REG-Smurfit Westrock plc Smurfit Westrock Reports Third Quarter 2024 Financial Results
30/10/2024 10:30
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Smurfit Westrock Reports Third Quarter 2024 Financial Results
Smurfit Westrock plc (NYSE: SW, LSE: SWR) today announced the financial
results for the third quarter ended September 30, 2024.
Key points:
* Net Sales of approx. $7.7 billion
* Net Loss of $150 million, with a Net Income Margin of negative 2.0%
* Adjusted EBITDA(1) of $1,265 million, with an Adjusted EBITDA Margin(1) of
16.5%
* Continuing focus on asset optimization
* Previously announced quarterly dividend of $0.3025 per ordinary share
Smurfit Westrock plc’s performance for the three months ended September 30,
2024 and September 30, 2023 (in millions, except margin percentages):
September 30, 2024(1) September 30, 2023(2)
Net Sales $ 7,671 $ 2,915
Net (Loss) Income $ (150) $ 229
Net Income Margin (2.0%) 7.8%
Adjusted EBITDA(1) $ 1,265 $ 525
Adjusted EBITDA Margin(1) 16.5% 18.0%
Net Cash provided by Operating Activities $ 320 $ 378
Adjusted Free Cash Flow(1) $ 118 $ 214
Tony Smurfit, President and CEO, commented:
“I am pleased to report an excellent performance for the third quarter, the
first for Smurfit Westrock. The Net Loss for the quarter of $150 million was
primarily due to transaction related expenses and purchase accounting
adjustments totalling approximately $500 million. With Adjusted EBITDA(1) of
$1,265 million and an Adjusted EBITDA Margin(1) of 16.5%, these results are a
strong foundation to build upon.
“Our established track record of delivering value to our customers through
service, quality and innovation is already beginning to yield results.
Equally, we believe our focus on plant level autonomy, operational improvement
and profitability will deliver in time, benefits at least equal to the stated
synergy target of $400 million.
“Our third quarter performance, combined with our deeper knowledge of the
Combination and continuing asset optimization, clearly points to the
opportunities ahead for Smurfit Westrock. We are at the start of our journey
to build the ‘go-to’ sustainable packaging partner of choice, a global
leader with an unrivalled scale, geographic reach and product portfolio.
Having spent the last number of months visiting our plants, it is also clear
that our people are excited and motivated to be a part of this journey.
“We expect 2024 Full Year Combined Adjusted EBITDA(4) of approximately $4.7
billion and we are increasingly excited by our immediate and longer-term
prospects.”
__________________
(1) Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Free Cash Flow are
non-GAAP measures. See the “Non-GAAP Financial Measures and
Reconciliations” below for the discussion and reconciliation of these
measures to the most comparable GAAP measures.
(2) All results reported for the three months ended September 30, 2024 do not
include the financial results of legacy WestRock Company (“WestRock”) for
the first five days of July due to the closing of the combination between
Smurfit Kappa Group plc and WestRock Company on July 5, 2024.
(3) All results reported for the three months ended September 30, 2023 reflect
the historical financial results of legacy Smurfit Kappa Group plc, which is
considered the accounting acquirer in the combination between Smurfit Kappa
Group plc and WestRock, which closed on July 5, 2024 (the “Combination”).
(4) 2024 Full Year Combined Adjusted EBITDA is a non-GAAP financial measure.
We have not reconciled Adjusted EBITDA outlook to the most comparable GAAP
outlook because it is not possible to do so without unreasonable efforts due
to the uncertainty and potential variability of reconciling items, which are
dependent on future events and often outside of management’s control and
which could be significant. Because such items cannot be reasonably predicted
with the level of precision required, we are unable to provide an outlook for
the comparable GAAP measure (net income).
Third Quarter 2024 | Financial Performance
Smurfit Westrock’s net sales increased by $4,756 million, to $7,671 million
in the third quarter of 2024 from $2,915 million in the third quarter of 2023.
