Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Smurfit WestRock PLC (SW, Financial) reported an excellent third quarter performance with adjusted EBITDA of $1.265 billion and a margin of 16%.
• The company has made significant progress in integrating Smurfit Kappa and WestRock, creating a strong foundation for future growth.
• Smurfit WestRock aims to be a global leader in sustainable packaging, leveraging its broad geographic reach and diverse product offerings.
• The company has identified numerous opportunities for growth and cost reduction, with a focus on value over volume.
• Smurfit WestRock has a strong capital allocation strategy, with plans to invest $2.2 to $2.4 billion in 2025, focusing on internal projects for long-term success.

Negative Points

• The company faces risks and uncertainties that could cause actual results to differ from expectations, as highlighted in their forward-looking statements.
• There is a need for operational improvements in certain areas, particularly in the corrugated box plants.
• The European market, especially Germany, has underperformed, impacting overall results.
• The company is still assessing the strategic fit of its SBS (Solid Bleached Sulfate) mills amid market oversupply.
• There are challenges in integrating legacy systems and achieving the anticipated $400 million in synergies, which may take up to 24 months.

Q & A Highlights

Q: Can you clarify the full-year guidance, particularly regarding the expected performance in the fourth quarter compared to the third quarter? A: Tony Smurfit, President and CEO, explained that the guidance includes a conservative approach due to the new company structure and additional downtime costs of $60 million in the fourth quarter. Ken Bowles, CFO, added that the year-on-year progression shows significant improvement, which should be considered.

Q: Regarding the CapEx plan for next year, is there more opportunity in the WestRock business due to low-hanging fruit or catch-up maintenance? A: Tony Smurfit stated that they see reasonable opportunities for returns on non-maintenance CapEx and are focusing on integrating the two businesses to improve customer service. The capital investments planned for next year are based on current needs, with further developments expected as the year progresses.

Q: How should we think about the cadence of the $400 million in synergies and the potential for additional operational improvements? A: Ken Bowles mentioned that the hard synergies are on track to be fully realized by the end of next year, with additional operational improvements expected over the next 18 to 24 months. These improvements will focus on commercial opportunities and cost reductions.

Q: Could you discuss the performance of the North American corrugated and consumer businesses and your impressions of the consumer business? A: Tony Smurfit expressed satisfaction with the consumer business, highlighting its segmentation into food, beverage, and health and beauty. He noted the need for strategic decisions regarding SBS due to market conditions but praised the overall quality and efficiency of the mills.

Q: How do you plan to manage the transition to a decentralized, empowered business model, and what impact might this have on operations? A: Tony Smurfit explained that the transition is already underway, with responsibility being devolved to plant and regional levels. He emphasized the enthusiasm among managers for this approach and noted that while some disruption is expected, many managers are familiar with this model from previous experiences.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.