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SW

Smurfit Westrock plc (SW)·Q1 2025 Earnings Summary

Executive Summary

  • Solid quarter with Net Sales $7.656B, Net Income $382M, Adjusted EBITDA $1.252B and 16.4% margin; diluted EPS $0.73. Guidance reiterated for Q2 EBITDA ≈$1.2B and FY 2025 $5.0–$5.2B, with ~$100M incremental economic downtime in Q2 versus Q1 .
  • Consensus snapshot: Primary EPS beat; revenue slightly below; EBITDA in-line/slightly above and met company guidance (see Estimates Context) *.
  • Integration advancing with ~$80M synergies recognized in Q1 and closures of >500k tons of capacity to sharpen the footprint; management emphasized “value over volume” and owner-operator model .
  • Near-term stock catalysts: capacity rationalization economics ($50–$60M annual EBITDA benefit; ~$100M capex avoidance over 5 years), progress on synergy capture, European pricing pass-through vs energy/OCC cost trajectory, and tariff uncertainty backdrop .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue ($USD Billions)$2.930 $7.539 $7.656
Net Income ($USD Millions)$191 $146 $382
Adjusted EBITDA ($USD Millions)$475 $1,166 $1,252
Adjusted EBITDA Margin %16.2% 15.5% 16.4%
Diluted EPS ($USD)$0.73 $0.28 $0.73
Net Cash from Operating Activities ($USD Millions)$42 $781 $235
Adjusted Free Cash Flow ($USD Millions)$(130) $257 $(144)

Segment breakdown

Segment MetricQ1 2024Q1 2025
Net Sales to Unaffiliated Customers – North America ($USD Millions)$412 $4,578
Net Sales to Unaffiliated Customers – EMEA & APAC ($USD Millions)$2,190 $2,576
Net Sales to Unaffiliated Customers – LATAM ($USD Millions)$328 $502
Segment Adjusted EBITDA – North America ($USD Millions)$59 $785
Segment Adjusted EBITDA – EMEA & APAC ($USD Millions)$385 $389
Segment Adjusted EBITDA – LATAM ($USD Millions)$54 $115
Segment Adj. EBITDA Margin (Adj. EBITDA/Net Sales Aggregate) – North America14.3% 16.8%
Segment Adj. EBITDA Margin – EMEA & APAC17.6% 15.1%
Segment Adj. EBITDA Margin – LATAM16.0% 22.5%

KPIs and operating metrics

KPIQ4 2024Q1 2025
Corrugated Box Volumes Δ – North AmericaFlat -4.7% same-day; -4.3% absolute
Corrugated Box Volumes Δ – EMEA & APACFlat +1.5% same-day; broadly flat absolute
Corrugated Box Volumes Δ – LATAM-3.4% -6.3% same-day
Synergies Recognized in Period ($USD Millions)n/a~80
Dividend per share ($USD)$0.4308 $0.4308

What Went Well and What Went Wrong

  • What Went Well

    • North America margins improved to 16.8% on sharper commercial and operating focus; consumer packaging shipments +1% Y/Y with food and bev strength .
    • LATAM delivered 22.5% Adjusted EBITDA margin, with pricing actions offsetting FX and lower volumes; continued investment and expansion pipeline .
    • Synergy program on track: ~$80M captured in Q1; full-year recognition ~ $350M, exiting at $400M run-rate; quick-win projects expected to add >$40M EBITDA in NA within 2 years .
    • “I am pleased to report a strong first quarter performance… Adjusted EBITDA of $1,252 million… driven by good results across all three segments” – Tony Smurfit .

  • What Went Wrong

    • Q2 incremental economic downtime now ~$100M vs prior ~$10–$15M expectation from year-end, reflecting system balancing ahead of closures .
    • EMEA margins compressed (15.1% vs 17.6% PY) on higher energy/recovered fiber/labor costs; Europe paper market facing new capacity start-ups and elevated energy costs .
    • Adjusted Free Cash Flow negative $(144)M on heavy capex ($477M) and integration/restructuring costs; cash from ops $235M .
    • Revenue modestly below consensus; near-term demand outlook remains uncertain with choppiness in March/early April and tariff-related risks .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Billions)Q1 2025~$1.25 $1.252 (actual) Met / In-line
Adjusted EBITDA ($USD Billions)Q2 2025n/a≈$1.2 New
Adjusted EBITDA ($USD Billions)FY 2025n/a$5.0–$5.2 New
Economic Downtime ($USD Millions)Q2 2025~$10–$15 incremental (earlier view) ≈$100 vs Q1 Raised
Capital Expenditure ($USD Billions)FY 2025$2.2–$2.4 $2.2–$2.4 Maintained
Dividend per share ($USD)Quarterly$0.4308 $0.4308 (payable 6/18/25) Maintained
Cash Interest ($USD Billions)FY 2025~$0.7 ~$0.7 Maintained
Cash Tax ($USD Billions)FY 2025~$0.6 ~$0.6 Maintained
Effective Tax RateFY 2025~26% ~26% Maintained
Synergy Capture ($USD Millions)FY 2025$400 run-rate exiting FY25; recognition timing evolving ~$350 recognized in FY25; exit $400 run-rate Clarified phasing

