Smurfit Westrock Q1 2025 TU Earnings Report

Smurfit Westrock EPS Results

• Actual EPS: $0.73
• Consensus EPS: $0.65
• Beat/Miss: Beat by +$0.08
• One Year Ago EPS: N/A

Smurfit Westrock Revenue Results

• Actual Revenue: $7.66 billion
• Expected Revenue: $7.41 billion
• Beat/Miss: Beat by +$243.61 million
• YoY Revenue Growth: +161.30%

Smurfit Westrock Announcement Details

• Quarter: Q1 2025 TU
• Date: 5/1/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 7:30AM ET

Smurfit Westrock (NYSE:SW) Plc, together with its subsidiaries, manufactures, distributes, and sells containerboard, corrugated containers, and other paper-based packaging products in Ireland and internationally. The company produces containerboard that it converts into corrugated containers or sells to third parties, as well as produces other types of paper, such as consumer packaging board, sack paper, graphic paper, solid board and graphic board, and other paper-based packaging products, such as consumer packaging, solid board packaging, paper sacks, and other packaging products, including bag-in-box. It also produces linerboard and corrugated medium, paperboard, and non-packaging grades of paper, as well as converted products, such as folding cartons and corrugated boxes, and other products; recycled paper-based packaging products; and packaging machinery. The company primarily serves food and beverage, e-commerce, retail, consumer goods, industrial, and foodservice markets. Smurfit Westrock Plc was founded in 1934 and is headquartered in Dublin, Ireland.

Smurfit Westrock Q1 2025 TU Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Smurfit WestRock twenty twenty five Q1 Results Webcast and Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to Kieran Potts, Smurfit WestRock Group VP, Investor Relations. Please go ahead.

[Ciaran Potts, Head of Investor Relations at Smurfit Westrock]

Thank you, Sharon. As a reminder, statements in today's earnings release and presentation and the comments made by management during this call may be considered forward looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings. The company undertakes no obligation to revise any forward looking statements.

[Ciaran Potts, Head of Investor Relations at Smurfit Westrock]

Today's remarks also refer to certain non GAAP financial measures. Reconciliations to the most comparable GAAP measures are included in today's earnings release and in the appendix to the presentation, which are available at investors.smurfitwestruck.com. Before handing over to Tony, I would ask that you limit your questions to two. And should you require any clarifications on what we are discussing today, myself and Frank will make ourselves available after the call. I will now hand you over to Tony Smurfit, CEO of Smurfit Restaurant.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, Kieran, and good morning, good afternoon, everybody. I'm joined here today by Ken Bowles, our CFO, and I'm delighted to again report a strong first quarter performance across all of our regions, in line with our stated guidance. I'm particularly happy at the structural improvement we have shown in our North American region, which, you will all recall, is in the early days of our integration together. Our EMEA and APAC regions performance was good, given the environment was somewhat challenging, while our Latin American region performed very well, driven by our value approach. I'm delighted to say that our synergy program also remains strongly on track and is expected to deliver the GBP 400,000,000 of promised synergies within the tight time frame we have set.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Moreover, having put the two businesses together, we now see very significant operational improvements that will garner at least the same again in additional benefits. This is something the team is working on day in and day out to ensure that Smurfit WestRock continues with the objective of becoming the highest performing company in our sector. As you're all aware, we and the management team are all stakeholders in the company. And through the lens of being owner operators and treating capital as our own, we continue to review our asset base at all times, both through investment and return on capital, optimizing our system to ensure that our assets are and will be, in the future, best in class. We are relentless in our pursuit of excellence and will continue to adjust and develop our asset base as we go forward.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

We have proven over the years that we are an effective stewards of capital, having successfully navigated many different challenges over the decades. The key to the development of Smurfit WestRock will be ensuring that we have a well invested asset base that can be developed for the benefit of our customers to ensure the best quality, the best service, the best innovation and the highest standards to give our customers and our business leaders the chance to win in their marketplaces. As such, we'll continue to invest in our asset base to ensure these objectives are met. Across our regions, we're reducing our cost base in our paper mill systems, investing to improve reliability and output and ensuring we have the best converting machines available to meet the needs of our modern customers. We have recently authorized an initial investment of around 25 converting machines across our system to begin implementation in 2026, which will also help to lower our operating costs, so that our shareholders can be rewarded for these investments.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

We remain excited about the number of opportunities we see to continually optimize our system for growth, but also for cost takeout. In line with all of that, and as and when appropriate, we continue to look at rationalization opportunities within our system. And while these are very difficult decisions to make, it is entirely in line with our philosophy of ensuring that our stronger assets get stronger, while at the same time increasing operating efficiency. In the last forty eight hours, we've announced the closure of over 500,000 tonnes in paper capacity in The U. S, which coupled with the recent actions in Mexico and The Netherlands, totals nearly 600,000 tonnes.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

These actions will make the company stronger as we invest to ensure better longer term returns across our business units. I remain very excited about the combination we created some ten months ago. We have an unrivaled geographic scale, operating in 40 countries and many different product areas where we have strong leadership positions. What has been heartening in such a short period of time is to see the improvement in our North American business, where our commercial approach and the focus on plant level autonomy has been embraced and is contributing to improved margins. At the same time in North America, we have streamlined our operations and have significantly reduced SG and A costs by a reduction of over 1,800 people, and this being prior to the recent announcements.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

In our European market, which is currently on an improving trend, we continue to have industry leading returns with our innovative and sustainable packaging offering. With a very well invested asset base and highly motivated people, we have many exciting growth projects in certain regions and certain business areas, while at the same time continuing to tackle our cost base. With regard to our LATAM business, you will see that we continue to execute as a result of our leadership positions and our market facing approach. We continue in Smurfit WestRock to see obvious cost takeout opportunities. I have authorized us to implement close to 140 quick win projects, as we call them, that will deliver around $50,000,000 of extra EBITDA in the North American region and over 60 projects in the European and APAC region, which will deliver $20,000,000 in 2026 and beyond.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

