WRK - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Marcella, and I will be your conference operator today. At this time, I'd like to welcome everyone to the WestRock Company Fourth Quarter and Full-Year Fiscal 2018 Results Call. At this time, I'd like to turn the call over to Mr. James Armstrong, Vice President and Investor Relations.

James Armstrong

Marcella. you, Thank and everyone, for us joining Good thank today. morning, you website. press We Investor and our release posted our 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 Packaging. Chief Financial President Chalovich, Officer; Officer, on Bob President Voorhees; Consumer Steve Packaging; of Feeser, me With WestRock's Ward today's Jeff of call Executive Dickson, Chief Corrugated our

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

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

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

Steven Voorhees

Thanks, WestRock. an joining James. exciting time call morning. Good Thanks be at for to our It's today.

that about welcome from our new receive it. things future and building KapStone wait completed regulatory worth have fiscal XXXX. that reported rose a lot Friday, wait segment look we goals at to we a year. key increased acquisition. adjusted the fiscal increased strong adjusted to results. KapStone with XXXX and flow our This after adjusted Adjusted cash I KapStone We the of year-over-year met of impact margins the XX% the the good forward fiscal WestRock fourth rose of will XX%. EBITDA for by operating On we EPS The EBITDA the mates morning, quarter on. beginning XX% and positive together. on year financial Sales set and have our was segment team and in We I'm XX.X% full-year fiscal enthused XX% going approval, long out

During through customers strategic team our projects that opportunities opportunities paper investment shelf-ready in through at deliver we customers in our our packaging of capital with and machinery Mahrt customers' in KapStone cases markets strong in both implement value to and made proprietary and that with and are capabilities continue we'll we margins, help significant to the Schluter add of WestRock. supply with Porto and win Florence, with the outstanding helping WestRock's improved year, packaging, marketplace. attractive our both Over sustainable for locations. solutions to differentiated course cash installing the from several one-third sales In to year our our to strategy the packaging and consumer at that XXXX, provide Corrugated that differentiated flow, the with well-positioned our fiscal plastics Covington, Packaging significantly acquisitions. stockholders. buy our eCommerce in our providing Feliz, improved replacement, provides. strides win many our investments corrugated year, Packaging during our generated Plymouth and business many and to and capital activation, our chain optimization brand customers includes customers We're Moreover, and

above a KapStone in run $XXX of and last delivered adjusted million share. segment the million very well $X.XX by the of $XXX positive the KapStone's trailing we cash from Adjusted and XX-month the while business approval. remain time It's solid. quarterly performed to increased adjusted reporting of EBITDA very for or continue Underlying time acquisition. This rates XX%, rate remain September during team. increased team Let's were $XXX KapStone on EBITDA outstanding increased EBITDA reflection is and Sales quarter results per $XXX Operating the of flow backlogs our million fundamentals uncertain operating across well regulatory waiting announced $X.XX $XXX million. adjusted favorable. XX% the adjusted turn to increased quarter. EPS a and by million year-over-year, year. period to demand we supply at be high KapStone

X%, shipments year-over-year. and Packaging Packaging a and grew on Corrugated saw rise per year-over-year X.X% business and Our shipments day volumes X.X% basis, Consumer paperboard Mahrt converted total containerboard increased by American products by North our

synergies is expect from sheet balance be that ratio and quarter forma ended the the rate the with of basis, a KapStone leverage will run of We impact in With we X.XXx. a improvements of the the leverage good about full million excluding of KapStone performance Our on pro shape. acquisition. Xx $XXX our

plans pension by are qualified Our $XXX over-funded million.

period during investments assets, to are in low-risk in markets. pension be place Our volatility the is this of excellent an financial primarily which

important Our WestRock. WestRock in dividend Board weeks strategy. return pro the confidence of XXXX. Directors X%. when increased was The We've our formed per in a the formation is ago XX% to our long-term of yield dividend. of of increase $X.X At our since the approved the by cash $X.XX $X.XX dividend flows WestRock of the was demonstrated to returned forma stockholders We've to share an share X.X% two or more billion stockholders capital a than summer part annually, capital is allocation since

Packaging Corrugated we've XX months. the the for last Corrugated the and market and to attractive business. turn outgrown Let's industry growing Packaging remains

shipments compared and segments, This service, referenced day on markets. food by X.X% American driven a WestRock's on as absolute year. As was across increased our I earlier, an especially increase of basis retail the volume per rising last basis most X.X% demand end-market box North and eCommerce, to

on integration able build and containerboard our was our XX% to quarter back like be. We're American shipments Our basis X% inventories in increased day shipping In one XX% box to by as as per demand basis with extra them day and our a for the where October, increasing compared enter X.X% ran an well We was year. on October we level year. integration to level to we're holiday we'd experiencing the absolute for North and very the last season.

