WRK - Earnings call transcript Q4 2021

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Operator

Ladies and gentlemen, good morning and thank you for standing by. At this time, I would like to welcome everyone to the WestRock Company Fourth Quarter 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

If you would like to ask a question at that time, [operator Instructions].

to question, like Instructions]. would you withdraw [Operator your If Thank you. like I call to over now to today's turn would Mr. James Armstrong. Please go ahead.

James Armstrong

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

us Our today. incoming Alex room is CFO, Pease, also in with the

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

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

slide non-GAAP referencing will also the the measures have call; we reconciliations measures We be of the directly presentation. financial the comparable of in appendix during most provided to non-GAAP these GAAP measures

that said, it the presentation our turn slide And is I'll previously, mentioned with to on As you available over David. website.

David Sewell

business observations It's I of Since see we moment, opportunities and Company with the clear for first, end that would who the for XXXX, to now the full-year day. Company. outlook clearer work quarter, Thank But I'll the picture fiscal some I've dedicated to the calendar you make approach in XX,XXX performance tremendously challenges currently have substantial we joined both of is dig much WestRock, and you, walk had year. into every opportunity personal and like James. a hard a In through as the I a employees our WestRock as our our it. great

me. our important greater Investor outline to us vision to and now been opportunity end in to of XXth, us provides To Day with remains solutions of taking strong. where number this steps focus will that success We flexibility up the at for business in our And start, things growing has future broadest then of is number serves and in clear between are the and a future. greater wide but WestRock detail are on will on a very industry. set the and Already, customers portfolio greater packaging range our for Our markets, be valued. February the of in differentiation there markets

more we have forward, to Looking efficient. be

and and innovation on strategy. we to efforts, our accelerate We to move that. our we're And core have focus faster have doing just

were our volumes significantly, the the million environment. these year-over-year customers. our volumes our teammates chain with implementation increased Now, achieved Labor quarter, our box to improve quarter, of which fourth efforts for production down $X.XX customers. year-over-year, a down prior We're quarter, X% disruption to possible Adjusted increases the price and also and We billion to a do. guidance Packaging all to a per Packaging quarter to year. supply adjusted business. or dedication and September up we came inflation shipments X%. volumes shortages we of pricing, than increased compared realized we than Overall in sales inflation low in driven sales making offset all year-over-year their year-over-year end to said achieved by In of were share at XX% we XX% and $XXX rising for was in the across guidance. more year-over-year, sales our record and industry in the XX% increased Paper was continued better work XX% for earnings X.X% fourth serving higher the EBITDA the our grades. WestRock increased I with results and year-over-year. issues, to segment demand higher In by our anticipated, across caused turning strong on bit than hard want driven can. of inflation. we virgin volumes This costs therefore $X.X fiber, recycled widely conditions natural by improved along gas. thank updated and growth higher where fiber, across dynamic the

margins adjusted the generated segment project. of ramp the XX% Trace by our completion and EBITDA strong of of after driven expansion margins business increased year-over-year. and sequentially XX.X% positive mill impact up of EBITDA the corrugated Our Baha's The the Brazil demand

EBITDA we segment a Consumer margins year, from WestRock adjusted XX prior segment points margins points versus points segment sequentially. cash were XX.X% points XXX insurance. basis quarter, and business basis EBITDA, proceeds This Our free adjusted In prior of and basis Packaging flow XX.X% of performed up million with generated segment well million. sequentially. $X Overall, adjusted the up very of includes EBITDA of XXX interruption basis XX adjusted from year $XXX

bonds a at of of inflation $XXX March in As redeemed $XXX would of the our capital million increased year. matured strategy, part throughout stock balanced million levels allocation that have Cost repurchased higher-than-normal XXXX. we and

Our for the being August previously currently published increases, increase price more fiscal board inflation price container offset XXXX. implementation implemented. is latest of published The than

grades in and process October. XXXX, fiscal published most flow-through price Kraft increases price of across are Consumer implementation also recent paper, in all the in and increases the of and into the pricing including implementing realizing continue higher price We containerboard. will published throughout export

billion. up than stepped inflation to teams a of well XXXX. result, And up of Adjusted strong sales to cash share generated impressive $X.XX billion. expect sales price of Net opportunities Net we EBITDA challenges. of of customers. year and an extent even was our reported flow in free realization Demand more record very $X.X meet our as segment to we adjusted and larger as XX% an offset billion. a of per year Fiscal both were EBITDA adjusted As $X to was earnings segment across for XXXX. we markets, was the adjusted year and needs the X% increased XXXX fiscal $XX.X end our up most year-over-year.

We also had X.X times. target X.XX times X.XX of to times our net the leverage at year ending

Looking XXXX. forward, we fiscal have momentum entering

set We in strategic Sheet significant strong have ramping are investments benefits our Balance are a XXXX. generate and up, now to and

$XXX continues replacement reached an and of sales have annual more rate Our grow, opportunities. plastic innovation pipeline of to than million from we run

integrated them their help their reduce We risk, their grow are that well-positioned improve packaging to and help our sales, with sustainability. solutions customers

WestRock Now, adjusted generated generated Xth flow in $X free Slide fiscal billion cash $X.X flow. we turning to X, The free year billion that XXXX. straight more than has in in cash

As plan we We to growing a have maintain very and shared before, dividend. in clear. core our sustainable business our allocation principles reinvest capital are and

repurchase attractive opportunistically clear our on will align strategy. shares a to returns strategic invested line there sight capital. this We investments consider and And generate and of when acquisitions is actions with

fiscal in our support that million During maintained future. into business growth the investments through capital our invested our assets and $XXX XXXX, we

raising ratio. generation it Given We announced a our increase for XX% cycles, multiple $X.X increased we over of total our our cash business $X.X shares. billion $XXX million repurchased leverage or in adjusted as stock flow dividend billion and X.X again, million And by Sheet XX% net October, Balance as further reduced to return then since consistent in targeted May. strengthened we to a We of February. our debt

