Earnings call transcript Q1 2023

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Operator

Good morning and welcome to the WestRock First Fiscal Quarter 2023 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded.

I'd now like to turn the conference over to Rob Quartaro, Senior Vice President of Investor Relations. Please go ahead.

Rob Quartaro

you our thank XXXX fiscal and call. earnings morning for first joining quarter Good press morning our release accompanying our issued We this the Relations presentation and Investor section of website. to the posted at ir.westrock.com using you're this They can view be or a the to link via webcast. application on accessed

Officer, Alex With Pease. Executive WestRock's me our and are call Sewell on Chief today's Chief David Financial Officer,

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

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

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

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

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

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

David Sewell

free our quarter. on Thank morning, you, a cash overview second strategy, provide progress thank adjusted will Rob our joining followed more of flow, I'll results, first fiscal quarter transformation. outlook review provide an the review Alex, review over call fiscal today. of to all our by detail for and earnings turn and it our our Then who our I'll in This segment performance for and our you

then move will Q&A. We to

generated adjusted XX% the $X.XX, million at Adjusted were of free on $X.X flow. Net a to $XXX was company year million. comparable adjusted $XX prior and prior first decrease EBITDA our Turning X% quarter sales results three. the quarter, to of declined to billion cash year compared and consolidated EPS to slide

rates was weather adjusted also note Pension and to important consolidated downtime exchange and $XXX foreign growth that our adjusted by year-over-year disruptions. to consolidated due by million economic negatively EBITDA EBITDA negatively combined. impacted impacted It's million $XX

operating and These continued as quarter external first the Corrugated inflation, containerboard environment anticipated, consumer rebalancing, spending. we our as elevated segment. inventory saw Packaging well As trends primarily demand impacted shifting

Packaging Corrugated X% to shipments square feet and million XXX American North day. up with packaging per improved However, quarter-over-quarter

supply continue and customers' to of We balance tons the our incurred downtime XXX,XXX quarter. demand, our during with we economic

Our consistent demand by exposure Consumer continue markets see several solutions. adoption Packaging to replacement resilient business external and our of to paperboard and plastics end supported

mills. was items impacted During the and quarter, disruptions consumer weather our by of several negatively business our other in

the to consumer The we resiliency market. and see in diversified the us our healthy backlogs. business However, our continue business of and demand illustrates benefit model of differentiates

adjusted of also share XX points. only Longer excluding the Packaging margins XX.X%, were well Corrugated solutions, points. range year-over-year sales, and Consumer of Both basis to paper to automation. EBITDA of from as increase strong margins, benefited trade adjusted and pricing. Consumer basis were Corrugated an XX offer XX.X%, we increase margins packaging able a positions of an us EBITDA term, full and machinery wallet including are Packaging capture company packaging it more

are We continue business, in price previously several continuing for consumer increases months. implement published our to which more should

the XXX to price and Global above demand X.XX leverage to selling adjusted We of favorable inventory quarter our to X.XX declined times, softer pressured as by net basis of basis paper times driven results. margins and XX% slightly with primarily XXX times. rebalancing range EBITDA margins Distribution X.X%, targeted increased mix. X.XX points ended points

recognizing the remain to executing Investor the striving our over outlined expected cash stake May, the We focused and we toward time. macroeconomic and range our to our sale Chattanooga our on as of use proceeds uncertain in from Mill environment. We in our flow RTS free leverage well goals as to intend our Day return transformation last targeted

We drive invested capital. increase see and our on margins our return significant opportunity to productivity, improve

cash will to and return our growth, in invest capital leverage our to manage robust flow to leverage We continue shareholders.

for Before included moving initiatives, Dow the Sustainability consecutive in to third an our practices. to sustainable of that I'd business top in index North recognizes the of highlight The was year, commitment on our sustainability WestRock update our Jones recognition transformation America XX% core like Index we're members to and recognized the XX,XXX our performance we efforts. everything living our Sustainability values for to and among in is be And they Canadian at what do. the I'd XXX companies. for to WestRock, largest US proud to like do thank team

the progress in we X. transformation areas. continue to our these of strategy, Turning communicated May, and Slide we each four of pillars key make Last to

leveraging the First, One WestRock. power of

uniquely Given capabilities serve are customers we positioned and and broad deliver our to scale, their to packaging value needs. WestRock's

relationships, our of base growth. creates end of customers this pounds our of of million rings Coors. our and with solutions XX it is continues see Molson and machinery An to strong the ongoing deeper our waste and We our annually relationship relationship this machines Coors their packaging now with of installed XXXX. plastic months with organic business complementary the by our in have demand Through machinery solution example over eliminate pack use will backlogs of estimates drives Molson is Molson well, X.X our grow. The replacing quarter. serves for as packaging We and solution. over partnership, X,XXX Coors plastic automation between cluster

next pillar growth. focus sustainability with innovating and Our is on a

those related investing customers solutions meet plastic to projects More their XXX help We projects than displace our plastics with more targets sustainability are XX development. to packaging innovative and in innovation replacements. are in than of