the American was has the made outstanding which since Our Packaging first We've North Smurfit-Stone margins years. Corrugated full-year six acquisition. business progress doubled American XXXX, past EBITDA North the following over

corrugated was higher points XXX than this EBITDA year prior North During quarter, American XX.X%, adjusted margin quarter. basis the

performance to the that. in to people, programs our and We to momentum improve maintain We plan just across system. the our have place the do the we projects, have

With of many our opportunities we across the KapStone, expanded system. addition have efficiencies to drive

of the by to expect $XXX We in realize synergies fiscal and performance XXXX. million the improvements end

Our exceptional with moment expect talk Feliz and on impact on I'd box plant quarter Hurricane results producing Porto Michael had take has delivered is this EBITDA during Brazil segment margins of we to adjusted new about team the our XX.X%. schedule at quarter. a sheets and the our start to Construction like operations.

extensive WestRock our in hard our in water, returning the committed remain none community the recovery extremely housing, We impacted to the come. I As full I'm the to I City providing and for reported, everything Fund. of the has we way Relief say with We're during this supplies visited risen temporary running. the two that team and and and Employee Panama get through weeks the family Panama any storm. sustained to were supporting to previously food, other their or while our to ago. back financial City of each storm. to years teammates operations helping period of the lost occasion grateful injured they've mill City mill them others worked and our I'm extremely have up of teammates Many damage members of how the proud care take to and Panama also mill assistance

across along vendors, With to the way. running we production with WestRock the and members of assistance November. and up well rate linerboard Saturday, contractors And ramp a expect under to started month company full the team of are during on repairs our

months. to $XXX interruption expected is at of million. Our full property operating damage be should approximately claim to capacity the six XX% back initial of business market in line be operation The in December. early pulp production insurance We and is estimate

property interruption of mill excellent a covered, most of $XX deductible, million will expect of but the differences are the majority to be the that and have bringing received. cost cover insurance we Except vast timing with for until We the proceeds damage operation. business back insurance will some cost full

the total make capacity more and the while and capacity, our our two be of of mill machines. Tres adjusting of a at third-parties tonnes to electricity its will the year XXX,XXX OCC. supply generator the to operation pulping to properly to provide addition the system full are that in our investing turbine As in supplied. our a Barras we've of potential. boiler, of includes the enable upgrade generator, addition biomass We're Virgin The and Brazil new customers sure we business Virgin achieve debottlenecking box paper XX%. self-sufficiency low-cost pulping The of been biomass sustaining allow Feliz our new in paper machines, to will of we'll eucalyptus us to debottlenecking produce our increase able boiler By of that per pulp higher support the will plant use to our growth containerboard Porto the new region. The cost turbine the eliminate recover,

In tonnes the our produce world. and investments year-over-year. and and by side, in to This many Brazil's lowest Importantly, quarter consecutive including the mills we growth current converted retail solidify adjusted food, improve paperboard will the of as in mill reduce retail business. margins combined consumer will the Feliz, of end of volume increased will markets, Porto cost at one all XX%. beverage. plant EBITDA was products with our standing box cost of the than segment food approximately increase rising packaging, our will service, project see liquid EBITDA and the upgrade mill Packaging fourth our owning our X.X% shipments Consumer more healthcare, in of than food We the XXX% demand more these the When

packaging in help interested their our are paper-based that convert plastics customers sustainable Our more alternatives. solutions to them

investing and accordance on either a remained of in The in The backlogs beginning Week results in business for remaining price mill, cost in of March products price significant at the of machine operating XX-year-old existing meet will Number quarter in and paperboard shifting freight, improve the these Week mechanisms being Paper in of Mahrt, the several Week five customer We're the the and our and the affect and we're reliability business increase areas coater was our similar our maintenance increases machine Our replacing segment indices. We terms. wage cost. Mahrt Pulp our needs we're at across improve segment with reduce our project we're our XX% lowering between ability grades. our flexibility and weeks our of the materials, Mahrt published SPS six based the million. currently lower in consumer increases improve two in paper coater other million, was energy strong published the needs quarter further with head chemical Covington, & of usage new implementing XXXX. an One Mahrt our major the and coating contract each not process, for to to & inflation mills delivered changing provide increases grades approximately reduce box important Pulp This to that EBITDA quarter business upgrading and with and or the are to Paper paper to our Paper paper At increases Covington in the productivity part our density executed us will printability, related fully of $XX At machines between directly meet export production which & by by to customers. Adjusted a replacing inflation. Pulp contributor Alabama curtain and a $XXX offsetting cost. mill. and all

of tonnes XXXX at of Covington combined these nearly expect of least to better sales. to require XXXX. The during after-tax additional as will WestRock company generate projects unlevered Mahrt a to addition implementation in returns a The We and $XX of billion total downtime an XX%. fiscal projects annual compared makes and brings to us KapStone fiscal XX,XXX the us

