WRK - Earnings call transcript Q2 2018

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Operator

Good morning. My name is Lisa, and I will be your conference operator today. I would like to welcome everyone to WestRock's Fiscal Second Quarter Earnings Results Call. At this time, I'd like to turn the call over to Mr. James Armstrong, Vice President of Investor Relations.

James Armstrong

Operator. you, Thank and everyone, for us joining Good thank today. morning, you Web press We Investor and our releases posted a Relations the of the morning to this issued presentation accompanying section site. slide ir.westrock.com or can right of webcast. application the accessed this They using view via side to be you’re link on the the at of Chief segment. are Packaging; Chalovich, Jeff our of Corrugated today’s With Executive Steve Officer; me call on Packaging Voorhees; Financial Officer, Bob our Feeser, President and Chief WestRock's Ward Consumer Dickson, our President

Following we call remarks, our a for the prepared up open will question-and-answer period.

year to a to begin, I'd be including results that uncertainties these out we describe with our the and statements beliefs actual discuss we Before number materially -- cause statements XX-K the future and could involve course those forward-looking quarter our call. December today's for September like the plans, differ during of will XX, our ended point We we the risks to fiscal XXXX. our XX-Q during uncertainties ended and filings SEC, XX, estimates These related call, for and today expectations, in involving XXXX of events. risks from making may the

call. Additionally, comparable is to available non-GAAP measures we presentation. We presentation slide the our slide non-GAAP The measures financial will appendix these on provided site. in the during be of GAAP the reconciliations directly referencing measures most of Web the

you, over it So turn to Steve. with said, that I'll

Steve Voorhees

across and Packaging for increases acquire an all based during April, ton with reaching today. to in attractive. in our March consumer and KapStone. $XX completion strengthened James. our on team the we're you, of quarter. published Thank trends price benefiting paperboard grades. remained morning, in results published offerings paper from businesses. price Today Paper our Packaging agreement & Paper the published you Plymouth across contracts containerboard the and PPW mix Also our prices everyone. Good March the customers solutions and adjustments our packaging acquisition of and price capabilities per Week WestRock joining markets Most of Pulp by price increase and Thank favorable demand, March. PPW. delivered strong for our call We include

one our $X billion set We at of goal performance inception WestRock. quarter that within improvements are and achieving the synergy of we

rate run annual end Our the March million. of $XXX was at

flow the $X next reach to January, year. two million goal remain $XXX In this operating cash of fiscal expect to the target adjusted raised billion generated we that We to cash $X.XX track and months. 'XX within through billion in flow adjusted goal. we We March operating our meet on

of over segment adjusted earnings EBITDA were raising and for $XX.X was are Adjusted our full-year billion are was for an was $XXX increase the billion $X.XX. year. year raising segment quarter EBITDA for last million. and share were our per for to $X margin XX% up to sales an EBITDA $X.X This We over last XX.X%. guidance XX% Sales billion. guidance we This adjusted of

flow year. adjusted XX% compared increased cash to Our operating by last

and and and costs offset these ensure transportation, are inflation other impacting input quarter and second the Recycled driver inflation we continue. favorable. reduce entire chemicals, costs, costs to the represented taking rates largest Higher the will customers our the offset we we're merely which truck rail can in that service fiber labor economy was in productivity and it's one in actions in were cost. efficiently. believe U.S increases $XX million $XX This generated by of team Transportation Our million. quarter

We are of the expanding we carriers use. number

businesses. disruption the of caused Lower result converting mill number on the these by across million higher on had We shipping energy, networks our and a million was included are to $XX and more financial a and estimate This for increasing to additional storms the costs $XX of our large quarter. severity impact significantly million a use our in of than the impact provide had fleets higher $XX storms our results maintenance The as guidance. winter dedicated negative production, the options.

in you quarter As that sure we a with not can that significant reminder, understand, our would had the financial I'm strong The we as we in provided the momentum March. results and January growth weather business, adverse severe have of additional guidance predict year-over-year time in performance. could at the in reflect

completing toward progress making are KapStone. of the We acquisition

the previously subject KapStone's is to stockholders. disclosed, the approval acquisition As of

acquisition of and to continuing December Mexico, close are September the the end expect quarter. by or through the to the work the quarter approval we the regulatory U.S. and We processes in during

WestRock $XXX million. strong of adjusted year-over-year with XX% Packaging EBITDA posted in team results This quarter segment Corrugated Our a improvement. was the

Packaging of Our performance North EBITDA adjusted improving the progress with over made, basis the prior million corrugated EBITDA year. a of several $XXX past This American I an was the team been XX.X%. the adjusted has Corrugated points margin XXX years. over improvement pleased the very with our business is have

team position four several This over Our inventories business the X.X% adjusted in next of commercial Packaging the to growth capital the U.S XX% EBITDA rates attention an business. years. box industry [technical in After supply. as quarter of to below XX the This over demand team has average above the margins investment, the was and supported an past continues the the and years its growth year-over-year the on for weeks grow adjusted improvement only shipments This committed basis. by were more supported milestone difficulty]. of past week by even demonstrated operating Corrugated several aspects EBITDA remains acquisition And operational achieved XX.X%. after immediately of margin is for to our months Smurfit-Stone of important XX%. the

two April increased to far X% strong approximately We demand has from increase box of more per was markets. a recent and as on an XXXX on year. April North our demand by well XX% approximately acquisitions shipping than WestRock's day are This basis. sales channels. box the shipments seeing of so last all driven across compared corrugated our WestRock's e-commerce, increased year. X.X% pizza days strong as American volume has in in basis contributions absolute last and volume retail

automated component of to installations customers. packaging machines machine Across business Our quarter. machinery our on contributes solutions the demand that is line more This installed to our machinery Plymouth the we enhances acquisition value brings than systems The our a with XX key Packaging expanded the second of growth box businesses, and differentiation of total our machines. provide X,XXX. to during strategy offering we that our

of improved and price During containerboard the published the channel realized quarter, the increases previously benefits we mix.

