Q3 2026 International Paper Co Earnings Call

October 28, 2026

Operator: Good morning, and thank you for standing by. Welcome to International Paper's Q3 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, you will have an opportunity to ask questions. To ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. As a reminder, to ask a question, please press star one. To withdraw your question, press star one again. It is now my pleasure to turn the call over to Mandi Gilliland, Senior Director of Investor Relations. Ma'am, the floor is yours.

Speaker #1: After the speaker's remarks, you will have an opportunity to ask questions. To ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again.

Speaker #1: As a reminder, to ask a question, please press star 1. To withdraw your question, press star 1 again. It is now my pleasure to turn the call over to Mandi Gilliland, Senior Director of Investor Relations, ma'am, the floor is yours.

Mandi Gilliland: Thank you. Good morning and good afternoon, everyone, and welcome to International Paper's Q3 2026 earnings call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer, and Lance Loeffler, Senior Vice President and Chief Financial Officer. Before we jump in, please note that this quarter, in light of the planned separation of the EMEA business and the subsequent UK regulatory requirements, we are no longer including our existing Packaging Solutions EMEA US GAAP financial guidance in our guidance framework and do not anticipate providing such guidance in the future. The EMEA management team will provide more information at the DS Smith plc Capital Markets Day on 3 November. This will include details about the business model, growth strategy, and financial outlook following the separation. I would also like to remind everyone there is important information at the beginning of our presentation, including certain legal disclaimers.

Speaker #2: Thank you. Good morning and good afternoon, everyone, and welcome to International Papers, third quarter 2026, earnings call. Our speakers this morning are Andy Silvernail, Chairman and Chief Executive Officer; and Lance Loeffler, Senior Vice President and Chief Financial Officer.

Speaker #2: Before we jump in, please note that this quarter in light of the planned separation of the EMEA business and the subsequent UK regulatory requirements, we are no longer including our existing packaging solutions EMEA US GAAP Financial Guidance in our guidance framework, and do not anticipate providing such guidance in the future.

Speaker #2: The EMEA management team will provide more information at the DS Smith PLC Capital Markets Day on November 3. This will include details about the business model, growth strategy, and financial outlook following the separation.

Speaker #2: I'd also like to remind everyone there is important information at the beginning of our presentation, including certain legal disclaimers. For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties.

Mandi Gilliland: For example, during this call, we will make forward-looking statements that are subject to risks and uncertainties. Information about these risks, uncertainties, and other factors that could cause actual results to differ materially from our forward-looking statements can be found in our press releases and reports filed with the US Securities and Exchange Commission. We will also present certain non-US GAAP financial information. Reconciliation to US GAAP financial measures are available on our website, along with our Q3 earnings press release and today's presentation slides. Now let me turn it over to Andy Silvernail.

Speaker #2: Information about these risks, uncertainties, and other factors that could cause actual results to differ materially from our forward-looking statements can be found in our press releases and reports filed with the U.S.

Speaker #2: Securities and Exchange Commission. We will also present certain non-U.S. GAAP financial information. Reconciliation to U.S. GAAP financial measures are available on our website along with our third quarter earnings press release and today's presentation slides.

Speaker #2: Now, let me turn it over to Andy Silvernail.

Andy Silvernail: Thank you, Mandi. Good morning and good afternoon, everyone. Let's begin on slide 3. in Q3, we improved execution and delivered an important inflection in earnings in an environment of weak consumer confidence and rising inflation. Our focus is to control what we can control and execute the 3 pillars of our strategy: an advantaged cost position, superior customer experience, and a high relative supply position in the markets we serve. In North America, we made meaningful progress improving productivity, particularly across our mill system. Better execution helped us deliver results above expectations and offset persistent inflation as we continue to serve customers and strengthen our position in the market. Given performance to date and expectations for Q4, we expect to outpace industry demand by approximately 2 percentage points for the full year. In terms of improved execution, Pine Hill is a tangible example of our progress.

Speaker #3: Thank you, Mandi. Good morning and good afternoon, everyone. Let's begin on Slide 3. In the third quarter, we improved execution and delivered an important inflection in earnings, in an environment of weak consumer confidence and rising inflation.

Speaker #3: Our focus is to control what we can control and execute the three pillars of our strategy: an advantaged cost position, superior customer experience, and a high relative supply position in the markets we serve.

Speaker #3: In North America, we made meaningful progress improving productivity, particularly across our mill system. Better execution helped us deliver results above expectations and offset persistent inflation as we continue to serve customers and strengthen our position in the market.

Speaker #3: Given performance to date and expectations for Q4, we expect to outpace industry demand by approximately 2 percentage points for the full year. In terms of improved execution, Pine Hill is a tangible example of our progress.

Andy Silvernail: We completed the roof repairs and restarted the mill ahead of schedule. The team's disciplined work and the commitment to safety allowed us to restore operations safely, limit disruption across the mill system, and minimize the impact on customer box shipments. I want to thank everybody involved. Great work. Packaging Solutions EMEA also improved sequentially, although results were below our expectations. Natural gas costs rose sharply and consumers remain cautious. Realization of previously published paper price increases are on track and cost-out actions help mitigate rising input costs. We are also advancing preparations to separate the EMEA business, which I'll discuss later in the call. Across both businesses, the progress is encouraging, but there's more work to do. We expect the current market conditions to persist in Q4 and into 2027.

Speaker #3: We completed the roof repairs and restarted the mill ahead of schedule. The team's disciplined work and the commitment to safety allowed us to restore operations safely and limit disruption across the mill system, and minimize the impact on customer box shipments, I want to thank everybody involved.

Speaker #3: Great work. Packaging Solutions EMEA also improved sequentially, although results were below our expectations. Natural gas costs rose sharply and consumers remained cautious. Realization of previously published paper price increases is on track, and cost-out actions help mitigate rising input costs.

Speaker #3: We are also advancing preparations to separate the EMEA business, which I'll discuss later in the call. Across both businesses, the progress is encouraging. But there's more work to do.

Speaker #3: We expect the current market conditions to persist in the fourth quarter and into 2027. Our priorities remain clear: execute with discipline, manage what we can control, and strengthen the three pillars of our strategy.

Andy Silvernail: Our priorities remain clear: execute with discipline, manage what we can control, and strengthen the 3 pillars of our strategy. I'm on slide 4. Let me spend a minute on demand in North America. Our box shipments declined approximately 2% year-over-year in Q3, 1 point better than our estimate of industry demand. In the quarter, we experienced headwinds from the disruption in the West Coast fresh fruit and vegetable business and softness in protein that have come from smaller livestock herds, inflation, and a strained consumer. In Q4, we expect to continue to grow above market along with modest recovery in West Coast agriculture, and we expect to see the traditional seasonal increase. We expect to outperform the industry by more than 1% in Q4 and by approximately 2% for the full year.

Speaker #3: I'm on slide 4. Let me spend a minute on demand in North America. Our box shipments, declined approximately 2 percent year-over-year in the third quarter, 1 point better than our estimate of industry demand.

Speaker #3: In the quarter, we experienced headwinds from the disruption in the West Coast fresh fruit and vegetable business and softness in protein that have come from smaller livestock herds, inflation, and a strained consumer.

Speaker #3: In the fourth quarter, we expect to continue to grow above market, along with modest recovery in West Coast agriculture. And we expect to see the traditional seasonal increase.

Speaker #3: We expect to outperform the industry by more than 1 percent in the fourth quarter and by approximately 2 percent for the full year. With that, I'll turn it over to Lance to discuss third quarter results and outlook in more detail.

Andy Silvernail: With that, I'll turn it over to Lance to discuss Q3 results and outlook in more detail.

Lance Loeffler: Thanks, Andy. Turning to slide 5 and our enterprise results for the Q3. Revenue improved sequentially, primarily through realization of previously published price increases. In EMEA, softer demand and a challenging macroeconomic environment continued to weigh on sales. Earnings and margins improved significantly from the Q2. In North America, the main drivers were price realization, lower planned outage activity, and the absence of spending associated with the now-completed Riverdale machine conversion. Higher-than-expected inflation and softer demand partially offset those benefits. In EMEA, we continued to face softer demand and rising input costs. The team responded by accelerating cost-out actions, which helped mitigate the impact of these pressures. Q3 adjusted EBITDA increased to $843 million, including $37 million of corporate expense. Of that expense, $30 million was attributable to higher insurance costs.

