WRK - Earnings call transcript Q3 2018

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Operator

Good morning. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the WestRock Company Third Quarter Fiscal 2018 Results Call. At this time, I would like to turn the call over to Mr. James Armstrong, Vice President of Investor Relations.

James Armstrong

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

up course open our I cause be fiscal and risks will ended actual involve call March call, risks we for described point related period. comments, We prepared to March the statements SEC, plans, our XX, XX-K results will the for question-and-answer the would quarter XX-Q beliefs from including may and our with a XXXX. -- out to differ XXXX, these during discussed a Following number involving the for those we ended estimates forward-looking filings making year that that of future of the our uncertainties September the could to expectations, statements XX, we like events. during and the today's call. our and in uncertainties materially for These

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

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

Steve Voorhees

strong of business. call in June excellent results morning, Good the all today. joining everyone. our are WestRock Fundamentals James. Thanks delivered our Thanks, for quarter. financial across

adjusted XX%. previously are track consumer segment increased performance levels. Sales Year-over-year $XXX This communicated on adjusted improved or by or capacity, and remain We Adjusted Our synergy EBITDA just adjusted containerboard ago. mills near-record generated operating achieve company, $XXX are set for cash this and year. and for throughout of we targets inception such year we backlogs flow. plans our to $X We at quarter, three operating performance flow. operating billion In goal and increased the million million for from our that million. the we cash from the specific the as XX% increased and $XXX significantly. last the including EBITDA full developed WestRock full When mills at functions at goals improvements of operating years and we locations achieved procurement goal, logistics. set

milestone Our of productivity to goal drive $X us I'm on collective milestone, that early. other many And we relentless. while celebrate we been enabled achieve billion one has this the company. to focus we team's opportunities quarter efforts proud our our have know across this

set million $XX over WestRock In $XXX billion. performance returned we've synergies the and capital we $XXX less share dividends This to since million through quarter, to through the creation we'll total that the per addition, sights of on paying share. complete return stockholders to acquisition, stockholders improvements when of $X.X our million brings and approximately $XXX our million buybacks, $XXX cost the the We outlined. previously our delivering KapStone in than

will demand Friday, This quarter. services. the the follow rates. the in grew this faster favorable report Analysis at believe quarter highlighted Sales doubt goods increased GDP grow sustainable no billion. than Bureau trend for last real paper-based you X.X% for and Economic positive As $X.X U.S. that June I continue, were saw that reported of Should packaging

performance our compelling had our share earnings significant margin growth per This XX.X% and diluted Our in we've the by were points XX% momentum consolidated year. the last increased reflect results basis adjusted financial year-over-year. year-over-year segment of EBITDA over was Adjusted business. up in of $X.XX. The XXX that quarter

outstanding for quarter year. results basis, the have $XXX last $XXX press KapStone's may in KapStone with KapStone's earned EBITDA stated I million. $XXX they They is This adjusted and performance. the XX-Q XX the was XX% we the posted for team is million seen ending over trailing planned a adjusted the XX. release You quarter million, when of On the EBITDA January. $XXX month announced for congratulate run million acquisition which higher their rate we than June

of As grow. we people team in our the a WestRock and is X. WestRock. I'm The KapStone to innovate September the grow the for for acquisition with scheduled looking stockholders help meeting special subject customers, business to at a and for forward talented will KapStone approval company need our experience has who to our with addition the of KapStone

regulatory work the million. We of team by calendar Packaging United the the results in quarter. Corrugated WestRock year. the acquisition EBITDA $XXX outstanding to expect we and continue delivered States, close segment was to the The Adjusted end the through up approval in processes XX% to

quarter. corrugated we've congratulate I EBITDA segment remarkable our XX% their Since Smurfit-Stone, American on corrugated Packaging American the organization. North increased the of they basis acquisition than Our higher points. leadership XXX execution by Corrugated adjusted margins X,XXX the have margin the than basis of North was and the year throughout team prior points more

demand as compared We're retail last markets. X.X% Packaging in the box our shipments by our our now North margin public corrugated in American strategic between growing, day the reduce remains as to last margins e-commerce end machine driven our well absolute supply and months. seeing of this Corrugated the a that believe strong investment focus increased example of our volume per paper This corrugated to great X.X% chain basis are to contributions American margin our and industry comparable company on as Florence market attractive North A our competitors. will add upgrade, WestRock's and we've on of and XX and basis on improvement through was acquisitions majority basis recent an Our productivity programs, we projects increase year. and segment. for markets. of of the our XX maintaining demand strong across The the which We're our outgrown is type XX cost. optimizing investing points

year-over-year. level XX% integration quarter Our XX% the for to from increased

majority due demand strong of end tight the across to is markets. system Our our

are Our we independent be, We're entering domestic supply ensure network. has where of to long-term important with have they WestRock. long-term their our and containerboard it, some and remain into customers this that to working in they need inefficiencies below of contracts are when to very would them our like supply. converters Sales secure inventories to them to many caused