Our at run and to is $XXX than are targeting rate plastics more a currently we and rate million to increasing run revenue estimated fiscal by in million that XXXX. grow $XXX revenue continues replacement

margin is pillar third improvement efficiency. and Our relentless focus on increasing

productivity cost achieve We to XXXX. in in on million and initiatives are we fiscal on are our executing $XXX savings track

mill and efficiencies converting logistics our planning These network. driving in SG&A initiatives are and savings procurement, reductions, centralized through optimization, and

unlocking expand our fiscal to see we focused We margins. cost-saving continue opportunities on savings to beyond significant remain these XXXX and

disciplined deployment we year, And allocation. and remain last We've in finally, invested drive our our $XXX more our the of our than also over while more using million seven quarters, $XXX our We than cash maintain Last focused to on flow XX% strategy. improve capital disciplined million repurchasing assets. increased to value through executing dividend capital stock.

in better in We shut redirect continuing St. our permanently attractive other focus capital. are City also to Paul, in Last and portfolio on volatility, year, enabling higher-cost assets. our on most us improve the invested use significant investment toward and to refine reduce we markets, capital facilities to Panama capacity return

we non-core on the subject closing and we of work and mill, URB on approval. toward remains which December, our closed continue In to of the regulatory sale in sale RTS stake two Chattanooga to mills our

complements acquisition, Gondi increases exposure also footprint completed to We Grupo our our North the attractive Latin recently and our American America which market.

by The will expansion XX% States, IMF the driven export market goods. produce, than in product strategically than more grow faster protein, growth projects United the economic and important industrial and

unallocated results how financial we its and $XX near growth, high-quality longer In EBITDA addition results many operating timing with the Gondi's to with the and for report term. multinational returns, year this of closing other the attractive closer were in will it of to customers already quarter Grupo included The large bring in finalizing of us adjusted to acquisition million full Grupo expectations. closed given in contributing line since we our Gondi are our assets Gondi December in region. Grupo is are the

it Alex I'll discuss turn detail. segment more our over now in to to results

Alex Pease

Thank, David.

Moving X. consolidated quarterly our to results on Slide

down by adjusted basis higher EBITDA XX and year-over-year. and lower consolidated net year-over-year. benefit offset roughly Price volumes year-over-year This at flat contributed quarter inflation, declined $XXX EBITDA sales were $XXX billion, to $X.X first and costs. The was was adjusted positively million. approximately operating XX.X%, mix Consolidated cost margin X% million points

also Pension impacted negatively Note, operating $XXX combined. and economic consolidated disruptions, million downtime rates impacted volumes growth weather due was our impacted consolidated to by which foreign $XX exchange EBITDA and our adjusted and year-over-year million EBITDA by adjusted negatively costs.

Turning Adjusted increase X% excluding EBITDA increased million sales were increased an points excluding of basis sales, margin, EBITDA $XX billion, Adjusted segment trade million to sales, $X.X trade Corrugated to XX.X%. Slide X%. or year-over-year $XX X. or year-over-year. XX Packaging

quarter-over-quarter and feet. million of of were David million by lower with $XX to negatively weather million, and due $XX $XX Results offset impacted largely we and from downtime during per by operating XXX $XX X% inflation, shipping pricing $XXX million square saw As disruptions contributed volumes improvement quarter. costs. million mentioned, the million higher Strong mix day volumes from economic

with for We we'll are our customers' continue balance managing conditions, production our demand. our business to current and

and remains Packaging XX.X%, year-over-year XX $X.X to Turning Adjusted and $XX or consumer an by or This year-over-year. business of EBITDA $XX offset $XX million. million basis margin operating partially volatility Slide are and strong of on $XX X% million, healthy. long-term backlogs adjusted earnings business million packaging reduces points mix Consumer increased sales Strong attractive price Consumer contributed $XXX EBITDA and to Segment increased our from higher X. of growth billion. was provides increase opportunities. X%, demand the and million costs inflation diversification

to Paper Global basis billion. to EBITDA million segment year-over-year $XXX decreased declined million sales points X. Adjusted margin Slide XX% XXX to EBITDA XX%. with declining $X.X $XXX Turning or XX% to adjusted

million. X% million, EBITDA offset it year above volume and price mix of $XX $XXX $XXX quarter and by XXXX. adjusted of of million Strong year-over-year, was the than declined While first more fiscal contributed inflation

demand economic declined prioritize declined weather continuing in Paper domestic paperboard our Note and to for XX%. containerboard containerboard Export million disruptions. containerboard while that current we the volume XX%, more demand quarter. Global during environment, downtime for to saw adjusted EBITDA over was $XX negatively We weaker impacted by segment. margin In due and are resilient the

