Smurfit Westrock H1 2025 Earnings Report

Smurfit Westrock EPS Results

• Actual EPS: $0.45
• Consensus EPS: $0.57
• Beat/Miss: Missed by -$0.12
• One Year Ago EPS: N/A

Smurfit Westrock Revenue Results

• Actual Revenue: $7.94 billion
• Expected Revenue: $7.88 billion
• Beat/Miss: Beat by +$55.09 million
• YoY Revenue Growth: +167.40%

Smurfit Westrock Announcement Details

• Quarter: H1 2025
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 7:30AM ET

Smurfit Westrock (NYSE:SW), 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 H1 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: The Group reported Q2 adjusted EBITDA of $1.213 billion with a 15.3% margin on net sales of $7.9 billion and $387 million of adjusted free cash flow, meeting guidance.
• Positive Sentiment: North America delivered $752 million of adjusted EBITDA with a 15.8% margin, driven by sharper operational focus and early synergy benefits including a ~40% cut in loss-making corrugated plant volume.
• Positive Sentiment: The $400 million synergy program is on track to achieve full-year run-rate by end of 2025, with an additional $400 million of margin enhancement opportunities identified.
• Positive Sentiment: Fitch upgraded the company’s long-term debt rating to BBB+ with a stable outlook, underscoring confidence in the business’s credit quality and cash-generative profile.
• Negative Sentiment: European operations faced weaker consumer demand and headwinds from energy, recovered fiber and labor costs, resulting in a 13.4% adjusted EBITDA margin modestly below last year.

Presentation

[Operator]

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, Heidi. 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.smurfitwestrock.com. Before handing over to Tony, I would ask you to limit your questions to two. And should you require any clarifications on what we are discussing today, Frank and I will make ourselves available after our call.

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

I'll now hand you over to Tony Smurfit, CEO of Smurfit WestRock.

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

Thank you, Kieran, and good morning, everybody. I'm joined today by Ken Bowles, our Group Executive Vice President and CFO. I am delighted to report a strong second quarter performance as we continue to deliver fully in line with our stated guidance. Ken will take you through our financial performance in greater detail.

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

In terms of headline numbers, we are delivering adjusted EBITDA of 1,213,000.000 and a good adjusted EBITDA margin performance of 15.3%. Turning to our regions. We have delivered an initial yet significant improvement within our North American business, reflecting a much sharper operational and commercial focus, together with identified synergy benefits. We're only getting started here and with significant scope for continued delivery. Our European business continues to perform in a challenging market.

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

However, we are comfortable that we are close to a low. Our Latin American operations delivered an outstanding margin performance in a region which continues to present opportunities for growth. We see opportunity across each region, whether it's in terms of operating efficiency, a sharper commercial focus or capitalizing on growth areas. We continue to optimize our system, which we expect to drive improved margin performance for Smurfit Rest Rock with our recently announced restructurings. Finally, and of note within the quarter, Fitch upgraded our long term debt to BBB plus with a stable outlook, reflecting their confidence in the quality of our business and our longer term prospects.

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

As it is now one year from the conclusion of the combination between Smurfit Kappa Group and WestRock, I want to take a step back to look forward. Let me outline our key achievements and what we have found within that time frame. First, we have very successfully and seamlessly integrated two major businesses, combining the best elements of each organization with a strong performance led culture. Secondly, we have identified and are delivering on at least 400,000,000 of synergies. And as we said before, we see a much greater opportunity to deliver at least equivalent value through a much sharper commercial and operating focus.

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

For growth and increased operating efficiency, we continue to invest in a disciplined way across our regions. We are continuing and will continue to optimize our system through the elimination of non strategic or inefficient assets. As you know, we recently announced the permanent closure of 600,000 tonnes of capacity. The steps we are taking and continue to take are delivering a measurable improvement to the business performance within a relatively short time frame. We have built strong foundations with a generally well invested asset base, excellent market positions and above all, the excellence of our people.

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

You have often heard us talking about our distinct operating model that has driven our outperformance. Fundamentally, it revolves around people and the culture which exists now within the new Smurfit WestRock. Culture and values are fundamental to us, and we demand the highest ethical standards. First, we devolve profit responsibility down to the individual businesses, ensuring that each manager runs their business as a fully accountable owner with responsibility for all aspects of their business, with an emphasis on customer service and profitability. In order for our managers to be successful, there are a number of prerequisites, such as having a complete focus on their people within their organizations, safety at work and a relentless focus on delivering value, innovation and quality for our customers.

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

In order to do that, we incorporate effectively give those managers the tools to do the job, ensuring clear strategic direction and support. Naturally, we tightly and centrally control capital and ensure structures are simplified and there is an unrelenting focus on cost takeout, while at the same time eliminating unnecessary structures. Our identified synergy program is delivering at or better than planned. Importantly, though, we see very significant margin enhancement opportunities through our methodology and way of working. We're already seeing the benefit.

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

And to demonstrate this point, we've already cut our loss making and corrugated by approximately 40% in our U. S. Operations. We've always strongly believed that as a general principle, our assets must be world class. Within our business, in our previous incarnation of Smurfit Kappa, we continued over two strategic plan periods to develop world class systems, world class assets and businesses which have a long investable future.

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

In the new Smurfit WestRock, as always, we will be doing the same in a disciplined and measured way. We have started that journey now in the New Smurfit WestRock with GBP 1,000,000,000 already invested in our system, roughly equally split between paper and converting assets. We have also initiated what we call our quick win programs with an amount of almost 200,000,000 already committed for the next eighteen months to rapidly take out costs with a minimum returns exceeding 20% plus. Frankly speaking, we've been doing this for decades and seeing the opportunity in the new Smurfit WestRock is truly exciting. But of course, equipment without people is useless because anybody can buy new equipment.

