WRK - Earnings call transcript Q4 2019

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Operator

Good morning. My name is Jake, and I will be your conference operator today. At this time, I would now like to welcome everyone to the WestRock Company Fourth Quarter 2019 Earnings Conference Call.

At this time, I would like to turn the call over to Mr. James Armstrong, Vice President of Investor Relations. ahead. go Please

James Armstrong

the Good fiscal Jake. call. thank for section side site. The of and view you you issued to Thank quarter using of morning. be the presentation release link a this Web and our posted or to morning ir.westrock.com, application this fourth press earnings at slide full via joining our presentation our webcast. on the Relations you, release and And accompanying year We can Investor accessed the right are XXXX

Consumer With me Packaging, are Commercial Chief Dickson; Steve and well Officer, Packaging, Officer Financial Executive of Chief Chalovich; Chief Jeff Chief Officer, Pat on today's our Lindner. our Corrugated call Voorhees; Officer as our of as and President Innovation Ward President

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

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

referencing Additionally, the call. measures be financial we will during non-GAAP

in GAAP We of have provided reconciliations the of to the the appendix measures presentation. these directly comparable measures most non-GAAP slide

Web on As mentioned previously, our site. the available is presentation slide

said, that With now over Steve. turn I'll you it to

Steve Voorhees

teams of joining year our accomplished. WestRock, earnings It's eventful call. Thanks that at Thanks, XXXX James. proud been I'm Good our fiscal for quarter fourth morning. and an all

$X progress made delivered year strategic in that the have consecutive flow capital the performance, over the During billion We've KapStone the completed integration in year, adjusted past WestRock. cash acquisition on fourth for operating free generating we underway. the and since we including projects formed we've solid fiscal substantial we've

share per to strong flow basis. increase our cash we're our on demonstrates dividend for The by in In our generate $X.XX we increasing long-term. that announced to morning, confidence an the this X.X% annualized ability ongoing

WestRock's many As of of customers. to winning our premier is partner vision unrivaled you be provider solutions know, and for the

vision. performance our Our achieving our advanced 'XX progress toward in fiscal

industry's fiber-based packaging We with increasingly of successful have customers broadest win markets. organization paper delivering portfolio help value-added and the that's solutions an solutions sustainable our of advantages at combined the their customized in the that becoming

a an July As example, XXXX, annual run of replacement our since than million sales. more of generated solutions sales of plastic in $XXX have rate

billion XX% For XX XX% prior by the billion billion key entire $XX.X were fiscal North American excluding 'XX marked square feet square higher XX from was year grew of recycling year-over-year, sales. achievements. year segments sales Fiscal box several 'XX, net We our feet. to by

our the we value of each appreciating grew And industry diverse organic X.X%. X.X, portfolio. $X More rate customers of KapStone due box was in where of the buy We by this while from for most than year acquisition, period grew fiscal our $X.X to same still million annually X.X% the than customers to XXXX. growth are realizing XXX the billion. enterprise sales the segment our more And daily shipments to or increase and compares differentiated

$XXX times capital invest adjusted flow in $X.X use projects. cash operating strategic to including flow, more and capital, to since paid the that cash our in returned returning million remain billion stockholders we in We $X.X $XXX end generated down repurchases. leverage and debt fiscal we X.XX the first to X.X million billion focused to than We've target. We share than through dividends more and on of quarter,

fiscal fourth the Let's quarter. turn to

last same the sales. prior billion, $X.X year up year, compared sales of recycling to also Our XX% than were more quarter excluding

were segment adjusted margins XX%. Our EBITDA

conditions. XX% Packaging North remain adjusted were Our EBITDA adjusted EBITDA Packaging XX%. year-over-year segment of market margins American despite Corrugated softer Corrugated segment strong margins the

consumer Our implemented increases grew and published basis XXX converting EBITDA for year-over-year. price We up reported margins shipments XX.X%, previously points of paperboard. packaging business

contributed Our was inflation of containerboard offset a adjusted EBITDA segment improvements, lower EBITDA published for growth, this increased lower paper. pulp previously $XX million volumes, to partially changes or KapStone by The lower XX% which craft pass prices and productivity and year-over-year. through and price export acquisition,

to our Now Corrugated Packaging segment.

of EBITDA another represented Corrugated segment Packaging in year-over-year. team WestRock's segment Adjusted adjusted margins Our XX% performance XX% by increased EBITDA outstanding North America

lower through, reductions export pole quarter. previously during and negatively prices, impacted in flow prices The weakness price containerboard for and the paper, published craft EBITDA

than EBITDA improvements. KapStone cost negative the the as of offset results, declines well our However, from inclusion impact as and more and by was lower productivity pricing volume in and

softer the with containerboard, environment our customers' supply matched and for demand. production we demand Given our

