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WestRock Co (WRK)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 FY2024 net sales were $4.620B and consolidated Adjusted EBITDA was $570.7M; GAAP diluted EPS was -$0.09, with Adjusted EPS of $0.20, reflecting $66M in restructuring/other costs and elevated business transformation expenses .
  • Corrugated Packaging grew segment sales 3.5% YoY and external containerboard shipments rose 21.9% YoY, while Global Paper and Consumer Packaging faced pricing and demand headwinds; over $200M in cost savings were achieved, with management expecting to significantly exceed the FY24 $300–$400M target .
  • Q2 FY2024 guidance: Adjusted EPS $0.17–$0.31 and consolidated Adjusted EBITDA $550–$600M; additional guidance includes D&A ≈$373M, net interest expense ≈$118M, adjusted tax rate 28–30%, and ~259M diluted shares .
  • No earnings call was held due to the proposed Smurfit Kappa transaction; management reiterated expected closing in early July 2024 and withdrew guidance beyond Q2 to avoid regulatory submission delays, a key narrative driver for investor focus on H2 demand recovery and transaction timing .

What Went Well and What Went Wrong

What Went Well

  • “We grew external containerboard shipments… We are continuing to deliver on, and we expect to significantly exceed, our cost savings targets,” highlighting operational execution and self-help levers .
  • Corrugated Packaging segment sales +3.5% YoY and Adjusted EBITDA margin of 13.5% (14.0% excluding trade sales) amid pricing pressure, supported by Mexico acquisition integration and cost savings .
  • Consumer Packaging Adjusted EBITDA margin expanded 60 bps to 15.7% despite lower volumes, underscoring pricing/mix discipline and savings momentum .

What Went Wrong

  • Consolidated net sales declined YoY to $4.620B on lower Global Paper (-$205M) and Consumer Packaging (-$156M) sales, reflecting weaker paperboard demand and prior divestitures .
  • GAAP net loss of $22M driven by lower selling price/mix, increased economic downtime, prior mill closures, lower volumes (ex-Mexico), and higher restructuring costs .
  • Distribution margin compressed to 3.1% on lower volumes and cost inflation; Global Paper margin fell to 12.9% with pricing and volume headwinds despite cost savings .

Financial Results

MetricQ3 FY2023Q4 FY2023Q1 FY2024
Net Sales ($USD Billions)$5.121 $4.988 $4.620
Diluted EPS ($)$0.79 $0.43 -$0.09
Adjusted EPS ($)$0.89 $0.81 $0.20
Consolidated Adjusted EBITDA ($USD Millions)$801.9 $736.0 $570.7
Consolidated Adjusted EBITDA Margin (%)15.7% 14.8% 12.4%
SegmentQ4 FY2023 Segment Sales ($MM)Q1 FY2024 Segment Sales ($MM)Q4 FY2023 Adjusted EBITDA ($MM)Q1 FY2024 Adjusted EBITDA ($MM)Q4 FY2023 Adj. EBITDA Margin (%)Q1 FY2024 Adj. EBITDA Margin (%)
Corrugated Packaging$2,524.4 $2,419.9 $433.8 $327.8 17.2% 13.5%
Consumer Packaging$1,211.1 $1,059.3 $203.8 $166.2 16.8% 15.7%
Global Paper$1,012.4 $918.3 $133.6 $118.4 13.2% 12.9%
Distribution$314.1 $289.7 $10.9 $9.0 3.5% 3.1%
KPIQ3 FY2023Q4 FY2023Q1 FY2024
Net Cash Provided by Operating Activities ($MM)$693.6 $584.3 $275.0
Capital Expenditures ($MM)$254.6 $323.8 $247.3
Cash Dividends Paid ($MM)$70.5 $70.5 $77.6
Total Debt ($MM)$9,027.0 $8,583.9 $8,698.2
Adjusted Net Debt ($MM)$8,550.6 $8,033.5 $8,057.9
Cash & Cash Equivalents ($MM)$314.8 $393.4 $488.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EPS ($)Q1 FY2024$0.24–$0.37 Actual $0.20 Lower than guided range
Consolidated Adjusted EBITDA ($MM)Q1 FY2024$575–$625 Actual $570.7 Slightly below low end
Adjusted EPS ($)Q2 FY2024n/a$0.17–$0.31 New guidance
Consolidated Adjusted EBITDA ($MM)Q2 FY2024n/a$550–$600 New guidance
Depreciation & Amortization ($MM)Q2 FY2024n/a≈$373 New guidance
Net Interest Expense ($MM)Q2 FY2024n/a≈$118 New guidance
Adjusted Effective Tax Rate (%)Q2 FY2024n/a28–30% New guidance
Diluted Shares Outstanding (MM)Q2 FY2024n/a≈259 New guidance
Maintenance Downtime (k tons)FY2024n/a549 FY24 schedule New guidance
Guidance beyond Q2FY2024Fiscal 2024 expectations provided in Nov; now no guidance beyond Q2 No guidance beyond Q2 due to transaction submissions Withdrawn beyond Q2

Earnings Call Themes & Trends

Note: No Q1 FY2024 earnings call was held due to the proposed Smurfit Kappa transaction .