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

And if you don't have the people with superior knowledge in their marketplace, then you will just be another average company. In the first six months, we have demonstrated with some 39 unique awards given to us that Smurfit WestRock has some of the most powerful, innovative tools and applications that will bring our customers' packaging to another level and help them win in their own marketplaces. With over 2,000 designers worldwide, we are in the early innings of bringing all that knowledge together for the benefit of our customers, so they can reduce their own costs and drive increased revenue, giving them unique designs at the same time sharing value. The sustainability journey, which a large portion of our customer base is committed to, is another area of expertise. We are becoming the innovative and sustainable packaging partner of choice for our customers, which is continually demonstrated day in and day out across our regions.

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

And with that, I'll hand you over to Ken, who'll take you through our financials.

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

Thank you, Tony. Good morning and good afternoon, everyone. And as always, thank you for taking the time to join us. As you can see here on Slide nine, the business delivered another strong performance in the second quarter with net sales of over $7,900,000,000 adjusted EBITDA margin. We had a guidance at $1,213,000,000 adjusted EBITDA margin for the group of over 15% and a strong adjusted free cash flow of $387,000,000 This is a marked improvement compared to the combined performance of the business for the same period last year, showing mid single digit growth in adjusted EBITDA and a further improvement in the group margin.

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

The performance reflects the strength and resilience provided by our diversified geographic footprint and product portfolio, particularly in a challenging macroeconomic environment and the commitment and dedication of our people to delivering for our customers. The ongoing improvement is also a clear reflection of our plan to embed our unique performance led culture right across the Smurfit WestRock organization. A culture that empowers mill and converting plant managers, places the customer at the center of decision making, underpinned by a relentless focus on cost and operating excellence. Turning now to the reported performance of our three segments and starting with North America, where our operations delivered net sales of 4,800,000,000 with adjusted EBITDA of $752,000,000 and an adjusted EBITDA margin of 15.8%, an excellent outcome. Compared to the combined results in the second quarter of last year, we saw significant margin improvement predominantly due to higher selling prices, early evidence of the operating model in action, and the benefits of our synergy program, alongside some input cost relief from recovered fiber, which more than offset lower volumes and caused headwinds on energy, labor and higher mill downtime.

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

Car gated box pricing was higher compared to the prior year, while box volumes were down 4.5% on a same day basis, an outcome very much in line with our ongoing value over volume strategy. Third party paper sales were 2% lower, while consumer packaging shipments, again on a same day basis, were down 2.7%, with volumes in Mexico being lower than in our U. S. Business. One year on from the combination, we are particularly pleased with the performance of our North American team with much of the heavy lifting now complete in terms of establishing our performance and culture based on empowerment and plant level responsibility.

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

Looking now at our EMEA and APAC segment, where we delivered net sales of $2,800,000,000 adjusted EBITDA of $372,000,000 and an adjusted EBITDA margin of 13.4%. Despite a more challenging market backdrop in the region, our operations remained resilient with combined adjusted EBITDA modestly below the prior year. This performance reflects the skill of our local teams in managing a highly volatile cost environment and underscores the effectiveness of our operating model, which continues to deliver the most innovative and sustainable packaging solutions and industry leading returns. Higher corrugated box prices year on year were more than offset by headwinds in energy, recovered fiber and labor, while corrugated box volumes remained flat on a same day basis. To consolidate our leadership position in the region, we have made significant investments in new converting machines, upgrades to corrugators and significant investments in our bag in box business, resulting in a business that is primed to take advantage of the return of an improved demand environment.

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

Our Lat Am segment again remained very strong in the quarter with net sales of $05,000,000,000 adjusted EBITDA of $123,000,000 and an adjusted EBITDA margin of over 23%. Corrugated Box volumes were down 1.9% on a same day basis, with the demand picture in Argentina showing a nascent yet marked improvement and strong demand growth in Colombia and Chile among others. All while our value over volume strategy continues to play out in Brazil as we continue to phase out unprofitable legacy contracts. The region successfully implemented pricing initiatives that almost entirely offset a negative currency translation impact and lower box volumes to deliver this strong result. We believe that Latin America continues to be a region of high growth potential for Smurfit WestRock and one where we are well positioned to drive long term success.

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

And just a reminder of our proven capital allocation framework, a framework that is flexible and returns focused at its core. In Smurf and WestRock, we see internally allocated capital backed by a management team with deep industry experience as key to the future success of the business. After conducting the near term assessment of the capital leases business, our CapEx range of 2,200,000,000.0 to $2,400,000,000 for the year includes high return quick win projects already underway, while we continue to build out broader strategic plan for the business. The dividend is also a cornerstone of the framework, delivering on our expectation of paying a dividend stream in line with legacy SKG's progressive policy, subject to the necessary Board approvals and demonstrates our confidence in the cash generative ability of the business. You will note that today, we have declared a quarterly dividend of $0.04 $3.00 $8 per share.

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

The balance sheet at Smurfit WestRock has significant strength and flexibility. We are committed to maintaining a strong investment grade credit rating, and I am particularly pleased with the upgrade to our long term issuer rating from Fitch earlier this month to BBB plus with stable outlook. Given the scale of our operations and indeed our ability to generate significant free cash flow, we are targeting a long term leverage ratio of below 2x through the cycle. We will also maintain a disciplined approach to M and A, benchmarking any growth opportunities in this area against all other capital allocation alternatives. And the inclusion of other shareholder returns reflects our strong confidence in the future prospects of the business and signals our commitment to continue exploring avenues to create and deliver value for our shareholders and benchmark those opportunities against available options.

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

Ultimately, this framework is all about creating long term value for all shareholders. Turning now to Slide 12, and I'm pleased to confirm that our synergy program is delivering as planned. We are on track to deliver $400,000,000 of full year full run rate synergies exiting 2025. And moreover, we have identified a minimum $400,000,000 of additional opportunities following from a sharper operating and commercial focus. The drivers of that medium term target involve our long standing value over volume philosophy, the consolidation of production of more efficient machines, the ongoing benefits of our decentralized operating model and through the rollout of our unique innovation offering.

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

Furthermore, as we noted in the release, we expect to deliver third quarter adjusted EBITDA of approximately $1,300,000,000 and our full year adjusted EBITDA guidance remains between $5,000,000,000 and $5,200,000,000 And with that, I'll pass it back to Tony for some concluding remarks.

