WRK - Earnings call transcript Q3 2020

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Operator

Good morning. My name is Amy and I will be your conference operator today. At this time, I would like to welcome everyone to the WestRock Company’s Third Quarter 2020 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

presentation Chief Good ir.westrock.com fiscal Amy. today’s our Financial thank for the using Jeff can accompanying you release of Relations Thank website. view application our via our Ward of Steve this call on are quarter Lindner. President morning. a and to me XXXX our Officer, They President WestRock’s Innovation slide the Consumer are posted Chief Chief you third morning Voorhees; Chalovich; our accessed issued Packaging, the earnings With our Officer, Dickson; joining and Investor as this Commercial section Pat Executive at you, be Chief and And to webcast. Officer of or call. as press Officer on We well Packaging, Corrugated link

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

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

predicted at uncertain the extent our duration, highly these forward-looking the be and we effects time. addition, and is the of cannot confidence of The pandemic and pandemic making will this about of severity scope operational In impact COVID-XX financial with performance. statements be on including

non-GAAP also the during be will measures financial We referencing call.

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

presentation it now available Steve. previously, on said, to mentioned slide the over With website. turn that As our you, is I’ll

Steve Voorhees

outstanding call. our safety joining thanking I'll over Thank past and fiscal The their first commitment, focus earnings and is quarter performance for third the start of WestRock you, James. teammates team Good by the our months. foremost. morning. for several Thanks

implementing our the WestRock In to focus comprehensive is during across the teammates of injuries footprint. to organization addition of measures of our to testament frequency This pandemic. impact and have physical the the a entire COVID-XX, precautionary severity reduced address

Our making delivering that teammates paper ensure goods packaging to supplies in including our at food of and operating essential locations are medicine and are the and on needed time full. delivered and

their innovation dedicated our help solutions them helps team grow and to their total achieve win cost, the manage that providing the customers sales, that markets their them sustainability Our reduce through is in goals. their risk,

needs. markets these such customers and that had support and scale with as health our our operations partner e-commerce, customers care, have to has increased enabled demand the to us For food of

by outstanding All paid performance of one-time this this our results the was was delivered the bonus that team WestRock evident a with during And the manufacturing the quarter. in operations teammates recognized and quarter. during for we

in Now, fiscal quarter. to the results let's turn the third

reduced maintenance margins our items. earnings efforts, segment our We reduction cost company, other per moved cost Margins to of billion and to curtailed Despite quickly sequential segment our cost, Across travel XX controlled outages, our gains $X.XX deferred adjusted adjusted share. sales, million expenses. we due were with productivity discretionary changed. $X.X sales adjust volumes as and primarily EBITDA points and increased Our by lower of basis EBITDA adjusted net improved $XXX sequentially.

in Our entire dynamic supply chain performed this environment. well

to we in tons and a non-recurring of a supply results items In our addition, with Sales took short-term This to compensation to fiscal increase. benefit reflect continues across broad economic year demand the Corrugated The our our the including incentive months over in annual downtime our Consumer ago. our XXX,XXX of rose billion quarter expenses. To XX our reduction of a $X.X $X.X enterprise third to portfolio quarter, be balance compared customers of products capabilities value and customers' is recognized XX% a our the customers. mills. billion by past

even machinery bringing solutions XX pandemic, During the customer we to placed with total than an quarter, our placements. the additional facilities X,XXX more in

also We internal growth initiatives. our against progress made

are Our strategic capital projects progressing.

with We XXXX. operating and $XXX the mill net of quarter, expect and by half to up growing machine over Brazil to We're We our our on mill paper million complete debt in run to implementing first Três our fiscal upgrade way end our $XXX cash the adjusted later million the integration by of $XXX the we synergies start this reduced million flow $XXX Florence of XXXX. generated KapStone this million. year at in plan rate Barras

our end Our million additional ensure support that of for continued actions that during XXXX, adjusted investment will This the year billion than cash debt. providing we're we pandemic year, to with end fiscal we of quarter. this less year billion of May, to the while billion $X reduce the through generate debt improve generate on majority the number to to from generated which $X.X sustain cash be our at and In during fiscal WestRock fiscal $X track XXXX. operations. business billion plan, addition total This the to was success. the more funded an our remain plan outlined the through the in will to expected of we is long-term action cash announced a well-positioned And will $X of additional than $XXX provide

to slide turn X. Let's

cost. quarter, end other commercial kraft inflation and increase the and protein, in by in was in the strength $XX fiber offset sales pricing. These now. year-over-year During bridges bridge The than The flow-through food this driven market by the volumes and was paper are on freight were per price believe We've partially is slides which fiber, most increase price/mix lower the by sequential segments. cost reflects ton consumer pulp the useful in include products. published affected sequential, healthcare recyclable of the high-end appendix. and and the industrial, variance virgin included in segments that market by The print COVID-XX. previously offset more The decreases the declines comparison following lower we our was in e-commerce, market and energy

You expenses from in can quarter, third to and first of face reduced control maintenance in see the the scheduled quarter quickly that the revenue. quarter moved fourth we the XXXX. originally of of bridge the fiscal XXXX We postponed outages, fiscal to

the we've our generation Our is fiscal quarter. half cash second performance of in the was to weighted cash our flow highlighted past, as year. the in flow operating And solid seasonally

margins adjusted fiscal Packaging and adjusted XX.X% million American extremely EBITDA of delivering EBITDA XX.X%. in segments the Now adjusted $XXX segment quarter. were the stable compared fiscal margins for margins Corrugated segment performed EBITDA segment. second Packaging Brazil's Corrugated the were XX.X%. Box segment North of team third to segment were EBITDA quarter and well, adjusted as

with June trends in up April, same growth May June. declines on levels monthly number month-to-month both Our per reflect and day of has X.X% July trend shipments month-to-month This shipping in the from in with continued days.

