WRK - Earnings call transcript Q4 2020

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

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the WestRock Fourth Quarter Fiscal 2020 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. Thank you. I'd now like to hand the conference over to your moderator for today, James Armstrong, Vice President, Investor Relations. Please go ahead.

James Armstrong

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

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

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

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

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

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

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

Steve Voorhees

the fiscal results our Good amount quarter our packaging in exceptional leverage Explaining by the WestRock's performance reductions both ratio. the the and morning. sales operating around cash quarter of WestRock We business. was incredible begins performance Okay. and fourth our with and highlighted delivered that flow meaningful during fourth world. of solid James. enabled Thanks, across our teammates record fiscal debt

health and our families. that the the have been customers our as safety things. all changes exceptionally of the teammates, foremost, the implementation safety over us rapid many pandemic And on had amazing company. safety always These teammates all activities the our the our I'll our stress months hours our out one from of it's Mill, to challenging for across X COVID-XX the just safety impact due a our daily Demopolis, of and has and been million who've of Alabama teammates protocols, and the in instance. call We've activities and feel While of our at friends include demands recordable worked well-being, accomplished and first example, without past the X

just involved operations formed across you for of teammates those differentiates that done is For we that we company of When what And in the company thanks business, itself of amazing. during to all to needs and in set challenging this, and goals total to especially doing sustainability the meet their cost, lower with their their of a manage broad capabilities over We've their grow customers quarter. with meet products successful very risk. the a times. WestRock these created WestRock, sales, past been partners they've the their and

our building markets. exposure some to we've has on less been attractive for and our focus As business, packaging said our time, reducing

packaging were sales of billion pulp. fiscal sales containerboard net markets. $X.X additional attractive and In set SBS, of $XX.X and billion providing markets. remaining And margin sales includes stable lower of reason, packaging I'm perspective or pulp diverse XX% sales of a the WestRock's $X.X and our $XX.X end billion $X.X to or export were The billion XX% paperboard of on XXXX, sales that were to business. billion. For WestRock's

products to our to own and for CanCollar This sites solution redundant installations business glue-free packaging the in is outstanding wasteful machinery superior than and ingeniously in is to that We support critical. packaging built and of that offering our And our XXX an in packaging chain X,XXX some distribution customers. plastic Coca-Cola product its Supply Eco, to is waste. important well-located as our without allows world more an capability by locations, product XXX used create packaging XX cans. ability functionality designed services, The this and including platform replace And to value container. demand be customers' converting includes eliminates on this box. is value are products facilities. use a from a to mills e-commerce further for WestRock's deliver to Our provide meet glue make all the our that well incredible seeing differentiator the transfers XX,XXX teammates We're CanCollar them. packaging to increasing increasing We're happen. initiative enhancing Europe a packaging fiber-based our quality customers help demand our of sustainable for positioned shipped growing additional Demand WestRock's supports that customers' for to their solutions. competitors glue-free

Our sustainable to that's consumers. a important provides customers solution and experience much both better brand

also Our products safer consumers help about can purchases. feel their

in in folding store. ensure that not Bio-Pak is transit. Protect product food Our with restaurants tampered enabling safety to enhances This solution seal items the by the carton delivery helps

information digitally packaging connect and Our to product is content. promotional consumers helping

with about Our customer demonstrates to the recent experience. enhance recycling consumers live the they of pizza boxes content digital educate Domino's can work how where

box year of and provides sheet solutions to out utilize We had productivity solution offerings, to our another growth our packing customers machinery their By complete their cost their lower customers. of Our risk, improve machinery lines. a placements. in machine associated our our WestRock with combining drive and solutions

to placed. customers opportune for working portfolio with accelerated winning our customers solutions, markets. substrates, We network be total a fiscal placements making win by in than services now sustainable other more world-class solutions packaging X,XXX a business demand grew and packaging as design has to year, combining machine an the more we're result. XX% customers. and of We're fiber-based capabilities, During paper by pandemic markets, converting machines at packaging, this our new customers' time distribution their of and than that our The help these our to create help doing adapt our WestRock to our our

fact, to next we onboard business over our that days, In pipeline, to expect strong very into going the hot indicates demand XXX XX that's This is healthy. XXXX.

XX,XXX downtime remained rapidly as an Let's to commercial strong. and $X.XX. We positively SBS that segment billion. cost were changing adjusted which and our taken environment. sequentially last system, consumer SBS across of for and demand nonrecurring In up solid quarter. incurred And the by quickly. packaging of quarter. recycled print market we lower exported and year. quarter conditions the less record EBITDA X.X% X.X% due in These performance sales levels, are you for very containerboard all turn know, and benefited applications. packaging containerboard Adjusted maintenance was at fiber the The in of economic and from volumes $XXX across foodservice, to We with contrast, our the third received Demand results food over is another $X.X fourth beverage share corrugated results changing increase impacted in quarter's delivered during were WestRock offset quarter tobacco soft our million per earnings packaging higher declines absence our and packaging, both partially tons benefits both volumes benefits a in and were results. cost, labor the of segments