business. system leading overnight a the plant in addition has our Our of footprint situated been and well producer solutions America kraft the box differentiated the enhanced also by American broad acquisition a portfolio. mill of Packaging of Corrugated adds makes new distribution our of North that fills paper channel North in portfolio to and The us

multiple is that synergies. took EBITDA price the This expected, reduced acquisition the longer X.Xx the improved delivered after outstanding of benefit adjusted $XXX KapStone that purchase us approval their the than While to much to million. results

the leverage forma target in nature transaction Our opportunities completion of sets our improvements. be to $XXX about the up leverage Xx, after us to million The our to complementary pro our systems X.XXx synergies creates will X.Xx. return the performance to and of well which achieve of

have energy to several addition week. of make products This set a to Victory customers very of our potential I so We line the of we're our happen. to away. WestRock This current lot getting a locations weekend additional ship product the of and it been we over pleased the response to right with past portfolio. KapStone's to paper after whole kraft brings like WestRock. synergies these pent-up began entire organization boxes I've new

yet for replace for an In attractive paper another with with fact kraft plastics alternative products. sustainable us plastic sacks, to provides us is substitute

under for Importantly, the ability KapStone's and just an swing corrugated my business into and fit be us. continues by and of into paper easily to That difference mills enough Packaging containerboard size containerboard to it make boxes Egan, Ward? that to KapStone the concludes over mills will for Chalovich. Jeff kraft business. system is of of distribution We'll enough The Victory. is business Ward. supplies. turn President the It's and paper by of plants big production small North the and our attractive Corrugated to have their Corrugated led structure who will business led existing will Packaging back several a the be comments The from I our integrated WestRock's are operate as sales box kraft Majority name. Bob related grade Victory right again. regional to American

Ward Dickson

Steve. Thanks,

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

set Walking $XXX as segment acquisition during are we in flow the of of the approximately consumer a EBITDA be seasonality Pricing to EBITDA to KapStone. the segment as $XX million business for first compared contribute to expected adjusted our impact between in that price based million result quarter. published adjusted segments months the fiscal the next two quarter. The WestRock of will $XXX through expect be and in through increases. segment both excluding items higher our business. sequential our bridge, We result $XXX the quarter in million on to a Volumes adjusted are fourth in million expect previously as of EBITDA the decline

increase fourth and adjusted exclude Adjusted clarify will $XX financial shipping Panama quarter damages should box We cost the claim increased situation. fewer their maintenance take quarter non-cash additional insurance EPS and associated insurance by pension group for operating consumer of include two XX,XXX reach To the million. costs the scheduled costs costs complex business. sequential should stable as decline earnings Hurricane and will the as mills tonnes Higher well have employees in both income from in EBITDA the downtime recovery is across sequentially. reduce insurance Typically, our Input calendar and days The as corrugated deductibles. group in we a year, the proceeds. production. EPS both guidance will and impact negative at lost City related a our mill be

first estimate we negative fiscal the impact $XX from production. quarter, lost For million

an per to of due items of adjusted KapStone count and certain D&A election increased expect for purchase slightly the expense XX.X%, higher a share $X.XX stock shareholders tax the WestRock These interest $X.XX. and of higher to $X.XX per by share, share, price. aggregate take We rate to

Moving XX. to Slide

approximately business invest billion FY our $X.X of to expect in We in capital XXXX.

these strategic approximately $XXX $X and more projects FY invested in about projects million our Florence, should in our million half return In high half roughly projects. be and for in invest including we our also going capital, base generating to maintenance two $XXX service, KapStone, billion will EBITDA in Brazil. to including Mahrt, with Covington, generate Our than in Once $XXX XXXX, business. million should investments

under mentioned the approximately look term debt of loan bank other rate hand. and an loan capital. term the on our Initially refinance per billion with earlier, potentially committed KapStone, to lines we annual Post we Steve KapStone funded dividend other of with and increased cash share. $X.XX also some will acquisition our $X.X drawn facility As have we to

interest and our We estimated income the have in provided appendix. FY expense interest XXXX assumptions

expected to to business, get our guidance. conditions, and We to overall in confident On ratio our fiscal outlook back expect target of leverage in X.XXx Slide outline fiscal XXXX. XX, remain our XXXX. X.Xx industry full-year We we during our

Our guidance of includes XX KapStone's months results.

are We in to in and Key KapStone full-year to $XX of increases growth goods reduction offset volumes a the sold. our revenue, of reporting published by record These sales of recycling billion. previously business business external of accounted partially box stable The increases include net both price as is the recycling impact expect a growth in now function. as volumes, cost sales change consumer. drivers in for the exceed corrugated procurement segments,

lower the sales We complete monetization have will we land development program. and as also

adjusted expect contribution guidance. We $X.X increase XXXX to billion. approximately EBITDA to the fiscal to highlighted KapStone our We've

