WestRock Reports Fiscal 2022 First Quarter Results

WestRock Company, a leading provider of differentiated, sustainable paper and packaging solutions, announced results for its fiscal first quarter ended December 31, 2021.

• Record first quarter net sales of $5.0 billion increased 12.5% year-over-year
• Net income of $182 million increased 19.9% year-over-year
• Consolidated Adjusted EBITDA of $680 million increased 1.6% year-over-year
• Earned $0.68 per diluted share (“EPS”) and Adjusted EPS of $0.65, up 19.3% and 6.6%, respectively

“I am pleased with our strong performance during the first quarter of fiscal 2022, in which our teams delivered record first quarter sales and double-digit EPS growth while navigating the continued and unpredictable macroeconomic landscape. We also delivered solid margin performance in the face of continued supply chain disruption, higher inflation and increased absenteeism associated with COVID-19,” said David B. Sewell, chief executive officer.

“As we look to fiscal 2022, we are continuing to execute our transformation program, which included reorganizing our operating businesses to better align with our strategy to deliver profitable growth and to increase transparency into our performance. In addition, we continue to hire key talent, including new Chief Financial Officer, Alex Pease, and new Chief Supply Chain Officer, Peter Anderson, who both bring deep experience and fresh perspective to these critical roles. We are on a journey to position WestRock for outperformance and are executing swiftly with significant opportunity ahead. Thank you to our 50,000 team members around the world for their continued dedication and hard work.”

Consolidated Financial Results

WestRock’s performance for the three months ended December 31, 2021 and 2020 (in millions):

	Three Months Ended
	Dec. 31, 2021			Dec. 31, 2020			$ Var.			% Var.
Net sales	$	4,952.2		$	4,401.5		$	550.7		12.5	%
Net income	$	182.3		$	152.0		$	30.3		19.9	%
Consolidated Adjusted EBITDA	$	680.3		$	669.8		$	10.5		1.6	%

Net sales increased $551 million, or 12.5%, year-over-year. Paper segment sales increased $262 million, Corrugated Packaging segment sales increased $201 million, Consumer Packaging segment sales increased $76 million and Distribution segment sales increased $21 million.

Net income increased $30 million, or 19.9%, year-over-year primarily due to higher pricing and lower interest expense that was partially offset by net cost inflation, lower aggregate volumes, increased maintenance outages and other items. Consolidated Adjusted EBITDA increased $11 million, or 1.6%, year-over-year as strength in the Paper segment more than offset decreases in the Corrugated Packaging, Distribution and Consumer Packaging segments. Additionally, non-allocated expenses declined by $4 million.

Restructuring and other items during the first quarter of fiscal 2022 was $2 million, primarily related to severance and other employee costs.

Net Cash Provided By Operating Activities and Other Financing and Investing Activities

Net cash provided by operating activities was $253 million in the first quarter of fiscal 2022 compared to $719 million in the prior year quarter primarily due to higher working capital usage compared to the prior year period. The working capital usage was higher year-over-year primarily due to actions taken in the prior year to preserve cash due to the high uncertainty during the COVID-19 pandemic.

Total debt was $8.2 billion at December 31, 2021, $8.0 billion excluding $188 million of unamortized fair market value step-up of debt acquired in mergers and acquisitions, and $7.8 billion after further excluding cash and cash equivalents of $291 million. The Company had approximately $3.6 billion of available liquidity under long-term committed credit facilities and cash and cash equivalents at December 31, 2021, and our net leverage ratio was within our 2.25x to 2.50x target. During the first quarter of fiscal 2022, WestRock invested $173 million in capital expenditures and returned $166 million in capital to stockholders, specifically $100 million in stock repurchases and $66 million in dividend payments.

New Segment Reporting Structure

Effective the first quarter of fiscal 2022, the Company reorganized its reportable segments due to recent changes in its organizational structure and how the Company makes key operating decisions, allocates resources and assesses the performance of its business going forward. The Company believes the change will increase transparency and better align business operations with corporate strategy and future growth plans.

Our new reportable segments are:

• Corrugated Packaging, which consists of our integrated corrugated converting operations;
• Consumer Packaging, which consists of our integrated consumer converting operations;
• Paper, which consists of all third-party paper sales; and
• Distribution, which consists of our distribution and display assembly operations.