$X during billion billion flow. to the quarter, year we cash in fourth brought We $X.XX fiscal debt generated year. cash than free the cash This our a million the by in million million $XXX more which total strong $XXX and than than Importantly, In adjusted $XXX generated more generated flow. adjusted the is fifth row XXXX. for flow, we net reduced more quarter, adjusted in we've free in fiscal

million adjusted to EBITDA go prior segment to quarter. Corrugated The up North the line American adjusted quarter. Slide quarter adjusted basis. sequentially margin demand were was X.X% compared in This margins corrugated of $XXX Packaging $XX momentum Let's million and box per third XX.X% in fourth American on increased Packaging This delivered day a the in as the with North shows the XX.X%. Corrugated the business was The X. EBITDA EBITDA of

box progressed, serve higher-value from and export box domestic to customers. tons shifted containerboard markets and quarter lower-margin increased, the As we demand

our shipments rose rate fell integration result, by XX% we the our can to ended tight sequentially. shipments, box a in XXX,XXX We're As inventories. export growth now tons we produce, quarter. the With ton with in that our quarter and every selling

marketplace. is new winning WestRock the in business demand corrugated As box grows,

Our box volumes industry reported in up in the Association. volumes X%. excess was Box of This by the Fiber September were

the and Our corrugated this signals strong backlogs record at demand future. levels, are growth into box

base the serve by growth similar ability making auto positioned Sales sales this million to of from X% up into and direct and with and in offerings provides growing this e-commerce as market packaging and broad product were it integration daily Packaging Our differentiate the service distribution need to to the of and stores. retailers with our to We're channel. Victory shipping in the business October distribution requirements to Recovery parts we're in well for box prior increased along from year. experiencing in with further between We're Victory the progress We're enhanced their us the growth, and e-commerce shipments in retailers our demand further the for consumers storage business. our services $XX sequentially. service consumers. moving respond a pleased business, fueled X% trends

XXX,XXX we our supply corrugated tons of Victory packaging a to annually than system. reminder, from more As boxes

of profitable. completion the and up that the our on we of we're and natural tons Feliz shipments fiber-based made system paper to growing kraft in at our were the the containerboard than realizing and the bags In specialty shipments kraft In strong as from we're our packaging. quarter, and plant positioned ramp-up from XX% our seeing business containerboard. packaging away already with is region same We're making the fourth sequentially. grew toward We're box half year. high-quality demand more Porto Tres for of in and paper new make XX,XXX project packaging envelopes of we've the the In quarter Brazil, first last Barras the even growth October, Our of plastic Florence, accelerates. trend well benefits higher our machine very corrugated In paper XXXX. to the quarter, investments the competitive capitalize the started

expect the our these of execution COVID overcoming important restrictions the Brazil who've from construction in with of face of area. teams on as in in the team projects in $XX due pandemic. machine We product mill challenges Barras first start-up EBITDA by The half run schedule rate EBITDA on forward. is fiscal Tres to full the upgrade going in million a the 'XX, for $XX with of track the million on I'm focus maintained XXXX, improve delays proud to our they

plant Our run improvement 'XX, of a currently ramp with box XX% in in a projected fiscal and full is incremental This Feliz it's rate to generate capacity, to $XX expected continuing up. EBITDA year. at EBITDA Porto is in million plant $XX of million in

to in augmented including million our run amount now opportunities million similar in Finally, benefit year. and with integration. system additional our we expect more synergies the rate $XXX synergies this through EBITDA complete sustained end capture use XXXX. continue than accruing a we total, we fiscal in reality. fiscal in expect our to of capabilities, add We've $XXX integration 'XX. achieve fiscal In And to our we We're XX% to our systems digital KapStone momentum the full through the expect of by

Turning to SBS. third was million quarter Slide in from Consumer economic primarily due $XXX adjusted the to quarter the Packaging down in X. million, $XX segment's EBITDA downtime fourth

quarter than compared same stock demand be back-to-school last election for plate As have tobacco, demand the follow COVID-XX XX% the even while markets, of with and understand year, industry than sales print you SBS by markets. sequentially. many foodservice for in promotions declined modestly continues commercial and specialty In who by sequentially. been XX% pandemic. down The SBS to of demand more demand to especially declines more Commercial print, declining, cup has specialty cup stock accelerated our improved have the

year. of balance XX,XXX downtime of downtime Evadale tons our mill early tons October, inventories the took of our one our we a supported As and of removal scheduled to XX,XXX originally shutdown machines Evadale customers' we demand, this paper supply weakness end result the SBS of quarter. the with The in in In of the tons. reduction sequential economic capacity there. This of for our calendar announced XXX,XXX at the was X with shutdown the of our

keep in X,XXX corrugated However, address per This this we're meet month strong need up containerboard is the Evadale XX,XXX for currently strong demand producing short-term packaging. demand very may to containerboard. to through the a to to We help at of tons help measure March.

the by attractiveness by substrates, of XXX,XXX declines of and and supply of in non-cash approximately This results our the attractive our majority value-added and of of to The sustainable packaging packaging the sequentially SBS Our of machine The beverage X% and foodservice Consumer set highest we The is demand fourth improving, We segment compared rest pulp are range year. future Covington restart business. sales month. capacity acceleration of broad our markets. EBITDA. is the for the packaging for demand certain reduction markets quarter specialty solutions paper made our of tons Packaging for sales segment's by the masked goodwill and the between science, the our and increasing for design, X% to and food, plans extensive of impairment complemented last business to demand by and unaffected foodservice automation. food, our The idled accounts packaging converting portion Consumer The SBS external includes in including extension. paper balance beverage customer of later they're advanced packaging during segment. challenges good to projected business charge the specialty the remove and fiscal this machinery our and e-commerce, paperboard our caused shipments from to consumer of vast progress the business XX% capabilities, Packaging portion use SBS the attractive the corresponding our Packaging solutions and and lower SBS printing consumer our fiber-based These of and at have between this margin material plan markets.