In These increased and key price assumptions the annual offset addition, of in published you the across impact by through capital inflation, of rest of outages, the partially our business, the the previously the of see strategic are flow implementation our gains segments. both increases projects. including

lower negative impact Michael, In have addition, of income, other items will the impact million. FX, $XXX pension from Hurricane and a

partially EPS per higher expense. by be adjusted and driven by share interest $X.XX expect offset approximately We adjusted EBITDA to higher D&A

utilization to Steve higher FY the back related positive business. cash benefit modeling, wrap-up assumptions by tax reduced tax the higher most due that expect and for various partially other to shares FY flow outstanding. for billion. rate executed. XXXX help planning XX. This be grow cash tax in To cash you cash in development acquisition from credits tax $X.XX Steve? available Higher operating of turn and now Adjusted earnings included are is we XX% million it in of I'll flow an the land interest, closing to XXX our rate Slide appendix approximately will book XXXX your addition, will in on offset efforts and adjusted rate, of over In the full-year of and we comments. to XX% the

Steven Voorhees

enhances of geographic across provides strong just ability solid opportunity operating We've a execution our We're good presence, Ward. addition significant serve year, backlogs. XXXX of greatly high large and momentum strong the and KapStone synergies majority and conditions WestRock's strong Thanks, remain entering creation. demand sustained We're to for experiencing markets. Market completed experiencing fiscal stronger favorable. rates The very with platform. continued results. and even customers, us We're value our

is America sales, and A global North We expect to demand that energy. the increase capacity realizes our in productively attractively in world roughly global earnings, containerboard deploy additions flows In have of Virgin supplies to response positioned for of demand. number line with in this in fiber, global to deliver the growth GDP cash recycled and and for competitors fiber, containerboard of stockholders. announced with benefit closing, capital and continues rise

We through sustainable in this paper are unique differentiated solutions. packaging well-positioned customers competitive market portfolio to our of provide value broad our and to

use flow and reinvest flow grow make business our our capital our strategy. allocation, to our improve cash we'll margins and and acquisitions strong and our For execution in the support that strong cash

team, share and increasing and long by repurchases. capital return through investors the opportunities for time is provides and our a dividend stockholders that our over will term. customers, over our to short significant formula This We

concludes James, Now my Q&A. for remarks. prepared we're ready that

James Armstrong

you, Steve. Thank

a our get one allows. We'll chance to to everybody follow-up we first time take as our your to please needed. as reminder a audience many ask to question a a As with Marcella, question? question, can please to limit give as

Operator

question the Chip from [Operator Instructions] first Vertical Dillon from Research. line Your comes of

Your line is open.

Chip Dillon

that? several and particular Yes, should surge But volume morning. details. all know last data. we those jumped export going – noticed big to some farther saw XXXX, didn't real with what seen for attractiveness saw there I was there the what and the but I months you had the genesis has know for in mainly export that I was thanks the what in say of Thank good or published the domestically across it industry something trends of My a of the continue? really we there do in and if if October was on question the else of than have we see we Was and these markets didn't prices just since because

Jeffrey Chalovich

Hey, Chip. Good It's Jeff. morning.

So, I WestRock. speak can for

shipment the our As you do were have full downtime didn't so running ability is we been recall, pushing able all we on our on out the any we've this since actually year. maintenance make orders first year to year. entire catch-up quarter basically This to we've been

market, we quarter, last up the export tonnes that push our but we down the for catch-up in opportunity this shipments into although and we markets to the participating been over had So we're to went hadn't continue use had XXX,XXX year in where customers export out.

of As the you noted, for opportunity our those stable been had out pricing for markets catch-up that to we most been and year. in took our has pushing we this customers

Chip Dillon

And helpful. follow-up. just a then That's quick

how the impact Ward, expense includes versus and $XXX You FX? mentioned. mentioned breakdown tied much could the is of to million guidance, the you I lower the portion a give of that on us not Michael But is other that production rough to the and that additional aspects pension you assume in the

Ward Dickson

Sure.

from $XXX recovery approximately carrier of our production one-third then lower the the third, that million. residual a of is So of lost the third FX million, insurance of – remaining the is of the another lower $XXX on a claims pension the the portion and the is timing the

Chip Dillon

Okay. Thank you.

Operator

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

line Your open. is

Brian Maguire

Hi. Good KapStone. morning, and on on guys congrats closing

Steven Voorhees

Thank you.