the our August. steadily have Our measure increased box These indicating month over volumes backlogs July the box weeks. in two to three during next stable of expected shipments

reduced to of the five previous for per and the the customers, industrial declined X%, third to exit to plants consolidation parties agricultural demand of year. of low-margin sheets year. and prior from was quarter, due box the the Now shipments distribution, compared over sales decline The day

not done We agricultural the our economy expect increase over trend. distribution recovers. business to as the demand year-over-year customers as the I'm this and long-term long-term, in our to ability three from over The industrial grow and they've a confident years. is previous the variance Packaging team's volume Corrugated

our on Our of reach delay customers the opportunities to it business growth we timing have pipeline. integration COVID-XX goal virus in and may are to and focused further the our is of differentiated our with not on a when situation long-term proposition customers, ability The be We're our doesn't changed. integrate these and unprecedented or But value volatility to delivering reach the in hot to goals. goals. destination supplier change

it's closures XX,XXX E-commerce Other and operations sequentially. back end segments tons significantly fiscal recovering toward plant calendar business since sales and early from agricultural the beginning highest and significant shipments to XX these on XX% markets hot that that online. customers' had the end Packaging Corrugated Our the our the this sales will over improve of Sales We declined for in came the relative indicates an such acquisition. these COVID-XX due quarter. been Export a declined year markets, next it's quarter. KapStone second the were during containerboard strong. already should strong increased the impact pipeline third onboard measures days. This industrial remains XXXX. protein up pizza market to begin as of This volumes And we e-commerce, our market sequentially. saw as quarter.

East have XX% remainder XX Over gone the Africa, about to to Latin the and exports the approximately America, past Asia Middle with world. going XX% and of other to parts months, the our of Europe,

and As North We balance customers' our points American more second to cost shipments. packaging environment market of In end Corrugated declining our an improved tons, a we the to XX and quarter. than corrugated fiber this Packaging portion businesses' adjusted integrate recycled supply is our margins moved to total XX.X%. likely This containerboard cost, rising our is more segment become EBITDA quickly of demand. basis smaller demand control with

downtime. economic took the in downtime, to we of In took tons XX,XXX July, of During maintenance month only economic the tons quarter, addition XXX,XXX we of tons downtime. of XX,XXX

target operating Our control during and slightly costs. supply Corrugated with Packaging extremely efficiently working system chain our currently operate levels. and inventory performed to balance below well segment entire the quarter, in is The

Our focus Packaging of exceptional waste key include a and the and operating team. and credit metrics, delivery Corrugated are the and commitment on-time these were productivity to

the Consumer markets. fiscal of compared sales segment adjusted quarter. margins and high-end segment Adjusted team health offset segment. spirits. of from categories quarter, lower our segments execution in to Adjusted demand the and We've print the in EBITDA fiscal the and X% EBITDA beauty, reopening sequentially to care consumer cosmetics $X.X beverage include the Disciplined meet economy. with strong improvement. Demand Packaging management these basis turn in our market sequentially a and XXX our Increased cost in high-end $XXX margin last seen in improved and commercial the foodservice, to coincident let's markets declined year. these adjusted drove points food, million in billion increased In X% These was markets. these in EBITDA our Now softness pickup demand and second well year-over-year. increasing EBITDA end of and significantly XX.X% performed third demand increased by

continued we volumes, excluding quarter mainly our the commercial mill in XX,XXX took adapt to In our three with backlogs stable SBS and Packaging to tons our between We our in weeks. XX,XXX to downtime system. print were SBS four Consumer customers' tons during of supply demand. currently took July, Our system are demand economic to system customers' and our downtime of balance

and the may We've service you view recall Packaging food, pulp MPS through foodservice Packaging specialty represents the for this from XX% revenue MPS As softness and Consumer beverage, we XX% last this following and strength during and pandemic food, health categories: packaging, category and been our in other. Consumer packing. accounts specialty quarter, with in business in Sales SBS mixed and beverage, and this high-end strength seen has specialty food our revenue. segment in care of

of to decline for SBS this XX% quarter, specialty demand had Our mainly revenue due and in difficult a print. represents commercial sharp the business

pulp negatively impacted credit Packaging X% commitment of the be other Packaging the continues to The by focus for improved segment the prices. Finally, Consumer performance is team. Packaging only accounts a and sales pulp global of and Consumer to low Consumer entire and

navigated the markets controlled trends this and that cost. quarter, demand across served successfully we varied adjusted end many consumer the customer our chain and During customers, serve. and They geographies supply successfully their team

sustainable service food has at In highest with to Since of be demand, million more our is than our away shift for to the leverage including July term, demand in movement many priorities COVID beverage fiber-based e-commerce, the these they're from caused integrated growing. and these a offer designs plastics in $XXX sales and of from for high XXXX, The several for science, While the continues run material near packaging. customers has broad and sustainable plastic packaging machinery a are many more design, our to to rate and the capabilities. increases. of that automation packaging. automation the businesses markets. markets convert our replacement food, with ways customers. packaging plastic designs from grow innovate customers packaging well WestRock printing shows we our to WestRock X the Slide set of fiber-based replacement include and for value-added of capabilities that solutions to plastic multiple packaging applications products advanced for machinery as sustainable These position, packaging demand

glue, an carton important addition, customers. designs do focus our differentiator which contain that not for In we on is