the In the majority and As merger, for the carrying MeadWestvaco established of combination this our MeadWestvaco the were charge of the units. reduced segment that The acquired values $X.X entity, The Rock-Tenn goodwill since the accounting background, WestRock. produced the noncash was billion cash combined by merger. goodwill XX%. balance Packaging strong formed and was Consumer by to has assigned segment flow the

EBITDA segment generated cash from adjusted we've $X.X flow pretax in billion segment minus measured this by fact, is and In CapEx. the

portion we're the As reducing mill on with portion the of business, demonstrated business more attractive results also by our actions our solutions to corrugated integrated offerings. our with our and XX% less Packaging packaging and integrated exposure our that's of growing and Consumer system attractive focused paperboard we're XX% well well our

Now over I'll Ward? turn Ward. it to

Ward Dickson

Thanks, Steve.

on Looking forward to to at debt in down and dividend. our -- near-term continuing capital we capital stockholders allocation our priorities, we our return while are through investing focused paying business, our

This investment fiscal higher due investments $XXX capital range estimates pandemic to needs. plan growth expect the to capital the that action respond today to $XXX we be we of XXXX into to incorporated We million. is projects in specific have that to million the than

$XXX capital and a projects converting systems. we our million strategic be to between the term, our complete anticipate level, reap year. in projects, XXXX, this half of cost billion levels fiscal our return start to During be investment in invested maintenance half capital and we upgrade Barras $X Longer At Tres enable the in with and projects return-generating to will customers. benefits our mill to grow mill our us will will invested reduce that other and each

and share targeted increases to debt leverage capital our we reduce cash, to range, return in opportunistic expect more down As continue to and through generate buybacks. we pay towards dividend our stockholders

packaging potential businesses. see M&A also opportunities our focused We for are on that the

cash strong debt We strengthen down and continue to sheet. use to flow balance pay our our

by XXXX, fiscal we adjusted reduced million. debt $XXX During net

billion committed credit of investment-grade very plans cash, pension available and Slide solid are XX, our maturities and and little on a $X.X we shown liquidity As approximately near-term overfunded. ratings debt have

guidance. to Turning

strong models. share We million years, sequential with XXXX. and expect In quarter first days prior expect volume versus of I Consistent sales decline earnings a seasonal the your provide $XXX many fourth growth you to quarter will displays, a and $XXX of share. our and with prior shipping adjusted million, segment declines with help in some per EBITDA merchandising XXXX between we to commentary with Victory with guidance be quarter including earnings shipments, food $X.XX and normal the but and to $X.XX X we continued in fiscal Packaging, Corrugated per the the higher adjusted less quarter day quarter. We anticipate per sequential of quarter first anticipate businesses, from between fiscal sequential the box in first MPS beverage.

While in demand first fiscal to we completion XXXX. outage the track for half remained Barras Tres mill upgrade. strong is our are support during project executing Brazil, This on significant of a

We expect beginning along enter and to the health of increased gas cost at as calendar the the occurs of we reset the employee winter prior freight that with costs natural deductibles year. higher months, insurance

our short-term were action plan, will pandemic incentive target accruing as below base a XXXX addition, our In and at level. payouts higher fiscal begin for targeted XXXX fiscal we part of

are due adjusted markets COVID-XX, to we our fiscal year at not cash. In demonstrated market continue time. or cash our to full this providing and conditions quickly adjusted generate guidance to As we operations EBITDA change to XXXX, ability to revenue, continue flow adjust free

to along progress with debt confident our continue and With the strategic plan, the pandemic strong capital we benefits make target. to generate action backdrop of leverage our improving of flows, projects, the demand our and completion in towards of meaningful cash conditions, our are reduce ability

for turn to I'll Now remarks. Steve closing it back over

Steve Voorhees

Ward. Thanks,

improving. company. and incredibly grateful beverage to and each times, we're particularly see We team XXXX WestRock every delivering our for presented for e-commerce of proud I'm in how is The fiscal the markets. that's and customers our Our demand these I'm and challenges food new through environment day. this managing

our cash packaging benefits solutions. we're Tres projects, flows. our We're do so and as projects. fiscal our growth operations. with the This capital additional free of sustainable complete the with an additional time, projects generating we capturing strong XXXX continue in committed ongoing exited opportunities for enhance constantly and synergies the We to to of capturing strategic and WestRock. the innovation performance. productivity opportunities Barras to same certainly At free platform improve our priority e-commerce identifying Florence We're fiber-based, includes improvements, and have we'll We efficiency cash that's with that

positioned our portfolio leverage reduce whether the customers we is WestRock well execute to solutions That demands. for Q&A. provider we're machinery capabilities. value need trends that to take of offerings solutions, and teammates to with current broad target meet our packaging market and of ratio. customer our supply and and partnering we'll remarks. packaging critical that's our our for strategy, their challenges, is sustainable return of partner our stockholders. paper and prepared my concludes advantage with WestRock today's We're winning and As market or debt changing innovation to address fiber-based solutions, premier the customers, changing delivering complex chain ready unrivaled sustainable, our James,