containerboard supply benefit the fiber Longer-term, of demand from globally. external for virgin our business limited should

increased will fiscal second like quarter Global quarter, face the I'd we XX% XXXX. that second as in year-over-year year-over-year to of difficult in Paper a comparison revenue mention the

partially EBITDA year-over-year. price distribution by of decreased volume $XX nine. and our on Segment $XX XX% million of results to slide sales and mix contributed adjusted X% inflation increased and Next, $XXX are $X million. offset million, million, year-over-year Strong

points the expansion. favorable In price of and quarter, basis contributed mix margin the to selling XXX

quarter, fiscal XX% increased year-over-year faces XXXX. difficult business to quarter distribution Looking our in second as also distribution comparison a of the second revenue the year-over-year almost

slide to XX. Turning

During cash generated the down $XX flow, quarter, free capital driven in expenditures. we adjusted million year-over-year $XX by higher million

$X of free for this billion. above billion fiscal be year, year the free to expect above cash flow $X adjusted cash the year XXXX We flow eighth straight adjusted making

times. the leverage X.X We of with ended quarter net

Looking ahead, range on times to we're our returning of to that X.XX X.XX times. focused target leverage

financial our of our slide of machinery to Turning uniquely us serve guidance. packaging and and in complementary position the to long-term confident portfolio We other trajectory business. diverse fiber-based WestRock's remain XX our customers. sustainable

on packaging and plastics solutions. replacement business focused our our are and growing We through innovations, cross-selling, customers serving

and logistics At opportunity cost productivity leveraging our to savings the following actions; mills and planning; the by converting procurement; in driving to network; same reduce three, streamlining costs time, significant and our operations. scale our we capture two, and one, see fourth, our optimizing back-office

in said, immune conditions, we're from not That created macroeconomic the have uncertainty near-term. which

removing full we're such, year guidance. As our

EBITDA Our second $XXX forecast to quarter earnings and adjusted between for is adjusted is $X.XX. $XXX $X.XX and consolidated share per million million

assumptions approximately outstanding. freight. An between effective costs include at gas natural MMBtu; the $XX driven million by stable and diluted ton; our and OCC stable $X in Some outlook virgin tax approximately costs following; fiber, shares XXX rate to XX% and per behind XX% favorable costs sequential and down XX% per chemicals

are in the across maintenance system scheduled XXX,XXX We quarter. planning of our tons downtime second

to it Q&A. to David conclude now move turn David? over before we to I'll

David Sewell

Alex. Thanks

dynamic, financial the environment model well. business While diversified strength WestRock's current and us positions remains very

machinery corrugated solutions the complete provide us packaging, sustainable us deliver solutions. a packaging to consumer to range and complementary positions market packaging and ability differentiates uniquely of Our in

distribution a to serve customer allows our our and base. broader provides an products for channel addition, business In us additional

engine market in us to Our you strong Thank updates future, and balance sheet our transformation on progress. of business our conditions. agenda look flow We excited in our midst about forward and invest we cash changing enables you. remain to execute and robust the providing the

And Rob, move to let's that, Q&A. with

Rob Quartaro

are Thank questions. to you, David. Operator, we take ready

Operator

Thank you.

ahead. White begin Deutsche the We first [Operator session. Please Bank. Kyle from comes go will from question-and-answer question now Instructions] Our

Kyle White

that implications as outlook and guidance uncertainty morning. a for the to seeing the question. Good decision? guess, or taking the full rationale wanted uncertainty year guess, you Hi. you're well? and pricing, seeing Is it. in of and it level where just remove this touch I on are the of in for in similar I corrugated decision on on to the consumer most the kind Thanks is demand I

David Sewell

be at. to Kyle. Thanks, it's Yeah. really with economy and And David. the is This wanted we very where transparent

came QX. to packaging in with and both your So question, answer business our in consumer our in corrugated fully expectations line in

forecast. both our our full Corrugated We have full year business, and packaging Consumer in and confidence

despite QX. even biggest sales, Paper Global we macroeconomic see our our our in margins is headwind business. soft the all Where So in EBITDA conditions in the and were packaging, up our

customers that with environment the inventory quarter, true higher market. even demand Our they the was much last really levels than lost in particularly no There softer was much experienced a in export business. expected. And

global Our relationships just an are macroeconomic extremely strong. environment. uneven It was

So environment. visibility, difficult the as the it we this look was year, in to at ascertain for full us in Global Paper purely just

are to customers probably in the with productivity. that we than we'll more anticipated customers going to second control sequential of back improvement. year, Our confident just We're we a and longer get we the definitely It's half bit focused and on We're what anticipated. little expecting expect normalization do and manage can and and our cost our take steady normalization.

forecast get to the to environment. to do best back provide global quarterly to the in a felt we And so was confidence more thing

as in XXXX. XXXX, And incredible going had were up XX% we're just up reminder, still EBITDA global a our up was year Kyle, an back X%. Sales almost. And Paper XX%. to

see its we the So paper business cyclical downturn. and

have through as it. well turns the tremendous through I'm past, year moving confident all We actively the very the and and managing leadership measured progresses. cycle We've in a paper that's team we're these