This increase was primarily due to the positive impact from acquisitions of
$4,693 million, of which $4,684 million related to the acquisition of
WestRock, and a net positive volume impact of $98 million (excluding the
impact of acquisitions), primarily driven by an increase in corrugated
volumes. The above increases were partially offset by the net negative impact
of a lower selling price/mix of $30 million and a net negative currency impact
of $5 million.
Net income decreased by $379 million, to a net loss of $150 million, with a
net income margin of negative 2.0% in the third quarter of 2024, from net
income of $229 million, with a net income margin of 7.8% in the third quarter
of 2023. This decrease was primarily due to a $4,148 million increase in cost
of goods sold (including an expense of $227 million for the amortization of
the fair value step up on inventory recognized on WestRock’s inventory
acquired) and a $657 million increase in selling, general and administrative
(“SG&A”) expenses, both driven by additional costs related to the
acquisition of WestRock. Additionally, transaction and integration-related
expenses associated with the Combination increased by $250 million. These
increased costs were partially offset by the increase in net sales.
Adjusted EBITDA(1) for the Company was $1,265 million, with an Adjusted EBITDA
Margin(1) of 16.5% in the third quarter of 2024, compared to Adjusted
EBITDA(1) of $525 million, with an Adjusted EBITDA Margin(1) of 18.0% in the
third quarter of 2023.
The Company’s interest expense, net increased by $128 million, to $167
million in the third quarter of 2024, from $39 million in the third quarter of
2023 primarily due to increased debt in connection with the Combination
partially offset by higher interest income on cash balances.
Other expense, net increased to $13 million from $4 million in the third
quarter of last year primarily due to a $12 million expense recorded in the
third quarter in connection with the sale of receivables under an accounts
receivable monetization program acquired as a result of the Combination and
partially offset by other movements.
Income tax expense decreased by $40 million to $33 million in the third
quarter of 2024, from $73 million in the third quarter of 2023, primarily due
to the loss in 2024 compared to a profit in 2023, the change in the
geographical mix of earnings and the significant impact of transaction and
integration-related expenses associated with the Combination which are only
partly deductible for tax.
Net cash provided by operating activities decreased by $58 million, to $320
million in the third quarter of 2024, from $378 million in the third quarter
of 2023. The decrease was primarily due to an increase in tax payments of $29
million, an increase in net cash interest paid of $162 million and a negative
working capital change of $272 million, partly offset by an increase in
consolidated net income adjusted for non-cash items.
Including capital expenditure of $512 million in the third quarter of 2024,
and $202 million in the same period last year, free cash flow was an outflow
of $192 million in the third quarter of 2024 and an inflow of $176 million in
the third quarter of 2023. Excluding transaction, integration and
restructuring costs of $310 million (net of tax) in the third quarter of 2024,
Adjusted Free Cash flow for the period was an inflow of $118 million. Adjusted
Free Cash Flow(1) in the third quarter of 2023 was an inflow of $214 million.
Adjusted EBITDA(5) for our Europe, MEA and APAC segment remained at $411
million in the third quarter of 2024, consistent with the same period in 2023.
This was primarily due to a $37 million positive impact from the acquisition
of WestRock offset by a reduction in Adjusted EBITDA (excluding the impact of
acquisitions) primarily due to an increase in raw material, payroll and
distribution costs, partially offset by an increase in net sales and a
decrease in energy costs. The Adjusted EBITDA Margin in the Europe, MEA and
APAC segment was 15.5% in the third quarter of 2024, compared to 18.8% in the
third quarter of 2023.
Adjusted EBITDA(5) for our North America segment increased by $714 million, to
$780 million in the third quarter of 2024, from $66 million for the third
quarter of 2023. This increase was primarily due to a $724 million positive
impact from the acquisition of WestRock partially offset by a $10 million
decrease in Adjusted EBITDA (excluding the impact of acquisitions) primarily
due to an increase in raw material costs. The Adjusted EBITDA Margin in the
North America segment was 16.8% in the third quarter of 2024, compared to
16.4% in the third quarter of 2023.