James Armstrong

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

Operator

George Bank of Staphos with America. Instructions] [Operator

George Staphos

of XQ you What, And XQ. Also, the Relatedly, the you types the installations retirement. seeing one to anything, about Steve, bit question, in progress. up obviously roughly in seeing I either you're previously? in to of it pipeline hot different my and I quantified you purchases fiscal the the gave Can what pipeline talked you on follow-on. I machinery that's on were COVID driving from terms, you offered to first to how what but a Porter talk XXX if think Congratulations guess us date then quarter, seeing congratulations about qualitative some numbers fiscal have positive installations Jim his out were versus shipment and translates and you commentary. 'XX? are further

Steve Voorhees

is well Jeff's our and Officer, Okay. that. with Chief very in George, tune Commercial

ask to going I'm respond. Jeff So to

George Staphos

Sure.

Jeff Chalovich

pipeline. start with George, so I'll the

So the across our and cold, and entire a business, we we hot, the have enterprise. track pipeline warm flow-through rate

we hot so know we so average, XXX And in to the target pipeline, in XX days. XX% that certain we close that a our amount on or and

business And so on in the we in where is from that we cycle. informs believe selling coming what are

whole those, close XX%-plus rate are enterprise. So the like said, across I about

of what whatever shifts or business us or we allows is need capital, from coming add that both to plan to capital So a in. standpoint the

we the quarter So into good have a then look and beyond.

So to XX days. XXX days

see On about had ALDI and machinery, right, we growth incremental you're we to the machines. ALDI continue XXX

of you continuing Hence, that and think we're one, labor the how the separate customers shops COVID, one manually there's lots packing to of of in shop. number I customers people So and back partly, boxes are have at, -- people another. see top looking still then do on

and to do great as our reduce gives get it people seeing harder opportunity given And into we're out also machine opportunities opportunity that. in with and productivity to gain plants, innovation apart. our an spread are cost, the So we're also a then to And looking to machines. platform has good us move

box-on-demand pipeline -- had a for actually and Victory use design ship-from-store demand Packaging we're to looking new business, our augmenting ability adding to we've we've and at pre-make packaging. come And we're mailers with So business then or distribute. pouch up our either the

who's So looking single-face retailers the we large into world, of have in who's out plastic of a mailers. mailers the moving one at customer, largest

we've do augmented glue so we be put in-store. to can them. tubes in tear label then box-on-demand them, them, tape we that able And corrugators score from to our we're on And fold able and sample to

trends e-comm customers. our then help largest also And Victory our in So distribute. the use Packaging is shipped-from-store for able of one to to we're

George Staphos

COVID, an around agree has question X now X things were hey, before. created all -- have rate might e-commerce, ago, incremental that demand been look, From notion my it it for the year growth we're of would differently question corrugated didn't and that Jeff, ago, months think embedded doing the exist than follow-on we how created from you with or behind you do view. -- the much is being don't incremental maybe

get you maybe think agree disagree, we're when what How say, whatever. would would the is? all this don't us you looking comps know, you with maybe a in think you go And normal we in your there's is corrugated cetera, point, to incremental a have And that that? at when would of, you future. vaccine, X what customers we I back about that, If think to back one-and-done et normal, tougher growth

Jeff Chalovich

George. Thanks,

in I that's So think what e-commerce growth the we're is accelerated. channel seeing

If you was projected e-commerce the of retail look to for part channel. what be at

to retail, still XX% I see sales So Kantar we by be at to of accelerated, they be that you be, schedule that the will largest the and e-com. retail look had XXXX if from channel.

would that retail. in So be

So at we see an be I it you'll XXXX, And acceleration, see box by positive XXXX could continue and this has for a demand. point. that been that think and

I Now right? see it's but hard retail that and And packaging. have what ship-from-store, And takes when called we are Well, definitely what places everybody shippers are is online percentage, subscription, you the in buy to for shipments. bunch largest packaging, the boxes that, store then is to corrugated the to added tell think overall trends, in you that talking because the SIOC stores. last-mile pickup talked about some especially and last-mile there's space just in that about, a move go us. it's you growing, puts As envelopes, about there's trends of the share

so have Well distribution their stores. without a the their to retailers that customers or looking serve fit are the have And can a uniquely customers to set do best lot of we're of at because shops. can their machine a have room with platform they in having network and how we pile help don't they now to up in-store that ship-from-store we up back

ship-from-DC I and boxes, trend making. corrugated, positive the but going for a and ship-from-store, think we're that not to in be for they're from just pouches moving that's mailers things So the into like

Operator

Weintraub Mark Seaport with Global.