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

Thank you, Ken. Well, as I said at the outset, we are happy that we've come a long way in a short space of time. But clearly, there is much to play for. Our North American business has seen significant improvements in its first year of the combination. Our European business continues to be resilient with a decent margin performance despite a challenging environment.

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

As the region recovers, we will be a major beneficiary. Our Latin American business continues to be an area of significant opportunity where we see significant growth in many of the countries in which we operate. Smurfit WestRock is about building on the strong foundation we have laid to be the go to innovative sustainable packaging partner of choice for our customers with an emphasis on value, quality and service. Smurfit WestRock, which operates in 40 countries, is truly at the beginning of this journey. We believe that we have the best people in the business.

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

We believe we have the best knowledge in our business, and we have strong market positions in practically all countries in which we operate. All senior management in the company are fully aligned with shareholders with a proven track record of delivering. As we have set out in this morning's release, our confidence and conviction on our performance and prospects in part reflects the measurable progress that we've already done within this very short time frame. I thank you for your attention, and now I will hand it back to our operator for some questions and answers. You, operator.

[Operator]

We will take our first question. And the question comes from the line of Mike Roxlett from Truist Securities. Please go ahead. Your line is open. Mike Marklenz, your line is open.

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

Mark, we can't hear you. Mike, sorry, we can't hear you.

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

Hi. Here. Sorry. Can you hear me now? Sorry about that.

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

Yeah. Okay.

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

Apologies. Yeah, thank you. Thank you for taking my questions, everyone, and congrats on all the progress. First question I had was, Tony, you mentioned you the loss making, I believe I heard you say, in North America corrugated by 40%. What metric or metrics are you referring to exactly? Just can you provide some more details around that?

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

Yes, sure. Mike, basically, when we came in, we obviously put the profitability back to plant level and we could see that a lot of plants and actually, the numbers are pretty well the same. About 40% of our plants have moved into profit from being in loss and about 40% improvement in the overall number. We've basically gone through every account very systematically, and there have been some accounts that have been heavily underwater. And we have a part of the reason for our volume performance is that we have lost some business that has was very uneconomic for us to run.

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

And so that's been a systematic process. I mean we can't get out of all contracts that we're in that are not necessarily good ones. And so we're going through that process continually in the company. And so the good news is that when you open up valuable machine space and you give a sales team the chance to go and fill that valuable machine space, If you're losing a lot of money on an account, just getting breakeven accounts business is not so hard. So you improve your business substantially.

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

It does take a little bit of a lag period. So if you lose, let's say, a machine of a customer, it'll probably take you six months to refill that machine with better customers. So that's why you get this sort of lag period of getting your volume back. But overall, just by the actions that we've taken of removing poor volume and replacing some of that already, we're seeing the benefits, and we'll continue to see the benefits. There will be some factories, Mike, that will be unsavable for different reasons, but the vast majority of them are savable and will improve continually.

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

And I would say to you all that we've said about operational improvement is really continuing to do what normal corrugated factories do, which is sell at a reasonable rate of return, giving value and service and quality to the customer and ensuring that the plant is able to continue to pull the paper through the system rather than push the paper through the system. That's what's happened and it's happening.

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

Got it. Appreciate the color, Tony. And then just one quick follow-up. How much of the business in North America remains in a loss position? And then quickly, just on Europe, you mentioned you feel like you're close to a low in Europe.

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

But that said, it looks like pricing continues to weaken, which could potentially threaten certainly the back half of this year into the '26. So I would love to get your sense as to why you feel you're close to a low right now in Europe as well. Thank you.

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

Okay. Well, we still have a number of facilities in loss making. Going back to the first question, we still have a lot still to do. There are as I said, there are companies that where we have contracts that we have to continue to honor with our customers that are significantly underwater that as those contracts come up, we will either get the prices up or we will lose the business and replace it with better business. So we have still, as I say, about 60% of the loss makers corrugated loss makers to move into profit.

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

So that's a big opportunity and chance for us. I don't say all of them will get there, but I would say that at least another 40% will get there over the coming year or So and the ones that have come from loss making to marginal profitability, we should start to see them improve as well. And then hopefully, we'll see our decent plants continue to improve over time as well. So without being too optimistic, I see a lot of opportunity in our corrugated space to improve our business. With regard to Europe, I think there was an announcement today, Mike, about a paper mill closing down.

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

What we're saying in Europe is that at the current levels, if you're a third or fourth player paper mill in Europe and you have no integration, you are not in good shape right now. And that's you saw the one closure today. That's just an indication of how difficult it is for independent papermakers right now in Europe with the current level of pricing. And so I think that our business model has proven out. We've got very good assets, which we've invested in over the years.

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

We've got very good integration, which we continue to invest in. And we will in fact, our pricing should move up in corrugated in the second half or slightly move ahead as we push forward our contracts that will come up for renewal during the second half of the year. So I think at the current level of paper, it's not sustainable for the vast majority of players, and that's why you're seeing some closures. And I suspect you're gonna see some more.

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

Thank you very much, Harry.

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

That's great. Thanks, Mike.

[Operator]

Thank you. We will take our next question. Your next question comes from the line of Lewis Roxbury from Goodbody. Please go ahead. Your line is open.

[Lewis Roxburgh, Equity Research Analyst - Industrials at Goodbody]

Hi, thanks for taking my questions. The first is just on tariffs and consumer confidence. So I guess Q2 would have captured some of that initial tariff impact and obviously the delivery was encouraging in that context. But as we move into Q3 with a little bit more visibility uncertainty in policy, are you seeing any signs of improvement in consumer confidence or demand across your key markets? And the second question is just I guess a follow-up on European capacity rationalization.

[Lewis Roxburgh, Equity Research Analyst - Industrials at Goodbody]

And know you mentioned weakness in non integrated players. You've already announced some closures in Germany, but just given the scale of The U. S. Reduction and the fact that sort of European market stands relatively oversupplied, do you think there's scope for further capacity closures on your side?

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

Yes.

