WestRock Reports Strong Fourth Quarter Fiscal 2023 Results

WestRock Company (NYSE:WRK), a leading provider of sustainable paper and packaging solutions, today announced results for its fiscal fourth quarter and year ended September 30, 2023.

Fourth Quarter Highlights and other notable items:

Net sales of $5.0 billion
Net income of $110 million, Adjusted Net Income of $210 million; net income included $344 million ($239 million of which was non-cash) of restructuring and other costs, net and a $239 million gain on sale of the Company’s interior partitions converting operations and Chattanooga, Tennessee uncoated recycled paperboard mill
Earned $0.43 per diluted share (“EPS”) and $0.81 of Adjusted EPS
Consolidated Adjusted EBITDA of $736 million; Corrugated Packaging segment Adjusted EBITDA increased 13.0% compared to the fourth quarter of fiscal 2022
Results negatively impacted by $64 million due to economic downtime and a $40 million increase in non-cash pension costs, each compared to the fourth quarter of fiscal 2022; WestRock’s U.S. qualified and non-qualified pension plans remain overfunded
Announced 10% dividend increase in October 2023
Announced proposed business combination with Smurfit Kappa Group plc to create a global leader in sustainable packaging (the “Transaction”)

Full Year 2023 Highlights:

Net sales of $20.3 billion
Net loss of $1.6 billion, Adjusted Net Income of $778 million
- Results reflected a $1.9 billion pre-tax, non-cash goodwill impairment and $859 million ($605 million of which was non-cash) of pre-tax restructuring and other costs, net
Consolidated Adjusted EBITDA of $3.0 billion
Loss per share of $6.44 and generated $3.02 of Adjusted EPS
Generated net cash provided by operating activities of $1.8 billion and Adjusted Free Cash Flow of $933 million
Exceeded cost savings expectations in fiscal 2023, and exited fiscal 2023 with greater than $450 million in run-rate savings
Invested $1.1 billion in capital expenditures and returned $281 million in capital to stockholders in dividend payments.
Simplified the Company’s portfolio to streamline its business and improve performance

“The WestRock team delivered another strong quarter, demonstrating the power and resilience of our diversified portfolio, innovative solutions and scale,” said David B. Sewell, chief executive officer. “I’m incredibly proud of our team’s commitment to serving our customers, while executing on and accelerating our transformation actions. Through our portfolio optimization actions, cost savings initiatives and strategic growth plans, we are positioning WestRock well to deliver shareholder value. As we turn to fiscal 2024, we remain committed to unlocking additional cost savings and driving profitable growth.”

Consolidated Financial Results

WestRock’s performance for the three months ended September 30, 2023 and 2022 (in millions):

	Three Months Ended	Three Months Ended
	Sep. 30, 2023	Sep. 30, 2022	$ Var.	% Var.
Net sales	$4,988.2	$5,402.5	$(414.3)	-7.7%
Net income	$109.8	$344.5	$(234.7)	-68.1%
Consolidated Adjusted EBITDA	$736.0	$919.7	$(183.7)	-20.0%

The decline in net sales compared to the fourth quarter of fiscal 2022 was driven primarily by a $417 million, or 29.2%, decrease in Global Paper segment sales, which was partially offset by a $138 million, or 5.8%, increase in Corrugated Packaging segment sales. The increase in Corrugated Packaging segment sales in the current year quarter includes the operations of the Company’s former joint venture in Mexico that were acquired in December 2022 (“Mexico Acquisition”).

Net income declined in the fourth quarter of fiscal 2023 compared to the prior year quarter primarily due to higher restructuring and other costs, net, lower selling price/mix, lower volumes excluding the Mexico Acquisition, the impact of increased economic downtime, increased non-cash pension costs, the prior year ransomware insurance recoveries, higher net interest expense and business systems transformation costs. These costs were partially offset by the gain on sale of the Company’s interior partitions converting operations and Chattanooga, Tennessee mill (collectively referred to as “gain on sale of RTS and Chattanooga”), increased cost savings, net cost deflation and the contribution from the Mexico Acquisition.

Consolidated Adjusted EBITDA decreased $184 million, or 20.0%, compared to the fourth quarter of fiscal 2022, primarily due to lower Global Paper segment Adjusted EBITDA that was partially offset by higher Adjusted EBITDA in the Company’s Corrugated Packaging segment.

Additional information about the changes in segment sales and Adjusted EBITDA by segment is included below.

Restructuring and Other Costs, Net

Restructuring and other costs, net during the fourth quarter of fiscal 2023 were $344 million ($239 million of which was non-cash). The charges were primarily costs associated with the closure of the Tacoma, Washington containerboard mill, and the consolidation of converting facilities, ongoing costs related to previously closed operations, and acquisition, integration and divestiture costs, including those associated with the proposed Transaction, the sale of the Company’s interior partitions converting operations and Chattanooga, Tennessee uncoated recycled paperboard mill.