Mark Weintraub

question. X I you're -- mean obviously this to shift last for It's industry, these to about X% actually talking to sustain as important sustainable just is is of others big it X% understand and numbers X%, on going whether to -- X kind I really wanted the forward. if months, follow-up well George's we -- was hugely talking can X close

about to there or whether we that it for from there on and notion that these being thanks And that this whether or step-up the highlight? all things fashion? the factors or sustain color And levels are not you e-commerce. and to other cautious this again, is can as coming at not back would on suggest build so other in that Are going maybe would here extrapolating a

Jeff Chalovich

Sure.

we've I day. we seen so So finished -- that October our think what X.X% in up per

COVID. e-commerce so had that. by markets also part was a large And recovery of we continued in affected But

protein our business came back. So

food Our beverage. industrial retail, strong processed and back. bakery came business still in is our Distribution, markets

of X.X% all that. had I to But from not, To COVID. what's that, project have that going at X%. coming So stay those acceleration don't markets I would almost what's positive know of to extrapolate out and I new the some the we back growth pipelines, to our that And changes from do think of some business products, we consumer frozen have, of to the the of our fresh. see business. positive in the middle store,

in of and online well store. the into went people buy online, in store. you in that COVID. give of it's store store to buy online bought picked XX% pickup store, year, Just e-commerce Last who XX% who a year, point, to consumers up with a the XXXX, pickup even point, data This in up and

are people store, think a bit happens of back? let I inventory think with inventory some positive on what their of seeing COVID what I are paper some the the frozen and can just-in-time more new customers go who in changing tiles, And to think our seeing really of a tissues, to cleaning we're in have things trends the products, becomes. customers stores levels, those innovate and tiles, sustained I products you do Mark. X the some what pickup so And that you there's going some keep to last. those term, quarter project up of or normal with it don't some be middle of to pickup, their to certainly. depends long So But trends then that who of the our it's the growth demand. continue hard beyond But But is

Mark Weintraub

as quick well. And follow-up great. one Okay,

at of basis? kind making the economic you're is mill a Evadale at some an emergency as Or go-forward the swing that of this strategy you're a So -- type circumstances? given where feasible thing It a doing to Evadale on measure containerboard. we purely like view should

Steve Voorhees

Mark

Jeff Chalovich

Now your -- sorry. -- comment, I'm well was it first is it

Steve Voorhees

ahead, Go right. All Yes. Jeff.

Jeff Chalovich

-- the a to profile really not inventories our it's for No, short containerboard. term. Yes. back get to get is speed. It's The help cost us

short-term a that's emergency. So

Operator

John Rider with Stephens.

John Rider

This is John on for Mark.

around earn what much you that assuming can And the your have point, expectations change? freight So assuming for us just you price business, tell capital to of outlook? for SBS, cost side how in doesn't prices in cost this the rise your to at you're in

Patrick Lindner

So Pat John, is this Lindner.

pricing market. I can't So forward-looking actions in on any comment regarding impact how the really would SBS, price and that

on can't I that. comment So really

I'll Ward. question, turn Ward, okay? over if that freight that's the On to

Ward Dickson

Sure.

So look QX, we a from whole we costs. in about something QX we're that a year, roughly our the of XX% through short-term we look less see because now costs. the sequentially exposed are -- our pressure of we our increase And about similar to as we market right than on freight rates, out projection have trucking then but some outlooks we're have into X% demand, spot we diesel and as only -- a to anticipating also spot for to declining

the expectation So as is year. not the freight outsized full look for we

John Rider

capacity And liquid end-market do And Evadale, at packaging, the That's you helpful. then Evadale? Okay. with will paperboard foodservice closure like others? overall what pulp what with you to look expect and do between extra mix carton the your machine at

Patrick Lindner

Yes.

So is John, this Pat again.

a don't economic downtime. were SBS product -- we shift experiencing to really line the in mix significantly. of we We So lot expect the

we the economic of about downtime economic in or our can say, with you as there's And we XXX,XXX the at data downtime, overall, of took Evadale I you. shipment SBS XX,XXX should As about charts shared the quarter. Steve see in prepared that tons in system and in shared, tons

amount increases there a year, addition, last significant pulp we In of produced year-over-year.

way that's order to economic relatively mix we a about and tons so system, that is it in our of to customers' the to XX%. same. capacity, right stays of that production lot as serve the figured customers order decided out SBS the of really think can match that as our capacity, about take with overall of the we XXX,XXX will move our was what demand, But downtime we it So you with and had on -- supply well in our pulp

Operator

Pettinari Citi. with Anthony

Anthony Pettinari

of there's if the historically hikes taken maybe Ward, been And side. containerboard, previous that's the long about market you versus the could some And for how comments, your building increase just to price in increase November. how environment on for current I'm earlier wondering sort previous price talk it's a flow of maybe characterize you years? box on then just from through announced

Jeff Chalovich

it's Hi, Jeff.

it So this start flow-through we and containerboard boxes. in the flow happen customers quarters the on typically $XX-a-ton how through. then to much will did to there communicate the quarter. I our first won't of year expect calendar be And will X in increase is a

Anthony Pettinari

of then And positioned of think market hikes terms you've in previous how you kind is seen? Okay. versus just the maybe that

Jeff Chalovich

Box and market the conditions WestRock want. our for our are -- is market So than we for the business say, lower inventories I'll

record levels. record are this shipments Our a box quarter. heading volumes record in now We're at QX October record to per in and day

-- a our the position demand. good us, for for So it's

Our supply is now. than tighter right we want

unknown of the question Evadale. The the So we're is that's some doing the pandemic. really of with things

market that had been. we've in a least never So At I've in. a never pandemic been