XX,XXX we an of additional quarter, of maintenance XX,XXX and downtime tons took the During tons economic downtime.

in agriculture, retail. saw growth our end many and markets, e-commerce, bakery, We protein of including pizza,

containerboard offset and KapStone. Our slightly excluding lower craft-paper was shipments, and broad that in based exited, strength lower end by also by markets these margin external we year-over-year business

was rate the long-term rate XX%. Our year of and for XX%, targeting integration integration we’re

For October, box our by last over the the year. increased month of daily X.X%

of than our by domestic XX,XXX October, and tons. customers and export economic the demand demand the over our scheduled expected our systems with inventories month no box downtime, us increase while last downtime, operate from the combination in the to maintenance During of reducing allowed year, stronger

tons paper the executing outage machine. paper scheduled has underway month. we three later new three start now tons paper machine month, we’re to tons the XX,XXX machines capacity outage includes we this This of while complete a Florence for taking older our that one a our we want outage downtime. modern our the of is older XX,XXX with After at up project to For the downtime place, replace mill. December of XXX,XXX entire maintenance quarter, This of

new We paper start in up XXXX. machine the expect the spring to of

with value and differentiated customers, strength results. quality of we in our product delivery WestRock's board through and machinery offerings. the ourselves value our The up design, high of portfolio our We consistent for distinguish including shows deliver

with portfolio a broad footprint of products a services. includes Our scaled and platform

meet of EBITDA above local, thousands growth able and of with ability and the rates regional, supports combined global needs margins. been Our organic national how explain to and platform, attractive market helps our commercial our customers to to approach, we’ve sustain

Consumer Packaging, grew material costs partially volumes, margins freight lower points lower productivity pulp Year-over-year, revenue. and energy, wage were on offset pricing and adjusted by prices and EBITDA only lower In XXX improvements, improvements, segment lower inflation. basis

Mahrt In following paperboard addition, inventory was offset to growth Covington. volumes the strategic lower shipments were primarily year-over-year restoration outages as in slight by due converting lower more of than at and the shipments,

of of CRB just approximately full begun than fiber the of that backlogs CNK segment at packaging weeks. range during broad expect that this $X Currently, year to grades six billion to of We've backlogs and all based SBS, and roughly in levels our XX%. are Since portfolio. year with we sales grown time by from the our per potential customers have or $X.X each tap million from XXXX, buy more three

deliver the of to solution, we system. ability and optimizing portfolio a the and our throughout growth. investing right sales to the realizes value projects of market differentiated regardless strategic reduce number the cost. substrate, We're efficiencies and system drive cost We're the savings will in our the As fiber-based expect further opportunities that of

and the enthusiastic see last opening capacity well-equipped than expect box EBITDA excited billion $XXX these a this fruition each in year. our especially I'm from X month Porto produce plant's realize about box come We feet to square incremental new more with to of about year to I in attended the plant projects these million each initiatives. Feliz.

the We also America. South preprint operate first in machine

that Our variety has to packaging workforce capable of to customers. wide Porto the Feliz expertise amazing has an a is highly high-quality deliver

schedule of Victory Through XXX,XXX to the Packaging acquisition. KapStone the $XXX 'XX. from tons internalized and annualized synergies now achieve We've end to to in fiscal shipments million million $XX fourth the system, are the on realizing our and by XXX,XXX We're of we've than Victory. realized annualized supply tons more quarter, year synergies

we of XXXX, of Asset In capacity to of optimization And spring that announced in drive will million once system. XXX,XXX out reconfiguration cost. linerboard costs mill eliminate is the $XX will of another Charleston completed reduce improvement lever annual our tons. the by North September, EBITDA

sustainability. about talk let's Now

short-term sustainable that's fiber increasing fiber Our customers sourced been sustainable increasing especially recyclable, made forest. and/or from and is for their packaging virgin are it's are Fiber-based that’s compostable. of recycled for because embracing goal use long-term reusable from setting well desire packaging packaging They or aspirational solutions. either the positioned,

our using been WestRock's alternatives at team about help to Consumer is Corrugated solutions. differentiated goals customized successful WestRock enthused with them We've Packaging working customers portfolio Packaging, this. machinery meet Our creating of their by sustainability and doing

and folding $XXX perfect we've And in delivery today we've use since paperboard, replaced July clamshell run of our variety by a food out so by plastic largest million market 'XX replacing plastic carry sales service of and food for dine-in, solutions, and The has use. annual cases. far our been carton rate increased where with wide of

to In of CanCollar our used solution, replace for plastic beverage, customers. dozens rings and paperboard wrap, rings replaced we've our shrink Cluster-Pak paperboard

solutions customers. cost-effective and Our machinery reprising. for what is asked to makes paperwork the easy our plastic We're addressable the for market frequently transition