Kyle White

quarter, Sounds for give maybe as business, shipments are the sense then the outlook have here January good. the assumes demand? well both as corrugated a for next on in the And able how for outlook what of you consumer trended us or to

David Sewell

Yeah.

uptick. Year-over-year, from So QX QX. slight definitely a Kyle, seen actually we've Corrugated stable into it's

And going. start. So cyclical we through that's business, January a this where to truly off is resilient a is about strong consumer very good really feel environment. good

make seven on weather comment I'd impact of have One consumer. did December. We at mills our in

resilient impact business little the the us did and been a but I'd paperboard as paper, strong it's Global that well. on is in bit, side also resilient. So say

market. at. where particularly the in you our we're and full really, the look really at It's the So around when year just uncertainty forecast export business, Paper Global

Kyle White

you. good. Sounds I’ll over. turn Thank it

David Sewell

Thanks, Kyle.

Operator

Our comes next Seaport. Please ahead. from Weintraub Mark from question go

Mark Weintraub

Thank just clarification. quick you. a David,

I an does i.e., mentioned you year-over-year. quite down, uptick are that but assume So looking Corrugated, year-over-year bit as as little that opposed a the better, that slight down it's not to a seeing uptick? comparisons still -- mean actually

David Sewell

Mark. Yes,

wasn't Sorry, if I clear.

So look do down. if we a year-over-year. still see we slight the we're volume But we exited QX uptick seeing how year-over-year, at over QX

Mark Weintraub

Okay. Thank you.

containerboard. assume fair on to -- grades? that opposed I also Consumer to mean say the and Paper, I So just Packaging the as Global that's much pretty Is

David Sewell

That is correct.

sales-wise paperboard sales Our were actually up year-over-year.

Mark Weintraub

what you your quarter, your And in prior can share with us export at of point going percentage percentage of containerboard was this -- the market? what the production maybe into

David Sewell

look about containerboard, So And if then the the dramatic export. domestic, usually in export environment, side. typical at in saw it's more XX% softness just it's XX% you about on we

as base, A of tight could getting they business. just other say, wasn't you lost you containerboard our just customers, side business, rebalancing a customers But over further customer our their end when I pretty behind. of the containerboard in business. they're much corrugated last again, inventory saw than as lot our wasn't reiterate, XXXX, And to much to softness tight compare had know. market. customers a we're a they on quarter it the inventory It toward They really was anything were the were of lot our And would as with little export that inventory. in market global of with so

little full just bit year. better So to visibility we that's get where the wanted a in

Mark Weintraub

footprint? kind just One improve performance, at a I Alex, think, to Okay. et number you make satisfied to at sense on I additional or point, this additional any cost cetera. of lastly, be at with action thing -- actions? actions that footprint on were didn't it footprint, anything And then you, mentioned you, was of might looking Are looking the the potential hear

David Sewell

Yes.

XXXX, So said we be at Investor footprint. to what in continuing going back consistent and optimize to Day we to our are our actions

and City, divestiture As you mills the with the stake. know, URB closure action RTS sale we in took Panama Paul St. last of of and our year

do continue to bottom that. of cyclical we'll maximize And footprint, we trough. the of continue CapEx we at is continue We'll we're the or to do our improve returns. to especially business. vertical want so again, to think this We optimize But our where a for kind And our integration. near

our to for So telling get everything are the going and as year, continue we to through us upside we customers think it's this the improve.

So our we'll balance demand. of all in that our supply customers' with

Mark Weintraub

Appreciate the details. you. Thank

David Sewell

Thanks, Mark

Operator

Our of next ahead. question from Please go George comes Bank Staphos from America.

George Staphos

hear you Good everyone. okay? me morning. Hi, Can

David Sewell

Yes. Good morning, George.

George Staphos

details commentary. all the and the for Thanks

the is first like out in than had that your the I have the tonnage quarter is you, for things slide maintenance we the guess one So looks you third in I downtime noted been your of in had Correct it that's to. there question lower schedule, that regard. to change previously going earnings? there noting, wrong what's on guiding in is relative I'm of the me and what's if schedule impact a you if worth But terms the

David Sewell

George, change with believe scheduled into -- we follow. XXX,XXX Yes. been. material quarter, our maintenance which we've there's downtime. different, tons, I believe consistent that's third have we'll and where we if But is can no it I look in in

George Staphos

think you're million the slide. $XXX at I last in

So all. I there's checking that's notable was there, just anything if

Alex Pease

that's with of anticipating mentioned. tons of in No. line our We're schedule. normal about And XXX,XXX David maintenance sort

of be and to it. always the with You'll tends that's be -- the our sort period, calendar the and tends the first know done of we've our that to year heavy calendar of way consistent end maintenance year

