WRK - Earnings call transcript Q3 2021

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Operator

Good day. Thank you for standing by. And welcome to WestRock Company Third Quarter Fiscal 2021 Results. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. advise conference be being Please Instructions] that is today’s recorded. [Operator Thank you. Instructions] [Operator I conference hand speaker to would like now the today, over Mr. your to James Vice President Investor Armstrong, of Relations. Sir, go ahead. please

James Armstrong

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

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

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

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

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

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

David Sewell

provide sales financial to joined Adjusted will share. a $X.X company. robust. billion, an to per WestRock’s terrific us for adjusted XX% quarter, since of quarter increase growth like very record who American the e-commerce, was This James, performance during our today year-over-year. $X X% continued including and a start We as some with detail performance turn our the XX% up year. revenue of of to remainder sales EPS provide packaging summary key XX% I future. the performance $XXX the progress strong on the across of Ward industrial. continuing our box all and be in inflationary and XX% the well was you, our strong businesses, underway morning. fiber-based and per and in third I up rose beverage of quarter, with were environment I’d to We and demand third up on We demand delivered work we in be perspective North to robust markets Then it million to Thank will shipments the for performance good outlook challenging segment in for had well the day positions additional packaging over EBITDA as fiscal serve, generated food, with year-over-year.

We across These adjusted growth paper with major are outpaced combined inflation improvements, drove EBITDA the implementing previously of our even grades. our XX.X%. year-over-year growth margins pricing published mix volume price adjusted a and and and XX% increases gains,

enterprise, our that times investing QX of the delivering flows our X.XX to cash Last we also We balance down is free to continue used from times, sheet, at I our end business shareholders. strong to while in leverage net of in a generate X.XX quarter, areas peak. the strengthen of Overall, capital take value and at to each for program. I’d a and strategic our key priorities allocation the WestRock, to the walk executing meeting innovation sustainability, about our disciplined path these ahead. accelerating and progress leveraging through talked power of minute some like

on the first in job. the quickly We have been months moving four

our solutions. we and needs sustainable their to These belief visits broad value packaging the customers. have paper reinforced unique portfolio challenging visit continue spend opportunity through of time, packaging meet this for and customers solutions, time and our my help to our During our most I facilities with and provide have

review We end detailed portfolio the looking where have further is enhance initiated focus markets our a business differentiated to across rewarded. at on attractive how

in our is recently but early still the leveraging team step of stages this in power significant are of a the We process, realignment our forward enterprise. fully announced

our strengthening lead on disciplines solutions these for focus, combining providing are We our our sustainability sustainable to in the and to together and commercial functions. excellence, enterprise, that provides and enable innovation the us these integration Bringing activities alignment focus and company grow and across customers. innovative would critical

opportunities are We across maximizing focused business and portfolio. packaging the on our growing

in MPS Unifying the business our one serve packaging of former maximize productivity our global the operations. better to into beverage teams We and and have our operations food team. and combined commercial these customers

We across containerboard have consumer into consumer and teams and containerboard our sales integrated the combined mills our paperboard businesses, system. also one and

quarter, to and During strategy allocation our capital further sheet. the our disciplined third we continue implement balance strengthened

$X past reduced dividend adjusted the our and investment completed capital billion, the raised quarters, have by our strategic projects. by Over three XX% net debt in we

So WestRock. team of flow. The relentlessly and cash enterprise improve the continuing on leveraging to excellent the what’s returns, power is free ahead margins while for WestRock focused to deliver

investments invest will to packaging capabilities markets systems also our exposure such potential, SBS as will serve margin where to further cost this improve working markets our where converting value don’t in packaging, overall and our to customers see to This support differentiation. containerboard means structure. in our reduce growth We we to businesses. enhance system export our in low mill and These our our those

in disciplined remain capital allocation. also We our

maintaining remain our to consistently and strength committed business. are as growing to our to We ensure working profile of our sheet grade flexibility dividend. and balance the credit we our investment We invest grow

capital that opportunistic through returns future going value in our consider with attractive and as we significant clearly aligned provides and we capital priorities strategy have shareholders. our will made leverage provide in invest ratio allocation reducing our tuck-in invested to will optionality And share M&A projects return capital. forward. to We on repurchases opportunities we progress our The additional make

while our flexibility and financial strength maximize execute in required seeking balanced the our maintaining be to will We approach, strategy. returns, to always

As emissions. reduce to announced science-based our commitment we set lead target a sustainability, greenhouse strive gas in we to to

improve partner Sustainable our with full economy working their we packaging customers on a our for are to also focused to meet work customers our sustainable help potential and are the we fiber-based realizing we accelerate of to As to innovation demand packaging. is circular own. our critical improving to sustainability, pipeline

alternative can Our with This the WestRock great packaging power capability, new product fiber-based product appeal, packaging. into and corrugated to no a packaging, customer. produce and the leverages can recyclable our bring other to consumer curbside our capabilities the It be the recycled packaging. produce and creates is and of of a EverGrow great sustainable shelf example enterprise new plastic company leveraging machinery protects expertise has design that

look financial a the for with quarter. You can code Ward? QR about performance packaging. that, the third now ask will details And at this new exciting on in provide this use our Ward I page closer to