Speaker #4: Thanks, Andy. Turning to slide 5 in our enterprise results for the third quarter. Revenue improved sequentially, primarily through realization of previously published price increases.

Speaker #4: In EMEA, softer demand and a challenging macroeconomic environment continued to weigh on sales. Earnings and margins improved significantly from the second quarter. In North America, the main drivers were price realization, lower planned outage activity, and the absence of spending associated with the now-completed Riverdale machine conversion.

Speaker #4: Higher-than-expected inflation and softer demand partially offset those benefits. In EMEA, we continued to face softer demand and rising input costs. The team responded by accelerating cost out actions which helped mitigate the impact of these pressures.

Speaker #4: Third quarter adjusted EBITDA increased to $843 million. Including 37 million dollars of corporate expense. Of that expense, 30 million dollars was attributable to higher insurance costs.

Lance Loeffler: Our adjusted EBITDA margin improved nearly 400 basis points sequentially to 13.6%, and adjusted operating earnings per share was $0.37. Despite the improvement in earnings, free cash flow was -$267 million in the quarter. This reflected cash payments for the Q2's heavy maintenance spending, annual interest payments on legacy DS Smith debt, and an inventory build following our planned outage season. For the full year, we expect to generate free cash flow of approximately $100 million to $200 million. Turning to slide 6, Packaging Solutions North America increased adjusted EBITDA by 56% sequentially. Price realization and stronger operating performance drove the improvement despite softer demand and higher input costs. Price and mix were $141 million favorable, reflecting faster realization of previously published price increases announced through June. Volume was -$46 million unfavorable.

Speaker #4: Our adjusted EBITDA margin improved nearly 400 basis points sequentially to 13.6 percent. And adjusted operating earnings per share was 37 cents. Despite the improvement in earnings, free cash flow was negative $267 million in the quarter.

Speaker #4: This reflected cash payments for the second quarter's heavy maintenance spending, annual interest payments on legacy DS Smith debt, and an inventory build following our planned outage season.

Speaker #4: For the full year, we expect to generate free cash flow of approximately $100 to $200 million. Turning to slide 6, packaging solutions North America increased adjusted EBITDA by 56 percent sequentially.

Speaker #4: Price realization and stronger operating performance drove the improvement, despite softer demand and higher input costs. Price and mix were $141 million favorable, reflecting faster realization of previously published price increases announced through June.

Speaker #4: Volume was 46 million dollars unfavorable. The benefit of one additional shipping day was more than offset by softer demand including food safety-related disruption in West Coast agriculture, weakness in protein, seasonally lower daily demand, and lower exports.

Lance Loeffler: The benefit of one additional shipping day was more than offset by softer demand, including food safety-related disruption in West Coast agriculture, weakness in protein, seasonally lower daily demand, and lower exports. Operations and costs were $85 million favorable. Improved mill efficiency was the key driver. Initial benefits from the Riverdale ramp-up and the absence of spending associated with the completed machine conversion also contributed. We also experienced additional benefits from a full quarter of NORPAC earnings, our 80/20 strategic initiatives, and lower ongoing mill costs. Inflation was higher than we anticipated during the Q3. Higher diesel, OCC, and energy costs drove a -$55 million unfavorable impact on input costs. The temporary Pine Hill shutdown had a -$20 million unfavorable impact in the quarter, including roof repairs and business interruption that were partially offset by insurance recovery. We received most of the expected insurance recovery during the quarter.

Speaker #4: Operations and costs were $85 million favorable. Improved mill efficiency was the key driver. Initial benefits from the Riverdale ramp-up and the absence of spending associated with the completed machine conversion also contributed.

Speaker #4: We also experienced additional benefits from a full quarter of NORPAC earnings our 80/20 strategic initiatives and lower ongoing mill costs. Inflation was higher than we anticipated during the third quarter.

Speaker #4: Higher diesel, OCC, and energy costs drove a 55 million dollar unfavorable impact on input costs. The temporary Pine Hill shutdown had a 20 million dollar unfavorable impact in the quarter.

Speaker #4: Including roof repairs and business interruption, that were partially offset by insurance recovery. We received most of the expected insurance recovery during the quarter. In total, packaging solutions North America delivered $663 million of adjusted EBITDA in the third quarter.

Lance Loeffler: In total, Packaging Solutions North America delivered $663 million of adjusted EBITDA in the Q3. Moving to our Q4 outlook for Packaging Solutions North America on slide 7. Price and mix are expected to be favorable, driven by the continued realization of previously published price increases. The September published price increase is expected to begin flowing through late in the Q4 based on our normal realization patterns. Volume is expected to be favorable, as seasonally higher daily demand is expected to more than offset two fewer shipping days. Operations and costs are expected to be slightly favorable sequentially, supported by the continued Riverdale ramp-up, NORPAC synergies, and the absence of the Q3 Pine Hill expense. As a reminder, we also expect this to be the final quarter of Ixtac insurance proceeds, as those benefits will not repeat in 2027.

Speaker #4: Moving to our fourth quarter outlook for packaging solutions North America on slide 7. Price and mix are expected to be favorable, driven by the continued realization of previously published price increases.

Speaker #4: The September published price increase is expected to begin flowing through late in the fourth quarter, based on our normal realization patterns. Volume is expected to be favorable, as seasonally higher daily demand is expected to more than offset two fewer shipping days.

Speaker #4: Operations and costs are expected to be slightly favorable sequentially. Supported by the continued Riverdale ramp-up, NORPAC synergies, and the absence of the third quarter Pine Hill expense.

Speaker #4: As a reminder, we also expect this to be the final quarter of XTAC insurance proceeds. As those benefits will not repeat in 2027. Seasonally higher labor and employee medical benefit costs are also expected to partially offset these benefits.

Lance Loeffler: Seasonally higher labor and employee medical benefit costs are also expected to partially offset these benefits. Our outlook assumes continued inflationary pressure, with input costs expected to be unfavorable, primarily driven by higher diesel and OCC costs. As noted in the footnotes, our diesel assumptions reflect futures market pricing and US Department of Energy projections published as of 29 September. These items result in an adjusted EBITDA outlook for Packaging Solutions North America of approximately $700 million to $740 million for Q4. Moving to slide 8, I would like to take you through our updated full year 2026 outlook for our Packaging Solutions North America business. The Q3 improvement was meaningful, and our execution confidence and output is improving. But higher inflation and weaker volume expectations have reduced our full year outlook. Our full year adjusted EBITDA outlook is moving to $2.27 billion to $2.31 billion.

Speaker #4: Our outlook assumes continued inflationary pressure, with input costs expected to be unfavorable, primarily driven by higher diesel and OCC costs. As noted in the footnotes, our diesel assumptions reflect futures market pricing and U.S. trends.

Speaker #4: Department of Energy projections published as of September 29. These items result in an adjusted EBITDA outlook for packaging solutions North America of approximately $700 to $740 million, for the fourth quarter.

Speaker #4: Moving to slide 8, I'd like to take you through our updated full year 2026 outlook for our packaging solutions North America business. The third quarter improvement was meaningful, and our execution confidence and output is improving.

Speaker #4: But higher inflation and weaker volume expectations have reduced our full year outlook. Our full year adjusted EBITDA outlook is moving to 2.27 billion dollars to 2.31 billion dollars.

Lance Loeffler: Since our Q2 call, incremental headwinds of approximately $145 million have emerged. The largest drivers are higher diesel fuel and distribution costs, along with increased volume pressure. Those headwinds also include approximately $20 million from the Q3 Pine Hill event, net of insurance recovery, which was not included in our prior outlook. The balance primarily reflects higher employee medical costs and an outage move from Q1 2027 into Q4 of this year. Partially offsetting these headwinds is $35 million of price benefit from faster realization of the June increase and partial realization of the September increase. Together, these items reduce the midpoint of our full year North America packaging outlook by approximately $110 million. Our 80/20 initiatives remain on track.

Speaker #4: Since our second quarter call, incremental headwinds of approximately $145 million have emerged. The largest drivers are higher diesel fuel and distribution costs, along with increased volume pressure.