it's estimate exactly, least While addressable is market billion. the believe we $X to at difficult

more Importantly, expanding demand as the consumers sustainable packaging. is addressable market

with more based our to for customers with even to opportunities. develop customers sustainable working us develop We’re paperboard work capabilities and to WestRock’s science opportunities to based application. innovate continued packaging packaging fiber fiber more designed machinery position

us regularly productivity challenges. for labor biggest need among the efficiencies tell Many that customers are their and improved

out needs. erector provide solutions customers we us, with case Often sealer. all businesses. can them our boost Our productivity issues starting We solutions these case fit address their for machinery by or types simple just a of customers' with best supplying when instantly are that

turnkey machinery increasing even labor corrugated throughput Further, their largest cost. Approximately WestRock’s efficiently use designing expansion packaging, to solutions. both by are without for we sales secondary use can our help of and XX% footprint primary operations additional that and customers packaging that the or more solutions

growing. customers keep the longer-term that we've We appreciate Our machinery contracts that and machinery have for solutions stable innovative developed. replacements demand service typically and

On that One eliminate corrugated use Consumers our back plastic. bubble mailers. sized recently On solution to Pak pushing including we've help single customers use able we’re pouch our Pak Demand developed use plastics, the begun make plastic Through is Demand against have pouches, pouches of custom new machinery that system. single

or our system Demand their customers' cost help reduces creates machinery drive often and them minimize for chain challenges The The customers customers. while how improve new our helps demonstrates meets supply Pak the the grow On customers. critical and providing packaging productivity, offerings our their consumers helping that Pak our Demand their fill. value grow improve labor pouches lower demand. and board sustainability solutions help On solve sustainability experience their risk. eliminates sales cost, WestRock and our sales, recyclable for create goals This efficiency lower

Packaging WestRock's enterprise our customers first a as critical helping alert their story, solve example, is approach The current challenges. have

a sustainable improved complex of provides challenge the chain a and SKUs a customer with started Alert an First experience. creating supply that XXX more with than package

the reduce changeovers. of and We footprint access of cost tooling keep also needed to the same

Solving for sustainable this team complexity of and solve. the solution, of packaging type that's to a challenge WestRock creating loves

common paperboard, Packaging the team machines package paperboard. won for common NatraLock our using the the SKUs converted improved to into from clear provided to sustainable WestRock reduced and provided blister the WestRock paperboard and three shell blister the new seal sizes XX and packaging heat We cards package. this the cards Award Counsel.

award highlighted most sustainable was XX% customers of This weight. only that in reduction and our capable from XX% the awards for plastic every on We're This value create the positive performance our very day. the in of packaging with Paperboard that we industry XX packaged a providing one team. the the and solutions reflection Packaging the received packaging Counsel highly of the in reduction

Now FY I ' first Ward year XX over discuss and will to Ward? full quarter outlook. it our turn to

Ward Dickson

Thank outlined our we fiscal XXXX guidance. you, On slide Steve. XX, year

these the paper Consumer additional previously volumes our American This craft business. in North declines Offsetting KapStone is increased reflects as an $XX billion. in sales $XX.X net paper published board, export month year in and North flow of to in index be container and expect market of the through pricing experienced the corrugated that and well pulp. declines guidance our we've Brazil, board volumes sales, full impact craft container of and and as in declines forecasted and box Packaging We between billion pricing, growth America market

mentioned, in categories. expected anticipate of ongoing to just to benefits other of assumptions range be our fiber. non-commodity The billion. deflation, in wages, pricing commodity and especially impact the billion and EBITDA I cost in recycled $X.X declines key include We inflation is the Adjusted $X that

operational impact upgrade also the system mill and Florence some Três will experience from in Barras We our projects.

during the improvements $XXX also expect than productivity We more year of fiscal million.

adjusted provided reflect variability EBITDA costs. range to assumptions guidance pricing key We have and volume, the of an potential our input around

strategic capital the by typical maintenance directly and outages impacted Our earnings pattern projects. reflect and will timing is seasonality our of

project We and half approximately in year the EBITDA of in of the that half the XX% XX% of will be year. second generated adjusted the our first

significant generation. a strengths higher cash year. for flow flow than billion We is of and expected project more anticipate greater during the capital $X consecutive increased cash than our WestRock operating of cash to year. to free the cash be One Adjusted $X.X rate We adjusted usage tax is working flow the be billion. fifth

will As $XXX and our maintain million Barras. mill in billion strategic invest we systems, previously, and $X.X have expenditures improve including shared we and for projects in Florence Três to converting our capital

should we we As complete the XXX anticipate you million in that billion that models. help capital $X your complete appendix, fiscal we to provided XXXX. In annual level projects, we return these to year details investment will additional have

