管理層發言
Hello, and welcome to the Magnera Q1 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. It is now my pleasure to introduce EVP, Investor Relations, Robert Weilminster.
Thank you, operator, and thank you, everyone, for joining Magnera's First Quarter 2026 Earnings Call. Joining me, I have Magnera's Chief Executive Officer, Curt Begle; 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. Lastly, we filed our annual report and proxy statements with the SEC, which can be found on our website under Investor Relations and Financials.
As referenced on Slide 2, 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, Curt Begle.
Thank you, Robert. Good morning, and thank you for joining our call. I'm pleased to present our first quarter results and highlight the momentum that we've carried into 2026. For today's update, I'll focus on our financial performance, highlight key innovation efforts to improve our differentiated portfolio mix and update you on how our business excellence journey is aligned with emerging macro trends. First, our sequential earnings improvement over Q4 was in line with our expectations and reinforces our 2026 adjusted EBITDA guidance of 9% growth with our synergy realization and Project CORE transformation programs tracking as planned. It is noteworthy to mention that despite consumer spending concerns related to inflation, our customers are indicating resiliency and demand for the essential products we provide. Magnera's improved earnings for our Rest of World segment is a result of the intense focus on addressing our cost structure in competitive end markets while increasing our consumer solution mix in our portfolio.
Our organic volume growth in North America helped offset the expected year-over-year volume decline in South America due to competitive import pressure from Asia. There are open inquiries in several countries connected to antidumping concerns and potential countermeasures. We expect earnings stability in South America in the coming quarters as we lap the prior year comparison in the third quarter. The improved mix in our personal care businesses is a result of addressing the demands of the largest consumer products companies and expanding our premium product lines in private label applications. The continued strength in our consumer solutions is a result of ongoing sustainability infrastructure investments in Europe and Asia. The benefit of our global scale anchors our ability to better manage energy efficiency through increased productivity. I've tasked our Americas team to increase operational progress in North America through targeted investments and operational excellence to enable growth opportunities in oversold platforms.
As predicted, the South American markets are stabilizing, reflected by the supply chain alignment we have with our customers. Pivoting now to innovation on Slide 7. I will highlight the positive impact our efforts will have on our business mix in 2026 and beyond. Shortly after we launched Magnera, our resources were intentionally deployed to programs that were part of our broader strategy to be a cost-competitive product leader in our chosen markets. We thrive on being the trusted solutions partner to meet the most challenging consumer needs. The presentation materials provided highlight a small sample of our key leading innovations in two categories, with the first being transformational by design. Although these innovations take longer to realize full potential, they address key end market needs. We identified a second category as incremental improvements to current products or introducing an existing innovation to a new market.
Last quarter, we launched a transformational breakthrough in barrier protection for health care applications. This proprietary innovation delivers fluid repellency requirements for health care professionals while ending the need for PFAS chemicals. This innovation not only resolves end-of-life material concerns, but it provides the mission-critical performance demanded by the end user. Another exciting development is the progress that we have made with an advanced materials solution that extends battery life and accelerates charging times. As lithium-ion batteries grow with vehicle electrification and increasing defense needs, we developed a product that is a candidate for a government grant supporting regional supply chain priorities in critical national security programs. Next, I'll speak to innovations enabled by Magnera's existing intellectual property and platform capabilities to improve existing products.
Our Kamisoft platform is a step improvement in softness while maintaining barrier and tensile strength. We launched this product in North America and have taken that platform to the remaining regions. Last year, we had $15 million in sales, and we're seeing growth in mid-single digits as we go into 2026. The benefits to consumers are common in branded and private label personal care products. Before completing my opening comments, I want to clarify how we are winning in the market. In the first quarter, our premium hard surface disinfectant wipes technology proved its value in the face of an elevated flu season. Our ability to meet our customers' dynamic supply requirements demonstrated our flexibility and localized supply chain value, resulting in strong growth in our Americas region. In addition, we were able to support the growing needs for premium private label baby, consumer and dispersible wipes.
A second bright spot was growth in European infrastructure enabled by our strong position in essential utility investments and maintenance projects. As Europe has prioritized infrastructure to provide continuity for critical utilities and data cables, we have made operational improvements to increase efficiencies and meet the growing demand. Lastly, our branded Geca Tape, which provided required protection against corrosive environmental elements found above ground and undersea for high-voltage cable applications and wind and solar energy expansions, also provided nice gains in the quarter. Turning to Slide 10. Our strategic priorities are clear, disciplined, and intentionally designed to position the company for sustained long-term success. At the foundation of our strategy is a commitment to strengthening our global cost structure, ensuring we operate with efficiency, scale, and competitiveness required to earn the right to win in the markets we serve.