XXX,XXX markets. containerboard decline This tons of to XX,XXX to converters. a months, XX market. the we've the this to than more sequentially. we year-over-year During was quarter, XX,XXX tons shipped tons million of We In tons tons export independent X.X XXX,XXX and past shipped shipped

was XXX half Our plant results margins fiscal and under basis during the way, sequentially Brazil quarter Feliz 'XX. points this record the new start points of and is up up team basis plant XXX Porto delivered over with EBITDA our prior we to box XX.X%. exceptional expect This year. the at of segment second Construction adjusted in

our team liquid in and end increased an from been increased that beauty, believe food organic the of in flat half the by demonstrates signals quarters with We food we've food the volumes strength this Consumer have This with having to last in service, from a customers. the business center over reversal X our the row. down that story seeing. was pickup market in significant success volumes a and half this packaging the impressive markets, the acquisitions, packaging of approximately year-over-year, a X% we're growth through in including consumer core of from other most health Our beverage. Packaging Volumes and packaging, and this increase

growing weeks X price the the backlogs Our Paper each ever consumer of issues X implementing paperboard we're increases backlogs We're into in the At SBS and $XXX segment across are improved weeks, and machinery. WestRock. as published long-term April CNK. across multiple-year also they're securing the -- in buying multiple cartons, of quarter was craft June and contracts price the through contract. markets, and X March broad seek year-over-year. and for for And million, business of contracts lock in Many up these XX% care. our longest to Adjusted currently our in grades, products customers we've they including market Week partitions, are in CRB PPW winning We're end and entering across some are July. Pulp multiple & increases between new seen. published implementing increases portfolio, and and by business health under and these leaflets URB in CRB supply EBITDA quarter with beer our labels,

volume not to costs price. and the generated inflation, cost the fiber as the help impact segment. but recovered year-over-year Lower bridge, at corrugated in the growth same strong Looking of degree in we mitigate

X used mills tons less consumed million recycled our by significantly Our the mills. year, X fiber corrugated consumer a million tons than of

and excellence from Six the the resulted of procurement productivity by results the internalization capital our delivered teams. paperboard Our MPS of $XX in performance and investments, million volume benefits savings, our Sigma

million important quarter. it Our an in our now $XX offsetting in inflation. wage That fully productivity materials, results freight our quarter energy majority my I'll of in concludes the in contributor and the inflation over offsetting of by increases was and comments the to to turn Ward.

Ward Dickson

closing we also including Corner, the residential a Thank projects large and in past last land Land Cabin Summers on the large week, you, successful sale had several the quarter closed of the We In Steve. sales, Development, in Bluff. very the of development on portfolio.

the monetization the end Land and the be calendar to year portfolio substantially expect of of We Development by with XXXX. the complete

in than Steve improvements. As and billion of will synergies normal we we accomplished more goal seek goal, and offset continue this of inflation. quarter, we to Even performance June improvements that performance though the referenced, productivity important our $X achieved

improvement, driving Our key execution, financial strong continuous culture results. all is future one of and to innovation

the quarter Turning financial key fourth to Slide XX, guidance. fiscal in detail included assumptions our we

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

mix by we EBITDA million adjusted gains. continued result increase as flow-through to volumes, a the previously to price segment higher seasonally of $XX productivity First, increases, million of and sequentially favorable expect $XX announced

by million have expect XXX,XXX cost benefit Lower we decrease maintenance downtime mill an will $XX quarter-over-quarter. tons items estimated other Second, system. and to sequentially across downtime maintenance our

recycled consumption ton, price fiscal paid the quarter near million fiber in are term. our and Based index the million lower in third we now July the third $XX have levels on average our expect price. the Third, input regional mix, for costs declined, Recycled to costs stay quarter. expected be at which $XX $XX them matches than was index to fiber to higher per

For recycled from will the that prices forecasting fiber decline July's slightly quarter, we are levels.

we've Fourth year, XX.X% quarter be adjusted will fiber difficult. recycled volatility amortization. cost higher predicting the the rate and by EPS and unfavorably impacted noting depreciation remains this However, seen tax

XX. Slide to Turning

We of EBITDA. more cash flow billion as year fiscal full our $X.XX our as of than are well adjusted adjusted of billion guidance reaffirming XXXX guidance operating $X.X

see and of revenue our guidance fine-tuning revenues expect billion. are now We $XX.X to full year

in at expenditures expect capital We fiscal $X in curtain that total million including the expect box will billion invest strategic that over $X and $XXX to the our we the Brazil paper coder includes XXXX. project the we Florence mill. invest plant Mahrt projects, The in billion machine, capital

