2027 yet. So that's just really the carryover of how the inflation that we're seeing in 2026 will show up in the cost that have those pass-through mechanisms. On the $1 billion, that is something that we've been aggressively pushing on as a way to offset the inflation that we're seeing this year. So we have been taking those prices already throughout the year. That's what you started seeing show up somewhat in Q3 and will show up even more in Q4, and then we'll continue to push that as we see inflation continuing to stay elevated. So a combination of all the $150 million of pricing and the cost actions are helping us to cover the inflation.

Philip Ng

So I interpret your comment correctly, Chuck. So the cost plus piece, it sounds like it's in the $150 million. Anything on the $1 billion you guys are trying to be proactive on that, that could be incremental? Is that [indiscernible]?

Charles Lischer

No. I'm sorry, no. That is in the $150 million as well. Both components that we've driven in 2026 are in the $150 million. And if there's additional opportunity in 2027, we'll come back on that on the '27 guide.

Philip Ng

Okay. Helpful. And then I believe Graphic as well as some of your peers have announced price increases -- new price increases for SBS. Curious how your order book and backlogs are shaping up? A little surprised that RISI hasn't reflected the CUK increase you guys have out there. Any color in terms of what you're seeing in your order book on CUK backlog? Any color on that front would be helpful.

Robbert Rietbroek

Yes. I'll let Chuck comment on it in a second. But at a high level, the industry conditions are evolving versus where they were 9 to 12 months ago. We do see a tighter environment across the grades. So last year, imports into the U.S. were down by about 100,000. This year, imports are flat versus that lower year last year. And obviously, tariffs are impacting those trade flows. We continue to see the backlog be higher versus a year ago. [ Unbleached ] there's continued tightness. We see a little bit of overselling of capacity. There's been some recognition an increase and some of it hasn't been recognized.

On the coated unbleached kraft, which is CUK, which is used for beverages, primarily because of the strength profile of that paper we are building inventory for next beverage season because we want to make sure that we have sufficient volume for the beverage season, we can't run out. Within recycled, we're flexing between CRB and URB. We're growing in both grades and we're leveraging the installed capacity. Our Waco facility is, which we -- came online last year, is a state-of-the-art facility. It has the best quality that we make bright -- brightness, printability. And I think that what you're saying is correct.

And let me just pass it on to Chuck for a further color on the further grades and the pricing.

Charles Lischer

Yes. I think Robbert covered it all very well. I'll just add a little bit of commentary on the actual pricing actions that we -- that you alluded to and that we've taken. In October, we did go out with our third increase in bleached. And so that grade, as Robbert mentioned, continues to be tight and our order books continue to be strong with that increase that we are out with. And then on unbleached, as Rob mentioned, that continues to be tight, and we have 2 increases in the marketplace there. And continue to be tight. And so certainly believe that the increases are justified.

Operator

Our next question is coming from Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan

I guess a couple of questions here. So first off, just to reiterate on the free cash flow, I understand there's going to be a pretty large working capital release. But by my math, it comes out to at least about $200 million. Is that right? And if so, for Q4, it does -- would you have to kind of rebuild that inventory next year? And would that be a cash drag? So I'll start with that.

Charles Lischer

Yes, Arun, this is Chuck. I'll take that. So the cash flow movement is really just driven by the overall seasonality of the business and is what we've seen in the past. Last year, for example, our Q4, we generated over $500 million of free cash flow. And so this seasonality of our cash flow, driven by higher sales during the summer and working down the inventory towards end of the year is something that has been a part of our business for many years. And so that's that's a consistent situation that -- and we do expect to see that continue in Q4.

I will tell you that the amount of working capital that we need to harvest in Q4 is lighter in Q4 of this year than it was last year given the strong performance in our free cash flow and working capital in Q3.

Arun Viswanathan

And then just on the cost side, so obviously, there's been some energy cost inflation recently, and it looks like it's potential to persist for quite a while. So I guess, is that helping with the price increases, meaning giving support and are customers kind of willing to understand that environment? And if so, are the CPGs in turn, going to be raising prices as well? What are you hearing from those customers as far as pricing and promotion? And could that have further negative impacts on demand?

Robbert Rietbroek

Yes. Look, it's a great question. We are pulling all available contractual and noncontractual pricing levers that we have available, right? So I think Chuck already mentioned that we have about $60 million of price increase in 2026. $150 million run rate. And that includes the last, I think, increase on bleached. The longer-term, we're structuring our customer renewals to really shorten the lags to quarterly openers. Remember that we have $1 billion of noncontractual business, where we are already taking pricing and we are refining our go-forward processes in terms of commercial finance revenue growth management, contract development and implementing inflation recovery mechanisms.

It has to be accretive, both the customer and us have to benefit from the supplier relationship that we have. I can't speak to their pricing strategy but we do know that from publicly available information that they have commented on balancing volume and pricing. So we're seeing the same publicly available data that you do.

Operator

Our final question today will be coming from Matt Roberts with Raymond James.

Matthew Roberts

On a '26 adjusted free cash flow, I think there is 200-some-odd receivables related cash to date and investing. Could you distinguish what's ordinary or any increases in the program utilization or acceleration of collections there? Are there any changes assumed in 4Q? Or how should we think about that going into '27?

Charles Lischer

Yes. Matt, this is Chuck. I'll take that. The -- we, of course, have a broad set of initiatives to drive free cash flow in the business, overall optimize the business. And so we're looking at every lever that we can, whether it's inventory, extension of payment terms, ways to accelerate cash collections. And as we look across that, one of the items that we saw was an opportunity to expand our AR sales programs, and we decided to go forward with that since the cost of those programs is favorable compared to our bank facilities and also provides us an additional source of liquidity. So that is all included within the working capital improvement that we expect for the full year and that's in the range of $275 to $325 million.

Matthew Roberts

Okay. Thanks, Chuck. Appreciate that. And maybe on the debt comments, when was that executed? Why now given the improving leverage outlook? Any changes there regarding the borrowing spread or fees for capital allocation? And also CapEx, is that coming down? Any changes to ongoing expectations or catch-up needed in that figure in 2027?

Charles Lischer

Yes. So this is Chuck. I'll take those. So from a covenant standpoint, as I mentioned on the prepared remarks, we proactively saw the amendment that is going into effect today, really just as a risk mitigation measure and it adds cushion to our existing covenant ratios where it existed already. And just to reiterate, the amendment doesn't change anything about our priorities, which are to pay down debt and improve our leverage ratio with our cash flows.

In terms of the cost of it, it was about 10 basis points to get that executed. And then from a CapEx perspective, you asked about that for 2027, we'll come back to you and guide on that when we guide in February.

Operator

Ladies and gentlemen, this does conclude the Graphic Packaging Holding Company's Third Quarter 2026 Conference Call. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.