Adjusted EBITDA(5) for our LATAM segment increased by $42 million, to $116
million in the third quarter of 2024, from $74 million for the third quarter
of 2023. This increase was primarily due to a positive impact of $56 million
from the acquisition of WestRock partially offset by a reduction in Adjusted
EBITDA (excluding the impact of acquisitions) primarily due to an increase in
payroll and other costs. The Adjusted EBITDA Margin in the LATAM segment was
23.1% in the third quarter of 2024, compared to 22.0% in the third quarter of
2023.
__________________
(5) For the three months ended September 30, 2024, Adjusted EBITDA and
Adjusted EBITDA Margin for the segments are our measures of segment
profitability because they are used by our chief decision-maker (“CODM”)
to make decisions regarding allocation of resources and to assess segment
performance in accordance with Accounting Standards Codification 280. These
financial measures comply with GAAP when used in that context. For the three
months ended September 30, 2023, segment information reflects performance of
legacy Smurfit Kappa Group plc.
Earnings Call
Management will host an earnings conference call today at 7:30 AM ET / 11:30
AM GMT to discuss Smurfit Westrock’s financial results. The conference call
will be accessible through a live webcast. Interested investors and other
individuals can access the webcast, earnings release, and earnings
presentation via the Company’s website at www.smurfitwestrock.com
(https://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.smurfitwestrock.com&esheet=54144193&newsitemid=20241030338802&lan=en-US&anchor=www.smurfitwestrock.com&index=1&md5=8a17f71cb0c7d318cd36b35a9acab3f7)
. The webcast will be available at
https://investors.smurfitwestrock.com/overview
(https://cts.businesswire.com/ct/CT?id=smartlink&url=https%3A%2F%2Finvestors.smurfitwestrock.com%2Foverview&esheet=54144193&newsitemid=20241030338802&lan=en-US&anchor=https%3A%2F%2Finvestors.smurfitwestrock.com%2Foverview&index=2&md5=122f28440b2617bbe96ff69c73cd346b)
and a replay of the webcast will be available on the website shortly after the
call.
Forward Looking Statements
This press release includes certain “forward-looking statements”
(including within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended)
regarding, among other things, the plans, strategies, outcomes, outlooks, and
prospects, both business and financial, of Smurfit Westrock, the expected
benefits of the completed combination of Smurfit Kappa Group plc and WestRock
Company (the “Combination”), including, but not limited to, synergies, and
any other statements regarding the Company's future expectations, beliefs,
plans, objectives, results of operations, financial condition and cash flows,
or future events, outlook or performance. Statements that are not historical
facts, including statements about the beliefs and expectations of the
management of the Company, are forward-looking statements. Words such as
“may”, “will”, “could”, “should”, “would”,
“anticipate”, “intend”, “estimate”, “project”, “plan”,
“believe”, “expect”, “target”, “prospects”, “potential”,
“commit”, “forecasts”, “aims”, “considered”, “likely”,
“estimate” and variations of these words and similar future or conditional
expressions are intended to identify forward-looking statements but are not
the exclusive means of identifying such statements. While the Company believes
these expectations, assumptions, estimates and projections are reasonable,
such forward-looking statements are only predictions and involve known and
unknown risks and uncertainties, many of which are beyond the control of the
Company. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend upon future circumstances
that may or may not occur. Actual results may differ materially from the
current expectations of the Company depending upon a number of factors
affecting its business, including risks associated with the integration and
performance of the Company following the Combination. Important factors that
could cause actual results to differ materially from such plans, estimates or
expectations include: economic, competitive and market conditions generally,
including macroeconomic uncertainty, customer inventory rebalancing, the
impact of inflation and increases in energy, raw materials, shipping, labor
and capital equipment costs; the impact of public health crises, such as
pandemics (including the COVID-19 pandemic) and epidemics and any related
company or governmental policies and actions to protect the health and safety
of individuals or governmental policies or actions to maintain the functioning
of national or global economies and markets; reduced supply of raw materials,
energy and transportation, including from supply chain disruptions and labor
shortages; developments related to pricing cycles and volumes; intense
competition; the ability of the Company to successfully recover from a
disaster or other business continuity problem due to a hurricane, flood,
earthquake, terrorist attack, war, pandemic, security breach, cyber-attack,
power loss, telecommunications failure or other natural or man-made events,
including the ability to function remotely during long-term disruptions such
as the COVID-19 pandemic; the Company's ability to respond to changing
customer preferences and to protect intellectual property; the amount and
timing of the Company's capital expenditures; risks related to international