others solutions packaging During the plastic wrap last and from Coca-Cola to and Nestlé, WestRock shrink paperboard, to beverage quarter, rings transition Anheuser-Busch plastic chose InBev, packaging and paperboard. automation

kraft in In the the addition, a of production provide with chain Europe and tertiary and promote trays, boxes. Bull United its as corrugated we and Glendale, how more highlights to Arizona. than WestRock global we've includes operations the brew strong solution. pizza site. This is development provided machinery end supply our customers. have States and This the packaging expanding builds recyclability Red in complete relationship cartons, portfolio pads XX one greenfield at complement location has CanCollar the our to on partnered secondary products through of that of for in another. Bull Red will WestRock Domino's products a folding packaging with broad the manufactured the

boxes be material. don't impact with that the and While many and recycled, the cheese do of recycling pizza we grease recycled made nor impact a in believe packaging process, quality that typically pizza can't found boxes the study new at conducted they levels demonstrated residuals

people Domino's answer access provide consumer about many aware is a not are to instructions, and that questions boxes partnering sustainability box helping initiative facts build goals. and are to WestRock its pizza meet that recycling. Given recyclable, pizza WestRock Domino's This website to are

talk position outlook. I'll to Now about it financial hand Ward over Ward? our to and

Ward Dickson

Thanks Steve.

to and maturities and the rate. and we In very quarter, significant is ratings. sheet credit S&P reaffirmed approximately debt net interest In issued with XX-year liquidity. maturities million $XXX provide strong by reduced bonds million. our liquidity limited more our extend attractive near-term long-term we Moody's balance June, investment-grade $XXX at our Our in a

now is quarter. things billion in Our are plan models our of U.S. the fourth consider overfunded. $X.X and your are for and There cash long-term as build committed liquidity pension some to excess you

one We expect other quarter expect commodity segment have many day quarter. the volumes shipment to tons we We the that the -- we $XX currently be resurgence fourth Based than on experienced the our in third quarter. benefit to current XXX,XXX to per modestly fiscal additional remains Uncertainty average to fiscal of expect shipping similar million third the downtime slightly be fourth $XX plan lower non-recurring in and fourth third recycled trends, of approximately quarter. not COVID-XX ton these in see quarter, we items third lower the due quarter. to fiber in improving take than markets. quarter's our the the of we and EBITDA In the fiscal cost maintenance adjusted costs of have to we and be will fourth quarter the

rate rate the tax full XX.X% in adjusted an expect also XX.X%. a of We adjusted quarter year tax approximately and be to

year more cash. more generation. is Action CapEx quarter business of to of projects. cash as closing of other have will of cash third that we cash. of on working With be of over produced adjusted the flow. our and strategic In Steve And million of the now $X I'll half Even fourth creation in Traditionally, while remarks. relatively cash reduction back as benefits our to adjusted than of earnings well capital it the second believe generate the sequential Pandemic the cash quarter Plan; pillars flows. we ability another capital, invested since turn $XXX stable WestRock, strong free the the fiscal for in we the focus of of our our flow, our year free Each the than our period One strongest to flow is generate we we quarter pandemic generated continued billion

Steve Voorhees

be strength again an equity our time. diversity the WestRock outstanding more Thanks will of a this incredible. that Diversity to quality, and inclusive diverse cost, where and customers, a WestRock our commitment, Ward. been that their heard, and Thanks teammates accordingly. building the the teammates of WestRock doing backgrounds, the with comes safe. and over TEAMMATES things. the The future. company integral teammates; many for focus, diverse ideas. company culture. from have safety, urgency We're increase It's experiences, belonging encompasses We're a performance. are and focused on Recent events building want acting company valued, WestRock necessity at to sense of I and are and productivity, WestRock welcome, everyone heightened of we're for part and values

in We businesses. scale our leading and positions market have

the to advantage Our sustainability and impact products well-positioned markets of of pandemic are the take innovation. and and capabilities trends long-term short-term in

help their partner cost, attractive our an to success. to and market have steps We're and customers the we while total differentiated achieve we're help to remains scale, ready manage sales, our that risk, improve and goals. completes place, broad their strong strategy their Our debt. reduce additional well-positioned already our on for generate them improvements we've With operating and our their that portfolio James, available prepared grow cash with we're company Q&A. sustainability based the in for positions, making sustain to that taken reduce cash remarks, our business them to

James Armstrong

you, can Thank [Operator our Steve. now first Instructions] Operator, question? we take

Operator

Certainly.

is America. line from Bank Your your comes open. first line Staphos George question of the of with George,

George Staphos

volume power say, you're of that if middle Hi we trends might consider the would increment primary of additional moves incremental my do not on next we a Good think could for let's you'll be question that details parse the to around because be to question. taking think constant do stay will year in? in within taking all my next outlook which Barras, you Florence, morning. of Thanks. position great. earnings And you that year KapStone, the is of price what Really guide. what any be business. everyone. Tres the Holding and -- same for assuming see may realizing and Thanks productivity there that impact you that the When coming have make you and any synergies

question second first. The to kind the of related

impressive the Consumer Corrugated guys. You some productivity what numbers large larger in million Corrugated the you, in the and movers those in quarter. $XX luck both in Good Thank of showed the for quarter was some for million? there in and Consumer figures $XX

Ward Dickson

Hey George, it's Ward.

George Staphos

Good morning Ward.