These projects give guaranteed cost takeouts with IRRs ranging from 25% to 150%. In Latin America, we remain focused on expansion, where we see an opportunity, especially in our Brazilian market, to grow rapidly with new facilities in different parts of the country. I'll now hand you over to Ken, who will take you through our financials.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Thank you, Tony. Good morning and good afternoon, everyone, and thank you again for taking the time to join us. As you can see from the highlights here on Slide nine, the business delivered a strong first quarter performance with net sales of over $7,600,000,000 adjusted EBITDA in line with our guidance of $1,252,000,000 and an adjusted EBITDA margin of 16.4%. This is a significant improvement compared to the combined performance of the business for the same period last year, showing double digit growth in adjusted EBITDA for the group and an improvement in our adjusted EBITDA margin. The performance reflects not only our relentless focus on costs, quality and efficiency, but the incremental benefits of our synergy program and some early stage benefits of our operational changes, including our operating model and all underpinned by our strategy of value over volume.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

As Tony has outlined, we are well on our way now as a combined business. And while the geopolitical outlook is uncertain at this moment in time, we are confident in the future success of Smurfit WestRock, thanks to the unrivaled geographic footprint and product portfolio, our experienced management team and the dedication and commitment of our people to our customers. Packaging at the end of the day is a local business and with the vast majority of our business operating in the FMCG sector, we are and have proved to be in the past a highly resilient business. Turning now to the reported performance of our three segments in the quarter and starting with North America, where our operations delivered net sales of $4,700,000,000 with adjusted EBITDA of $785,000,000 and an adjusted EBITDA margin of 16.8%, an excellent outcome. Compared to the combined results in the first quarter of last year, we saw significant margin improvement due to higher selling prices, which more than offset cost headwinds on energy and labor and higher mill downtime, coupled with lower corrugated volumes year on year.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Corrugated box pricing was higher compared to the prior year, while box volumes were down 4.7% on a same day basis and 4.3% on an absolute basis. Our third party paper sales saw a low single digit decline in the quarter, while consumer packaging shipments were 1% higher when compared to the prior year, as growth in food and beverage products more than offset a decline in our smaller home, beauty and healthcare product lines. We have taken significant actions to streamline the central functions of the segment and to continue to optimize and invest in the asset base. Ultimately, we are changing the business model to drive profit responsibility at the mill and the box plant, while retaining strong central capital controls, where we see significant opportunity to drive profitable growth and higher cash generation through the cycle. Looking now at our EMEA and APAC segment, where we delivered net sales of $2,600,000,000 with adjusted EBITDA of $389,000,000 and an adjusted EBITDA margin of 15.1%.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Exiting what was a challenging year for the industry in this region, our operations continue to demonstrate resilience as sales remained stable and our adjusted EBITDA outcome was only moderately lower compared to the prior year on a combined basis, leaving an EBITDA margin of over 15%, a testament to the skill and dedication of teams locally and continue to deliver for our customers and manage a volatile cost environment. Higher corrugated box prices year on year were more than offset by headwinds predominantly on energy, recovered fibre and labour. Corrugated box volumes were broadly flat on an absolute basis, but 1.5% higher on a same day basis. To consolidate our leadership position in this region, we've continued to make significant investments through new converting machines, upgrades to corrugators and safety systems and substantial investments in our bag in box business, all ensuring we meet the evolving needs of our customers with market leading quality, innovation and service. Our LatAm segment again remained very strong in the first quarter, as you can see here, with net sales of $500,000,000 adjusted EBITDA of $115,000,000 and an adjusted EBITDA margin of over 22%.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Again, when looking at the comparative performance year on year, adjusted EBITDA and adjusted EBITDA margin were significantly higher in the first quarter of twenty twenty five. Corrugated box volumes were 6.3% lower on a same day basis, with Argentina remaining an outsized drag on the region's demand picture, along with our value over volume strategy playing out as expected in Brazil as we continue to roll through a sizable portion of uneconomical legacy contracts. Nonetheless, by leveraging our strong track record in quality and service, we successfully implemented pricing initiatives that more than offset a negative currency translation impact and lower box volume to deliver this strong result. Latin America is a region we are proud to have operated in since the 1950s and benefits from growing economies and a diverse customer base. By leveraging our deep understanding of each local market, Smurfit WestRock is well positioned to continue to drive long term success in this region.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Turning now to Slide 11, and I'm pleased to confirm that our synergy program is progressing well as planned, and we are on track to deliver $400,000,000 of full run rate synergies exiting 2025. We expect to realize approximately $350,000,000 in adjusted EBITDA this financial year, with $80,000,000 being recognized in their first quarter reported earnings of $1,252,000,000 Moreover, we see at least $400,000,000 of additional opportunities following from a sharper operating commercial focus. The drivers of this medium term target are multifaceted and involve our long standing value over volume philosophy, the rationalization of high cost capacity and consolidation of production to more efficient plants, and through the rollout of operational best practice and our suite of unique innovation tools. And finally, as we noted in the release, consistent with our disciplined approach in running a balanced system and before we see the impact of the announced capacity closures, we expect to incur additional downtime in the second quarter costing approximately $100,000,000 over the first quarter. And while the demand outlook is uncertain, we expect second quarter EBITDA adjusted EBITDA to be approximately 1,200,000,000.0 and our current estimate for full year adjusted EBITDA is between 5,000,000,000 and $5,200,000,000 And with that, I'll pass it

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

back to Tony for some closing remarks.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Yes. Thanks, Ken. While we're just a little over nine months into our transformation journey, we have delivered and will continue to deliver meaningful progress. I'm very happy how Smurfit Kappa and WestRock have come together to create Smurfit WestRock with operational and cultural integration progressing very well.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

As Ken has said, our synergy program and operational and commercial focus are delivering a meaningful improvement in our business. We continue to see significant opportunities to develop the business across all our regions and product lines. Equally, as we've demonstrated by our recent actions on capacity rationalizations and cost takeout, there are continual opportunities to reduce our operating costs, underpinned by our disciplined approach to capital allocation. While we are still at the early stages of our journey at Smurfit RestRock, with the innovation, the quality and service that we can give to our customers, we are confident that we will deliver for all stakeholders. While there's no doubt that we are in uncertain times, we believe the actions we're taking today and will continue to take will translate to superior operating and financial performance in the months and years ahead.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

And with that, operator, we will go over to questions. And thank you all for listening.