Equally important, we are focused on delivering product leadership by fostering thoughtful, collaborative innovation across the organization and with our customers. By aligning deep market insight with technical excellence, we aim to develop differentiated solutions that create enduring value and reinforce our leadership positions. Finally, we are advancing a comprehensive set of commercial excellence initiatives to ensure we fully realize the advantages of our portfolio, capabilities, and market positions. Through disciplined execution, sharper focus on priority segments, and stronger customer engagement, we will maximize our impact in the spaces where we choose to compete and grow. Our strategic direction was constructed to capitalize on established positions in key markets, as noted on Slide 11. By design, we continue to balance our product portfolio to ensure financial stability in all economic cycles.
We remain confident in our ability to deliver on our full year financial guidance. Our optimization efforts are well underway and we continue to cultivate an innovative culture aligned with our commitments to our customers while providing the stable financial results our investors expect. At this point, I will conclude my opening remarks and invite Jim to provide a detailed overview of our financial performance.
Thank you, Curt, and good morning, everyone. Turning to the financial highlights on Slide 12. As Curt referenced earlier, our quarterly earnings performance was in line with expectations. This performance reflects the continued discipline and execution of our global teams who delivered meaningful cost reductions, advanced productivity initiatives and further optimized our product mix across the organization. Importantly, during the quarter, we made substantial progress on Project CORE, positioning us to realize earnings benefits as we continue to optimize our global footprint and align our cost structure with long-term demand trends. For the quarter, sales were $792 million as strength across our consumer solutions categories was offset by weaker performance in Latin America as well as continued broad-based market softness in Europe. Despite these headwinds, our team remained focused on disciplined pricing, portfolio management, and cost containment.
Adjusted EBITDA for the quarter was $93 million, flat year-over-year on a constant currency basis as contributions from synergies and cost reduction initiatives offset the impact of softer demand in Europe and South America. Turning to our segment performance, beginning on Americas on Slide 13. The Americas division delivered 2% organic volume growth during the quarter, driven primarily by strong demand in our wipes and adult end markets. These gains reflect both resilience in our core categories and the effectiveness of our commercial execution. As we've discussed in previous calls, the performance in South America baby business was challenged by heightened competitive intensity, which began in the second quarter of fiscal 2025. In addition, reported revenues were impacted by contractual pass-through of lower raw material costs, which reduced revenues but did not have a material effect on profitability.
Adjusted EBITDA in the Americas declined by $3 million compared to the prior year. This decline was largely attributed to volume and product mix pressures in South America. While we are not satisfied with this performance, we remain confident in our ability to improve results through the balance of the year. Our teams are actively executing on a range of targeted initiatives under Project CORE, which are focused on enhancing efficiency and optimizing the regional footprint. As we expect these initiatives, combined with continued synergy realization and strong emphasis on operational excellence will support margin recovery in the coming quarters. Turning now to the Rest of World division on Slide 14. We experienced year-over-year decline in revenues during the quarter as strength in our Asia healthcare business was more than offset by ongoing general market softness in Europe and the pass-through of lower raw material costs.
While the top line conditions in Europe remain challenging, we are encouraged by the resilience in the earnings of the region. Adjusted EBITDA for the Rest of World division increased by an impressive 9% to $35 million. This improvement reflects the continued progress on our disciplined cost management and synergy realization as we focus on delivering differentiated products into end markets with attractive profitability. This performance of this division highlights the benefits of our strategic focus on operational efficiency and portfolio optimization. Turning now to our capital allocation priorities, which are outlined on Slide 15. Free cash flow over the last four quarters totaled $97 million, representing a free cash flow yield of approximately 18% based on market capitalizations at the end of the quarter. Our strong cash generation underscores the quality and resilience of our earnings and demonstrates our disciplined approach to capital deployment.
At the end of the quarter, we had approximately $550 million of available liquidity. In the near term, our capital allocation priority remains strengthening our balance sheet as we've committed to deleveraging in line with our stated capital allocation framework as we work towards our targeted leverage ratio of 3x. This disciplined approach ensures that we maintain financial flexibility while positioning the company for long-term value creation. In support of this commitment, we repaid $27 million of outstanding debt during the quarter and expect to repay approximately $100 million over the course of the fiscal year as we deliver sustained and attractive returns to shareholders over time. This concludes my financial overview, and I'll turn it back over to Curt.