Ward Dickson

walk P&L, with as the performed can we that first, look if you all start it businesses, really second you categories was in down question And me I the well. at the both remarkable. you okay? really was cost in can performance So, cost Let and it --

So systems that, Steve talked well demand. extremely overtime fact the the about in fact operating well. in maintenance that, We expenses. maintenance Steve We waste across systems. highlighted our our the the in in outages. performed Consumer fluctuating converting Corrugated and very costs, had systems mill reductions adapted deferred in to meaningful controlled maintenance both We performance

expenses sequentially discretionary Our meaningfully. declined

So a small sequentially. – $XX declined is simple million travel example expenses almost from

payroll of are is normal taxes first We Payroll payroll. calendar highest our seasonality usually at also quarter. payroll the had expenses payroll their – the – in

million so And sequentially. almost to they $XX declined

really So P&L. it across the is

it took see control where our is as manufacturing operations in And place. our well. the both Consumer cost up portion SG&A, and true P&L in can even in of and Corrugated across both the You it was and headquarters'

the quarter. So that's

go next Let's year. to forward

it through of get me rate walk There projects what Porto its be just peak So XXXX, was Feliz to at performance it's kind – cost extremely performed it up. remember been of well. will key we mark into And – run will coater as generate. our completed. continues that the ramp its our that's strategic And FY are. you curtain the let of

better could somewhat from flow upon market the FY are by down as Brazil. and XXXX we But Barras will that volume machine market somewhat demand see, the again paper XXXX environment for dependent Porto go the versus into or will XXXX. the in. dependent ramp-up million overall projects could FY much So we again we somewhat be could some be. could $XX FY is benefits be the of dependent easily I and get benefits Tres in the are Tres FY and could over Florence XXXX of upon be or overall Florence. conditions it operating meaningful dependent from should But, slowed what And benefits FY of of The XXXX. overall volume Feliz course then year-over-year the be the conditions benefits Barras into

George Staphos

over. Ward. you, Thank it will I turn

Operator

question your Citi. Your Anthony, the line next Anthony is from with comes of open. line Pettinari

Anthony Pettinari

morning. Good

from You – for this the contribute comp sort to And different year. with July strong. those improving you May did remaining the set completely you you August referenced that that quarter? – did shipments to a that question up I Are easier through is contributed demand you box some pretty guess, had comp kind closures or strength getting difficult box my plant saw that lapped, as went of earlier of

Jeff Chalovich

Good Anthony, morning, it's Jeff.

the closures on plant lapped not we're no yet. So

have through there – so time lapped. until still started January, So that's it completely in April we some

So on that's still headwind volumes at the a point. this

Anthony Pettinari

headwind less or one quantify could that it? point Okay. than Is any there maybe X.X you is way of kind or point,

Jeff Chalovich

where It's lower. X.X to It's directionally Yeah. But is. it a range point Sure. that's point. that X.X in little

Anthony Pettinari

or Okay. well? about to improvement consumer That's I foodservice products level you what categories if possible a around from then that wondering, sequentially just the helpful. And was fiscal maybe it's XQ? talked quickly doing put are you point demand. maybe of to And finer saw XQ just improved in

Pat Lindner

the to with help for This is be Thanks Sure. question. happy that. I'd Pat.

delivery We for a restaurants different and plate So markets. foodservice cup And integrated into for also of SBS sell quick-serve takeout we open us for the paperboard for number curbside involves example. offerings and applications. have

the some softened so the other Plate the there done stock on and quite look little stock hand actually market at had bit. in had May. through those and July sequentially. a kind of been you has June And in probably the opening then, if softening And markets, of cup well recovery of each as holding it

strong. typically there. see take-out restaurants and, despite growth restaurants, the been fact pretty concerts fewer of restaurants, have seen where we and there that we've have curbside so And demand, quick-serve been the quick-service And kind events of, some sporting

we've for net-net, in demand sequential foodservice. seen good So, increases

Anthony Pettinari

it Okay. I’ll That’s turn helpful. over.

Operator

line from open. of your comes Mark Global. next is with the Seaport question Mark, Weintraub Your line

Mark Weintraub

Thanks.

First, I congratulations just to little performance whole bit if Obviously, to One WestRock more, times. I wanted the challenging thing a down great in team. drill could.

maintenance, have on some is? at that deferring to show can as give back amount in us the how essentially a maintenance And larger later the that date? sense does much On to you the expenses, a then up

Ward Dickson

this Yes. to the QX is to tell to I QX. if Hey, from the on incremental relative $XX Ward. What it's go to to saw Mark, is you at quarter approximately would you that, look say, from from QX that third expense million QX, bridge the QX million When you it you benefit QX, I in fourth would quarter. $XX the

Mark Weintraub

And or year then, be, it level? it normally going to whole, a be where as as be we think it at would still will deferred about a is this type

Ward Dickson

relatively it's normal, Mark. think I

Mark Weintraub

debt should just net that you debt target obviously, And then like or Super. an for about thinking of making ratio great type talked on side. And absolute debt leverage lastly, the also we you’re be Okay. you progress targets. Did about? have

Ward Dickson

highly -- target the clearly taking and leverage We're paying and focused on The target level also obviously, is debt. the down. in more the dependent focused the is source primary really that the on leverage debt, given generation down upon EBITDA of absolute driver -- business down we're paying

more we're range. focused So targeted on the

Mark Weintraub

are? wondering potentially of would I that in if the Right. EBITDA And volatile, was there number an your understanding I guess, absolute kind because goals be what is is just helpful

Ward Dickson

No.

has and rather to as return target, X.XX goal is, which we very quickly times X.X been the stated, it than as the consistently can, our absolute. think, I

Mark Weintraub

Okay. Thank you.

Ward Dickson

Yes.