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

I mean we continue to look at, Lewis, our portfolio. And so at this moment, we closed the mill last year in Europe, in France. We don't in the short term because all of our mills continue to be profitable because they're integrated. And so we're in reasonably good shape. And as I say, we're mainly first and second tier mills in our system because we've been investing in them for the last decade.

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

If you remember, if you go back a long time, we used to have 23 mills doing 3,000,000 tons. Now we have about 15 mills doing 5,000,000 tons. So our footprint has become ever more efficient over the last fifteen years or so. So we're ourselves in good shape because we have people to sell to, which is ourselves. And that's the integrated model that we continue to talk about.

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

So do I I suspect there are many, many mills that are in desperate trouble right now, and that was indicated by just one closure today. And I suspect that as we go forward into the third and fourth quarter, if things persist, that those will continue to happen. The first part of your question, Ken, do you want to take the tariff question? Tariffs.

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

Just clarify, Louis, that the closures we announced in Germany last quarter are corrugated box plants, not paper mills. So generally, that we were consolidating that volume across the existing footprint in Germany. So the volume remains just over a lower fixed cost overhead, which is better for the system, So natural benefit.

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

In terms of tariffs, it's important to remember that the 10% was already in for a lot of the paper imports into North America anyway across the piece. So the incremental five doesn't present that much of an upwards correction given what the number could have been out of the August 1. I think historically, the consumer tends to take on about 70% of all the tariff increase. So I think we've seen some of that come through. But I I think our position based on where we sit today is I don't think we'll naturally see any change in flows of imports or exports of papers in or out of North America based on the tariffs as they currently sit today.

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

While they yes, the margins might erode it for the imports into North America for the European producers, it still probably presents a slightly better market than other markets for them. So I wouldn't necessarily expect any shift or change there. Clearly, given our footprint in North America around paperboard, probably does present an opportunity around the cost of the domestic product versus the imported product is much more attractive. Think you would hear that yesterday from one of our peers too. So you won't be surprised by that.

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

We've always kind of said that the real impact in the system will be what happened to consumer demand. I think you can see the volumes in the second quarter, particularly in North America, market down 2.5. We were slightly more than that. But again, that was targeted around exactly what Tony spoke about there, limiting loss makers and unprofitable volume. I think in Europe, given where Germany sits as part of that economy, the settling of the tariffs should, in theory, given the size of the German economy in the context of Europe, give some impetus if Germany wants that in terms of pushing Europe forward.

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

But we are flat volumes in the second quarter in Europe. But as we look out, nothing yet to suggest that, that demand picture will change very quickly. We're certainly not baking that into any of our forecasts. So it remains sort of a relatively volume is okay, demand is okay, but could be a whole lot better. And I think as the tariff picture settles in, I think we'll see where consumer confidence might come back in certain areas that's been lacking, I think, over the last year or so.

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

Yes. The only thing I would say is that we're waiting for the seasonal demand pick up in The United States to happen. We didn't see it move forward in July. And hopefully, we'll start seeing that come forward in August and September based upon the settling of the tariff situation, if that happens. Because there's still a lot of unanswered questions with regard to Canada, Mexico and a lot of Latin American countries.

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

So we'll wait and see over the next few days and indeed, including China. So we'll wait and see over the next few days what transpires in those areas.

[Lewis Roxburgh, Equity Research Analyst - Industrials at Goodbody]

That's very helpful. Thank you.

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

Thanks, Louis.

[Operator]

Thank you. We will take our next question. The question comes from the line of Phil Ng from Jefferies. Please go ahead. Your line is open.

[Philip Ng, Managing Director at Jefferies Financial Group]

Hey, guys. Tony, you gave some great color with, Roxanne earlier. So on the loss making contracts in North America, can you kind of give us a little more flavor in terms of how that winds down? Is that a two year cycle waterfall? And when you think about your team, are you in a good spot to value sell, right? It's about offering the service throughout reliability and the buy in from your sales force.

[Philip Ng, Managing Director at Jefferies Financial Group]

Just give us a little sense on where they sit on that front and then just the environment as well because we've seen, obviously, a lot of capacity come out. So you've been in North America for some time. How do you think about the setup here from an industry structure standpoint as well?

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

Okay. A lot of questions there. Are we in a good spot with regard to innovation? Yes. But as I said in my commentary, we're in the early innings.

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

So for example, Phil, we have just recently hired a new innovation person when I say recently, four or five months ago now to be our corrugated innovation person from a major brewery company. And he's been learning our business and is doing very well. I'm very happy with him. We're all happy with him. And we have a global innovation conference with our innovators in September, whereby we're going to pool the knowledge that we have across our companies.

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

And I have to say that there's some really good innovation in the legacy WestRock business, too, that we need to make sure that we got all the information corralled, and then we have to bring it into the organizations in a controlled way. So from the point of view of where we're at, in Europe, obviously, we're in very good shape. In North America, we've got some very good spots of it, but we've got to corral it a bit more. And in Latin America, we're in good shape. So I think what we'll do, you'll see a big, big move over the next year in our whole innovative selling as we roll this out across our global basis, but specifically in North America.

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

We're set up a lot of capacity has come out of the market, that's for sure. Demand if there's any pickup in demand, that will obviously be very good for the situation. We don't envisage taking much downtime, if any, in the second half of the year other than the normal maintenance type downtime and the odd problem that we're going to have inevitably in some of our mills. But so we don't envisage taking downtime. We would like to see demand a little bit stronger, Philip, to be honest.

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

It's we know that we're going to replace that bad volume with better volume. And every plant I go to, you can see the enthusiasm of the sales teams. And when we start to roll out this innovation even in a greater way, then it's going to be much stronger for our team. So we with the normal lag of replacing it, I think we're going to be in good shape. But we would like to see the general market be better.

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

We're hearing about a lot of customers themselves taking downtime for a week or two weeks, which is which obviously not what we want to hear. We want to hear about an economy that's moving forward. So that's the only, I suppose, issue that I would have right now. With regard to the first question, which was? The wind

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

down of unprofitable contracts in terms

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

So the wind down, I would say by this time next year, with the exception of very few, we would suggest that they will all be gone this time next year.