David Sewell

up, follow there was though, can difference. if We any

George Staphos

enough. Fair Fair enough.

grade? provide revenue the apologies, the you tell specified consumer buying two-parter. if the that's number us on been some where metric we've don't did, consumer You look by here's of an so said enterprise where -- give that of kind and what where backlogs backlogs are give million you number us in can look question, of we update? corrugated know $X generated WestRock you backlogs Can amount and talk used -- you being customers you like point, to sales. And of across sales packaging us good. Second from customers I a both Can the enterprise could you like. a but you or if are, here's discussion

David Sewell

George, tell been XXXX backlogs I the consumer Sure. we side, QX. are with off, into would as what you, consistent they've on first our head in

paperboard as feel So consumer good it's We -- very we where about as well that's our resilient at we're business with both feel why our business. our a business.

And on about you We asking the piece, I enterprise that. great it. feel appreciate

tracking are been billion over of sales Gondi. buy customers million And we're over in that customers what's and Consumer $X the encouraging with We still dialogue we $X having have now that Corrugated. in is really

industrial of some customers, particularly have Many those large and Mexico. beverage operations in customers in

so both And good we're really and dialogue side. Corrugated having the Consumer on

-- just Gondi this So, that of the we acquisition. importance really emphasizes

George Staphos

Okay. that, or any kind versus, that from guess, question, number show growth of sort the you delta, do like or that customers, enterprise have last getting Last say, two of you're ago? that progress the years of something would I sales a year

guys And not will containerboard have could XQ we pricing, a give that WestRock's it be last seen the that And the see in in Thanks quarter. say then fair forward-looking getting luck likely XQ? would and change impact fiscal results in to you if but in one, price good of us my fiscal into and cadence? that most

David Sewell

sure. Yes,

corrugated with and XX% is right to pricing going business, to been months. to contract about to announced, So, of implementation that we at don't pricing, about if is six But your pricing what question with has the contracts pricing now you our typically obviously, start tied look three are the forecast RISI do. believe on we

of increases you'll and if months, three add XX% our when announced in back those So, see about that corrugated customers. six were you to you plus out

last side. the in as that immediate of we months sales. quickly our price see Conversely, much about Global got six delay do You was you more three that saw and increase very paper, on pricing year, Paper there to

Operator

line mute? Our next from Ng Phil question is Jefferies. comes from Phil your on

from from ahead. Cleve UBS. Rueckert Our go next Please comes question

Cleve Rueckert

taking morning. for good Thanks questions. Hey my

were about can kind timing just Just in talked I of the what you both and Consumer stuff and update sort how the we as margins Corrugated question. the about on about the us you and before, give I you're segment thinking remind And an EBITDA Day Investor recall, -- and big really following we've where we targeting margin of maybe on the us on are But of want to stand? can margin picture in start XX% some up targets those.

David Sewell

sure. Yes,

you out. on if greater productivity business. we our Investor And and driving Corrugated in with also go targeted volume, And for base, back Day, pricing solutions value cost So, margins overall to segment, that than customer over company. our ties our Consumer our our value-added the in laser-focused our both our XX% but are and discipline, we

even a even margins you QX, a business is at So, grow corrugated the just both economy, able consumer. to we which of as softer in historically in look were cyclicality and low-margin on quarter and the

committed focus feel our of we're Investor the we right to the right Day. So, We're on path. targets for XXXX

Cleve Rueckert

Okay. say But Consumer right improvement that margin the it is fair I kind now. of to and in is Corrugated focus mean,

David Sewell

growth, driving the solutions customers. provide We'll it, but we also That's where it's way I'd say profitable our correct. great growth. for That's

Cleve Rueckert

Sure.

don't Okay. And then, dead just a understood. follow-up want the to on guidance. but horse, That's I

QX it you're the on pretty EBITDA. sort was expectations, hit midpoint, basically the you close that if add said back of to weather, line with which you in your You

mean, of this we the in I'm sort second And isn't and So, then right about second more that where I'd degree when the clear half is of outlook. demand really just just to this line comments like take the around and I uncertainty of uncertain export to -- higher or about to understand uncertainty. there's container trying square should is mean a falling just those quarter? being QX now,

Alex Pease

take at a me it. let swing I guess, Cleve,

all, inventory, destocking Paper, businesses line They're by inventory expectations. are question, segment converting mentioned demand. that First prior and how the in really issues to driven response directly more been David we has as our that performing really, his Global feel with around about mentioned, The been performing. the has good in customer David of the challenged

is the well, cost -- environment So, driving really in We're the efficiencies. can control. through use feel that's managing We're office. executing we is team the of driving that downtime. the it's prudent performing economy slowdown uncertainty. We team that of back the the operational macroeconomic everything good We're out against that's and the really taking

we're so controlling we And control. everything can

David As the businesses. converting in even saw mentioned, expansion margin we still

Global uncertainty not real rebound. just begins it from that and of back level we to comes that of though the as knowing when But the Paper feel ours. just the I So year. business good don't opposed the cyclical which to it strengthen as felt we will But uncertainty, a is given get uncommon again, we annual was cadence like quarterly industries cadence, think prudent an that to to as shift for to half

Cleve Rueckert

Okay. Thanks, Alex.