Operator

from of Connelly comes Your Stephens. next open. is your Mark, the Mark question with line line

Mark Connelly

us there's the displays live at years. Thank of I what's you. in Can tell been display last business? couple happening been no the choppy Where all. you It's

of curious So I'm sort broadly. more happening just what's

Jeff Chalovich

Jeff. Mark. Well, It's good morning,

business So our store display of pandemic, at some of in e-comm. significantly off of pandemic. business, the the now good the stores. that we're some has We What business, are looking the there -- well, business year on the kitting is all started been very and displays until is the -- the shelf-ready, Litholam because the just up, in some headwinds of

decent folks great into subscription on in up. we're of made business, for controlling good like of to lot the a kitting not to Had our there's kitting But progress They've going in So on retail-ready type of more work how looking versus the has out convert at costs it that still row. costs. to ship actions how economy as think, retail-ready looks in a very displays. market we taking job. more they fully some the A and forward what opened I just furloughs, and did displays costs self-ready a business do, are this shelf-ready quarter pure

Mark Connelly

one $X is helpful. more the little Okay. a in of And That's short color composition just give of question. you money on of Can a pandemic us is? a the what more bit period plan lot billion time.

just So I'm targeting? wondering what kinds you're of costs

Ward Dickson

This is Ward.

a for you last could the through actually pieces the payroll a benefits I'll compensation -- was dividend. the the Act in -- to was release quarter. was years. There slide walk in CapEx CARES in pieces. mean, I the stock reduction the then there the also the plan the reduction earnings of there published the we pandemic both defer of we in So the where is XXX(k). And in our There was short-term of incentive there related taxes. use But

So, those that -- to it don't it's in slide. we're I me, executing pieces front of plan. have just that were enumerated but in

Mark Connelly

-- your I lot timing operational out? badly. so of got does very particularly -- I'm is you ask look break was What sort future a changes? of at is, is I'm piece, wondering programs. well. how is how big I how to pieces Sorry Because change just and CapEx And the of the didn't curious going that CapEx Yes asking sorry for my whether as you that question

Ward Dickson

move close continuing than to we strategic year projects. capital of to and So sorry. to less fourth And we're required fact, into execute execute next --yes complete the have I'm those projects. as the continuing million to in we'll We're quarter $XXX CapEx

are we capital we strategic maintenance focused very mill high-return the projects. run system in operations. the are project and and that both the We've protected sustainably to required our So, our that protected projects doing have converting on have

Mark Connelly

That’s Okay. Thank you. helpful.

Operator

with comes is of your Mark, question the from next Your line Wilde Mark Montreal. open. line Bank of

Mark Wilde

I'm question markets Thanks. Good quarter, wondering for lot market Consumer sort terms And And lows to there's Pat. you Packaging is that. you're in and Covington of how it on served of what a doing MPS in in are morning. is and whether interested of really structural segments mitigate like highs I'm by give the seems in then, us of My first performing. some can sense pressure that

Pat Lindner

Great.

with for help the that. to Thanks happy question. So

dynamics. June So, sequential lows March it's quarter now. of then. and in strong, stock I'll speak been some Food those pantry big kind some Beverage of the starting print I right dynamics XX%. with increases stable the continued levels sequentially. Plate center has and curbside. highs on store relatively of to be the the ever saw stayed call. we shared earnings last And the really and take-out are of -- I impacts really our by first April all offset softened. July winning relatively since market really really There's foodservice in differentiated in our in parts April the there that restocking that customers before. commercial was about down which stable with at with versus of and downside are cup particularly and we're that and of it's solutions The mentioned but stock have about that then seems

year-over-year sequentially. and XX% to off range So, XX% it's in both the

to there's pieces that. MPS, with two Turning associated

the been and MPS has and Health the First cosmetics productivity some and with strong driving of focused specialty spot performing spirits. differentiated being as year-over-year. offerings care to of well all, by real That's customers. on bright the has sequentially and offset beauty high-end Steve growth mentioned a been very is

associated travel that been has relatively Some travel retail of with retail, soft. that duty-free

an bit MPS. of that. of as So, me a you kind if ups part downs a question remind -- that's and third of update had as on that can third you I the of well think And

Mark Wilde

the just first a Covington MPS, of And was the Well just of all, get possible MPS? the products? then and really pressures is structural sort Yes. revenue just it on on on some for question to other of number

Pat Lindner

Yes.

the slide this of on specialty at or Packaging X you the the look business if XX% results, packaging think Consumer -- can I of revenue X slide you So, segment. see at of MPS

see you out reported there. So can that

the as significantly impacted As far do as mentioned print COVID. Covington, I of commercial have we concerned, at by make so products Covington that been before some is

in And one will May there our that so, we least lines for idling of be at announced we XX days.

not update provided an have We that to externally.

reflects you July. I'm see then the So we even clearly quarter. and tons in to in downtime softness increased took of that results economic by that supply the have confidential as that that customers' And in downtime our mentioned declines SBS we our cup match in And in this with But impacts the can need and been XX,XXX commercial – keeping point. before, at economic increased also stock print. June our the still July, XX,XXX tons July, that has impacted our to I also and which demand in

Mark Wilde

one on it just MPS. get possible just again the And year-over-year Is on Okay. more sales? to a

Pat Lindner

we But of to in front and me get can certainly you right don't with now. follow-up have that. right I that back

Mark Wilde

Thanks, Super. it turn I’ll Pat. over.