[Philip Ng, Managing Director at Jefferies Financial Group]

Okay. That's great color, Julien. Really appreciate an exciting opportunity in front of you. Europe, I'm just generally less familiar with. The margins were a little lighter than expected.

[Philip Ng, Managing Director at Jefferies Financial Group]

Can you provide some color on some the headwinds in quarter and how you kind of see that progressing in the back half of the year, especially with some of the movement you've seen on OCC and gas prices?

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

Yes. I mean I'll let Ken take that. But I mean we're in better shape on costs in the second half than we were in the first half as a general view. But Ken?

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

Yes.

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

Generally, Europe in the second quarter, mean, APAC, we did do a good bit on price as a positive in that quarter, about 3% on boxes. But that was offset by a little bit of volume lower than we would have thought. Energy higher than we thought, but that's come down a piece since. Recovered fiber, I think, was a big headwind of about $28,000,000 in the quarter itself versus last year. And labor, about 17,000,000 They were the two big ones.

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

So predominantly, box pricing offset by, call it, some energy, recovered fiber, a little bit of labor getting us where they are. But as you kind of move forward through the year, I think you see the backdrop around recovered fiber, a little bit of labor and certainly energy get a lot better than we would have thought at the start of the year.

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

Thank you, Phil.

[Operator]

Thank you. We will take our next question. And the question comes from the line of Gabe Haidai from Wells Fargo. Please go ahead. Your line is open.

[Gabe Hajde, Research Analyst at Wells Fargo]

Tony, Ken, good afternoon. Hey, Gabe. Gabe. Tony, if you can, on the second half, maybe put a little bit more of a finer point on some of the underlying assumptions sort of in the 1.3, I guess sort of at the midpoint around 1.3 for the fourth quarter in terms of volume expectations across the three regions. And just more specifically in North America, we were reading some reports about some retail business moving around.

[Gabe Hajde, Research Analyst at Wells Fargo]

And I was curious if you were expecting kind of that down 4.5% rate to accelerate in the back half or get better? I know you just kind of told us by June or second quarter, things should be getting close to normalized, but any color there would be helpful.

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

I'll do the volume piece and hand over the assumptions to Ken. Basically, I would suspect that we should start to see normal seasonal pickup in volume. That's what we're obviously believing. That's what typically happens. At this time, we've no reason to believe it won't happen.

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

The but we're not assuming that we're even if I think that we've won a lot of business in new places, that will probably impact us next year. The I think that the second half, we're assuming basically flat volumes to where we are now. We don't expect deterioration, but neither do we expect things to be materially better. So that's sort of our assumption on volumes. But Ken, do want take any other

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

Gabe, taking the third quarter specifically, I think we can make it really easy for you. The third quarter going 1,200,000,000 to $1.3 is just really two things. It's lower downtime, which is about a $50,000,000 impact in the quarter positively. And the rest is really around recovered fiber predominantly for the other 50,000,000 So it's really relief on cost inflation. There's no real assumptions there, as Tony says, flat volume, not necessarily baking anything in on price for the third quarter.

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

So really, the third quarter, point 2%, 1.3% is possibly predominantly recovered fiber and then lower maintenance downtime in the third quarter over the second quarter. For the full year, we kind of end up at the same place as we guided all year. I suppose the moving parts have been, as Tony just said there, moving to flat volumes for the back half, albeit lower for the first six months, so lower on volume but doing a bit better on price across the year than we would have initially thought and certainly a lot better in energy. So energy where we might have guided about $350,000,000 headwind year on year is now about two fifty million Other raw materials probably doing a bit better, 50,000,000. Things like recovered fiber itself where we might have guided a headwind of about 154,000,155 million pounds at the start of the year, probably see that more down to 105,000,000 to 110,000,110 million space of 40,000,050 million pounds saving there.

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

And across even labor, a little bit better as we get into the second half. So there's some big chunky moving parts, and I know Kieran and Frank can take you through them in bit more detail. But broadly, I think if you were characterizing the second half from where we are now, doing bit better on energy, doing a bit better on labor, a bit better on recovered fiber, a bit better on price, volumes remain flat and you kind of dealt on all that as you end up back at the same place.

[Gabe Hajde, Research Analyst at Wells Fargo]

Thank you. All right. And one last one, guess. Tony, you alluded to not being a million miles away, of giving us an update on the consumer packaging business. I think you talked about volumes being down.

[Gabe Hajde, Research Analyst at Wells Fargo]

Ken, 2.7, if I heard you correctly, in Americas, and that includes Mexico down a little bit more. Just curious kind of, again, another quarter under the belt and thinking about sort of the opportunity set there to be on both sides of the house in terms consumer and corrugated. Any updates there? Thank you.

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

Yes. I still feel like it's a very good business to be involved in. I think we've got some very strong market positions. The cross selling opportunities are in Europe, where we're a bit more advanced on that, is very strong. We're because we're much bigger in corrugated than we are in consumer, we're introducing our consumer folks who are really very, let's say, either in health and beauty, which is more of a niche.

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

But on the general market, they didn't really have a lot of selling tools, which we're now obviously opening up for them. So that's a big opportunity in Europe for our consumer businesses. And if you take The United States, I think, generally speaking, we've got some very good businesses with great people. And we've got to think about structurally a couple of issues like SBS, our long position in SBS. But we have ideas that we'll come forward with probably towards the back end of this year or early part of next year as to what we're doing on that.

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

Gabe, just to help you out on that, the consumer volumes, yes, 2.7% down for the quarter, including Mexico. If you exclude Mexico, it's probably more like 2% down. Thank you and good luck. Thank you very much.

[Operator]

Thank you. We will take our next question. And the question comes from the line of Charlie Muir Sands from BNP Paribas. Please go ahead. Your line is open.

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

Good afternoon, guys. Thanks for taking the questions. Just a couple of follow ups on the topics that have already been covered. Just firstly, on the loss making box contracts. Obviously, said you're sort of 40% through.