Speaker #4: Those headwinds also include approximately $20 million from the third quarter Pine Hill event, net of insurance recovery, which was not included in our prior outlook.

Speaker #4: The balance primarily reflects higher employee medical costs and an outage move from the first quarter of 2027 into the fourth quarter of this year.

Speaker #4: Partially offsetting these headwinds is $35 million of price benefit from faster realization of the June increase and partial realization of the September increase. Together, these items reduce the midpoint of our full-year North America packaging outlook by approximately $110 million.

Speaker #4: Our 80/20 initiatives remain on track, we delivered a significant improvement in the third quarter, and expect further progress in the fourth quarter from productivity gains the Riverdale ramp-up and NORPAC synergies.

Lance Loeffler: We delivered a significant improvement in Q3 and expect further progress in Q4 from productivity gains, the Riverdale ramp-up, and NORPAC synergies. Many of these actions supporting that improvement are already complete and contributing to results. That execution gives us confidence in the expected Q4 step-up, even as demand and inflation remain challenging. Turning to Packaging Solutions EMEA on slide 9, Q3 results improved sequentially but were below our expectations, reflecting continued softness in market demand and persistent cost inflation. Price and mix were $27 million favorable sequentially, primarily reflecting the passthrough of previously published paper price increases and higher prices on external paper sales. Higher paper costs pressured box margins, partially offsetting these benefits. Volume was $32 million unfavorable sequentially, as demand across the business remained soft and fell below our expectations.

Speaker #4: Many of these actions supporting that improvement are already complete and contributing to results. That execution gives us confidence in the expected fourth quarter step-up even as demand and inflation remain challenging.

Speaker #4: Turning to packaging solutions EMEA on slide 9, third quarter results improved sequentially but were below our expectations. Reflecting continued softness in market demand and persistent cost inflation.

Speaker #4: Price and mix were 27 million dollars favorable sequentially. Primarily reflecting the pass-through of previously published paper price increases and higher prices on external paper sales.

Speaker #4: Higher paper costs pressured box margins, partially offsetting these benefits. Volume was 32 million dollars unfavorable sequentially, as demand across the business remained soft and fell below our expectations.

Lance Loeffler: Operations and costs were $76 million favorable sequentially, reflecting cost-out actions, tighter management of controllable costs, and lower variable costs associated with reduced volume. Input costs were $39 million unfavorable, primarily due to higher energy costs. All in, Packaging Solutions EMEA delivered $210 million of adjusted EBITDA in Q3. As a reminder, considering the planned separation of the EMEA business and the subsequent UK regulatory requirements, we are no longer including our existing Packaging Solutions EMEA US GAAP financial guidance in our guidance framework and do not anticipate providing such guidance in the future. I will now turn the call over to Andy to provide an update on the separation planning. Andy?

Speaker #4: Operations and costs were $76 million favorable sequentially, reflecting cost-out actions, tighter management of controllable costs, and lower variable costs associated with reduced volume.

Speaker #4: Input costs were $39 million unfavorable, primarily due to higher energy costs. All in, Packaging Solutions EMEA delivered $210 million of adjusted EBITDA in the third quarter.

Speaker #4: As a reminder, considering the planned separation of the EMEA business and the subsequent UK regulatory requirements, we are no longer including our existing packaging solutions EMEA US GAAP financial guidance in our guidance framework, and do not anticipate providing such guidance in the future.

Speaker #4: I'll now turn the call over to Andy to provide an update on the separation planning. Andy?

Andy Silvernail: Thanks, Lance. Turning to slide 10 and to the EMEA separation. We are advancing the EMEA separation and are on track to finalize execution. Earlier this month, we issued a press release confirming that we are evaluating a potential sale while continuing the spin-off work in parallel. The release was issued in accordance with UK requirements. As a matter of practice, we do not comment on ongoing M&A discussions, so I will not elaborate further beyond what we have already disclosed. Work on the potential spin-off is progressing well. Under that scenario, we expect both companies to have investment-grade credit ratings, tailored investment and capital allocation strategies, and compelling financial profiles. We plan for International Paper to retain approximately a 20% stake in the independent company, DS Smith plc. Regardless of the path we ultimately take, we are moving swiftly forward with the separation.

Speaker #5: Thanks, Lance. Turning to slide 10 and to the EMEA separation. We are advancing the EMEA separation in our on track to finalize execution. Earlier this month, we issued a press release confirming that we are evaluating a potential sale while continuing the spin-off work in parallel.

Speaker #5: The release was issued in accordance with UK requirements, as a matter of practice we do not comment on ongoing M&A discussions so I will not elaborate further beyond what we have already disclosed.

Speaker #5: Work on the potential spin-off is progressing well. Under that scenario, we expect both companies to have investment-grade credit ratings, tailored investment and capital allocation strategies, and compelling financial profiles.

Speaker #5: We plan for international paper to retain approximately a 20% stake in the independent company DS Smith. Regardless of the path, we ultimately take, we are moving swiftly forward with the separation.

Andy Silvernail: The progress reflects tremendous focus, discipline, and commitment of the teams working on the separation. I want to thank everyone involved for the excellent work they are doing to prepare both companies for success. As noted earlier, on 3 November, the EMEA management team will host the DS Smith Capital Markets Day, providing a deeper look at the business, its growth strategy, and its financial outlook following separation. This will be an important opportunity to showcase how DS Smith plc is preparing for the next chapter. Let me close on slide 11. Our Q3 improvement is meaningful, and the trajectory will continue this year and next. Across both regions, we have lowered structural cost, eliminated inefficient capacity, and invested to improve our customer experience. We have made substantial progress and there is more to do.

Speaker #5: The progress reflects tremendous focus, discipline, and commitment of the team's working on the separation, I want to thank everyone involved for the excellent work they're doing to prepare both companies for success.

Speaker #5: As noted earlier, on November 3, the EMEA management team will host the DS Smith Capital Markets Day, providing a deeper look at the business, its growth strategy, and its financial outlook following separation.

Speaker #5: This will be an important opportunity to showcase how DS Smith is preparing for the next chapter. Let me close on slide 11. Our third quarter improvement is meaningful and the trajectory will continue this year and next.

Speaker #5: Across both regions, we have lowered structural costs, eliminated inefficient capacity, and invested to improve our customer experience. We have made substantial progress and there is more to do.

Andy Silvernail: In North America, we expect further improvement in the Q4 and throughout 2027 as cost reductions, productivity gains, and price realization help us offset inflation. We will continue to simplify the business, invest in customers, and build strength in our most promising markets. The upcoming separation creates the opportunity for two focused regional packaging leaders. EMEA will continue to focus on its self-help story with a step function change in cost position and investing to leverage in its market position and customer relationships. The new International Paper will drive significant improvements in profitability and returns in Q4 and in 2027 by building on the progress we have made in cost transformation and commercial depth and breadth. Following the separation, we will share more details on our financial outlook, capital allocation framework, and strategic priorities.

Speaker #5: In North America, we expect further improvement in the fourth quarter and throughout 2027, as cost reductions, productivity gains, and price realization help us offset inflation.

Speaker #5: We will continue to simplify the business, invest in customers, and build strength in our most promising markets. The upcoming separation creates the opportunity for two focused regional packaging leaders.

Speaker #5: EMEA will continue to focus on its self-help story with a step function change in cost position and investing to leverage in its market position and customer relationships.

Speaker #5: The new International Paper will drive significant improvements in profitability and returns in Q4 and in 2027, by building on the progress we've made in cost transformation, and in commercial depth and breadth.

Speaker #5: Following the separation, we'll share more details on our financial outlook, capital allocation framework, and strategic priorities. Our confidence in future profitable growth is grounded in what we have accomplished and the actions already underway—not in the assumption that the environment will get easier.

Andy Silvernail: Our confidence in future profitable growth is grounded in what we have accomplished and the actions already underway, not an assumption that the environment will get easier. We will be disciplined in execution and focused on creating lasting value for customers, our teammates, and shareholders. With that, let us open the call up for questions.

Speaker #5: We will be disciplined in execution and focused on creating lasting value for customers, our teammates, and shareholders. With that, let's open the call up for questions.

