Graphic Packaging (NYSE:GPK) reported modest year-over-year sales growth and improved sequential profitability in the third quarter of 2026, as cost reductions, productivity initiatives and commercial actions helped offset elevated input-cost inflation and higher maintenance expense.
Net sales totaled $2.2 billion, slightly above the prior-year period. Volumes rose approximately 1%, while pricing reduced sales by 1%, or $15 million. Innovation sales added $42 million, while foreign exchange and other factors had a $2 million unfavorable effect.
Adjusted EBITDA was $289 million, down from $383 million a year earlier, while adjusted EBITDA margin reached 13.2%. The margin expanded 190 basis points sequentially, marking the company’s second consecutive quarter of sequential improvement. Adjusted earnings per share were $0.23.
Cost actions offset inflation pressures
President and Chief Executive Officer Robbert Rietbroek said the company’s results reflected progress on priorities established earlier in the year, including structural cost reductions, productivity actions and commercial initiatives.
“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,” Rietbroek said.
Commodity input and operating-cost inflation totaled $83 million during the quarter, including logistics, chemicals, resins, secondary fiber and labor. Senior Vice President and Interim Chief Financial Officer Chuck Lischer said the quarterly cost increase was about $5 million above the company’s prior expectations and included $55 million of incremental inflation.
Graphic Packaging generated roughly $30 million of structural cost reductions in the quarter and increased its estimate for full-year savings to about $90 million, up $5 million from its previous forecast. The company has reduced more than 500 roles during the year, according to management’s comments on the call, and has incurred related severance expenses.
The company now expects about $170 million of incremental input-cost inflation for the full year, compared with its earlier estimate of $150 million. Management said its pricing and cost actions are intended to address those pressures. The company has generated $60 million of in-year pricing actions, representing a $150 million run rate, Lischer said.
Graphic Packaging is also revising customer contracts to include more inflation-recovery mechanisms. Rietbroek said the company is adding producer-price-index-based pricing provisions for non-paperboard inflation and moving from semiannual to quarterly pricing openers as contracts renew. The company renews roughly one-third of its contracts annually, he said.
Cash flow, debt reduction and covenant amendment
Adjusted cash flow for the first nine months of 2026 was $314 million, an increase of $646 million from the first nine months of 2025. The company maintained its full-year adjusted cash flow outlook of $600 million to $700 million.
Graphic Packaging ended the quarter with net debt of $5.2 billion, down $148 million from year-end 2025, and a reported net leverage ratio of 4.8 times. The company expects to pay down $400 million to $500 million of debt during 2026 and finish the year with net leverage of approximately 4.7 times.
Lischer said the company amended its credit agreement to provide additional covenant cushion through the remaining life of the agreement, describing the move as a risk-mitigation measure in a dynamic macroeconomic environment. The amendment took effect on the day of the call and cost about 10 basis points, he said. Management said the change does not alter its priorities of reducing debt, maintaining its dividend and improving financial flexibility.
Total liquidity stood at $1.9 billion at quarter-end. The company intends to use cash flow to reduce its revolver balance in 2026, while cash flow and revolver capacity are expected to address a bank term loan and unsecured notes maturing in 2027.
Waco recycled-paperboard ramp exceeds expectations
Management said the ramp-up of uncoated recycled paperboard, or URB, production at its Waco facility is ahead of expectations. The facility can serve folding-carton, lamination and low-strength tubes-and-cores applications, and the company sees additional demand from industrial customers.
Graphic Packaging expects to sell more than 20,000 tons of URB in 2026 and more than 100,000 tons in 2027. Rietbroek said the company has made minimal investments to enter portions of the tubes-and-cores market and will evaluate further downstream applications, including higher-strength products.
The stronger-than-expected URB opportunity led the company to raise its expected year-end inventory level to approximately 19% of sales. Expected downtime costs associated with inventory-reduction efforts were lowered to about $75 million for 2026, from a prior estimate of $90 million.
The company also said it is deploying artificial intelligence in selected areas, including inventory management and fulfillment across paperboard grades, and is testing applications in commercial and procurement contract processes.
End-market trends and outlook
Food remained Graphic Packaging’s strongest and largest market, supported by North American demand in bars, confectionery, sweet and savory snacks, and frozen and shelf-stable prepared meals. International performance was more mixed, with dry prepared meals performing well while cereal and fresh protein faced pressure from inflation and widening price gaps with private-label alternatives.
Beverage performance was stable, with stronger relative demand in energy drinks and emerging categories. The company said it has sold 12 machines to beverage co-packers year to date and now has more than 95 machines installed across the co-packer network. Health and beauty results were mixed, while food service and household businesses continued to face affordability-related pressures.
For the full year, Graphic Packaging reaffirmed expectations for approximately $8.6 billion in net sales, adjusted EBITDA of about $1.05 billion and adjusted EPS of approximately $0.65. Full-year volume is expected to range from flat to up 1% compared with 2025, while fourth-quarter volume is projected to range from down 1% to up 1%.
Capital expenditures are expected to remain below $450 million in 2026. Management said fourth-quarter results should benefit from pricing actions, contractual pass-throughs, structural cost reductions and improving Waco utilization, though inflation remains a significant offset. Rietbroek said the company expects its initiatives to support a return to year-over-year EBITDA growth, margin expansion and stronger cash conversion in 2027.
About Graphic Packaging (NYSE:GPK)
Graphic Packaging Holding Company, through its subsidiary Graphic Packaging International, develops and manufactures fiber-based packaging products for consumer goods companies. Its offerings include paperboard folding cartons, beverage carriers, cups, foodservice packaging, and other packaging solutions designed for products sold in grocery, foodservice, beverage, and household markets.
The company serves brand owners and manufacturers across a range of end markets, including food, beverage, consumer packaged goods, and foodservice.
