Q3 2026 Packaging Corporation of America Earnings Conference Call - PACKAGING CORP OF AMERICA

Thank you for joining Packaging Corporation of America's third quarter 2026 earnings conference call. Your host today will be Mark Colzan, Chairman and Chief Executive Officer of PCA. Upon conclusion of his narrative, there will be a question and answer session. I would now like to turn the conference call over to Mr. Colzan. Please go ahead when you're ready. Thank you, Jamie. Appreciate it very much. Good morning, everyone, and thank you all for participating in Packaging Corp. of America third quarter 2026 earnings release conference call. Again, I'm Mark Coles and chairman and CEO of PCA and with me on the call today is Tom Hasfurther, our president, and Kent Fletter, our chief financial officer. I'll begin the call as usual with an overview of the third quarter results and then I'll be turning the call over to Tom and Kent who will provide further details. And then after that I'll wrap things up and then we'll be glad to take questions. Yesterday we reported third quarter net income of $262 million, or $2.93 per share. Excluding special items, third quarter 2026 net income was $272 million or $3.04 per share compared to the third quarter 2025 net income of $247 million, or $2.73 per share. Third quarter net sales were $2,600,000,000 in 2026 and $230,000.000 in 2025. Total company EBITDA for the third quarter, excluding special items, was $577,000.,000 in 1026 and $503,000,,000 in 2020. 2025. Third quarter net income included special items expense of $0.11 per share, primarily for costs and write-offs related to facilities closures, acquisition and integration related costs, the impact of a fire at our Palmyra, Pennsylvania sheet feeder, and the Wallula restructuring charges. Details of the special items for the third quarter of 2026 and 2025 were included in the schedules that accompanied the earnings press release. Excluding the special items, our earnings increased by $0.31 per share compared to the third quarter of 2025. The contribution from the acquired Greif business was $0,24 favorable year over year, generating $013 of earnings this year versus an $011 loss last year in the first month of ownership. Legacy earnings improved by $0.07 per share, driven by favorable price and mix in the packaging segment for $0,79, favorable production and sales volume in the packaging segment, which includes the impact of additional container boards supplied to the Greif operations of $012, favorable price and mixed in the paper segment for five cents, and the lower share count two cents. These items were partially offset by higher labor and operating costs, $0.28. Higher freight costs, $0,26. Higher corporate and other expenses, $13. Higher fiber costs, 12 cents. Higher depreciation and amortization expenses, 6 cents. Higher maintenance outage expenses in the paper segment for 4 cents. Lower sales volume in the pay-per-segment for 1 cent. And higher interest expense, excluding the grife acquisition and debt in this, for 1 As comparable quarters going forward will include the ownership of the acquired great business for the entire periods, we will no longer separate the state and state the earnings contribution from the acquisition in the future. We exceeded our guidance of $2.91 on the strength of price realization and a higher-than-expected contribution from The Acquired Great Business. These items were partially offset by higher labor and operating costs, partially driven by lower-than-forecast corrugated products volume. Looking at our packaging business, EBITDA, excluding special items in the third quarter for 2026, of $578 million, with sales of $2.4 billion, resulted in a margin of 23.9%, versus last year's EBITda of $492 million and sales of 2.1 billion, or a 23.1% margin. the mills produced 1 million 489 000 tons during the quarter the legacy mills produced 1,286,000 tons of container board about 77,000 tones more than the second quarter of 2026 and 31,000 tonnes more thanthe third quarter of 2025 the acquired mills produce 203,000 tons quite frankly an exceptional number for a quarter in which riverville was down for an extensive annual maintenance outage. System-wide, our inventories were up 34,000 tons from the end of the second quarter, and in fact, most certainly, we need that inventory as we move into the fourth quarter. We've been able to catch up with keeping our plants adequately supplied, resume shipping via most efficient methods possible, and we're in a good position to supply our customers in the fourth corner, even with three of our container board mills down for their annual maintenance outages. Operational performance was excellent across the board, much improved from the second quarter, and we completed the first annual maintenance outreach at the Riverville Mill under our own ownership safely and successfully. From the cost side, in addition to increasing freight, we saw significant increases in recycled fiber, purchase power and chemical costs during the quarter and we expect these input costs to continue to go up our mill production reflects improved output at Jackson even ahead of the completion of the winder project coming online in the fourth quarter as we continue to maximize the performance of the paper machines we also benefited from continued improvement or liability out of the acquired Greif Mills about now be turning it over to Tom who provide more details on container board sales and corrugated business in general. Thanks, Mark. Domestic container board and corrigated products prices and mix were 75 cents per share above the third quarter of 2025 and up $1.11 per share compared to the second quarter of 2026. We have realized substantially all of the first net $50 increase and about half of the second $50 increase. Price realization came in ahead of forecast for the third quarter. We expect to realize almost all of the remainder of the second increase in the fourth quarter. Realization of the $70 