[Operator]

Thank you. We will now go to your first question. And your first question comes from the line of Charlie Maher Sands from BNP Paribas. Please go ahead.

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

Good morning, good afternoon. Thank you for taking my questions. I'll stick to two as requested. Firstly, just on your 2025 guidance, I just wondered if you could elaborate a little bit around what are the assumptions that go into that. Are you, for example, assuming the similar kind of box volumes in the North American business for the remainder of the year that you saw in Q1 or maybe a bit lower given the run rate seems to be sort of deteriorating at least at the moment?

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

And are you, for example, in Europe, assuming that a second board price hike, which many have mooted but has not yet been recognized, is successful? And have you factored in OCC? Yes, just digging into some of the assumptions there. And then the second question is just your comment about the plan for 25 new machines next year. Think it was early days, I appreciate.

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

But does that mean that CapEx in 2026 could be much higher than 2025 or within the kind of envelope that you've previously been indicating? Thanks.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Let me take a bit of it, and I'll ask Ken to jump in when I miss something. On the second part, CapEx, we haven't really even thought through yet what our CapEx number is going to be in 2026. We're obviously front running a lot of the programs that we have in place for our strap plan to ensure that we get the benefit of these growth opportunities, primarily growth opportunities and cost reduction opportunities, some of them are, to be able to implement during 2026 and to get the benefit of as early as possible. You know, obviously, our CapEx plans are going to depend on what the environment is and what we see the future environment is. And we feel very comfortable with the assets that we bought.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

We feel very comfortable with the positioning of the company. And the question is what growth is going to be there and what opportunities do we have for cost takeout is going to really reflect on how much we spend. But it's very early days, Charlie, but think we're just getting a jump on a relatively small amount of capital for 2026. And the good news is for anyone who's listening is that we don't have a huge pipeline of big projects going forward into 2026 or 2027. So we can adjust pretty easily the organization as to how the environment is.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

And that's always been a key tenant of this company, is to make sure that we have the agility to be agile, and that's what we will continue to be. And obviously, as I mentioned in my notes, that we are all owner operators and we want to make sure that whatever we do is in the best interest of the shareholders for the short, medium and long term. And so that will decide what we spend in 2026 and beyond. But no decisions yet and we're not, to use the euphemism, we're not at all ahead of our skis here. With regard to the box volumes, what we're saying is, we don't anticipate very significant box volume improvement.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

In fact, probably because of our value strategy, we'll probably continue to improve our earnings, but probably lose some volumes. But at the same time, we are seeing very, very significant adoption by our people about the way that we're managing the business. I think that's going to be extremely beneficial for the company as we move forward, both in regard to profitability, because at the end of the day, that's what I believe it's about, profitability, but equally about winning business through the innovation approach that we've had in Europe. And you can see our margins in Europe have very significantly outperformed our peers. And we expect the same to happen going forward.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

It'll take some time. Rome isn't built in a day and making sure that everybody understands the innovations that we have, the applications that we have. We just hired a brand new innovation officer for The United States. He's been with us two years. He's learning the ropes.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

He's an excellent guy apparently. So, we're going to bring that forward. And then finally, to your last point about the hike, there are so many moving parts at the moment. Wastepaper has gone up a lot or recovered fiber has gone up a lot, but energy has come down a bit. So we just have to wait and see over the next week or so to see what's going to happen with the second increase.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

But the first increase is solidly in both in North America and in Europe. And I think that's going to benefit us going forward into the rest of the year, especially if volumes come back.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

I think there are probably two small things out there, Charlie. I think on the CapEx question, I sort of go back to the comment Tony made in his script, which is around disciplined capital allocation and irrespective of how we see the outlook. Our capital allocation always kind of fits into that. So we phase in time as we see fit depending on the environment that's ahead of us. But equally, as Tony said, we're not carrying a lot of CapEx into 2026,

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

so lots of flexibility and agility.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

On the other side of kind of guidance, a lot of the assumptions haven't really changed from where we were. If you think about where we are now, I think the big impacting factor there is the $100,000,000 of incremental downtime Q1 to Q2. I think if we went back to the year end, we probably saw that Q1 to Q2 incremental cost year on year was probably in the order of 10,000,000 to $15,000,000 So that's really the big impact between where we see Q2 now versus where we might have seen it back in February and indeed the full year versus where we see it now.

[Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas]

Great. Thanks.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, Charlie.

[Operator]

Thank you. Your next question comes from the line of Phil Ng from Jefferies. Please go ahead.

[Philip Ng, Managing Director at Jefferies Financial Group]

Hey, guys. On a solid quarter a tough environment. Then Tony, Ken, much appreciated in terms of the increased transparency in the deck and providing us 2025 guidance. It's just helpful for all of us to kind of think through just given all the volatility. So I guess first question, you guys announced sizable mill and box footprint optimization.