Operator: Thank you. If you would like to ask a question, simply press star one on your telephone keypad. To withdraw your question, again, press star one. As a reminder, to ask a question, press star one. To withdraw your question, again, press star one. We will now pause a moment to compile the Q&A roster. We do ask that you limit yourself to one question and one follow-up question. Your first question comes from Phil Ng with Jefferies. Please go ahead.

Speaker #1: Thank you. If you would like to ask a question, simply press star 1 on your telephone keypad. To withdraw your question, again press star 1.

Speaker #1: As a reminder, to ask a question, press star 1. To withdraw your question, again press star 1. We will now pause a moment to compile the Q&A roster.

Speaker #1: We do ask that you limit yourself to one question and one follow-up question. Your first question comes from Phil Ing with Jefferies. Please go ahead.

Phil Ng: Hey, guys.

Speaker #6: Hey guys. Well, Andy great progress in 3Q in terms of the operations and commercial side of things, so that's pretty encouraging. But in terms of the outlook, what are you seeing in terms of what your customers are saying, whether it's North American Europe, appreciating 3Q got impacted by some of the ag dynamic, but have you seen that kind of bounce back?

Andy Silvernail: Hey, Phil.

Phil Ng: Well, Andy, great progress in Q3 in terms of the operations and commercial side of things. That is pretty encouraging. But in terms of the outlook, what are you seeing in terms of what your customers are saying, whether it is in North America and Europe? Appreciating Q3 got impacted by some of the ag dynamic, but have you seen that kind of bounce back? Just curious what kind of trends you are seeing in October, November, and the opportunity on the commercial side, perhaps, to win some new business in 2027 for North America as well.

Speaker #6: Just curious what kind of trends you're seeing in October, November, and the opportunity on the commercial side perhaps to win some new business in 2027 for North America as well.

Andy Silvernail: Yeah. First of all, good morning, Phil. As I look at North America, what I would say is the market is stable. If I think sequentially, the market is generally stable. We expect it is going to take some time to work through the fruit and vegetable issue on the West Coast. What I mean by that is obviously you are starting to see demand at the consumer level picking back up, but that will take its time to work itself all through the supply chain and then the growing season into next year. It will take a little bit of time there, but we do not see any big issues. Protein was a little soft, and if you look at the beef folks as an example, they are getting squeezed right now. Consumers appear to be trading down. We are seeing that certainly in the marketplace.

Speaker #3: Yeah, first of all, good morning Phil. So as I look at North America, what I would say is the market is stable. If I think sequentially, the market is generally stable.

Speaker #3: The and we expect this is going to take some time to work through the fruit and vegetable issue on the West Coast, and what I mean by that is obviously you're starting to see demand at the consumer level picking back up, but that'll take its time to work itself all through the supply chain and then the growing season in the next year, right?

Speaker #3: So it'll take a little bit of time there, but we don't see any big issues. Protein was a little soft, and if you look at the beef folks as an example, they're getting squeezed right now, and consumers appear to be trading down.

Speaker #3: We're seeing that, certainly, in the marketplace. And so you're seeing softness there, but generally, I would say pretty flat sequentially. Across the board, the biggest issue, both on the inbound side and hitting the customer, is inflation.

Andy Silvernail: You are seeing softness there, but generally, I would say, pretty flat sequentially. Across the board, the biggest issue, both on the inbound side and hitting the customer, is inflation, right? That is the thing that they are wrestling the most with. Obviously, we are wrestling the most with input costs, and we are now seeing price flow itself through and becoming positive there, but we expect that to continue. In Europe, it is much the same, just more volatility. I think that is just fair to say. More volatility on the input costs and more volatility that the customer is experiencing in the marketplace. Everyone has seen the news of what is going on over there. There is hesitancy in the marketplace. Generally, North America, pretty flat sequentially.

Speaker #3: Right? That's the thing that they're wrestling the most with. And obviously, we are wrestling the most with input costs, and we're now seeing price flow itself through and becoming positive there.

Speaker #3: But we expect that to continue. And Europe, it's much the same, just more volatility, right? I think that's just fair to say. More volatility on the input costs and more volatility that the customers experiencing in the marketplace and everyone has seen the news, what's going on over there.

Speaker #3: So there's hesitancy in the marketplace. But generally North America, pretty flat sequentially. Europe, very modest uptick that we have seen thus far in October but I wouldn't say anything to get real excited about at that stage.

Andy Silvernail: Europe, very modest uptick that we have seen thus far in October, but I would not say anything to get real excited about at that stage.

Phil Ng: Okay. Helpful. Appreciating some of the dynamics you are seeing in North America is timing, right? You have got a pretty good box price realization in Q3, and that will continue to build. I think at one point you were talking about aspirationally 20% plus type EBITDA margins in North America. Is that still a realistic goal for 2027 given the pricing you have realized already, or do you need more help on that for it to get to that type of profitability in that business?

Speaker #6: Okay. Helpful. And appreciating some of the dynamics you're seeing in North America, is timing, right? I mean, you've got a pretty good box price realization in 3Q and that will continue to build.

Speaker #6: I think at one point you were talking about aspirationally 20% plus type EBITDA margins in North America. Is that still a realistic goal for 2027 given the pricing you've realized already or do you need kind of more help on that front to kind of get to that type of profitability in that business?

Andy Silvernail: Yeah. We are not doing anything in terms of guidance for 2027 at this stage. I think that is prudent given what we are seeing happening with inflation in the marketplace. But I think the trajectory that we are on and our ability to get to something with a 2 in front of it, I still very much believe that that is possible in the business. Just across the board, we are starting to see traction operationally, which is really good. If I go back in time, really throughout this entire year in the mill system in particular, it has been clouded a little bit with a couple events in terms of the ice storm and with Pine Hill. But if you look at the underlying operational improvements over the past year, the team has just done a terrific job, and we are now seeing that momentum.

Speaker #3: Yeah, we're not doing anything in terms of guidance for 2027 at this stage. I think that's prudent given what we're seeing happening with inflation in the marketplace.

Speaker #3: But I think the trajectory that we're on and our ability to get to something with a two in front of it, I still very much believe that that's possible in the business.

Speaker #3: And just across the board, we're starting to see traction operationally, which is really good. And if I go back in time, really throughout this entire year in the mill system, in particular, it's been clouded a little bit with a couple of events in terms of the ice storm and with Pine Hill.

Speaker #3: But if you look at the underlying operational improvements over the past year, with the team is just on a terrific job. And we're now seeing that momentum.

Andy Silvernail: If I think back to this time last year, we were talking about a lot of the issues that had been consistent in that mill system from under-investment, and we are seeing fewer of those. They are not zero, and I do not expect them to be zero because the investments take time to build, but I really like what we are seeing there. If you look across the entire system, in the US, we have closed 20 facilities in total, box plants and mills.

Speaker #3: If I think back to this time last year, right, we were talking about a lot of the issues that had been consistent in that mill system from under investment.

Speaker #3: And we're seeing fewer of those. They're not zero, and I don't expect them to be zero. Because the investments take time to build. But I really like what we're seeing there.

Speaker #3: And if you look across the entire system, right, we've in the US, we have closed 20 facilities in total, box plants and mills. And we've really lost no business along that process.

Andy Silvernail: We have really lost no business along that process. In fact, we have won business. Most importantly, we are seeing the kind of productivity that we talked about in Q2 and Q1. We saw it again in Q3. We believe we are going to see it in Q4, and we will see it significantly into next year as we lap some of the big projects that we did this year, as we bring up NORPAC, as Riverdale continues to ramp. So we feel good about the trajectory that we are on in terms of margin improvement.

Speaker #3: And in fact, we've won business. And most importantly, we're seeing the kind of productivity that we talked about in the second quarter and the first quarter.

Speaker #3: We saw it again in the third. We believe we're going to see it in the fourth and we'll see it significantly into next year as we lapse some of the big projects that we did this year as we bring up NORPAC.

Speaker #3: As Riverdale continues to ramp. And so we feel good about the trajectory that we're on in terms of margin improvement.

Phil Ng: Okay. Appreciate the color, Andy. Thank you so much.

Speaker #6: Okay. Appreciate the color, Andy. Thank you so much.

Andy Silvernail: Thank you.

Speaker #3: Thank you. You bet. Thanks, Phil.

Lance Loeffler: You bet. Thanks, Phil.

Operator: Your next question comes from the line of Mark Weintraub with Seaport Research Partners. Please go ahead.