We financial are cash full revenue, flow. With year record strong adjusted positioned to turn EBITDA results for and in adjusted over that, Steve. operating back I'll to growth the it deliver and

Steve Voorhees

value Ward. differentiated a each talk bought paper some past this I'd progress of the to like serve customers solutions. optimize $X and packaging our this our from with integrating system. from solutions of to we segment business sales for months. To portfolio and provide us XXX broad This our at customers million about XX topic, the opportunity our products excellent who Thanks, least is moment across than providing that over for more on the perspective making portfolio. sale grow our We're

billion top sales. Sales WestRock's Our to customers average to per the of of about year aggregate million $XX sales evenly Corrugated Consumer XXX account these and segments. split this our between annual in and group $X for are the are

and Our the ways other many work can provide company us replicate. to customers in portfolio opportunity that no these and with capabilities other

the use most integrate of our have to few customers' We portfolio ability cases. a our into examples. many I'll important broad you provide

folding help an important in design provide over installed to our our directly the the consumers. brand, pairing health With is both many expect and the and This displays, corrugated addition are the of platform, provide to number gaining is box merchandising our beverage that package and a cost identify directly packaging more portfolio, to easily store the successfully this retail tandem than corrugated stocking their we overall the In quarter, with the customers. that with customers, a and used solution with and We leaflets grow. boxes compliance which products requirements from products. corrugated our combination XX ability optimize and the ship our cartons, to shoppers we met. shelf. folding retail-ready their and favorite We the machine purchase customers of Across both the combine displays on deliver placements carton that many to beauty brings total and carton full and our our cereal. we to carton and machinery pharmaceutical We the products. cereal integrated together fiber. machine for is solution goes in these and provide machines continue to cartons retailer, promote an produce into ensures the can and carton, can their to beverage the box this cartons machinery, companies supply customers box performance cereal. start use to promote cases, we're powerful Box We're a to integrate to company Demand to on of Let's can X,XXX. This inserts to the for saves with rigorous safety interest integrating and

So our across cross-selling differentiated more coming success is portfolio. our than simply from

and minimize challenges of customers grow to Our WestRock's deliver execution or provider machinery uniquely cost, working are solve are the packaging of growth challenges, critical sales, business lower we're We're across is the and the and be customers' solutions combination risk unrivaled help our teams margin process, our the most positions the improve and their premier our to providing of facing. operating our we're their corrugated partner paper solid for WestRock Whether that their proud customers. to consumer improve helping customers packaging sustainability, business. value. I'm way solutions winning our in critical our us meet strong through driving together fundamentals. total their vision and

margins than consolidated will that EBITDA basis by points. more XXX We our expect adjusted fiscal XXXX increase

support needs them continue to broad customers, Through their together Consumer concludes help margins to and our shares time working by acquisitions and our segments our solutions. our provides provide leverage Our and increasing reinvest ready have strategy. target ratio. Corrugated packaging their and win that strong enabling to are flow for opportunities use our and team significant execution the investors we our to in customers that prepared our them We'll This offerings will is is allocation, capital paper return using packaging to short cash make capital customers strong remarks. and WestRock a and portfolio WestRock's committed for differentiated over repurchasing and our achieve for our cash goals for the we'll employees, of value within marketplace. formula unique over business my to flow grow long term. one and stockholders partner in improve that the Q&A. James, That dividend help opportunistically across

James Armstrong

Steve. you, Thank

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

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

Operator

of question the George line first from Bank your Staphos with of America. comes Certainly,

open. is now line Your

George Staphos

a on in the question award. is see a on just also, follow-on. little and related with whether you or of a the better was worse, I perhaps then forecast, little And outage called any had guess, first segment recent perhaps was congratulations whether to the the in the had trying I corrugated. out And I consumer. performance expense line, to your Steve, consumer that

Ward Dickson

fill related we excess that The And our is I'll had outage, Ward, the outages this system. in. let we leading the that and we embedded was the start, guidance performed corrugated highlighted into the outage to that I'll our and in Bob business expectations cost to in the was George, consumer quarter.

George Staphos

So largely Florence Ward? then,

Jeff Chalovich

our of This quarter, tons maintenance, Florence. downtime. other outage had And we well. XXX,XXX some was wasn't eight maintenance largest mills go it No, costs. Nine X had Jeff. outages, we well, in labor, costs didn't our excess very so fiber it's had of of went as George, them and

that the So outage. was

George Staphos

Box contracts of keep know machine sales relative turnover What been this you any guess, kind there of on versus kind as of this the had, going? but I the in top getting, think I are initiative, new far could are? of other existing relatively installations you it's terms your keep see terms how do these relay sticky and on it's, a in Are any return where a volume encouraging sale that that installation? to And that what you audit machinery get to seeing And is of I question you you then about risks trends machine you're the Demand initiative so there's sort have to of business? the growth. on

Jeff Chalovich

me one lot there, let them break a was in so George, That down.