Operator

from Our question from Phil ahead. Please Ng next comes Jefferies. go

Phil Ng

guys. you me hear Can now? Hey

Alex Pease

Yeah. Phil. Good morning,

Phil Ng

Hey demand strong. looking business, you be consumer to year your pretty at mostly you about weather-related? backlog been quick the commented were I'm question. Anything this Dave, down business like if expect about right, your X%. Sorry how Do to that. Was for part? that's On that flat the in most it has driving volumes guys, that? consumer else up

David Sewell

Yes.

of things. a December. certainly in a role there So, played was Weather couple

were large We the back year, got the And at we where levels. to January XX they we're levels. also inventory end just started, feel their we that wanted as reduce national have to then how accounts of to it some really

take the look when looks it, as flat, this which at you which way to basis, it's overall, So, how similar you that at if out is FX a as is I dollar industry also to look and pricing. far know common

see relations strength the end just So, in our where large we think a I the at. customers just of we're business with some at continue consumer and year. and was weather there some to related inventory And

Phil Ng

export weaker side? you business probably little Are seeing bit? containerboard. a your explored You that little any about believe in boxboard a on how I of SBS the you mean, your talked was I

David Sewell

Yeah.

So because could paperboard. in up the have more. that bit we mentioned, sold little of a still December, weather I the happened in our sales because weather, were as of actually But

containerboard paperboard at all. trends not to So seeing we're similar

Phil Ng

inputs? about And some Alex, implementing major side, year back helpful. for it's full from the inflation holistically of a think standpoint, the Super pulled And how you remind color then you recently? us I a a do started bit appreciate because quite But it's it Okay. you an then basis on hedged of on hedging certainly, nat fiscal really lately. gas program think much more more how you XQ. Can provided the

Alex Pease

Yeah.

to we're hedged assumption is of $X the code. XX% So MMBtu. we've ZIP on in our gas What quarter the per XX% sort probably is natural for done around second

you outlook for So a about year we contributing think that's When sequentially. the to expect stay tailwinds $XX full year, about EBITDA, full gas, million when to you the relatively think natural it stable.

So on XX%. about, basis, a down call year-over-year it,

is versus freight. are we seeing and other area and The year-over-year where fiber also again, sequentially are favorability –

the balance the that's then So as strengthen we to, through flat, about sequentially, of anticipate being fiber, continuing OCC, year, but virgin, X%. is we roughly up a ton and get which offset about down X% call by it, to $XX

as becomes from a freight So has to that sequentially about guy good QX. well. And EBITDA then mitigated $XX million

anticipate we that sequentially, So being about X%. down

which mentioned inflationary some X%. chemicals, both seeing wages just about and I that effect we're are where good up area guys offsetting both The are the

million a about And So year. point will Gondi then and balance while going about million and that's $XX depreciation interest. just and to that likely persist of headwind important about kind of $XX about of sequentially, the to for $XX quarter through outlook, add out the incremental of million the we're is the talking guidance

models you're get those as your getting So two inputs. tweaked,

Phil Ng

at you're nat us can you where remind in the hedge your on exposure value? dollar And gas, hedged

Alex Pease

is purchase the in dollar course average do and we dollar what it cost market cost we're the of averaging Well, over make it. a we every we month,

per $X that can is share So like portfolio. we overall blended I said, the number over MMBtu our

Phil Ng

you're a that you. to free helpful. to standpoint, cash want that sustaining flow the pretty that's of any how environment, uncertainty impressed thoughts offsets that cash guidance. cash kind of Got on And flow Super Any reiterate capital? you're free then seeing from you despite your current level helping And able deploy I'm you David, this flow. in

Alex Pease

about where talk flow it. he's I'll the and Maybe can cash going David take to spend comment, then

quarter the look, biggest CapEx. was the So on in delta

year-over-year last the of So the look that about capital – it we're deploying the we we and lot in into million was A that year, to were $XXX chain if system, constraints system. driven because supply the had from orders higher of sort of now CapEx. is you accelerating purchases get that

the So, some to opportunity as we through the do as manage there's of that we feel though year. get balance

The in working area we see some I can improvement where other think capital. is

of of had cash managing negative year, period, we So, across well. our impact several the and flow the customers just did see we their a as the came into as end large basically that

So, are we pull. we think strong of levers both can those

out, One as cash of and the lived point years, billion COVID. the you through generated I'd eight cycles said more the in $X flow, we the the eight free remarks, of of last all years, for last have we've than prepared including things

And we so in deployment? be I generate you regardless our about the revenue the talk want and of David, ability profitability think And strong uncertainty continue the cash to to confident the around to extremely growth. do

David Sewell

X.XX%. we get fairly down came with range last Yes, targeted leverage that to we've and it's a And and our get half I year year, demonstrated up, we'll the is over continue that Gondi consistent paid between X.XX% what quickly. with we'll the think in

sustainable share think with generation, dividend. and we'll our the growing is with when undervalued. a cash we'll be our in stock we then And continue And flow opportunistic repurchases

Phil Ng

appreciate a Thanks Really it. guys. lot Okay, super.