Earnings Call Themes & Trends

TopicQ3 2024 (previous)Q4 2024 (previous)Q1 2025 (current)Trend
SynergiesTarget $400M affirmed; value creation beyond synergy flagged Q1 2025 EBITDA guide; transformation progress; dividend raised ~$80M captured in Q1; ~$350M FY recognition; exit $400M run-rate Acceleration/execution
Capacity rationalizationOngoing optimization; strategic closures highlighted Continued closures across facilities Announced closures of >500k tons (Forney CRB/containerboard; St. Paul CRB; consultations in DE); benefits timing 2H Material footprint reshaping
Pricing & volumesValue-over-volume philosophy NA volumes flat; EMEA flat; LATAM -3.4% NA box vols -4.7% same-day; EMEA +1.5% same-day; LATAM -6.3% same-day Mixed; margin-focused
Europe market dynamicsStrong integration; EMEA resilience Record service/productivity; pass-through dynamics New capacity starting; energy costs elevated; second price hike uncertain Watch costs/pricing pass-through
Cost buckets (energy/OCC/labor)Post-combo cost headwinds discussed Energy spiking; hedging; OCC relief in NA Y/Y headwinds: energy ~$350M; labor ~$200M; others ~$100M; OCC relief NA $100–$150M Mixed; NA relief vs EU pressure
Tariffs/macron/an/aTariff uncertainty (USMCA flows, consumer demand risk); modeled ~$100M annualized direct trade impact absent mitigations Risk monitoring
Quick-win projectsn/an/a>90 NA quick wins (> $40M EBITDA in 2 yrs); EMEA/APAC IRRs 25–150% Pipeline building
Consumer packaging strategyn/aPlatform assessment underway; dividend policy reset CRB/SBS/CUK strategies under development; footprint adjustments continuing WIP strategic planning

Management Commentary

  • “Our synergy program is on track to deliver $400 million, with approximately $350 million in the current year... We believe there is substantial opportunity to continue to structurally improve the business...” – Tony Smurfit .
  • “We expect second quarter Adjusted EBITDA to be approximately $1.2 billion and our current estimate for a full year Adjusted EBITDA is between $5.0 billion and $5.2 billion.” – Ken Bowles .
  • “We have recently announced the closure of over 500,000 tons of paper capacity in North America… and have initiated consultations to close two of our converting facilities in EMEA & APAC.” – Tony Smurfit .
  • “Our long-standing value-over-volume philosophy… is contributing to improved margins.” – Ken Bowles .

Q&A Highlights

  • Q2 downtime and earnings phasing: Incremental ~$100M downtime is concentrated in Q2; Q3–Q4 benefit expected from reallocated tonnage post-closures .
  • Closure economics: Two mill closures expected to add $50–$60M annual Adjusted EBITDA across the system and avoid ~$100M of maintenance capex over ~5 years; asset sale proceeds expected to recover ~50% of cash cost over time .
  • Demand trends: March and early April were weak; order books improved in late April; consumer packaging up ~1% with food/bev resilience; company not banking on a strong 2H recovery .
  • Europe pricing/energy: Paper price increases flow to boxes with 3–6 month lag; energy costs remain elevated vs historical norms; new machines ramping mid-year .
  • Tariffs: Modeled direct annualized ~$100M impact without mitigations; shifting cross-border production to reduce exposure; larger risk is demand destruction and confidence .

Estimates Context

MetricQ1 2025 ConsensusQ1 2025 ActualSurprise
Revenue ($USD Billions)$7.749*$7.656 Slight miss
Primary EPS ($USD)$0.667*$0.829*Beat
EBITDA ($USD Billions)$1.239*$1.252 (Adjusted EBITDA) In-line/slight beat

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Integration and synergy realization are tracking well, with ~$80M captured in Q1 and a clear path to ~$350M recognized in FY25 and $400M exit run-rate; quick-win projects provide incremental margin tailwinds .
  • Footprint rationalization (Forney/St. Paul closures and EU consultations) tightens supply, improves integration (containerboard integration +3 pp to ~89%), and should deliver $50–$60M annual EBITDA benefits plus capex avoidance; benefits begin in 2H .
  • Near-term headwinds include ~$100M Q2 downtime, elevated EU energy/recovered fiber costs, and tariff uncertainty; management is balancing the system and remains focused on value over volume .
  • North America margin trajectory is favorable given pricing discipline and consumer food/beverage resilience; watch corrugated volumes and independent benchmark dynamics .
  • Europe: monitor pass-through of paper price increases and new machine ramp-ups vs sustained energy cost levels; box price lag suggests uplift skewed to late 2025/early 2026 .
  • FCF inflection depends on moderating capex cadence and normalization of integration/restructuring cash costs; capex guidance maintained at $2.2–$2.4B .
  • Tactical setup: 2Q earnings near ~$1.2B Adjusted EBITDA and temporary downtime may pressure near-term prints; 2H trajectory improves as rationalization and pricing pass-through accrue .

Appendices: Non-GAAP Notes

  • Adjusted EBITDA reconciles to GAAP Net Income: Q1 2025 adds back tax $8M, D&A $603M, integration $36M, interest $167M, share-based comp $43M, other items $17M; Margin 16.4% vs Net Income Margin 5.0% .
  • Adjusted Free Cash Flow reconciles to Free Cash Flow with add-backs for transaction/integration ($76M), restructuring ($44M), and tax on above ($(22)M) .