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

the $XXX of in be to the million first compared XXXX. fiscal first to as $XXX segment We million EBITDA expect million $XXX quarter quarter and between in adjusted

the do for of earnings mentioned that of our seasonality models fiscal account current earlier. I analyst not Some quarter first for the XXXX

the expect the through year-over quarter in Walking given in add of results, first $XX close EBITDA, XXXX. fiscal a November to million year the of to segment include quarter of KapStone adjusted bridge, we full higher as volumes $XX our year we

Consumer pricing, partially in and price paper approximately benefit the expect price offset through published container pass business. of results published negatively $XXX We by lower The prices, mix board of impact to be previously will craft previously indexed and export by the our increases Packaging million.

year-over-year globally anticipate and impact a $XX are approximately of to $XX negative we down million. prices Pulp

higher Finally, healthcare is would higher also and more than we million This productivity quarter. you quarter prior as improvements $XX wage this prior lower million scheduled the And commodity XXX,XXX expect higher year the $XX a to over maintenance outages cost. expect offset cost as XXX,XXX improvement includes year than tons tons. year-over-year of

for for assist with to to completing We it have items your closing provided turn first back you And Steve additional I'll quarter. models the now remarks.

Steve Voorhees

organically is that WestRock their helping market for the creating to support in well of advantage their sustainability in grow customers added customized seeing team Ward. opportunities for packaging, opportunities Thanks, proactively need several sustainable ways. We're value-added respond solutions. and goals. growing all taking we industry We're challenging environment. reduce value them while our as their total solutions sales, these and packaging performing a e-commerce We're their risk, by cost to achieve increasing

sustain and business growth, a term. to that customers, our and We're productivity our a create teammates in our mates. the flow acquisition We're advantage. value of long platform. of for and of our We're customer our team period for sustainability, long innovation, by moving expand We're for focus investing projects stockholders people investment improve growth processes combination and our from systems our a large in to on our organic technology building strategic free and increased the better generation, cash period competitive the efficiency using scale and advantage to term and in operating enhance our of digital engage to experience, take will

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

James Armstrong

Steve. you, Thank

reminder to to can chance give many yourself a to we audience first a a question, We'll limit to our one take please time everyone as As question our ask get as Operator, allows. question. please to

Operator

Thank you.

question with first from Seaport Our comes Weintraub global. Mark

Mark Weintraub

$X on its providing up a tax quite $X.X flow CapEx was to we the seem understand as it's would out build north plus color come EBITDA to rate could back through look for hoping something fact and bit the or room that that else But be gives billion lines something number. we you're to which scope capital at and just billion the the on. with cash cash working of either free And the we be at be. would saying plenty XX%. perhaps free the going the cash if to I those flow, of of know is and walk the along I what Any plus, great.

Ward Dickson

Ward. Mark, this is

right. you're So

components correctly. key read You the of guidance

in midpoint we rises XX%. will cash through strategic The that of some to comments we $XXX billion cash my modest go be our there'll our normal interest from fluctuations projects. rates $X.X seasonal did the execute range outages be around million. increase say working expected So EBITDA capital XX% maintenance capital so and in as We is the tax a adjusted

was the out then in that of part versus strong timing timing we're mentioned consumer we very quarter that we as and there of, a the came in In that addition, levels strategic also of of QX, performance and some outages. was had amount QX. was QX we rebuilding we There had inventory our cash collections strong some QX

generation, on go to for we with focused inventory push expanding we'll on driving than customers cash focused reductions and say we financing payables billion also extended $X balance free that on be and did through and have we flow exposure as year be will the as our chain, We more terms. supply the our they

confident we we there a we to that. capital in So minimize this feel said going more $X than build and implied working are guidance is very small strive to and billion

Mark Weintraub

give we you some transitional guidance Florence, that the are the in you instance us costs cetera. would sense projects? be for to would a $XX be some also did for And benefits just still that the 'XX. I investments year Are talked 'XX the fiscal about generating if million of $XX Previously additional million and could. and EBITDA, quick types in in and million ended related, embedded additional you there offsetting those $XX in additional from mention 'XX? just about $XX of one the provided get in the million 'XX, as of et then And you costs other numbers that one, strategic Could the 'XX

Ward Dickson

previously my the major outage of projects still is with capital What returns we've Mark, line said strategic we the correctly. from you achievement comments The with what in the disclosed. again, read So have we'll for the million the Barrasas we that get the in two year. be transition $XX as and between million in of impact items Florence, those $XX Três and negative prepared will

of those in So offsets benefits year, it the to as some projects. complete we this prepare

Operator

from comment Dillon question next Vertical. with Our Chip or comes

Chip Dillon

another about if synergies, seeing My boxes. such you mentioned talk you're finding are question reason paperboard, of board could just has buy pricing. do to you're -- there now, or folding say and XX% and finding about synergies both, XX% with where And to that and customers container than cartons overlap? sales Is customers those other you maybe