[Philip Ng, Managing Director at Jefferies Financial Group]

Any color on how to kind of size up the cost savings associated with this? And Tony, when you kind of look at your footprint holistically, whether it's The U. S, perhaps Europe as well, are there still any noticeable opportunities to take out more capacity? I'm particularly curious in Europe and on the SBS side for The U. S.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Hey, Phil, and thanks for your feedback. It's good to see we're kind of progressing in that sense. In terms of the benefits of the two mill closures, if you take them in two buckets, if you like, so the full year impact of those two mill closures from an adjusted EBITDA perspective is probably in the order of 50,000,000 to $60,000,000 of incremental EBITDA through the system of those closures. And from a CapEx perspective, if you take a kind of a five year general cycle of maintenance capital, there's probably a capital saving of somewhere in the order of $100,000,000 from those two closures in terms of maintenance capital avoided.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Yes. On the second question, Phil, we continue to look at our system. I'm a little bit blue in the face at the moment by saying that we've been very impressed with what we've seen in the legacy WestRock mill system. Primarily, we've been very happy with what we've seen. And unfortunately, we don't like to close things, but we'll continue to optimize our system going forward.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

But obviously, as and when necessary, and as you will have seen that we've taken two machines out in Mexico and they're really small and in Holland. Without their legacy Smurfit Kappa machines that have done well for us for many years and it's come their time. And we've taken out a legacy Smurfit Kappa mill, which in the bigger scheme of the Smurfit WestRock system, you know, it was fine in the Smurfit Kappa system, but as part of the Smurfit WestRock system is obviously one of the weaker mills. And that's why we figured that that's the right one to move on. And so in answer to your question, we will continue to look at all issues in all grades across all the world, just depending on how the situation evolves.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

And that's what we've always done in our company. With regard to specifically SBS, what I would say to you is we are continuing to look at all of our system and we have a strategic plan and process that we're continuing to develop. And when we're ready, we'll let the market know about what our thinking is in the various different grades. You'll have seen we've taken out a CRB mill today, but obviously we're looking at the market and seeing where things go. But when we're ready, we'll address that issue.

[Philip Ng, Managing Director at Jefferies Financial Group]

Super. From a demand standpoint, you guys are taking some economic downtime it sounds like economic downtime ahead of your closure in North America. Tony, just would love to get your thoughts on what you're seeing out there. Certainly, a

[Philip Ng, Managing Director at Jefferies Financial Group]

lot of

[Philip Ng, Managing Director at Jefferies Financial Group]

choppiness with the tariffs in The U. S. And whatnot, consumer weakening. Any color on how intra quarter trends progress, April trends? And then it was pretty encouraging to see your consumer business, if I heard you correctly, up one.

[Philip Ng, Managing Director at Jefferies Financial Group]

I think your biggest competitor is seeing a more muted outlook on demand. So any color on what you're seeing intra quarter and how you kind of think about the balance of the year on the demand side, whether it's containerboard or your consumer packaging business?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Yes, it's a long question. Let me try and address it. I think that we did see a lot of weakness in March and the April. It seems to be steadying itself. Our order books are getting better in the April than they were in, let's say, the six weeks prior to that.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

So that gives us some encouragement. It's a bit difficult to say. I know our competitors are talking about second half recovery. We're not banking on that, frankly. We'll wait and see what happens.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

If it comes, then we'll be very happy, because a lot of our costs are under control. So we'll be very happy if demand comes back in the corrugated and container sector. But we're not, as I say, banking on a very strong recovery. We were banking on some recovery, but not a significant one from where we are. With regard to the consumer business, yes, we had a reasonable first quarter.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

That market has got choppy. There's no question that there's competitive threats out there that we continue to monitor, and that's something it has got more choppy in the consumer side of things for sure.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Yeah. And Phil, you did hear that right. Keep in mind that, you know, 75% of our consumer business is food and beverage. So generally in times like this presents slightly more resilience than

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

say the home health and beauty pieces.

[Philip Ng, Managing Director at Jefferies Financial Group]

Okay. Appreciate all the great color and the good work.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, Phil.

[Operator]

Thank you. Your next question comes from the line of Mike Wroxlin from Truist Securities. Please go ahead.

[Michael Roxland, MD - Equity Research at Truist Securities]

Yes. Thank you, Tony and Ken, for taking my questions, and congrats on all the progress.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, Mike.

[Michael Roxland, MD - Equity Research at Truist Securities]

First question, I just want to follow-up on what you just mentioned, Tony, in terms of not banking on a second half recovery. Can you give us a sense just in terms of how you're thinking about the demand trajectory in 2H and how that corresponds with your guide for the year?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

I mean

[Michael Roxland, MD - Equity Research at Truist Securities]

Especially like containerboard.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

We're sort of saying it'll be somewhat similar with a little bit of upside because the comparators are a little bit better in the second half. So a little bit better than it is in the first half. Honestly, if you look at it, Mike, you'll see the containerboard side of things. If there's any demand recovery, it will look very strong indeed. So we remain still optimistic sorry, not still still very optimistic on the sector.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

It's a question of when demand comes back. But I do think there needs to be some sort of level of consumer confidence coming back into the market to see that happening. As we sit here as of, I think it was this week or early late last week, the consumer confidence index in The United States market was not very strong. So we do need to see consumer confidence coming back, I think that comes back to the whole question of tariffs and uncertainty and getting some certainty in those in that area for the consumer to feel good in the North American market. Conversely, in the European market, I think things are actually a bit better.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

I mean, there's while demand isn't strong, it's reasonable. And most of our markets are doing well or reasonably well with one or two exceptions. So we feel good about the European market and our positioning and the pass through of the first price increase that's gone in, and we'll wait and see whether the second one goes in or not. So we feel good about the European market. Latin America, you see the results is very strong for us.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

We've taken some decisions that we don't we believe in trying to make money, and we try believe in trying to give our customers excellent service. And in doing that, when you find out the business that you're losing tremendous money on, tend to let it go, because I don't want to run bad business across expensive machines. That's a message we're putting into our organization all over the place. You know, there is obviously, there's a consequence to that if you've got some bad business that you're going to have to let it go. There's an adjustment period of time.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

So, you know, when we look at the second half, there'll all be a lot of moving parts, but we still feel very comfortable and happy with our value over volume concept. And as I say, I think it's been well embraced by our people.

[Michael Roxland, MD - Equity Research at Truist Securities]

Got it. I appreciate all the color, Tony. And then just a quick follow-up. Just, Ken, you mentioned additional downtime of $100,000,000 in 2Q. You had been originally thinking maybe 10,000,000 to $15,000,000 back in February.