Speaker #1: Your next question comes from the line of Mark Weintraub with Seaport Research Partners. Please go ahead.

Mark Weintraub: Thanks. Andy, you've sort of got in front of my question a little bit, saying you don't want to provide any guidance for next year, which I understand. Everybody's trying to work that out. So maybe the controllables, and what as we think about, obviously, where costs go, that's very hard to predict. We still have a lot of the flow-through from price. Is it fair to say that you don't have a lot of the September increase baked into box prices for Q4?

Speaker #5: Thanks. Andy, you sort of got in front of my question a little bit, saying you don't want to provide any guidance for next year or to help us understand.

Speaker #5: I was trying to work that out. So maybe the controllables, and what as we think about obviously where costs go, that's very hard to predict.

Speaker #5: But we still have a lot of the flow through from price. And is it fair to say that you don't have a lot of the September increase baked into box prices for the fourth quarter?

Speaker #5: Is that.

Andy Silvernail: That is correct.

Speaker #3: That is correct. That's correct.

Mark Weintraub: a fair statement?

Andy Silvernail: Yep.

Mark Weintraub: Okay.

Andy Silvernail: That is correct.

Speaker #5: Okay. And I think you mentioned Riverdale. You mentioned NORPAC as something that can continue to ramp higher. Are there other things in terms of actions you've done and/or have already signaled that we should be contemplating in terms of what can drive earnings higher next year in North America?

Mark Weintraub: I think you mentioned Riverdale, you mentioned NORPAC as something that can continue to ramp higher. Are there other things in terms of actions you have done or already signaled that we should be contemplating in terms of what can drive earnings higher next year in North America?

Andy Silvernail: Yeah, Mark, it's not kind of big nameplate things like facility closures that we've mentioned in the past, but what we're now moving to really aggressive reinvestment in productivity, and that's what we're seeing show up now. Our expectation is that we are going to be delivering kind of trend line productivity here into 2027, and feel very good about that as I think about the investments and the costs that we've had in 2024, 2025, now 2026. We're definitely seeing that ramp in productivity. So you should not expect to see kind of, again, big nameplate things, but you should expect to see meaningfully above trend line improvements in productivity.

Speaker #3: Yeah. Mark, it's not kind of big nameplate things like facility closures that we've mentioned in the past. But what we're now moving to really aggressive reinvestment in productivity.

Speaker #3: And that's what we're seeing show up now, right? And so our expectation is that we are going to be delivering kind of trendline productivity here into 2027.

Speaker #3: And feel very good about that as I think about the investments and the costs that we've had in 2024, '25, not '26. We're definitely seeing that ramp in productivity.

Speaker #3: So you should not expect to see kind of, again, big nameplate things, but you should expect to see meaningfully above trendline improvements in productivity.

Lance Loeffler: Yeah. I'd also add, Mark, that next year too, will also be the continuation of eliminating the tails on that operating cost for the facilities that we have closed as we continue to

Speaker #6: Yeah. I'd also add, Mark, that next year too will also be the continuation of eliminating the tails on that operating cost for the facilities that we have closed as we continue to sell the real estate and actually fully exit a lot of those decisions.

Andy Silvernail: Yeah

Lance Loeffler: sell the real estate and actually fully exit a lot of those decisions. That will continue as well. So those layers mean a lot, maybe not in isolation

Speaker #6: That will continue as well. So those layers mean a lot. Maybe not in isolation, but as you stack up 20 of them on a monthly basis, it's a meaningful number.

Andy Silvernail: Right

Lance Loeffler: but as you stack up 20 of them on a monthly basis, it's a meaningful number. We expect to make significant progress in that area too.

Speaker #6: And so we expect to make significant progress in that area too.

Mark Weintraub: Okay. That's helpful. Just maybe, if we think about, I guess you're really not talking about Europe at all, but as that process happens, is there anything on, like, the corporate expense side as you run North America separately, that we should be thinking about that would change in 2027 versus 2026?

Speaker #5: Okay. That's helpful. And just maybe if we think about I guess you're really not talking about Europe at all, but as that process happens, is there anything on the corporate expense side as you run North America separately that we should be thinking about that would change in 2027 versus '26?

Lance Loeffler: Yeah, Mark, so there's an extensive part of this, right? That's aimed at watching the stranded costs, and eliminating those as we go into the course of next year. So that's something that we have been focused on, that we're planning for, and that we will continue to execute so that those stranded costs don't become a weight on the new IP.

Speaker #6: Yeah, Mark. So there's an extensive part of this, right, that's aimed at watching the stranded costs. And eliminating those as we go into the course of next year.

Speaker #6: So that's something that we have been focused on that we're planning for and that we will continue to execute so that those stranded costs don't become a weight on the new IP.

Andy Silvernail: Yeah.

Speaker #3: Yeah.

Mark Weintraub: Okay. Any color

Speaker #5: Okay.

Speaker #3: And that's a—let me finish. So that would also include the impact of GCF, too, remember. So we've sold GCF earlier this year, and so it's a combination of the stranded costs associated with carrying GCF and our European business.

Lance Loeffler: That's a. Let me finish. So, like, that would also include the impact of GCF too, remember. So we sold GCF earlier this year. It's a combination of the stranded costs associated with carrying GCF and our European business.

Andy Silvernail: Yeah, as they come off the TSA. Yep. We will give more specific guidance when we execute the separation, whether it is a spin or a sale, we will have more information for everybody to give, kind of help you with the modeling more specifically.

Speaker #6: Yeah, as they come off the TSA. Yeah. And we'll give more specific guidance when we execute the separation. Whether it's a spin or a sale.

Speaker #6: We will have more information for everybody to give kind of help you with the modeling more specifically.

Lance Loeffler: Correct.

Speaker #3: Correct.

Mark Weintraub: Fair enough. Thank you, guys.

Speaker #5: Fair enough. Thank you, guys.

Andy Silvernail: You bet. Thanks, Mark.

Speaker #3: You bet. Thanks, Mark.

Operator: Your next question comes from the line of George Staphos with Bank of America. Please go ahead.

Speaker #1: Your next question comes from the line of George Staffos with Bank of America. Please go ahead.

George Staphos: Hey, everyone.

Andy Silvernail: Good morning.

Speaker #7: Everyone, good morning. How are you? Thanks for the details. I want to, if you understand that you're not going to go on '27, I wanted to come back a little bit to maybe some of the individual buckets in terms of the bridge.

George Staphos: Good morning. How are you? Thanks for the details. Understanding that you are not going to guide on 2027, I wanted to come back a little bit to maybe some of the individual buckets in terms of the bridge. In particular, let us call it the 80/20 cost piece or productivity piece as we look out. Is there a way to size what in North America that benefit was this year, 2026, and what it could look like in 2027? What the ongoing cost inflation that you have got to hurdle every year might look like, and what it looked like this year?

Speaker #7: And in particular, let's call it the 80/20 cost piece or productivity piece as we look out. Is there a way to size what in North America that benefit was this year, '26, and what it could look like in '27?

Speaker #7: And what the ongoing cost inflation that you've got a hurdle every year, might look like and what it looked like this year?

Andy Silvernail: Well, I think so, George, if you take a look at everything we have published so far to date, including the Q3 today and the expectations on the Q4, if you go back and put those bridges together, that will answer the first part of your question really explicitly.

Speaker #3: Yeah, I think so, George. If you take a look at—if you look at everything we've published so far to date, including the third quarter today and the expectations on the fourth quarter—if you go back and put those bridges together, that will answer the first part of your question really explicitly.

George Staphos: But-

Andy Silvernail: And then

Speaker #7: But I just want to get at but an 80/20, you do include some commercial, I think. So just on the cost outside of where I was going with that, Andy.

George Staphos: I just want to get at. But in 80/20, you do include some commercial, I think. So just on the cost outside of it, where I was going with that, Andy,

Andy Silvernail: Yeah

George Staphos: and then what you would look like.

Speaker #7: What you would look like.

Andy Silvernail: I think that is trying to parse it too finely, right? Because you really need to look at cost as a total. I would break it down between input costs and structural costs, and that is how we have it broken down by line item in the decks. So you can see kind of all that. To ascribe a specific number to a specific action, I do not think is the right thing to do because these things are tied together in all the different work that we are doing. As is specific to 2027, again, we will guide 2027 when we do the Q4 call at the end of January.