to increased over markets. primarily due quarter to reduced more Of to XX% plants past sales the Our export were integration than interest, level to XX% for year, sales acquisitions. the increased volumes by box from offset volumes our

prices export average the over year, increased attractive than While on remain they to last domestic markets less markets.

volume, in We and quarter past because both converters offset than experienced under second well over basis our converters X% cost our cost. the million transportation conditions. higher basis primarily in was tons to Porto in higher spot cost WestRock. Net lost start Our interruptions sequentially up XXX over containerboard conditions and to was points of during and Brazil XXX due segment market. year. underway domestic this operations Sales quarter. very weather points to inflation $XX the up the mostly plant expect operations during to and important were half had shipped our mill were is sales and by more plant to last volumes new lower independent the These loss fixed Brazil, months X.X our absorbed remain extremely fiber of and Corrugated the resulted for the severe due million box converting second the affected independent energy to of we XXXX. increased This minimal, the And XX year. we’ve domestic Construction quarter. of containerboard EBITDA chemical prior fiscal team to strong of Feliz labor margins by delivered results in cost. the XX.X% this

winter to faced Our challenges disruptions. due cost team inflation and weather packaging consumer

half well-positioned 'XX. as seasonally into We’re improved second move performance stronger fiscal for we of the

declines, beauty, healthcare, liquid retail The food-service, personal as as well care, secular We and is print tobacco. strength strength are by commercial packaging seeing food. offset being in in and

segment markets than total account these for less Fortunately, XX% of declining sales.

Machinery are strategy good to had beverage differentiated of machine quarter important serve our a with replacements. beverage element markets. We XX Our Solutions

a strong have We second year. half machine backlog the of orders for the

the and currently four and through quarter and on between SBS CRB. are improved backlogs weeks and Paperboard CNK five on six five Our between and weeks

our published As as March I consumer grades, and across mentioned increases increases through implementing process in and our were business converted of these products each we're of Paperboard and contracts. volumes our they the PPW earlier, flow across April stable. price in

solutions multi-packaging basis. year-over-year by quarter tons million. in with was X.X% driven XX,XXX the EBITDA business. associated or a increased the shipments Adjusted Our $XXX This the volume was segment on

degree of 'XX. a cost weather our of OCC to the We some corrugated repeat our for not Like labor increases. help these the chemicals, expenses. Input virgin quarter. fiber production, lower volume bridge, shipments. mills. Lower or mills. reduction The recycled not our in Looking caused the less programs year-over-year fiscal This in Severe winter on in segment four Corrugated at winter well but experienced across lost weather in our merchandising cost reflects used did promotional segment, impact consumer and negative volume energy all softness display as disruptions unfavorably transportation, and that had declined as results significantly million pulp the the by inflation we was than driven in higher the impacted as financial offset the 'XX higher repair impacted segment corrugated mills price our cost consumer resulted the largely fiscal cost, display as operations. $XX same

seasonally Six temperatures another productivity and the procurement The fiscal we due The our They our in of power increases, implementation from deliver reflect strength and and and half over performance programs. During segment delivered the $XX consumer turn million the published excellence of capital efforts, ongoing to and Sigma of the integration the productivity investments will price With losses segment were Ward local it to of of production quarter the utilities. to improved this we now on savings. 'XX. in these experienced second of benefits impact benefits yet you. freezing from markets, performance improving I expect machinery interruptions improved initial from storms productivity.

Ward Dickson

land remaining achieve good to Thank and the monetization end of on development you, progress making expect the calendar year. our We're and goals this portfolio by Steve.

improvements the Steve of goal our will performance accomplish WestRock. set synergies and billion of when June As $X we referenced in that created we initially quarter, we

Turning key fiscal in assumptions third-quarter our financial to XX. included guidance. detailed Slide We the

the earnings, We -- higher earnings expect to than diluted $X.XX second significantly achieved adjusted be quarter. the share per share sequential in

continued and by productivity gains. to of $XX increases, as million $XX EBITDA higher increase favorable expect price to million result sales we mix seasonally First, volumes, a

increase This Second to we will our an across quarter-over-quarter. estimated have $XX expect maintenance mill downtime impact system. tons XX,XXX cost sequentially million

second million paid are for input to Based million our a the costs second to price and be average Third, ton. declined consumption costs fiber the lower $XX quarter. impact. this quarter is have was regional fiber index fiscal expected Recycled to expected in $XXX positive a $XX recycled mix, on have than per

Our average ton. $XX was per index April

April's quarter, with flat are recycled For the we forecasting fiber to remain prices levels.

amortization this $XX EPS $X.XX the higher noting sequentially impacted $X.XX million. unfavorably expected million seen will we've difficult. Adjusted higher third higher quarter and be cost expect year rate, due predicting to remains to However, tax we items, expense. also $XXX depreciation recycled higher by adjusted interest Combining fiber EBITDA that these to and will volatility, be

in Slide year. over more more to in We We're $XXX revenue this revenue now and EBITDA than million EBITDA expect raising both by $XX.X adjusted expectations adjusted Turning generate each. our than billion billion and to $X.X full-year XX.