Ward Dickson

David. Thanks, executed well and third our We this. quarter in results reflect the

segment sales David compared As $X.X of These we year. and mentioned, record the we was generated Demand results per with range $XXX that EPS strong our guidance EBITDA quarter. of exceeded $X of to prior of increased outlined share. adjusted revenue adjusted XX% the net last billion, million high end

$XXX improving The all across cost on and grew our million Our and year-over-year of mix. and published focus business exceeded implementation continue more improvement of in our we inflation action to max than was increases improved revenue higher price earnings and pandemic businesses last by drove year-over-year inflation part energy, nature costs. the million. due of as of some chemical $XXX by costs to taken the Operating non-recurring Cost driven cost were year plan. fiber transportation, recycled the higher of business actions

in FY cash than In flow more addition, QX $XXX quarter reduce debt. quarter XXXX. outage use was that We of maintenance and majority free in in the to adjusted our million peak the generated cash

the is leverage X.X to approaching leverage high times X.XX of net our end target. Our times

and due Our packaging year-over-year. strong to continue published the This both increases. increases price revenue increasing sales implementation grow of XX% to businesses demand with

can cosmetics with in increases volumes. retail, food than such this Packaging External see year-over-year, markets total our and of sales. were economies increased slide, sales recover. as spirits packaging price to were on offsetting sales of and sales also you demand lower XX% third while total and our Demand strong in volumes continue paper were sales the as improved with XX%, beverage, e-commerce XX% paper quarter, in global up As more distribution.

We domestic and focused packaging, board paperboard on growing container our integrated businesses. are

containerboard We export are SBS also working to specialty markets. reduce our and volumes lower and margin

For is reference, market the lower margins of our combination XX% below WestRock’s containerboard XX.X% EBITDA the to margin adjusted average. in and export compared specialty total company as SBS

and look improve profitability important manage pricing inflation our we We X.X% our $XXX EBITDA Increases improvement forward. improve on to discuss current going believe a As in to sequential it’s progress. we basis highlight us updating up segment XX% enabled on sequentially. We and adjusted by forward earnings, our to results up quarter-over-quarter. in We trends. to you significant will revenue next approximately also million our reported actively outpace mix, with

While we our weather benefit of quarter, period. business segments our had in quarter from maintenance sequential the ransomware tight. in was remain the the peak Inventories impact both third the second outage and

XX.X% Turning reported American corrugated business $X.X to the our Adjusted were and XX.X%. segment revenue EBITDA and EBITDA segment adjusted North of for were segment margins million. Brazil of our results, corrugated margins packaging EBITDA billion our adjusted $XXX

tonne cost, was versus I of recycled outage across QX, increase broad driven transportation, which to and shipments remain pricing of million QX. As energy box inflation X% increased mix mentioned levels Inventory came we set outpaced $XX from sequentially. cost peak remained up corrugated higher strong out and $XX mill with along markets, were end demand fiber by QX as per packaging before a Corrugated inflation Sequential costs. chemical our quarter. low by

quarter. We in tonnes maintenance downtime fourth outage of planned have XX,XXX only the

to increase expect continues of production expect market Finally, the and to full to in be is in fourth the mill the as the end ramp fourth mill fiscal the fiscal the quarter. continues the mill Florence Brazilian Três we well, and operate Demand and we at quarter production very up. Barras levels at improve strong margins to

segment quarter Adjusted XX.X% billion points segment sequentially. $XXX packaging, Turning basis segment EBITDA reported million. and up the were were consumer adjusted EBITDA margins of revenue XXX of to $X.X the and in

paperboard Our driven all sales and demand sales improve substrates food sales. Asia, sequentially. in Packaging to up increased and higher and North strong margin and were sales by packaging paperboard mix Europe America, beverage and in continues

seven-weeks strong backlogs Our six-weeks our remained and are grades. currently very to at across

production operating we mix, and with exceptionally performed the of flow-through high system strong rates. mill the price saw increases. price On benefit published well of Our

the reconfiguration as sales and higher has had CNK tonnes increased pulp significantly, the end of have and liner of July XX,XXX we year. Texas CNK the which normal from since containerboard is XX,XXX higher kraft sales mill. inflation and we at up this Our of less $XX Cost than at mix produced improved, of QX, our commodity Evadale, sold Many tonnes costs of XXXX. including increased levels input -- FY our throughout per mill. OCC, a up of tonne is In

our third our been we significantly end inflation. fully at previously those offset have containerboard implemented successful the increase positive. in of spread inflation the in However, have price quarter between August. be increases implementing price system, turn published April price across and The In which should the fiscal published system

implementing in in this We export quarters published accelerating XXXX/ in price containerboard. and Consumer of more are generated into pricing increases higher three paper flow realizing year. first $X.X adjusted continue free We fiscal also billion kraft in cash fiscal will than year the flow-through

net debt KapStone the XXXX billion. quarter our second in adjusted of the acquisition, $XX.X at Following peaked

net with made this $X.X We in quarter third progress debt. and debt exited adjusted reducing outstanding have billion in quickly the

are target. approaching net X.XX quickly our high We of X.X the leverage times to times end

redemption reduce mature to that announced million our our continue in the We in March which $XXX occur sheet. debt balance September further. recently even will notes The using debt will of strengthen of our cash of hand on We XXXX. and senior redemption reduce

improved fourth be guidance, costs. will volumes, fiscal minimal offset higher recycled sequentially partially higher and maintenance productivity. downtime fiber, virgin by fiber prices, expect to we Turning stronger energy scheduled and This quarter

will share turn EBITDA and $X.XX a expect And range result, we to $XXX $X.XX. in million million of earnings adjusted segment As it $XXX per now, back be in David. of over to to the adjusted to I the range