Thank you, Jim. Now that Magnera has officially entered our second year of existence, I would like to thank our valued employees for their willingness to embrace challenges and execute on our demanding playbook. Despite a dynamic macroeconomic environment, we expanded margins through disciplined operational focus and delivered a strong financial quarter. We are committed to increasing value for our stakeholders through earnings growth and robust free cash flow generation. Our priorities are clear: operational excellence, balance sheet strength, disciplined capital allocation, and strategic investment in growth opportunities. These actions position us to secure long-term shareholder value while maintaining flexibility in a competitive global environment. Operator, please open the line for questions.
分析師問答
Our first question comes from Gabe Hajde with Wells Fargo.
I wanted to start with, Curt, you kind of laid out some potential intervention antidumping and countermeasures that are being explored. Can you just talk about maybe timing of those? And I'm assuming most of that sits in South America. And again, like if you've seen any change in behavior on the competitive landscape front? And then sort of correlated to that, we've seen some of your customers merging or pursuing some partnerships in the market. Has this changed conversations at all at this juncture?
Gabe, thanks for joining the call this morning and for your question. To begin with the antidumping situation, there are some legislative proposals in Brazil, and we anticipate that these will reach a conclusion around May. We're optimistic about the ongoing conversations. Recently, there have been some antidumping measures related to polyolefin materials entering the region, and these have now been proposed and expanded to include the nonwoven materials that we manufacture and ship within the country. Regarding customer dialogue, we have seen a stabilization in our discussions with customers and alignment with the supply chain. We are encouraged by the shift in our portfolio towards higher-end applications in the region that are beginning to grow. Additionally, in South America, we are noticing an increase in the adoption rates of adult incontinence products, partly due to government subsidies.
These rates are rising, and the quality of the products available in the region is leading to outcomes similar to those observed in the U.S. and various European countries. We're optimistic about this trend, and we are already witnessing a change in our product portfolio in South America where we have historically focused on baby products. Currently, baby products comprise only 20% of our total portfolio in that region. We expect to see continued improvements and changes in our product mix. I believe your other question was about some of our customer partnerships. Could you please clarify what you were referring to?
Yes. There's just been some merger activity or kind of cross-border partnerships that have been entered by some of your customers. And I'm just curious if that's enhanced, changed the dialogue with those customers and perhaps...
Yes. Look, I always view that as a pretty positive thing as it relates to our situation because of our global scale and because of the relationships we have with pretty much every customer that's in the spaces that we serve. And so if anything, we see that as an enhanced opportunity for further innovation and driving some supply chain efficiencies on their end. And so again, we stay very close to those customers. Obviously, there's dialogue that takes place. You're limited in terms of how much can be done prior to the actual conclusion of the two organizations. But we've had a couple of those customers more recently announce the intent to either combine, merge or acquire, and so we stay very close to them and also where they're growing, right, where they're putting some of their own investments as it relates to capacity additions or just recapitalization of their existing assets. So we stay pretty close to that as well.
So we view it as a very positive thing historically. And now with the bandwidth that we have inside the organization and the diversity of the portfolio, it gives us a greater opportunity to have the seat at the table and really find ways to solve their needs. Look, they're all looking for cost innovation opportunities, but also the innovation portion of differentiation on the shelf. And that's really where we put a majority of our efforts as it relates to our innovation team and commercial excellence team to stay in front of them.
Understood. So more of an opportunity. Just a point of clarification, you said adult incontinence approaching 20% of the portfolio down specifically in South America?
Correct. As we shared in some historical information, our Personal Care segment constitutes 47% of our total enterprise. This segment includes adult, feminine, baby, and healthcare products, and globally, we’ve maintained a roughly 50-50 split between adult and baby products, which has significantly increased over the past five years from the adult side. South America has been somewhat lagging, primarily focused on baby products, with lower adoption rates for adult incontinence. However, as that portfolio in South America reaches 20%, I expect to see a similar 50-50 split in the next three to five years. In more mature markets like North America and Europe, I anticipate that split may shift from 50-50 to closer to 60-40. It takes about three to four baby diapers worth of material to make one adult incontinence product. We continue to capitalize on our platforms due to consistent materials and demands concerning discretion, form fit, and function. Additionally, we are heavily focused on providing our customers with effective feminine care products to enhance that segment as well. Overall, I'm encouraged by the developments in South America, which seem to be progressing even faster than I expected a couple of years ago.