We raised first reaffirming cash than call. guidance which adjusted are earnings by full-year a million our billion, quarter on of we greater $XXX flow operating $X.XX our

versus tax of improve book Our XX.X% fiscal previous investing expectation our adjusted estimated XX%. business. In capital that are approximately our projects XXXX, full-year rate we in will strategic is

underway. our coater new Florence, Our and paper mill are and South investments our in at plant, containerboard a machine curtain in the Feliz Mahrt the mill box Porto Carolina

approximately investments capital for base our in expect million. is $XXX to to this million addition projects these in XXXX of year. We reach This $XXX fiscal expenditures

back in revenue, We positioned growth to and turn the strong EBITDA, call deliver financial over Steve. are results flow. to adjusted operating I the will cash record for with adjusted that, And full-year with

Steve Voorhees

translating provide the into Plymouth premier Thank provider winning our The our our advanced our the is be of This KapStone announcement acquisition solutions you, partner is on vision customers. capabilities and our in can Ward. of and January, to strategy proposed the financial we the for our customers. by unrivaled and completion strengthening WestRock's value acquisition of performance.

through solid driving margin fundamentals. growth operating and are strong across We WestRock execution business

will XX%. our increase basis company adjusted to total approximately margins fiscal EBITDA points more by We XXX 'XX than expect

Our Through their of will together achieve flow. execution, working to and portfolio team paper our our cash using customers is to differentiated and we strong margins improve our our committed to goals help continue grow packaging solutions. our

our cash use to support back flow our business will strong and make strategy. our that acquisitions We into reinvest

and WestRock over We remarks. target we're expect to my investors within for by That that return stockholders long-term. a believe shares increasing opportunistically I Q&A. WestRock ratio. capital and our time leverage the short WestRock employees, our to over continue significant dividend that prepared provides formula James customers and ready opportunities repurchasing this is to concludes for

James Armstrong

Steve. you, Thank

one question give a needed. one audience our As ask a as reminder to everybody your question, to chance follow-up to a limit please with to

our many allows. time as please. to first as take question get will Lisa, we can We

Operator

line America Merrill Bank Our Staphos comes first from question of the from Lynch. George of

is line open. Your

George Staphos

machinery these work morning. the I have in the Florence. do terms everyone. both us details. a of and you. of how into -- bit on put tell improvement? to my solutions times $XXX us the of question, terms Thanks what Thank in formal the talk Obviously, you’ve investments in number corrugated next on helping second coater, ultimately large been more Good perspective a growth you staying budget underway, the facility performance projects taking your the Can means the percentage and projects are the question. in about to that's box what talked the consumer mile markers about. you what a little the said couple Hi, for all Thanks And which you can terms business, for and that and more million, my in them or market? cost machine for component you you of that little you of mentioned in installations in curtain and growth, Brazil, talking you remarks wanted about the are the then Steve,

Steve Voorhees

talk Porto talk then then machinery. going and about I Feliz about George, Feeser I’m to Jeff Bob and talk to ask briefly, about Okay. to Florence Mahrt, may

building expect so of a going in Feliz, we just broken So we’ve we and ground, operations commence second Porto XXXX. half said the there's out to I as think

So that's the mile marker for the project.

XXXX. I said to the during half Bob, Mahrt. be expect as second of We operational

Bob Feeser

for impact is as the track we reduction Yes. talked George product good of on an feel the benefits as progress about the coater Mahrt also scheduling cost have April benefits, It very engineering on for and Mahrt our quality we scheduled are XXXX. well. on right in terms important will and The at of we but project. -- a about

with on right we're feel we track So project. that

George Staphos

pretty curtain Is Hey, the than machine there. coater, that that Mahrt Bob, just normal paper is a quickie bigger that coater, is ilk? of standard a for

Bob Feeser

two comparable on at be would number it machine we’ve coater George, to that Mahrt. curtain the

So …

George Staphos

Okay.