increase will be split between Q4 and Q1 and skewed more towards Q1 in terms of timing. Export container board prices were $0.04 above last year's third quarter and $0,03 above the second quarter of 2026. Export sales volume of container board was 5,000 tons higher than the second quarter OF2026 and 10,000 tones lower than the third quarter OF 2025 and remains at a relatively low level. While various factors that we've previously discussed led to lower agriculture and market volume, demand was solid throughout the quarter across the remainder of our customer base. Shipments were up around 11% in total and per day versus last year, with the legacy business down a half a percent, which is about in line with our expectations taking into account the lower ag shipments. A silver lining is that we got ourselves back on solid footing from an inventory standpoint in time for what looks like a pretty strong fourth quarter from a volume standpoint based upon our September and October bookings. We were also able to save a lot on freight during the quarter by being able to plan and optimize our routes. We remain in a very tight container board market, which based upon what we are seeing in our own system, appears to be further tightening with fourth quarter seasonal pickup. As Mark said earlier, we have three container board mills down for annual maintenance in the fourth quarter, including DeRidder, and we will need the mills continuing to perform at the top of their game to keep us properly supplied. The acquired corrugated business meaningfully contributed to our profitability during the quarter, though volumes took a hit from the fire at Palmyra that kept the plant down for most of September. Integration levels continued to improve, and legacy PCA mills supplied approximately 45,000 more tons of container board into the Greif system during the quarter than it did a year ago. The improved integration, together with better operational performance in the mills that Mark mentioned earlier has us well ahead of our synergy targets. All systems work will be completed during the fourth quarter, which will further improve our visibility and day-to-day management of the business. This acquisition is working out very well for us, in large part due to the quality and performance of our people who have put in a tremendous effort integrating and running the business, and I'll turn it back to Mark. Thanks, Tom. Looking at the paper segment, EBITDA excluding special items in the third quarter was $34 million with sales of $163 million or a 20.6% margin compared to the third quarter of 2025 EBITDA of $40 million and sales of $161 million or a 24.9% margin. The differences in EBITda and margin results from the maintenance outage being in the second quarter last year and the third quarter this year. Sales volume was approximately 0.9 percent above the second quarter of 26 and approximately 2.5% below the third quarter of 2025. Prices in mix were up 2.8% from the second quarter of 2026 and up 3.8%. Sales volume, price realization, and cost performance contributed to performance above our expectations. I'll now turn it over to Kent. Thank you, Mark. Cash provided by operations was $472 million, and after $247 million of CapEx, free cash flow was $225 million. In addition to CapExs, the primary payments of cash during the quarter included dividend payments of $134 million, cash tax payments of 66 million, and net cash interest payments of 29 million. We did not repurchase shares during the quarter. Excluding special items, our effective tax rate during the third quarter was 25.8%. We expect our fourth quarter rate to be nearly identical to the third quarter. We now forecast $865 to $890 million of CapEx for the year and excluding special items just above $705 million of depreciation and amortization. These primarily relate to timing of expenditures and assets placed in service and do not reflect changes in our overall plans. Our special items expense for the year to date, just to remind you, through Q3 included just under $60 million of depreciation expense and write-offs primarily associated with renewal restructuring. I'd now like to give you an update on the annual outage schedule and earnings impact for the rest of the year. Our outage expense was $0.28 during the third quarter. Our fourth quarter estimate is $0,72 now, totaling $1.48 for the year. The increase of $0 from when we last updated you is primarily due to some timing, with a couple of cents in 3Q moving into 4Q, as well as our decision to substantially increase the scope of maintenance activities at the completed third quarter Riverville outage, with more costs now being amortized into the fourth quarter and, to a lesser degree, an increase in the scope of the derittering outage that will take place next month. I'll now turn it back over to Mark. Thanks, Kent. As we move from the third quarter into the forth quarter, we expect solid corrugated products demand with some seasonal improvement. Shipments per day are expected to be at or around last year's fourth quarter level with two fewer shipping days than the third quarterly and total corrugated shipments will be higher than the third quarter. Prices for container board and corrugator products are expected to improve as we continue to implement earlier price increases, but corrugater products mix will be seasonally weaker with higher e-commerce volumes. Container board production will be lower with annual maintenance outages at three of our mills, and mill maintenance outage expenses, including the impact on production volume from the fourth quarter outages will be significantly higher in the fourth quarter. We expect seasonally lower volume and slightly higher prices in the paper segment. We expect freight costs to increase across our business with diesel fuel prices above third quarter levels. We also expect costs for recycled fiber to continue to increase as well as higher wood fiber cost to increase due to winter yields and mill