Graphic Packaging sees Waco, Texas, mill costs rise, project remains on track

In its second-quarter 2025 earnings report, Atlanta-based Graphic Packaging has reported a decrease in net sales and income and an increase in costs related to its recycled paperboard mill project in Waco, Texas, but CEO Michael Doss is “more encouraged than ever” at the company’s ability to deliver on the returns of that project.

“The capabilities are going to be fantastic, both in terms of quality and cost,” Doss said of the Waco project during Graphic Packaging’s earnings call July 29.

“No one likes a cost overrun. We take those things seriously and, obviously, we try to deal with them as you’ve seen us do here by managing other aspects of our business to make sure we deliver our free cash flow. But we had to get the project done. … It’s going to start up on time, and I’m really excited about bringing Waco to life here in the fourth quarter.”

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The project primarily is seeing higher costs in labor and final engineering and design costs related to permitting and insurance requirements, and Graphic Packaging now estimates 2025 capital expenditures of $850 million.

“If you add up where we’re over on that project, it’s around 20 percent from our original commitments that we made about two and a half years ago,” Doss said.

With the project still on track to start up in the fourth quarter of this year, Doss said Graphic Packaging’s capital spending will decline “sharply” next year, and he expects the company to generate cash exceeding its internal needs “for years to come.”

Second quarter results

Graphic Packaging has reported second-quarter 2025 net income of $104 million compared with $190 million in the same period last year, while adjusted net income for the period was $128 million compared with $183 million last year.

Meanwhile, second-quarter 2025 net sales decreased 1 percent to $2.2 billion this year compared with $2.24 billion last year, a decline driven by a $40 million impact from Graphic Packaging’s divestiture of its bleached paperboard manufacturing facility in August, Georgia.

The company’s earnings before interest, taxes, depreciation and amortization faced a steeper decline, shrinking 29 percent to $323 million in the second quarter of this year compared with last year.

“In the second quarter, we saw a continuation of uneven volumes as consumers remain stretched,” Doss said. “Promotional activity helped drive modest volume improvement in some categories. Conversations with our customers suggest potential for an increase in focus on volume growth and protecting their market share in the quarters ahead.

“With Waco set to begin production later this year, we closed our Middletown, Ohio, paperboard manufacturing facility in May. We are now serving those customers mainly from existing inventory. Waco is the last major investment of our Vision 2025 transformation program. Recycled paperboard has by a wide margin, the lowest environmental footprint, the lowest upfront capital and sustaining capital requirements and with our quality advantage can replace more expensive to produce bleached paperboard in a wide range of applications.”

Graphic Packaging's full second quarter financial report can be found online.