Pat Lindner

you. Thank

Operator

next line open. question Debbie comes is line from your with of Bank. Deutsche Jones Debbie, Your the

Debbie Jones

tons with to my morning. seeing bit level demand you're of might bit? shipments. number the understand I Thanks – expect good start that expect quarters know And to questions. here, the export out especially down, what's come wanted by continue there you kind more just of weakening, strategy about couple dollar a to that over but export would a what that kind I you you're want a for your would sales I increase or there? taking next that the integrating is to Hi, asking the the of

Jeff Chalovich

Debbie, integrate year-over-year. as goal before our the is stated and this further least is our basically were business versus And flat they channel were quarter we to sequentially box Hi, We down QX. export. so profitable

as to would channel expect our So to implies further the that export come we're that going look channel I forward. into as we the ultimately to move which out box of integrate channels, decrease we

Debbie Jones

does you products get shift plastic? coming paper then I'm Just to to available because have be some kind fully there highlighting and there big to is there there the or you substitution plastic the aren't versus away that sense curious, think customers capability of appreciating? something And from out trying a obviously a what's do seem what's of to you're Okay. your that again of

Pat Lindner

solutions where – couple material Steve place around add And I applications differentiated beyond our that cases of we examples Slide us design, with platform, is shrink coating add I'll But foodservice really automation Hi-Cone it where science Corrugated. plastics customers beverage our to around as comes have well rings. X in shared this Debbie, our so capabilities are converting of paper on solutions around as plastic really example this I'll and which multiple showed is Diageo, The with replacements Yes, and capability, wrap for through can and coating those and to as Pat. packaging a design beverage But for I couple an to into in earnings appropriate think our chemistries, that. as a machinery, important. well in great clamshells. mentioned, we Jeff certainly where try is answer can through that a and ago but convert we're from we in extends have

goods very Our marketplace. a razors really coatings plastic deodorant different applications which solution food, capability. We're our in is Personal capability, lot bio been received seeing coatings barrier trays mailers, tubes and like foam there. e-commerce pack eco of the leverages and profiled has well in

to as want bit converting machinery customers. little – so our And capability number how we bring our our are of Jeff, on printing maybe as coatings And automation. examples to different you think capability, I value going add to to capability, automation there back going back a to again design add and to a well

Jeff Chalovich-

Sure.

only highlighted think machinery customers is substrates roll Pat one I in Debbie, Consumer starting I'd our And of it's a them. We growing. versus fiber-based month month a had and a e-commerce small XXX,XXX to that off of XX,XXX moved the plastic started as trial our up as Corrugated. of the into with add applications mailers and are out and the combined to thing customers whether or see we some our of differentiated that's some large So mailers

out On Pak our also We Demand. rolled

focus So we customers marketplace other of with the broad automation single plastics replacing platform getting or some for of these packaging customers. envelopes. as of that fiber-based a and just using, our our products more looking is phase mailers portfolio at the with solution And paper on the and customers some traction have replacing in were

Debbie Jones

very I’ll interesting. That’s turn over. Thanks. it

Operator

next line question Brian Maguire line with of from the open. Your comes Goldman Sachs. your is Brian,

Brian Maguire

this the sort like relief sort or you negative appendix And seen, of of benefited wondering, all the a and up guys. the Thanks percentage a you trends e-commerce is some little we've details. guys from seems your that been the impacting couple pandemic, shows do question a trying a see your Hey. of the I lockdowns have just of a -- And a in of we be positive think now the some or that's wise. of, I'm past sort quite from into referencing morning, of strange you for of of had guess if months demand? mix has vaccine come from how Corrugated sort sense Corrugated for an Good it the I I'm that here? might like just would were volumes as bit to question. obviously, And lockdowns. end has the But the sound the lockdowns or really business see a get to bit a

look Corrugated off volumes there's not would what's overall, far probably pieces this lot on yes, going year. have But from moving thought otherwise. your a So, to we of at where as you too

any is to impacting kind you So, the this kind volumes of how see of point? at entire say, situation lockdown kind there of way

Jeff Chalovich

Sure. it's Hey, Brian, Jeff.

really And segments with that feeder have distribution paper and sheet there's business. major affected highly And our So, three our end our been paper start is really lockdown. I'll by the the use business.

decided in part is the that business. other away And as segment that plants that the lockdown. we the and independents, distribution. a seen some from space. that our So, And even Victory lockdown is the have open for of up, really that part and that supply pickup walk of moderating some low-margin we've the is in moving mostly other July, more But the some of non-essential business really affected to us, of been starts disproportionately single of who that is And of by just to effect in storage. the

economy up of come that segment this the I is of other that So, will A help industrial. online. think the part large opening part business, back

that really we is come last next look the so is paper. things quarter So, said, biggest The And up online. large large part our it the is ag industrial, produce we that's affected and by as the as been open segments. at X% if year-over-year, lockdown. industrial and And expect starts part other to back of really a with mix, you and distribution

the that still we've back up, agricultural as are back So piece restaurants also And up, And segment. where will economy to not sequentially, think due quarter-over-quarter seen to open and it's commercial and open be but it products. another last and side that and really was that's to started serving year. the produce restaurants back foodservice the other of places I

lockdown, and really during we it's affected three those the that have for gradually us So, disproportionately expect been segments that increase. to

back things seen to As to start increase. that as and that start moderate open up, into June July, we've seen we've

Brian Maguire

of in particular, Others on print, some Covington taken downtime people commercial and industry down the July. economic And market. have about of question July up a in well. like others in following Obviously, Okay. the taking of the then, quick on talked in SBS the you've a already amount Packaging, SBS lot what weakness Graphic just some asked you've in about time as some talked

Just come would to grade? you across need think industry? that particular to you'd the in out you industry guys that decisions what if capacity capacity some does see the wondering, need make around permanent in before more And

Pat Lindner

and comment the question. out This future into I'm considered look for Pat, out the to not or on is Thanks plans future. anything might that able Yeah. in the

taken we as share a the in and customers' matching July, with saw as we've our our in demands. of did quarter reflection the you well our downtime that economic As supply

Brian Maguire

again, guys. Okay. Thanks

Operator

with from line your Chercover open. line comes Steve question Next of Steve, D.A. is the Davidson.