Brian Maguire

in freight. also costs the seeing like little I we of commodity sort calling an acceleration ballpark maybe of and you companies a out in and X% key where of are provide kind what in Ward, think of some cost in range just expecting you're the flattening range, as or I there, were can XXXX a but just maybe XXXX well. context a on bit inflation some for we're question wondered for guidance X% rough

also of off seeing the kind start could So wondering you you're was if I we on of comment what trends as here. just kind fiscal year

Ward Dickson

$XXX Sure, have decline OCC about million a $XXX OCC because the year-over-year fiscal in half of in XXXX, assumption, $XX of million. assuming inflation embedded in year the so between full-year of for of of first decline and actually the next we're million we that

So We of half. for closer our down then current XXXX X% of cost average million per for second and stable $X overall in a then first It's about and cost. the projected in basis up is cost's includes the the OCC It other on year. increase obviously the $XXX XX% wage, year million levels Freight do XXXX we FY inflation. full-year benefit, have in freight year-over-year ton. half fairly and with this to versus FY $XXX have to was embedded small a that

Brian Maguire

with now? lot great, just You Steve Florence, have right, mill And helpful. the obviously integration, box project the on or Brazil. to KapStone All on a Brazil timing maybe that's for and the do the the in one going Company then the plant the in Jeff, just decision project in

– about going on on complexity different the risk projects if and execution Just think right all of you've you got wondered the the how that now?

Steven Voorhees

they've ability plant the pushed our for bit project. about out good box of execute it. a well to to through and very so and it months of execute We feel prepared a number Brazil the I little actually been go because

that time been he our very he's long execute comfortable Brazil with of many again a spending week, last he's who Porter, Jim lot prepared. better going But here be was there for to of a But and know ability not be this time. been you I project. could has in know there really to they feel week. I So

Brian Maguire

Okay. Thanks very much.

Operator

the from line Staphos America. of Your question Bank George comes from next of

Your line open. is

John Babcock

Good is George. morning. line the for This John on Babcock actually

change KapStone quickly of maybe that across the to little see want the But even Just might can logistics to invest follow-up WestRock a on do opportunities sort overall business? platform? And KapStone how and this. to talk point, what on CapEx also about you early then you comment it the bit in

Steven Voorhees

Jeff?

Jeffrey Chalovich

Hi, good morning.

we based model. believe of So the Their for and million mills we've system, system system $XXX in KapStone We to types us that's in the about the on plants. we've we box the think budgeted we the strategic our do optimize of our in gives invest. same sufficient system in things done the know what sourcing an to opportunity incremental can

where domestic, our going part So for for overlap grades, there's for forward. and literally the that opportunities in freight, lots really really part our trades, gains, to productivity and a today exports of optimize for of a the areas large and is commonly million, optimizing we trend, pairing. chain that's that's optimization, work synergies supply of in the large customer that But of the plant the $XXX starts

there's the So a lot in opportunity of acquisition.

Steven Voorhees

the And capital the at we rate anticipate. just run

Jeffrey Chalovich

right. That's

John Babcock

than EBITDA follow-on for a that. around just quick business about and million one then synergy full-year just that the then apply you're expecting the seems to kind thinking more how some And there capture? about assumptions of gets $XXX million appears it the here, in you of you're bit trajectory the maybe you of Can greater talk than $XXX in EBITDA, or which also

Ward Dickson

got – is correct. business. also and you box published that our previously embedded business the flow So where year-over-year the containerboard the increases price they've mean for have volume KapStone across we in full-year on inflation through a the base have assumptions your are the assumptions assumptions I and basis, of similar

going are a million. we synergies addition, rate by we're year first million run of to $XX of projecting to approximately that In $XX of the end the to get

across portion the of year. get initiatives that during our productivity So a fiscal achieve to we'll

Operator

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

Your line is open.

Steve Chercover

Thank you. assets. I had a question about of the KapStone the basis

since kind up million brand reasonable, that $XXX previous assets weren't about is than if of run rate is and the So more know depreciation math we my the surprises new. KapStone's me

I'm you how you have terms assets just an of in So of latitude do write-up acquisition? lot a in wondering

Ward Dickson

just purchase through price allocation. the process now are the we and of going so Well, valuation

the the assets, our So rate combined going be run and plus goodwill, their the million $XXX the million, the $XXX and estimate purchase would D&A it's intangibles. includes original was between between price write-up – which base be allocation and between to

that are we just as you and work update it. do complete So we'll now we to starting

Steve Chercover

it it that If the would back indication low quick to Okay. well. One and too specifically stock Well, and dividends as and the that pertains future? the congratulations it's dividend's is getting other done becomes shareholders. of allocation be in more on the an returning to about stock that so capital question nice X%, north buying was compelling than operating therefore boosting it that

Steven Voorhees

those think make hard things. I between two to it's judgment a

going an overall have our I capital think at that. you if increased Xx. look our focus at on to allocation, We're reducing leverage ratio

go see that, back process expenditures I'd our projects capital to invest terrific Think very returns the think – generating into good of And we continue demonstrated that's think as a opportunities use on weight allocating and through our by Beyond of we'll on beyond reducing very at we'll said, then look to high returns and cost capital got business. across by debt at we so as repurchases. and look that capital. by share these I have on projects, dividend is year, generating our The our first this consistent we we'll reducing as say will those you for we've business. of

Steve Chercover

Steve. Thanks,

Operator

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

Your line is open.