mix. Costs for chemicals and energy will increase due to higher chemical prices and higher seasonal energy usage. Considering these items, we expect fourth quarter earnings of $2.81 per share, excluding special items. With that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call today constituted forward-looking statements. The statements were based on current estimates, expectations, and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Jamie, I'd like to open the call for questions. We'll begin that question and answer session. If you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and dann 1 to join the question queue. Our first question today comes from George Staffos from Bank of America. Please go ahead with your question. Hi, everyone. Good morning. Thank you for the details. I wanted to maybe kick off on volume. You mentioned, Mark, that you expect volume to be, I'm paraphrasing, even or around the volume trend from last year. Can you talk a little bit about what you're seeing in terms of bookings and billings and how you characterize volume being at or around comparable with also a tight market as you're saying it? Yeah, we'll let Tom get into that. Hey, George, it's Tom. Good morning. Good. Bookings were, you know, good in September. They're doing very well here in October as well, up a little over 5%. Billings have lagged a little bit, and we expect that will catch up during the fourth quarter. So, you Know, we're forecasting right now for pretty flat for the fourth quarter but keep in mind that you know that's a tough comp we're talking about as well so uh you know it's it's uh it's easy it's easier to kind of look at october november and get and get some insight but december is always a bit of a crapshoot so uh we're just uh you know we're just going to be a little cautious in terms of that uh in terms OFA forecast um but we're we're pleased with we're pleased with the cadence of the volume we're you know, we've had some we've had some struggles, as we mentioned, with the ag business, especially related to the lettuce issues and some things like that from some of our customers, and we expect some pickup, but again, that'll be determined seasonally. You know, sometimes it picks up in the fourth quarter, sometimes it tracks into the first quarter. So that's kind of where we are right now, and of course, you know, our mix is going to be a little more concentrated towards e-comm in the fourth quarter as well. Right. Appreciate that. But related to mix and volume, perhaps, again, in the third quarter, given the number that you gave in terms of pricing effect in 3Q is quite strong, you said pricing is ahead of your expectations. Do you think that perhaps maybe you've lost a little bit of volume momentum at all with your pricing or not really? And why do you view that to be the case? relatedly, when we do just revenue over tons, the mix was a little bit, a couple points lower than we're expecting. Is that Greif effect or is that e-commerce effect in third quarter from what you could see? And then I had one last follow-on. Okay, George, you know, I'm going to remind you of something we've talked about for years. When we're in price increase mode, we're 100% focused on price increase because those opportunities don't come along that often and that's incredibly important to our business in the long term. Relative to volume, we may lose an item or something like that, but for the most part, these are the same customers we've been dealing with for a long, long time. They understand the situation we're in and they're in the exact same situation. And when you're using revenue over tons, yeah, there's some greif effect in there, no question about it. That's a different segment of the market that we weren't in before. So that's going to impact that a little bit. Hopefully that gives you your answer. It does. And then lastly, you mentioned that the CapEx increase and the maintenance spending tweaks were mostly timing. Was there anything in there that was actually required or maybe not anticipated that you had to pull forward in terms of maintenance or CapEx? Thanks and good luck in the quarter. So, George, I'll give it to Mark after this. But in terms OF timing, no. We were a little favorable in 3Q to what we put out there last time, but that rolls into the 4Q. That's really kind of timing of amortization of expenses more than anything else. In terms of activities, Mark can maybe comment a little bit more on what we're doing in the two mills. Yeah, I mean, George, we always reserve the right for new discoveries, new opportunities. We move the capital up and down as we see fit, and some of it's just timing on engineering and deliveries of equipment for installation. But we're pretty encouraged. We just went through that annual shutdown at Riverville. And, you know, during that week of downtime, for most of that week, we had over 1,400, 1,500 contractors and people in the mill site working on that mill. We found some good opportunities, and it will lay out some really nice upside opportunity for that mill over the next few years. You know, I'm talking about things like some head box, some forming section work, some dryer section work, press section work things in the back end of the mill we're very encouraged by the continuing opportunity that Massalon and Riverville will provide in much in the same way that the Boise mills delivered over the years using that term, the gift that keeps on giving understood, thank you, I'll turn it over next question please Our next question comes from Mike Roxland from Truist. Please go ahead with your question. Yeah, thank you, Mark, Tom, and Ken for taking my questions. First of all, you know, it seems like the Greif assets provided most of the upside to 3Q as price-cost overall was neutral based on our estimate. First, you Know, would you agree with that assessment? And if so, you Now, what drove the strong performance at Greif and why was it better than expected? let me let me talk