Lewis Roxburgh

Lewis Roxburgh asked how the 'value over volume' strategy would impact pricing relative to benchmarks, cost reduction through right-sizing, and the expected evolution of volume, particularly whether demand would normalize by year-end. He also inquired about the specific focus areas for growth CapEx across regions and businesses, and sought clarification on the annual allocation of the $4 billion growth CapEx and its relationship to depreciation.

Answer

CEO Anthony P. J. Smurfit stated expectations for positive year-over-year comparisons next year, driven by market share gains from a focus on quality, design, and customer value. EVP and Group CFO Ken Bowles clarified the depreciation stream, noting the impact of amortizing intangibles. Smurfit emphasized the company's adaptable capital allocation, focusing on numerous small, high-return projects, particularly in robotics to mitigate rising labor costs, with flexibility to shift investments between regions based on growth opportunities.

Lewis Roxburgh asked about any standout focus areas for growth CapEx, given its broad-based nature across businesses and regions. He also sought clarification on the $4 billion growth CapEx (approximately $0.8 billion annually) in relation to depreciation.

Answer

CFO Ken Bowles clarified that D&A would be around $2.6-$2.7 billion annually, considering amortizing intangibles. CEO Anthony P. J. Smurfit emphasized the company's adaptability in capital deployment, focusing on many small, high-return projects (none over $200 million). He highlighted investments in robotics to counter rising labor costs and the flexibility to shift investments between regions based on growth opportunities.

Lewis Roxburgh inquired about the expected relief on OCC pricing and other cost buckets like energy, and sought more detail on the 2026 CapEx spend, specifically how much is related to Legacy WestRock assets versus other projects, and if this level represents a new normal.

Answer

CEO Tony Smurfit explained that the CapEx spend is slightly skewed towards Legacy WestRock assets to improve quality and service, aligning with past Smurfit Kappa strategies. CFO Ken Bowles provided updates on cost trends: fiber is a $130 million-$140 million tailwind, while energy and labor are headwinds of approximately $180 million each, and downtime impact is $180 million-$200 million.

Lewis Roxburgh asked about the realization of expected OCC pricing relief and other cost buckets like energy, and sought details on the proportion of 2026 CapEx allocated to legacy WestRock assets versus other projects, and if this CapEx level represents a new normal.

Answer

CEO Tony Smurfit confirmed a slight skew of 2026 CapEx towards legacy WestRock assets to improve quality, service, and corrugators, aligning with past Smurfit Kappa strategies, but noted the European business is already well-invested. CFO Ken Bowles provided updates on cost buckets: OCC pricing relief (tailwind) increased to $130-$140 million, energy headwind reduced to $180 million, labor headwind reduced to $180 million, while downtime impact (headwind) increased to $180-$200 million for the year.

Lewis Roxburgh of Goodbody asked about the potential Q3 impact of tariffs on consumer confidence and demand, and whether Smurfit WestRock sees scope for further capacity closures in its own European operations.

Answer

EVP & Group CFO Ken Bowles noted that the incremental tariff impact is limited and that consumer demand remains the key factor, with no significant changes baked into forecasts. CEO Tony Smurfit added that Smurfit WestRock's European mills are profitable and integrated, so no short-term closures are planned for their own assets, but he expects more closures from non-integrated competitors if current market conditions persist.

Lewis Roxburgh of Goodbody asked about the potential Q3 impact of tariffs on consumer confidence and demand, and whether Smurfit WestRock sees scope for further capacity rationalization in Europe, similar to its recent actions in the U.S.

Answer

EVP & Group CFO Ken Bowles noted that while tariffs may have some impact, the real driver will be overall consumer demand, which remains soft. He doesn't expect major shifts in trade flows. CEO Tony Smurfit added that while the company continuously reviews its portfolio, its European mills are profitable and integrated, making immediate closures unlikely. However, he expects non-integrated competitors to face pressure and potentially shut down capacity.