Baha's and our earlier, at we completed Trades Florence As investments mills, our noted fiscal XXXX. in

fiscal We investment-grade to And of XXXX. demand credit the will profile. realize an into remain strong. new as allocation disciplined these committed are and benefits Overall move in strategy remains enter we continue to as we year, our we retaining capital increasing investments

chain As impacted sales we our volumes. production supply challenges and have highlighted, negatively

and products our improving, almost markets, for Looking food gains food in packaging Within demand with and especially are continuing. beverage be related to up of retail strong and fast trends at our food volumes. demand quick-serve market continues makes our Foodservice COVID beverage, casual. half

to channel are buying box beauty retail holiday are and stable the should reopened. supply season were lengthened anticipate our and We and e-commerce projected to key disruptions. with channels to significantly driver up volume pandemic total to of in year-over-year. packaging as The challenges a markets these our ongoing Although, markets packaging XX% the chain markets overall consumption. line in remains experiencing recover XX% This our Sales total rates are makes be be the of impacted growth and due our healthcare continue impacting XXXX which approximately labor demand. expectation. channel fiscal were These of they Volumes by volume. e-commerce overall

quickly uncertainty in pivot and end participation enables Our customer’s to market our allows face us meet footprint to broad and of the capabilities manufacturing of our remain mix to needs. resilient us

innovation optimize primary, driven design to packaging and that unique continue our grow solutions to will portfolio ability and business We our customers for our our by packaging. tertiary secondary,

the cup. forward this our Hortons This produces plastic compostable meet ready move our packaging forward. Moving to recyclability sales a X, few our demand to this meet announced And innovative look just rate many machinery brand material through that examples million the generated packaging. is and incremental biggest science designing replacement. more these of partnership one work few recyclable slide of costs recent and to a to of range helps reduce a run partnerships, that includes our sustainability to recently recyclable Tim our a valued customer cups these packaging a for that of customers goals. plastics $XXX and free beverage of with face, is labor current consumer WestRock test hot customer capabilities. We are demand shelf design have from customers slide most which from helping challenges, sustainable

excess our the a Packaging throughout it believe slide incredibly partnership recently and cans to product awards, to to supply chain. held would X. this won The I'm durable paperboard-based pleased of packaging for of that well Year our opportunity with Council Sustainability few the highlight packaging. for Award share is in award-winning incremental Paperboard million I multi continue a and CanCollar our like annual of CanCollar their We annually. Europe-Pacific use $XXX designs is sales pack the we on Coca-Cola WestRock's partners of the and performs solution on

sustainability, XX innovation, and are additional awards These recognition of outstanding great work won also the for team. awards design. of the WestRock We

we XXXX, our previously of published first continue and guidance price the to XX Slide to quarter increases. all Turning implement successfully for financial

by expect our recycled cost natural increase seasonal Fourth with We driven inflation Quarter. to inflation gas, the forecasted million is costs, be healthcare costs. a than This fiber $XXX sequential in and commodity and higher diesel, higher combined cost virgin approximately

have good increases in delays approximately to XXX,XXX along implementing mill the $XX flow-through price we than with across news that is approximately XXXX, our the originally will However, scheduled more earlier that And of we negatively maintenance the we to system fiscal due by downtime impact tons inflation. are planned million. offset of that expect our this outages, in earnings

the We have XX quarter. maintenance major in first mill outages fiscal

assumptions adjusted amounts and with million price and quarter to $XXX shipping EPS the in in fiscal largest segment share. XXXX, WestRock's the normal solid adjusted combined end in $X.XX in of One most our history. of days, $XXX our continued X previously X demand published and flow consumer expect results business, These across seasonality through EBITDA to markets of per fewer increases. we of $X.XX In the of forecasted

inflation. a continued the outpace cost anticipate some as expect implementation result segment sales We published in and anticipate record We of of inflation. fully We a previously EBITDA. fiscal increases adjusted year input price to commodity offset

by labor fiscal year. also expect may productivity supply higher through the persist chain We affected unavoidably that be challenges to costs ongoing and

outage in Our than higher planned year, the throughout fiscal a XXXX. be will scheduled but thousand XXX mill maintenance approximately fiscal tons declines still

to of is in grow Given annual attractive earnings these flows and WestRock, we've assumptions, forecast $X.X This adjusted cash varying compounded billion billion. commodity range able EBITDA inflation. the of free by formation to to business range been segment levels be rates. across various Since the $X.X at we adjusted cycles of sales driven

have resilient face flows challenges. business of We the record fiscal model, a in cash many XXXX with in adjusted free which reinforced was

adjusted as and XXXX EBITDA, strong our segment outlook marketable fiscal cash trend in flow. Our for as growth continues of sales well through

and can we value solutions, With our broadest paper customers our of unique shareholders. the to packaging and portfolio industry's bring

structure into As XXXX, reporting segments; to paper, and we new decided our turn I fiscal have distribution. three packaging, update to

better the we Company As reporting provide we and structure our be our of our will will move the performance each new into strategy, forward clarity to with way running area. this align

innovation that that WestRock's and businesses packaging This will attractive segment markets drive of solutions, to converted packaging well-positioned end segment challenges. Our include sustainable packaging is with helps our critical the ability has for unrivaled growth WestRock an serve future fueled diverse our capabilities. portfolio unmatched margins. by customers

