"During the first fiscal quarter, the WestRock team delivered solid financial results and generated strong cash flow resulting in debt and leverage reduction, with record box shipments and growth in key end markets." – Steve Voorhees, CEO, WestRock.
Jan. 28, 2021 - WestRock Company (NYSE:WRK), a leading provider of differentiated paper and packaging solutions, today announced results for its fiscal first quarter ended December 31, 2020. Notable items in the first quarter of fiscal 2021 include:
"During the first fiscal quarter, the WestRock team delivered solid financial results and generated strong cash flow resulting in debt and leverage reduction, with record box shipments and growth in key end markets," said Steve Voorhees, chief executive officer. "We continue to work around the clock to restore normal operations from the ransomware attack as quickly as possible, and to safely produce the paper and packaging needed by our customers and our communities. As we look to the future, we remain confident in our strategy and our ability to generate strong cash flow and partner with our customers to meet their growing needs for sustainable, fiber-based packaging solutions."
Operating Highlights for the Three Months Ended December 31, 2020 compared to December 31, 2019:
Net sales decreased $22 million compared to the prior year quarter. This decrease was primarily due to the absence of Land and Development net sales due to the completion of the monetization program in fiscal 2020. Consumer Packaging segment net sales increased $58 million and Corrugated Packaging segment net sales declined $45 million. Segment income decreased $24 million compared to the prior year quarter. Consumer Packaging segment income increased $46 million driven by strong sales and operating performance, including productivity improvements, and Corrugated Packaging segment income decreased $68 million.
Restructuring and other items during the first quarter of fiscal 2021 included the following pre-tax costs:
Net cash provided by operating activities was $719 million in the first quarter of fiscal 2021 compared to $431 million in the prior year quarter. The increase in net cash provided by operating activities was primarily due to favorable working capital compared to the prior year quarter, including the payment of certain fiscal 2020 annual bonuses and 401(k) match in the form of stock, rather than cash, and deferral of certain payroll taxes in connection with the Company's pandemic action plan.
Total debt was $8.94 billion at December 31, 2020, or $8.74 billion excluding $205 million of unamortized fair market value step-up of debt acquired in mergers and acquisitions, and $8.48 billion after further excluding cash and cash equivalents of $254 million. The Company paid down $491 million of debt during the first quarter of fiscal 2021 and had approximately $3.4 billion of available liquidity under long-term committed credit facilities and cash and cash equivalents at December 31, 2020. During the first quarter of fiscal 2021, WestRock invested $171 million in capital expenditures and paid $53 million in dividends to stockholders.
WestRock's segment performance for the three months ended December 31, 2020 and December 31, 2019 (in millions):
Operating Highlights for the Three Months Ended December 31, 2020 compared to December 31, 2019:
Segment net sales decreased $45 million, primarily due to $27 million of unfavorable foreign currency impacts, $13 million of lower volumes, including the impact of COVID-19 and the Tres Barras planned maintenance outage to support the mill upgrade, and $6 million of lower selling price/mix on sales. The Corrugated Packaging segment delivered a Segment EBITDA margin of 15.6% and a North American Adjusted Segment EBITDA margin of 18.2%.
Segment income decreased $68 million compared to the prior year quarter, primarily due to an estimated $63 million of net cost inflation, $28 million of Hurricane Michael insurance recoveries net of direct costs in the prior year quarter, $21 million of decreased indirect tax claims in Brazil, COVID-19 relief payments and other safety, cleaning and other items related to COVID-19 aggregating $17 million, $6 million of margin impact from lower selling price/mix, $5 million of lower volumes, including the impact of COVID-19, and $3 million of unfavorable foreign currency impacts.
These factors were partially offset by $24 million of estimated productivity savings net of the Tres Barras planned maintenance outage, $12 million of lower depreciation and amortization, primarily due to accelerated depreciation incurred in the prior year period associated with the Florence, South Carolina paper machine project and North Charleston, South Carolina mill reconfiguration project and other favorable items aggregating $38 million compared to the prior year quarter. These other items included higher income compared to the prior year quarter related to the North Charleston, South Carolina mill reconfiguration project and the Florence, South Carolina paper machine project, the decreased negative impact of maintenance downtime and other items.
Operating Highlights for the Three Months Ended December 31, 2020 compared to December 31, 2019:
Segment net sales increased $58 million, primarily due to $27 million of higher volumes, including the impact of COVID-19, $21 million of higher selling price/mix on sales and $10 million of favorable foreign currency impacts. The Consumer Packaging segment delivered a Segment EBITDA margin of 14.0% and an Adjusted Segment EBITDA margin of 14.7%.
Segment income increased $46 million, primarily due to an estimated $44 million of productivity improvements, $18 million of margin impact from higher selling price/mix, $6 million of higher volumes, net of the impact of COVID-19, $4 million of lower depreciation and amortization and $3 million of lower outage costs, which includes the impact of the strategic capital projects performed in the prior year quarter. These items were partially offset by an estimated $14 million of net cost inflation and an estimated $11 million of economic downtime and other items. In addition, we incurred $4 million of other net costs, including $15 million of relief payments and other, safety, cleaning and other items related to COVID-19.
On January 25, 2021, the Company announced a ransomware incident that occurred on January 23rd impacting certain of its operational and information technology systems.
WestRock's security teams, supported by leading cyber defense firms, continue to work on remediation of and recovery from this incident. With some exceptions, the Company's operations have continued to run and deliver for customers. In locations where technology issues have been identified, we are using alternative methods to process and ship orders.
The Company will discuss the ransomware incident on its fiscal first quarter conference call referenced below.
WestRock will host a conference call to discuss its results of operations for the fiscal first quarter ended December 31, 2020 and other topics that may be raised during the discussion at 8:30 a.m., Eastern Time, on Thursday, January 28, 2021. The conference call, which will be webcast live, an accompanying slide presentation, and this release can be accessed at ir.westrock.com.
Investors who wish to participate in the webcast via teleconference should dial 833-360-0873 (inside the U.S.) or 478-219-0243 (outside the U.S.) at least 15 minutes prior to the start of the call and enter the passcode 7865486. Replays of the call can be accessed at ir.westrock.com.
WestRock (NYSE:WRK) partners with its customers to provide differentiated paper and packaging solutions that help them win in the marketplace. WestRockâs team members support customers around the world from locations spanning North America, South America, Europe, Asia and Australia. To learn more, visit: www.westrock.com.
SOURCE: WestRock Company
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