Speaker #3: I think that's trying to parse it too finely, right? Because you really need to look at cost as a total. And I would break it down between input cost and structural costs.

Speaker #3: And that's how we have it broken down by light item in the decks. So you can see kind of all that. And so to ascribe a specific number to a specific action, I don't think is the right thing to do because these things are tied together in all the different work that we're doing.

Speaker #3: And as it's specific to 2027, again, we'll guide '27 when we do the fourth quarter call at the end of January.

George Staphos: Okay. Appreciate the thoughts on that. Let me try a different area or topic. Looking to Q4, you guided to what you should do from a volume standpoint in North America and where you think the market is. You are dealing with significant inflation and raising pricing, and we understand that point. What impact do you think is occurring to your volume or maybe the market as a whole from the impact of pricing on demand? As you think about the next couple of years in North America from a demand standpoint, what do you think the algorithm looks like? If traditionally we grew 1.5%, how much do we shave off because of inflation at the consumer level or GLPs? What can that growth rate look like given all the work that you are doing to try to raise pricing, understandably?

Speaker #7: Okay. Appreciate the thoughts on that. Let me try a different area or topic. So looking to the fourth quarter, you guided to what you should do from a volume standpoint in North America and where you think the market is.

Speaker #7: And you're dealing with significant inflation and raising pricing and we understand that point. What impact do you think is occurring to your volume or maybe the market as a whole from the impact of pricing on demand?

Speaker #7: And as you think about the next couple of years in North America from a demand standpoint, what do you think the algorithm looks like?

Speaker #7: If traditionally we grew one and a half percent, how much do we shave off because of inflation at the consumer level or GLPs? What can that growth rate look like given all the work that you're doing to try to raise pricing, understandably?

George Staphos: Thanks, and I will turn it over there.

Speaker #7: Thanks. And I'll turn it over there.

Andy Silvernail: Thanks, George. Appreciate that. A few things in there that I think are important. Number one, I think the question is what do we believe the long-term demand profile looks like in the business? Our view is it is somewhere in the neighborhood of a half a point to a point of volume growth. That is our view. Right now, because of the inflation that is out there and the pressure on that mid-level and lower-level consumer, we expect the markets to be pretty flattish. That is our expectation as we stand here right now. They certainly are pressuring it. If you think about that K-shaped economy that all of us have talked about so much, the bottom of the K is hurting. There is no doubt about it. Those folks are making really specific choices about their goods purchases.

Speaker #3: No, thanks, George. Appreciate that. A few things in there that I think are important. So number one, kind of I think the question is, what do we believe kind of the long-term demand profile looks like in the business?

Speaker #3: And our view is it's somewhere in the neighborhood of half a point to a point of volume growth. That's our view. Right now, because of the inflation that is out there and the pressure on that mid-level and lower-level consumer, we expect the markets to be pretty flat.

Speaker #3: That's our expectation as we stand here right now. But they certainly are pressuring it. So if you think about that K-shaped economy that all of us have talked about so much, the bottom of the K is hurting.

Speaker #3: There's no doubt about it. And those folks are making really specific choices about their goods purchases. So I think as I kind of think about the near term, the next quarter, into the early certainly part of 2027, all indicators would say that folks are going to continue to be under pressure as we think about elevated energy costs, whether it's oil, it's natural gas, right?

Andy Silvernail: As I think about the near term, the next quarter into the early part of 2027, all indicators would say that folks are going to continue to be under pressure as we think about elevated energy costs, whether it is oil, it is natural gas, it is diesel, you pick it. There is no reason at this stage to believe that that is going to fall off in a meaningful way. That is how we are planning the business is to expect that we will be living in an elevated level. To be clear, the gyrations around the energy equation have been really incredible since February, if you go to look at the ups and downs. Obviously, we are all reading the news and hearing about what may or may not happen post-election in the Gulf.

Speaker #3: It's diesel. You pick it. There's no reason at this stage to believe that that's going to fall off in a meaningful way. And that's how we're planning the business—to expect that we'll be living at an elevated level.

Speaker #3: To be clear, right, the gyrations around the energy equation have been I mean, really incredible since February. If you go to look at the ups and downs and obviously we're all reading the news and hearing about what may or may not happen post-election in the Gulf, obviously we have no control over that.

Andy Silvernail: Obviously, we have no control over that, but that volatility is what we are managing, and I think managing quite well, actually. I expect there to be continued pressure on the consumer, which will create pressure on the customer. We need to continue to drive cost out of our system and raise prices appropriately as the market forms and how we think about the business. That is how I would characterize it.

Speaker #3: But that volatility is what we're managing. And I think managing quite well actually. But I expect there to be continued pressure on the consumer, which will create pressure on the customer.

Speaker #3: And we need to continue to drive cost out of our system and raise prices appropriately as we see as the market forms and how we think about the business.

Speaker #3: So that's how I would characterize it.

George Staphos: Well, we would have liked a little bit more color on the cost outs. You are certainly doing a really good job on that, both in terms of EMEA and North America. You did a great job there at managing against that.

Speaker #7: Well, we would have liked a little bit more color on the cost outs. You're certainly doing a really good job on that both in terms of EMEA and North America.

Speaker #7: You did a great job there of managing against that. And we'll mark the progress in '27. Thanks very much. Turn it over.

Andy Silvernail: Thank you.

George Staphos: We will mark the progress in 2027. Thanks very much.

Andy Silvernail: Thank you.

George Staphos: I'll turn it over.

Speaker #3: Thank you. Thanks, George.

Andy Silvernail: Thank you, George.

Operator: Your next question comes from the line of Detlef Winckelmann with JPMorgan. Please go ahead.

Speaker #1: Your next question comes from the line of debtless Winkleman with JP Morgan. Please go ahead.

Detlef Winckelmann: Hi, guys. Good morning. Maybe to start just with your free cash flow guidance that you have given us. I know it is now down to, call it, $100 million to $200 million. Are you able to kind of talk through the moving parts? Because if I am looking at it, obviously, we have got an EBITDA line item, we have got tax and interest, we have got your CapEx guidance, but there still seems to be a bit of a gap of, call it, I do not know, $300 million to $400 million. Is that just working capital? Anything else I might be missing on that side? Then I have got one follow-up, if you do not mind.

Speaker #7: Hi, guys. Good morning. Maybe to start, just with your free cash flow guidance that you've given us. I know it's now down to $100 million to $200 million for the quarter.

Speaker #7: Are you able to kind of talk through the moving parts? Because if I'm looking at it, obviously we've got an EBITDA line item, and we've got tax and interest.

Speaker #7: We've got your capex guidance. But there still seems to be a bit of a gap of, call it, I don't know, 3 to 4 hundred million dollars.

Speaker #7: Is that just working capital? Anything else I might be missing on that side? And then I've got one follow-up if you don't mind.

Lance Loeffler: Yeah. I think that is the one filler. For us, particularly in Q3, what you saw in our free cash flow number was the catch up on inventory and the build that we have been trying to. That did not happen. Remember, we had a huge turnaround quarter in Q2. Normally, we would be preparing for that and building inventory in Q1. We were unable to do that because of the winter storm. So Q3 is really the catch-up quarter for us from an inventory perspective. So working capital was a big draw. As you think to Q4, two perspectives, Detlef.

Speaker #3: Yeah. I think that's the one filler. And for us, particularly in the third quarter, right, what you saw in our free cash flow number was the catch-up, right?

Speaker #3: So, on inventory and the build that we have been trying to do that did not happen—remember, we had a huge turnaround quarter in the second quarter. Normally, we would be preparing for that and building inventory in the first quarter.

Speaker #3: We were unable to do that because of the winter storm. And so the third quarter is really that the catch-up quarter for us from an inventory perspective.

Speaker #3: So working capital, was a big draw. As you think to the fourth quarter, two perspectives, debtless. One is the outlook change, which is, I'd say, fundamentally is driven off of the direct result of the lower earnings outlook.