about uh greif and then tom and kent can weigh in you know we we we took some criticism last year during the first first phase of our ownership of greif because we uh we got heavily engaged in uh fixing the assets right away we we uh you know had all of our technology organization heavily involved in massalon and riverville right from the get-go last september when we closed on September 2nd. So we took advantage of that and very quickly were able to get the mills in a very good position to start delivering results. And we talked about that on the second quarter earnings call, that we had accomplished a great deal from a reliability and a performance point of view. And so, you know, quite frankly, through the summer months into the fall now, we've seen exceptional performance coming out of both of those mills And the same thing on the core choice side of the business. They continue to make improvements. And so, you know, again, that's what we do. That's, you Know, what PCA does best. We've got an incredible technology and operational group and across the board. And so the results speak to that. Tom, Kent, you want to weigh in on that? I'll just add, obviously the integrationists did help a lot, but I would not put it all on Greif. Some of the other things that we do and we do incredibly well is we can utilize these Greif assets in some different ways than they were able to use it since we have such a large system and we're positioned all across the United States. so you know there's some there's some end market restructuring that took place as well within our system which which contributed but that's kind of a there's some puts and takes to that you know the you may move it over to one as opposed to the other and so you know that's why I say you can't you can just hang it all on gripe but it did but it did provide a lot of opportunities for us and as Mark mentioned that's what we do well we get in there and we take advantage of it and we figure out how to maximize these assets in a way that, you know, perhaps, you know, wasn't previously available to the previous owner. So that's, and I think, you know, when I talk about end market structure, that's not only how we're going to these end markets, but also perhaps how we're, you know, some of the opportunities that afford themselves in terms of profitability as well. Kent, you got anything else? No, I'm good, thanks. Anything else, Mike? No. Yeah, it's very helpful. Just one quick one. Just can you help me understand, I mean, Tom, what happened to legacy volumes in 3Q? If you look back the last couple of quarters, you were outperforming the industry by a few hundred basis points. In 3Q, legacy box volumes declined 0.5%. Obviously, you had the ag issue, but I think the 0. 5% when all said and done, when we get the industry numbers, you'll probably be in line with the industry. So wondering what's happened with in terms of the outperformance as just a matter of you may be focusing more on price and maybe less so in volume scale. Well, Mike, let's put it this way. Our objective is profitable revenue growth. That can come in a number of different ways. Price is where our supreme focus at the moment. So that's what's driving our results at the moment. And as I mentioned before, we did have a couple of segments that were pretty large in that have been a little bit of a drag, but it has nothing to do with losing business. It's just that they had some issues of their own, which cut down some of their demand. Got it. Got a big sentence. If I can squeeze one more in, Chris, quickly. Kent, you guys guided 4Q down to be down around 20 cents sequentially. How should we think about the progression from 4Q to 1Q this year, particularly given the fact that the third price increase is flowing through? all right mike without putting too fine of a point on this because we uh we really only guide one one quarter in advance but i mean these are the drivers um you will see continued price improvement from 4q to 1q is as as the as the um the 70 increase the remainder of that comes in okay mix also improves a little bit from 4 q to 1 q as well um outage expense also significantly the P&L hit moves in the right direction. Volume goes down just seasonally. 1Q is, you know, 4Q is sort of the peak. 1Q then comes down a little bit. Mill production up a little bit because we have less outage impact. On the cost side, you're going to see mill operating costs primarily at 4Q, if not even a little unfavorable just because you're in winter. And then you have the normal inflation that hits the, you know, labor benefits, services, all that sort of thing, you know, starting at about 3%. We do the best on that, though, to whittle that down through operational efficiency. So, you know, I gave you a lot of factors there, but, you know, hopefully that gives you at least a start based upon our historical performance when you try to model all this. Very, very helpful. Thanks, guys, and good luck in 4Q. Thanks, Mike. Next question, please. Next question comes from Mark Weintraub from Seaport Research Partners. Please go ahead with your question. Great. Thank you. First, maybe just following up then a little bit on these kind of sequential type analysis since we've been going there. As we think about 4Q v. 3Q, I think at a conference you had sort of talked about something less than 45 cents having been experienced last year might be what you would see this year. Now, is the difference now the kind of more $0.20 reduction you're projecting from 3Q to 4Q? Is that a function of the September pricing? Would that be kind of the main reason why that would have changed? Oversimplified, yes, but I'll give you a little more color on this, okay? We saw a fairly large sequential increase from 2Q to 3Q in price. Given the mix and given the timing of rolling, we won't be nearly as favorable 3Q to 4Q, but the price favorability should be enough to offset the additional cost that we're taking on in the outages. It should be, you