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

Is there any possibility of putting any kind of dollar numbers around the level of losses you think that on a fully costed basis that business was tracking profits historically? And then secondly, you're talking about some of the assumptions into the second half and talked about flat volumes. I just wanted to clarify, are you talking half on half or year on year? The reason I somewhat ask is that the last two years on a pro form a basis, there's been a bit of a historic dip in profits, particularly in North America business in Q4. I don't know whether there's a reshuffle of the phasing of maintenance, which means that, that won't recur this year.

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

But I'm just trying to get some understanding so we don't get caught out because obviously, the implied fourth quarter guide range is now quite wide.

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

I'll let Ken take the second question. Ken?

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

I suppose the reason of range is there, Charlie, to take account of that fact. I suppose, look, if we think about where we sit, the two assumptions the two big calls in the second half are one big call really is where does demand go. Currently, the first two quarters are probably underwhelmed in terms of where it ended up. And the second half, we're not really baking in much in terms of assumptions of an uptick other than, as Tony talked about, seasonality and everything else. So I think with the range we put in place, there's a lot to play for there, both on the upside but slightly moderating to the downside.

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

But we're not talking about a big number either side of this either way. So and as you know, given our history, volume is not really the real predictor of where we'll end up. It's what we do on price. And then certainly, in that sense, we're doing a bit better on price than

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

we might have thought as we come into the six months. Charlie, on the box plants, let me just try and articulate it. I mean, they have over 100 box plants. So obviously, some are profitable. But if you take a box plant system that was losing relatively significant money I don't want to break it out last year.

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

And if you take a box plan system that's, call it, dollars 1,000,000,000 in sales or so, you know you should be sorry, you should be making about somewhere between 8 percent and 12 percent margin in your box plan system. So on a $10,000,000,000 I should say the $1,000,000,000 on a $10,000,000,000 sales system, you should be making somewhere between $800,000,000 and $1,200,000,000 on a box plan system. And it was loss making last year. So obviously, we're not there yet, but that will be our goal over the next five years to get there. And that's a material improvement and obviously a long way ahead of where when we talk about synergies, it's a lot more than the synergies we can get if we get to that point.

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

Sorry, Charlie. I skipped your fundamental question. I've been giving you the long answer. It's flat volumes half two versus half one.

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

Great. Thank you.

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

Thank you.

[Operator]

We will take our next question. The next question comes from the line of Detlef Winklemann from JPMorgan. Please go ahead. Your line is open.

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

Hi there. Thanks for taking my questions. I've got two. So the very first one comes back to your EBITDA bridge into Q3. I understood from the earlier question that it's €50,000,000 in maintenance, euros 40,000,000 to €50,000,000 in lower OCC or recovered fiber costs.

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

I'm a bit surprised that there's no price in there. I mean, my understanding was that the linerboard price increases we saw in The U. S. As well as in Europe wouldn't have been fully implemented by Q2. Can you just touch on that? And then I'll come back for my second.

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

Detlev. Yes. But I suppose that's to be played out during the quarter. Like in reality, the big building, roughly 1,200,000,000.0 to €1,300,000,000 are the €50,000,000 for downtime and the €50,000,000 for other cost buckets. You also have to remember that within that, we're not baking in any assumptions where our volume might go in the third quarter either.

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

So there's a bit of moderation there in terms of conservatism around price and volume. So as we sit here today, 1,300,000,000.0 there, thereabout seems right in our heads where we'll end up.

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

Okay. Perfect. And then a very technical one or maybe a stupid question. But I mean when I look at your synergies here, you've given us, I think it was Q1 synergies of $80,000,000 Q2 implied is about $100,000,000 And then for the full year, we've got about $350,000,000 So that implies that we're going to go backwards at some point in Q3, Q4. Does that make sense? Or am I just misreading that?

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

I don't think it's going backwards. It's about how you achieve them and when you achieve them. Look, they all come in, in different times depending on if it's in purchasing, when you get those purchasing contracts through, if it's around, whatever it might be, consolidation of volume on more efficient machines. They all just happen at different pace. I think with synergies, you're not necessarily looking for a constant run rate in terms of the quarter itself, but the ultimate run rate in terms of where the synergies go.

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

So the achievement in the quarter is something. But ultimately, I don't think we think about it as going backwards. I think we think about hitting the synergy number and exiting 25,000,000 of that full 400,000,000 in our pocket.

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

Okay. Thanks very much.

[Operator]

Thank you. We will take our next question. The next question comes from the line of Lars Kjellberg from Stifel. Please go ahead. Your line is open.

[Lars Kjellberg, Managing Director at Stifel Institutional]

Yes. Thank you for taking my question. Tony, you just alluded to a number of 800,000,000 to £1,000,000,000 in a box estimate. And of course, you have spoken to the operational commercial improvement opportunities of at least €400,000,000 I. E, equal to the synergies. Two questions on that. I mean, you highlighted a potentially much larger number. But the second real question is, where are we on this now? Are we starting to see any of that equal to at least the synergies coming through in the current year?

[Lars Kjellberg, Managing Director at Stifel Institutional]

Or is that starting to come through in 2026 and build over the years to come?

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

We're definitely starting to see some of that, Lars. I mean, we have continued to see improvement in our box system, as I mentioned. So some of that improvement is already in our numbers. And we have a long way to go in our box system, but there's already an improvement in the first half in our corrugated system versus last year in a considerable way. I'm very happy with how that system is moving and how the team are responding.

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

If you look at the performance of the company and you can see that our margins have grown in The United States, It's basically synergies and improvement in our corrugated box system. And then you look at where our company has had difficulty has been in Europe, where we have had 18%, 19% margins in the past, and we're down in the mid- to low teens at the moment. And that's a reflection on the market, which, as I said, I think is at the bottom or close to the bottom and will improve. The question is when will the demand environment improve to really pull that thing forward? And that's is it 2026 or the second half, first half, 2027?

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

We don't know. But Europe itself is not too bad with the exception of one or two markets. And unfortunately, one of those markets is Germany, which is the biggest, and that that pulls Europe down.