Bob Feeser

large. it’s …

of with paper other As scale we've you at experience that but machine technology machine. that know that’s larger Mahrt, got a our with

George Staphos

you. Thank

Jeff Chalovich

George are Florence, we on on track. And

down started. machine. payments We are on getting just We’ve

getting are permits. We

still on early, machines, XXX we're project large excited track. that project inch web, costs, us, a again and higher on three it's So and that's take about we’re we’re but will narrow so track older machine the out for

Ward Dickson

in invested George, million about we’ve the to the We year over the in projects. the And of towards in XX% investment also half. first is period in And, of that -- investment quarter. year Florence year. over remainder first it's FYXX. the will $XX a had the million give curtain quarter, the $XX next it fiscal FY’XX. be this the on so capital Porto About not Ward than these this in capital The coater you Feliz perspective half million then $XX of heavy more And FY’XX first investment obviously, just XX weighted the is quite, and then is investment the

Jeff Chalovich

our are happening. our in total the portfolio. product, we customers pieces sell helping operations And so that to streamlines it can to helps more markets the drive are our machine. These helping solutions tight George, they have across piece, customers it are then on them labor machine internalize continue their its that One, two cost, sales the

great it and also business, higher has brown margins us, pull average a it revenue and box has has stickier For our contracts. on

years up are XX%. repeat these high five the So typically rates with high contracts in

So a part us our for and growth significant large of to it's a of our differentiation part customers. our

George Staphos

So, sort Jeff, the threw kind are you out, number growth for clarification? of what seeing, just of we

Jeff Chalovich

last APS it in our So where the was over double year-to-date machine is year. group

George Staphos

Okay.

Jeff Chalovich

business We that doubled year-over-year.

George Staphos

you Thank much. very

Jeff Chalovich

Sure.

Operator

next Our Weintraub from comes Research. of line question from the Mike Buckingham

open. is line Your

Mark Weintraub

clearly get out the & Pulp the you. up laid pricing in regarding typically price Thank -- historically been pace very had which for containerboard both questions presentation. at two having in I with having March. just increase Thanks the Paper reflected Week shown would

you does the how of quickly pricing the how quickly translate in typically If and its And the on back, prices? look box show into P&L? the into that kind find side, likewise up then contract way did the consumer

Jeff Chalovich

I will Good start. morning, is Mark. Jeff. This

As we’ve last you’ve two the we've done typically seen quarters. in is consistent, that two been

So rate $XX, at how a quarter of group. in the performed full we the September the run will that's containerboard leave we historically

Bob Feeser

is this Mike, Bob. Yes,

three consumer the to On closer side, quarters.

to implementation 'XX. -- of our in this quarter our at with of we’ve first run recent rate the round customers we're that So increases full communicated looking fiscal

Mark Weintraub

Okay.

And so that is … for

Ward Dickson

just I Ward. that So implementation Mark guidance the described. Jeff and just then for we that reflected full-year -- Bob QX gave reiterating was this is both the the for and

Mark Weintraub

how its the that Historically, what for that’s guidance by first would included might much average And on have so in you that had full quarter of quarter. in and of there? the get -- ahead, would the quarter, percentage you run a Right. recognizing second rate the Jeff typically sense it be end

Jeff Chalovich

by which fourth, part. fiscal our starts its quarter the just fourth of our Mark, third let quarter, is phase-in. and me correct the end So, really the It's to early

contracts So, XX-day ton. But it's customers. the we’re when end typically pile all rate and of what run a $XX and the seen negotiations is, you lag of there's multiple or a months with a six you’ve at by five then together that

Mark Weintraub

Thank you.

Operator

from comes the line Maguire question next Goldman Brian Our from of Sachs.

Your line is open.

Brian Maguire

guys. morning, Good Hi.

Just following question the lags. there, Mark's on

Just in bit, longer own quite of in improved has I a and know lag your backlog this it's obviously here. lot consumer have of enabled a industry markets consumer, a year, pricing than little the the a it's bit the backlog, but last specific corrugated improved to some

if the some to bit to you as pricing industry to consumer better. about think come in see contracts do contracts, do the the trying forward, wondering to that toggle, other potential try is business little they’re think opportunity a other a to this lags corrugated as the closer lag you -- that up Just market reduce as I some maybe opportunity to reduce strength but I option thing make multiyear going we which than that the on see would or side? up? structurally use Is something tighter they of know that what or come scope see and

Bob Feeser

very thinking Yes. is top forward This how I discussions be and mind think customers, and we opportunity go about certainly Hey, our it. in us for will much for Bob. as of we with Brian, its that’s us an of

Brian Maguire

Any might enough to put their you reason what out visibility on seems like the think able that? into it what why hasn’t own Any obstacles to early they be like historically for some have guys way? have two price price effect. I quarters increases read to but that worked protection, -- Obviously, customers

Bob Feeser

we consumer you discussions challenge for go the dynamics, products, can't the imagine customers consumer But in have each and But that. around know again of as with are are is the each big particular, us. them markets, that those specific their always a with specifics own in of into and might very discussions You specific very with customers.

Brian Maguire

Ward one Okay. Maybe from for just me.

some what shifts what capital as Is the from will raised up in what timing not with wonder well? EBITDA working cause just there? ops, guidance, is or maintained Just it go offset that to or the cash the

Ward Dickson

for for So, the cash sure. the we did lower first year. raise quarter cash cash impact Remember flow of in tax the rate guidance the -- back the

-- -- a effect if $XX increase I take tax flow. So $XXX EBIT if million I cash to the would imply contribution EBITDA million the additional

that land some our fourth fourth sales calendar and We quarter development are straddling the have quarter. and fiscal

expectations of our or use then original consumer as So higher have have capital a little the and of a both with to receivables corrugated And little usage bit a compared because associated selling less that's increases do we our a bit price businesses. working we of source. across

Brian Maguire

Okay.

the first So into start probably timing fourth? the the maybe that fiscal affects shift, slipping quarter,

Ward Dickson

Yes.