Steve Chercover

in the you. a session. It's late Thank little

Is that higher, XX.X%? So, come segment doesn't if this I out at entire were something nitpicky. American X hope does across your was do Corrugated margins North to XX.X% But, with come points lower EBITDA and India? how the as Brazil

Ward Dickson

is called Victory. business primary The our driver distribution

So...

Steve Chercover

Got you.

doing well Okay. Well, I And -- is How there? know India? big okay, Victory. you are

Ward Dickson

We're revenue million generating $XX is of I approximately think so... Indian year, positive The business EBITDA. a

Steve Chercover

it. Got

pipsqueak. real So,

thought. something than EBITDA getting Okay. we did -- it side? you And so then mid-cycle fixed consumer is consternation. a target know, a to on you Do think be do you seems I consumer better have source the there? of for packaging, But

Pat Lindner

Yeah.

work Pat. the recognizing team that there. the this really the of did. proud improvement So Thanks is for We're

and basis As Steve prepared basis his margin XXX sequentially. in points year-over-year points mentioned EBITDA in improvement XXX comments,

enterprise for customers. you And innovation. so the we're driving really saw of consumers. a example piece positive is the replacement a Bull. These We're Plastics our of all Red good capability, Leveraging lot are and thanks with solutions of that. winning

And So same driving the the at commercial side managing our effectively. of it. time, costs

third You and we're sure in saw make for productive to options as as going quarter possible. the that continue look well did to we that we're to

are terms to now far have things continue can't because unfold. year, to are of progress As made we improve uncertain going looking you -- and good and the have think sharing we as plans shared, business we things we've forward forward. to as see Ward not throughout fiscal in consumer right But Steve guidance going can we're how this too as

Steve Chercover

Terrific. good and luck. Well, you thank

Pat Lindner

you. Thank

Operator

Your question the your of Kumar Morgan with Neel is comes Stanley. open. line next from Neel, line

Neel Kumar

you can What Hi, business? the how quarter? have the to business, compare just box do in about And so has your thanks you Corrugated for taking demand trended in my seen Brazilian question. your In far trends how U.S.? talk

Jeff Chalovich

Sure.

of So the the Brazil, a over But virus. they over with progress. down. which the as well some are businesses see that business open shut up nonessential with think same things X%. they're the and being we're down. overall has performs seeing they'll here time. seeing seeing outperformed And little Nonessential seeing market flat some industry same in the in We quarter, Brazil bit was the is was I still businesses outperformed down which things being we're the And were

Neel Kumar

customer characterize customer of, Thanks. require quicker seeing Thanks. lower And patterns for you businesses? times on Just, the mean, them in levels and generally turnaround inventory levels customers how environment? just this would kind you helpful. any keep both one color ordering levels. on in Are I be inventory your would

Jeff Chalovich

I'll start. just pick up. I'll

the filled as about can destocking. talking you're to I think shown if possibly box they keeping with their So demand. restocking, That as they're meet uncertain itself customers, has inventories

think trying to seen the in at customers they their their inventory are meet can where they've that demand levels segments. in So keep I -- end-use our their box

typically happen. that our supply them for containerboard, any in see they to tighter thing. have. going advantage don't the box spikes base extent They They're than can converting think plants, domestic I to of keeping able their levels they they're customer I same want inventory individual that their plants. take to their be

our than keep. see from we unusually standpoint, So don't a would typically they inventories smaller low or

Pat Lindner

maybe seeing rapidly. their to foodservice to changing is Jeff changing I meet just food to the that and Yeah Things I'll inventory want and in especially side, are customer the what what similar consumer demand. sufficient add we're customers on shared keep think that to you is

supply So would there to lead that in the our trend also that then a manufacturing some is and portfolio. our I say does we plan maybe customers. to lumpiness simplify how

streamline can productivity. desire Our as really a and customers have keep to as simple they for it

overall their supply with their design as automation customers, our And so them can really we for reduce chain ability in of reduce our we them important and with capability, number to And, capability work SKUs. minimizing them manage their supply end well that's have help the the course, and of complexity to their as costs.

Neel Kumar

Great. Thanks.

Operator

of open. comes from Adam, line the question your Your Adam next Josephson is with line KeyBanc.

Adam Josephson

stable on you about just during down August X% XQ? in morning July the in you in just talked what July August. talk fitting both that year-over-year month here. indicating having and in demand, Can Jeff, Good volumes box Thanks implies compared about for me steadily of backlogs everyone. to the increased

Jeff Chalovich

so XX an the there's aggregate, So Adam in July year-over-year, we're now about the right of XX. X.X%. up out with day, X%, And days about we're July. In extra down

Adam Josephson

Yeah.