TopicPrevious Mentions (Q3 FY2023 and Q4 FY2023)Current Period (Q1 FY2024)Trend
Demand normalization / destockingQ3: Destocking pressured volumes; Q4: Containerboard demand stabilized, corrugated shipments up sequentially Expect significant H2 demand improvement (seasonality, macro, normalized inventories) Improving into H2 FY24
Cost savings / transformationQ3: On track >$450M run-rate; Q4: $200M saved in Q4, ~$350M FY23 >$200M savings in Q1; expect to exceed FY24 $300–$400M target Strong execution; upward bias
Pricing cyclesQ3/Q4: Flow-through of published declines pressured revenue/margins Continued realization of declines in H1; announced price increases across substrates Mixed near term; positive H2 intent
Mexico acquisition / portfolio optimizationQ3/Q4: Integration boosted Corrugated; footprint rationalization and mill closures Continued integration benefits; facility consolidations deliver ~$85M annual savings when completed Ongoing margin enhancement
Tariffs/regulatoryQ4: Transaction proposed; no call; FY2024 expectations Antidumping tariffs in Jan 2024 to support kraft paper; transaction expected to close early July 2024 Supportive for kraft; deal timeline key
Input costsQ3: OCC/energy deflation; Q4: lower energy, virgin fiber Q2 outlook: higher energy & recycled fiber; relatively flat virgin fiber/chemicals/freight Near-term mixed cost inflation

Management Commentary

  • “During the quarter, we grew external containerboard shipments… We continue to expect significantly improved demand in the second half… We are well positioned to capitalize on the opportunities ahead.” — CEO David B. Sewell .
  • Transaction update: company will not host a call; expects closing early July 2024 and will not provide guidance beyond Q2 to avoid regulatory delays .
  • Strategic actions: closed higher-cost mills, consolidated converting facilities, increased vertical integration, and investing in new converting capacity (Longview, WA; Pleasant Prairie, WI) to improve margin profile and returns .

Q&A Highlights

  • No Q1 FY2024 earnings call or Q&A was held due to the proposed Smurfit Kappa transaction; investor materials were provided via press release and slides .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable for WRK in this period due to a CIQ mapping error; therefore, a formal comparison versus consensus cannot be provided at this time. Values retrieved from S&P Global were unavailable due to mapping constraints.
  • Internal guidance comparison indicates Q1 results were below the prior guided ranges (Adjusted EPS and Adjusted EBITDA), while Q2 guidance implies sequential stability with anticipated improvement in H2 on volumes and pricing actions .

Key Takeaways for Investors

  • Near-term demand recovery narrative is intact: management expects significant H2 improvement with normalization of inventories, seasonality, and announced price increases; Q2 guidance suggests a trough-to-stabilization dynamic in H1 .
  • Cost-savings execution is a key offset to pricing/demand pressure: >$200M realized in Q1 with intent to exceed FY24 $300–$400M target; footprint optimization and facility consolidations should structurally lift margins over time .
  • Corrugated strength versus paperboard softness: external containerboard shipments +21.9% YoY and segment sales +3.5% YoY, while Global Paper and Consumer Packaging faced pricing and volume headwinds; mix and integration strategy supports Corrugated resilience .
  • Guidance implies steady operating cadence in Q2 despite higher energy/recycled fiber costs and continued published price decline flow-through; watch adjusted tax rate (28–30%) and net interest expense (~$118M) for EPS sensitivity .
  • Transaction timeline and disclosure constraints are central: no call and no guidance beyond Q2 to expedite regulatory submissions; expected early July close is a stock narrative catalyst, with H2 delivery on volumes and price increases likely to drive sentiment .
  • Balance sheet/liquidity remain adequate for operations and transformation: Adjusted Net Debt $8.06B, cash ~$488M, ~$3.4B liquidity; ongoing capex ($247M in Q1) focused on asset recapitalization and strategic investments .
  • Trading lens: monitor kraft paper tailwinds from antidumping tariffs, execution on announced price increases, H2 volume trajectory, and any updates to transaction timing; near-term print lacks a call catalyst but H2 setup could re-rate if demand/pricing materialize .