[Lars Kjellberg, Managing Director at Stifel Institutional]

And just coming back to what you just said about some of some of that is all in your numbers. You you spoke to, of course, well, value of volume is making progress, but at the same time, you said you it will take a bit of time to fill those machines. So basically, which avenue number is now cutting the losses and the real benefit for it really start to move into the revenue line and EBITDA that's still to come. Just a clarity on that. And then can, you know, on Yeah. Yeah. Sorry. Go

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

ahead. Go ahead. No.

[Lars Kjellberg, Managing Director at Stifel Institutional]

Was gonna say No.

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

You're right. I I disagree with you.

[Lars Kjellberg, Managing Director at Stifel Institutional]

Good. Very good. The rating upgrade, does that mean anything to you from a financing point of view?

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

Not really, Lars. To be honest with you, from an economic point of view, it's very little. It did give us a small decrease in our revolver and some of our commercial paper programs. But actually, when you look at our bonds and how they price, we probably price already at BBB plus to be honest with you. So we present as a BBB plus credit, we which would have done out of the box with all the agencies from an economics perspective. So small savings but not material in the round.

[Lars Kjellberg, Managing Director at Stifel Institutional]

All right. Very well. Thank you and good luck.

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

Thank you.

[Operator]

Thank you. We will take our next question. The next question comes from the line of Mark Weintraub from Seaport Research Partners. Please go ahead. Your line is open.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

Thank you. Thanks for the very comprehensive review. Far, I mean, one thing I haven't heard is currency very much and we've obviously had a very big move in the euro relative to the dollar over the course of this year. Can you explain to us a little bit how that's impacted results and sort of sensitivities in the way we should be thinking about it as we model forward?

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

Hey, Mark. Actually, the reason you haven't heard it, it didn't actually have much of an impact, to be honest with you. Any of the moves in the dollar in Europe, for example, were a compensator offset by moves in Latin America. So I think net net, if memory serves me, I think the it was about $8,000,000 in total was the currency impact on EBITDA year on year, I think. So that was it, the square root of really nothing.

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

In terms of sensitivities, broadly, every zero one dollars move in the dollar would be plus or minus $12,000,000 is the simplification. Okay. If you take a euro number move by a cent, you get an impact of $12,000,000 broadly. And on the debt side, that's about $30,000,000 Okay.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

And that captures the translation of?

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

Yes, As you can imagine, it's a rough crude calculation based on what we see and what we know over time. But broadly, we see is if you take our euro earnings on a translation basis, every $01 will be plus or minus $12,000,000

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

Okay, super. And then just last sort of big picture, as I was hearing it, a number of things have played out a bit favorably relative to initial expectations, which creates and you kind of listed a bunch of them. And you sort of kept guidance to where it was. Is that primarily that the volume situation, the uncertainty on the volume situation? Or what has sort of held you back from this leading to perhaps a little bit more optimism on the outcome for the year?

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

I think it's I mean, you read the same newspapers that we all read and there's obviously, there's a lot of uncertainty out there, whether it's tariffs or whether it's the general economy or the consumer confidence. So I think that each individual economy has its own different challenges. But when you we don't see we haven't seen volume picking up yet in The United States. And clearly, if volume picked up in The United States, that would give us more confidence. But we haven't seen that yet.

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

And until we see that, then we're going to hold our fire because it's there are a couple of markets that are pretty important to us. Germany is one. And we don't see any major improvements in that market at this juncture. And The United States, as I say, we're going through this transition period where we are looking for newer volumes and phasing out some volumes where we're not able to make any money on it. So that's outside the whole economic environment, which is, as I say, we all read the same newspapers.

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

They're or maybe we don't read them. We look at them online anymore. I think so we're just if you see volumes pick up, clearly things will be much better.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

Fair enough. And maybe this is related to all of this. And maybe I remember wrong, but I thought we had like $100,000,000 negative from maintenance in the second quarter. And you're talking about getting €50,000,000 back but running pretty full. So I'm just trying to understand that dynamic.

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

Yes. But remember also, we begin to see the impact of the closure of Forney that quarter, too. So the need to take less downtime comes into view too. Clearly, Mark, it's an estimate as we start the quarter. If the demand picture deteriorates to any significant impact, it doesn't change much, we can flex that.

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

It's not it's just currently where we sit, demand picture, the order book, everything else that suggests that in less downtime in the third quarter over the second quarter. And some of that is the impact of the closure of Forney helping that.

[Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners]

All right. Thank you.

[Operator]

Thank you. We will take our next question. The next question comes from the line of Anthony Pettinari from Citi. Please go ahead. Your line is open.

[Anthony Pettinari, Research Analyst at Citigroup]

Good morning. Hey, with some of the actions that you've taken in North America, can you remind us what your integration rate is in Corrugated and Consumer? And then broadly, as you kind of execute the operational improvement in your box system, I'm wondering how you kind of compare the carton converting system in terms of sort of opportunity, quality and where you are versus where you want to be?

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

Okay. I'll take the second one. Mean, we're I have to say that I've been very impressed with the carton most of the carton plants, which I've seen and the operations that we have. We obviously have some strong very strong market positions with very big customers. And as you will have seen, a lot of our larger customers have some volume issues themselves in the consumer business.

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

Their profitability is effectively being held up by price. And that's great, but it's not great for volumes. And so we would expect that situation to change as we see more promotional activity going forward into the second half and next year as these bigger customers look for market share gains or market share back. But I with the one or two exceptions, I think, in fairness to Legacy, WestRock, they did a very good job in the carton board system in rationalizing their carton board operations over a number of years. And I think I'm guessing from memory, it's about 15 closures that they've made in Near 20.

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

Near 20 closures they've made, including Europe, yeah, over the last number of years So they have a very good system. And I think that it's a very it potentially is a very good business for us to continue to invest in and grow. And that's what we've been doing. Very good systems business, very good business in health and beauty, very good business in consumer, but obviously somewhat impacted by demand.

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

And then when you look around the globe at our business, whether it's in Europe, Mexico, or indeed in Asia. And I think we've got strong market positions with strong businesses that are investable in. So that's where we sit on the consumer business. Ken?

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

Anthony, in terms of integration levels on the containerboard and corrugated side, about 90% now after the closure of funds. And on the consumer side, it's about 60% if you take all grades in.