Brian Maguire

Thanks very much. Okay.

Operator

next Steve the from of comes Chercover from Davidson. question Our line

line is Your open.

Steve Chercover

From systems scrutiny all requested normal this you. Thank and from go know that some just instance more KapStone comments, text for has is DOJ this Information, course the the sounds MPS Good it rigorous I acquisition. it's morning. your for than additional like or acquisition? so is evidently

Steve Voorhees

course. normal That’s

we receive So request. the did second

customers as competitive its to review We our ability enable are working going pretty compete. KapStone conducts of justice to and cooperatively us the we continue it our to acquisitions as with and the serve view because improve to transaction proposed it's

remaining confident from Justice. transaction successfully to going challenge we’re the Department So complete the without Of we’re

Steve Chercover

it Terrific. you much, part recognized wasn’t for And that, -- where is for my much a sales then of question EBITDA. sale were consumer transaction And guys. I good up than is HH&B of more the packaging second

So higher MPS, than and is or the home margins there a my question, in -- I noise? guess, were beauty health just is in was

Bob Feeser

higher the with and And inflation. winter Yes, expect them line as be in quarter cost history. indicated as look we we Steve, by will as we forward in weather the margins second in the half, well improve impacted margins as the to were really

half customers. our good the in and quarter, seeing a demand second we for increases year. to productivity are very price really we’ve backlogs the implementing strong communicated we of expect environment that the strong, had And that also and are We to we're continue

the we margins. about outlook feel second very overall, good half around So

Ward Dickson

margins. Ward. MPS's is Home, Steve, this than and beauty published health higher margins were

that made than we we time, to that get opportunities acquisition. the narrow paperboard synergy the of we identified over the other integration the through when Now

Steve Chercover

you clear, much. just it And was so a I very think be thank you. sale, Thank good to Great.

Ward Dickson

Yes.

Operator

Our next Kjellberg from of question the Suisse. comes Credit Lars from line

line Your open. is

Lars Kjellberg

just your Thank containerboard back sales. come a external to you. want I bit to

taking of and you’re export What when the about those out markets. biggest you shipping in on what color region markets? currently than is the we're sort the You see volumes where talk being quantum do export talking give of pull about out markets, to Could others? some better you

Steve Voorhees

Jeff?

Jeff Chalovich

Lars. Good Hi, morning.

integration are looking driving our system. we So internal at into

As that important about, goal a But be we’re at remember of we talked we X-year to said the to tails managing XX%. businesses. it's all of our

has opportunity support that that with don't the downs delta, into export actually have we that up and and swung that quarters. won't some some XX% to where our business we We’ve the we better control. done over better so contracts of the a move box low-end export term. we’ve back So and the be last of over of places to export want biggest in for exited the -- moved better two other we take that, want price and is to of And in doesn’t long-term. export That customer have and cyclicality mean account us national we though tail the and a of be want in some the channel

and so more be don't going grateful. addressing to We be high into we So the We channels. Middle that long-term to We just that pull, be season overexposed market. East, Africa, it's export The Latin coming also pull. Central, in good Asia had continues to the see has mark. America, now right we're We want to in a think market. good like

them, good So all our internal demand now. export, across domestic segments, all box profile very are of right

Lars Kjellberg

Just to speakers]. be clear [multiple

Ward Dickson

offset sales to box it increased a and down approximately domestic tons, our customers. Our by basis export shipments actually were and our increases year-over-year by in XX,XXX was shipments on containerboard

Lars Kjellberg

Very are Europe, board to -- comments your in export want The equally but just the markets. on the in side. the really very on making some continue good. about so I topic domestic bullish peers of same demand consumer

seeing are in from platform? you footprint especially improved the MPS? -- two you U.S questions business in European So market a the that. And opportunities seeing improved SBS for export Are from your much

Bob Feeser

In Yes. it's general, I Lars, this Bob. about stable. say would is

tick in that or out I opportunities wouldn’t expect. consumer. are of we're We good we a export and significant across it's haven't markets markets their so own in seen what international they’re in that say growing up would right, normally The

Steve Voorhees

in Europe. the performing particularly Europe in MPS [indiscernible] Lars markets. is well, healthcare very

Lars Kjellberg

Okay. you. Very good. Thank

Operator

of Our the Dillon Chip Vertical Research. next question line from comes from

is line open. Your

Chip Dillon

Yes. Good morning.

little EBITDA just $X.X. question improvement, a the you you it's third like that of tax X like and guys with headwinds It guiding around effect -- around you're XX, saying fiscal to looks $X.XX, housekeeping. First so to quarter are looks it if the it's in it, around

third? the So if you flat in confirm in is $X.X the for of for assumption full-year fiscal fourth what me, so could just or that correct quarter and/or the relative billion and guide OCC your secondly EBITDA, to the you see

Ward Dickson

Jeff. It's Hey, Ward.

think back so -- I -- your to is the think -- question played about understood. easily QX me and the you our So guidance, chart accurate, I

to increase and in a as per So ton full-year, -- QX have -- then the about -- assumed approximately QX. we $XX sequential I think from

Chip Dillon

then a Okay. That’s very quick helpful. just follow-up. And

have had before, very there less are Europe different What market, the now Europe in now containerboard I’m about and and -- with dynamics all of consumer, now some America your boxes, you've that containerboard you are South good talking of and a MeadWestvaco general for some thoughts as regarding quite there especially focused You bit given experience your were success. containerboard exposure about fiber? domestically in what a thoughts

Steve Voorhees

really and footprint speculate the how with looks Europe have to can't on containerboard. now, that happy we we’re think us for I

Chip Dillon

Got Thank you. you.