David Sewell

company We to shareholders. and great improve while margins, grow to have our customers, teammates value our opportunities and providing

rapid are on our strategic We making priorities. progress

First, we enterprise. are leveraging the power of the

commercial markets enable are agility we market will our several that changes in specialty made And our align efficiencies. to containerboard alignment, export, we and minimize structure deliver This leadership our determine how strategy. low SBS exposure grow to new we further operational margin markets. value teams This faster high greater working enhance quarter and in and and

the to excited growing Second, of partner sustainability with opportunity to innovation. we and are lead the our striving customers, in to improve sustainability We their accelerate remain about packaging.

solutions. excellent As a emissions and earlier, making setting gas plastic greenhouse replacement progress have we commercialization I to committed on our are the target our to mentioned science-based reduce

Finally, allocation. capital we will be disciplined in

As cash challenges. difficult we more team successfully we work. achieve and and and have differentiated ability we create to XX,XXX am we goals will customers’ want and strong bright WestRock grow in solutions our their that achieve solving differentiated to shareholder most we The as levers I incredible thank earnings. our value, to continue deliver and our portfolio, leverage customers’ provide our truly to flows excellent With performance. committed our value future to complete to sales opportunities create target, is at I team for confident have This is utilize value. multiple is our that a members to our

James, are opportunities that, concludes ready the about now my remarks. we prepared ahead. With We are that Q&A. for excited

James Armstrong

David. Thank you,

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

We take as may will get time to allows. first our as question. Operator, many we

Operator

Thank you.

question the from first Pettinari Your line Citi. comes of Anthony of

Your line open. is

Anthony Pettinari

timeline then, there you as or anything Good strategic of your look morning. that strength kind at particular David, review WestRock as a people within within a months for you the technology, do to organization? particular the completed? stands processes might be in out when need few is first largely you And the, a have

David Sewell

Yeah. your question. A Thanks, couple to Anthony. things

the that here? rest do is, we things stages your months in as approach, strength I that the biggest people, leverage through -- will other and we changes which I strategy. forward make we strategy opportunity few efficiency to I step to supporting think think continue and our value to question see How structure than of the of the standpoint throughout do really we looking announcements I have standpoint, and see the And the tell But are seen it And are that to the who year activities progress, growth we the that. of were will are the our do have goes been what’s review a is tremendous, portfolio. those. in we you there really I announcing be have important. unique have I second strength I both part been four from an tremendous the in but you our the the first to and And early our a of will

huge are customers who innovation they approaching us both buy is and sustainability, want our annually. customers. enterprise and up $X billion to And consumer Our corrugated from with a partner on for demand solutions which

that. productivity want we can have Pat where focusing well get our to continue growth, on So to market as sustainability, excited to continuing innovation relentless we and be and as lead to are our efforts. push And in we rewarded,

rest answer your timing year. the So, I’d throughout of be to guess, I question, say, the will the

we executing we have of piece cost The really acquisitions the that. our take I from see structure I and think with And made people opportunity that is in synergies I opportunity was is think the portfolio integration broad -- continue of just out that further and first to our an we our systems. to the that. strength the

So see the more so first will the months and that’s lot I year. it the in where of I see four rest a think here far throughout you

Anthony Pettinari

a what comp say service trying underlying seeing you just COVID, higher you there’s moving moved and is Okay. that or and what… substitution? reopening asking, possible this in pieces evidence sustainability demand of understand with market? in Are just it Just because think then to is That’s lot against to food of plastic And very it’s consumer, helpful. a sustainable because real

David Sewell

Yes.

Anthony Pettinari

Yeah. What’s the underlying growth?

David Sewell

Yeah.

business. our consumer about excited are We

know, our also consolidated you beverage business we back those our consumer on our the MPS exciting, can pulling growth former And business. business, that’s we with together. but really and efficiencies As the just, food from have the bring end, again,

is the their We big are margins, bit. a consumer focus a seeing improve And back, is for business us. retail exciting come about really also obviously, what’s ability which to quite

business in unique with machinery allows tie for Our solutions. the really

are growth. has consumer opportunities -- we tremendous So further we for think

the and Europe. both growth We are U.S. in that seeing in

this and So continuing we we see year the go the of XXXX. into through rest as

Anthony Pettinari

I helpful. over. will very turn That’s it Okay.

David Sewell

Thanks, Anthony.

Operator

Phil question Jefferies. And from comes of of next Ng your the line

open. is line Your

Phil Ng

you Hey, to require certainly the more that trying are integrate noticeable goals implement to to changes David. of execute amount the Curious very and forward? The you are going kind looking up of do a business extract further the accomplish you exciting. to to step And would synergies, here. capital people you think from right on have

David Sewell

been Yeah. The Phil, question. the thanks have people for tremendous.

our leaders have businesses now. leading right We the

capital, The the I bringing And we as excited focused opportunities. are out forward. efforts piece be will evidenced productivity extract the on our together. -- and cost So mill path further bringing spent on really am to additional about by there really capital our systems

$XXX We in in have XXXX billion to committed $X million to fiscal year CapEx.