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

Got it. Target, yes. On target, but in papers. Yes.

[Anthony Pettinari, Research Analyst at Citigroup]

Great, great. That's very helpful. And then just one really quick follow-up. You mentioned Mexico and I think volumes underperforming consumer there. Can you just I assume that's tariff related uncertainty, but can you just tell us what your customers are telling you in Mexico and what that volume number was?

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

The Mexican business actually is like the Brazilian business, has been relatively one or two very large customers have either underperformed due to tariffs or due to changes in habits. And then we've also taken a very strong view on some legacy business of WestRock that has been really, really poor business that we have exited. So that's why it's a little bit of our own making in the sense that we've chosen to move. I'll give you a good example. One of our factories in on the border was supplying a large customer, and we couldn't make any money on it.

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

And it was a plant that was losing $05,000,000 a month. And as soon as we exited that customer, it was making $05,000,000 a month. So it was a big customer, so it was taking up a lot of machine time. And that's the kind of action that we continue to look to take, and that's why the Mexican volumes are so poor and not like anything we've seen before. We'll get back to growth in Mexico.

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

We've got a fabulous business there, fabulous market position and, generally speaking, great people that are really enthusiastic with a strong share in the business. So I think I'm absent the tariff issue, I would be incredibly optimistic about our business in Mexico to continue to grow.

[Anthony Pettinari, Research Analyst at Citigroup]

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

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

Thanks very much, Anthony.

[Operator]

Thank you. We will take our And final the final question comes from the line of Reinhard Van Der Waalte from Bank of America. Please go ahead. Your line is open.

[Reinhardt van der Walt, EMEA Metals, Mining & Steel Research at Bank of America Merrill Lynch]

Good morning, folks. So thanks for taking my question. Without laboring the point too much on the loss making contracts, I just wanted to check the ones that you've cut, are we referring here to EBITDA loss making contracts? Or are you also looking at this from an EBIT lens? I guess what I'm looking for here is, do you have the visibility from an ERP point of view at the moment to be able to push ROIC optimization?

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

I'll certainly give the second part of that question to Ken. But on the first part, yes, they were EBITDA loss making. I mean, there is no way that you would run the businesses that we have walked away from, there is no way that you would as an independent owner of your business, which is what I go back to, that we are asking our management to be independent owner operators responsible for their own P and L responsibilities. And if you had that business as your if it was your own plant, you would not be running it because you're using a valuable machine time to lose money. And that's not a very sensible way to run a business.

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

So we have exited that kind of business. And we will replace it with it doesn't even have to be good business. It has to be average business or even poor business, and it's better than what we had. Ken?

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

Hey, Reinhard. We have full visibility on the income statement side now. A lot of heavy work done by the team here and the team in Atlanta has achieved that in a very short space of time. Full visibility on an individual to entity basis across their full P and L, which really feeds directly into point Tony is making there around responsibility. You can really only have responsibility for something if you have it in your hand and then can own it.

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

In terms of the balance sheet, is the next phase of the exercise. We're currently breaking those balance sheets out first, the segment levels there clearly, then into the division level of mills, box vans and indeed consumer. And then we go beyond that into the entity level as we get there. But we still have a reasonable view, if you like, of where Roy comes out or Rocky comes out simply because we do have the balance sheet of the segment itself, and we do understand where the capital goes and how we allocate the returns associated. So not necessarily vital to have it at the plant level but will be at the plant level in a relatively short space of time.

[Reinhardt van der Walt, EMEA Metals, Mining & Steel Research at Bank of America Merrill Lynch]

Got it. That's very helpful. Sounds like it's going well. And maybe just a second question, just on the CapEx outlook. I think, Tony, you've mentioned before that FY 'twenty six CapEx is going to depend on the market environment.

[Reinhardt van der Walt, EMEA Metals, Mining & Steel Research at Bank of America Merrill Lynch]

But just as things are today, any steer on just directionally how we should think about CapEx into next year?

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

Not yet, Reinhard. We're as you know, we're developing a strategic plan for the new Smurfit WestRock, and we will give you full guidance on that in February and probably some earlier guidance on CapEx towards the end of this year so you have a feel for at least next year's view. Clearly, we see tremendous opportunity for cost reduction and some growth in certain markets. And so that's all going to be baked into our thinking as we go forward over the next five years. And as I say, we'll bring that forward in a five year view in February, and then we'll bring it forward in next for next year, we'll probably give you a bit of steer for next year earlier.

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

But the key for us as a company has always been and will always be to be agile. We're not a company that's going to be doing any grandiose plans of $1,000,000,000 CapExes and that sort of stuff. We're in improved mode, developed mode, cost takeout mode, growth mode, but nothing that's going to get us too far ahead of our skis.

[Reinhardt van der Walt, EMEA Metals, Mining & Steel Research at Bank of America Merrill Lynch]

Brilliant. Thanks a lot.

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

Okay, everybody. Thank you for joining the call today. I really appreciate you joining the call. It's I know it's been a busy earnings season for you, and we look forward to continuing to work hard to try and ensure that we get to our stated goals in the years ahead. Thank you all for joining, and have a good morning or good afternoon wherever you are.

[Operator]

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 & Director
• Ken Bowles, EVP, Group CFO & Director

Analysts

• Michael Roxland, MD - Equity Research at Truist Securities
• Lewis Roxburgh, Equity Research Analyst - Industrials at Goodbody
• Philip Ng, Managing Director at Jefferies Financial Group
• Gabe Hajde, Research Analyst at Wells Fargo
• Charlie Muir-Sands, Head of Paper & Packaging - Equity Research at BNP Paribas
• Detlef Winckelmann, Equity research - Head of EMEA Paper & Packaging research at JP Morgan
• Lars Kjellberg, Managing Director at Stifel Institutional
• Mark Weintraub, Senior Analyst & Head - Business Development at Seaport Research Partners
• Anthony Pettinari, Research Analyst at Citigroup
• Reinhardt van der Walt, EMEA Metals, Mining & Steel Research at Bank of America Merrill Lynch