George Staphos

Sorry about that.

Jeff Chalovich

okay. Starting expectations. synergies our group to We're our combining really that's -- on they Box with Demand. So systems performing are between packaging so out, getting automated

So our selling leads EPS already Demand. are Box on sales

we any the turnover We seen contracts haven't have. in that

the margins So X-year a a of deal, is that just contractual repeat rate And associated product, with Like better is most APS sticky. differentiated our typically there that business and our business. business. high with like there's business, it's

our solving don't It's critical looking and our specific marketplace, customers it's a If innovate differentiate corrugated, all beverage our it And always vacuum, really to carries you then business we're the both machine box to the higher a to differentiated for projects. constant continue our customers. and pipeline typically. brown innovation next platforms, problems have have in margins in we in to that their innovation for that meet in the working plain Across products, so and do and have machine in the we like with differentiation, take versus demands. you but

that's what do machine across to continue we our so And platform.

I okay. think -- I

Operator

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

Your line is now open.

Brian Maguire

how year. in it the box maybe some of quarter, on relative rate to you'd you what kind much give comment maybe pace you you with to can hoping last and could in get just of fourth price the how exit was possible, maybe if the the increase you saw the And of on increase the quarter? data, much then realized third expect I

Jeff Chalovich

Consistent we contractual latest will recover our with said based last this in quarters on contractual X, business, based what the increase, on published flow-through. March our X we on

left leave already of lot the over little before So the XX%, happen quarter, rate we June typical Through same this difference. in same quarter earlier, this, we'll the a run at that at XX% run quarter. there's we had XX% in after And it's -- so a quarter, $XX so the been to September the the rate. difference last fall, in quarter, it There's some the it basically a but not contracts be way run still rate. ends over

Brian Maguire

some little lately, wanted you're mixed The just Just we've Oregon assets. I market China's a interest solution else, in given export ban of mill. product bit a gears was you've buyers bit. there's decent of Newberg to yourself partnership opportunities would an coming around bit it as mill on seen out consider in in somebody increase has there, a got to some also recycled news that I been little could that seen to maybe little paper. potentially with a being a mill a -- commentary in from restarting a pulp switch or the if recycled pulp wondering that We've you make reevaluating U.S. Chinese if be looks like for think

Steve Voorhees

Steve. is this Brian,

financing. site sell unable close entered we're of and couldn't buyer in kind to we a the think the to obtain contract I into January, because

best to and decision. frame to don't of now the It's an facility. use that steps, we make identified us assessing time time So for have the some going next to the take determine Newberg we're

Operator

line Connelly comes from of Stephens. Your next Mark question the with

Ashish Gupta

for Mark. Ashish Gupta is This

reference the in First kraft was, your or more to less markets, of just paper into comments in to about go strength wanted just strength KapStone. question the

some you can Just on wondering color what's that. if driving provide

Jeff Chalovich

Jeff. it's Ashish,

our in can't there's paper, world, for So in our business kraft KapStone. speak multiple use I

packaging in So also food ours strength is food service service, strength fillers. in business. There's

and for that. some kraft fillers the been has So driving of the movement of bag ecommerce some

KapStone is other business to for acquiring more scope that being look and So expanding our and and we robust markets. forward competitive us, across

Ashish Gupta

of well. just remarks. the that like seems up comments the to I guys timed follow wanted in you it on Yes, prepared some

the this your think customers. guys I speak long-term I've is first heard to you with contracts time

Just -- about the what wanted to pricing mechanism works work the would explore how how pricing mechanism contracts. in that, the you're thinking

wanted understand that. Just more to about

Jeff Chalovich

Okay. It's Jeff again.

what to we've I'll seen. So speak

So in ones. box, different containerboard and of couple a there's

methods, getting won't varying look. So with our or containerboard secure over some long-term would get But it the and into our longer mechanisms us and go negotiation There in that our views standpoint, contracts are of X It gives historically our secured I we're years. X pricing, individual to contracts, that varying specifically, them gives a on customers. supply. a customers' there's but that's move

us. and space the we're both at look investing growing space. and competitive And our in good more packaging for capital we seeing and good customers for containerboard as corrugated our it's be So them and marketplace, it's that across for

Ashish Gupta

ahead. Oh, sorry, go

Bob Feeser

as would get We're our longer-term I say I customers. the well. in contracts. having embedded of again, And we but about into discussions with the ditto our just mechanisms, contracts mechanisms space have price variety in won't a with consumer the customers

Operator

from And comes Bank Mark of question your with of line next Montreal. Wilde the

Mark Wilde

Steve, kind of I could of your with grow ability products. what us that just kind in on packaging to volumes kind MPS, of give those progress sort you if of you're little color seeing specialty a more wondered business,