comprised our evolve paper to these external this and segment is positioned customer's needs. As market adapt our in to will trends trends be environment, WestRock changing dynamic sales. The uniquely paper of

paperboard partner customers strong markets. attractive we to this, and the and as business, have with we containerboard exposure will We do export SBS to containerboard customers. these seek and will we are domestic And continue reduce to and specialty our

to We and made an the across the cost business are And products. our segments integrated going forward flexibility system. our format more customers. align efficiency these reductions provide more WestRock's distribution in focused provides first with we segment up our The of in serving in on mill sharing and way competitiveness strategy will newly will of business believe the run chain solution Packaging distribution the closely warehousing report This business. enhance our our finally, driving when and I on services improve forward. service for to that be segments local and quarter. investing look supply new We information Victory is these differentiated we important channel this our

bring is look enhanced we sales with converting, material WestRock. innovation as Growth focus also of and drive such are on and engagement, future, teams and area technology, at digital improvements to to on packaging an brand ongoing an how automation. science, As machinery the and our in smart development expansion and and investing in research can development innovations we

leverages and Ward solutions WestRock. power opportunity platform a Dickson is ahead. of up differentiated for customers way this to of portfolio, I will wrap unrivaled a forward his industry, as the the We Westrock the our And are to bring would of also for I look all that all are to in building to in that fully enterprise. opportunities that these broad success I the contributions today, take thank like The that leverages sales and WestRock excellence to

to the has and beauty and and business. development mergers as and business, from spin-off MeadWestVaco XX of been our and in RockTenn, I sale the of acquisitions, the Ward, know our will all Alex, land in Company the with WestRock. the merger instrumental CFO, health As incoming our disposition you them who of assistance welcome have Alex I forward greatly, very we Company. time, growth including you Ward want than WestRock's as more home in with joined CFO look the retirement. well. and miss working also your Pease, is best here development Overseeing the wish I Ingevity, plastics of benefited At I the same today. at to of and I sitting us

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

to to are investments the of accelerate We lead the and our leverage in innovation and working platform. enterprise the power needed making sustainability

shareholder to allocation As disciplined cash this, capital strategy, we do remain and look strong in we'll to we use flow create our our value.

create As value and levers we to have strategy, implement multiple and earnings. sales our we grow

and XXth. strategy for further a We was in our on York team discussing Investor February New and our goals effort, the Fiscal I want great look thank dedication opportunities year things great about XXXX and are ahead ready are Company. James, prepared long-term our WestRock. our to Q&A. remarks. Day concludes forward members look ahead and my excited XX,XXX forward I to to we That for now for for at the

James Armstrong

our Thank take first you, please? Operator, David. we question, may

Operator

everyone question question, ask remind with to of comes I like a time, in America. Staphos this line Instructions] Bank [Operator George Your At of first would order the to from

is line Your open.

George Staphos

ends your Staphos. starting go assumptions I'll the morning. of I John and if will Hey, some standing driving And that range? the great be provide This is lower could just for Babcock then out, guidance George from upper actually are key there. good of in you it guess

Ward Dickson

key Ward. will is you to some in this fiscal start range to John, try assumptions QX and Hey, with I the the provided for we through that XX. quarter, QX for year the walk I'll full FY then of

benefit from fact on is flow-through QX Price have in key the we pricing does outpace PPW inflation. So for drivers the the increases. primary the

have our in corrugated packaging our We consumer lower volumes or seasonally business.

is maintenance days the fewer quarter outages merger. packaging largest We We corrugated maintenance thousand X since tons quarter. This in outage have XXX our had business. of the in shipping the

OCC higher and we're of then that approximately the doing have script their fiscal costs the have $XX at weather, continue calendar wet system. and or because we then gas, then corrugated seasonally the and by our year. in highlighted they're virgin higher trying of QX. first million fourth both in think quarter the our had, million $XXX full always costs to fiber costs passed the QX, and to I we've increased That we mills productivity. the increases incremental worth QX quarter we it we in consumer because increases in that hamper of -- for had from QX the XX to that worth And end across that's And accounts from finally, healthcare driven natural higher supply healthcare is deductibles challenges discretionary to everybody get chain of quarter, mill

both our we've lower moving that impact our at in and of that our system the look aren't our customers. amortized be over had the quarter. relative startup and outages That from Plus Costs you in are incurred mills QX to converting the challenges productivity operations cost. material actually will If some the outage capitalized periods, our of into and our to around the QX. but

the point So of represents drivers. the quarter of represents year, year, Last year about our or again, for the XX% generated we about first-quarter. mid-X of XX% those of EBITDA. XX% And the primary midpoint in quarter the XX -- are about guidance total the the full

year in our in second start slower earnings half the of the first relative seasonally a of have year to generation. always the we the So half

is year guidance our And impact outpace the and of sales and price increases. record strong through what the assuming of The and I generation. full the inflation. you elements year okay, flow full-year year. flow-through will EBITDA and the key And of price we're for for midpoint that's reflects published if flip that walk previously Now, the full will increases full the guidance cash the to

biggest earnings price from the and In fact, growth inflation year-to-year, the the significant driver of relationship. is

have we across published of all the full-year these of grades. impact increases all will our So price

paper demand growth core have our have and We across in packaging, both and markets. solid we'll

and both ramp We the feed have volumes, sell its capital in Brazil, on to our paper that ramp up our external box investment the reflects ability we impact and of made had to the rapid we Inflation up the second during Felise fiber impact XXXX. Portal fiscal really of energy full-year increases plant. half that cost, the and of the in in of

to OCC average going that year. very other everyone 'XX, needs higher and to think midpoint And to we've exited our $XX than give ton cost. am assumptions you for per remember OCC guidance the I So specific the I related in the some got of at some fiscal full