Got it. I wanted to ask a couple of our companies thus far have mentioned weather. I know a decent amount of your plants kind of sit in the corridor where some of these storms came through. So any impact, this is more of a near-term question, but just any impact from that and how we should think about it?
It's been an interesting winter, to say the least. This is the first time we've seen so many sites affected by the storm, and our customers were also impacted. In terms of long-term demand, we are still expecting what we had projected for the remainder of the year. Thankfully, our teams did a great job in preplanning and prioritizing safety, which meant that call-offs related to employees were manageable. Almost all our facilities in North America felt the effects of the initial storm, which we estimate affected about 10% of our shipping days in that region. We anticipate some catch-up during this quarter and into the next but expect minor impacts on shipments and timing. However, we will regain overhead absorption as operations ramp back up. The recent storm in North Carolina also impacted us since we have a significant presence and customer base in that area. I'm proud of our team's ability to quickly resume operations and get products moving again.
So far, we have not encountered any major disruptions in our supply chain logistics. As stores replenish inventory and some customers ramp up, we'll keep monitoring overall freight availability and logistics. Fortunately, many of our customers handle pickup, so we're helping them find the best routes to receive their products. We are not in a situation where we can't fulfill customer orders; it's about managing inventory and ensuring store shelves are stocked, which we will continue to handle effectively.
And our next question comes from the line of Kevin McCarthy with Vertical Research.
Curt, on Wall Street, I think some investors have gotten excited about the uptick in PMI in January. And I'm curious, as you look across your portfolio, are you seeing much evidence of either improved underlying demand and/or some restocking activity as the calendar page flipped from December into January?
Kevin, thanks for joining the call. Good to hear from you. I think you and I have had some dialogue about destocking, restocking, and I try to avoid those topics because from our standpoint, we try to be on a short cycle with our customers. But in general, we've experienced some of the same demand trends that you would expect in North America in particular. So as we mentioned on the call, we have experienced growth in North America. We would expect that to continue on and we forecasted that for the guide. Europe continues to be a little bit of a concern just as it relates to overall demand dynamics, but we had also put our guide toward minus 3% in the region. I think it was minus 5% out of the first quarter. We'll continue to monitor that and take the appropriate actions. But I'm not ready to wave the flag and say, hey, demand is just going to be tremendously robust. However, we're seeing or experiencing the same signals that maybe some of the consumer products companies are sharing as well, which would be a positive thing. But for us, it's just to remain disciplined close to our customers and be ready to take them on when they need the additional product. So we'll continue to monitor it. But optimistic for sure, but we're not putting that anywhere in our outlook at this point.
Understood. And then secondly, I was wondering if you could provide an update on Project CORE, maybe review what you've done so far and talk through the next steps or mileposts we should be thinking about there?
No, thanks for that question. Yes, so Project CORE, we mentioned a little bit on the call, I've been very pleased with the execution from our teams globally. As we mentioned before, it was impacting all regions, and we really targeted those areas where it was the longer supply-demand dynamics related to the platforms that we are serving. So just as a reminder, some of the spun bond technologies that we have inside of the system, we focused on prioritizing investments on those lines to more premium applications, but also taking the appropriate measures to remove some of the capacity from our system that, again, will help inorganically kind of shape up what we would expect to have better utilization rates globally. We had a slight benefit in the first quarter as we expected, and we'll see that continue to ramp up throughout the balance of the year, quite a few actions in this quarter that will start to reap some of those benefits and then blended in over the course of the next two quarters.
So still very much in line with what we had anticipated in the range of $15 million to $20 million of benefit. We had certain executions that have already taken place on time, on schedule, slight delay on a couple of others, but nothing materially different than what we've already put a guide toward. But again, for us, there are certain areas and certain platforms inside of our network where I'm pushing our teams to be able to drive more productivity because we're getting much tighter utilization rates than historically we've experienced. And so we'll continue to monitor that. But just in terms of the overall Project CORE-related programs, well on schedule and well within what we provided in our guide.
Very good. And then last one for me, if I may. If I look at your Slide 11, you have a nice snapshot of the portfolio. And you have six categories there essentially. I was wondering if you could speak to the outliers, maybe help us understand where you're seeing the strongest positive growth and on the other end of the spectrum, if there are any pieces that you think are running subpar at the moment or opportunity for improvement as the year progresses? I'm guessing adult might be in the positive category based on your prior comments. But any additional color along that framework would be helpful.