Steve Voorhees

I that had we think, MPS well the performed, very has expectations going to according in.

pretty is acquisition we working the as out think planned. I much

care I And think Europe, the health markets. capacity. exposure pushing given it where really of has -- and to it's particularly that's constraints been to in health I higher-grade in particularly higher-quality been growing us we're the think point care,

acquisition. the trying the has with had business been since volume deal to that so they've more in issue great and the And MPS that their growth the had had,

Mark Wilde

ago, Steve. going being Smurfit whether essentially, regional for a a you think of think still being I business? global traditionally talked them. regional it you talk or this, was going packaging business they but a could paperboard as to been you -- of of kind I think XX kind business a shift businesses is what's about of went just more forward were follow-on, if I back from kind years lot the And XX wondered, Okay. to

Steve Voorhees

it's is, evolution as an we're explain I'll And of that and I in going the where think and it through in we've think see MPS But I and MPS more think a cognizant and second. it, we I acquisition. the think of a revolution. seen market it it customers, I we're rather than

think I for basis for of to customers customers. then global supply feeling that's so that of a their consistent those buy, the a And second condition. a the opportunity is have have quality global packaging packaging one to around think have condition to customers, they strong there on a I type those globe. Those is

is those It customers. see for customers opportunity, that isn't if Let's about customers, quality. -- be certainly those have quality then about say, the the print today we and quality, to serve somebody has consistent But with and care somebody that is global If those or case. global we're and case. they regional, it's the able not around is it customers the the different won't brands isn't the concerned world

Bob Feeser

If this Mark, follow Bob. could just is that. I up on

So packaging out system markets. where the plays world. focus you really more consistent in around might as pharmaceutical a imagine, quality companies, health markets a in and the is on beverage having And the of care that there's with

markets, coverage. end broad-based lend in more particular, those themselves So are the end international really to that

Mark Wilde

in luck good fourth helpful. Okay, that's Listen, quarter, guys. the

Steve Voorhees

thanks the note this your Okay, Mark, morning. and hooray in for

Mark Wilde

That gift for belongs brings you. a long to time that that

Steve Voorhees

amazing an done just has team corrugated the but job. too, been, have We

Operator

line question the Research. from Your with Buckingham of Weintraub next Mark comes

Mark Weintraub

the to And contracts clarify, that in would you discussing could, I clearly, wanted were the multiyear that when you're place. side. on be if supply just I putting

would particularly volatility as might work reduce lead And to they in where see historically? you on are way the corrugated, also So relative the to there mechanisms that differences, might potentially or have -- the that it? pricing

Jeff Chalovich

Mark, it's Jeff.

I multiple remember buyers have earlier, sellers. and trigger contracts. pricing mechanisms is that between important we set As that in to commented the movement It's

the will a always it's be. competitive it market, it has in we're So always market, and

by and the So contracts, and on that the and customer price. there's to we in so the by then trigger accounts. negotiate varies multiple And movements ways price agree

them and volatility then customers, And triggers all different agreement. or there's and important just baseline what helps there's the to with It's us, that in way that And like and movement. I move that just said, could the so our the boxes. best be It's is our systems we market-related, more methodology supply/demand for across across no cost-related consensus helps that containerboard a we have volatility inventories, one and of have types. the

And move a so their how our one-on-one with it's we customers negotiation prices.

Mark Weintraub

Understood. shouldn't read that the in to create But we which it are to volatility in trying into model you're a margin, you? less time conceptually, have or ways might over engage

Jeff Chalovich

way. No, I that that, categorize wouldn't

customers solve we invest what that we plan from that can future want think we plan them contracts I is customers our long-term what problems. our and benefit on capital from, the And are help supply doing they we can benefit so based demand. also the in to and

in invest they run a run how capital, and we us gives just view better operations. volatility how their less we our and that plants how So

Mark Weintraub

on given U.S., And any kind the actually that supermarkets things well? you way on? call up that Are the as Smurfit as little I in thoughts OCC And had surprising It's more all generally a just bit. Kappa, on their the seeing to started had go it. going suggested yesterday, understood different of

Jeff Chalovich

No.

as I right what June we've we CCIC, in think the restrictions is is now. well Group, see -- Inspection put Certification stated place China as in, are inspections. been the still the flattish when in all and self-inspections it The still that doing on have

going China. And you've the of fiber is they slowdown, stop for altogether. places, that almost Chinese are seen, looking as other OCC in a causing so a may And and to ban imports

well can it flat; term, who get knows? term, It They can can the So through in in pulp. long we to get perform They it with recycle our the OCC recycled virgins, China of it depends does. also, well-positioned the of in And system through market. it short get balance fiber. the through see and containerboard. regardless what They to happens supply. We're what we're well-positioned

Ward Dickson

Mark, Ward. $X is QX QX $X. decline clarify to is and guidance, on the sequential this our between And To from