$X And bucks a That's assume profile up then so QX we FYXX. in assume $XXX ton a And our a a QX, QX, we a in ton increase XXX $XXX per OCC, and a we QX. quarterly for our $XXX ton. reduction In QX per a from a the midpoint we of is from for year. and which $XX full ton, ton, ton a some see see

as then the million recycled the is a a average XX% year. than And we FYXX, is year. higher they're for is than full it story costs fiber -- $XXX with approaches natural gas for September's year-over-year $XXX exited million, So similar basis full inflation was the on the more

increase reflect versus the strips a current So FYXX. XX%

on and chemicals Virgin end year-over-year transportation quarter all see of the second to the real half during changes material this towards we environment do Fiber cost or we the a a of element not year, basis. into fourth costs, year supply calendar up So then the any and chain our And get until FYXX. ramped inflation is in the

volume, chain continue think outpaces price and to I disruptions the productivity. So inflation, supply price is sales from growth we're will again, going get impact and key driver

finally, FY and from start Brazil get Florence. the we of Our full-year just benefits investments in then to that benefits short-term and our also I'll up, ramp to I'll operating where 'XX And were flow investment And get is Cares stock but our their have as returned to we we deferral quickly 'XX. everybody then that. the flow in cash. that's then And plan pandemic in on incentive those now the during got about made full-year of really Operating 'XX flow the for FY we cash for which back our in talk action contribution benefits the payments. we Act for cash and to they've made deferrals higher a payroll and and remind EBITDA, by flat make really well. driven flips our the FY match actually that payments cash XXX(k)

'XX. that Our going in we cash drives in we're system. that's capital first what generation And invest our $X FY payment to assuming in billion the year-over-year. And flow investments then are

George Staphos

up then And helpful. just of from very That's growth. some on following the points

update are positive overall, packaging could trends on some And expecting growth that'll are in if be demand you and both in to fiscal provide far also consumer how Just in so the great. be first-quarter then corrugated volume you XXXX?

Ward Dickson

the that have the I'll our I'll of if as over market across get well, And up any then our Yes. volumes full Brazilian corrugated paper talk wants about that ramp and to consumer benefits both we in he our the growth end to turn we year, midpoint and packaging, guidance assumes and the of do and it Pat increase business. trends.

David Sewell

Sure.

Ward Dickson

term and Short [Indiscernible].

David Sewell

for Ward thanks So that.

fiscal our market segments. also generally are non-durable year across are X%. stable goods showing trends. healthy XXXX are conditions is about overall fundamentals to strong. the Consumer be durable solid. into positive expected spending and and pretty most going And GDP is So Economic

full year. the So that we good pretty about feel for

mentioned the consumer brick-and-mortar every the really online market up in packaging at between seasonal happens the you've becoming shipping bit pick year. online e-commerce and blur we got a had But for days growth corrugated have especially us. brick-and-mortar e of the look also is e-commerce we which -- As The and in curbside. because is buy a in and fewer and in-store online first-quarter, certainly packing, as highlights do at the year, return Ward the full and single the slowdown pickup for the with little tailwind continued

world, And reopening blurring QSR return We market. sort was have travel there. dependent cup duty-free test is that, with e-commerce we COVID the impact. strength important will one and levels. on kits do with around returned so and trends, an to see turn Print, international have things we really especially With Foodservice, spirits, year, which see sporting pre -pandemic growth some retail also events certainly see will high-end beauty the and in but the -pandemic is out open, concerts Commercial travel versus down coming cosmetics. every to how back do that's which brick-and-mortar levels. last stock COVID in pre COVID also depending

comments in especially across When better quarter the feel over October your our on see are and brief up think backlogs we in supply was generally see gains, were we about because improvements improvement September first his and And last still positive sequential significantly was are pretty labor here David peak holding box, We September we're I'll the worst we so season the the there. September. we're comments. look as sequential in remains is -pandemic business mentioned issues talked and there really talked and see the the comps pre to while of good that better -- corrugated the starting the are and to rates -- in challenges year-over-year behind up start that store of we introductory than saw us that. picking high, corrugated about August, the -- to certainly than about the beverage the us. uncertainty holiday some the And we But We [Indiscernible]. August strong. seeing So quarter. of chain, and year. some some difficult and in Traditionally, just Operating impacted industry box the we've make and we that, center in packaged food at is

George Staphos

you. Great. Thank

Operator

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

Your line is open.

Mark Wilde

little Thank the particularly I board just could highlighted I'm David, mill wanting mills start wondered investments by undergoing do that costs. drive interested the bit to bleach what you. mills, a and perspective off of in if a lot you the because across about with containerboard both you then system down market you is transition. might talking

David Sewell

Mark. as you mill our mills I into starting that. would we one at Yes. efficiencies corrugated system, know, consolidated nice what from this we look a year already to both and some and say as earlier Thanks, see doing our we're And consumer leader, we're under right really market. in have it. the going assets innovate make them assessing can And we invest better. of also make to to where our sure doing assets we're we're is assets to now all address the and we best are And that underperforming, we're going

that the on going high-value how before, more broad have have we the advantage we we And sure focus grow. side, world-class as portfolio the flexibility to think align make do I we focus to the to of take mentioned on we're at can that So as packaging to markets, want we segments, announced that into we mill to our change to paper structure new assets the want our into we're trends. we as markets we so also that adapt we looking system provide market domestic

point there's grow. where to then growth, can different don't where grades want your we to and grades, deemphasize we As where

So have we're it. underway productivity right thinking multiple programs about that's how now. And we

where want forward. driving to that grow help So out of assets, this strategy the an give driving is we we on really us grades cost we productivity, world-class that match to focus higher move going believe advantage as

Mark Wilde

executive level just any a operating Could programs, as follow-on. considering then and both at you the for address perspective at And Okay. level just WestRock. at incentive the

David Sewell

Mark. apologize, I

level as a with driving want incentive well out as programs bit to I our is at what cut level? our question little reconfirm mill question. leadership your your just You were

Mark Wilde

that changes see we any might in interested under leadership. I'm your Yes.