Lance Loeffler: One is the outlook change, which is, I would say, fundamentally is driven off of the direct result of the lower earnings outlook for the business for the year based on the things that we have already discussed on the call. But in terms of cash flow itself for Q4, I would characterize it as stronger operating results, generally speaking, with a big working capital swing back to the positive now that we have got that inventory build behind us. Then this will be probably the lowest CapEx quarter for us for the year. So all those events sort of combined a much stronger free cash flow profile in Q4.

Speaker #3: Right? For the business for the year. Based on the things that we've already discussed on the call. But in terms of cash flow, itself for the fourth quarter, I would characterize it as stronger operating results.

Speaker #3: Right? Generally speaking, with a big working capital swing back to the positive. Right? Now that we've got that inventory build behind us. And then this will be probably the lowest capex quarter for us for the year.

Speaker #3: So those all those events sort of combined a much stronger free cash flow profile in the fourth quarter.

Detlef Winckelmann: Okay, great. Thanks. Then maybe just one just technical question in terms of EMEA. Nothing regarding the outlook, just in terms of where do you have your carrying value for EMEA now? My calcs are saying it is about $3.6 billion, but I just want to confirm.

Speaker #7: Okay. Great. Thanks. And then maybe just one, just technical question in terms of EMEA. Nothing regarding the outlook. Just in terms of where do you have your carrying value for EMEA now?

Speaker #7: I mean, my calcs are saying it's about 3.6 billion, but I just want to confirm.

Lance Loeffler: No, let's get back to you to make sure we get that accurately. That number

Speaker #3: No, let's get back to you and make sure we get that accurately. That number is going to be very low. Yeah.

Detlef Winckelmann: Okay

Lance Loeffler: is going to be very low. Yeah.

Detlef Winckelmann: Okay, great. Thank you.

Speaker #7: Okay. Great. Thank you.

Andy Silvernail: You bet.

Speaker #3: You bet.

Operator: Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Speaker #1: Your next question comes from the line of Anthony Pittinari with Citi. Please go ahead.

Anthony Pettinari: Good morning.

Speaker #6: Good morning.

Andy Silvernail: Good morning, Anthony.

Speaker #3: Good morning, Anthony. Just.

Anthony Pettinari: Hey, just following up on CapEx. I understand you are not giving guidance on 2027, but as IP becomes kind of North American standalone, I was just wondering if you could kind of talk about sort of the CapEx needs of the North American business as you see it. At the Analyst Day, I think you gave kind of a 6.5% of sales kind of

Speaker #6: Hey. Just following up on capex. I understand you're not giving guidance on '27, but as IP becomes kind of North American standalone, I was just wondering if you could kind of talk about sort of the capex needs of the North American business as you see it.

Speaker #6: At the analyst day, I think you gave kind of a six and a half percent of sales kind of benchmark out there. But I'm just wondering how we should think in the future about where you are from kind of a capex cycle perspective.

Andy Silvernail: Yeah

Anthony Pettinari: benchmark out there. But I am just wondering how we should think, in the future, about where you are from kind of a CapEx cycle perspective.

Andy Silvernail: Anthony, I think the 6.5% you are remembering was specific to Europe, to EMEA. We have said that we are going to be elevated in North America here for a couple more years. I think that the range that we are in right now, we should expect to see this year, next year, and we will figure out 2028 then based on the capitalization needs and the opportunities. But I would say generally, the range that we are going to have this year will be similar in 2027 for North America.

Speaker #3: Yeah. Anthony, I think the six and a half percent you're remembering was specific to Europe, to EMEA. We've said that we're going to be elevated in North America here for a couple more years.

Speaker #3: And I think that the range that we're in right now, we should expect to see this year, next year, and we'll figure out '28 based on the capitalization needs and the opportunities.

Speaker #3: But I would say generally the range that we're going to have this year will be similar in 2027. For North America.

Speaker #6: Okay. Okay. Okay. That's very helpful. And then just as a follow-up, I don't know if I missed this, but how much of a headwind was West Coast Ag on volumes in the quarter?

Anthony Pettinari: Okay. That is very helpful. Then just as a follow-up, I do not know if I missed this, but how much of a headwind was West Coast ag on volumes in the quarter? Then did you mention how volumes have been in October from a North American box side?

Speaker #6: And then, did you mention how volumes have been in October from a North American box side?

Andy Silvernail: We have not broken out the impact of West Coast ag specifically. We have just noted it in more general terms. We see it within our book of business customer by customer, so we can kind of see it like that. But we have not aggregated it as a singular piece and said it is X percent. So we have not broken that out to that discrete a level. Then as you look right now, what I would say is, look, things are generally kind of similar in the US as I look through the month. It just does not look a whole lot different, right? It feels like the consumer, and therefore the customer, is generally cautious in dealing with inflation.

Speaker #3: Yeah, we haven't broken out the impact of West Coast Ag specifically. We've just noted it in more general terms. We see it within our book of business, customer by customer.

Speaker #3: So we can kind of see it that way. But we haven't aggregated it as a singular piece and said it's X percent. We haven't broken that out.

Speaker #3: To that discrete level. And then as you look right now, what I would say is, look, things are generally kind of similar. In the US, as I look through the month, it just doesn't look a whole lot different.

Speaker #3: Right? It feels like the consumer and therefore the customer is generally cautious in dealing with inflation.

Anthony Pettinari: Okay. That's helpful. I'll turn it over.

Speaker #6: Okay. That's helpful. I'll turn it over.

Andy Silvernail: Thank you.

Speaker #3: Thank you. Thanks.

Lance Loeffler: Thanks.

Operator: Next question comes from the line of Hillary Cacanando with Deutsche Bank. Please go ahead.

Speaker #1: The question comes from the line of Hillary Kakanendo with Deutsche Bank. Please go ahead.

Hillary Cacanando: Hi. Thank you for taking my question. In terms of pricing, when would you expect to have substantially all of the September price increase reflected in box pricing?

Speaker #5: Hi, thank you for taking my question. In terms of pricing, when would you expect to have substantially all of the September price increase reflected in box pricing?

Lance Loeffler: Hilary, this is Lance. For us, it is probably fully realized, it is probably the beginning of Q2 into Q1.

Speaker #3: Yeah. Hillary, this is Lance. For us, it probably fully realized is probably the beginning of Q2, end of Q1, something like that. Takes us about four or five months to fully realize and work it through.

Lance Loeffler: Something like that. It takes us about four or five months to fully realize and work it through.

Hillary Cacanando: Got it. Thank you. In terms of the expectation to have outperformance versus the industry, is it primarily share gains or is there like a mixed component there as well?

Speaker #5: Got it. Thank you. And then in terms of the expectation, to have outperformance versus the industry, is it primarily share gains or is there a mix of mixed component there as well?

Lance Loeffler: It is mostly share gains. It is business that we have won in prior periods that are now flowing through between large and small customers. It has been pretty consistent there.

Speaker #3: It's mostly share gains. So it's business that we've won in prior periods that are now flowing through. Between large and small customers. So it's been pretty consistent there.

Hillary Cacanando: Okay, got it. Great. Thank you very much.

Speaker #5: Okay. Got it. Great. Thank you very much.

Lance Loeffler: Thank you.

Speaker #3: Thank you.

Operator: Your next question comes from the line of Anojja Shah with UBS. Please go ahead.

Speaker #1: Your next question comes from the line of Anuja Shah with UBS. Please go ahead.

Anojja Shah: Hi. Morning, everyone.

Speaker #5: Hi. Morning, everyone.

Andy Silvernail: Morning.

Lance Loeffler: Morning.

Speaker #3: Morning.

Speaker #7: Morning.

Speaker #5: I wanted to morning. I wanted to ask about your funds in the back of your deck. So I noticed that on a sequential basis, your box funds fell by about 5%, but your container board funds increased by about 14%.

Anojja Shah: Morning. Wanted to ask about your tons in the back of your deck. I noticed that on a sequential basis, your box tons fell by about 5%, but your containerboard tons increased by about 14%. Can you just talk about what is happening there?

Speaker #5: Can you just tell me about what's happening there?

Operator: Pardon the interruption, Ms. Shah. Your connection, we cannot understand you.

Speaker #1: How did the interruption miss Shah? Your connection, we cannot understand you.

Anojja Shah: How is this? Can you hear me better now?

Speaker #5: How is this? Can you hear me better now?

Andy Silvernail: No, it is broken up. Let us have her come back on at the end.