So the and future what's it's it in on something put speculate so into with going with pandemic, past on the to hard that. I the take that's can't

Anthony Pettinari

Okay.

move CNK to tighten not technical up few helpful. over seems desirable very or or Or has That's just a to from to good very like quick for demand CNK has CUK Okay. strong and commercial consumer. pricing relative been possible or to your years. past SBS system? been It the possible or follow-up on And reasons? then that possible SBS customers is Is it

Patrick Lindner

Thanks for the pantry and strong, pantry really up. restocking as CNK you by markets food Pat. has -- for -- so CUK been as load The the is the for beverage WestRock driven or well as Yes. question. mentioned, is This

there products. your But their what what WestRock As use moving demand really been prefer that is say to can had around what we I CNK of has do SBS, far to in been what and to certainly, specifically, question they most as we moving like our understand that. -- at different substrates across there try end-customer examples effectively they try is and would

and we have open shared where before, And obviously, time are situations do in capacity, so as there our some we've SBS.

can application. for really their SBS meet going the end-customer we that. the it do demand if that, needs do works we're such to But to So

but looking at it, customers' lead. our And so certainly following

Operator

Gabe Hajde Wells Fargo with Securities.

Gabrial Hajde

well. you free if but some family about I not know formally your cash we moving is you to can of guidance, was flow parts. just hope I I and providing -- guys maybe try are talk the

$XXX would think down CapEx I be directionally, million.

You talked about $XXX capital from investments. stemming million of known EBITDA improvement

us I XXXX? can parts any there then be you that missing? fiscal is And think wouldn't moving other remind it in working I capital believe might I up was that a reason pretty big guess drag to of this be any year.

Ward Dickson

Sure, Gabe. This is Ward.

cash a generate have in of flows. we strong So ability our lot confidence to

the of for the to hit of pandemic CapEx $XXX We've you so got We the midpoint the And plan. of key at have reduction. some action million the $XXX -- year, elements. million still benefits that's some on of our guidance

you between operating cash our And as if cash We really -- first the adjusted actually should investments. FY larger -- it occur 'XX that a occurred -- that the payment. normally were abnormally short-term some would FY only quarter have and we of XX% 'XX. recall, capital So rate credits. paid cash, also payments FY a other payment got look high just would I incentive is fact had in point that were the relationship item stock -- via to the you'll or we lower if would like because and have that EBITDA R&D XX% tax in with the actually cash had flow at 'XX,

our would in FY actually book tax 'XX. FY that, below I the anticipate closer tax any was in to would changes, XX% 'XX. move that Barring rate tax rate cash So cash rate policy

point Capex, for elements the strong The synergies plan. is lower and to other EBITDA contributions of incremental the really, then starting drivers and environment, capital is the EBITDA. of the discussion positive pandemic strategic still the related response that earnings for supply-demand some projects and So contribute have to we the

flow do terms of to the So confidence what's full in generate year. cash we the over despite going can year to the uncertainty course the we pandemic related of during that the of have some strong the demand environment

Gabrial Hajde

with know you little on consumption, I second, guys I then a all side. but the for you guess where the like at-home utilization are be might feels And there, don't exactly it rates CUK bit to said, like little you paper you bit any maybe to test plans particular trying some customers Do constrained, eke more or grade? out have that on a and for capacity the ability SBS.

Patrick Lindner

Yes.

So thanks for is the again. This Pat question.

CUK mentioned been CNK as for So strong. before, WestRock, we or has

X-X have and operating the range. in Our in rates high the are our been backlogs week XXs,

$XX-per-ton just increase we a did So notify price recently. customers and of

beverage by food. well as in strength market-driven good So that as

to far customers' a increasing capacity on around changing capacity, basis opportunities say the with I As products. will really needs as but I looking or that our can't right at comment meet our forward-looking always plans, capacity we're

to and so I to do at identify time. have that opportunities that try any certainly on in direction, this can't And we we'll that we but specific share move as plans

Operator

Mark Wilde with BMO Markets. Capital

Mark Wilde

Yes. cost $X.X I'd to EBITDA kind and of like year, the cumulative you come the in If back you've billion. this to the you've EBITDA billion. next improvement to about years. outlook couple of just $X.X synergies XXXX, done back only deals over $X.X big last X of since go I the for And did time pointed last

on somewhere. leakage So going like it there's seems

couple And that for flow give you to do through? got confidence there improvement of you've are can these going EBITDA years next to out numbers people the so what really

Ward Dickson

it. is see I'll wants then So Steve if and add to this Ward. Mark, I'll start, anything to

in you've think things obviously cost manufacturing inflation. about a have I you the think year got to one business of is every

every wage and we've commodity inflation cost, X% have look cost cost benefit got energy profile, if year. you inflation X% at year. each transportation entire our And and between cost and We

I So around we on basis, a $XXX approximately have would impact to million to generate say, around of inflation. the -- productivity normal offset

clearly, And that of at. do conditions the pricing, Steve, EBITDA comes is with and volumes things key across you And the other that supply-and-demand of So our the you driver that's that we have businesses. pricing the one we the have need to that all then want environment it. look to...

Steve Voorhees

add, I'll just Mark. Yes.