know, that's about even, okay? We then have higher operating costs, and, you Know, if you look across the portfolio of costs in our mills and operations, you're going to have higher recycled, higher freight, higher seasonal, okay, offset a little bit by favorable in the corrugated operations just to get a better cost absorption. So, you know, all those factors into place, yeah, we're about, you Know, 20 to 25 down from 3Q to 4Q, but the big help there is realization of the 70 increase, the beginning of realizing that. Hope that helps, Mark. Yes, it does. Thank you. And then, you obviously, you've been doing a terrific job offsetting a very difficult cost environment on the pricing side. I mean, your long-term track record has been a lot about company-specific value creation as well. And you've alluded to several things that should help 27 versus 26 on that score already. Maybe if you could sort of give us like a laundry list, Jackson, Counts, the Box Plan in Ohio, further gains from the Grife improvements, et cetera. I mean, what are the things that big picture we should be thinking about? And lastly, I think the energy projects are more 2028, but maybe update us on your thoughts there. Let me start. Yeah, the energy project, you'll see the benefit more into the 2028 period. Again, we're in construction mode right now at Jackson and breaking ground at DeRidder. We're waiting on permits for the gas turbine installation at the Riverville Mill, so that's pending. But you just hit it on the head. We continue with our capitalization program. Tom, comment on the successful startup of the new box plant in Ohio. We had an incredibly good startup in our new Newark plant. which also allowed us to, you know, announce the closure of Middletown a little bit earlier than what we probably would have otherwise. We've got further installations going in there as we speak, and we're continuing the same cadence, basically, with putting in other equipment and upgrading other equipment in box plants all across the United States. So, you know, we have to be incredibly well-equipped to continue to deliver at the levels that we do for our customers and perform the quality that we have and those sorts of things. I might mention in addition, you Know, the work we continue to do on our proprietary grades of paper is allowing us a lot of opportunity, and we'll continue to do that going forward. And that has a lot to do with our capital expenditures as well. So, you know, Mark, we continue to do what we do incredibly well and we've been doing on a regular basis for the last decade. Another example, Mark is the new winder at the Jackson Mill that had been under construction for over a year. And we got that started up at the end of september and the really the last couple of weeks now uh but it came up incredibly well and uh that that winder's running uh as planned and so uh you know jackson's got a you know a duplicate winder now running 10 000 feet a minute if we need it uh which you know the plan would be to uh put more fiber over that machine and uh you Know but i fully see the jackson mill over the course of the next year and a half or so will become a million-ton-a-year mill, and we've been talking about that for the last six or seven years, that that was the direction we were taking the mill,and that's where we're going. Counts is another example. We've got the second phase of the work going on on the number two machine at Counts to upgrade that capability, so we'll be seeing further benefits, significant benefits, out of the Counts number two machines, which will be productivity, quality, cost. but again this is you know we've got approximately 200 people in the corporate technology organization dealing with these matters seven days a week and you know those of us at the corporate level this is what we do you know and either we're doing and working on operational matters or the groups working on customer based marketing and sales matters and that's what we focus on and that is what we deal with anything else Actually, one really quick one, if I could, then. Maintenance, outage expense, it's high this year. Is that just because things are more expensive, or were you just taking more outages this year than normal? So if we think about next year, should we just assume similar to this year, or not necessarily? You know, good question. It's both. We undertook, obviously, with the Massalon Mill and the Riverville Mill, we undertook more activity. but also we're just doing some things at the legacy mills that we want to get done. And, you know, we always take care of these assets and, you know, in terms of we may have older mills, but if I took you into these mills you'd think they were new mills. And so, you know, but also it's the cost of capital. The equipment costs today are significantly higher than they were just a few years ago. And so whether you're buying a pump or a motor or a new head box, the costs have gone up dramatically just in the last year or so. And then, again, the labor cost to install, if you're having contractors come in, that labor cost is up significantly. And so that's really, it's the amount of work we're doing and taking advantage of the time and the capability to do it and the pure capital cost of these components and the labor cost to do it. So I would mention, you know, we are in a really good position. You know, for the last 10 years, we have gotten ahead of the curve, so to speak, on recapitalizing our, you You know, box plant assets, our mills are in great shape. And so everything we're doing is more on autopilot opportunity, taking care of the customer base, growing with the customers. And, you know, Tom, why don't you add a little bit more to that? Well, just to follow up on that, Mark, I think that, I mean, I think what's, you Know, we've mentioned this numerous times, but, you Now, this cost of capital has gone up, you Know, 2, 3x in a lot of cases, both at the mills and at the box plants. And, you know, so it's