sales and operations; failures in the Company's quality control measures and
systems resulting in faulty or contaminated products; cybersecurity risks,
including threats to the confidentiality, integrity and availability of data
in the Company's systems; works stoppages and other labor disputes; the
Company’s ability to establish and maintain effective internal controls over
financial reporting in accordance with SOX, and remediate any weaknesses in
controls and processes; the Company's ability to retain or hire key personnel;
risks related to sustainability matters, including climate change and scarce
resources, as well as the Company's ability to comply with changing
environmental laws and regulations; the Company's ability to successfully
implement strategic transformation initiatives; results and impacts of
acquisitions by the Company; the Company's significant levels of indebtedness;
the impact of the Combination on the Company's credit ratings; the potential
impairment of assets and goodwill; the availability of sufficient cash to
distribute dividends to the Company's shareholders in line with current
expectations; the scope, costs, timing and impact of any restructuring of
operations and corporate and tax structure; evolving legal, regulatory and tax
regimes; changes in economic, financial, political and regulatory conditions
in Ireland, the United Kingdom, the United States and elsewhere, and other
factors that contribute to uncertainty and volatility, natural and man-made
disasters, civil unrest, pandemics (such as the COVID-19 pandemic),
geopolitical uncertainty, and conditions that may result from legislative,
regulatory, trade and policy changes associated with the current or subsequent
Irish, US or UK administrations; legal proceedings instituted against the
Company; actions by third parties, including government agencies; the
Company's ability to promptly and effectively integrate Smurfit Kappa's and
WestRock's businesses; the Company's ability to achieve the synergies and
value creation contemplated by the Combination; the Company's ability to meet
expectations regarding the accounting and tax treatments of the Combination,
including the risk that the Internal Revenue Service may assert that the
Company should be treated as a US corporation or be subject to certain
unfavorable US federal income tax rules under Section 7874 of the Internal
Revenue Code of 1986, as amended, as a result of the Combination; other
factors such as future market conditions, currency fluctuations, the behavior
of other market participants, the actions of regulators and other factors such
as changes in the political, social and regulatory framework in which the
Company's group operates or in economic or technological trends or conditions,
and other risk factors included in the Company's filings with the Securities
and Exchange Commission. Neither the Company nor any of its associates or
directors, officers or advisers provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any such
forward-looking statements will actually occur. You are cautioned not to place
undue reliance on these forward-looking statements. Other than in accordance
with its legal or regulatory obligations (including under the UK Listing
Rules, the Disclosure Guidance and Transparency Rules, the UK Market Abuse
Regulation and other applicable regulations), the Company is under no
obligation, and the Company expressly disclaims any intention or obligation,
to update or revise publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
About Smurfit Westrock
Smurfit Westrock is a leading provider of paper-based packaging solutions in
the world, with approximately 100,000 employees across 40 countries.
Condensed Consolidated Statements of Operations
in $ millions, except share and per share data
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2024 2023 2024 2023
Net sales $ 7,671 $ 2,915 $ 13,570 $ 9,231
Cost of goods sold (6,321) (2,173) (10,817) (6,878)
Gross profit 1,350 742 2,753 2,353
Selling, general and administrative expenses (1,028) (371) (1,797) (1,144)
Transaction and integration-related expenses associated with the Combination (267) (17) (350) (17)
Operating profit 55 354 606 1,192
Pension and other postretirement non-service benefit (expense), net 8 (9) (31) (29)
Interest expense, net (167) (39) (225) (109)
Other expense, net (13) (4) (13) (19)
(Loss) income before income taxes (117) 302 337 1,035
Income tax expense (33) (73) (164) (258)
Net (loss) income (150) 229 173 777
Less: Net (loss) income attributable to noncontrolling interests - - - -
Net (loss) income attributable to common stockholders $ (150) $ 229 $ 173 $ 777
Basic (loss) earnings per share attributable to common stockholders $ (0.30) $ 0.89 $ 0.51 $ 3.01
Diluted (loss) earnings per share attributable to common stockholders $ (0.30) $ 0.88 $ 0.50 $ 3.00
Segment Information
Following the completion of the Combination we reassessed our operating
segments due to changes in our organizational structure and how our chief
operating decision maker (“CODM”) makes key operating decisions, allocates
resources and assesses the performance of our business. The CODM is determined
to be the executive management team, comprising the President and Chief
Executive Officer Anthony Smurfit and the Executive Vice President and Group
Chief Financial Officer Ken Bowles. The CODM is responsible for assessing
performance, allocating resources and making strategic decisions.