So with we extracting efforts, of to confident really out seeing we our along our we and and going are number, value operations. start are comfortable with results and those productivity are that investments

Phil Ng

Got it. backdrop. And Ward, question certainly, for, then maybe very the a inflationary it’s

think year-over-year? do in cost guidance, reflected behind do drive August the the you to still at the cost you of kind you assuming headwind. fiscal productivity indexes When price expansion quarter going be we the curve have to by still for price margin the are fourth in think I containerboard, implicit QX enough increases and your is and potentially XQ look

Ward Dickson

Thanks. Thanks, Phil.

am to bit. you I challenge going little a So

more between we year-over-year, at a trends inflation. we our and price relationship I actually it’s think both are inflation positive our driving and than price look price are, -- if sequentially you realization

increases $XX increase the guidance. in But embedded have the and as fourth $XX have OCC largest also that and inflationary the flow-through clearly continued quarter, we item into our tonne really the got a it’s Moving to we have, in published flow-through we consumer from the accelerating realization the all April. containerboard the the of across increases price in of momentum PPW have the across full in the business. price that published price we the And increases the of quarter

what head quickly. It ramp to we into QX. I start generate QX, in As get think and will will really in QX the pretty then be in fact QX up it -- if We we does into in will -- much QX. publish, PPW benefits won’t move

are our earnings that price So, QX think, of actually, part are part well. but the guidance it’s we from the -- is exited cost as relationship I and to also it’s we growing QX outage, we its volume, our of sequentially peak maintenance fact

we into think momentum albeit where we cost as fiber and So we earnings an have recycled environment year, we cost. transportation move next have in virgin elevated

Phil Ng

Got it.

Okay. That’s helpful, it. Ward. Really appreciate

Operator

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

is line open. Your

Adam Josephson

and very just David morning. much. good more… Ward Ward, Thanks one

David Sewell

Good morning.

Adam Josephson

about guidance. question in XQ … the assumptions embedded

about that? So in up will XX another, compared any you or please potential increase it insurance for in impact just guidance I in from the third refute that expecting XQ that to and year the in previous then insurance are you XX -- thinking, any August, that call assume then what confirm was was price fiscal up guidance? it, proceeds XX what it And OCC full be in to are so July, your

Ward Dickson

Yeah.

So, let give will and I then the will… I first quarter me take --

Adam Josephson

Okay.

Ward Dickson

second we to … April. half minute on back gave in spend guidance the a you that the relative

QX $XXX a a tonne QX. So was cost tonne is $XXX to our for average a $XXX embedded tonne. What’s OCC our in guidance about about for

to from we the QX at simply being the that both been driver gave on full very August for transparent the can think into here price what -- What elevated But than well. call. have well. about end have inflation our been always assumptions realization price, we some in environment. the you the be guidance we and done implies increases I billion consistent the as with very, year. from $X.XX OCC as and guidance sequential full tried I of has have lower the year for had of very that that I September So midpoint -- April the Really April It’s

the assumptions $XXX OCC go then So to we QX I is, back transcript tonne. our would exit think we a can you around and thought probably with

XXXX. little been filed our insurance in April. I gas higher ransomware cash that portion really had But steer be that to a in Adam, quarter guidance recovery have we have our remained natural because related have higher. clarity business moderate also claim. any to And what we through then able $XX is way not generation fiber carriers will and claim our have start for we then good and am going thought have very I we the we and elevated and to have the the $XX I our current going higher have, The recovery, than claim. not we to don’t the we I we bit it’s timing assumed that So would feel -- of they back costs momentum are with about in it. and this embedded flow interruption virgin still the to just clarity recover FY just don’t -- have to that as I communicate I the get confident around we more have

Adam Josephson

one when go much it’s for the just easy Ward. to export is containerboard sustainably of Yeah, how you means, about export pretty it’s is but commentary? it obviously, when the wondering exposure Is plan now, direction, be appreciate as David, involved acquisitions other not things in So that how domestic to times capacity? your in in then, that. are reduce some to do, to good through booming more thinking it I is because markets through it market? demand that independents, difficult And you, some just in do that, opposite on the you

David Sewell

the Yeah. is things, domestic enjoy Adam. on containerboard of good A we margin. are there attractive very I some appreciate and question markets that couple that,

what what the do years standpoint. integration several will a is we And around from to we successfully continue XX% and want integration XX% to mid-XX% exactly have we from our said last be We to do have to that improved over said. you vertical

we systems. will plan happen We multiyear continue forward will operating in continue that also and our to investment independents we look of to move a acquisitions at have as bolt-on

that there desire want that going expansion will this think in right get the our So is and work that there. faster. the our segment strategy footprint you optimize will we of and in part think to path grow, what manufacturing markets support result see right be continue and that’s now to on and to to we invest to to have is a a get continued And as margin accelerate we we moving I great that’s

Adam Josephson

so David. much, Thanks

David Sewell

Thanks.