Operator

KeyBanc. with from your question line And Josephson comes Adam next the of

now is open. line Your

Adam Josephson

thinking already I'm that of XXX Florence of question on would year, Florence, based be maintenance that fiscal Brazil in particularly you've concentrated that And you've million. million next about. of on I year. about 'XX. any one add XXX of to total would you've you just XXX the talked Do investment Ward, about and for just about know then will add based you? CapEx I most sound million believe about off what next XXX those talked about Mahrt on and talked said pieces million

Ward Dickson

for and Florence No. view The $XXX the million next is I $XXX $XXX between projects, million strategic remaining baseline, think $XXX on the million year. million roughly the to plus

Adam Josephson

an I just given you're we're Can already? update in know through talk in July shipments. what quarter. at that saw about just you all July, June the X.X% the month you And up on

Jeff Chalovich

Yes.

the Adam, up aggregate. closed, month X there's Remember, we're more but were up shipping days, X.X% we Before X.X%.

Operator

your And Chip next of Vertical Research. from Dillon line the question with comes

open. line Your is

Chip Dillon

players, would you that that the for you suggested, on be from it front we that, It's when recognizing terms one instead, of as I is look strategy to just Florence, doing what you private interesting, didn't export. need the in going from capacity need board, believe just the growth that been to if pull out? announced you And and And add to the of feel we've that, all in you've still -- needs one except more ones supply you are X top heard the their going pretty much the private one have forward.

Jeff Chalovich

to we with we're the capacity have looking acquisition. KapStone remember, acquire more Well, that

serve. currently customers expand us some in So serve that that expand opportunity the and that markets gives to do don't we we currently with further to

that grow we're from calls capacity with mill going on add to besides invest our opportunities I've pulling also in KapStone. we mentioned current So could system. export, capacity the other to in to that's have

that. to had been us And and that don't with as haven't for based do see downstream capacity a acquisition, having demand demand most There strong. folks KapStone of the is integrated you said, need But And adding have do for the We on customers. remains term. the have to box. I short in it

the of So KapStone we our with in and system are to well-positioned acquisition expand.

Chip Dillon

follow-up. on think just last -- quick I And the one

maybe that hear and misunderstand your each -- is in there sure considerably. that? X%, I I that just Did misheard were wrong, X you, would I had didn't make You July, would up, X%, want that suggest was more that which days, I day to per given this were day mentioned but down shipments

Jeff Chalovich

plants be heard strong in the and day, still no of down July change in our our middle functionally and right. backlogs, it's July change still demand. box in It's X.X% mean, running very I there's changed in no backlogs, but strong, month, profile. nothing you mills. is but we're per we'll demand Xth full-out of No, the -- our

Operator

question next Debbie your from Deutsche Bank. comes line of with And Jones the

line open. is Your

Debbie Jones

$X First, billion congratulations on the target early. hitting

sense for to there's mentioned You what an opportunity think give you a you Can performance. some KapStone. or else us one going highlighted opportunities going forward? of forward improve optimistic know there's I you're about

Ward Dickson

out the margin both our Investor Day and We laid presentations for improvement plans in Consumer. Corrugated

side position. in MPS talked of didn't And of So opportunities. benefits some Corrugated improve the the -- the synergies the business -- that vertical from making, investments about investments the achieving our increasing it Consumer cost the we we business, did have the integration, the in we're the to , strategic to related

the we are drive the the We the to across sure that offsets make improve plants have driven that we sustain in and in inflation this so of that both to functions and normal organization rate ability margins. productivity,

Deborah Jones

turn to some wins business if a impressive. or sustainable pretty were to shift thought just of consumer. a substrates get trying wanted your to I volumes highlighted. that I'm that is synergies revenue And is based from how on I of and this sense the Okay. you've other

Bob Feeser

is Debbie, Yes, Bob. this

think is And was important not of looked to as at and the was our in health really Steve -- of in our store, quite frozen business in plastics area, in fueled but food shifting recognize terms just that in just from foam of outside well, participation And America and just three and also health food good you our also smaller participation about as in see. as and when grocery reminder, a that dry in which where seeing and we acquisition the in underlying with MPS, And quarters of care, also business retail the and snack we've we quarter, growth in some referenced, seeing over areas. mix that also to some And food was seen that beauty. U.S. food it's and to then highlighted consumer, important good North the area, the winning we're being XX% both row so we're the I a service think growth paper. strong, And we're We're this. center about Europe. strong faster-growth by as to that shift think new fundamentals, return brands. I

it's we appears of we're recoveries center demand America really growth, we're we beverage, and in some economy. decline sparkling saw North seeing Latin in to then stable, good And and area. see spots whether the overall So the But in America, good to the and growth. craft brew very water starting with store be have where

our our So really that approach points we opportunities customers touch have more customers again, giving the overall the feel And good outlook. about we is and across us grow. enterprise with more to

Operator

Davidson. comes question with Steve of next the from Your line Chercover

Steve Chercover

thing. My about question competitors? set point you're the KapStone integration preparation you to this a collaborative? wanted full-blown if the ask, data to up operate joint compelled at you are still able I was just Or room to so as is are

Steve Voorhees

we're as full-blown to compelled We're operate competitors.

