Smurfit Westrock plc (SW)·Q4 2024 Earnings Summary

Executive Summary

• Q4 revenue was $7.54B, adjusted EBITDA was $1.17B (15.5% margin), and diluted EPS was $0.28; vs Q3, revenue declined 1.7% and EBITDA margin compressed 100 bps, while EPS swung positive from a Q3 loss driven by lower transaction/inventory step-up charges in Q4 .
• Management guided Q1 2025 adjusted EBITDA of ~$1.25B and reiterated a $400M synergy program to be completed by YE25, with additional operational/commercial opportunities of “at least” another $400M; net leverage ended 2024 at 2.7x (Net Debt $12.74B) .
• 2025 cash planning: Capex $2.2–$2.4B, cash interest ~$0.7B, cash tax ~$0.6B, effective tax rate ~26%; the quarterly dividend was increased 42% to $0.4308, consistent with a progressive policy .
• Near-term stock catalysts: Q1 EBITDA delivery vs ~$1.25B guide; cadence of synergy realization ($30M net in Q1; ~$150M net in FY25); pricing follow-through in Europe post announced containerboard increases; and clarity on tariff risks (Canada/Mexico exposure) .

What Went Well and What Went Wrong

• What Went Well

  • Strong sequential execution in LATAM: Q4 LATAM net sales (aggregate) rose to $0.52B with adjusted EBITDA of $121M (23.1% margin), up from Q3’s $116M; pricing actions offset FX headwinds and softer volumes in pockets like Argentina .
  • North America performance resilient: Q4 North America delivered $710M adjusted EBITDA (15.4% margin) on $4.59B of aggregate sales; management highlighted value-over-volume discipline, paper integration benefits and operational improvements .
  • Clear capital allocation and shareholder returns: Dividend lifted to $0.4308 per share and 2025 capex framed at $2.2–$2.4B to fund growth, integration, and sustainability, with a target net leverage <2x through the cycle .

• What Went Wrong

  • Margin compression vs Q3: Adjusted EBITDA margin declined to 15.5% from 16.5% in Q3, with EMEA/APAC modestly lower on higher recovered fiber and some labor cost pressure, partially offset by lower energy/distribution costs .
  • Ongoing integration/one-time items: Q3’s loss reflected heavy transaction/inventory step-up charges; while Q4 normalized, “other adjustments” still included a $42M non-cash Argentina currency translation and $34M restructuring, underscoring continued cleanup and integration .
  • Potential tariff/macro risks: Management called out exposure to possible tariffs (Canada mill exports to U.S.; Mexico-sourced produce that SW packages and crosses into the U.S.) and noted recent energy price volatility in Europe despite partial hedging (~25% Q1) .

Financial Results

Headline metrics (YoY and sequential)

Segment performance (aggregate net sales, adjusted EBITDA, margins)

Key cash/return KPIs

Notes: Q4 2023 reflects legacy Smurfit Kappa only, given accounting acquirer treatment; comparability is limited post-combination .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “I am pleased to report a strong fourth quarter performance with Net Income of $146 million, Adjusted EBITDA of $1,166 million and an Adjusted EBITDA Margin of 15.5%... Full Year Combined Adjusted EBITDA of $4,706 million.” – Tony Smurfit, CEO .
• “Our synergy program of $400 million is on track and will be completed by the end of this year... The year has started well and in the first quarter of 2025... we anticipate delivering an Adjusted EBITDA of approximately $1.25 billion.” – CEO .
• “North America... delivered sales of $4.6 billion with adjusted EBITDA of $710 million and a very solid adjusted EBITDA margin of 15.4%... ‘value over volume’ began on day one and has been embraced.” – Ken Bowles, CFO .
• “We’re about 25% hedged in Europe for Q1... we wouldn’t want to see energy spike much more than this as we go through into March.” – CEO .
• “If you have a bad business... you replace bad business with better business... when you lose a big chunk... it might hurt a factory for... a year, but you typically come back within a year if it’s bad business.” – CEO on value-over-volume .

Q&A Highlights

• Synergy cadence: Net ~$150M for FY25 after costs; ~$30M net in Q1; full $400M hard synergies in run-rate for 2026; additional $400M+ operational/commercial improvements over ~18–24 months .
• Europe pricing path: Containerboard increases announced for Feb/Mar expected to translate to boxes with lag; paper system “at the bottom,” margins supported by integrated model .
• Energy/maintenance: ~25% hedged in Europe for Q1; Q1 maintenance ~$10M less sequentially; Q2 typically the biggest maintenance quarter .
• Tariffs risk: Potential U.S. tariff impacts on Canadian mill exports and on Mexican produce packaged by SW crossing into the U.S.; consumer pass-through uncertainty .
• Pricing model in North America: Moving away from blended integrated margins toward plant-level accountability and profit responsibility to improve commercial outcomes .

Estimates Context

• S&P Global consensus estimates (revenue/EPS/EBITDA) were unavailable at retrieval due to API request limits, so we cannot quantify beats/misses vs Street for Q4 2024 or Q1 2025 guidance. We therefore benchmarked performance vs prior quarter/year and company guidance only [GetEstimates error].

Key Takeaways for Investors

• Integration on plan: $400M hard synergies by YE25 with ~$150M net benefit expected in FY25; additional $400M+ improvement potential provides upside to mid-term margins .
• Q1 set-up constructive: ~$1.25B EBITDA guide, lower maintenance vs Q4, stable cost book ex energy; Europe pricing tailwinds could build through 2025 .
• Balanced regional profile: North America and LATAM executing well; EMEA/APAC to benefit from pricing recovery and ongoing operational improvements .
• Capital deployment: 2025 capex of $2.2–$2.4B focused on growth/integration/efficiency; dividend raised 42%; deleveraging toward <2x remains priority (YE24 2.7x) .
• Risk watch: Tariffs (Canada/Mexico exposure) and European energy volatility; management has partial hedges and operational levers to mitigate .
• Narrative drivers: Delivery vs Q1 guide, synergy run-rate progress, European price realization, FCF conversion and leverage trajectory should be key stock catalysts over the next 1–3 quarters .

Additional detail and reconciliations

• Non-GAAP adjustments in Q4 included a non-cash Argentina currency translation ($42M), restructuring ($34M) and losses at closed facilities ($2M); Q3 included significant transaction/inventory step-up costs, explaining the swing from Q3 loss to Q4 profit .
• FY24 Combined Adjusted EBITDA delivered $4.706B (15.2% margin); YE24 Net Debt $12.74B and Net Leverage 2.7x (Net Debt/LTM Combined Adjusted EBITDA) .