Operator

[Operator the next from Cleve question of Instructions] Your line comes Rueckert of UBS.

line is open. Your

Cleve Rueckert

And very and going Thanks your excess I the the to require Great. acquisitions the today, can color a bolt-on couple of for appreciate have already. and really you on for that guess, help years the timeframe or box it you thanks follow-up us improve sales in for just then, what’s been to discussing? the changes and was of tell capacity that your investment on it much a -- where it’s wanted ask some the, for I I quarter? strategic plan, it to market. have that all of focus investment to side business integration integration again, and we other plans has any a these of sort is in improve are the do the going type force been containerboard

David Sewell

to We where progress the -- system, that for in question, thanks of I exited that’s want we QX again, XX% at continuous believe exited we Steve. integration So be. and

on investments where we bolt-on go system as which be you be focus our be to you M&As said, continued and to something see we then as we part really far to timing, As to de-emphasizing certainly strategic progress also in, right there that are going as to want to we but that with will want that soon that. in want with will dial that shifting help And looking markets that where exactly, our will flexibility mill is now support system, and well. we our of at as strategic that to in, it’s and into play providing it’s play and don’t going you as go as that again, going it’s share we is

want with turn share to you ready that. a give am do going for this I a just in further to approach as yet to to dialing timing, to it’s any we over plan the And accelerate it -- be soon where will company. that of want lot important to Ward, as So this, other multifaceted I exact but we not a will so. as commentary. is to We we you, start go part an you because

Ward Dickson

Cleve, our would what box invested we note that, I system. in have is plant

If you have look over to million the last system over invested EVOLs. installed we our five upgrade have XX years, we $XXX and over almost

had have we And to continue vertical tuck-in been we will acquisitions and we on have we a supplement well path for that. So that then do more with will as it potential of integration.

Cleve Rueckert

Yeah.

it sort sales guess, that So, and almost I of this it we go? I at how know, mean, focus. stay tuned more sounds I will like see focus of don’t point an investment But, guess, I

Ward Dickson

actually Yeah. I it’s say both. would

Cleve Rueckert

Yeah.

Ward Dickson

it’s both. I say mean, are… would I we

Cleve Rueckert

Yeah.

Okay.

Ward Dickson

facilities we focus piece. be of optimize it’s strategic be there done on and we I M&A how will piece have what mean just investments there point do have on we the part our infrastructure what also and our will towards be will there and

Cleve Rueckert

Right. the detail. Right. Thanks Thanks. for Yeah. makes sense. That

Ward Dickson

Thanks.

Cleve Rueckert

has to at-home on heard OCC of I thematic lower the one reopening just out the guess the a just one wanted the and I of increase seeing year. quite last sort follow-up throughout just things OCC were a to half I that year in some recycling availability. was the rates that OCC we bit wondering in system played part of middle of you any shift the through consumption. with are am within OCC as availability your sort if first

David Sewell

it’s we single single we done we operate many actually our of XX some that our ensure we Yeah. smaller facilities and last we and plants is capabilities X% the operate made of can up system what in streams you because the capture we have e-commerce That’s packaging over own, own sort actually our stream some investments the good stream. question, of inside from have that generation recycling to is our a interesting, year know, see really facilities. our And

been also a actually has tonnes of up investments so we security to we point facilities And have… we generation the have we and in but sure can than we shift. make consume, remember, fiber capture made manage more from that our So we view,

Cleve Rueckert

Right.

David Sewell

with … that fiber relationships into other security got brokerage generators our to of OCC we ensure system. have

Cleve Rueckert

quarter. Good Thanks, guys. it. Got this luck

David Sewell

Thanks.

Operator

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

Your open. line is

George Staphos

Hi well. doing for are questions… Thanks everyone. taking the Hope you

David Sewell

Good morning, George.

George Staphos

Hi, details. David. and … providing Hey.

So, want to David, a ask you question. I

consolidating it’s combined frequently the your have number you that in sort what that? and related the you to quick of of you Given haven’t could quarter around kind in on your and do question been I million a is both missed in corrugated accounts did point, on if on deck customers I us experience, think over doing What you, sensitivities up. $X for running But answer? who long. for and and consumer very enabling see And operations And you so revenue are the I then about had perhaps, buying key the the of past of There coming itself detail, it, adjusting effectively? WestRock that not is forces. and update experience do sales

David Sewell

business. value. That’s brought $XX previous my part an the fully billion brought for to From we segmented more into brought where at We what life acquisition And George, going Valspar. those drive Thanks, really exactly that side, of I we Thanks. am where We experience of the in to back Sure. value did. under infrastructure of I was integrated standpoint work customer standpoint, Sherwin-Williams, lot an to operations together being question. appropriate. teams We really solutions. part the on then with a that team efficiencies. one bring leader drive proud of And really to a -- of from a we

playbook do I you to that when that don’t just ensure I a on a there’s acquisitions bringing So use, bolt-on. that

how There’s it get excited growth, good do they you important business value. lot further And to bring am do think more this integrate really the I have a to what and more the to also here. the really throughout continue my been of career. for about I us I done it’s just synergies opportunities for value on infrastructure. You then customers, drive And that’s drive and about bring and where it excited opportunities

far billion that corrugated. million we -- the piece, customers over yearly in in consumer sales as on enterprise about $X will we over have buy in basis a $X and of $X As million approach