During the three months ended September 30, 2024, we identified three
operating segments, which are also our reportable segments:
1. Europe, the Middle East and Africa (MEA), and Asia-Pacific (APAC).
2. North America, which includes operations in the U.S., Canada and Mexico.
3. Latin America (“LATAM”), which includes operations in Central America and
Caribbean, Argentina, Brazil, Chile, Colombia, Ecuador and Peru.
These changes reflect how we manage our business following the completion of
the Combination. No operating segments have been aggregated for disclosure
purposes. Prior period comparatives have been restated to reflect the change
in segments.
In the identification of the operating and reportable segments, we considered
the level of integration of our different businesses as well as our objective
to develop long-term customer relationships by providing customers with
differentiated packaging solutions that enhance the customer’s prospects of
success in their end markets.
The Europe, MEA and APAC, North America, and LATAM segments are each highly
integrated within the segment and there are many interdependencies within
these operations. They each include a system of mills and plants that
primarily produce a full line of containerboard that is converted into
corrugated containers within each segment, or is sold to third parties.
In addition, the Europe, MEA and APAC segment also produces types of paper,
such as solid board, sack kraft paper, machine glazed and graphic paper; and
other paper-based packaging, such as honeycomb, solid board packaging, folding
cartons, inserts and labels; and bag-in-box packaging (located in Europe,
Argentina, Canada, Mexico and the U.S.).
The North America segment also produces paperboard and specialty grades; other
paper-based packaging, such as folding cartons, inserts, labels; and displays
and also engages in the assembly of displays as well as the distribution of
packaging products.
The LATAM segment also comprises forestry; types of paper, such as boxboard
and sack paper; and paper‑based packaging, such as folding cartons,
honeycomb and paper sacks.
Inter-segment transfers or transactions are entered into under normal
commercial terms and conditions that would also be available to unrelated
third parties.
Segment profit is measured based on Adjusted EBITDA, defined as (loss) income
before income taxes, unallocated corporate costs, depreciation, depletion and
amortization, amortization of fair value step up on inventory, transaction and
integration-related expenses associated with the Combination, interest
expense, net, pension and other postretirement non-service benefit (expense),
net, share-based compensation expense, other expense, net. restructuring
costs, legislative or regulatory fines and reimbursements, losses at closed
facilities and impairment of goodwill and other assets.
Segment Information (continued)
Financial information by segment is summarized below and in the schedules with
this release.