Jeff Chalovich

Chip, good it's morning, Jeff.

value broad simplicity of in are enterprise customers with business And have offerings, at We doing the group, with portfolio or are if leads XXX $XX and finding look billion in those. seeing about top we customers, you XXX top of account value accounts. our one we do our our

customers. of each. have over some packaging about mentioned in over are And million look about the of large built each, them billion is do we in quite those XXX fiber-based eight business some And XXX solving And have, through and of grow critical us think $X we we addressable to those or we our of customers that but challenges that account space. $X supply account customer for we chain. organically teams, plans nine them those don't we there's by million And of $XX then

us the on If chain side, our surveys from at the supply customers, whether with you our our tell the consumer customers, look or optimization. help us corrugated

then cost with consumer Corrugated we platform that's best folding and So machines. the the out total automation that can take with business, across and do

you sustainability presented is today. we second and The saw

and channel takes that with process out and together. So help. for optimizes we They're We asking product. brand fiber sustainable pair have automation the help, that packaging a

that, our that fuel to business our one across and And for customers finding helping value capabilities for growth. our the so place we're they with go synergies and that's

Chip Dillon

just follow-up. quick then And one

million to largely should how in I all fiscal million them $XX think see in eventually XX call for the start those Do I'll costs Ward $XX fiscal go away projects in 'XX. that start-up those ' up mentioned we dissipate? or

Ward Dickson

Chip, this is Ward.

'XX of Barras small be complete through XXXX, we and ramp projects. up and 'XX. with We'll all into start fiscal fiscal get move capital have So will the into just will to largely as benefits Três we as the we strategic tail then from projects the a

Chip Dillon

to have right? reversal said million somewhere a get top think So these said in and 'XX you've that, you'll costs. but from 'XX which of Is Florence, not a differently, of that going benefit you're only $XX you're I around was on

Ward Dickson

That's right.

Operator

you. Thank

Staphos Our with next comes George comment Bank question of or from America.

George Staphos

gave many as kind on and Thanks of great. systems for a I that and be a cross-selling then and you on. could the have X,XXX. you the longer in range at quick figure on wanted quick But maybe questioning you give that'd somewhere being and remember number follow always. Jeff, first installations you that currently periodically, the last if how machine all details, continue do helpful. machinery, would of on can just to be one I the customer us comment a update us

Jeff Chalovich

So between have across X,XXX sales XX%. about deployed, up customers, and we this the to George, about the APS year and system X,XXX X,XXX so roughly, are

helping platform machine us solve year our up our whole grow the challenge across consumer strong So and them organically critical as us and customers a corrugated. across to system differentiating and X% platform and those helping we're

George Staphos

me question, a sustainability talk consumer getting in from you're It and though. back, other it between you the and selling taking talk the also a about, strikes across corrugated total, you're My benefits seeing platform. cross from that you about and benefit step

corrugated Just looking from that a numbers getting be might both. the at volume bigger lift

on consumer growth Thank converted that if given on up volume basis so, you the was Consumer in you number the sustainability, the in cross-sell headwind, corrugated should said luck only converted from be benefit seeing should differently volume and good we you a but quarter. stronger a what's opportunity from given If So slightly perhaps there? basis? getting been the a will be

Pat Lindner

so mentioned in they you you more year-over-year as of restoring cross idea Xth just were what levels, The SBS mentioned the the quite from X% had our to as in to significantly down selling. give wasn't inventory actually related and It and an primarily quarter in the around really to converting volumes around the the related range. C&K was at were well volumes to Steve strategic outages. the look overall is and XX, we across XX that up noted in in X% are challenge of were and and quarter volumes And really ' This a is consumer Yes, really Lindner. you it's Pat our in grades bit as was XX,XXX tons that about fiscal less all fiscal overall strategic year in outages. of year or than ' production our because paperboard when was up

So we're first in now coming obviously that quarter here. out the of

quarter, Our but so sustainability building we're to can see demand corrugated fiscal levels. inventories continue we and we enterprise. restores normal our see back across going to the our first by capture driven that tremendous plastics whole some supply as growth, to capture We to of that we're consumer in replacement tremendous and ability and demand

George Staphos

thought up but it. you that explains said was I much. Thank slightly, converted you had very

James Armstrong

our everybody, would next question, we go get possible. to question. to can to Operator, Just we many to limit to like as questions remind one yourself so can as we

Operator

you. Thank

Steve Chercover next from question Davidson. D. comes with A. Our

Steven Chercover

was packaging. So Amazon topic a few ago quarters the rightsizing hot

I I referred is it you this good mean is your how to think volumes? about for but they free, felt for an but overall system? on pack very on-Demand, I have really impact assume frustration