Debbie Jones

morning. good Hi,

Steven Voorhees

Debbie. morning, Good

Debbie Jones

Charleston? to there plant at take you're see question first that if calling to note your improvement the flush How really at And is my on more. mill little you then long strategies a that the to if the wanted system specifically much in around does on could the just legacy KapStone? related some Thanks, that plant synergies into out business of it at and level side, versus implement KapStone. the I improvement of out to I investment have is bit box how anything

Jeffrey Chalovich

Sure.

of overall the mill optimization. performance there's and synergies network then Debbie, energy improvements, lie chain optimization, about the supply fiber mill XX% in So

large a the preponderance that's – So of that synergies.

moving You rate plants the and pairings optimization, our Victory efficiencies, the the for Again in the of of and efficiencies. assets, that well procurement, the converting are have part – those we'll $XXX other footprint plant of run is any in targeted customer we and you get do million forward. capital XX% that for that's funded the administrative there's all XX% of KapStone and the then projects need box other the mills in of to we've integration believe

Debbie Jones

break could volume segment And side is my expectation. mix And quite a generally the got the for have then growth least and things there out for year-over-year? I price in volume implied your except question second line which surprises I may is been actually volume improvement Consumer And side of you at Okay. where your XXXX, Corrugated, if mix guidance some wondering then was on or on versus strong performance. of driver not. in

Robert Feeser

Hi, Debbie. This is Bob.

our that that up see were would mix the overall have referencing. display side on converted impacted and bar pulp and X.X% sales, lower volume we volumes as as that's Just did products, about mix that we announced well lower paperboard which volume so sales as you're

Debbie Jones

Yes.

to And that product XXXX a you're expect there seasonal converting should we be to because so shipments – negative doing in just something quite is continue it nicely? are or is obviously that

Ward Dickson

assumption to on stable XXXX Yes. be We FY Consumer in said were basis the across for the our a year-over-year contribution business XXXX. versus going volumes of

Debbie Jones

you. great. Okay, Thank

Operator

question of from Wilde of the Mark next Your comes from line Montreal. Bank

is Your open. line

Mark Wilde

Good morning.

Steven Voorhees

Good Mark. morning,

Mark Wilde

to back I assets, sort a if then a kind that both been looking discussed I CapEx just at KapStone wondered Charleston There you boilers KapStone of address and to at couple been the debottlenecking just Jeff Longview, come of the have or of around potential have could bit the further those issues recovery out issues? of Ward, wanted out. and

Jeffrey Chalovich

I so a or had successful think boiler that they I was a quarter So very last this ago. reported year think recovery install,

there seen paper the the looking plant. course a box look or constraint always whether through we to machines on that's we system as elevate at And when the we're matter about. we're in the So anything of that assets, haven't then concerned

Six at morning. into So expect capital process, view we'll have what we'll the to with on and our Sigma, to investments, starting opportunities And Lean at today. continue look clearer embedded more this as a we do get do that we system we operations,

We and have corporate all at headquarters. people box the mills, plants,

we'll first morning thing and for and there work's So of shifts we the beginning. are be in all this as facilities our the

Mark Wilde

Okay to Charleston and that come Jeff to just issue. back

couple a of were there boilers there might work, just thought can down I that that? clarify So recovery you need

Jeffrey Chalovich

put Mark. in $XXX there's what that outside that seen more again project our us is So we million, nothing to of going I've

able into comment and what get to moving understand I'll we better as assets forward. on further capital be plans So the were, the that

Mark Wilde

little around more you you I also the Right numbers at and pretty in quarter then it I more cost in should so It wondered didn't the could softness any to mean move – a and would just a striking pricing I quarter's quarter this a like this quickly. talk Packaging. Consumer if color when the put offset seasonal follow-on. Bob displays. hikes wondered pulp last that displays is tight, good Feeser, market just these look even with if seem you potential in have And can about been was quarter? through boxboard for

Robert Feeser

just I'll will about pulp like really small take our in pulp a within talk overall that The relatively the maybe be minute. system from in we'll There and was mix. decrease displays So and changes quarter-to-quarter. our

increases major each and the our pricing, of on flowed as that there our XXXX. the we've comment half of quick six so have fiscal a of with Mark, XXXX those you in decrease through grades know, published – Just across published first a been two $XX had

by cost our from March paper customers You our our reminder, line, the that that bridge negotiated to market with three the the and business. competitive and captured from we're a really The And published million includes that to around our increases given in models and is apply around changes quarter capture. were commercial negotiating for can $XX value creating inflation see lag roughly XX% contracts, succeeding some just always bottom of the very we're the in that quarter about about fourth customers And to as pulp terms. consumer of our solutions. we be of remainder and differentiated price industries, it the continues

