Magnera Corporation

Good day and welcome to the McNaira second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1-1 on your touchtone telephone. Please note this call is being recorded. I would like to turn the call over to Robert Wallminster, Executive Vice President of Investor Relations. Please go ahead.

Thank you operator and thank you everyone for joining Magnera's second fiscal quarter 2026 earnings call. Joining me I have Magnera's chief executive officer Kurt Bagley and chief financial officer Jim Till. Following our prepared remarks we will have a question and answer session. To allow everyone the opportunity to participate we ask that you limit yourself to one question with a brief follow-up then fall back into the queue for any additional questions. A few things to note before handing over the call. On our website at magnera.com, you can find today's press release and earnings call presentation under investor relations. You can also go directly to ir.magnera.com to review the investor presentations from our recent conference attendance. Our annual report and proxy statements with the SEC can be found on our website under investor relations. As referenced on slide two during the call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measures in our earnings press release and in the appendix of the presentation available on our website. Additionally, a reminder that we will make certain forward-looking statements. These statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore are subject to risks and uncertainties. Actual results or outcomes may differ materially from those expressed or implied in our forward-looking statements. Some factors that could cause the results or outcomes to differ are in the company's latest SEC filings and our news releases. These statements speak only as of today, and we undertake no obligation to update them. I will now turn the call over to Magnera's CEO, Kurt Bagley.

Thank you, Robert. Good morning, and thank you for joining our call. I am pleased to present our second quarter results and highlight our performance amid ongoing macroeconomic uncertainty. My remarks today will focus on four key themes. First, our earnings of $90 million of adjusted EBITDA were in line with expectations after adjusting for weather-related factors highlighted during our February earnings call. Our strong free cash flow enabled us to pay down $36 million of debt in the quarter. I will discuss the winter storms that affected more than 50% of the United States, causing significant supply chain disruptions, impacting both our customers' operations and our own. Third, the war in the Middle East has created global challenges on many fronts, including having a direct impact on our raw material and supply chain costs. Lastly, I'll discuss how Magnera has responded to these challenges and continues to strategically invest in our business to position us for future success. The global economic environment remains strained, though there are signs of resilience within the Americas. Elsewhere, we continue to encounter tempered demand, particularly in Europe. Compounding these challenges, new geopolitical conflicts have contributed to higher operational costs and further supply chain disruptions. Magnera's scale and global footprint are built for times like this. Through localized sourcing, disciplined cost management, and success in project core initiatives, we have mitigated many of these impacts. We remain focused on managing our controllables. As mentioned, our largest region, North America, was impacted by back-to-back winter storms, Fern and Hernando. Fern required the temporary shutdown of 13 manufacturing sites resulting in lost production impacting shipping days depending on the location. The second storm, Hernando, affected seven plants, but as with Fern, there was no significant damage and shipping resumed. We anticipate recouping most weather-related setbacks in the second half of the fiscal year. Transportation lanes remain tight in the quarter and are expected to require additional time to stabilize. Our teams did an excellent job responding to the storms by working together to prioritize the safety of our employees and assets. As the weather improved, our teams quickly assessed impacts and initiated plans to restart production and supply to our customers. We had no major weather-related damage at our plants. Next, I want to talk about how the conflict in Iran impacted us in the quarter. Our strategic principles to procure, manufacture, and sell within our regions provides a competitive advantage given our extensive asset base and leading positions in specialty materials. The majority of our business is sourced and sold locally within the respective regions, providing us and our customers reliability of supply. The rising costs in raw materials, fuel, container shipping, and delivery times notably affecting resin, pulp, and energy expenses, constitute approximately 70% of our cost of goods sold. Additionally, inbound and outbound transportation expenses have increased. To address these pressures, we are working closely with customers to transition pricing mechanisms to a monthly cadence, helping mitigate timing lags and cost recovery. While enhancements to our global energy program have helped offset some of the increased costs, prices remain above pre-pandemic levels. Further details on the financial impact and working capital implications will be provided by Jim in his update. Before transitioning to Jim, I want to reiterate the resilience demonstrated by our organization in a persistently challenging market. In the Americas, industrial activity remains subdued despite signs of stability as the sector contends with tariffs, geopolitical uncertainty, and policy ambiguity. The U.S. economy persists in a stable yet cautious state, while South America shows early signs of improvement following proactive measures addressing deflationary pressures and elevated transport costs from Asia. We expect a stronger performance in the latter half of the year in this region. And excluding weather impacts, volumes in the Americas would have reflected a positive year-over-year increase. In Europe, the manufacturing index has seen modest improvements. However, business sentiment remains cautious, mirroring trends from recent years. In the rest of the world, year-over-year volume change was down 4%. We achieved mid-single-digit volume increases globally in infrastructure product lines, driven by seasonality and continued emphasis on consumer solutions. Adult personal care categories, especially in continence, and feminine hygiene also experienced solid growth, supported by demographic shifts and higher consumer adoption. Initiatives from governments and NGOs to destigmatize incontinence products, combined with customers' preferences for innovative and premium features, have bolstered demand. We are investing in our business for growth and improving our competitive position. We initiated two critical projects at our Gernsback and Lidney facilities that will reduce our energy consumption and help advance our sustainability agenda. Our litany project will reduce our electricity and water usage by installing modern vacuum blowers. We appreciate the support from the Industrial Energy Transformation Organization in our decarbonization efforts. Our team at Don Buell recently commissioned a new film asset that will modernize our product offering for elastic backsheets in hygiene, generate new volume, and provide energy, raw material, and plant efficiency improvements. Each of these investments is aligned with our capital allocation strategy and demonstrates our commitment to improving our business over the long term. Finally, I would like to highlight the ambitious commitments detailed in our latest corporate sustainability report. This document underscores our resolve to operate transparently and deliver measurable progress. We have set targets to reduce Scope 1 and 2 emissions by 42% and Scope 3 emissions by 25% by 2035. We are also aiming for a 10% reduction in water consumption and plan to achieve zero waste to landfill at 75% of our sites or 34 locations by 2035. These goals reflect our commitment to building a more resilient, sustainable enterprise, and making meaningful contributions to a better world. I will now turn the call over to Jim for a comprehensive financial update.