Jeff Chalovich

is size to of this the is in automation on critical or it package, think platform multiple no mentioned reduce challenges, so XX% you you then a that if seen solve which mandrel our our I packages waste, from one, really box opening take you fiber of change. the, solution an up gives right frustration experience can machine, up the number you tooling packaged us the can to again the out and pre-package run the help sustainable opportunity fiber, as you of pack good take on carton; a and to general formed we've that degradation can the think size help So the Demand the so so

some sold floor packaging of can't we X rid plastic to the get that then helps , just away off not to throw the peanuts, two. and and We all of optionality a of of Demand out on the of one have XXX% all we've and and curbside size footprints of recyclable because put things you recycled we envelopes recycling. internal had and and as beta that sold gives machine the introduced machine you right can an its pack appeal you are that us rid plastics, these mentioned a invested size, Box opportunity in that be built package PMI the our get as we number and one just size multiple

not we're their the opportunity for see including to as for customers So in degradation, Amazon. a this like seeing e-commerce folks we chain an solve channel, supply and problems

Steven Chercover

key like do. in is consumer talking I have really And related, corrugated other this I know have they that do your in competitor knowledge, That's does about machinery these competitors capabilities? think machinery you but don't your the you

Jeff Chalovich

We're the only Corrugated manufacturer that builds machinery.

we suppliers vendors, very is it and build, platform different but others well I other think established full OEM with we so is a our agreements business where outside work we have Yes. some machine competitors. can place they with may than make our

Operator

you. Thank

Our next sir. go ahead, question Anthony with Please Pettinari comes Citi. from

Anthony Pettinari

weeks, detail and articulated following X on lot for you X range target which within I you've the I'm maybe on these grades just integration of similar you is as boxboard business. have was a wondering backlogs side if you just for could consumer of on corrugated provide three opportunities have to you any Sustainability X up question then well. more if consumer to the wide the given wondering a seem grades, consumer cited target and I somewhat think for any George's the or

Pat Lindner

morning. Good Pat. is This

about let So backlogs. the talk me

your first is question. First

seen industry, four the last SBS of three with And in years, This X or softness. typical C&K of you've around the and published might some we the some isn't backlog. across as the industry So four is of seasonal some typical those the activity. published what's in statistics, down happened and of backlogs normal come have so down range over we be think so weeks three typical really are see or is around CRB

area in the longer or outages as the our a to of is reduced our and different little capacity a that in us end of our, availability situation I to is on answers that sell and prior to four the is publishing. SBS we end my before little generally markets three of really so of to primarily the the weeks. what in be what normal C&K is volume different attributable shared had, industry kind and bit continue reason that's four longer situation, Now bit SBS one mentioned to for or our to little mentioned lower of bit higher The CRB some of weeks in at so the six I the for that of ranges and that backlogs SBS we the some strategic than a

tobacco, to specialty is X Relating of first to on best shortest outages we'll about able quarter different that and we them in parts. of really down through we of our the we the of fiscal second to possible that in and restore want continue all your liquid the serve integration in naturally segments expect three year question bring integration, when they we to this continue in really so around number our market place high can, primary to do maintenance up and time one demand. backlogs is not 'XX think around packaging. have those complete catch applications ability and so Number the around commercial We although this to inventories those and some a serve we we're to customers quarter, fiscal

each user all specified These really of sell. were SBS SBS we to those of there total in product markets that downstream our serve one and those or are end in and with XX% SBS that's about the we

and through facilities, converting SBS at much. integrated some So hasn't XX we integrated where that integration paperboard food, consider converting we're service of that in C&K about our and really at areas healthcare look and specialty you the beverage be of XX% and food XX% those the applications. view other at When our CRB about at to changed assets by

as customers packaging our user We get a and generally sustainability positive, as view close especially integration sustainable plastics and end to and we replacement.

those in ways our to segments increase it's attractive important but paperboard our is market us. positive ways and a to same time, to for we'll at continue integration open very look So sales the levels, generally

markets capable Many sales of adapt assets our our at in customers as service serving forces, not are serving. that local, of are are regional

our integration and sales is see of continue we improve market really the increase this nice to nice look level combined to combination. a with open mix So and healthy we'll integration paperboard where accessing

Anthony Pettinari

large a export then talked conditions Corrugated I one And market your inflection stabilization of quick little on one October. and about could, if just or maybe a competitors even in has

markets? I weak or specifically pretty that general if just Europe been all something craft which of I'm liner you're think kind wondering any on comments year. export that's has seeing

Jeff Chalovich

and of Europe inventories. back their Latin coming that in into the in weeks so XX% our is stabilize inventories stabilization more are challenged here balance last go some then and we've also. much seen the where of and quarter still November see is the stable up with board space. did the bit the then coming backlogs October to in stable that demand most half is container and China in America second little We actually their a shipments or and three

Operator

Thank you.