Steven Voorhees

display, on than was and last it true Mark, stronger you year. it seasonally said was even a that's it strong was this year quarter and

have you why decline sales you in that's have sequential a display. So year-over-year –

Mark Wilde

of pretty you It's competitors? containerboard these five margins. you Steve. just to to on kind want or years enough. four the just last I also compliment relative did Fair Okay. the impressive what's over happened

Steven Voorhees

noticing. for has much Thank appreciated. team you done the lot been A do work that. of to It's by

Operator

comes of Wells Gabe the Fargo question Hajde line from Your from next Security.

open. line Your is

Gabe Hajde

question you Good on congratulations the deal. KapStone taking the and for Thank morning.

I global tonnage found First down. peculiar up, one one, actually was OCC, are but prices around the is that kind for yet that flows of export centers of things

just So local if I I with export you're on versus guess seeing was demand curious you here? could all comment at demand what

Jeffrey Chalovich

this Jeff. Sure, is

So Number fiber. say more cleaner what so has really I'd And rest lower is a only from class remains to is class stable the high been waste fiber office That strong. XX, our then the we're mixed OCC exports, which seeing that's or not.

of is countries only other but OCC So more licenses maintained we're we cleaning thing waste issued, the in cleaning this to we've we Asian their country. other China There on exports specific but going they're been fiber. system, so do seeing our same up, thing believe they're taking only are told then really Number a our are the these are that's what probably that But see there not from and the XX in countries it world. had XX% down into shipping the from to off of been going also some the falling as it, and in is bunch

Gabe Hajde

you of on I vertical in do XX% opportunities KapStone to that. at think integration increasing then Thank guys I a rate, integration around appetite terms was XX%. or question the that around and guess the guess I around rate you. Okay. risks the And something the full-year the the in or

Jeffrey Chalovich

Sure.

continues. our that So do appetite to

and shipping move acquisitions Victory range XX% with sense. the can keeps further we into where integration certainly in Victory our we XX%, makes integrate organically KapStone system us boxes at we so XX%, still expanded more want bolt-on through believe continue XX%. XX%, XX%s we to that the look of keeps so that So will with to mid grow tonnage it us opportunities and to for the

Gabe Hajde

thank you. Great,

Operator

Your line question Securities. from from comes of Mark next Seaport Global the Weintraub

Your line is open.

Mark Weintraub

congrats expand Thank PPW what's some KapStone, and domestic is of Consumer your that couple perhaps differently. export the mechanisms pricing Consumer you of in a you'd you you, where done have that and happening by affected little also the business mentioned on questions stuff other a side, and on was there XX% and much those then is and the export bit? How the then added you that Can markets? on

Robert Feeser

have include with contracts outside Yes. long-term they from Mark, to much of of and It is associated Bob. XX% would not would linked to America XX% run liquid business typically packaging North Roughly business it's and and like that tobacco those years. we four our of one of business business about PPW. is to pieces where

Mark Weintraub

Okay.

they have stable? are how so relatively And been

Robert Feeser

stable. Relatively

Mark Weintraub

way – it? the length are way because the I'm on so Is guess you price the given put sorry, not the the costs, able by necessarily hit higher on getting I to contracts. of that contracts in of side, it you're price the of recoup the think to but side

Robert Feeser

contract. extend Yes. one pricing the mechanisms by The over contracts to changes vary and years four for

Mark Weintraub

on side. one consumer thing Okay and the then the again other

On look looked good. very dynamics, very, been we it's supply the demand when the hand, at one it's like

do those I Why align would think that an given environment you in do we're of hand, a mean in be seem so Can On two spot? producers competitive mention especially it's kind would the it other observations? the good help that pretty you is very you where competitive. that it

Robert Feeser

the and always a market markets of linked by which basis. where a I the business. packaging, Well, to In But bit just tight the little in in the and the maybe previously portions it's competitive business be carton provide business, we to grade, U.S. are Much PPW. of might we've to SPS and mentioned, linked of PPW helpful. folding had CNK CRB business SPS of market. and increases context The previously half other those weighted are for end good more of international are global portions realizing less liquid than PPW really price is the success increases and that through and to CRB remaining, to a published those are is on again CNK our linked portions business aren't the as we're in seeing published that business those compete were tobacco, SPS flow and PPW.

Mark Weintraub

Great, thank you.

Operator

Quinn the next Paul line from RBC Your question from Capital comes of Markets.

open. is line Your

Paul Quinn

get to KapStone finally great able much that were see to and you done. Thanks Yes. very

Steven Voorhees

Thank you.