David Sewell

and as the compensation cash go want generate. are that on the focus strong programs. cash our things new And of going going margin really our maintain top-line we a growth, EBITDA We're we into that growth. couple we to flow to EBITDA also drive we're and on So to flow, in we year, focused on expansion,

So, going -- going to goals to be to And how the want for growth our to mill cost be hold level, productivity. from at recognized And ourselves leaders, a important we're we're to teams we're drive basis each really leadership to level, mill hold accountable around mill to measured. that's then We're and going going diversity also and organically. we sales we're inclusion. going at to higher our and margin our safety

making to plans are comp our they're going to strategy. to and changes our we So align

Mark Wilde

Okay. I'll turn Very good. over. it

David Sewell

Thanks.

Operator

would Again, [Operator Instructions]. ask if question, you like a to

Your Phil next Jefferies. from question Ng with comes

open. is line Your

Phil Ng

Hey guys. the and the thanks for great congratulations. years Ward, help all through

Ward Dickson

though. Appreciate it. Thanks

Phil Ng

been able And I think gotten to have David. fair Inflation you services? value -- pricing it. and Do all headwinds fair see WestRock more come to too more do a seeing how enough get your you've do your you but you and able much first expected in into question it's products chain to you you've a been get off, pronounced for pricing are would unique a have of amount year, this business? elasticity not think than Yeah. year, you've been almost guess anyone your supply for peers

David Sewell

way inflation, has been point, this if look so our we And has your that. pricing standpoint. on look chain on So customers a changing. about value are that from very team the is world and focused able What do price Phil, to provide can at outpacing supply chain with our you the feel solutions are customers. increases, published we at really supply we're we changed To what good

on we So primary, secondary, have they supply portfolio a solutions. want what and is assurance, packaging tertiary broad

and from The is, is able our We to able our were automation customers. labor And seeing to the more elimination business, We're the that reduce other the really demand machinery for challenge extremely high. other thing thing waste. driving with we're of labor is efficient. be we're

is have a of we're beginning design highlighted is that we But other great products little we our portfolio teams, bit design and the call. a solutions. how have waste? of the and do on-demand, do We trying have great We the on box thing we eliminate with sustainable them to

more which ever think a and connect waste. I portfolio their us well leader unique industry. in elimination as and chain the to investing, us than for why be is our sustainability, as with well So customers, assurance, positions with truly our of so supply customers want innovation, to is the we're they extremely partner can And

Phil Ng

these of super color you're be how when appreciate I'll of of in pivoting bucket you've helpful. on think guess, gave expecting made you around standpoint has front? some sustainability little segment some corrugated. think any just but guide, consumer that a been that way in more of about color little kind That's growth to you Any the some you a and XXXX color a your I choppier, the just areas. But growth that from give consumer some because on that, more helpful, gain to obviously in big strides growth you us the kind terms of about opportunity. seeing growth

David Sewell

Yes.

a providing The lot providing as There's little lot also thing So, runs it a do into are market going very to talk more share volumes. graphics a I'll dig have that look gaining. high you in you the about Pat more it on. works. that's customization specificity. we're There's on than is There's the we're more on. business lot I'll that what then a higher solutions turn is, smaller value, going really It's to more the level over consumer high we

And MPS you just there. we're Pat, really already plastics segment. consolidated on maybe this wins little the side believe starting the in share segment. of we we're seeing, in It some we're We've replacement continues can about market And bit grow. the So talk business. especially efficiencies to our consumer a to gaining and see

Pat Lindner

consumer Thanks, last nice over XX the and EBITDA enhancements XX% Eva margin as up several seen almost other basis and mentioned we're some points margins about the great. business XXX sequentially. year-over-year quarters -- the basis And Sure, points the David. than its

and But Connected is there. sustainability certainly automation is seeing organic and footprint And good of EBITDA. growth a and big there it's also produced in part big and and that part driver an to are there. of important in important in important the the that So addition critical part products changes are momentum is an what of the a of packaging we've digital that. productivity in made that and we're solutions some

to worth shared have us plastics that coming those to million generated And solution, up past Paperboard that of we're as actually of producing and the examples over we've We've $XXX not years. the in XX offerings. of will trial, number that's about got going the $XXX that's the get application. patents So David replacement annually time. first just a Tim run point cups that's on we out be million with for next We've new for Hortons this rate alone, and to earlier, few a cup said a

opportunity great value long-term to we've talked terms have for sustainable the in a benefits about. Sustainable environmental as [Indiscernible]. us So well of as economic

new of a have that one And We frozen best making packaging some automated tertiary medium this around a tertiary one optimizing solution just We're I can do wrapping and bowl at that primary, we're else beginning that only bowl Nobody have what is Expo. shelf all fiber-based sustainable, fiber-based from end. that’s then And highlight until launched this. a ready package package secondary, really examples for doing, is is secondary point a a We of corrugated is do. package to want the coming specifically a and in and of also perhaps something go all fiber-based compostable. recyclable this that. we that to And we're it's food. the launched new Pack our packaging, has forward can which because WestRock

consumer and it's the can a to what and And Company digitally design, do materials connected as tremendous segment. for advantage we you so overall, deliver is robotic. well going This automation as when around look growth solutions, to machinery continue for at high-end,