Gain (Loss) on Extinguishment of Debt

In the fourth quarter, the Company discharged $500 million aggregate principal amount of our 3.00% senior notes due September 2024 using cash and cash equivalents and borrowings under our commercial paper program and recorded a $10.5 million gain on extinguishment of debt.

Gain on Sale of RTS and Chattanooga

In the fourth quarter, the Company completed the previously announced sale of the Company’s interior partitions converting operations and the sale of the Chattanooga mill to its joint venture partner and received $318 million of proceeds, including a preliminary working capital adjustment and other customary adjustments, and recorded a pre-tax gain on sale of $239 million, excluding divestiture costs.

Cash Flow Activities

Net cash provided by operating activities was $584 million in the fourth quarter of fiscal 2023 compared to $540 million in the prior year quarter.

Total debt was $8.6 billion at September 30, 2023, and Adjusted Net Debt was $8.0 billion. Total debt decreased $443 million compared to the third quarter of fiscal 2023. The Company had approximately $3.4 billion of available liquidity from long-term committed credit facilities and cash and cash equivalents at September 30, 2023.

During the fourth quarter of fiscal 2023, WestRock invested $324 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 the Company’s Corrugated Packaging segment.

WestRock’s segment performance for the three months ended September 30, 2023 and 2022 was as follows (in millions):

Corrugated Packaging Segment

	Three Months Ended	Three Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Var.	% Var.
Segment sales	$2,524.4	$2,386.1	$138.3	5.8%
Adjusted EBITDA	$433.8	$383.9	$49.9	13.0%
Adjusted EBITDA Margin	17.2%	16.1%	110 bps

Corrugated Packaging segment sales increased primarily due to sales from the Mexico Acquisition that were partially offset by lower volumes excluding the Mexico Acquisition and lower selling price/mix. In addition, the fourth quarter of fiscal 2023 included $35 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 increased cost savings, net cost deflation and the incremental contribution from the Mexico Acquisition, which were partially offset by the margin impact from lower selling price/mix, lower volumes excluding the Mexico Acquisition, the net impact of economic downtime and prior year mill closures, the prior year ransomware insurance recoveries and non-cash pension costs, each as compared to the prior year period. Corrugated Packaging Adjusted EBITDA margin was 17.2% and Adjusted EBITDA margin excluding trade sales was 17.8%.

Consumer Packaging Segment

	Three Months Ended	Three Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Var.	% Var.
Segment sales	$1,211.1	$1,305.7	$(94.6)	-7.2%
Adjusted EBITDA	$203.8	$219.2	$(15.4)	-7.0%
Adjusted EBITDA Margin	16.8%	16.8%	0 bps

Consumer Packaging segment sales decreased primarily due to lower volumes. In addition, the fourth quarter of fiscal 2022 included $34 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, net cost inflation, the impact of increased economic downtime and non-cash pension costs. In addition, the fourth quarter of fiscal 2022 included $4 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 increased cost savings, each as compared to the prior year period. Consumer Packaging Adjusted EBITDA margin was 16.8%.

Global Paper Segment

	Three Months Ended	Three Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Var.	% Var.
Segment sales	$1,012.4	$1,429.2	$(416.8)	-29.2%
Adjusted EBITDA	$133.6	$306.4	$(172.8)	-56.4%
Adjusted EBITDA Margin	13.2%	21.4%	-820 bps

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 the margin impact of lower selling price/mix, lower volumes, the impact of increased economic downtime and prior year mill closures, the prior year ransomware insurance recoveries and increased non-cash pension costs, which were partially offset by increased cost savings and net cost deflation, each as compared to the prior year period. Global Paper Adjusted EBITDA margin was 13.2%.

Distribution Segment

	Three Months Ended	Three Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Var.	% Var.
Segment sales	$314.1	$374.1	$(60.0)	-16.0%
Adjusted EBITDA	$10.9	$26.0	$(15.1)	-58.1%
Adjusted EBITDA Margin	3.5%	7.0%	-350 bps

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.

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

For the complete press release, click here.

About WestRock

WestRock (NYSE: WRK) is a global leader in sustainable paper and packaging solutions, with more than 58,000 teammates in the Americas, Europe and Asia-Pacific. Our integrated packaging capabilities offer end-to-end solutions to help customers address their greatest challenges.

Contact:

Robby Johnson – Senior Manager, Corporate Communications – robby.b.johnson@westrock.com – (470) 328-6397

Source: WestRock Company

Most Read