Yes. Look, and I think it's important to look at it by segment or region as well. So particularly in North America, we are seeing some positive implications as it relates to the innovation that we've had on the baby front. And if you look at store sales data in the U.S. markets, baby has ticked up slightly. So it's very low single-digit growth, but adult continues to gain momentum. Wipes, as we've talked about, is an excellent enterprise or franchise for us inside of the portfolio, particularly as you look at some of the proprietary technology, and Kevin, you had a chance to see it in our Mooresville site during one of your visits; that Spinlace technology and that proprietary technology has really certainly gained up momentum, and we've been able to grow with the market and support our customers as they've grown in those areas. From an infrastructure standpoint, we highlighted Europe on this call.
That's an area where it's a nice mix of business. It's a nice niche application for us. But when we look at North America, we also have a strong TYPAR brand, and we continue to find ways to evolve that portfolio by having some additive products within that space. What I would say is on the home food and beverage side, this is a very strong position that the historical Glatfelter business had. And so a big focus we've had there, as we've talked about before, the qualification of other materials, finding ways for compostable solutions for our customers and the benefits we can provide them as well. And so that business, I would consider stable. The team has done a nice job of securing the right contracts, the right mix of business that we want to run. And we all root for cold season, so people drink more tea and coffee. But in general, that business is very stable, I would say, because a big concentration in Europe, it's not necessarily down negatively in a big way, but it's more tempered than what we'd see in other parts of the world.
And then lastly, healthcare being relatively small in terms of the total portfolio is where we've had a recent launch for our gowns and drapes and elimination of PFAS materials. We think that there's not only an ability to protect the business that we currently have in that market, but potentially expand through whether it be market share gains or further demands from end users on better solutions for PFAS-free materials. And then again, there's some outliers within each of the regions that I would say are a little bit more tempered in general. We talked about baby in South America and the competitive pressures that we've had from Asia and other imports. Regardless of what happens with the antidumping measures, I think for us, we've definitely found stability in the region and the conversations with customers and our ability to have that local supply and the responsive rate has helped at least shore up some of the dialogue that we've had with them.
But more importantly, it's the discussion on how we pivot more towards some innovative products that historically haven't been as prevalent in that region than we've experienced in other places. And our team in Asia continues to do a nice job of securing the right businesses for those lines; albeit relatively small in terms of our total business, profitable business, and the team does a really nice job of also supporting other regions, not only with innovative products, but best practices across the system. So again, without getting too deep into some of the outliers within the product mix, in general, we feel good about the majority of where we sit from the portfolio. I can get into certain applications that are relatively small and immaterial that we continue to evaluate from a portfolio standpoint. But in general, hopefully, that provides you a little bit of flavor. But Europe still continues to be soft, as you heard from other major players. U.S. showing nice green sprouts, South America stabilizing, and Asia Pacific continue to be stable.
And our next question comes from the line of Roger Spitz with Bank of America.
For fiscal 2026, is your volume growth assumption still flat? And how do you think about 2027 volumes if you have some thoughts there?
Thank you for joining the call, Roger. It's great to hear from you. We won't comment on 2027 at this time, but we can discuss longer-term growth dynamics. As we provide guidance throughout the year, we may offer additional insights. Jim, do you want to add anything? We started the year with flat volumes, anticipating a slight downturn in Europe of about 3%, while North America showed slight positive growth to balance that out. In the latter half of our fiscal year, we expect to see more normalized comparisons in South America. Overall, we anticipate flat volumes. We've also made strategic choices about where to focus our efforts in our commercial excellence programs. Some businesses may not align with our long-term goals, either because they don’t fit within our competitive landscape or don't have the right growth potential for us. We are being selective to ensure we achieve value from the products we provide and serve our customers effectively, and that will influence our actions with CORE.
And then for the fiscal 2026 EBITDA guide up from pro forma fiscal 2025, including Glatfelter, is therefore the main drivers of the growth cost savings and merger synergies? Or are there other items that might be driving that improvement?
Yes. I'll just mention that from a mix standpoint, it's clearly been a focus for us. Jim, I'll let you take over here regarding synergies.
Yes, thanks, Roger. Yes, the primary driver for growth, as we highlighted, we're sort of assuming flat volumes for your last question. So the main driver of growth in 2026 is going to be both the synergy realization as well as the Project CORE initiatives as we sort of highlighted on the last call.