imperative in order to be able to continue to grow with our customers and be able take care of our customers and all those other sorts of things to be able to, you know, earn your cost of capital. And, you know that's that's part of, you know, that's that's part of a struggle, you know, the week that we have every day to make sure that we're able to do that. And, you know to Mark's point also is, you know, as I mentioned, you know, we've been at this for a long time. So a lot of a lot of those improvements that we've that we put in place were prior to some of these exorbitant increases that have that we're now encountering but uh you know those are those are definitely considerations going forward and uh you Know all these all these projects that we got going on also uh god only knows we need we need all these we need these tons too they're they're sold already. Appreciate all the detail. Thank you. Thanks, Mark. Next question, please. Our next question comes from Anoja Shaw from UBS. Please go ahead with your question. Hi. Good morning. Morning, Anojas. I wanted to ask about synergies. I think you said they're running ahead of plan. Any way to put a finer point on that, like how much it contributed in 3Q, and also are you still expecting 30 million, 30 million for this year next year or do you think you can end up doing a little better than that no we're doing a Little Better Than That we're we're on a run right now between 40 and 50 um and and you know we we we called out um 45,000 tons of increased integration from PCA into the acquired that's that's a big piece of it there's other integration benefits and then there's just the reliability, cost performance, and whatnot at the acquired Greif Mills. You know, run rate, you know, 70,000 more tons now than what it was doing at the time of the acquisition. So really, those buckets are the factors and the synergies at this point. Right. Okay. And then switching over to end markets, have you seen any pickup? So I know the FDA declared the cyclospora outbreak done. Have you seen any improvement in your shipments, recognizing that it's probably a bit of a seasonal market? And then also, can you talk about what you're seeing in your other end markets, industrial and consumer? Anoja, I'll take a stab at this. You know, I've mentioned ag numerous times. You know we do see some recovery in ag. The question will be is how much of that occurs in the fourth quarter and how much rolls over into the first quarter, and does weather cooperate. That's been also a little bit of a drag. Protein markets have been, especially on the beef side, have been down now for quite some time. Everybody's heard about the level of the herds and how long it's going to take to get those herds back up and get that volume back up, so that's going still take some time, But, you know, the other market, e-com, is still, you know, not growing at the same rate. It had grown, you know, for a long time, but still is a growing market and still doing quite well. Outside of that, the other markets are kind of where they are. I mean, we'd like building products to pick up some and things like that. That has to do with government regulations and a whole bunch of other things and interest rates. So, you know, there's lots of puts and takes, and we're in so many different markets and we've got, you know, thousands and thousands of customers in these various markets. So it's hard to predict any single one. Ag has stuck out more than others just because of what's gone on weather-wise and the lettuce and all the other things that have occurred. Right. Okay. Thank you very much for that. I'll turn it over. Thanks, Anosha. Next question, please. Our next question comes from Phil Ung from Jefferies. Please go ahead with your question. Hey, guys. Congrats on another strong quarter. I think if I heard you correctly, you guys are doing a little more extensive work in the fourth quarter with it to DeRidder and I think Massillon as well. My question is, you know, does that, you now, unlock potentially more capacity, more debodling, necking? I think when you guys announced idling Lula and deballing some of the other mills, I had a number in mind, roughly 6 million tons of capacity once it's all said and done, but you guys always find new things to do. So can you kind of help us think through your capacity to produce just because, as you kindof pointed out, market's very tight? Yeah, I mean, if you think about our expected run rate for 2026 is probably going to be 5,757,000 tons. So, you know, I would think we're on track, and I've been talking about this for the last year, that, you know, we'll get to be a 6 million ton system with this work that we're doing. And so it's basically, you know, we get through these outages next year at counts and some of the work we've got going on at Jackson. We certainly have that capability that, you know depending on the grade mix you're producing, you know, we're bumping up against that 6 million ton capability. But this is ongoing. This is what we do. We continue to stretch the capability. We see the opportunities. That's why I mentioned earlier on the call the annual shutdown that just occurred at Riverville Mill. It unlocked these opportunities before our eyes in terms of some capital input will greatly improve the productivity and performance of the Riverville mill. And so that's going to be another, you know, piece of the, you know, container board supply over the next couple of years as we get that equipment installed and that mill stretched out. Massalon Mill is a good example. You know, Massalon Mills performing incredibly efficiently compared to a year ago. And so, you know, these are the little things that we do that, you know, make Massalon such an important mill to us. You've got the new box plant down in Newark. I believe it's like 80 miles from the Massalon Mill. So it's basically shuttle truck distance away. The Ashland box plant is probably 40 miles away from Massalon. So Massalon