As a result of the reorganization, the Company now reports the benefit of vertical integration with its mills in each reportable segment that ultimately sells the associated paper and packaging products to our external customers. Prior to the reorganization, the Company had two reportable segments, Corrugated Packaging and Consumer Packaging.

The Company’s measure of segment profitability for each reportable segment is Adjusted EBITDA as allowed for under Accounting Standards Codification 280, “Segment Reporting” because it is the measure used by our Company to make decisions about allocating resources and assessing segment performance. Certain items are not allocated to our reportable segments and, thus, the information that the Company uses to make operating decisions and assess performance does not reflect such amounts. Items not allocated are reported as Non-allocated expenses or in other line items outside of Adjusted EBITDA. Adjusted EBITDA is defined on page 10. Prior period amounts have been recast to conform with the new segment structure. These changes did not impact the consolidated financial statements. We have included the recast segment information for the last two years, including quarters therein, at the end of the earnings release.

Segment Results

Corrugated Packaging Segment

	Three Months Ended
	Dec. 31, 2021			Dec. 31, 2020			$ Var.				% Var.
Segment sales	$	2,220.0		$	2,019.5		$	200.5			9.9	%
Adjusted EBITDA	$	288.9		$	347.6		$	(58.7)			(16.9)	%

Corrugated Packaging segment sales increased $201 million, or 9.9%, primarily due to higher selling price/mix that was partially offset by lower volumes.

Corrugated Packaging Adjusted EBITDA decreased $59 million, or 16.9%, primarily due to higher net cost inflation, reduction in productivity and other operational items, including increased maintenance outages, and lower volumes that were partially offset by the margin impact from higher selling price/mix. Corrugated Packaging Adjusted EBITDA margin was 13.0% and Adjusted EBITDA margin excluding trade sales was 13.5%.

Consumer Packaging Segment

	Three Months Ended
	Dec. 31, 2021			Dec. 31, 2020			$ Var.				% Var.
Segment sales	$	1,138.7		$	1,062.5		$	76.2			7.2	%
Adjusted EBITDA	$	169.3		$	175.3		$	(6.0)			(3.4)	%

Consumer Packaging segment sales increased $76 million, or 7.2%, primarily due to higher selling price/mix and higher volumes.

Consumer Packaging Adjusted EBITDA decreased $6 million, or 3.4%, primarily due to net cost inflation that was partially offset by the margin impact from higher selling price/mix, increased productivity and other operational items, including increased maintenance outages, and higher volumes. The Consumer Packaging segment delivered an Adjusted EBITDA margin of 14.9%.

Paper Segment

	Three Months Ended
	Dec. 31, 2021			Dec. 31, 2020			$ Var.			% Var.
Segment sales	$	1,352.6		$	1,090.9		$	261.7		24.0	%
Adjusted EBITDA	$	232.4		$	151.7		$	80.7		53.2	%

Paper segment sales increased $262 million, or 24.0%, primarily due to higher selling price/mix and higher volumes.

Paper Adjusted EBITDA increased $81 million, or 53.2%, primarily due to the margin impact from higher selling price/mix, increased productivity and other operational items, including increased maintenance outages, and higher volumes that were partially offset by net cost inflation. The Paper segment delivered an Adjusted EBITDA margin of 17.2%.

Distribution Segment

	Three Months Ended
	Dec. 31, 2021			Dec. 31, 2020			$ Var.				% Var.
Segment sales	$	324.8		$	303.8		$	21.0			6.9%
Adjusted EBITDA	$	6.5		$	16.4		$	(9.9)			(60.4)%

Distribution segment sales increased $21 million, or 6.9%, primarily due to higher selling price/mix that was partially offset by lower volumes.

Distribution Adjusted EBITDA decreased $10 million, or 60.4%, primarily due to net cost inflation and lower productivity and other items that were partially offset by the margin impact from higher selling price/mix.

For the complete press release, click here.

About WestRock

WestRock (NYSE:WRK) partners with our 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. Learn more at www.westrock.com.

Contact:

James Armstrong – Vice President Investor Relations – james.armstrong@westrock.com – (470) 328-6327

Source: WestRock Company