WestRock(WRK)2024-05-03 20:08Financial Performance - Net sales for Q2 fiscal 2024 were $4.7 billion, a decrease of $550.9 million or 10.4% compared to Q2 fiscal 2023, primarily due to lower selling price/mix and volumes [190]. - Net income attributable to common stockholders was $15.5 million for Q2 fiscal 2024, compared to a net loss of $2.0 billion in Q2 fiscal 2023, which included a $1.9 billion goodwill impairment charge [191]. - Consolidated Adjusted EBITDA for Q2 fiscal 2024 was $618.3 million, a decrease of $170.3 million or 21.6% from $788.6 million in Q2 fiscal 2023 [192]. - Earnings per diluted share for Q2 fiscal 2024 was $0.06, compared to a loss of $7.85 per diluted share in Q2 fiscal 2023 [193]. - For the six months ended March 31, 2024, net sales decreased by $854.0 million, or 8.4%, compared to the prior year period, attributed to lower selling price/mix and volumes, partially offset by increased sales from the Mexico Acquisition [200]. - Adjusted Earnings Per Diluted Share for the six months ended March 31, 2024, was $0.59, compared to $1.32 for the same period in 2023 [288]. - Adjusted net income for the six months ended March 31, 2024, was $151.8 million, up from a loss of $1,960.8 million in the prior year [292]. Cost and Expenses - Cost of goods sold for the second quarter of fiscal 2024 decreased by $411.0 million, or 9.4%, compared to the prior year quarter, mainly due to cost savings and lower volumes [202]. - The decrease in cost of goods sold for the six months ended March 31, 2024 was $706.9 million, or 8.3%, compared to the prior year period, driven by cost savings and lower volumes [203]. - Selling, General and Administrative (SG&A) expenses excluding intangible amortization increased by $48.6 million in the six months ended March 31, 2024, primarily due to costs related to the Mexico Acquisition [208]. - SG&A intangible amortization expense was $161.0 million for the six months ended March 31, 2024, down from $172.8 million in the same period of fiscal 2023 [209]. - Restructuring and other costs for the second quarter of fiscal 2024 were $81.2 million, significantly lower than $435.8 million in the prior year quarter [210]. Cash Flow and Debt - Net cash provided by operating activities for the six months ended March 31, 2024, was $312.1 million, down from $550.0 million in the same period of fiscal 2023 [194]. - Cash and cash equivalents increased to $494.7 million at March 31, 2024, up from $393.4 million at September 30, 2023 [257]. - Total debt increased to $9.0 billion at March 31, 2024, compared to $8.6 billion at September 30, 2023, with short-term debt rising to $1.3 billion [257]. - The company plans to fund its capital expenditures and other obligations primarily from cash generated from operations and borrowings under credit facilities [276]. Strategic Initiatives - The company expects to exceed its fiscal 2024 cost savings target of $300 to $400 million, with further progress anticipated in the second half of the fiscal year [195]. - The company invested $138 million in its business systems transformation in fiscal 2023, with $91 million expensed and $47 million deferred or capitalized [185]. - A Transaction Agreement with Smurfit Kappa was entered into on September 12, 2023, with expected closure in early July 2024, subject to regulatory and shareholder approvals [178]. - The company plans to permanently cease operations at its Tacoma, WA and North Charleston, SC containerboard mills, which ceased production in September and June 2023, respectively [177]. Segment Performance - Net sales for the Corrugated Packaging segment in fiscal 2023 reached $10,054.9 million, with an adjusted EBITDA margin of 15.9% [228]. - In the second quarter of fiscal 2024, net sales for the Corrugated Packaging segment decreased by $229.1 million, primarily due to $187.0 million of lower selling price/mix [229]. - Adjusted EBITDA for the Corrugated Packaging segment in the second quarter of fiscal 2024 decreased by $89.6 million, impacted by $145.8 million of margin decline from lower selling price/mix [231]. - Net sales for the Consumer Packaging segment decreased by $151.6 million in Q2 fiscal 2024, mainly due to $99.3 million of lower volumes [237]. - Global Paper segment Adjusted EBITDA decreased by $57.6 million in Q2 FY2024 compared to the prior year, primarily due to a $105.7 million margin impact from lower selling price/mix [246]. Tax and Pension - The company recorded an income tax benefit of $10.0 million for the three months ended March 31, 2024, compared to a benefit of $116.8 million for the same period in 2023 [221]. - The company expects to contribute approximately $25 million to its qualified and supplemental defined benefit pension plans in fiscal 2024, following contributions of $8.8 million in the first half of the fiscal year [273]. - As of March 31, 2024, the company recorded a pension asset of $637.2 million on its consolidated balance sheet, indicating that its pension plans in the U.S. are overfunded [273]. - The company anticipates a cash tax rate in fiscal 2024 to be approximately 30 percentage points higher than its expected income tax rate, primarily due to changes in depreciation timing and tax legislation [272]. Market Conditions and Risks - The company anticipates ongoing challenges related to pricing cycles, economic conditions, and supply chain disruptions impacting future performance [294]. - The company has not experienced material changes in market risk exposure since September 30, 2023, despite fluctuations in commodity prices [296]. - The company is focused on completing a proposed transaction, which may affect operational focus and financial performance [295].