being a very efficient mill just within the first year of ownership presents an incredible opportunity. But we'll continue to stretch out. But, you know, long answer to your question, you know, we're definitely at that 6 million ton, you know, bumping that capacity and with the projects we've got coming on over the next six months to a year. Gotcha. And any early read on CapEx next year and big projects in the horizon? I mean, you spent most people would be happy with, but anything that you have up your sleeve that we'll talk about? We'll give you a better target in the January call, as we always do. But I mentioned some of the bigger projects we know that really the big spend over the next 24 months will come from the gas turbine installations. We've got three gas turbines going in and we've got to finish up the counts number two machine improvement work. That was a fairly sizable amount of work. And then the rest of it is just the whole host of opportunities that present themselves across the board in the box plants. You know, we're always you know, it's going to be the one off equipment. It's the EVOLs, the VOPs, you know, the various rotary die cutters, you know, new corrugators to continue to grow with our customer base. That's all customer driven. And that's the beauty of that, that we invest with the customer. And so I think without giving you a number, if you think about the cadence of our capital for the last couple of years, we're going to take advantage of those type of opportunities. We're generating significant cash flows. So I think the question will come, as it has always been, what are we doing with all the excess cash? So I'll leave it at that. Okay, super. Perhaps a question for Kent. Kent, you were kind enough to give some color sequentially from Q4 to Q1. Outside of the labor and benefits piece, which steps up every year around 1Q, are you starting to see your major input costs level off here just your operations freight and stuff like that uh and then any color on the september increase how much of that uh is flowing through in q4 versus 1q is it like a 2080 split okay so take your last one i think it's probably a little more into q4 than what you said but you know i i don't want to throw a number but it's better than 2080 in terms of q4 versus q1 um all right so on on input cost freight recycled um you know right now at least looking looking past 4q we got to assume it stays at elevated levels okay until we see some sort of breakthrough and and the drivers on those it it you know red right now i'm assuming you know at at fairly high levels similar to what we're forecasting for q4 Okay. That's helpful. I mean, margins should improve nicely with cost leveling off. Thank you so much. Thanks, Phil. Thanks, Bill. Next question, please. Our next question comes from Anthony Petinari from Citi. Please go ahead with your question. Good morning. Morning, Anthony. Just following up on the energy projects, I think at the beginning of the year, you talked about the gas turbine projects taking maybe two and a half years. And I'm wondering if I got that right and if kind of in the current operating environment, which is pretty tight, are you sort of on track for that? Are there possibilities to move that forward? You know, because there are three installations at three different mills, they're moving in three different paces we're currently you know we're actually in installation mode at the jackson mill that's moving along very quickly and part of that was we you know we we were able to get the permits very quickly to move on that uh through the you know summertime period and so uh de ritter is um you know is somewhat behind that and then virginia with the Riverville mill. We're going through a permitting process, and that's taking a little extra time. Part of it is we're just comprehensively looking at the entire mill footprint with the mill opportunities in terms of productivity on the paper machine side, the pulp mill side, and comprehensively look at what that mill will become over the next few years. So there's a little bit of extra time in the permitting processes. So that would be kind of like a late 2028 into, you know, the truly just the, you know, two and a half years out to see that one come on at best. That's why it's really a multi-year phased project. Got it. Got it, that's very helpful. And then I apologize if this was asked earlier, but in terms of the most recent box price hike, when we think about the implementation and the timeline for that hike? Should we think about that as being basically the same as the first and the second hikes this year? Or is there anything about, you know, we're kind of towards the end of the year or the competitive environment? Just how would you compare the implementation timeline for the third one versus the first two, just based on where we are close to the end of the year. Anthony, this is Tom. Our timeline is pretty much the same on each of these. And I gave you the, you know, I gave it in the commentary. You know, we got the first is the end. We still, you now, we still are realizing some of the second 50 in the fourth. We'll realize a little bit of the 70 in the 4th and the majority will come in Q1 of next year. So the cadence on these are pretty much the same. Now, you know, you may be asking the question because it's not every, you knows, not every day that we get, you now, three back-to-back-to back. So, you know, it's, but that's the, that's how this, that how the cadence is working for us right now. And it's all based on the normal, the normal procedures that we go through with our customers. Okay. That's helpful. I'll turn it over. Thank you. Next question, please. Our next question comes from Hilary Casanato from Deutsche Bank Securities. Please go ahead with your question. Hi, thank you for taking my question. Just a quick clarification question on the $70 increase. You said you expect obviously more in the first quarter than the fourth quarter, but are