"During the quarter, we grew external containerboard shipments, while we felt the impact of lower paperboard market demand." – David Sewell, CEO of WestRock.
Feb. 1, 2024 - WestRock Company today announced results for its fiscal first quarter ended December 31, 2023.
First Quarter Highlights and other notable items:
"During the quarter, we grew external containerboard shipments, while we felt the impact of lower paperboard market demand," said David B. Sewell, chief executive officer. "We continue to expect significantly improved demand in the second half of our fiscal year.
"We are continuing to deliver on, and we expect to significantly exceed, our cost savings targets. Our transformation initiatives have strengthened our portfolio, are increasing vertical integration and created significant operational efficiencies. With our broad portfolio of packaging solutions and self-help initiatives, we are well positioned to capitalize on the opportunities ahead."
The decline in net sales compared to the first quarter of fiscal 2023 was driven primarily by a $205 million, or 18.3%, decrease in Global Paper segment sales and a $156 million, or 12.8%, decrease in Consumer Packaging sales. These reductions include the impact of prior year mill and interior partition divestitures. These items were partially offset by an $83 million, or 3.5%, increase in Corrugated Packaging segment sales. The increase in Corrugated Packaging segment sales in the current year quarter includes a full quarter of operations of the Company's former joint venture in Mexico that were acquired in December 2022 ("Mexico Acquisition").
Net income declined in the first quarter of fiscal 2024 compared to the prior year quarter primarily due to lower selling price/mix, the impact of increased economic downtime and prior year mill closures, lower volumes excluding the Mexico Acquisition and higher restructuring and other costs, net. These costs were partially offset by increased cost savings and the additional two months of contribution from the Mexico Acquisition.
Net income in the prior year quarter was also impacted by the Mahrt mill work stoppage and a non-cash loss related to the Mexico Acquisition that were partially offset by a gain on foreign currency exchange contract derivatives entered into in anticipation of the Mexico Acquisition and a gain on sale of two URB mills.
Consolidated Adjusted EBITDA decreased $81 million, or 12.5%, compared to the first quarter of fiscal 2023, primarily due to lower Global Paper and Consumer Packaging segment Adjusted EBITDA, as well as higher corporate non-allocated expenses.
Restructuring and other costs, net during the first quarter of fiscal 2024 were $66 million. The charges were primarily for severance associated with converting plant closures and ongoing costs related to previously closed operations.
Net cash provided by operating activities was $275 million in the first quarter of fiscal 2024 compared to $266 million in the prior year quarter.
Total debt was $8.7 billion at December 31, 2023, and Adjusted Net Debt was $8.1 billion. The Company had approximately $3.4 billion of available liquidity from long-term committed credit facilities and cash and cash equivalents at December 31, 2023.
During the first quarter of fiscal 2024, WestRock invested $247 million in capital expenditures and returned $78 million in capital to stockholders in dividend payments.
SEGMENT RESULTS
Corrugated Packaging segment sales increased primarily due to the additional two months of sales from the Mexico Acquisition that were partially offset by lower selling price/mix and lower volumes excluding the Mexico Acquisition. In addition, the first quarter of fiscal 2024 included $42 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 decreased primarily due to the margin impact of lower selling price/mix that was partially offset by increased cost savings, the incremental two months of contribution from the Mexico Acquisition, the net impact of lower economic downtime and prior year mill closures and net cost deflation, each as compared to the prior year period. Corrugated Packaging Adjusted EBITDA margin was 13.5% and Adjusted EBITDA margin excluding trade sales was 14.0%.
Consumer Packaging segment sales decreased primarily due to lower volumes and the prior year divestiture of our interior partition operations. In addition, the first quarter of fiscal 2023 included $38 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 and the favorable impact of foreign currency.
Consumer Packaging Adjusted EBITDA decreased primarily due to lower volumes, the impact of increased economic downtime, net cost inflation and the prior year divestiture of our interior partition operations. In addition, the first quarter of fiscal 2023 included $4 million of Adjusted EBITDA for certain converting operations now included in the Corrugated Packaging segment. These items were largely offset by increased cost savings and the margin impact from higher selling price/mix, each as compared to the prior year period. Consumer Packaging Adjusted EBITDA margin was 15.7%.
Global Paper segment sales decreased primarily due to lower selling price/mix, lower volumes and the impact of prior year divested mill operations. Additionally, segment sales are lower than the prior year period because sales to the operations acquired in the Mexico Acquisition were eliminated for a full quarter in the current year period compared to only one month in the prior year quarter.
Global Paper Adjusted EBITDA decreased primarily due to the margin impact of lower selling price/mix, the impact of increased economic downtime and prior year mill closures, the impact of prior year divested mill operations and lower volumes, which were partially offset by increased cost savings, net cost deflation and lower planned maintenance downtime, each as compared to the prior year period. Global Paper Adjusted EBITDA margin was 12.9%.
Distribution segment sales decreased primarily due to lower volumes that were partially offset by higher selling price/mix.
Distribution Adjusted EBITDA decreased primarily due to lower volumes and increased cost inflation, which were partially offset by increased cost savings and the margin impact of higher selling price/mix, each as compared to the prior year period.
Due to the proposed business combination with Smurfit Kappa Group plc to create a global leader in sustainable packaging (the "Transaction"), WestRock will not host a conference call to discuss its financial results for the fiscal first quarter ended December 31, 2023. A slide presentation and other relevant financial and statistical information along with this release, can be accessed at ir.westrock.com.
Preparations for the Transaction, including regulatory submissions, are currently underway, and WestRock now expects the Transaction to close in early July 2024. To avoid a delay in this anticipated timeline caused by the inclusion of financial guidance after the second fiscal quarter in certain of those submissions, WestRock does not intend to provide such guidance for subsequent periods.
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
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