And there example distribution there with which for even with you all e-commerce. customers business and come is when our wanting with products. us Victory tells our Packaging that machinery you in is and obviously, of thought So our at I highlighted value business us solutions tie we a is, that, great EverGrow, to look data to of

achieve getting their hardest goals. we us and Those we enterprise are where our us we sustainability. So and pushing help solutions, is, for They combine for are we want focused ones are sustainability them in to are know we customers extract the And to our the customers looking are that. bit to and innovation the can there. maybe will complete seeing Pat, a have and it over excitement of what doing lot a you are little just rewarded that we we turn I on value about enterprise

Pat Lindner

morning. David, that, and good for Thanks Sure.

in progress the merger. and good making the the are up from we of mentioned, time billion $X enterprise $X David almost increasing sales as our about So, at to billion across

good really progress. a that’s So

even our packaging, and and the forward, are this we was particularly very tertiary importance mean, primary, only are were commenting put they go and to we do on of the strategic customer solutions, those on a we unique as accounts. going focus providing important that. can that to I ones WestRock more I earlier week top think, optimize we often is to you I with you secondary gaining have We part in carton which every that. too. important have some displays mix a pull business, automation, of talk time really a all of the carton, that’s now, Because strength with display in in digital it but a retail, a the don’t those folding it unique have a together, drive capability capability. machinery, about

with So examples secondary, there’s for And all examples we we put have to focus opportunities in chain look are from those a we successful, many packaging. sustainability, in value as done lot past, accounts optimize where way commercial primary, even of share but future. standpoint, us the you have been innovation, to the going throughout the more we and certainly a to more top those on forward sharing tertiary the

George Staphos

-- Thanks are that. going up. for just prices I

to you the billion great is $X at prior in are So relative the $X.X quarter. billion

XXX you quarter. quarter, Just XQ in can Good quarter. just the accounts, you. added about the far and can what you as talk fiscal here? last are Have to shaping at then are up so on my talk of in down accounts earnings? about volumes the follow-up you number step you how And Thank early maintenance luck your

Pat Lindner

Yeah.

up we So on XXX are just XXX. to -- from the the

to customers. So we add continue

customers, as leveraging of it’s climb overall not power important enterprise. just well in cross-selling, of really as only to revenue continues the us, that the the and number So the that’s to but

off really if think I I second will -- it current starting question, your was quarter is the just… the how I and quarter understand around

George Staphos

Yeah. It’s more Ward. for

Pat Lindner

that do one? handle you Okay. want Ward, to

Ward Dickson

in of the yeah, sequentially. There so The reopen everything to one into So, get obviously volume the go -- our comparisons the calendar driver as sequential the comparisons shipping I across of demand contribution of more year-over-year strengthen volumes. the started end think, that’s part to is when day businesses. earnings, started -- of the we remember, harder to and have sequentially, both earnings earnings we a year

Your $XX question, contribution $XX say, earnings I’d sequentially. million George, XXX,XXX that’s maintenance it’s downtime tons of to sequentially. almost million down

Pat Lindner

Thank Ward. you, very you Thank much, guys.

Ward Dickson

George. Thanks,

Operator

question next from Partners. of Mark of line Research the Weintraub Your Seaport comes

Your open. is line

Mark Weintraub

you. Thank

sustained the margins you a think, First I getting points there in is When one, about businesses, basis equalize big been basis right you higher now. you the like pretty looking that margins Or it’s time that various these other capital are and something long for there those containerboard picture and is think substantially an on, be to consumer ingredients, at average more their businesses? that will think reason spread the business over business, as two consumer the for packaging, businesses XXX than in time? question, you corrugated have intensity and in

David Sewell

you that our to margins? corrugated want I talking for it. understand matching the sure question. margins thanks make about I business consumer business Are Mark,

Mark Weintraub

margins. the those two, Comparing EBITDA Yeah.

David Sewell

Yeah. Yeah.

more drive goal to at. level to where is continue So our attractive we our packaging to much margins are to a

sure but the we close but want in our all well to we further have margins where we you making. can will the progress go am we consumer, corrugated not get think really with to way am very that. We are get know, to to I I to, get pleased as

points the EBITDA have I consumer, over margins to XXX in continue. quarter improved on basis our and think sequentially we expect that

there. about are The in that is we reporting paperboard other our thing sales

So extract our attractive. if external more margin the you even margins SBS, are lower

business consumer our exposure focus former margin the opportunity it’s expansion. with plus our reducing in that enhance really business, why that’s with replacement of combining that SBS, going market So the external to acceleration plastics our we MPS that to opportunity, of the believe continued

Mark Weintraub

there’s then up -- you That’s but indications and earlier, to next you had in And Can Great. apologize various technical be some picked us capital bit the to more average of I little kind a be as give if of might view CapEx I some difficulties goals. have what helpful. to general going the a achieve years? couple

David Sewell

fiscal we maintain I a expect XXXX. would for moving that year come $XXX million to of with out CapEx have us billion Well, $X to range forward.

