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SW

Smurfit Westrock plc (SW)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered net sales of $7.94B, Adjusted EBITDA of $1.213B (15.3% margin), and a GAAP net loss of $26M driven by $280M of impairment and restructuring charges; dividend maintained at $0.4308 per share .
  • Versus S&P Global consensus, revenue was essentially in line, while Primary EPS was modestly below; GAAP diluted EPS was -$0.05 due to restructuring costs. Management guided Q3 Adjusted EBITDA to ~$1.3B and reiterated FY 2025 Adjusted EBITDA of $5.0B–$5.2B .
  • North America showed a significant margin improvement (Adjusted EBITDA $752M; 15.8%), EMEA/APAC remained resilient amid cost headwinds, and LATAM demonstrated standout margins (23.7%) .
  • Stock narrative catalysts: visible synergy capture, decisive exit of loss-making contracts in North America, cost relief (recovered fiber, energy) and confidence in Q3 EBITDA bridge driven by lower downtime and input costs .

What Went Well and What Went Wrong

What Went Well

  • North America margin step-up: Adjusted EBITDA of $752M, margin 15.8%, driven by sharper operating focus and synergy benefits; loss-making corrugated volume cut by ~40% at plant level, enabling healthier mix .
  • LATAM margin leadership: Adjusted EBITDA $123M, margin 23.7%; pricing actions offset FX and lower volumes; strong positions in Brazil/Colombia .
  • Capital allocation discipline and rating upgrade: Board declared $0.4308 quarterly dividend; Fitch upgraded long-term issuer rating to BBB+ (stable) on July 2, reinforcing balance sheet strength and investment-grade commitment .

What Went Wrong

  • GAAP EPS and net income pressured by restructuring: $280M in impairment/restructuring led to GAAP net loss of $26M and diluted EPS of -$0.05, masking otherwise solid operating performance .
  • EMEA/APAC margin compression versus prior year: Adjusted EBITDA margin 13.4%, with headwinds from recovered fiber (~$28M QoQ impact) and labor; energy also higher in the quarter .
  • Volumes remain subdued: Corrugated volumes down in North America (-4.5%) and LATAM (-1.9%), with targeted exits of uneconomic contracts contributing; consumer packaging shipments down ~2.7% in North America including Mexico .

Financial Results

Consolidated Performance vs Prior Periods

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Billions)$7.539 $7.656 $7.940
Net Income (Loss) ($USD Millions)$146 $382 ($26)
Net Income Margin (%)1.9% 5.0% (0.3%)
Diluted EPS ($USD)$0.28 $0.73 ($0.05)
Adjusted EBITDA ($USD Billions)$1.166 $1.252 $1.213
Adjusted EBITDA Margin (%)15.5% 16.4% 15.3%
Net Cash from Operations ($USD Millions)$781 $235 $829
Adjusted Free Cash Flow ($USD Millions)$257 ($144) $387

Q2 2025 Results vs S&P Global Consensus

MetricConsensusActualDelta
Revenue ($USD Billions)$7.942*$7.940 In line (−$0.002B)
Primary EPS ($USD)$0.591*$0.509*Miss (−$0.082)
EBITDA ($USD Billions)$1.197*$1.172*Miss (−$0.025B)

Values marked with an asterisk (*) retrieved from S&P Global.

Note: Company-reported Adjusted EBITDA was $1.213B (definition differs from S&P’s normalized EBITDA) .

Segment Breakdown (Q2 2025)

SegmentNet Sales (Aggregate, $USD Billions)Segment Adjusted EBITDA ($USD Millions)Adjusted EBITDA Margin (%)
North America$4.755 $752 15.8%
EMEA & APAC$2.778 $372 13.4%
LATAM$0.518 $123 23.7%

KPIs (Q2 2025)

KPINorth AmericaEMEA & APACLATAM
Corrugated Volume Δ (YoY)(4.5%) 0.1% (1.9%)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Billions)Q2 2025~$1.2 Actual: $1.213 Delivered slightly above prior guide
Adjusted EBITDA ($USD Billions)Q3 2025N/A~$1.3 New guide issued (raised sequentially)
Adjusted EBITDA ($USD Billions)FY 2025$5.0–$5.2 $5.0–$5.2 Maintained
Capital Expenditure ($USD Billions)FY 2025$2.2–$2.4 $2.2–$2.4 Maintained
Cash Interest ($USD Billions)FY 2025~$0.7 ~$0.7 Maintained
Cash Tax ($USD Billions)FY 2025~$0.6 ~$0.6 Maintained
Effective Tax Rate (%)FY 2025~26% ~26% Maintained
Dividend ($USD per share)Quarterly$0.4308 $0.4308 (payable Sep 18; record Aug 15) Maintained
Credit RatingCurrentN/AFitch upgraded to BBB+ (stable) Jul 2 Positive rating action