Operator

comes next from question from the Our line of Anthony Citi. Pettinari

is open. Your line

Anthony Pettinari

morning. Good

transportation. on had Just question a

or it And was better freight on your expectation. to Is quarter that carry you or XQ in I hit much biggest of the how is think said that these actions point we relative market? a can or the put to even finer trucking hit as the sort into possible of worse something in get that you a fiscal some little undertake was? maybe quantify

Ward Dickson

Yes.

our the over incurred came our we the double-digit at expectations it's offsetting to we And relative in rail X%. domestic OCC to mid I been are the XX% in of are of I our mean, and about the versus we expectations been mix on close than north that and about the -- quarter our Intermodal almost less just truck at look mix, our mix. So directly XX% of experiencing is and mode -- is truck If then inflation quarter. about beginning very inflation lower the more freight stable. of mode It's frieght. XX% again inflation its XX%

seen have costs we for what total -- for XX% inflation would be on freight the that's expectation -- that So that's the saw our and approximately full-year quarter inflation. the

Anthony Pettinari

helpful. then just on That's quarter. box almost the corrugated saw Okay. volumes side, you increase in the X% very And

I said I you versus is corrugated how up do in heard or April And the but that there a right if or volumes around deceleration not sure you in thus -- I far. if that quarter? think X% so, volumes about effect know number? is represent correctly, very don’t that April in does day think the were volumes you’ve I’m an per seen M&A the strong

Steve Voorhees

there's You’re days X% per right. shipping more on was That a two basis, but day in April.

are they basis absolute an XX%. on up So

Anthony Pettinari

Okay.

speakers] [multiple maybe So

Steve Voorhees

So to strong. our [indiscernible] continue remain

days there slow or any shipping read in back I decline So based being wouldn’t on more April.

Anthony Pettinari

Got it.

over. it turn I'll Okay.

Operator

comes question the Our Deutsche Jones of from Bank. from Debbie line next

Your line open. is

Debbie Jones

that ask volume out. had called do you to the I negative through promotional that Hi. to expect and impact that number consumer with performing? we I of that on as wanted year display, just sequential Good that material wanted the to morning. would that when in lapped typically a in does business the question Should a if know focusing number. understand just progress is how I the business? rest of we kind

Steve Voorhees

-- and sequential think have didn’t would great year in material two -- we impact the year. expect did we but had great we I this last promotions promotions just a have same don’t I

proposition. integral ability are our display our point of the promote it's us to great working display So support take it's It integrated -- a such business, take customers is well their success, a fits with us. to that approach our to customers, because just integrated gives mills, It's our a And the on very to with with to even our value part customers market. our just products. we the better approach for but

Debbie Jones

pushing pricing move in Okay. market domestically have the I’m quite moving the towards U.S. that are to higher. It's customers just wondering just be strong, seems if move with seems Where to you more to shift strategy? can to export I And corrugated, any you your be then strategy there? tons if just your been in there's

Jeff Chalovich

our Debbie, still tons its channels. X us next And of of export. in the over years optionality bunch XX%, gives into strategy The all look to puts again, is at Hey, integrating that a the of tails it to Jeff.

we gives best in into our It over are channel whatever the answer. not that an us and black the channels. a We integration that’s long-term in. believe is optionality of a interested white Then as midpoint business, margins other XX%

and And is best advantage do we highest so to take create looking what of the can generate we’re optionality that’s channels where margins.

Debbie Jones

I Okay. over. will turn it

Operator

line question comes of Stephens. the Mark from Connelly from next Our

is open. line Your

Mark Connelly

some made business merchandise Thanks, doing. Steve. choices be You’ve Can you display? the to you the about of consumer side ex of a volume obviously talk want about kind more bit

So tell pruning have carton to us more see you you side can and the going volume whether do? where you

Steve Voorhees

let going Bob to Feeser respond to I’m that. Mark,

Bob Feeser

Yes. Hey, Mark.

So as MPS acquisition you was the that business with overall. in the know the mix of shift important an

we XX% tobacco beverage to those We -- roughly in of XX% food-service, our And had beauty, growing print. liquid is business the those in markets portfolio traditional food care, and and that then end and in then GDP. So personal of well the and above the health portfolio businesses is the commercial XX% indicated see packaging. or XX% and

gives overall Again, in and reason little feel business. the that good to shift markets that health those was a the about We feel that mix higher an want growing acquisition. So for to and we a mix of MPS important to continue beauty. you for bit of the

Mark Connelly

Where going? that is the food seeing beverage shrinking? and or is stability in Are side demand still you

Bob Feeser

would volumes stable. I say Yes, are overall

same the seeing general mainstream you X% by in flat. say I I in are But and beer's in stabilizing our would overall. well, And seeing, those And trends to then offset well. then as sparkling. in drink soft flat that growth the business down that’s down that's and know As we’re as up Craft food to but in being in flat been carbonated maybe X% to think markets, we’re by what beer Brew. being market offset But

Mark Connelly

Thank helpful. you. super That’s Okay.