David Sewell

you perfectly And answer Pat, I think well. that

in add thing up, starting other well. a to in expansion also see with travel I duty-free. one So segment opening healthcare we're would is see And as to nice uptick starting we're

segments, So in believe going right definitely our we direction. the are consumer

Phil Ng

your volumes, those not will And a as just looking appreciating David, you're dynamics have selling approach. like business? impact consumer note, favorable in that mix On you're selling solution a

call with thinking about bigger line-of-sight business kind consumer One growth. single-digit low we said, been on your of well? you in but Are has side it as on sustainability it of the of in our these the flattish, competitors a some gains see side, similar historically fashion generally

Ward Dickson

automated we're really segment partner going saying high-value and that help to and where that's it's I I to the just this want the want win can. applications, focus. replacement that That's that to that in transactional in lower to we us -- customers is think onslaught, the us on partner number with I'm pickup their we where broadly, this customers well said. are of portfolio. the design a applications. high-value partnerships want plastics to those with the but believe for way we innovation in very us. of And in And the the What pieces it's focus

Phil Ng

Thanks Ward. Really appreciate it.

Operator

the next line with Josephson Your KeyBanc. Adam question comes of from

Your line is open.

Adam Josephson

Good retirement. and with on Thanks. everyone, the a morning and best congratulations to your you. Ward, you pleasure working All

Ward Dickson

Thank you. truly very is with you same Thank And the you, Adam. much.

Adam Josephson

your percentage quantitatively, of in Pat, Thanks, what just change. just context you're more that fiscal earlier, October were will can 'XX you up? December about expectation And shipments be in I the talk matter, quarter Ward. in year-over-year expect you asked shipments expecting a the that but this for know your about you

Pat Lindner

Thanks for question. the

box a quarter, think that go challenges to labor bottom. before. chain we've in corrugated in and was the to shipments just had So challenges the have supply we September about We back and -- August we talked

over. is So the worst

going September I now sort an and remain in the labor in forward-looking are our seeing in in supply how we'll quarter But August and uncertainty month-to-month, give always guidance going are the demand confident chain the We a But period, October. improvement box to the quarter. sequential things can't we out to first will obviously and fourth fiscal quarter strong. to see of we are overall, pretty expect right seasonally that. to to from sequential into some exactly in There's continue stronger Operating because rates challenges. backlogs improvement We're see improvement high, be especially from

Ward Dickson

And Adam, add just would year-over-year one I from tough that would other last be we thing have year. comps the

that So have. very we we about feel the demand good

box look down. even at fourth you quarter, volumes our If while were

produced have we to, If If up percent. wanted challenges. box you look a chain couple the at could we challenges, would've what supply volumes labor our been

So we environment. carrying that and momentum through just a we're see balancing very tough in, working

Ward Dickson

we assumes And Adam, just basis, 'XX year-over-year in And is would I'll 'XX, remind a reiterate 'XX. on Ward. full-year this growth. X% versus full-year the growth that had I that guidance you

about feel year. we on for outlook have We the the confident compares tough the the ramp, QX but full

Adam Josephson

bit for wondering build, reduce, and to are your containerboard they dealing In they just Obviously September etc. they in December Thanks, just you higher, on chain Are you expectations Ward. like are and am you more are A along are with, other lines how as to other are everyone mess words, you what carry couple that supply quarter. lower, the where is question a characterize they grew industry would are whole, a those be, the quite inventories. trying inventories. of quarter the them the I in because to of to you thereafter. trying having your

David Sewell

we into with contractors delay some getting it attack. heavy this that would mills, had maintenance outage to is And of our the etc. way describe in I had maintenance. first-quarter So knew with ransomware we the COVID And a of we because

perfect do. our say, the as wanted created storm this to I first But you because wasn't demand outages. of We build we at inventory as that the it would with planned quarter liked Look did would kind coming seeing. we have build the we're inventory that So of quarter. mill much if for that into

quarter. be in a bit but build we're So little going inventory little we'd to like this we the to a in into at, were able probably behind first levels

Adam Josephson

you. one And last for terrific. just Ward, one That's

lines. any fiscal from year, of XQ the kind expected me of those to be year, the mentioned as sequential XQ it me XX% help fiscal which Obviously XQ the along terms you're improvement can it obviously I just XQ is below incremental call expecting on I to improvement. years onward? help the onward, bridge what the pricing of implied from was frame In you've XQ for balance you the of think below guidance based just with previous this well it's the to EBITDA, past maintenance, think based and Just the given full-year -- onward, lower from on XQ

Ward Dickson

you do to will look same I'm if FY you and 'XX, the to give a I for going you So of thing XX. at FY try second-half -- first-half, then for

EBITDA, I the total billion is, will for I the half, at the about year, of our $X think although say the we're in the at or versus it think the rest over the in be then year relative half. would we you to FY QX What lower so going Okay, XX%. if I think course last think of XX% be first look of QX XX% to and generated 'XX, about half second I I the first the

the If year. you midpoint at for full look the

ramp then fiber So full the mentioned the start you'll seasonal up, Trace but see costs. in and some of pattern it's -- first-half, the material, recycled up not of you'll declines of start to Baha's, the Felise second-half, the to see I and sequential -- ramp some Puerto some

the got got business, in the little you've bit longer a flow-through price corrugated. flow-through also that's comfort. increases of the take the that, what think they of the I gives you you've us know, on consumer side Then, as than --

benefit implementation price the increases have we'll of the as well. full of So the

Adam Josephson

Thanks so Ward, all best. the much

Ward Dickson

you. Thank

Operator

[operator Instructions].

