WestRock reports strong fiscal 2018 fourth quarter

The company’s North American corrugated packaging segment also experienced a strong fiscal year.

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November 6, 2018
Edited by Megan Smalley

WestRock Co., a provider of differentiated paper and packaging solutions in Atlanta, announced positive results for its fiscal 2018 fourth quarter, which ended Sept. 30.

According to a WestRock news release, the company increased its corrugated packaging segment’s earnings before interest, tax, depreciation and amortization (EBITDA) by $162 million this quarter, or 42 percent, compared with the prior year fourth quarter. It also delivered segment EBITDA margin of 22.9 percent and North American adjusted segment EBITDA margin of 25.4 percent in the fourth quarter, which is up 570 and 620 points, respectively, compared with the prior year fourth quarter.

WestRock reports that it earned $1.08 per diluted share in the fourth quarter, a 42 percent increase, compared to 76 cents per diluted share in the prior year fourth quarter. It also earned $1.29 of adjusted earnings per diluted share this quarter, a 48 percent increase, compared with the 87 cents of adjusted earnings per diluted share in the prior year fourth quarter.

In fiscal 2018, WestRock completed the acquisition of KapStone Paper and Packaging Corporation on Nov. 2, 2018. It also achieved consolidated segment EBITDA of $2.89 billion and adjusted segment EBITDA of $2.89 billion, compared with $2.26 billion and $2.29 billion, respectively, in the prior year. It also increased corrugated packaging segment EBITDA by $533 million, or 39 percent, compared with the prior year. The segment delivered segment EBITDA margin of 20.7 percent and North American adjusted segment EBITDA margin of 22.6 percent, up 460 and 510 basis points, respectively, compared with the prior year. 

WestRock reports that it generated net cash provided by operating activities of $2.42 billion and adjusted operating cash flow of $2.46 billion compared with $1.9 billion and $2 billion in the prior year, respectively. 

The company also executed disciplined capital allocation strategy, including investing $1 billion in capital expenditures, deploying $348 million to strategic acquisitions and investments, paying $441 million in dividends and returning $195 million to stockholders in stock repurchases. 

“The WestRock team delivered strong financial and operating results for both the fourth quarter and the fiscal year,” says Steve Voorhees, CEO of WestRock, in a company news release. “Our North American corrugated packaging business had an especially outstanding year, and we continue to advance our differentiated strategy focused on achieving operational excellence and delivering value for our customers. Now, with the addition of KapStone, we have expanded our portfolio of paper and packaging solutions for our customers and look forward to building on our success in fiscal 2019."

WestRock’s corrugated packaging segment delivered a Segment EBITDA margin of 22.9 percent and North American adjusted segment EBITDA margin of 25.4 percent, up 570 and 620 basis points, respectively. The company’s Brazil adjusted segment EBITDA margin was up 27.1 percent, up 870 basis points. Segment sales increased $152 million, primarily due to an estimated $148 million of higher corrugated selling price and mix and $78 million of higher corrugated volumes that were partially offset by $40 million of lowering recycling sales that were driven by lower recovered fiber prices and volumes and $33 million of unfavorable foreign currency impact, according to WestRock.

The corrugated packaging segment income increased $149 million this fiscal year, or 65 percent, as higher corrugated selling price and mix, productivity improvements, higher corrugated volumes and net deflation driven by lower recovered fiber prices were partially offset by higher depreciation, amortization and other items. WestRock reports that hurricanes had an estimated negative impact of $8 million and $15 million in fiscal 2018 and 2017, respectively. In the past fiscal year, WestRock’s North American box shipments increase 1.7 percent on a per day basis, including the impact of acquisitions. 

The consumer packaging segment income increased $8 million, as a result of higher selling price and mix, productivity improvements and a $10 million acquisition reserve adjustment were largely offset by cost inflation and other items, according to WestRock. Segment income in the fourth quarter of fiscal 2017 was reduced $12 million as a result of an acquisition inventory set-up charge related to the Multi Packaging Solutions acquisition. The company reports that hurricanes had an estimated negative impact of $2 million and $12 million in fiscal 2018 and 2017, respectively. Shipments of paperboard and converted products increased 1.7 percent in the fiscal year.