[Michael Roxland, MD - Equity Research at Truist Securities]

Where are you taking this downtime? Is that mostly in containerboard? Is there some in boxboard? And can you give us a sense of the tons that you're taking out? And then lastly, just on the synergy, it sounds like now you're aiming for $350,000,000 in synergies in 2025 with an exit rate of $400,000,000 Why the shift there in the synergies?

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

If you remember yes, take the second one first, Mike. We would have got a little bit back in 2024. So really, it's a bit of 2024, the $350,000,000 and $2,025,000,000 then you're exiting. And in terms of phasing, think 80,000,000 in quarter one, if you wanted to kind of keep it really simple, the balance across the three quarters and for the rest of the year, probably get you there. And again, we get to end of quarter two, I can look back and tell you what we achieved.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

But no real change or phase. It's probably more we picked up a bit in late twenty twenty four. When you add them to the 2025, you exit 2025 at April. In terms of where we're taking it, we can't really get into specifics, but it's across the system generally where we kind of need to take it, Mike, is the simplest way to put it. So where we feel it's most applicable.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

And remember, a lot of the mills anyway will be taking downtime for maintenance or some CapEx projects. So but not really a split specifically on containerboard versus paperboard, but across the system.

[Michael Roxland, MD - Equity Research at Truist Securities]

Got it. Thank you and good luck in 2025.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, Mike.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Thanks, Mike.

[Operator]

Thank you. Your next question comes from the line of Gabe Haid from Wells Fargo. Please go ahead.

[Gabe Hajde, Analyst at Wells Fargo]

Gentlemen, I'll echo everyone else's nice work in the first quarter here. Thanks for all the detail.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Thanks, Gabe.

[Gabe Hajde, Analyst at Wells Fargo]

I wanted to ask, we're a little less familiar, as you guys all know, about the European market. First quarter, again, margin is really good. Just curious, kind of from a timing phasing standpoint, I'm assuming second half kind of stronger than first half, taking into account the pricing that's flowing through. And Tony, I think in the last call, you mentioned the competitive landscape being a little bit different over there. I think there are three machines kind of starting up as we speak.

[Gabe Hajde, Analyst at Wells Fargo]

Just any feedback from that early days in terms of the market?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Yes, I mean, clearly the outlook for the European containerboard market, if you take it over the next year or so or eighteen months, is not as robust as The United States outlook. There are new machines starting up. They're not really in the market just yet, Gabe. They're about to start in the next three, four months and start ramping up then. Frankly speaking, as I've said before, I have no idea if I was running one of those machines where I'd be selling my product because a lot of the market is integrated and going overseas isn't a gift.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

So I don't and all of the people that are coming into the market have existing capacity, so it's not in their benefit to reduce pricing. Therefore, we'll see what happens in the European market, but the outlook is we've got a very well integrated system and you know our model and it produced 15% returns in probably when you see other people in single digit returns and even lower than that. When the market does recover, I think you can see we're building off a very strong and powerful base with our system.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

With regard to the first question was I think the first question was the market dynamics on price and that in the second half and how it works. It's not that dissimilar necessarily to North America, Gabe, in the sense that as paper prices come through to the market, it does take about three to six months before we begin to see them in the box price. Any incremental paper price, for example, that you might get in the second half of this year or early second half really won't begin to make a meaningful appearance at quarter four or the beginning of next year. So not necessarily that different in terms of dynamics. Probably slightly more, you know, as a group now, probably slightly more weighted on index than non index than we might have been before as perfect capital was broadly fifty-fifty, probably closer more to sixty-forty now.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

So, but in terms of the dynamics of pushing, box prices through from a paper price broadly similar, I suppose the backdrop for the paper side to follow on from Tony's comment is just to keep in your head that things like energy in the European context remain, you could argue, elevated and supportive to broadly where paper is because we still have albeit say this morning, 31 megawatt hour, that's a long way away from the norms of 15 we might have seen years ago. So the cost to Tony's point, the cost input backdrop around be it energy or OCC is quite different than when those mills and machines were initially started up or touted go back four or five years. So the return dynamic is quite, quite different from now than it was then, which is also useful in terms of when they might come on and how they might come on.

[Gabe Hajde, Analyst at Wells Fargo]

Understood. I'll try to be brief. The closures that you announced yesterday, I don't recall if I saw a timeline associated with it. And Ken, you rattle off a lot of numbers. I feel like I heard an incremental $450,000,000 of, I'll call it synergy or performance improvements, I think is what you said.

[Gabe Hajde, Analyst at Wells Fargo]

And then the number you gave us, the $60,000,000 of kind of income statement savings, that was on a per mill basis or that was an aggregate for what you just announced?

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Thank you. Aggregates to the system, Gabe. So the impact across the entire system from shutting those two mills gives you a full year benefit of adjusted EBITDA plus 60,000,000 In terms of the and a saving on the CapEx line of broadly CHF 100,000,000 over five years. In terms of the CHF 400,000,000, that's back to the commercial opportunities we kind of talk about at least equal to the synergy target we put out. So the CHF 400 broadly banked at this point, as you can imagine.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

But we've always talked about if we go back to quarter three, think is when we first talked about it, still see significant value to be driven out and that falls into that second bucket of more at least 400. But in terms of mills, think about as full year run rate 50 to 60 and CapEx avoided over a five year cycle of about 100. We can circle back, Gabe, to kind of to open those down if there's any confusion.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

And and and just to finish off the point on the two mills, there is asset value underneath those that will be released over over time that will be, you know Yeah. At least 50% of the cash cost back.

[Operator]

Thank you. Your next question comes from the line of Lars Kjellberg from Stifel. Please go ahead.

[Lars Kjellberg, Managing Director at Stifel Institutional]

Thank you for taking my questions. I just want to come back a bit to what you're seeing in your customer business with regards to tariffs and thinking in particular, the cross border trade from Mexico, but also from the European side. Are you starting to see any directional changes on your customers' business due to those tariffs? That's the first question. The second one, you're causing your earlier investment programs, you've had this agility that you spoke to deploy capital when the timing is right.