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

Your line is open.

Gabe Hajde

if the you Good take gentlemen. morning, you an a David, Thanks give as analyst, the mile. question. for guess, taking inch I

thinking efficient. your you that us SG&A this becoming to areas I the quantify. present of point? historical discussion way I kind a good how organization the the if commercial WestRock about I'm would on us. And about front, think jumped me where maybe you're maybe was I think of it's context was not at could to things to more for of a that mills operations try to curious about One whether I out then job guess you for And mean, doing pinpoint

related but just to million be I to I'm annual $XXX Any I think of going that the inflation there. annually, have productivity and know, I non-material kind that and case help you always might you guys have, try offset think forward, of don't $XXX assuming through

David Sewell

acquisitions focused past and Appreciate years. the are over to integrate Gabe. say that good past, it, that there to the several opportunities we've really you. areas we're in you've a morning on Thanks, made couple the me heard better the probably

So areas to I just I material have highlight impact we're a of our to believe that going productivity. on couple want

hired Peter we're is Officer, came Supply excited a new that over supply recently chain. Anderson, about. Chain We really comments Chief The first who from

had If of you unique the in businesses, way aspects to our we go back across we several before chain supply were structured them.

of So to our the consolidate our get productivity our consolidation S&OP right opportunity warehousing, supply mills. consolidate with chain, the our

Our freight spends to we'll we look as you know, tremendous one very We is be high, area at material savings. chain. supply that. opportunity That's see more drive is that become so to going efficient able to think in our

is together in piece second bringing across and our The the mills productivity together initiatives one mill. organization, new highlighting

of see top inflation, we programs inflation. point your we're on improve previous productivity our significantly with how to on do to pushing now standard productivity So

conversion have analytics, several we our And projects, we at as predictive far bit as get reduce as digital unscheduled where our waste, manufacturing well so can as better sites. identified with footprint areas multiple mill system downtime. our We've our a improve both little our

about will I see great piece we last talk commercial. there. opportunities is, And then So the

business, teams. recently multiple first consumer there. the So phase, our MPS in we just efficiencies in We had we've consolidated customer tremendous and service recognized

secondary, complete with with primary, want our customers. integration backroom in packaging. as that, solutions you the new tertiary can now well supply I've customers face to that look expand go buy this our world as opportunities, as chain, across at talked If we'll about customer-facing portfolio we where where opportunities And X to

customer going service as invest tremendous in more cost and Company. drive we're the I It really, to and also out across So Pat talked packaging there's invest think the to as We're way We but think transcends be will our we we're how really further modernize of going going in do this. in that now not both that going well we opportunity about, whole really efficient we We're to side. to to digital, side organization, them. productivity out, innovation. on manufacturing smart cost how in our

those really Day. more look sharing we to forward lot projects excited and we about are with the Investor A our at of get them detail opportunities. about So underway, you

Gabe Hajde

you. Thank

Operator

the Your UBS. of with comes next question line Cleve from Rueckert

line Your open. is

Cleve Rueckert

thanks, questions. everybody. Great, the Thanks for taking

Just And for prices falling a thinking there And tactically WestRock? a the differentiated portfolio. up breadth raw but year, already strategy it's if just times that is the opens prices year. out are OCC your if strategically, few throughout environment even called any certain opportunities WestRock's material with guidance for this you little at next or curious I'm David, call changes maybe calling bit all of your falling. on

David Sewell

for as ability OCC example. from just that flex we that at said of is. recycle past, as to I'll we've percentage XX% some look what So, about the The providing tried your question. mix. they we -- And from grades, they may may virgin want at thanks What way a We're use But and customer more on we look have they grades, at the an in more lightweight perspective. the to to want plastics of want though perspective is it your those do versus portfolio, recycle solutions internal replacement. may point on breadth more XX%, our

our to So that I is use like flexibility. word with capability the

capacity us back top-line And grown resiliency XXXX inflationary we've chart to to our see Company if very look very the environment, from can EBITDA of we've that is well, -- of different at you XXXX, all with this well. and new through So this where environments, and grown you and kinds and flexibility opportunities can sustainability top-line this our and great world our margin innovate well-positioned I and footprint to of just we with respond very think expansion chain adapt growth. just think drive customers, I has and innovation supply

Cleve Rueckert

And the plastics I to on clear. that's quickly just then for opportunity wanted Okay, follow up replacement.

annual sorry out or discussing $XXX $XXX run but, the I what's annual we're missed timing if is rate rate million target achieved, what opportunity. think million opportunity run you I'm there? million pulled it a originally had $XXX on I you subsequently, but then the the

Pat Lindner

Yes.

the million looking Pat, is over thanks we rate. at We think run for that next so this get So couple that years. that. We're to of can $XXX

to large -- from and coming products that We have strong a opportunities. out ones are very larger small of portfolio projects

of run against $XXX in that We million good $XXX pretty started it's XXXX. this July rate. So tracking million

we'll to couple out be see years started growth next several on that that increasing kind years, week. the the We expect it's the we XXX. of So of it and of certainly over next at early we're stage see but to the probably the

Cleve Rueckert

for Thanks the Appreciate. Okay. it. guys. questions,

Operator

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

open. Your is line

Paul Quinn

very much. guys. Good thanks Yeah, morning,

dollars spending. us in Maybe outlined big of CapEx. the buckets you You a just could some on details give of billion some

Ward Dickson

its Paul, maintenance, and rate, replacement, mill capital half Hey, is that systems. this away return-generating both ongoing half our strip converting the environmental, we it's have Ward. Historically, you when ongoing it's of in look projects and and the strategic you regulatory then at about investments and run the of

system, some look XX% broadly, I'd then you modernize say in system, converting it's going making it's mill our investments about in the in If and systems be to we're XX% the of to IT platform. of

Paul Quinn

was be would thought pickup then was we Okay, And that. corrugated area Brazil good expected. one it a that than for higher was surprisingly a thanks I for that jump

Just wondering you is, into that achievement going expect full-year how and forward what do sustainable 'XX?