you expecting the full $70 to be realized by the first quarter or do you think that that could extend beyond the first quarter into the second or even the third. Hillary, this is Tom. In the normal cadence that I just talked about, the great majority of the realization will all be in the first quarter next year. Okay. Got it. Thank you. That's helpful. And then just with recycled fiber costs continuing to increase, has anything changed in how you're optimizing the mix between recycled and virgin fiber? No, you know, again, we take advantage that it's a mill-specific opportunity, mill by mill, location by location. You've got transportation, you know, considerations on OCC. And then, again just what the pulp mill itself is designed to do. And so you balance out your fiber needs with OCC in general, DLK. But in the conditions we're under in terms of, you know, with the tight market need for container board, you know, we've got everything pretty well maxed out. Virgin Craft, you know, productivity, OCC plant productivity. So it's basically, you know, utilizing everything we can take advantage of right now. Got it. Thank you. That's helpful. Thank you. Thank you. Any more questions? Yes, sir. We have a follow-up question from George Staffos from Bank of America. Please go ahead with your follow-on. Hi. Thanks, guys. I'll make it quick. Mark, can you talk a little bit about what kind of lead times you're seeing on equipment? You talked a little about turbines, and obviously you already had purchased those, and opportunistically so. But if we think about converting equipment versus equipment you might need at the mill, what are your lead times right now? And how would those compare versus what you're hearing about, you know, elsewhere perhaps? And then, you know, when we think about Greif, the synergies which have now moved up, the turbine project, and then the mill realignment optimization program we announced last year into this year, or maybe it was the beginning of this year. I know it depends on where you start the clock, but I think we've talked in the past. Do you think you've added from all of that half a billion dollars to your EBITDA when you think about those three or four larger buckets? Thanks and good luck in the quarter. George, I'll knock off your last one. The answer is we're pretty darn close to that. There are some inflation effects to that, but yeah, we've talked about that before publicly and in response to your prior questions, but yeah, that's still a pretty good number there. Just marking a market there. Go ahead. And then on some of the lead times, it depends on what you're ordering. If you're orderings some very complex pieces of unit operations, the lead time can be longer. In some ways, there's some opportunities that have taken place. um you know some some of the equipment suppliers actually don't have as big a backlog as they had a few years ago so the lead times have shortened up um but more than the lead time it's the cost whether whether you know it whether two years ago it took 14 months to get something delivered now you get it delivered in 10 months it doesn't matter if the cost is is up 60 percent from what it was a year and a half ago and so it it's uh it's the absolute cost to acquire the the piece of equipment and then the installation labor that goes into it and the associated um you know installation factors that that have increased in many cases have doubled the cost of uh of capital projects just in the last, you know, two years. And I'd add that if we're building at all, I mean, you know, you're now competing with data centers for land and for steel and all these other things that are going on. So those construction costs are just going through the roof as well. We're definitely seeing if you think about contractor availability is a good example. And what Tom just said about data centers. With any specific region, if you are in the building and trades and you have an opportunity to go work at a data center, quite frankly, you know, if You look at the pay scales and locations, and quite frankly just the magnitude of the build-out, it's put an incredible demand nationwide on a lot of the building and trade. So again, that's another factor that we deal with. We're fortunate we We have a good group of contractors that we've aligned ourselves with. Again, we have our own incredibly talented maintenance organization that we use across the board. We call that the traveling team in conjunction with the technology group. So we're able to overcome a lot of that. But still, again, the delivery times is one factor, but it's the absolute cost of the equipment that's really the factor. Mark, I understand, but if I was ordering a new paper machine, I was converting something. I'm not getting into business, but let's say I was. Am I looking at two years on that? If I was buying a new Flexa folder glue, let's Say I was buy an Evol, not you, but me, am I a year before I get that equipment? That's just what I'm getting at. Thank you, and good luck in the quarter. Thanks again. Yeah, I mean, it just depends on the equipment you're buying, the vendor you're buying it from, what country it's coming from. Again, you know, the permitting issues, the contractor's availability to install it. But I can tell you, you Know, investing in this business is not for the faint of heart anymore. You know, so the game has changed significantly. Got it. Thank you so much. All right, George. Thank You. Jamie, any more questions? Mr. Colzan, I see that there are no more questions at this time. Do you have any closing comments? I'd like to thank everybody for joining us today, and as usual, we appreciate the back-and-forth question-and answer period and look forward to talking to everybody in January. With that, have a great rest of the year and a great holiday period. Thank you. And with that, we'll wrap up today's conference call and presentation. We do thank you for joining. You may now disconnect your lines. Thank you.