[Lars Kjellberg, Managing Director at Stifel Institutional]

But can you give us a sense of how you should think about incremental self help benefits into 2627 as the synergies literally will be on the books already exiting '25?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Lars, I'll give that very difficult question to second one to Ken. I'll

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

take

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

the easy one on tariffs. Like the USMCA, which is main trade between Canada and Mexico and The United States is in force until ninety days. And we obviously, because we did a lot of cross border trade with customers, mainly on the consumer side, we have been adjusting our supply chains over the last three months to ensure that what is produced in Canada and sold in America is now produced in America. And then equally the other way around, and less so for Mexico, because most of the stuff that's produced in Mexico is for consumption in The United States. So what we're seeing is very little at the moment.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

You know, we've tried to model what tariffs would cost us if they were implemented as pure cost to us, if they were implemented as originally portrayed by The US. And we're sort of seeing a number of an annualized number of around 100,000,000 without any offset to that, if in pure trade for ourselves, if we're not able to get that back. And, you know, obviously, that's not what our intention and workaround would be. Obviously, the big effect of tariffs is completely unknown to us. If the tariffs come in and it causes demand destruction, that is where we would be affected considerably more than any direct effects.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

But, you know, that's an issue of consumer confidence, that's an issue of, you know, general consumer demand. And, we are definitely seeing a lot of nervousness out there with customers, but not yet any material issue other than the uncertainty that we're all seeing.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Hey, Lars. On the soft question, the Quick Win program. So you'll know us well, and we've done a number of these over the years. So generally, these are projects that will deliver the returns within an eighteen to twenty four month timeline. It's the only reason they get approved in the first place and particularly work well in inflationary environments and high cost environments like we are now because they allow you to take costs out fairly quickly.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

And there's a lot of projects here that add up to the numbers, but no, not necessarily kind of big impact in any one particular part of business system. It's small projects in each individual location, adding in a system of our size, adding up to a decent benefit. But you should think about these if they start this year, you know, logically fully implemented between eighteen, twenty four months at the outset, with some incremental benefits for the shorter term projects as we go through it. So but two years max.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

And I think, Lars, just to make the point that these are just some we've selected. If I were to go to the three regional managers that I have and said, You have free rein to go ahead, we'd find a lot, lot, lot more to reduce costs. But it's just a question of management and fitting them in the envelope that we want to do. And as I said earlier, to fail not to make sure that we don't get too far ahead of our skis in the whole issue of CapEx deployment. So we're very, very religious in making sure that we keep stick to our knitting of what made the company Smurfit Kappa great and to make sure that we make the new Smurfit WestRock the kind of company we believe it's going to be.

[Lars Kjellberg, Managing Director at Stifel Institutional]

And just one clarification point. When you talked about the cost benefits or EBITDA positives from the closures, what is the timing of getting that benefit through?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

It'll be second

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

half.

[Lars Kjellberg, Managing Director at Stifel Institutional]

Essentially, they're closing the development?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Second half, we have to go through a process called the Warren Act, which is The United States requirement of sixty days. So sometime, certainly by the July, we'll have completed that process in all likelihood. And then with regard to the other closures in potential closures that we've asked to speak to the Works Council about in Germany, that will be somewhere between six months and a year, depending on the plant and depending on the movement of the volume.

[Lars Kjellberg, Managing Director at Stifel Institutional]

Understood. Thank you and good luck.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, Thank

[Operator]

you. Your next question comes from the line of Detlef Vinckelmann from JPMorgan. Please go ahead.

[Detlef Winckelmann, Equity research - Head of EMEA Paper & Packaging research at JP Morgan]

Hi, guys. Thanks for

[Detlef Winckelmann, Equity research - Head of EMEA Paper & Packaging research at JP Morgan]

the call. Just a quick one on your $100,000,000 of downtime economic downtime in Q2. I just want to kind of get a sense of how that plays into the full year number. Are we assuming that, that tonnage stays down in Q2, Q3, Q4? Or is there some sort of assumption that, that tonnage is like downtime is maintained or contained just to Q2?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

It's for Q2. And obviously, in Q3 and Q4, we won't have the output of the other containerboard mills. In a sense, and we'll be getting the benefit of that tonnage onto the existing mills. It's a one off. There'd always be maintenance downtime, dead leave, and there'd be other bits and pieces of downtime, and probably some machines not working the way we want them to work, but basically, the downtime that we're planning because of this situation in Q2 is a Q2 issue.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Yes, exactly.

[Detlef Winckelmann, Equity research - Head of EMEA Paper & Packaging research at JP Morgan]

Cool. Thanks very much. That's all from me. Thanks.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thank you.

[Operator]

Thank you. Your next question comes from the line of Patrick Mann, Bank of America.

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

I've got two. The rationalization of the mills and the 600,000 tonnes you've taken out, but you've also spoken a bit optimizing the packaging in the downstream operations. Does it change your net paper position at all? Does that and or how does that factor into these optimization decisions? And then the second question is the quick win projects, does that form part of the operational and commercial improvement sort of at least the same $400,000,000 synergies?

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

Or is it a sort

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

of different bucket of capital allocation? How should we think about it? Very much.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Hey Patrick, it's Ken here. Yes, the Quick Wind project program will form part of that second four hundred and that's why it's on the same timelines we would have talked about of achieving that 400 over eighteen to twenty four. So it fits into that kind of bucket. I suppose what we're trying to do here is as we kind of progress through the quarters, give you more kind of building blocks out of 400 built. And this is now in a place to kind of get on with those quick run programs projects that gives you some level of kind of certainty around where that's going to come from in terms of visiting through the income statement, through the capital line and the returns of it.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

So no form as part of the $400,000,000 On the other one, yes, for the two actually for both mills, for St. Paul and Forney, it does improve our integration levels a little bit. I think for on the containerboard side,

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

it goes from about 86%

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

to 89% integrated on containerboard and from about 67 before to about 71% on paperboard.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Yes. And just to add to that, Patrick, just on the quick wins, I mean, that forms part of it, and that's why we said at least €400,000,000 because we do see many opportunities, commercial and through CapEx, to develop this business in a much more material way than before. And so that's why it gives us a lot of optimism for the future.