Speaker #3: No. It's broken up. I would let's have her come back on at the end.

Operator: Understood. Your next question comes from the line of Mike Roxland with Truist Securities. Please go ahead.

Speaker #1: Understood. Your next question comes from the line of Mike Boland with Truist Securities. Please go ahead.

Mike Roxland: Yeah. Thank you, Andy, Lance, Mandi, and team for taking my questions. Lance, if I heard you correctly, you mentioned that Q4 should benefit from $35 million of faster realization of the June price increase and also partial realization of the September price increase.

Speaker #6: Yeah. Thank you, Andy. Lance, Mandy, and team for taking my questions. Lance, if I heard you correctly, you mentioned that 4Q should benefit from 35 million to faster realization of the June price increase and also partial realization of the September price increase.

Andy Silvernail: Yeah.

Mike Roxland: Just in terms of the faster realization for June, what has allowed you to realize the June price increase at a faster pace?

Speaker #6: Just in terms of the faster realization for June, what does it allow you what has allowed you to realize the June price increase at a faster pace?

Lance Loeffler: I think it is just the way that we have forecasted the business, and we look at traditional patterns and the way that we realize it. I think our teams have done a really good job of working the contracts, being forward with the customer, and just executing quicker.

Speaker #3: I think it's just the way that we have forecasted the business. And we look at traditional patterns and the way that we realize it.

Speaker #3: I think our teams have done a really good job of working the contracts, being forward with the customer, and just executing quicker. Yeah. If you think about it, Mike, right, these things are generally written into contracts and then you have a piece that's written into contracts and then you have a piece that is not.

Andy Silvernail: Yeah. If you think about it, Mike, these things are generally written into contracts. Then you have a piece that is not. When you get faster realization, one of two things tends to happen. Either with the piece that isn't contractual, you are able to get it into the market, and you are able to get it to stick quicker, which is, again, to Lance's point. We have done that a little bit faster than what our expectation would be, not enormously faster, but a little bit faster.

Speaker #3: Right? And when you get faster realization, one of two things tends to happen. Either with the piece that isn't contractual, right, you're able to get it into the market and you're able to get it to stick quicker, which is, again, to Lance's point, we've done that a little bit faster than what our expectation would be.

Speaker #3: Not enormously faster, but a little bit faster. And on the contracts side, what it really is, is just the diligence of making sure that you execute to the contract.

Lance Loeffler: Yeah.

Andy Silvernail: On the contract side, what it really is just diligence of making sure that you execute to the contract.

Lance Loeffler: Right.

Andy Silvernail: Because if not, it can take longer. That can lag. So we have got to make sure that we are working with our customer base and executing with the contract. So those two things typically are the levers, and we are just seeing a little bit better uptake on the first piece. On the second, we are just keeping disciplined with the execution within the contract language.

Speaker #3: Right? Because if not, it can take longer, right? That can lag. And so we've got to make sure that we're working with our customer base and executing with the contracts.

Speaker #3: So those two things typically are the levers. And we're just seeing a little bit better uptake on the first piece. And on the second, we're just keeping a discipline with the execution within the contract language.

Mike Roxland: Got it. Andy, would it be fair to say that maybe there could be some upside with the September price increase as well? I know Lance called out late Q1, early Q2. Could that be even pulled forward if you guys are on top of enforcing the contracts?

Speaker #6: Got it. And Andy, would it be fair to say that maybe there could be some upside with the September price increase as well? I know Lance called out late 1Q, early 2Q.

Speaker #6: Could that be even pulled forward if you guys are on top of enforcing the contract?

Andy Silvernail: No, I think what we have guided, we feel pretty good about generally. I think that is the number I would use. Yeah.

Speaker #3: Yeah. I think what we've guided, we feel pretty good about. Generally. So I think that's the number I would use. Yeah.

Mike Roxland: Got it. Great. Perfect. One quick just follow-up. In terms of Riverdale, how is that mill operating? When do you expect to be at full utilization? Can you just remind us what the start-up costs were in Q3, and when those should wind down?

Speaker #6: Got it. Great. Perfect. And one quick follow-up, just a follow-up. In terms of Riverdale, how has that mill operating? When do you expect to be at full utilization?

Speaker #6: And can you just remind us what the startup costs were in 3Q and when those should wind down?

Andy Silvernail: Start-up costs, do you have that, Ian?

Speaker #3: Startup costs—do you have that, Andy?

Lance Loeffler: Start-up costs in Q3 was. Yeah.

Speaker #4: Startup costs in 3Q was yeah.

Andy Silvernail: I'll have to get back to you on that, Mike. Sorry. Do not have that number specifically, but in terms of the ramp, right? If you recall, it basically ramps up through Q1 and Q2 of next year into full ramp. But what I'll say is, the team is doing a really nice job, right? We are on schedule, kind of no major issues. So, kudos to the team. Those of you who are really familiar with this stuff, this is very complex, and the team has done an excellent job. Same thing on Pine Hill, right? That mill operations team, if you think back over the last 6 months or 9 months, what they have handled and handled very well. Jason Handel, who is the leader of the business, he's just done an exceptional job, he and his team. So, real kudos to them.

Speaker #3: I'll have to get back to you on that, Mike. Sorry. Don't have that number specifically. But in terms of the ramp, right, if you recall, it basically ramps up through first quarter and second quarter of next year into full ramp.

Speaker #3: But what I'll say is the team is doing a really nice job, right? We are on schedule, and we have kind of no major issues. So, kudos to the team, especially those of you who are really familiar with this stuff.

Speaker #3: This is very complex, and the team has done an excellent job. And it's the same thing on Pine Hill, right? That mill operations team—if you think back over the last six or nine months—what they have handled, and handled very, very well.

Speaker #3: And Jason Handel, who is the leader of the business, has just done an exceptional job—he and his team. And so, real kudos to them.

Mike Roxland: Thanks very much.

Speaker #6: Thanks very much.

Operator: Ladies and gentlemen, that does conclude our question and answer session. I would now like to turn it back over to Andy Silvernail for closing comments.

Speaker #1: Ladies and gentlemen, that does conclude our question and answer session. I would now like to turn it back over to Andy Silvernail for closing comments.

Andy Silvernail: Well, thank you very much. Anojja, I'm sorry you got cut off, but we look forward to talking to you separately in our one-on-one sessions. Just thank you to everybody for your attention to IP and your interest in IP, and really, thank you to the teams. This has been an incredibly turbulent time over the last couple of years in terms of what's happened in the external markets, and how the teams have focused and executed, and we're seeing that start to ramp now and hit in the sequential numbers that we've seen, and what we believe will happen in Q4 and as we look forward into 2027. So look, the markets are going to be soft. We're going to be dealing with accelerated inflation. We all know that at this stage. We do not believe there's anything that's going to change that.

Speaker #3: Well, thank you. Thank you very much. And Anuja, I'm sorry you got cut off, but we look forward to talking to you separately in our one-on-one sessions.

Speaker #3: Just thank you to everybody for your attention to IP and your interest in IP. And really, thank you to the teams. This has been an incredibly turbulent time over the last couple of years in terms of what's happened in the external markets.

Speaker #3: And how the teams have focused and executed and we're seeing that start to ramp now. And hit in the sequential numbers that we've seen and what we believe will happen in the fourth quarter.

Speaker #3: And as we look forward into 2027. And so look, the markets are going to be soft. We're going to be dealing with accelerated inflation.

Speaker #3: We all know that at this stage. We don't believe there's anything that's going to change that. But our focus is controlling what we can control.

Andy Silvernail: Our focus is controlling what we can control, and that is the main thing, is commercially and operationally is for us to be laser-focused on the things that we can control and the levers that we can pull and enable us to get the kind of operating leverage that we know is possible in the business. Again, thank you to everybody involved, and we look forward to talking to you in a quarter. Thank you.

Speaker #3: And that is the main thing. Commercially and operationally, it is for us to be laser-focused on the things that we can control and the levers that we can pull.

Speaker #3: And enable us to get the kind of operating leverage that we know is possible in the business. So again, thank you to everybody involved.

Speaker #3: And we look forward to talking to you in a quarter. Thank you.

Operator: Once again, we would like to thank you for participating in International Paper's Q3 2026 earnings call. You may now disconnect.