Steve Chercover

of type can list do, mean, whatnot? can't I a and what you you So share preparation

Steve Voorhees

Just like not would as we as to do. much

get the So we're going regulatory completed. very in interested so deal we the through process can

a think, limit mentioned, how there's I introductory had to have you We but do. you had can much as meetings,

acquisition. to So we're move the with ready forward

Steve Chercover

virgin. containerboard sustain your less but goes but since to a competitors. mainly Okay. operational, guys And accomplishment for great that's to Can the there not a gap more you're yourselves virgin it's OCC between guess, back more And I'm you still sure OCC if then, it I up? a close is Is and helpful operationally? bit follow-up, you come

Jeff Chalovich

Steve, it's Jeff.

came I margin optimization, the think strategic optimization, and growth. differentiation, supply clearly we basis before of the footprint our investments, we had sales capital another in XXX the OCC that move points from chain out laid really repricing, Day, Investor

have more, of operating do improvements. well. we the So and we and business well to has will continue will track operate the continue been on And

Operator

question your Gaffner from of Scott with the And line next comes Barclays.

Scott Gaffner

minute order book X.X% July anything was down seeing slowdown you but a they I X.X%, the because you're follow-up year-over-year near-term to a little quarters, strong. that's shipments on the Is that then bit down in there prior box causing slow and also you Jeff, said, slowed, from just a relatively volume that did for think, said the growth on basis? a the

Jeff Chalovich

Scott, it's too. instructive, so I think

over a FBA if actually on X% day in the at FBA, you per the On X% comparison. shipments and our compare X.X%, when you FBA are up comparison, look the

overall. day So do comparison, sheets, the X.X% is Canada. was over X% just X% everything per includes and FBA you But and if our quarter

were So we that's you two we note if one. Note is, number last look XX%. where July, no. were, And at number up

So There's no slower is difference month. continues in any the to run full. business July typically our a of backlogs.

We have the Xth July. of

You have They customers couple downtime vacations off. a two maintenance. or of who have -- our customers took for have or week a

that So there's full nothing we're down, backlogs, out running again, our structurally our in the volume slowed business in or everywhere.

Scott Gaffner

Okay.

an a fair? more you're maybe than saying comparison So like just you underlying issue. of Is it it issue -- sounds market

Jeff Chalovich

that's think I fair. Yes.

Scott Gaffner

September of Is further of of that's there KapStone, Steve, now for this said deal? in is there end you second. closing said pushing saying I a KapStone and hurdle quarter December, at And the back? KapStone XXXX. anything beginning Originally, getting the by think anything you Okay. the had that the and Or you're around way regulatory you close, the then, to back think moving to just

Steve Voorhees

there's nothing new. No, really

some acquisition, I was second second receive we of request. think a the when request announced thought or there a probability we

think that. just working I we're through

Operator

And Pettinari your next Anthony from Citi. of the line question comes with

Anthony Pettinari

be, impact in supply are system. this are in then quarter mitigate that the like them could that just what inventories quarter in was led managing In corrugated, where and wondering, financial you And you of terms I'm to from that taking to some you'd you indicated and inventories quantify? to steps below inefficiency your there that a chain?

Jeff Chalovich

Jeff. it's Anthony,

in terms the $X and quarter between small some the the and roll it's plants really make in shipments side or million happy. small. customers the upgrades $X or keep take is impact -- million of shipping upgrades, some sense stock So better It's from to the of

downtime, so be we this less get we'll in and to no maintenance So our there's inventories quarter, have we're some confident the but effect not a lines material really the -- on this the upset, resupply is able have margins. of plants,

Anthony Pettinari

expect cost margins George's From having that five just a for then price up then boxboard perspective, lower or kind impact margin been increases quarter, And that, is of of know, year-over-year quarters. And you the I corrugated? on current price question. improvement driving have than a year-over-year, Or Or don't big-picture any improvement there else on of with moving is that's longer Consumer following something that? forward? think, MPS? would just is margin in I lags thoughts catch-up

Ward Dickson

Yes.