Ward Dickson

and drive it's investments Felize. Greenfield made mill growth that we at box we plant Porto that meaningful made So a of both in because the our and it's

our meaningful is it's we portion contributor to going think a the of biggest get as worth we of better we'll you and This the the growth this highest of As is our next that year So When through FY a go about driver. get $XXX will reporting 'XX, projects. fact be business. incremental talked into go drivers. strategic that And FY continue I Alex the to capital margin to million EBITDA 'XX from we is

Paul Quinn

just then chain main benefits of owning distribution. what Okay. environment the And supply of the in are lastly, constraints,

David Sewell

as plus Pat for supply our quick well be have able that they of heard as customers to our very we're you needs we able to a own e-commerce beneficial Well, warehouses, think fleet bit brick-and-mortar have delivery. trucks, and we do a it's little customization, lot distribution we're customers support about I of so talked talked proving local what a and in about more because looking are with redundancy I more our to assurance to support. lot supply chain, XX is with that

ability platform. So but for our we're a our with that's customers business the distribution it's for encouraged we with ability the the really with nice proposition a that proven looking that by growing, way value were, also us to nice supply be own really and always to opportunity local have are with

Paul Quinn

All right. Thanks. of guys. Best luck,

Ward Dickson

you. Thank

Operator

next Rockland Truist Your line of with the question Mike Roxland comes -- from Securities.

open. line Your is

Mike Roxland

taking for Thanks retirement. questions. my congrats much. very Thanks on Ward, the

Ward Dickson

Thank you.

Mike Roxland

your role. new congrats Alex, on

Alex Pease

you. Thank

Mike Roxland

ones. Most of questions quick been have my but asked, already X just

David, an e-commerce [indiscernible]and do you overall mentioned to with then on in You and seeing e-commerce full that the and for remains mind much the how respect what telling driver quarter, e-commerce you're today? has increased us an year,

David Sewell

e-commerce, levels. Yeah, above looking broad look pre-COVID ask continuing We're so of normal. at the a how exactly growth at a Pat, see new think e-commerce I'm there just some we're you on walk through to comment, that. But just to I'm on as but going I give details we going is to

think It's both. I not think either it's buying have consumer habits I and or, changed. it's an an

brick-and-mortars we're those what of differentiate. And where channel. trying to about into that are ability our love And is so more omnichannel the I a in the -- is think get growth there's e-commerce business piece nice to seeing I our with an

So, have over we're them we're when waste, working segment. growth Pat on trends, about efficient, a in I with boxes the that packaging, e-commerce, you'll those talk to and our equipment it really airspace you lot with additional seeing eliminate be design sometimes see turn in to of to the automation specific while more

Pat Lindner

David. that for thanks Yes,

specific and e-commerce. just 'XX volume question to year So answer your around fiscal

fiscal XX% about year up versus 'XX. are We

but So we've into we we the that supply before, in year. with ongoing certainly saw talked in chain good expect fourth flattening we growth area. growth saw about that quarter, the some [indiscernible] disruptions next

marketplace much very X to as the ago. I a And economy, years and higher huge just corrugated the wrap base that in a with do of than have all a opportunity off aspects solutions have mentioned, it's David in it obviously, terms dynamic that a there. evolves expect the this this we've in stay-at-home provide we in to automation other solutions, it's folding the range and market mix of store Paperboard really kind physical mid-teens the was future with grow omnichannel to to year really that it's industry. but it Hostess think Kraft e-commerce, different up, we whether 'XX, on-demand fiscal continue out carton -channel, we machinery digital through channel e-commerce the whole believe in Really, and They've unique however, distribution, and solutions, the we introduced in got paper. or believe solutions, I'd box displays, the and omni of the across spike, solutions

important well-poised?.? continue to future us in will be we to we're So very the and

Mike Roxland

Great. Thank you.

XQ in you expected near and that stated David, to range, you low one middle. Documents quick Just your follow-up. you you the being the you wind end in up be updated this, February, mentioned the fiscal guidance of

caused occurred I'm Company mid-September? to that said what's wondering -- the to So what in you outperform what happened specifically during last weeks relative few September of

Ward Dickson

get the EBITDA interruption business guidance then lower is range. This was was didn't that our it. we of recoveries of more We the $X low-end Ward. did worth take I'll million for $XXX anticipate. The ramps lower And tax client million the are -- through the state have of the EPS the planning quarter we end down efforts that came rate in two drivers. we the some and stronger closed quarter. a that Those at tax

Mike Roxland

you much, very Thank Ward.

Operator

call like questions time. Armstrong. James back no this would over to I further are Mr. turn to the There at

James Armstrong

today. joining everyone appreciate I the call

have you great out. And please day. reach you questions, thank a If have any and

Operator

today's you thank and This call. Ladies participating. gentlemen, conference for concludes

disconnect. now You may

WestRock (WRK) 9 Nov 212021 Q4 Earnings call transcript