Our customers cost value. a and increase, business greater manufacturing demand our is business

And so it's market. a competitive

we've the flows. very has to so free in generating we the $X that's have, used consecutive the business. capital we transactions And improve consistent And and which performance I generated implementing build platform of synergies X think years program think and to strong, said cash I of billion that and the flow, a the very couple cash a times, with of is strong

Mark Wilde

about early talk cost at some on Jim Southern because raising the congratulations in the a these Southern in if business EBITDA about offset Okay. degree the $XXX. or to price to we Jim OCC follow-on margins by was Week question they're over you a inflation when I or $XXX with in issues, -- need the and LTM Paper remember year, correctly. acquired XX% liner EBITDA remember it I'm little gains, but XX%, of other just to a talk about we them I if Porter, differently. think if an going is had Jeff -- 'XX, just Container basis sort came And wanted and Container. preceding & just it that Pulp I then of to about of be was My both to

OCC what Southern business are last whole And the margins margins, a do look the significantly lower. higher. is year, The price how down So from What's the up. at the just is for mismatch? as $XXX $XX you we $XX if about price put this to -- cost, explain liner used the that

Steve Voorhees

try, Tom Porter to adders WestRock give business. think to I'll opportunity Jeff addition an and to an I been then But Southern is I'll and with follow-up. Okay. Jeff, Stigers amazing is And entire team. they've Container in us, the and management Jim incredible

margins, we In that was And I think, was then I think the the first fantastic -- XXXX, has is were mentioned XX%, time now had it system, I at generate results. Container a Smurfit's acquired Solvay, continues it, -- which to margins Southern and several-million-ton think Smurfit. one its you year. Now

and it large was tons. I That was, think higher Solvay it, at XXX,XXX And volume Southern so with XX% about than Container's the we acquired very that. you take well time gets

to think, up end put the than And and that together now so results. with lower and corrugated something I over course team now, we're has incredible generated the you management of making XXXX

business, the a leaders a invested was that very margins and doing that in to, well, system It's incredible business now system with we're we've but I mill box that are and the system And operating our the mill mill a underperforming. very in have system, so entire invested competitive with with corrugated. the in think started And think, we we've plant I in. the

you do to Now Jeff, add like anything?

Jeff Chalovich

was a a so regional, add was mill. business, No integrated. were just had Solvay I'll just it. of proximity close customer good plants. things. Eastern to a XX in a We XX% it the -- highly gone were box We domestic with Mark, strong XX.X% few the export huge Steve well-capitalized XX.X% Smurfit part or base the And business, into today. we've after margins our to we as box the up that range. container year came first I said, business have still and acquisition, the base that the

a and it's much probably to EBITDA improve market, now the less market we're to We So business. XX% continuing the margins of X% and and the of business. XX% different were close

good overall. story a So I it's think

Operator

D.A. with Chercover Davidson. Steve

Steve Chercover

the and I'm interested in Covington or the Evadale Evadale -- situation.

that the of take it off bleach the all, what And line? beyond tonnage CNK? has to the Covington for is of containerboard, on first what's water And turning machine? So since conducive thrown cold potential EBITDA Jeff would

Patrick Lindner

Yes.

So thanks is this Steve, for Pat. question, the

prepared meet demand. of CX our the to in we we demand we as SBS in our customer tons. supply that and restart quarter Steve balanced. have economic end our in or our We others, Covington the CX his about supply is is are about now with we and machine believe our And commercial -- we capacity taking at half soft or customer downtime X We mentioned remarks, this million Covington. think have idled at -- due matched tobacco to of order the to because as So demand, our conditions relatively -- been print, planning

at our you're comment paper and it always locations machine is demand linerboard allowed future just we're for utilize to in capacity Evadale, decrease is this at plans at certainly way our before, that Evadale to on time. strong. they is question as can't your stage, will those the very seeing increase. ways a at really continued looking But of to most we not mentioned for look customers' in to to capacity continue on areas other increase and pay as us assets example producing Evadale future for opportunities, I comment or on one I Regarding or one that. And in our of changes our where meet effective

Steve Chercover

technological appreciate it wanted to that, then capacity CNK? from for just a of is Evadale I the but Well, the feasible And standpoint, know I make the machine. at CX to machine

Patrick Lindner

capacity at CX of that about machine XX%, Covington. Covington the is is maybe the So XX% at

So year. that relates and always I And in economic maybe innovation-oriented it the had gives guess person, innovation possible. is we an you the person, an anything I that downtime that idea some from to -- say -- as

look we'll all on we would look a at that and from that we'll would at so customer what at other continue several just but to mills. ways But our all including uncertain, the meet that accomplish it, And of different substrates demand. stage that how exactly and like this options at we investment return is our to look have, different making

Operator

Quinn Paul with RBC.

