WestRock(WRK)2023-08-04 20:22Financial Performance - Net sales for Q3 fiscal 2023 were $5.1 billion, a decrease of $398.6 million or 7.2% compared to Q3 fiscal 2022[197]. - Net income attributable to common stockholders was $202.0 million for Q3 fiscal 2023, down from $377.9 million in Q3 fiscal 2022, a decrease of $175.9 million[198]. - Consolidated Adjusted EBITDA for Q3 fiscal 2023 was $801.9 million, a decrease of $203.6 million or 20.2% from $1.0 billion in Q3 fiscal 2022[198]. - Net sales for the third quarter of fiscal 2023 decreased by $398.6 million, or 7.2%, compared to the same quarter in fiscal 2022, primarily due to lower volumes, partially offset by increased sales from the Mexico Acquisition and higher selling price/mix[211]. - For the nine months ended June 30, 2023, net sales decreased by $532.2 million compared to the prior year period, driven by lower volumes and unfavorable foreign exchange rates, but offset by higher selling price/mix and contributions from the Mexico Acquisition[212]. - Earnings per diluted share for Q3 2023 was $0.79, down from $1.47 in Q3 2022, with a year-to-date loss of $(6.88) compared to $2.28 in the same period last year[306]. - Adjusted Earnings Per Diluted Share for Q3 2023 was $0.89, a decrease from $1.54 in Q3 2022, while year-to-date adjusted earnings were $2.21 compared to $3.34 in the prior year[306]. - The company recorded a net loss of $27.8 million for the nine months ended June 30, 2023, which included a pre-tax goodwill impairment charge of $107.8 million[298]. Costs and Expenses - Cost of goods sold in the third quarter of fiscal 2023 decreased by $260.7 million compared to the prior year quarter, attributed to lower volumes and cost savings, despite higher wage and benefit costs[213]. - Selling, general and administrative expenses (SG&A) excluding intangible amortization increased by $37.2 million in the third quarter of fiscal 2023, mainly due to costs related to the Mexico Acquisition and business systems transformation[216]. - Interest expense, net for the third quarter of fiscal 2023 was $108.1 million, an increase from $78.5 million in the prior year quarter, primarily due to higher interest rates and increased debt from the Mexico Acquisition[226]. - Total restructuring and other costs for Q3 2023 amounted to $47.6 million, significantly lower than $0.6 million in Q3 2022, while year-to-date costs were $525.3 million compared to $366.3 million in the previous year[307]. Cash Flow and Investments - Net cash provided by operating activities decreased to $1.2 billion in the nine months ended June 30, 2023, down from $1.5 billion in the same period of 2022, a decrease of $236.5 million[200]. - Net cash used for investing activities in the nine months ended June 30, 2023, was $1,522.0 million, primarily due to $853.5 million for business acquisitions and $818.3 million for capital expenditures[283]. - Capital expenditures for fiscal 2023 are now expected to be approximately $1.0 billion, with potential additional investments of up to $0.5 billion per year in strategic capital projects[284]. - Net cash provided by financing activities in the nine months ended June 30, 2023, was $336.2 million, mainly from a net increase in debt of $561.1 million, offset by cash dividends of $210.8 million[285]. Acquisitions and Restructuring - The Mexico Acquisition contributed to increased sales, partially offsetting lower volumes[197]. - The company expects restructuring charges related to the permanent closure of the Tacoma, WA containerboard mill[202]. - The Mexico Acquisition added approximately 1.0 million tons of mill capacity to the pre-acquisition capacity of approximately 15.2 million tons[313]. - The increase in market risk due to the acquisition has been offset by mill closures announced during fiscal 2023[313]. Market and Economic Conditions - The company anticipates unfavorable non-cash pension expense of approximately $40 million in Q4 fiscal 2023[202]. - The company anticipates ongoing challenges and uncertainties in the market, which may impact future performance and results[310]. - If market interest rates increase by 100 basis points, the annual interest expense would rise by approximately $21 million[313]. - A 10% change in the price per MMBtu would impact the Cost of Goods Sold by approximately $6 million[313]. Taxation - The effective tax rate for the three months ended June 30, 2023 was 24.9%, down from 25.9% for the same period in 2022, with an income tax expense of $67.3 million[237]. - The company recorded an income tax benefit of $41.2 million for the nine months ended June 30, 2023, compared to an expense of $193.1 million for the same period in 2022, resulting in an effective tax rate of 2.3% versus 24.2%[238]. - The cash tax rate for fiscal 2024 is expected to be higher than the income tax rate due to changes in tax legislation affecting the amortization of research costs[289]. Segment Performance - Corrugated Packaging shipments for the nine months ended June 30, 2023, totaled 5,039.0 thousand tons, a slight increase from 4,903.2 thousand tons in the prior year[241]. - Net sales for the Corrugated Packaging segment increased by $609.0 million in the nine months ended June 30, 2023, driven by $770.2 million from the Mexico Acquisition and $386.4 million from higher selling price/mix[245]. - Adjusted EBITDA for the Corrugated Packaging segment increased by $163.8 million in the nine months ended June 30, 2023, primarily due to a $385.5 million margin impact from higher selling price/mix[247]. - Consumer Packaging shipments decreased to 1,063.0 thousand tons for the nine months ended June 30, 2023, down from 1,174.8 thousand tons in the prior year[250]. - Net sales for the Consumer Packaging segment increased by $71.2 million in the nine months ended June 30, 2023, mainly due to $363.2 million from higher selling price/mix[253]. - Adjusted EBITDA for the Consumer Packaging segment increased by $21.9 million in the nine months ended June 30, 2023, primarily due to a $352.2 million margin impact from higher selling price/mix[255]. - Global Paper shipments for the nine months ended June 30, 2023, totaled 3,397.5 thousand tons, a decrease from 4,806.8 thousand tons in the prior year[257]. - Global Paper segment net sales decreased by $544.6 million in Q3 2023 compared to Q3 2022, primarily due to $484.2 million of lower volumes and $35.5 million of lower selling price/mix[260]. - For the nine months ended June 30, 2023, Global Paper segment net sales decreased by $1,143.5 million, mainly due to $1,184.4 million of lower volumes, partially offset by $120.7 million of higher selling price/mix[261]. - Adjusted EBITDA for the Global Paper segment in Q3 2023 decreased by $222.0 million compared to Q3 2022, primarily due to $141.7 million of lower volumes and $56.2 million impact from economic downtime[262]. - For the nine months ended June 30, 2023, Global Paper segment Adjusted EBITDA decreased by $418.6 million, mainly due to $360.7 million of lower volumes and $130.7 million impact from economic downtime[263]. - Distribution segment net sales decreased by $39.9 million in Q3 2023 compared to Q3 2022, primarily due to $37.5 million of lower volumes[267]. - For the nine months ended June 30, 2023, Distribution segment net sales decreased by $98.2 million, primarily due to $115.2 million of lower volumes, partially offset by $14.4 million of higher selling price/mix[268]. - Adjusted EBITDA for the Distribution segment in Q3 2023 decreased by $13.2 million compared to Q3 2022, primarily due to $11.3 million of lower volumes and $2.4 million of increased net cost inflation[270]. - For the nine months ended June 30, 2023, Distribution segment Adjusted EBITDA decreased by $27.6 million, primarily due to $32.9 million of lower volumes and $18.4 million of increased net cost inflation[271].