Operator

Our line Barclays. question the Scott of next comes from Gaffner from

Your open. line is

Scott Gaffner

Thanks. Good morning.

Steve Voorhees

morning. Good

Scott Gaffner

guidance this something measurement to instituted clarify XQ. EBITDA in to you’re to the you new wanted that for regards guiding Just

is that EBITDA though this full-year or the For EBITDA, of is $X.X with EPS? segment billion EBITDA associated that segment

Ward Dickson

the when So L&D year, if back drivers you first half actually of sales and either we of the look earnings. the L&D, first at adjustment primary the the out the over is the --

it's you so of between material first the a two half, the course metrics those look long period time. material And if the really a not -- change over of at

same So full-year. in for it's the one the

Scott Gaffner

Okay.

In the the little but FYI, to to Steve, EBITDA confusing answered in Just twist did the you already you it's DOJ, from KapStone the on a that this but metrics, just two something request release to third quarter quarter. you look second regards acquisition acquisition, maybe question, different the when the into the mentioned could [ph] know future. from out I bit update that the have fourth

would maybe the So requesting it change Is material possibility that delay? more suggest -- they’re what’s driving to that a minimal of there. outlook something or changed the

Steve Voorhees

it's a put got in think that slippage request for there. potential the second we that just so and I

Scott Gaffner

I Brazil, just the then shipment lastly, at in us And quarter? box Okay. growth you in can if give a Brazil look

Steve Voorhees

think X% were about I they year-over-year. up

Scott Gaffner

you. Thank Perfect. Okay.

Operator

Our from Markets. next Mark question BMO comes from the Capital line Wilde of

is Your line open.

Mark Wilde

morning, Ward. Good quarter. morning, Good Nice Steve.

Steve Voorhees

Thanks. Mark. Hi,

Mark Wilde

wondered, little filling kind possible to in One Steve, or a questions. about guys your just it's got two I of America. bit for strategy I you talk if in, Latin

whether like and the I this & away then dependence market in question a pricing that And some contribute in whether is Brazil the Mexico of good maybe consumer. in and You’re integration? in had expansion sort the in move right also the and other an Week Paper of both region countries on now, kind actually biggest second in XX% just your might toward to opportunity the corrugated Pulp from and the have of so economies two you

lot strikes think of we a being that’s by I billion it industry that paper got us $XX is arbitrated editors. kind a strange trade of

Steve Voorhees

Okay.

Latin then take about will PPW. America, So talk I and

you’re a Latin think terrific us. right. is opportunity for I America

Monterrey, and that was the service in Monterrey up Mexico is mill box continued paper we just we're to Mexico. in also it, have in of for been opportunities into we has capacity, adjacent new a saw when box going investment plant and investment terrific us just investing we the one coming think Mexico. in Gondi a I new at looked

in part, our investing containerboard, allow the and plant. to agricultural the significant And Central think I and investments America. I our Gondi Western Brazil Both South amount increase think America to us in Brazil integration. respect we we’re in with primarily in, box for also in a of supply filling uses

as think a us potential for that’s I well. time over growth

I as PPD been -- point think point, I’ve long pricing I you've with take long mechanism, the the with I and your to in business, the there it's as in PPW agree as respect business. as your been been for

it's I hard be time. I for path a some subject conversation of to continue to going think away. necessarily see expect to it's a

Mark Wilde

Okay. Good enough. Thanks, Steve.

Operator

Your from of line open. Josephson line Our the Adam next KeyBanc comes is question from

Adam Josephson

and me I guidance. the I questions is that moving you Two for expectations said just guidance. everyone. your up morning, for are a One can Good Thanks. by OCC EBITDA the Ward, down. you presume with know would XXX, in help year well. your sales EBITDA parts on also as me cost

you just assets, with longer-term with EBITDA? the longer-term, of view but view as a go participants growth, in happened recycled that time containerboard amount prices? have OCC is some what that of just what virgin of Second and help terms OCC question to been hasn't of in global Obviously, that over up industry years. has your got recent because of change the ago OCC to So us compared can a significant three company on months

you. address two, be you would Thank it just those could great. if So

Ward Dickson

Adam, Ward. this is

to Let and guidance take -- you are then going I'll beginning walk to the -- you to walk full-year, you of through our today. for back we we the the through I’m year at then me and where

of drop FYXX I look assumed be that our at about back we $XX commodity thought it's and I versus original recycled higher very in that first I chemicals for freight to January had relative fiber, is million, $X inflation costs. -- expectation point total for would and November, is remarkable year. overall The I consistent recycled in fiber terms And the here changed. are in said what So mean expectations that full-year the in overall inflation average highlighted half at that we beginning initial for the think said, we’ve relative we had it then for to our now in and outlook in the quarter been reductions in the that our experienced first time we -- commodity our of would how outlook our FYXX. ton hasn't April the And by per average offset it's that additional inflation