Operator

ahead. go from comes Fargo. Instructions] next Gabe Please question from [Operator Hajde Wells Our

Gabe Hajde

good David, morning. Alex,

David Sewell

Good morning.

Gabe Hajde

I apologize if in economic as downtime. speaking, a we I ask wanted And which of we reporting late. it has with have your activity. sort the structure relates disclosure associated mill operations, economic this thought I -- this historically the downtime about to it out to that's you segregated. with new been called asked, Corrugated would I joined minute think been

Corrugated -- this taking there's just I'm we're maybe also that. was know to think downtime, transfer about So, don't related to how I that or operations effect? a

Alex Pease

Yes.

So, me Gabe. that let take one,

downtime, related the economic So, directly it mill to operations. is

basically our following our Corrugated and that Paper through dividing go We up process profitability we between transactions. Global As segment our of do the segment.

Paper that segment. fall So into segment. fall will a downtime economic in another the Packaging Global impact Corrugated that the portion of of of And the will segment, portion

why perhaps it's a little that's So, confusing.

did Packaging all did Corrugated the it been it But we that's our because when blended would impact business. that within Corrugated did set. impact Previously, historically, it where it have all our

mentioned, David of Paper. the as Packaging the well side business both remains on our strong, consumer Global Consumer consumer As as

fully we're segment, really by that's that's the the split you as where So see integrated you out. showing the margins just

does So that help, I hope?

Gabe Hajde

thrown It then quite understand And does. the know And of if bit. at? on look trying inventories, world, has been a does. we're the addressed. in terms It you I across But we I again, it destocking to where as was apologize on the outside you're term system

in where with going system the your at outage Just into you're Corrugated maintenance heavy period inventories specifically.

Alex Pease

looks. the Maybe I I'll David question, then take on inventory think, will, market how the internal comment and

internal standpoint, for good. inventory business the as we've quite to disruption as some labor the of take that I we to So at some related maintenance were looking think side as planning feel also consumer did we about. issues We then from our we higher we're inventory are potential an though the take levels the downtown. inventory on anticipating tend talked Mahrt And

elevated what have market elevated, we that beyond on do David, not expectations were. inventories but you want our comment were the So did to conditions? perhaps

David Sewell

I back administrative possible. let be soon want one and to other did our was as will work the Mahrt, I yesterday, just Alex contract do. you so employees will ratified comment. mentioned to that know Maybe as be

that just no in ensuring that. there feel just our was about service. So done us certainly help will great has on we disruption we team forward as our the job a productivity issues. customer move That And great

customers overall at corrugated I largely inventories, is As our destocking far behind us. as customer think

I a where few but really so export normalized as specifically in global earlier, paper levels. I more There's mentioned where elevated little the to bit there, levels. even maybe back market they elevated it's here it's have getting think still inventory

And secured go think there I they to to year kept make their lot product. customers sure I when it back was a of that was ordering tight, last with

than little economy, they a customer were softer of I softness with think so And the bit anticipated. in orders global their

sitting as elevated through as they're think half still inventory toward we on are normalization why, some the Alex second the confidence but we're where So be -- have at. of they that. we'll of mentioned, year, in And more levels, the get that's I working

Gabe Hajde

Thank you.

Operator

Citi. Anthony ahead. Next question Please go from Pettinari from comes

Anthony Pettinari

I And bit normalization half? smaller second in the your about inventory that your half look differentiation at second draw morning. paper half, you. global David, would for is following you guess last between about good fiscal talk the you America, Europe, Hi, and Asia customers maybe a you any or on when -- that calendar up When is calendar situation, point. second just export that XXXX, Latin is think you

David Sewell

that. It's for Yes, consistent. Anthony, pretty thanks

as our as Latin hit It's levels inventory the to we all Europe I are and smaller Asia in export You of Pacific. consistent that pretty across those of extent far seeing. mean, of kind a it. customers America,

So region's It's could classify pretty -- I consistent. don't one ahead think another. just really of been think I

are little we more worried the year market than telling bit anticipated. so I were when then of they last softness really was experienced so us and just a customers they think tight, our just

second your So think, come Anthony, question then I that I And the of part back. apologize will, what was?