[Patrick Mann, Vice President at Bank of America Merrill Lynch]

Thank you.

[Operator]

Thank you. Your next question comes from the line of Mark Weintraub from Seaport Research Partners. Please go ahead.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

Thanks very much and thanks for all the color so far. I wanted to just come back to the first half to second half bridge, if I could. You're essentially assuming about 100,000,000 to $300,000,000 pickup in EBITDA. And if I caught you right, you are looking for volumes to be flat to up modestly. So hopefully that's a positive.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

We've got less downtime assumed. You've got pricing in Europe that should in particular, but also in The U. S. That should be flowing through presumably you get synergies and some additional net productivity in the second half and you've the cost takeout. So kind of on the flip side, what are some of the negatives that you might be assuming and one, which I have a specific question to, is waste paper in Europe is a bunch higher right now which is kind of confusing to me in that the demand environment has been not that great.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

And so I was hoping to get some color on why that you think is happening and if we don't get a more sustained pickup in demand in Europe, does that just come back, roll back over? Thanks so much.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

I'll take the second one and let Ken take the first part of your question. I mean, on waste paper, it was a very big surprise to us, Mark, to be honest. We had expected we've been modeling somewhere around 120, one hundred 30 for the year, and all of a sudden it goes to 170, one hundred 80 in the space of literally six weeks. And it happened because there was an auction in Italy, and one major player who was bringing on new capacity panicked. And then all the other people who were bringing on new capacity panicked, and they bid up the price.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

And so the question of the sustainability of it is a very good question. We'll wait and see. But is while demand is not fantastic, it's not bad, it's certainly better than last year, and they're not making that much more wastepaper. So it doesn't take a whole lot to flip it and move it. And I think the reason when one guy panicked in Southern Italy or in Italy at a particular auction, it made a ripple effect throughout Europe, and that's what happens, everybody needs the stuff.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

As you know, Europe is a fundamentally, it's a waste based market. And so that's what happens. We'll see about the sustainability of it as we go through the summer. But there is new capacity in, demand is not bad in Europe. Stocks are low in paper.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

They're about 100,000 tons less than last year. And as I say, demand is reasonably good. So that's what caused it.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Hey, Mark. In terms of just broad building blocks and probably less half one to half two, probably more just to kind of revisit the year to year, probably more kind of relevant in terms of what we'd have spoken about before. I don't think much has necessarily changed now we're thinking about it. I think if you think about some of those bigger cost buckets, as we would have talked about maybe at the year end in terms of where we go full year to full year. In reality, energy is still quite a significant headwind year on year, about $350,000,000 call it Labor and inflation around that in the order of about $200,000,000 Other raw materials generally, probably a headwind of about 100,000,000 And that downtime piece year on year is probably costing somewhere in the order of about $150,000,000 year on year.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

There's a big kind of negative against that. You can see though, if you look at the pricing environment and the backdrop to that, which we would have talked about already today, sequentially year on year box pricing in North America is up broadly 8%, quarter on quarter probably 3%. So you can see that begin to come through to the second half. Clearly, the paper impact is coming through there as well. And the biggest piece there, back to OCC, was not necessarily seeing it in Europe, but in North America, certainly a relief on OCC probably year on year giving you the benefit of somewhere between 100,000,000 to $150 But so those big cost buckets haven't really moved around a lot since we would have spoken.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Clearly, as we've spoken a lot today, the demand backdrop and volumes, clearly the biggest variable that we kind of have to pin down as we kind of go through the second half.

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

Super helpful, Ken. Just one last follow-up, how about FX? I mean, we've had some big moves in dollar euro. I would have thought just on a translation basis that might have some implications. Can you kind of walk us through how that works for you guys?

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Yes, would be negative so far, but it's kind of it's not necessarily material as we sit here today given that the dollar has come back a bit. But we can help you model some of that, Mark, depending on where we go. We can give you some stats on taking a euro dollar per in terms of where you see it. But at the moment, slightly negative, not material. Probably the best way to think about it for the first quarter, particularly in Latin Thanks,

[Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners]

guys.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, Mark.

[Operator]

Thank you. Your next question comes from the line of Kevin Fogarty from Deutsche Numis. Please go ahead.

[Kevin Fogarty, Director, Equity Research at Deutsche Numis]

Thanks very much, and afternoon, everyone. Thanks for taking my question. So a number of them have been answered, but it's just one on exceptionals that we might see this year. Obviously, you've got some associated with the capacity closures and adjustments you've announced today. Could you just sort of step us through what else we should be thinking about?

[Kevin Fogarty, Director, Equity Research at Deutsche Numis]

I think you've kind of previously flagged a sort of two thirty five relating to synergies, delivery. Is there anything else we should be thinking about sort of accelerated depreciation or anything associated with with the closures, or any kind of more widely sort of restructuring charges that might hit this year?

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Essentially, no, Kevin. It's kind of as guided. The new information will be

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

around those closures last night. The cash piece, you would

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

have seen about 99,000,000. And then the impairments of the fixed assets, accelerated depreciation if you want, about $188,000,000 So we'll take the impairments now essentially for the second quarter and then the cash costs will go out over the remainder of the year. So nothing beyond what either what we guided already or indeed those impairments from last night.

[Kevin Fogarty, Director, Equity Research at Deutsche Numis]

What you guided relates to synergies is kind of as expected, sort of $235,000,000

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Exactly, yes, as expected, Kevin.

[Kevin Fogarty, Director, Equity Research at Deutsche Numis]

Great. Alright. Thanks very much. Thanks.

