Smurfit Westrock posts US$3B in Q2 amid higher recovered fiber costs and lower corrugated prices

01 Aug 2024 --- Smurfit Westrock has released the financial results for the second quarter of 2024 of Smurfit Kappa Group. 

Smurfit Kappa’s net sales (~US$3 billion) decreased by US$107 million (3%) to US$2,969 million in the quarter from US$3,076 million in the same period last year. The decrease was primarily driven by lower average box pricing in the company’s European business year-on-year.

The decrease was partially offset by an increase in group corrugated volumes of 3.1% (1.1% on a shipments per day basis), a US$28 million net positive foreign currency impact and a US$4 million positive impact from acquisitions.

“I am pleased to report a strong set of results, and continued delivery of quality and service for our customers. This has been driven by our performance-led culture, together with the continuing benefits of our prior year capital allocation decisions,” Tony Smurfit, president and CEO, comments.

“These results were also achieved against a backdrop of significantly higher recovered fiber costs and lower corrugated box prices. We expect these increased costs will be recovered through increased box pricing with the customary time lag.”

Smurfit Kappa’s corrugated volume growth was 3.1% in the second quarter with 3.5% growth in Europe and 1.5% in the Americas year-on-year. 

“On a shipments per day basis, volume growth was 1.1% for the group, with growth of 1.4% and 0.1% in Europe and the Americas respectively,” details Smurfit. 

“Demand in Southern and Eastern Europe remained robust while German demand remained soft. In the Americas, demand was generally good, with the exception of Argentina.”

Smurfit Kappa’s corrugated volume growth was 3.1% in the second quarter (Image credit: Smurfit Westrock).After the quarter ended on July 5, Smurfit Kappa Group completed its merger with WestRock Company. On July 8, Smurfit Westrock listed on the NYSE and was included in the S&P 500. 

Due to the timing of the completion of the combination of Smurfit Kappa and WestRock, results for the combined company of Smurfit Westrock will be reported from the third quarter 2024.

Second quarter review
Net income decreased by US$135 million, to US$132 million in the second quarter, from US$267 million in the same period of last year.

This decrease was primarily due to a decrease in net sales and additional transaction-related expenses of US$60 million associated with the Smurfit Westrock combination, which were partially offset by a US$12 million decrease in costs of goods sold driven by lower raw material and energy costs year-on-year.

Adjusted EBITDA for the group was US$480 million, with an adjusted EBITDA margin of 16.2% in the second quarter of 2024, compared to adjusted EBITDA of US$556 million, with an adjusted EBITDA margin of 18.1% in the second quarter of 2023.

Regional breakdown
Adjusted EBITDA for Europe decreased by US$77 million to US$355 million in the second quarter, from US$432 million in the same period of 2023. 

This decrease was primarily due to a US$143 million decrease in net sales and an increase in labor, distribution and recovered fiber costs, partially offset by a decrease in energy and other raw material costs. 

The adjusted EBITDA margin in Europe was 16.1% in the second quarter, compared to 18.4% at the same time last year.

Meanwhile, adjusted EBITDA for the Americas segment increased by US$6 million, or 4%, to US$146 million in the second quarter of 2024, from US$140 million for the second quarter of 2023. 

This increase was primarily due to a US$36 million increase in net sales, partially offset by higher raw materials and labor costs. The adjusted EBITDA margin in the Americas segment was 19.2% in the second quarter of 2024, compared to 19.3% in the second quarter of 2023.