WestRock Reports Fiscal 2023 Third Quarter Results

"We delivered impressive results under challenging market conditions. Our accelerated transformation strategy is exceeding expectations." – David Sewell, CEO of WestRock.

Aug. 3, 2023 - WestRock Company (NYSE:WRK) today announced results for its fiscal third quarter ended June 30, 2023.

"We delivered impressive results under challenging market conditions," said David B. Sewell, chief executive officer. "Our accelerated transformation strategy is exceeding expectations. We expect to exit the year with a cost savings run-rate of over $450 million. We remain focused on partnering with our customers, streamlining our portfolio, investing in our assets and further reducing costs. I'm excited about our execution as we continue to transform WestRock into a more efficient and more profitable company."

Consolidated Financial Results

The year-over-year decline in net sales was driven primarily by a $545 million, or 33.8%, decrease in Global Paper segment sales, which was partially offset by a $183 million, or 7.7%, increase in Corrugated Packaging segment sales. The increase in segment sales in the Corrugated Packaging segment in the current year quarter includes the operations of our former joint venture in Mexico since its December 2022 consolidation ("Mexico Acquisition").

Net income declined in the third quarter of fiscal 2023 compared to the prior year quarter primarily due to lower volumes excluding the Mexico Acquisition, the impact of increased economic downtime and planned maintenance outages, higher restructuring costs, increased non-cash pension costs, higher net interest expense and business systems transformation costs. These costs were partially offset by the impact of higher selling price/mix, increased cost savings, contribution from the Mexico Acquisition, net cost deflation and the gain on sale of an unconsolidated entity.

Consolidated Adjusted EBITDA decreased $204 million, or 20.2%, year-over-year, primarily due to lower Global Paper segment Adjusted EBITDA that was partially offset by higher Adjusted EBITDA in our Corrugated Packaging segment.

Restructuring and Other Costs

Restructuring and other costs during the third quarter of fiscal 2023 were $48 million. The charges were primarily costs associated with the consolidation of converting facilities, ongoing costs related to previously closed operations, and acquisition, integration and divestiture costs.

Cash Flow Activities

Net cash provided by operating activities was $694 million in the third quarter of fiscal 2023 compared to $837 million in the prior year quarter primarily due to lower earnings.

Total debt was $9.0 billion at March 31, 2023, and Adjusted Net Debt was $8.6 billion. Total debt decreased $479 million compared to the second quarter of fiscal 2023. The Company had approximately $3.5 billion of available liquidity from long-term committed credit facilities and cash and cash equivalents at June 30, 2023.

During the third quarter of fiscal 2023, WestRock invested $255 million in capital expenditures and returned $71 million in capital to stockholders in dividend payments.

SEGMENT RESULTS

We have included the financial results of the Mexico Acquisition in our Corrugated Packaging segment.

Corrugated Packaging Segment

Corrugated Packaging segment sales increased primarily due to sales from the Mexico Acquisition and higher selling price/mix that were partially offset by lower volumes excluding the Mexico Acquisition. In addition, the third quarter of fiscal 2023 included $37 million of segment sales for certain converting operations that were included in the Consumer Packaging segment in the prior year period.

Corrugated Packaging Adjusted EBITDA increased primarily due to net cost deflation, the incremental contribution from the Mexico Acquisition, cost savings and the margin impact from higher selling price/mix, which were partially offset by lower volumes excluding the Mexico Acquisition, economic downtime, planned maintenance outages and non-cash pension costs, each as compared to the prior year period. Corrugated Packaging Adjusted EBITDA margin was 16.7% and Adjusted EBITDA margin excluding trade sales was 17.4%.

Consumer Packaging Segment

Consumer Packaging segment sales decreased primarily due to lower volumes and the unfavorable impact of foreign currency. In addition, the third quarter of fiscal 2022 included $37 million of segment sales for certain converting operations now included in the Corrugated Packaging segment. These items were partially offset by higher selling price/mix.

Consumer Packaging Adjusted EBITDA decreased primarily due to lower volumes, net cost inflation, economic downtime and non-cash pension costs. In addition, the third quarter of fiscal 2022 included $8 million of Adjusted EBITDA for certain converting operations now included in the Corrugated Packaging segment. These items were largely offset by the margin impact from higher selling price/mix and cost savings, each as compared to the prior year period. Consumer Packaging Adjusted EBITDA margin was 18.4%.

Global Paper Segment

Global Paper segment sales decreased primarily due to lower volumes and lower selling price/mix. Additionally, segment sales are lower than the prior year period because sales to the operations acquired in the Mexico Acquisition are now eliminated.

Global Paper Adjusted EBITDA decreased primarily due to lower volumes, economic downtime, the impact of lower selling price/mix, planned maintenance outages, the unfavorable impact of foreign currency and increased non-cash pension costs, which were partially offset by net cost deflation and cost savings, each as compared to the prior year period. Global Paper Adjusted EBITDA margin was 16.6%.

Distribution Segment

Distribution segment sales decreased primarily due to lower volumes. The lower volumes were primarily due to lower moving and storage business volumes in the current quarter and a large healthcare order in the third quarter of fiscal 2022.

Distribution Adjusted EBITDA decreased primarily due to lower volumes, increased cost inflation and the margin impact of lower selling price/mix which were partially offset by cost savings, each as compared to the prior year period.

WestRock (NYSE:WRK) partners with its customers to provide differentiated, sustainable paper and packaging solutions that help them win in the marketplace. WestRock's team members support customers around the world from locations spanning North America, South America, Europe, Asia and Australia.

SOURCE: WestRock Company