in $ millions, except Adjusted EBITDA Margin and share and per share data
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2024 2023 2024 2023
Net sales (aggregate)
Europe, MEA and APAC $ 2,651 $ 2,191 $ 7,056 $ 7,047
North America 4,649 401 5,499 1,239
LATAM 506 341 1,187 1,000
Total $ 7,806 $ 2,933 $ 13,742 $ 9,286
Less net sales (intersegment)
Europe, MEA and APAC $ 5 $ 3 $ 13 $ 9
North America 118 - 119 -
LATAM 12 15 40 46
Total $ 135 $ 18 $ 172 $ 55
Net sales (unaffiliated customers)
Europe, MEA and APAC $ 2,646 $ 2,188 $ 7,043 $ 7,038
North America 4,531 401 5,380 1,239
LATAM 494 326 1,147 954
Total $ 7,671 $ 2,915 $ 13,570 $ 9,231
Adjusted EBITDA
Europe, MEA and APAC $ 411 $ 411 $ 1,158 $ 1,330
North America 780 66 900 209
LATAM 116 74 257 217
Total $ 1,307 $ 551 $ 2,315 $ 1,756
Adjusted EBITDA Margin
Adjusted EBITDA/Net sales (aggregate)
Europe, MEA and APAC 15.5% 18.8% 16.4% 18.9%
North America 16.8% 16.4% 16.4% 16.9%
LATAM 23.1% 22.0% 21.6% 21.7%
Condensed Consolidated Balance Sheets
in $ millions, except share and per share data
As of
September 30, December 31,
2024 2023
Assets
Current assets:
Cash and cash equivalents, including restricted cash (amounts related to $ 951 $ 1,000
consolidated variable interest entities of $3 million and $3 million at
September 30, 2024 and December 31, 2023, respectively)
Accounts receivable (amounts related to consolidated variable interest 4,613 1,806
entities of $823 million and $816 million at September 30, 2024 and December
31, 2023, respectively)
Inventories 3,585 1,203
Other current assets 1,396 561
Total current assets 10,545 4,570
Property plant and equipment, net 23,206 5,791
Goodwill 7,215 2,842
Intangibles, net 1,094 218
Prepaid pension asset 615 29
Other non-current assets (amounts related to consolidated variable interest 2,354 601
entities of $390 million and $- million at September 30, 2024 and December 31,
2023, respectively)
Total assets $ 45,029 $ 14,051
Liabilities and Equity
Current liabilities:
Accounts payable $ 3,357 $ 1,728
Accrued expenses 813 278
Accrued compensation and benefits 954 438
Current portion of debt 745 78
Other current liabilities 1,257 484
Total current liabilities 7,126 3,006
Non-current debt due after one year (amounts related to consolidated variable 13,174 3,669
interest entities of $337 million and $20 million at September 30, 2024 and
December 31, 2023, respectively)
Deferred tax liabilities 3,682 280
Pension liabilities and other postretirement benefits, net of current portion 788 537
Other non-current liabilities (amounts related to consolidated variable 2,267 385
interest entities of $334 million and $- at September 30, 2024 and December
31, 2023, respectively)
Total liabilities 27,037 7,877
Equity:
Preferred stock; $0.001 par value; 500,000,000 and Nil shares authorized; - -
10,000 shares and Nil outstanding at September 30, 2024 and December 31, 2023,
respectively
Common stock; $0.001 par value; 9,500,000,000 and 9,910,931,085 shares 1 -
authorized; 520,056,084 and 260,354,342 shares outstanding at September 30,
2024 and December 31, 2023, respectively
Deferred shares, €1 par value; 25,000 shares and 25,000 shares authorized; - -
25,000 and 100 shares outstanding at September 30, 2024 and December 31, 2023,
respectively
Treasury stock, at cost (2,037,589, and 1,907,129 common stock at September (93) (91)
30, 2024, and December 31, 2023, respectively)
Capital in excess of par value 15,890 3,575
Accumulated other comprehensive loss (1,011) (847)
Retained earnings 3,178 3,521
Total stockholders’ equity 17,965 6,158
Noncontrolling interests 27 16
Total equity 17,992 6,174
Total liabilities and equity $ 45,029 $ 14,051
Condensed Consolidated Statements of Cash Flows
in $ millions, except share and per share data
Three months ended Nine months ended
September 30, September 30, 2023 September 30, September 30,
2024 2024 2023
Operating activities:
Consolidated net (loss) income $ (150) $ 229 $ 173 $ 777
Adjustments to reconcile consolidated net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 564 147 872 430
Cash surrender value increase in excess of premiums paid (14) - (14) -
Share-based compensation expense 123 7 154 43
Deferred income tax benefit (89) 8 (99) (4)
Pension and other postretirement funding more than cost (26) (10) (30) (35)
Other 17 (8) 16 (4)
Change in operating assets and liabilities, net of acquisitions and
divestitures:
Accounts receivable (186) 93 (422) 63
Inventories 140 29 120 161
Other assets 74 34 (31) 21
Accounts payable (214) (110) (226) (438)