Gabe Hajde from question a with Securities. Fargo have Wells We

Gabe Hajde

to of was machine the separate I Can the I synergies chose have cost to? and if if talk a drove the if production and was beyond. about know $XX XX this And annual and machines and Slide the the ample then coming part have increase XXX you from this at productivity machine or you is at remaining it's Charleston. looking machines, that already I then liner kind closing guys close reduction was there or and identified you and how board above of those curious of flexibility. million two along what integration the the at of decision

Jeff Chalovich

was at synergies So looked that of so the synergies originally. original-XXX that the contemplated not not we a was when of million part

mill. made at us supply machines opportunity door to did at because that could Machine gave we're gives the to, the that structure that do to previously had we flexibility. swing XXX,XXX and an structure so those assortment at why number have reducing machine and the we one decision. them. cost further It the it. number reduce That and match number moving pack container door two, at back Now, really They board container but that's really at was pack swing board craft of mill opportunity wanted running assort tons one and less reduce that the flexibility moving assort, the and run then craft we're looking we're to us why we mill to if our we demand, cost of our to an cost that's door

Operator

you. Thank

Our comes from next question Brian Maguire Goldman with Sachs.

Brian Maguire

and like, July just out Just for are or it the to X% we signs wonder And year as as X.X to destocking you trends XXXX, EBITDA strong off last expecting level? accelerate like quarter the XQ you box at any pretty on starting just it if X.X, in that any it expectation of if Jeff, decelerated similarly, on bit of industry there comment a the look of through comment quarter. at to kind year? last why so, specific reason about I kind October that? you would part little is for been or the this sort would expect And of WestRock it's trajectory starting the a looks at box revenue, is of any the or to at average of growth X% at end, think that of look trend flat the then maybe you a from the deceleration you quick out looks calling it you a most out guidance kind grow similar expect on could question it. X, shipments, talked inter-quarter shipment

Jeff Chalovich

So I'll July comment. the start with

come year which quarter and X.X we and were then in It so you we've us were bit industry and last X.X% some per the was last that quarter, that September look at but was over X.X at X% comparatively up our So to back. we to at a of we and day we deceleration there X.X. year, quarter, was want for you good for atypical did and deceleration, if was quarter, again typically see the a the same but if look at

prior, us comments respectively. e-commerce for grow to acceleration our to through year build not positively and of so in expect X.X% it's the to and we've The a quarter, X% of the WestRock X%, and an business expect I the grown then a this the because I X% the years So two continue industry. to look deceleration at more comment of

in and ourselves the differentiate we to will we this continue we marketplace, in grow business feel projections. think confident our I

Brian Maguire

a bit a quick of just timing related looks follow-up or like again. the on or it reason seasonality little Just business? some Any the XX% that below corrugated for integration just and is it rate

Jeff Chalovich

of Gondi, our quarter some our for the trailing the more of which less to months. uncommon is is exports, Grupo not there XX seasonal that's partners, over XX% integrated Seasonality, in year

Operator

Thank you.

Our comes question next from BMO Markets. with Mark Wilde Capital

Mark Wilde

flow ? business this, to Jeff, since can Steve norms in have Corrugated of WestRock I a and capital new and on level of XXXX long both converting morning, and on business the either has the say key I the remain of of the I at margins lot or industry mill wonder returns just the two talk way maintain margins or initiatives particular, Good both a three come on this we're but high the at side. business and to seeing the itself, into high if you current end about

Jeff Chalovich

are we customers. satisfy continuing one number to So

that and focus on this We will us and business critical I have challenges now problems outward and profitably their customers solving on grow customer our focusing a think differentiated. help

invest plants automation reduce our Secondly, platform costs. to across the system in our both mills continue we to and in box in the our

on our an profile. is think the products, opportunity the things, to to continue and productivity control, and and we're of sites; enterprise. a we're grow manufacturing differentiate our work portfolio organically to control, process costs, going to growing the give broad We our package going solutions us good doing of to to cost process of combination do So manage maintain all margin going those

Ward Dickson

think about trying to said. transparent on what very do. what I'll been add to we're i Mark, we've Jeff

think you just Charleston. of not is project a I look out to you that undertaking a when allows come at textbook that There at we're like the have answer.

system out So our with operated what as invest opportunities have, looking capital to we at and more and efficiently system, come we of get the its our up looking even box mill to at how people have.

the the it results more be of use do continue to expect and going couldn't people side have take look we've in results strategy I assets mill to people the the tremendous I business, have able think to back made, if thank site you shows the up of proud and that our and the the about and producing to and think at that the to on and customers, assets care we've you and we I went acquired we're way talked I forward. converting I compensate be in the that of both with XXXX that going that's