our with capital opportunities allocation, at look will though. We

where return are costs, out So that. CapEx at have, will the So the with look provide do with if strong great excess there’s return? generation, we drive further we to cash we with we going at best look the to cash

repurchases. other and We look bolt-on at will continue we at opportunities for look to will M&As opportunities and share

where CapEx, that a standpoint, excess with then cash the with want our and go debt sustainable very we where to opportunities So we allocation flexibility. from we in with and are we dividend the be a levels, are growing our excited with for capital about brings our and disciplined

Mark Weintraub

it Appreciated Great. you. hand over. will I it. Thank

David Sewell

Mark. Thanks,

Operator

next (sic) from Montreal]. Your of line the comes [Bank Instructions] of of [Operator Wilde question Mark Seaport

open. is line Your

Mark Wilde

Ward you of projects five over possible over as Hodge, us there the number and converting money, amount business that’s years, the recently we years and fair these if been the to about thinking back about converting at at of has then idea. in some David. XX to were and in of last morning, Good the Different the businesses, it what is a mentioned, investments there Florence. firm, you I give going most really last years but at mill eight talk go both cases? into are Hopewell mill examples When get mean you a

trying like what look might So a forward, be they those sense to different. get projects going how going of -- might

David Sewell

the will over commentary. Yeah. and Thanks, to Mark. turn question. it I Ward then I start with will Appreciate additional any

well. really bring Florence. We Florence things like we our Brazil earlier, was to us. Barras $XXX had believe, alluded Pat was, EVOLs We they a I a Tres return to investment. plants. great investment, million invest to do in investment As We at the continue for conversion think as million obviously in $XXX look

really to in made large So have our some continue systems mill our and we conversion we in make plants. investments investments

at One of the our flexibility things really systems. looking is that we are in to mill

into strategy provided an higher business. Evadale, ability we margin SBS So lower again, into if margin you exiting at businesses, recall of to get us CNK converted get SBS the and that to

flexibility footprint now of options, look no But So those that that, us produce on was going to as growth for segments, we can CapEx. some to that. you if margin continue to demand, the that. to may in capital at at well. which with needed as turn best provides flexibility require mill certainly them what those we in I do our depending high to will in Ward, we do look to return we are will continue But invest want it there have system, one we we over

Ward Dickson

I Yeah. the side, And did box corrugator on have and actually there’s of upgrades. woodyard projects couple are years upgrades, We the focused costs. I the on in plant of [ph]. for on projects continued EVOL mill that ago reiterate key kind deployment, will other Mark, mean, debottlenecking system, that the greenfield some a of we numerous then opportunities Sealand build the the in made again, things investments container of reducing

Mark Wilde

you for thoughts my been or of four wondered to I just incentive you terms would at David, follow-up, five changes how in months have months any like sales just WestRock? comp set structures up helpful. on for That’s potential now, Yeah. in the

David Sewell

to we where want our a that’s with it’s to Mark, really really reward Yeah. grow. sales me, important because team good question, for

behaviors sales we our reinvigorating and revamping do. to to is that reward plans want of incentive part So that the

something we on as So us, it’s a are XXXX, right with now. year into go teams high the for priority we that’s fiscal working and

Mark Wilde

Okay. David. I Thanks, over. will Very it good. turn

David Sewell

Thanks, Mark.

Operator

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

open. is line Your

Mark Connelly

got two things. Just

David Sewell

Yeah.

Mark Connelly

of more tightly operations? the align David, with of operations? expecting you in the that into Does In box paperboard combining mills benefits give little new more between are manufacturing the and WestRock companies get teams are us from separation now put more mill some strategy that converting been and was approach your common the this containerboard to the that can acquired. place, and insight you to the it’s containerboard, your plants a board

David Sewell

on mill what supporting possible. we -- allow allow to systems effective as most way our hope and possible the be is being we focused will converting XXX% Actually, and to efficient our as systems

and structure efficient structure allowing our demand chain chain supply ensure this we us of I service. believe to again, going -- about optimizing supply flexibility, with benefit about wake quality, safety, both And as talking thinking segmentation going to with that. to shareholders. the and they we be up well. customers and the are a strong understanding -- focus in So our that’s most really do This do just and it’s systems have mill some the our we the how day, every have and allows cost

Mark Connelly

Okay.

of goal a Does I that question, Weintraub’s as reduce into introduce those up mills really it system. your capital relative you Now system competitors that containerboard that have lot CapEx significantly Mark your fiber is you your second requirements the ongoing to in about recycled a of your and on peers. some to am more more recycled wondering question, intensity reinvest systems following do.

Ward Dickson

Yeah.

Ward. this Mark, So,

for than you virgin You know lower I CapEx virgin, is recycled a mean, the are XX% our load the recycled mills. XX% right, virgin, it mill fiber and is is approximately the for fiber mix

very have in terms mediums the range a We a we positions have our support recycled wide always like we the ultimately to lightweight, customers. and heavyweight we to of us customers have Because and offering that of balance miners that broad in ultimately think of system. virgin

the but able And, you be think, we it I Mark, fiber the to ask mills mix comfortable our -- to have about is see in David, to balance. we appropriate, always we whether -- you a gives some is and And to… system flexibility have comment so, remember think got again, I will balance I another felt that across thing with have

Mark Connelly

Yeah.

Ward Dickson

recycled of as take mix conditions fiber versa input more … our virgin for system introducing market vice advantage those cost critical into and change.