Income taxes (29) (55) 34 (46)
Accrued liabilities and other 110 14 155 (20)
Net cash provided by operating activities 320 378 702 948
Investing activities:
Capital expenditures (512) (202) (897) (661)
Cash paid for purchase of businesses, net of cash acquired (688) (29) (716) (29)
Proceeds from corporate owned life insurance 2 - 2 -
Proceeds from sale of property, plant and equipment 12 10 15 11
Other 1 4 1 2
Net cash used for investing activities (1,185) (217) (1,595) (677)
Financing activities:
Additions to debt 315 8 3,127 77
Repayments of debt (1,607) (76) (1,640) (120)
Revolving credit facilities repayments, net - - (4) (4)
Changes in commercial paper, net (33) - (33) -
Other debt additions, net 17 - 17 -
Repayments of lease liabilities (11) - (12) (2)
Debt issuance costs (15) - (44) -
Tax paid in connection with shares withheld from employees (21) - (21) -
Purchases of treasury stock - - (27) (30)
Cash dividends paid to stockholders (158) - (493) (299)
Other - - (1) -
Net cash provided by (used for) financing activities $ (1,513) $ (68) $ 869 $ (378)
Effect of exchange rate changes on cash, cash equivalents and restricted cash 4 (32) (25) (5)
(Decrease) increase in cash, cash equivalents and restricted cash $ (2,374) $ 61 $ (49) $ (112)
Cash, cash equivalents and restricted cash at beginning of period 3,325 668 1,000 841
Cash, cash equivalents and restricted cash at end of period $ 951 $ 729 $ 951 $ 729
Non-GAAP Financial Measures and Reconciliations
Smurfit Westrock plc (“Smurfit Westrock”) reports its financial results in
accordance with accounting principles generally accepted in the United States
("GAAP"). However, management believes certain non-GAAP financial measures
provide Smurfit Westrock’s board of directors, investors, potential
investors, securities analysts and others with additional meaningful financial
information that should be considered when assessing our ongoing performance.
Management also uses these non-GAAP financial measures in making financial,
operating and planning decisions, and in evaluating company performance.
Non-GAAP financial measures should be viewed in addition to, and not as an
alternative for, the GAAP results. The non‑GAAP financial measures we
present may differ from similarly captioned measures presented by other
companies. Smurfit Westrock uses the non-GAAP financial measures “Adjusted
EBITDA,” “Adjusted EBITDA Margin,” and “Adjusted Free Cash Flow.” We
discuss below details of the non-GAAP financial measures presented by us and
provide reconciliations of these non‑GAAP financial measures to the most
directly comparable financial measures calculated in accordance with GAAP.
Definitions
Smurfit Westrock uses the non-GAAP financial measures “Adjusted EBITDA”
and “Adjusted EBITDA Margin” to evaluate its overall performance. The
composition of Adjusted EBITDA is not addressed or prescribed by GAAP. Smurfit
Westrock defines Adjusted EBITDA as (loss) income before income taxes,
depreciation, depletion and amortization, amortization of fair value step up
on inventory, transaction and integration-related expenses associated with the
Combination, interest expense, net, pension and other postretirement
non-service (benefit) expense, net, share-based compensation expense, other
expense, net, restructuring costs, legislative or regulatory fines and
reimbursements, losses at closed facilities and impairment of goodwill and
other assets. Smurfit Westrock views Adjusted EBITDA as an appropriate and
useful measure used to compare financial performance between periods. Adjusted
EBITDA Margin is calculated as Adjusted EBITDA divided by Net Sales.
Management believes Adjusted EBITDA and Adjusted EBITDA Margin measures
provide Smurfit Westrock’s management, board of directors, investors,
potential investors, securities analysts and others with useful information to
evaluate Smurfit Westrock’s performance because, in addition to income tax
expense, depreciation, depletion and amortization expense, interest expense,
net, pension and other postretirement non‑service (benefit) expense, net,
and share-based compensation expense, Adjusted EBITDA also excludes
restructuring costs, impairment of goodwill and other assets and other
specific items that management believes are not indicative of the operating
results of the business. Smurfit Westrock and its board of directors use this
information in making financial, operating and planning decisions and when
evaluating Smurfit Westrock’s performance relative to other periods.