Paul Quinn

a talk that be be move containerboard. flexibility your flexibility capacity opportunity could basis, question and maybe mill forward? do going you paper What's to you on on where have to the a able specifically kraft What important Just to highlighted between will and there? how that you

Jeffrey Chalovich

Hey, Jeff. Paul, it's

if system in Roanoke that capability mill does Tacoma the so we ability has Rapids So the have Dublin, you at Longview. combined mills, that also look today. and

it or or multiple gives optionality medium line us kraft So, on grades.

for grades, business, the So the We'll as optimize machines, mix, mills, our the the the look profiles we look the customers' demand the at altogether. to demand. freight

the that's system. opportunity So a combined we as have

Paul Quinn

then into How that is just guess I Victory. of XXXX guidance? up opportunity And – the at embedded on much the following Okay. the

Jeffrey Chalovich

fiscal we to integrated the have expect Victory in XXXX. fully Well,

we So, we can XXX,XXX believe we do that tonnes have and year? this fiscal

Paul Quinn

all Thanks that's I had. Great, lot, guys. a

Ward Dickson

Thank you.

Operator

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

open. is line Your

Mark Connelly

You've in substantial customers running about How West, the be? pretty shift East tonnes containerboard KapStone full. the will was with sourcing Thanks. Coast but talked in for replacing system Coast West the

a that and way? business business in mix the out question Virgin replace in to there is ratio. Where benefits one So increasing going you are to The away specifically? you from that stand the turning second containerboard with be KapStone it cited better does of big is is

Jeffrey Chalovich

Mark. Hey,

containerboard West Coast, with wouldn't the KapStone And say on be the the be So then that would acquisition. I turning we away will XX/XX business.

– to I we're customers to optimize opportunities looking see upgrade trades, turn I think always and don't away that. for to to mix, do the us looking but we're freights looking for our having

partners, think to do us but plant just our to away working having pairings; trade I that's see I with our turn and customer customers that. don't

Mark Connelly

you. Okay. helpful. That's Thank

Operator

KeyBanc. [Operator of Adam comes question from next the from Josephson Instructions] Your line

open. is line Your

Adam Josephson

what in year Thanks. just this sense over growth been you'll can historically? on one XXXX guidance have it's a CapEx will average fiscal $X.X from CapEx bleed couple questions, just the at on Barras? Good based growth about more of spend much morning, on and broadly Tres do And Florence everyone. what least you CapEx billion, you issue, how just on talk Ward, of of the

Ward Dickson

So, the let mix given we've first somewhat me you our base projects talk in and about the CapEx. strategic always

million in the million XXXX invest be $XXX projects year is CapEx tail be number Feliz, again strategic we'll this then $XXX That's Feliz, year. about Florence. that fiscal Florence, end $XXX Mahrt, we the Florence. drop should the Tres fiscal half contribute So year. will done Porto to Covington, we and a projects going That Porto about in and of approximately Barras. across But million of year because in Covington next just exit for on almost Barras We'll to Mahrt, investment are at of high XXXX. rate and as This Tres this fiscal

the generating fall we've should return from $XXX that and almost So down year. projects' between allocated maintenance million for the contribution talked strategic then our fact And $XXX equivalently about closer million to base next to to is projects. CapEx

Adam Josephson

I Thanks inflation on guidance, the Ward. year. missed think million said And million forgive if just to $XXX it, me this I but you $XXX

Ward Dickson

Yes.

Adam Josephson

ton have then fiscal that in a $X down well, you OCC $XX up When OCC prices you was XXXX? do for as ticking think or in back fiscal fiscal average million And What being XXXX? I talked XXXX. on about number

Ward Dickson

up XXXX. $XXX we was the for They're dramatically offset bridges of chemicals start directly during remarkably assumptions tally and gave to recycled and that it. what, every guidance the that I our up that the a and fairly quarter we or full you some underneath that's increases in in have fiber, XXXX, same inflation second from of the the year. the look beginning first just for Obviously for and gave of we stable inflation the the logistics swings they then the by the total as you dramatic million in freight by had would the if If you half fiscal in was the benefit lot offset there key pretty decline at year. but in But FY tick story half been approximately the at year, the

and be FY in and and projecting it aggregate wage $XXX and million cost to again benefits, million FY our are in we So cost, it million all was across categories XXXX. $XXX approximately XXXX $XXX in of input transportation; including between all our

Adam Josephson

for different I so if what is you just XXXX the Thanks. know number to that mean? adding apples-to-apples, KapStone And is it really

Ward Dickson

tried give price the base to No, the what it's because of across then and we assumptions guidance was KapStone inflation contribution our not business. – you

an comparison? apples-to-apples So it's

Adam Josephson

Q&A you. End Thank of

Operator

There I further time. turn call questions are the to at no this over the presenters. back

James Armstrong

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

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

Operator

This conference concludes call. today's

You may now disconnect.

WestRock (WRK) 5 Nov 182018 Q4 Earnings call transcript