WestRock(WRK)2024-02-02 21:07Financial Performance - Net sales for Q1 fiscal 2024 were $4.6 billion, a decrease of $303.1 million or 6.2% compared to Q1 fiscal 2023, primarily due to lower volumes and selling price/mix [170]. - Net loss attributable to common stockholders was $22.4 million in Q1 fiscal 2024, compared to net income of $45.3 million in Q1 fiscal 2023, a decrease of $67.7 million driven by lower selling prices and increased restructuring costs [171]. - Consolidated Adjusted EBITDA for Q1 fiscal 2024 was $570.7 million, down $81.4 million or 12.5% from $652.1 million in Q1 fiscal 2023, mainly due to lower performance in Global Paper and Consumer Packaging segments [172]. - Fiscal 2023 net sales totaled $2,014.4 million, with a net sales margin of 9.9% [183]. - Adjusted Earnings Per Diluted Share decreased to $0.20 from $0.55 year-over-year, reflecting a decline of approximately 63.6% [254]. - The net loss attributable to common stockholders for the same period was $22.4 million, compared to a net income of $45.3 million in 2022 [258]. Cost and Expenses - Cost of goods sold for Q1 fiscal 2024 was $3.9 billion, a decrease of $295.9 million compared to the prior year quarter, primarily due to lower volumes and cost savings [181]. - SG&A expenses excluding intangible amortization increased by $48.0 million in Q1 FY2024, primarily due to the Mexico Acquisition and higher business systems transformation costs [185]. - Interest expense for Q1 FY2024 was $101.4 million, up from $97.3 million in the prior year, driven by higher interest rates and increased average debt related to the Mexico Acquisition [189]. - Restructuring and other costs, net, amounted to $65.5 million for the quarter, significantly higher than $32.1 million in the previous year [258]. - The company incurred $381.8 million in depreciation, depletion, and amortization expenses, compared to $373.2 million in the prior year [258]. Segment Performance - Corrugated Packaging segment net sales increased by $82.5 million in Q1 FY2024, largely due to $209.2 million from the Mexico Acquisition [202]. - Adjusted EBITDA for the Corrugated Packaging segment decreased by $1.6 million in Q1 FY2024, impacted by $124.7 million from lower selling price/mix [203]. - Consumer Packaging segment net sales decreased by $155.7 million in Q1 FY2024, primarily due to lower volumes and the divestiture of interior partition operations [207]. - Global Paper segment net sales decreased by $205.3 million in Q1 FY2024 compared to the prior year, driven by $114.1 million lower selling price/mix and $42.1 million lower volumes [211]. - Distribution segment net sales decreased by $31.8 million in Q1 FY2024, mainly due to $36.0 million lower volumes, partially offset by $4.0 million higher selling price/mix [216]. Investments and Acquisitions - The company invested $138 million in its business systems transformation in fiscal 2023, with $91 million expensed and $47 million deferred or capitalized [166]. - The company expects to invest approximately $0.2 billion in business systems transformation in fiscal 2024, with about $0.1 billion to be expensed when incurred [167]. - The company completed the Mexico Acquisition for $969.8 million in cash and debt assumption, which has been included in the Corrugated Packaging segment [156]. - A Transaction Agreement with Smurfit Kappa was entered into on September 12, 2023, with expected closure in early July 2024, pending regulatory and shareholder approvals [160]. - The company is evaluating potential acquisitions and divestitures to enhance its market position and operational capabilities [261]. Cash Flow and Liquidity - Cash and cash equivalents increased to $488.1 million at December 31, 2023, up from $393.4 million at September 30, 2023 [222]. - Total debt was $8.7 billion at December 31, 2023, slightly up from $8.6 billion at September 30, 2023 [222]. - Net cash provided by operating activities increased by $9.1 million in Q1 FY2024 compared to Q1 FY2023, primarily due to $120.5 million reduced working capital usage [229]. - The company had approximately $3.4 billion of available liquidity under long-term committed credit facilities and cash and cash equivalents as of December 31, 2023 [223]. - In the three months ended December 31, 2023, net cash used for financing activities was $804.0 million, primarily due to a $774.0 million payment of secured financing liability and cash dividends of $77.6 million [232]. Future Outlook - The company plans to balance supply with customer demand in Q2 fiscal 2024, expecting sequential improvement in consolidated volumes despite winter weather disruptions [175]. - The company expects to invest approximately $1.2 to $1.5 billion in capital expenditures in fiscal 2024 to support productivity and growth [231]. - The company anticipates its fiscal 2024 cash tax rate to be approximately 15 percentage points higher than the expected income tax rate due to various factors including depreciation timing and tax law changes [236]. - The company expects to contribute approximately $25 million to its defined benefit pension plans in fiscal 2024, following a contribution of $4.3 million in the three months ended December 31, 2023 [237]. - The company anticipates ongoing challenges related to economic conditions, including inflation and supply chain disruptions, which may impact future performance [260]. Shareholder Returns - The quarterly dividend declared in January 2024 is $0.3025 per share, reflecting a 10% increase from the previous year's $0.275 per share [234]. - The company has suspended its share repurchase program indefinitely due to restrictions from the proposed Transaction Agreement [235].