David Sewell

that’s throughout I shift needed the Yeah. the a of, a Ward, is pivot our right we think from benefit on. a as I and it system. standpoint we flexibility in to hit theme and there here position provide our can you broad is best returns And think, think, great I customers of and portfolio are to our service

So, I think, you that well. Ward, covered

Mark Connelly

Thank you. helpful. Very

Operator

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

Your line is open

Gabe Hajde

David, Ward, good morning.

David Sewell

Good morning.

Gabe Hajde

you kind I it have am I you a guys seems and you about beyond your appreciate guys for the I into you like do, investment-grade you mean the bound just to afford time rating. were revisiting spent obviously, while, leverage guys have would But I committed an upper thought curious target. curious thought like any just it to put some it, a if acquisition I doing are -- activity. guys -- do some am pretty flexibility to just But that? tight window. like things it seems to you of

Ward Dickson

us pay then above up that. target brings are debt opportunity into grade We and the that -- short for talked help we discipline consider to get profile, lowering record within and the we have about flexibility we some lot. the expanding our saying, and a target in We to of organization are doing question. answer the past talk do to investors investment have provides of a had with like think period investors the it. from than track range, right range time about about the you and credit and had and back if I Board us talk part the this have generate and that Frankly, to talk capital to the We -- for have of And the we a not allocation. lever the us. I tightening like about exists others ask target to the prohibited down It synergies

sheet I conditions execute that to… that strategy felt in and has the we be to us supply our strong David, this flexibility period cost that and to a input balance to to some do business So demand able need always period. the also from want variability have have gives and you

Gabe Hajde

Okay.

Ward Dickson

that. … add anything to

David Sewell

we is Well, the want put allocation our I our return. to can just get as best where would where we capital approach, we about say, cash talked

reinvesting a share at part haves with should must cash again dividend, additional So look will we business, how repurchases investment growing we available are how investments. should And -- -- our or -- sustainable the in of the grade the profile. look and we invest at at, that, even should that look

is look of opportunities a really XXXX important. that. with But earlier, do pay as at so available calling bond flexibility Ward in have our I use So in our quarter to will other the mentioned investment, that of to And fourth cash. cash good was areas we think a we continue still additional to

Gabe Hajde

ideas are like it’s maximize out you. there -- that’s feel something the one, format or strategy, off about or of Thank lines last is to table it might returns? appreciate I mills to it you give on you the anything you that have is terms investing can a or you us up things could open and certain one this. like divesting mean of may of you include going keep it’s more way and things I product to everything or couple look like figuring an Okay. the And But challenging at. in sometimes

Ward Dickson

approach is I going strategy to you always that when Yeah. table. are the appreciate follow-up question. on My everything’s

You evaluate everything. have to

going our evaluate that after, structure our footprint, that markets strategy. to the are have we supports We the businesses, our

in So you the But goal on with that improved organic continue capital. are communicate our to strategy fairness. at looking what return question, I would profitable the throughout results we to margin And tell we means. will expansion growth, on you of answer ultimate be your everything invested year and will

Gabe Hajde

you. Thank Understood.

Ward Dickson

Thank you.

Operator

the Weintraub next Mark Partners. line of Your question Seaport comes of from Research

open is line Your

Mark Weintraub

you. Thank

a Just if I could. follow-up, quick

pretty have a tight got packaging page lot I you think of have of that price et grades published through, good the into consumer through cost containerboard how increases to packaging you which pricing? flow most of the recognized price flows consumer a on how be the there tend cetera. that’s increases in flow and just you Can also As that through have and XX, understanding the elements to might degree remind us

Pat Lindner

This Great. Pat. Yeah. much. is very Thanks

So a let handle standpoint. commercial me from to try that

is pretty you corrugated bit to of a months of majority and -- as as containerboard mentioned, containerboard PPW that, the number So market, indicated more it levels across three a different because through the the is box have and the those in routes understanding is good of different to our Consumer in to integration pass months linked in we four substrates substrates. different across of past. the complicated and

periods. in flow consumer say different different half is a that to use number tied so and of the in capture through And time mechanisms And in I PPW and those segment. we value aggregate of about can pricing

The of are based of amount bit other on us models a fair and pricing open models cost quite a gives flexibility. market, which also

way value the capture that’s we part lag And think and so model have the of we the and is that the price pricing in overall of about the discussion is the just overall with negotiation type customer. just

more right to through will As a that and it away. our that continue It’s increases to nine wait continue will year far can months for all and fiscal third case about really started to quarter months for flowing in fourth it indicated, to the year usually based the flow in quarter published you months start six the is into doesn’t see price as of starting flowing It But date Ward timing to see We in accelerating It’s through. and and increase. concerned, ramp as through on months. up the again six we will fiscal with the in XXXX. price some and nine it the XXXX. it’s previously through flow published

Mark Weintraub

you. helpful. That’s Thank

Operator

back further remarks. to turn this I Armstrong no questions any time. closing at for it Mr. would James are to there like And

James Armstrong

you joining you, our Thank for and thank today. call Operator,

any great further please and questions, reach hesitate out have day. don’t you to have a If

Operator

participating. concludes call. today’s you Thank for This conference

You may disconnect. now

WestRock (WRK) 5 Aug 212021 Q3 Earnings call transcript