So and I'll have Bob Ward, is I'll start, tag this on.

elevated P&L, of especially anything price The that? the as of the and published you want starting add costs. at earlier, the to Bob the increases, higher business, So and experience to OCC to flow-through, as fiscal remember Bob, has highlighted the to when contribute we do is freight look previously had you higher exit it's year. the the benefit not consumer from chemicals impact to getting deflation

Bob Feeser

Yes.

significantly XXX historical about been good by the the I as a with third talked go as third chemical and have saw more line just would I about, seasonally the offset in Ward good, expected, basis the our fully margins. expect think see we And over fourth in quarter. think, into consumer the costs to OCC impacted the freight higher a we're as think, heading into weren't I in further the levels. the improvement quarter as We expecting margins strong have good are We fourth quarter, in is that productivity improved lower the well. more quarter improvement quarter, Demand point quarter. we had and reminder, quarter as in that margins to productivity by definitely and cost. And

Operator

Glazerman line And Equity question Research. comes from with of your Gail the next Roe

now open. Your is line

Gail Glazerman

wondering, Going with back about shift starting are to interested you they're hear foam. away in where alternatives? demand, from customers consumer other from I'm you talked areas replacing in paper-based plastic the to

Bob Feeser

and retailers, Gail, regulators. as with top-of-mind issue a has become CPGs consumers, it's you really this Bob. Yes, know,

reduce of areas. So food paper, a cups. containers, variety ground replace to and takeout multipacks a plastic plastic beverage, eliminating a more there, the to which foam, we're as we Jeff clamshells to then replace it's of and In paperboard and to food a drink of in from and across I for cold including it this, in grease fill either paperboard. there, number in plastic bags. total. in overall renewed offering kraft solutions hot solutions, touched for and wraps, interest corrugated we And a us, paper in Then really packaging. a oil interest we're film machinery or recyclable. of call EnShield. Jeff there And about E-flute is packages packaging to on we're for on finally, talking e-commerce. a have paperboard plastic zero replace got void been also to reducing eliminating in well about, our drink printed help We've to are containers high-quality multipacks. that. interest from And Box has have sandwich and that lot talked then seeing And provides help shell customers seeing our really, variety that including think aluminum ring customers, like providing and including four replaces shift in is we our service, also for shifting the e for in in Demand paperboard in food, the e-commerce, cream Meta ice big without And good as moisture really barrier and materials more focus And which void plastic CanCollar, there's on solution of fill and focus, barrier This as we're applications, extruding that

Gail Glazerman

hear going of this concern protein customers probably Are from you There's And few that about any about quarters? a pressure freezers. side. as that been in starting impact hearing the on? stacking next on the more some just might concerns Are to broadly speaking, over corrugated talk trade mounting the demand then you up

Jeff Chalovich

So we're hearing from closely. customers if watching it they're

it. a we've is aware happens. what actuality, in everybody that and but They're yet see watching they business, react they'll accordingly had haven't of We seen when large their effect actually

Operator

line comes question from George of next your America. the of Bank And Staphos with

Your open. is line

George Staphos

a that the way, I performance in guidance question Brazil in capital Quickly, refinement, Is behind had, considering FX? very And terms good for of refinement Brazil? truckers' the bit strike this year, that the the other allocation. revenue the little just that? in By what's then of Is that.

even stocks and You has way return list? clearly doing be way value you're further the the your stock has the what peers' improved months, may the outlined you to consistent ranking few priority on its said the and in in past. what in last given But performed on terms the of

Ward Dickson

guidance of the just completion -- acquisition Shifting above to take to Xx, for them. X.XXx more target of nothing I'll be the reflects through our pinpoint really completion the our we of with capital leverage really revenue then forecast successful that The just so had X.Xx. will both performance QX over QX, KapStone it's allocation, you that. than and as know,

on down we clearly, focused -- do target. We repayment. on our back some flexibility and in buy we stock to But leverage debt will did debt do that inside returning and So we back priority have have our paying be this again, will forward. quarter, going FY be focused 'XX

Operator

question from And with your Mark line the comes of Stephens. Connelly next

open. Your is line

Mark Connelly

not excited more export -- announced price of market to just a could wondering and deal, and about. but the a increase OCC, few some lot environment, know been those about, you hood pricing broader it's guess, of say. I what there's Since excited months, containerboard I of maybe the you're since wanted if would through yet, walk under just KapStone as that you're feel kraft well you fair amount things movement, kind like I to you've whether a I as the be -- I had

Jeff Chalovich

in over biz packaging general. we the packaging, it's So at the look business. long paper the a great containerboard And exciting term. business think is We

to give and that currently broader current customers serve would that broader and us when so would markets the believe a markets them. to markets our weren't offerings we we chance enhance us And did make more we in and serve competitive, in acquisition,

And and that we we're actually. it bullish can't so it we on these wait and market done, get conditions to it, pleased make that forward we're when as were appealing or announced more, moving but

Operator

And this call. concludes today's conference

disconnect. now may You

James Armstrong

to if Thank have call audience as a our help. reach you always have you And great out during very everyone, the We're much. And questions. happy to day. any

WestRock (WRK) 4 Aug 182018 Q3 Earnings call transcript