Smurfit Westrock uses the non-GAAP financial measure “Adjusted Free Cash
Flow”. Smurfit Westrock defines Adjusted Free Cash Flow as net cash provided
by operating activities as adjusted for capital expenditures and to exclude
certain costs not reflective of underlying operations. Management utilizes
this measure in connection with managing Smurfit Westrock’s business and
believes that Adjusted Free Cash Flow is useful to investors as a liquidity
measure because it measures the amount of cash generated that is available,
after reinvesting in the business, to maintain a strong balance sheet, pay
dividends, repurchase stock, service debt and make investments for future
growth. It should not be inferred that the entire free cash flow amount is
available for discretionary expenditures. By adjusting for certain items that
are not indicative of Smurfit Westrock’s underlying operational performance,
Smurfit Westrock believes that Adjusted Free Cash Flow also enables investors
to perform meaningful comparisons between past and present periods.
Reconciliations to Most Comparable GAAP Measure
Set forth below is a reconciliation of the non-GAAP financial measures
Adjusted EBITDA and Adjusted EBITDA Margin to Net income and Net Income
Margin, the most directly comparable GAAP measures, for the periods indicated.
in $ millions, except margin percentages
Three months ended Nine months ended
September 30, September 30, 2023 September 30, September 30,
2024 2024 2023
Net (loss) income $ (150) $ 229 $ 173 $ 777
Income tax expense 33 73 164 258
Depreciation, depletion and amortization 564 147 872 430
Amortization of fair value step up on inventory 227 - 227 -
Transaction and integration-related expenses associated with the Combination 267 17 350 17
Interest expense, net 167 39 225 109
Pension and other postretirement non-service (benefit) expense, net (8) 9 31 29
Share-based compensation expense 123 7 154 43
Other expense, net 13 4 13 19
Other adjustments ((1)) 29 - 11 -
Adjusted EBITDA $ 1,265 $ 525 $ 2,220 $ 1,682
Net Income Margin (2.0%) 7.8% 1.3% 8.4%
(Net Income/Net Sales)
Adjusted EBITDA Margin 16.5% 18.0% 16.4% 18.2%
(Adjusted EBITDA/Net Sales)
((1)) Other adjustments for the three months ended September 30, 2024 include
restructuring costs of $19 million, losses at closed facilities of $8 million
and impairment of other assets of $2 million (three months ended September 30,
2023: $- million, $- million & $- million, respectively).
Other adjustments for the nine months ended September 30, 2024 include
restructuring costs of $19 million, losses at closed facilities of $8 million
and impairment of other assets of $2 million partially offset by legislative
or regulatory fine reimbursement of $18 million (nine months ended September
30, 2023: $- million, $- million, $‑ million & $- million,
respectively).
Reconciliations to Most Comparable GAAP Measure (continued)
Set forth below is a reconciliation of the non-GAAP financial measure Adjusted
Free Cash Flow to Net cash provided by operating activities, the most directly
comparable GAAP measure, for the periods indicated.
in $ millions
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
2024 2023 2024 2023
Net cash provided by operating activities $ 320 $ 378 $ 702 $ 948
Adjustments:
Capital expenditures (512) (202) (897) (661)
Free Cash Flow $ (192) $ 176 $ (195) $ 287
Adjustments:
Transaction and integration costs 307 17 364 17
Bridge facility fees - 8 - 8
Restructuring costs 45 13 45 13
Tax on above items (42) - (42) -
Adjusted Free Cash Flow $ 118 $ 214 $ 172 $ 325
Ciarán Potts
Smurfit Westrock
T: +353 1 202 71 27
E: ir@smurfitwestrock.com
(mailto:ir@smurfitwestrock.com)
FTI Consulting
T: +353 1 765 0800
E: smurfitwestrock@fticonsulting.com
(mailto:smurfitwestrock@fticonsulting.com)
View source version on businesswire.com:
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