We're again QX. inflation the then for And have it ton dramatically when were. laid has out by the So cost offset QX per as sequential expectations year. our I been the price we've different from increase said, been beginning then said And the are our published drivers than higher -- it's the -- benefits albeit expectations from freight the what remarkably guidance in original it's consistent, in increases been did And OCC price have that very to okay? mid-teens. again assumption what what of so $XX at the the recent getting the increases And from I is. that we the inflation not talking a truck, about was the at the -- of the price year, guidance we beginning we from

Adam Josephson

longer Yes, Thanks that, question? you. then on thank OCC the term for Ward. And

Steve Voorhees

be. prices going on really I to Yes. are can't speculate what

is just I -- comments. global a market attractive. The think couple really containerboard couple

last tons million year. it's and over X.X% it XXX a So grew

terrific to we're terrific going got In we are mix to because be as like mill we position and it's Mexico a and over going to well-balanced. think we’re I -- change Brazil, operations nice time. U.S are and I So and our markets continue to to our its adapt. grow, both to going containerboard a able and need expected so recycled virgin building very we've recycled capacity are adapt we model. a the In have virgin --

containerboard. in So our position I like

a past it's what impacting volumes really to price I market player -- so almost mean, market are nice to import a just because prices, -- a which significant you is it's that can't down prices to going go. in. in just be hard has are I think XX% fiber -- have recovered where do. I China interesting the and don’t to see going know their are

we’re So goes. going able be adapt market to flexible the where stay to and

Adam Josephson

Thank Steve. you,

Operator

Roe Glazerman from Our question next of Gail Equity line from Research. comes the

Your line is open.

Gail Glazerman

morning. Good Hi.

pretty wondering of food made On Pulp And consistent service updated if & know prices, a Paper I to last they Week the of folding there? just distinction so, market. they it significant the carton consumer specter kind I’m that attributing side, to And seem the to wanted what And be the on just and experience? with imports. your -- is is your view between

Bob Feeser

Yes. Hi, it's Gail, Bob.

into on strength So the we’re And this food firm. goes cup know point markets carton Pulp of But reflects very business & as the as I end at it well, folding food And service that's Work seeing the now. number the markets, the on general at portion, right is in service moment. as as you what quarters. well reflected of think carton firm both it continued many Week some our folding was Paper that market really for

Gail Glazerman

you might And a than have, what any on Okay. or just in seeing year-ago? view let's incremental whether pressure not you’re core say

Bob Feeser

Really a no year-ago. significant change from No.

Gail Glazerman

your just first directionally some moved inventories question the how the on? some on you second view my and quarter, -- context operational also and view them inventory, of with is And issues you quarter headaches in how where -- going you they Okay. stand and weather of where freight had next the you how the in then, disruptions the with just just in

Jeff Chalovich

It's will start I with containerboard. Jeff. the Gail. Hi,

affected We trying were build were thought. weather We to outages. didn't inventories much as XX,XXX tons. So into the the we as about build with going we

inventories. some So pull we did from

have chain supply we responded a for that we minimum well our and However, need stock.

there's have plants lot not box a room. the So shape. -- in good been It's not of

does So a lot ton we for and error. side, so on paper and every room we’re then freight the there's it not shipping can of exacerbated. making And of

do to turns those our moving do our railcars, getting However, to things we drivers, trucks, we're so the manage can control all looking that shipments around inventories. of can things, with more at we incremental trucks so lading

our So we with quarter. a just us to into manage through managing going inventories that that large through a we're it's and we’re have third set and outage believe in well, challenge the logistics for

Gail Glazerman

Okay.

Ward Dickson

on imagine Gail. inventory similar you portions little overall. the the very in Hey, of consumer, inventories. side in channel Its particular, in and Very the overall on consumer might as similar is some in story there CRB,

tight. quite are conditions market the So

Gail Glazerman

you. Thank Okay.

Operator

Our next Bank question comes George the from of Lynch. line Merrill from of Staphos America

Your is open. line

George Staphos

my for Thanks guys. Hi, taking follow-on.

Piggybacking, the off than ultimately and just one. quickly over you we a your beverage in you luck more service would ability whatever terms from being so the a itself I know typically have differently, your increase if the it natural I Just quick Paper see in of to of the at and implemented other & market. take. market? business when lag Would five price end you of of -- implement and Thanks Said traditional areas that growth aside food narrowing that more your asked, we in see -- food do some actions by good look in question be evolution gap pricing you and more Pulp that reflected quarter. consumer think, you by years that Week and next don’t Brian the had -- business that the of

Ward Dickson

on we much platform George, to with I and future the very have consumer like I hard speculate corrugated. think it's pricing.

because of contracts think we I that portfolio It's hard carry the to to serve way how to our going in distinctive the able work in really are have. we’re and a through customers future. to go-to-market

George Staphos

Okay. We understand.

it in We Again, up at luck quarter. good other some point. the will pick

Steve Voorhees

Thanks, George.

Ward Dickson

Thanks.

Operator

further will turn have the We back questions no to queue. in presenters. I

James Armstrong

our joining you our Lisa, call thank you, to Thank and audience for today.

a As everyone. you Have great any always, have we’re to happy reach day to us if questions, out help.

Operator

This today's conference call. concludes

You now disconnect. may

WestRock (WRK) 27 Apr 182018 Q2 Earnings call transcript