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Thanks,

[Operator]

you. Your next question comes from the line of Gaurav Jain from Barclays. Please go ahead.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

Hi. Good morning or good afternoon. Thank you so much. So two questions from me. One is, know, we have read that, you know, the Chinese containerboard importers who are no longer importing from US, they are shifting some of their demand to LatAm.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

Is this something that you are noticing, and would these changing trade flows somehow position you in a better context versus your other peers who are more sort of geographically, you know, fixed? So that was question number one. And the second question was on, you know, future potential m and a. So you have done acquisitions in prior cycles, in prior down cycles. And, yes, you just did this acquisition eight months ago and, you know, balance sheet has leveled up to, like, two and a half times.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

But if, you know, if we indeed get into weaker macro cycle and there is some opportunity which is too good to pass, would you consider it?

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Well, I'll take the second one. Well, I'll take them both actually,

[Ken Bowles, Executive VP, Group CFO & Executive Director at Smurfit Westrock]

Kate. Sorry.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Listen, our our objective is to get our balance sheet down towards the two point zero times. That's where we're solely focused on that. We will be making some smaller bolt on acquisitions as and when, if they make sense for the overall company. But we're not going to do anything that's off the pitch, so to speak. We're very focused on making sure that we bet the organization down, we're very focused on making sure that we bet every part of the business down.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

There's still a lot of work to do, Jain, about making sure the accounting function works well, making sure that everything, know, the reporting is great, that the operations are improving, that the integration continues on its path. So there's a lot to do before we would even think about a larger acquisition and do anything off the pitch, so to speak. With regard to the Chinese flows, we are hearing that there are people who are having to adjust. We saw public quotes for some of our competitors taking downtime, and we believe that that's continuing to happen. Because of the lack of exports, there are many mills with regard to that have specifically their focus on exporting to China out of The U.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

S. And that would obviously be problematic for them right now. We don't do any significant amount of exports to China. We do a lot of exports to Latin America, where we have long standing good relationships with excellent customers and we continue to keep those and develop those because we believe in long term relationships in Smurfit, WestRock and I don't think the Chinese thing is going to influence us negatively and can only be positive for us.

[Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank]

Thank you very much.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thank you.

[Operator]

Thank you. We will now take our final question for today. And your final question comes from the line of George Staphos from Bank of America. Please go ahead.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

Hi, everyone. Good morning. Good afternoon. Thanks for all the details, Tony and Ken. There's been a lot of discussion on containerboard today, so I'm going to focus a little bit more on consumer board.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

You're nine months into the acquisition. What have been the learnings that you can share on kind of an open mic discussion about the value addedness of being able to sell both consumer and secondary packaging well, we shouldn't call it that initially, but corrugated packaging across all of your customers? And what's changed perhaps, again, to what degree you can share versus what your perceptions might have been in July? Relatedly, within consumer, are there any differences that you can share in terms of how you're allocating capital looking at the footprint and so on relative to how you might go about your business in corrugated? And what should we take away, if anything, other than just you're aligning the footprint with the adjustment in CRB?

[George Staphos, Managing Director at Bank of America Merrill Lynch]

The fact that you're taking some capacity out of CRB would suggest that there's a long term plan, you're viewing it as an ongoing business within Smurfit. Any thoughts that you can share would be great, and good luck in the quarter. Thank you, guys.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, George, and good to hear you. Let me be I think that there is a very good business here in Consumer Packaging. We've got some great people, we've got some great assets, and we've got some great opportunities. And so we will view this business the same way we view our corrugated business, our bag and box business, our sack business, and decide where the best returns are going

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

to come

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

from as we look at each individual capital request. So, think we've got a superior offering or potentially have a superior offering, me put it like that. We need to work on some strategic elements of it, George, and that's something that we'll work through and we'll communicate to the market when we're able to. You know, we're literally nine months into this and, we are discovering a lot. You've asked what our findings are.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

I think it's probably a little bit tougher of a marketplace than we would have anticipated. But when I see the positives, I see we've got some incredibly good people and potentially incredibly good assets and incredibly good market positions to develop. So that's the work in progress, is to figure out where do we apply the capital and when, and what markets can give the shareholders the best returns. And that's still work in progress, but I would say this is a potentially very strong market for us because there is a cross sell opportunity, there is a good foundation of business that we can really develop and grow. But as I say, with regard to the specific grades, will know that and I think I've been upfront on this is that we do need to have a CRB strategy and we do need to have an SBS strategy and a CUK strategy for all of our operations.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

And, you know, we're in the process of developing that, and when we're ready, we'll come back to you and tell you what that is. But we're not a million miles away from telling you.

[George Staphos, Managing Director at Bank of America Merrill Lynch]

That's good, good to hear. Appreciate the thoughts. Good luck in the quarter. Thank you, guys.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

Thanks, George. Appreciate it. So, operator, I think that's our last question. With that, I would say to all participants and all those that have the questions, many thanks for listening to us. We are very proud of what this company has already become, but as I say, we are at the start of a long journey, a never ending journey.

[Anthony Smurfit, President & Group CEO at Smurfit Westrock]

But my colleagues and myself are really excited about the future. Obviously, it will be we're living in uncertain times, as you all know. And when we get back to growth, this company is going to be extremely well positioned to take advantage of that in every way. So thank you for your time and your attention, and we look forward to seeing you in person or at the next quarter call. Thank you all.

[Operator]

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• Ciaran Potts, Head of Investor Relations
• Anthony Smurfit, President & Group CEO
• Ken Bowles, Executive VP, Group CFO & Executive Director

Analysts

• Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas
• Philip Ng, Managing Director at Jefferies Financial Group
• Michael Roxland, MD - Equity Research at Truist Securities
• Gabe Hajde, Analyst at Wells Fargo
• Lars Kjellberg, Managing Director at Stifel Institutional
• Detlef Winckelmann, Equity research - Head of EMEA Paper & Packaging research at JP Morgan
• Patrick Mann, Vice President at Bank of America Merrill Lynch
• Mark Weintraub, Senior Analyst and Head of Business Development at Seaport Research Partners
• Kevin Fogarty, Director, Equity Research at Deutsche Numis
• Gaurav Jain, Head of EU SMID, EU packaging, and Global Tobacco and Cannabis at Barclays Investment Bank
• George Staphos, Managing Director at Bank of America Merrill Lynch