Got it. And then lastly, I don't know if you want to give further detail on the other items in fiscal 2026 free cash flow, for instance, working capital inflow/outflow, I think you were kind of neutral last time, cash taxes or any other items?
Yes, we always aim for flat working capital. If you consider your free cash flow projection, we are at a $395 million midpoint, with $135 million allocated for interest, $80 million for integration costs and taxes, and $80 million for CapEx. This will bring you to a midpoint of approximately $100 million.
And our next question comes from the line of Edward Brucker with Barclays.
To build on some of the innovation points you made, are you able to provide maybe directionally the margin profile for these innovative products and if they are proprietary products more commoditized? And then would these innovative products cannibalize any other products in the portfolio?
Yes, that's a very good question. So there's two different types of things that we do with our customers. First of all, it's protecting some of the existing business through the innovation and finding ways to not only benefit our customers from potentially cost savings opportunities, but a margin up opportunity from our side. The other thing that we look at is, is this a new feature or benefit within a particular product. And so we've been able to launch some of those as well. And historically, Edward, we expect obviously a higher than our average margin. So that can range anywhere between the mid-teens to 20-plus depending on how unique the application is, what materials are available and used in the product itself, but more importantly, the collaboration that we have with our customers. So again, we'll continue to find ways to help our customers drive efficiencies through cost competitive applications and sharing in those savings. But for us, we expect innovation to be well above our average of 11%.
Got it. Second one on the debt reduction goal for the year of $100 million. First, is that gross debt reduction? And then second, if it is, where are you targeting that debt reduction? Is it through the term loan or maybe taking some discount within the bonds?
Thank you for your question. In the quarter, we seized the opportunity to buy back bonds and term loans in the open market. Our strategy will focus on pursuing the best yield for our investments, which means we will continue to purchase in the open market. Our approach will depend on which option offers the best return at any given time as we reduce our debt over the course of the year.
And our next question comes from the line of Gabe Hajde with Wells Fargo.
Two hopefully quick follow-ups here. Curt, you mentioned in your prepared remarks improved operations and oversold platforms. I'm just curious what specifically you referenced there, if it's somewhere you're capacity constrained or something like that in North America?
Yes. As I mentioned earlier, during heightened periods, like an elevated flu season, we may experience a surge in orders over a short timeframe, leading to maximum capacity if we're close to 90% utilization. We're particularly focused on those platforms within our system where the supply-demand dynamics aren't as balanced, which can differ by region. Ideally, we're looking for ways to produce more with the existing assets we have through operational excellence and productivity measures, which are tied to our supply chain. This involves collaborating with our customers to identify the best-performing products and maximizing those. Additionally, the team's advancements in material science and innovation have allowed us to qualify alternative raw materials and identify more efficient material streams to run through our production lines. For instance, a simple upgrade to an existing winder could enhance our extrusion processes and overall efficiency, enabling us to achieve higher throughput while maintaining the quality and service that our customers expect.
Got it. Okay. So relatively capital light, it sounds like. Two last unrelated questions. One is just seasonality. We don't have a whole lot of history here, obviously, with the combined entity. But at the midpoint of kind of the guidance range, I think you've talked about before maybe low 40%-ish in the first half and the remainder in the second half. Can you help maybe Jim or Curt parse that out for us? And then putting a little bit finer point on the synergy realization. I think the ultimate target was $55 million. Last year, you were somewhere in the mid-teens in terms of absolute realization. What's the target for '26? And then kind of what does that leave in the '27 for us to get after?
Thanks, Gabe. So I think just maybe on the second question, we have put $25 million of realized synergies for 2026 with the balance then working through in '27. And we can follow up on that or Jim, you can highlight that. And then the initial question, just as it relates to demand by quarter, again, every region is a little bit different in terms of summer months and holidays, et cetera. But in general, Q3, Q2, Q4, Q1 would be the kind of the demand outlooks for us. So Q4 being a little bit softer because of the European shutdowns and excuse me, our fiscal Q4, Gabe, and then Q1 being one of the softer ones because of the holidays that we have, both at Christmas, New Year's, Thanksgiving, et cetera, in North America. So Q3, Q2, Q4, Q1.
I'll now hand the call back over to CEO, Curt Begle, for any closing remarks.
Thank you, operator, and thanks, everyone, for joining the call, your interest in Magnera. We look forward to following up with many of you here over the course of the next few days and look forward to the next earnings call for Q3 or Q2 results. So thanks for joining. Have a great day.
Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.