Jeff Chalovich

the go July. yet increased, saw the backlogs that strong in as backlogs know up we into I August, August economy. in don't it's August It's function a the of that's steadily opening really have the we're with And in. too say But coming hard. when -- can I we for of some

out, month-over-month economy. sequentially So see segments I those we the in called as improving some opening that three are

based And to in -- we're X.X% outbreaks but July. subject that's on economy, last what that's Now seeing we last with in the change so far. this year up, what were happens, in

So And year-over-year. it's a the we're aggregate day. per also, in up tough bit, a down comp but

Adam Josephson

Terrific to dividend, to or other the your on Thanks, before, the where to before involved? to is criteria there Jeff. was Steve, dividend priority X.X And the get down it level two restoring are

Steve Voorhees

overall our as going is our obviously I down do more at get We're over visibility into think But develop have our things the of bit. we and look a debt going to little we context to And time, want dividend. evaluate business. market where we'll the

Adam Josephson

you. Thank

Operator

Your with Bank question George the Staphos comes of your from George, America. line line next is open. of

George Staphos

got I again, Pat question those follow-on. as number the look those you'll And is adjusting terms number be are to businesses you their what have looking XXXX challenges of just one. address doing and question these consumer terms two, in way some in three. That's quantify my any performance on fiscal fixing taking some for some on, doing you businesses? well, businesses to businesses there benefit Thank that right what directionally, commentary now, the might the should additional outlook? in from so see adjust to WestRock, and Guys, Hi. additional to that the XXXX, from of expect you we business fiscal moves, segment.

care in down said pies, last Yet was -- you quarter's Foodservice the stable, that, the from sounded thought like from the in care health chart. percentage As the that last the chart. quarter. quarter I represented it good, it down but of relatively it actually was health year was was the

stock So that should consumer was and as that, good luck negative, quarter. Thanks sufficiently else so point the percentage we in its negatively? last up read on whatever total impacted of was and

Pat Lindner

Thanks.

first I'll relates well health And demand overall on performed one. answer the that. it portfolio, increasing second as or and maybe health second So question, then to care the your but care on seen Steve of yes all, Ward MPS we've for

some in beauty negatively in and I of or cosmetics there specialty MPS impacted. might X be been packaging the where think the and slide -- that health also spirits high-end you some of have referring shows, to

as And talked of by That number was then beverage that QX of your improved of in impacted. different cup including impact may mix. a offset, the throughout, And offerings some course well applications. foodservice is food, about our versus already, have stock areas of foodservice, other of integrated a So was that negatively QX. and a foodservice mixture we've number

Steve Voorhees

George to maximize our business first value just of think, we're on question, going packaging to businesses. and the the I look the at got We've continue integrated business. fantastic,

customers. We out do We have going a, We value open past paperboard, the executed have months. some see I supply cost that I mentioned be it's the think Pat's I in future. And more both in months. -- our we're I'm And Containerboard. to emphasis stay pleased sell but mentioned expect over be time flexible, what's couldn't to I export And adjust the to really several in extremely how customers. structure of we've of well think we've adventure excited to the there, operations, our great And several portfolio and trying marketplace Jeff the paper, will to our reduce consumer And over as about, happening. lower-margin we we areas. on went business And those businesses. our see done way our the could. how as evolves embrace tuned. to that, I'd mean, that market to past an

George Staphos

are of I As we, all guess.

luck. color for Good much the guys. very thanks So

Steve Voorhees

Yes.

Operator

line of Montreal. question with line comes Mark open. of the final Wilde Bank Your is your from Mark,

Mark Wilde

Thanks.

And and one you comment follow-ups. in your whether of holiday displays, on the heading new you into if I XXXX toward situation on and foresee Gondi Just brewery the season there prestige could it's and we're that any One, the goods, two particularly are any quick it as Mexico performance transfer the in changes have paper wondered, other machine if down Mexico. cetera. second quarter there is in et impact of paper then also just, light ramp-up of the might

Steve Voorhees

comments after you season Jeff On the Gondi, that. have on Pat but comment if on comment holiday you or on any Okay. I'll

Jeff Chalovich

Sure.

the November, typically the So as Mark, season happens by on on get December think uptick holiday in what lot e-commerce. there's I'll that we I season, depending a into purchasing driven October, the with start holiday large a

a with marketing holiday Typically tell -- So on said prime thing too right what may especially, budgets And will on the to But to storing look as too and be. same tell like, what's be hard too out. of, to now I are just call month hard that's sort the to it overlaps environment this It's season day this if remains that seen. the economy that of hard on. it's with before, opening on in It's to folks the year far in what environment. going a not based displays. in spend going is the a what

hard too it's point. to So at this tell

Steve Voorhees

And I Mark. think -- go ahead

Pat Lindner

Steve Pat. sorry, is this I'm

Steve Voorhees

am I sorry.

Pat Lindner

opens of the echo food terms the too to and and the the I on of foodservice I much so economy up, things example. was for tell in and would market going just that that when impacts social open It's add. to when up consumer. beverage hard distancing

Corrugated certainly comments on well. echoing just apply So consumer Jeff's to as

Steve Voorhees

making Gondi, just a been have though don't September potentially for They paper in demand. number Thanks, Okay. have coming just Pat. we paper machine on the then October. have start I on do Mark specific And impacted.

We -- provides paper Gondi supplier. we're to are ability compete markets. We the those that's markets. virgin to that the agricultural paper a in supply And

Mark Wilde

new a change that's a not would machine machine. with that because Steve So recycled paper

you're prep the board. So actually lining

Steve Voorhees

Exactly. Exactly.

Mark Wilde

Okay.

Steve Voorhees

an Okay, question. MPS answer And Ward think, then, to has your I

Ward Dickson

decline This decline approximately sales whole segment. compared The approximately Mark. is for -- year-over-year the to Ward. Hey, was X% MPS X%

Mark Wilde

Good Okay. That’s Thanks, guys. luck, super. Ward.

Operator

now remarks. will for closing This concludes Armstrong back I turn session. question-and-answer James the our call to over

James Armstrong

say, and great day. have to thank a interest in for Just your want WestRock you

Operator

Ladies concludes our gentlemen, this and call.

You may disconnect. now

WestRock (WRK) 4 Aug 202020 Q3 Earnings call transcript