WestRock Reports Second Quarter Fiscal 2024 Results
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WestRock Company (NYSE:WRK) announced results for its fiscal second quarter ended March 31, 2024.
Second Quarter Highlights and other notable items:
- Net sales of $4.73 billion
- Net income of $16 million, Adjusted Net Income of $101 million; net income included $81 million of restructuring and other costs, net
- Earnings of $0.06 per diluted share ("EPS") and Adjusted EPS of $0.39
- Consolidated Adjusted EBITDA of $618 million
- Consumer Packaging Adjusted EBITDA margin increased 70 bps to 18.0%
- Achieved over $160 million in cost savings; expect to significantly exceed previously announced fiscal 2024 target of $300 to $400 million
"I'm proud of our team's continued focus and execution, as we delivered strong results and made significant progress on our cost savings initiatives," said David B. Sewell, chief executive officer. "We have already exceeded the midpoint of our targeted cost savings for fiscal 2024, and we expect further savings through the remainder of the year and beyond. Our efforts are better positioning us to compete in the market and making us a more efficient company. Together with our scale and innovative, sustainable packaging solutions, WestRock is well positioned to capture share and drive long-term earnings growth."
Consolidated Financial Results
The decline in net sales compared to the second quarter of fiscal 2023 was driven primarily by a $229 million, or 8.7%, decrease in Corrugated Packaging segment sales, a $152 million, or 13.0%, decrease in Global Paper segment sales and a $152 million, or 12.0%, decrease in Consumer Packaging segment sales. The decrease in net sales was primarily due to lower selling price/mix largely driven by published price declines and softer volumes. Current year results were also impacted by the prior year mill and interior partition divestitures.
Net income in the second quarter of fiscal 2024 was not comparable to the prior year quarter primarily due to the $1.9 billion pre-tax, non-cash goodwill impairment and higher restructuring and other costs, net in the second quarter of fiscal 2023. Net income in the second quarter of fiscal 2024 was primarily impacted by lower selling price/mix and increased cost savings.
Consolidated Adjusted EBITDA decreased $170 million, or 21.6%, compared to the second quarter of fiscal 2023, primarily due to lower Adjusted EBITDA across each of our segments.
Additional information about the changes in segment sales and Adjusted EBITDA by segment is included below.
Restructuring and Other Costs, Net
Restructuring and other costs, net during the second quarter of fiscal 2024 were $81 million. The charges were primarily acquisition costs related to the Transaction (as hereinafter defined), ongoing costs related to previously closed operations and severance associated with converting plant closures.
Cash Flow Activities
Net cash provided by operating activities was $37 million in the second quarter of fiscal 2024 compared to $284 million in the prior year quarter. The decrease was primarily due to increased working capital usage in the second quarter of fiscal 2024.
Total debt was $9.0 billion at March 31, 2024, and Adjusted Net Debt was $8.4 billion. The Company had approximately $3.0 billion of available liquidity from long-term committed credit facilities and cash and cash equivalents at March 31, 2024.
During the second quarter of fiscal 2024, WestRock invested $301 million in capital expenditures and returned $78 million in capital to stockholders in dividend payments.
SEGMENT RESULTS
WestRock's segment performance for the three months ended March 31, 2024 and 2023 was as follows (in millions):
Corrugated Packaging Segment
Corrugated Packaging segment sales decreased primarily due to lower selling price/mix and lower volumes. These declines were partially offset by favorable foreign exchange rates.
Corrugated Packaging Adjusted EBITDA decreased primarily due to the margin impact of lower selling price/mix driven by published price declines, net cost inflation, lower volumes and the impact of winter weather, which were partially offset by increased cost savings, and the net impact of lower economic downtime and prior year mill closures. Corrugated Packaging Adjusted EBITDA margin was 13.3% and Adjusted EBITDA margin excluding trade sales was 13.7%.
Consumer Packaging Segment
Consumer Packaging segment sales decreased primarily due to lower volumes and the prior year divestiture of our interior partition operations.
Consumer Packaging Adjusted EBITDA decreased primarily due to net cost inflation, increased economic downtime, lower volumes and the prior year divestiture of our interior partition operations. These items were partially offset by increased cost savings. Consumer Packaging Adjusted EBITDA margin was 18.0%.
Global Paper Segment
Global Paper segment sales decreased primarily due to lower selling price/mix driven by published price declines and the impact of prior year divested mill operations.
Global Paper Adjusted EBITDA decreased primarily due to the margin impact of lower selling price/mix, the impact of increased economic downtime and prior year mill closures, the impact of prior year divested mill operations and the impact of winter weather. These items were partially offset by increased cost savings, net cost deflation and lower planned maintenance downtime. Global Paper Adjusted EBITDA margin was 12.7%.
Distribution Segment
Distribution segment sales decreased primarily due to lower volumes and lower selling price/mix.
Distribution Adjusted EBITDA decreased primarily due to lower volumes and the margin impact of lower selling price/mix. These items were largely offset by increased cost savings and by increased cost deflation.