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
SynergiesOn track; $4.7B FY24 combined EBITDA; plan to complete $400M in FY25 On track; ~$350M expected captured in FY25; additional $400M opportunities via operating/commercial focus Improving/expanding
North America contract exitsQ1 closures of ~600kt capacity; exits of uneconomic volume ~40% of loss-making corrugated moved into profit; targeted exits to improve mix; lag before volumes refill Improving mix, near-term volume drag
Tariffs/macroProtectionism risks flagged Incremental 5% US tariffs marginal vs baseline 10%; limited flow change expected; consumer bears ~70%; volumes flat assumptions Stabilizing; monitoring demand
Cost inputs (energy/OCC)Headwinds anticipated Q3 EBITDA bridge: ~$50M lower downtime plus ~$50M recovered fiber relief; energy/labor outlook improving H2 Cost relief building
Volume seasonalityN/AAssumes flat H2 volumes with seasonal pickup; order book supports less downtime Neutral to modestly better
European capacityRationalization ongoing; integrated model strength Non-integrated mills under pressure; closures seen; pricing expected to move up with contract renewals Rationalizing supply
Innovation initiativesEmphasis on innovation offering New corrugated innovation leader; global innovation conference; cross-pollination legacy tools Scaling innovation

Management Commentary

  • “I am pleased to report a strong second quarter performance as we continue to deliver in line with our Adjusted EBITDA guidance.”
  • “We’ve already cut our loss‑making corrugated by approximately 40% in our U.S. operations… removing poor volume and replacing some of that already.”
  • “We expect third quarter Adjusted EBITDA to be approximately $1.3 billion and our current estimate for a full year Adjusted EBITDA remains between $5.0 billion and $5.2 billion.”
  • “Corrugated box pricing was higher compared to the prior year… volumes were down 4.5% on a same‑day basis, an outcome very much in line with our ongoing value over volume strategy.”
  • “The third quarter going $1.2 billion–$1.3 billion is just really two things: lower downtime ($50 million) and recovered fiber ($50 million).”

Q&A Highlights

  • North America box system turnaround: ~40% of loss-making plants moved to profit; remainder targeted over next year; contract exits open machine time to refill with better accounts (six-month lag) .
  • Europe near the bottom: non-integrated paper mills facing unsustainable pricing; closures observed; corrugated pricing expected to tick up on H2 renewals .
  • Tariff effects: incremental US tariffs seen as marginal; consumer absorbs ~70%; limited change expected to import/export paper flows; focus remains on consumer demand trajectory .
  • Q3 EBITDA bridge: cost relief (recovered fiber) and reduced maintenance downtime are the primary drivers; H2 energy, labor also better than initially guided .
  • Integration rates: ~90% integration in containerboard/corrugated post closures; consumer ~60% across grades; supports internalization and margin capture .

Estimates Context

  • Q2 2025 revenue essentially matched consensus; Primary EPS was modestly below; S&P Global consensus had EPS at $0.591* vs actual Primary EPS of $0.509*, while GAAP diluted EPS was -$0.05 due to $280M in restructuring charges .
  • Looking ahead, consensus implies Q3 revenue ~$7.89B*, EBITDA ~$1.317B*, and Primary EPS ~$0.72*; company guidance corroborates an Adjusted EBITDA run-rate near $1.3B for Q3, driven by less downtime and input cost relief .

Values marked with an asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Mix upgrade underway: decisive exits of uneconomic contracts in North America are lifting margins even as volumes dip; expect lagged volume normalization as better business refills capacity .
  • Cost tailwinds into H2: recovered fiber and energy/labor relief underpin Q3 EBITDA bridge; near-term margin resilience likely as pricing/contract renewals progress .
  • LATAM remains a margin anchor: strong execution and pricing offset FX; region continues to present both organic and inorganic growth opportunities .
  • Guidance credible and maintained: Q3 Adjusted EBITDA ~$1.3B with FY 2025 $5.0–$5.2B reiterated; capital discipline intact with CapEx $2.2–$2.4B and progressive dividend .
  • Watch Europe’s supply rationalization: non-integrated closure signals support for pricing; integrated footprint positions SW to benefit as demand improves .
  • Estimate adjustments: modest EPS normalization below consensus this quarter; Street likely to refine EBITDA trajectory vs company’s Adjusted EBITDA and factor in cost tailwinds and contract mix improvement (S&P Global data).
  • Trading implications: Near-term sentiment should track cost relief realization and North America margin traction; medium term thesis rests on synergy capture, integration-driven ROIC, and innovation-led cross-selling across segments .