Anthony Pettinari

could that When is for fiscal? calendar the line you time or said second half be normalization,

David Sewell

to think I And is fiscal that a guidance our Yes. we transparency goes on are part the year. and

So obviously, end, of September. end we

And so year. our talking are customers calendar

that's And be it's certain. just think where just to we -- wanted I

think we'll second we that visibility that's to I So way think the XXXX like, our subtle quarter versus our with get we half versus why in understand whether stabilization fiscal get year we until as our that is give QX. the let's the felt calendar just and year, it's fiscal I to go think about which customers closer. just And year difference we of QX a

Anthony Pettinari

if point expected broadly, earnings business wondering full of I kind ago? XXXX, maybe maybe understanding there's or Okay. market you helpful. months not contribution in for mean, And and any relative giving you're XXXX of just finer three maybe how maybe but that in the year terms Gondi contribution more expectations to performing gave then just calendar Gondi, I'm the guidance That's is for just on Mexican

Alex Pease

Yes.

recently. outlook talk down about in Mexico was David me and then the actually, Let

talk the market. about Mexican So he'll

of we right, one business. did $XX you're So and did month. portion disclose the in contributed We disclose million, was the other Gondi for that unallocated

The with other our the it finished line trailing year a we point basis was in expectations. made XX-month on

But not or of from it to will lot a either a reasons. to guidance a our take for as expectations contribute I the we're it results on think fair performing for modeling standpoint, give for reasonable with going Now December line next in comments it's Gondi annualize what year. pro forma

David Sewell

more Mexico we line. their predicting they mentioned, sales. Yes. grow you than the our and to faster sales, than. North Mexico mean, I add No, in US, saw Gondi higher that sales And look nothing came the will as packaging IMF America if at other we than

Anthony Pettinari

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

Operator

Please Josephson comes from [indiscernible]. next Our question ahead. from go Adam

Unidentified Analyst

point morning. put good working David flow finer just cash and clarification Alex, from Thanks much. any your on you that CapEx spend as what on guidance. to you expecting you're year? capital on might this Alex, a free source Can very as expecting on be well

Alex Pease

Yes.

of your and four significantly. billion. what with will year improvement communicated CapEx sort conversion our call get you to guide with and it's in or $X consistent billion anticipate the fair of the think AR I I look our in So north back that in did anticipate, on that of $X to end working the we'll it, at days then working previously. is take capital, $X billion. That's line what we've that And a be of cash

Unidentified Analyst

And some be XXXX. costs mentioned specifically, whether I got inflationary, it's but you other you've deflationary fiscal labor -- that OCC, it's gas, your will expectations in Perfect. cost in significantly terms of total Okay. of XXXX, for then fiscal chemicals, and think

just a slight expect you flattish Any give deflation for us can what you sense thoughts total So -- maybe total inflation. there. cost, overall, do

Alex Pease

Sure.

I'm avoid going guidance. -- giving me let to So,

So, we're give headed. I'm going where to -- to try you

in as a MMBtu. do the I right an the we right in around that year. do OCC, through think it's relatively see at to back now strengthening steady gas mentioned anticipate We I of get now $XX see $XX, that half around We we at year. So, as QX my prior $X comments, the ton.

maybe and of it between where probably in a So, QX, was fiscal XXXX. bit QX exiting in little QX

the staying in largest stable. call balance which mentioned And that really the Virgin through with a it's ton freight headwind $XX, of the the the where mitigating, the last been year, I X%, being it, year. consistent so is freight persist will exited probably fairly chemical were and wage, being zone and $XX

Unidentified Analyst

it. Got

But know the during investors year again, obviously, withdraw Okay. a mean guidance. just topic thanks COVID, your year you've sense of doing providing just to I chosen get And help the you're full now it Alex. guidance, company are. for guidance. David, And I on to what full withdrew expectations

just have full it's commodity appropriate guidance basis, So, continue currency, And had over profit think just a on macro, no you've et given longer you cetera. the do control it. providing term you frequently to costs, withdraw how look, year to

so investors control? is for a So, to worth it really much what expect have you over try it to you no give when which just sense there's

David Sewell

Adam, you Yes, and for I appreciate thank your them. comments

our to one have continue points But firm and market, out are think forward. so you're to I lot a to control Your pieces right, don't that answer a we continue the moving a in other all right evaluate it. as continue move valid, it But way we'll and cyclical of are of we'll there versus evaluate are are or now. we we

Unidentified Analyst

Appreciate so thanks much David. Yes, it.

David Sewell

you. Thank

Operator

conference session. Quartaro the over I back question-and-answer remarks. Rob would our to for concludes like closing turn This to

Rob Quartaro

everybody, you, joining today. our Thank for call Great.

And that As usual, have. available are Thank look any you we forward call updating next the you we quarter. after for to questions additional again you.

Operator

has today's Thank concluded. attending conference now for The you presentation.

now disconnect. You may

WestRock (WRK) 1 Feb 232023 Q1 Earnings call transcript