Operator

you. Thank

Mark Our from next with Inc. Stephens comes question Connelly

Mark Connelly

the board you're integration container on at Following XX%. issue and

going also built and get You want getting box seeing a usually plants and going seeing new buying XX to that to out getting independents debottlenecking more we're we're built means more on. of and but then shooters lot

buy? fewer So when how getting you there think there's independents do about to

Jeff Chalovich

puts us we about rate get the with way is, years, we can X next XX%. believe so approximately that that grow think need the which it we the So over to X% tonnage we

on business organically system, capabilities we'll and the organic we we range. processes put at believe grow for really . sense that in would to opportunities this years the X those, and that's us, have XX% the there is us look future certainly bolt growth next So the that If toward makes over but that

Mark Connelly

existing lot And spends, to capital you projects within there are of do debottlenecking have there? get to your going

Jeff Chalovich

from you We we've by an as look have, in have know, the system we if the investments container the through outstanding today, mill you back plants XXXX built done. and

our and and debottleneck look of that typical We have plants capital constraints investments we're continue our bidding the at that. taken care to

can that continue investments capital the normal capital our have, in we we that believe rate in to at I exceptional was nothing grow So expenditures.

Mark Connelly

revenue nicely a clarification. very significant as comments about there Packaging were that that the is shift? gone the even what ton actually up in was volumes mix so Consumer Pat's down, one have But has Just per noticing I'm helpful. gone business

Pat Lindner

for the Pat. you thank question. is So This

is So proud the managed outages. of really I'm strategic through in available year team one how of demand customer things we've our this our the

at was volume reduced So quarter fourth the reported prior points even if XXXX really year you on market for ' segmentation and what our go in the consistent and over even that. in XX% business XXX attractive quarter able the were segmentation the doing and still those to our principles just in being and fourth basis margins volumes lower with look team that we proud we of customer the tempered, we're XX with volumes at really after of just reflects our service so that and most

business, and answer mix yes. are continuing the is the is that and to to To increasing improving of the serve So question, pleased we're business the quality that. the of your we see really

Operator

you. Thank

comes from Adam KeyBanc question Josephson next Capital with Our

Adam Josephson

Jeff Just question to shipment box think questions. Brian's two forecast. about your one I back

as expecting to you're a part to forecast? down, the up to this up forecasting is rate lower little you expect year year X outgrow what's, the what thinking So And slowing can do you're of industry just growth X.X e-commerce you're last you're see growth year, just give next as you continue X% sense down; to X% one there? economies me of then to that slowing

Jeff Chalovich

accelerating. we're looking wouldn't So I say at

and seen year we're that you've the X.X. were almost in started we've think looking off to X% planned we've I general to Yes, at, we that the we X% look as X% what is market what and outperform

when when look that, we're of higher going when you at the we're and end to market. planning So

business we the system this the So it's don't the market do slowdown, expect rate grow can the XX% how how to integration to that outperform we if I about expectation, and we reliably build future. exactly to still that but what think again in that's and have and that's we get the about going to at is ball it crystal that a says

Adam Josephson

can plus. I but working a just expectation about of to $X drag you and just working then bridge capital think you sense Just us given give was talked billion, you on is the on terms And billion what modest, said getting of that the one in your you? $X.X Could capital. more rough

us of give cap? sense you any delta that can how much Just is working of

Ward Dickson

It's $XXX million. approximately

Operator

you. Thank

question comes Staphos with George Our final of America. from Bank

George Staphos

a next luck Just fiber recovered your Thank to assumption guys. the insurance budget pricing again, the is I and receivable capital for cleanups. working your cash recovered the couple the quick pricing receipt could in paper what the clarification, you then for quarter. in just the for of quarter. is in a in And what year? relative you, And quarter. relay was assume One, that good flow

Ward Dickson

is Ward. George, this

versus cost second assumption fiber the that over fiscal or next first the fairly the year ton $XX recycled constant for year half. through half approximately XXXX. is increase levels is with the in year the and average the for whole So The of a the modest current remains OCC a year down

million. For $XX the guidance insurance, only of million in would quarter, quarter. everybody $XXX interruption I year. get we've as we will business flow and for of will recovery the excess of the million the that our business fourth remind believe $XXX total million $XX we in ultimately did assume flow our we And in working It million. claim be through recovered interruption, the during fiscal cash insurance The was expected received or $XX we We provider. were with

much. very you, Jeff. Thank you Thank

I for ends joining to Thank think our call call. our that audience today. our you

questions. always you to great always out any As if reach to We're have day. help. happy us a and Thanks have

Operator

gentlemen, Ladies call. Thank now the disconnect. you, concludes and that you sir. may And now

WestRock (WRK) 7 Nov 192019 Q4 Earnings call transcript