Marcus Campeau

longer about the bit starting This what for that broadly, Maybe business Brazilian into maybe talk growth? been demand that quite business. Can you fit been a strategy driving And box on is strong. your on term? has corrugated Brazilian has Marcus Paul. does Brazilian clearly demand box more how

Steve Voorhees

of the performance demand. in It market anything been strong, I been fits since period extremely the time, packaging and it's me very business business fits And Brazil world. improve And has you -- in for to because exceptionally with exchange any us. Let integrated on I because We're in America. within But for with if long have as XXXXs. the know that a there have our you corrugated fantastic of adder don't Jeff, on COVID to recovery. the culturally with think, is business for a it's to start same add? and has well both increase color have fiber-based big customers us we do the an region culturally, The we've business. it's us. overall organization It's business, low-cost North able ideas for the the it been a a like of worked

Jeff Chalovich

extremely Sure, really in pro the the an Brazil protein going And well. the in business -- really strong, point. e-commerce is retail. it's at business Yes. then very It's not beverage, this There's Steve. or food,

really really non-durable tight So the businesses positions there consumer typical that market it's also. again, and, are strong other

Marcus Campeau

All to right. do levels? compare your inventories, inventories How That's containerboard they quite right normal helpful. SBS And lean then be on now. and appear maybe to

Steve Voorhees

inventories been our as containerboard were think tight mean and paperboard SBS our Pat. -- our I very And we've I inventories inventories. And Jeff reducing

comments, you So home reduced the in significantly may I quarter. seen past saw pretty -- think you have we this prepared

reducing them levels our to think we that are we're for So operations. appropriate

Operator

KeyBanc. with Adam Josephson

Adam Josephson

containerboard Jeff and about the -- or or is reduce price Steve, box terms RISI published you talk increase, index? can containerboard increase in price how percentage changes the business about whether tied talk the of anytime much to And you want in of can your you that to soon?

Jeff Chalovich

Adam, it's Jeff.

differ. the that index the are for us. tied majority. of north there customers the So -- contracts And -- There to XX% indexes. were It's the have -- we that's

and pricing we what's large us certain overall for -- our price have it I have customers movements, customer. but that indexed model, We some they still what's but customers of that our is are customers way working to a for think more added. create work then extent, cost varies we're by value with the view the with customer-by-customer on And to fairest value

exercise. that a it's painting brush. with not a We -- not a it's really, So we're broad customer-by-customer do

Adam Josephson

is broadly, has Any Or in have just gone your portfolio business Steve, boxes there, is doing strategy the benefit you cartons. to shop you've I'd corrugated benefits thoughts of well the folding building successful consumer talked been? about how extent characterize would the And for how struggling, business a which being context differently? and for you about both appreciate. that the customers just any the the with would the of one-stop And and XXXX, how of

Steve Voorhees

anything wouldn't Okay. have Thanks for the question. done differently. I

performing exceptionally we're think I well.

quarter diluted success that think the somewhat we invite consumer I margins, the the is and SBS and then make I'd quite and go really the, has business seen of quite packaging think, our masked -- I sales it, has And if the call literally export the as of up of the in we've good. making performing out a And by to in in but very XX% in lower-margin side communicated we're you it's the margins, from consumer, packaging consumer, And have prepared through specialty corrugated the are we both XX% standpoint, when, EBITDA It about actually comments you side take end communication is -- reporting containerboard. frankly, fact, good. we've way. well corrugated the any we because packaging just been has to way the each relative measure. to about because pulp, gotten progress

just working customer there's as are enterprise of now, or XX of had between, by example-after-example across because work is we behalf -- tell to business. experience And customers, working you, some customer. packaging I'll company So our that our with on organized is doing reasons I how my you our to of customer? XX, we packaging of customer. with teams this we unrivaled got think included tell the investors were one by you, tell of want platform I'll the we've results we're are what an the behalf we commercial which it. communicate ago, work And a through business, the internal And tension and doing my customers our right that together the get I'll the I on surprised from across to years teammates

to it's consumer integrate we And are offerings, able whether our corrugated machinery. so or

digital working the our up that's have benefit, some nice quarter. this showing capabilities, and in We results and it's to

Now a to just Jeff invite lot anything and Jeff's to of add going think this I'm I activity. I'd that. led stop, to

Jeff Chalovich

it covered you Steve, think, I well.

that's our producer. one continued give enterprise. see a combining I'll oatmeal and the to We our had quarter, success good businesses, packaging we've of and the In spaces, in example with the innovation last machinery. large

of So our customer. a paper Longview is to oatmeal mill from the from packet

and that wrap box as around. goes goes We the XX that corrugated ours it have -- in carton the a

not over million our X-year all deal set machinery -- And $XX X a so I'm roughly we probably make. with that's of in So it years is products that and for us. the

to a Steve's the you strong have platform, grow to we'll point, and in highlight continue I So think packaging, we both. if

Operator

final to now time back That's we have my turn it over questions pleasure to team the all for the is for remarks. today. It WestRock

Steve Voorhees

management team. Porter amazing am George very and he's he's a he's does. Okay. and about and is he's an Yes. I'll available an partner, brought to passion Gondi, us And And -- the had been make incredible Mark what just will as talked just amazing he's Porter friend, to it's friend career, the been retiring. excited that And I by he an staying Jim involved just and Jim that accomplished staying with an with contributor a phone. to company be adviser and and

to to So friend phoning I when a look forward. forward issues have we go

call. I and appreciate engagement I questions, our next January. guess, on And the So to be and look we the call it in people, forward will

Okay.

thanks, everybody. So

Ward Dickson

you. Thank

Operator

participation. thank call. today's We your concludes This you for

You now disconnect. may

WestRock (WRK) 5 Nov 202020 Q4 Earnings call transcript