WestRock(WRK)2023-02-03 18:33Financial Performance - Net sales for Q1 fiscal 2023 were $4,923.1 million, a decrease of $29.1 million or 0.6% compared to Q1 fiscal 2022, primarily due to lower volumes and unfavorable foreign exchange rates [158]. - Net income attributable to common stockholders for Q1 fiscal 2023 was $45.3 million, a decrease of $137.0 million or 75.2% compared to Q1 fiscal 2022, impacted by increased net cost inflation and restructuring costs [159]. - Consolidated Adjusted EBITDA for Q1 fiscal 2023 was $652.1 million, down $28.2 million or 4.1% from $680.3 million in Q1 fiscal 2022 [159]. - Earnings per diluted share for Q1 fiscal 2023 were $0.18, down from $0.68 in Q1 fiscal 2022, while Adjusted Earnings Per Diluted Share were $0.55 compared to $0.65 in the prior year [160]. - Net income attributable to common stockholders decreased to $45.3 million in Q4 2022 from $182.3 million in Q4 2021, representing a decline of approximately 75% [244]. - Consolidated Adjusted EBITDA for Q4 2022 was $652.1 million, down from $680.3 million in Q4 2021, reflecting a decrease of about 4.5% [244]. Segment Performance - Net sales for the Corrugated Packaging segment increased by $15.2 million in Q1 FY2023, driven by $204.0 million of higher selling price/mix, offset by $189.0 million of lower volumes [189]. - Adjusted EBITDA for the Corrugated Packaging segment rose by $20.3 million in Q1 FY2023, primarily due to a $206.0 million margin impact from higher selling price/mix, offset by $79.0 million of increased net cost inflation [190]. - Consumer Packaging segment net sales increased by $76.3 million in Q1 FY2023, mainly due to $132.3 million of higher selling price/mix, partially offset by $52.4 million of unfavorable foreign exchange rates [194]. - Adjusted EBITDA for the Consumer Packaging segment increased by $14.0 million in Q1 FY2023, primarily due to a $132.3 million margin impact from higher selling price/mix, offset by $54.0 million of increased net cost inflation [195]. - Global Paper segment net sales decreased by $229.0 million in Q1 FY2023, primarily due to $328.6 million of lower volumes, partially offset by $99.8 million of higher selling price/mix [199]. - Global Paper segment Adjusted EBITDA decreased by $75.1 million in Q1 FY2023, primarily due to $113.7 million lower volumes and $47.9 million increased net cost inflation [200]. - Distribution segment net sales in Q1 FY2023 were $321.5 million, a decrease of $3.3 million compared to the prior year quarter, primarily due to $24.7 million lower volumes [204]. - Adjusted EBITDA for the Distribution segment increased by $4.3 million in Q1 FY2023, driven by a $19.9 million margin impact from higher selling price/mix [205]. - Grupo Gondi Acquisition contributed $102.2 million in net sales and $17.3 million in Adjusted EBITDA in Q1 FY2023 [207]. Costs and Expenses - The cost of goods sold for Q1 fiscal 2023 was $4,157.9 million, representing 84.5% of net sales, an increase from 83.9% in Q1 fiscal 2022 [173]. - Selling, general and administrative expenses (SG&A) excluding intangible amortization increased by $26.2 million in Q1 FY2023 compared to Q1 FY2022, primarily due to $21.7 million of business systems transformation costs [175]. - Interest expense, net for Q1 FY2023 was $97.3 million, an increase from $86.7 million in Q1 FY2022, primarily due to higher interest rates and increased debt from the Grupo Gondi Acquisition [180]. - Pension and other postretirement non-service costs for Q1 FY2023 were $5.0 million, a significant decrease from income of $39.9 million in Q1 FY2022, driven by higher interest rates affecting plan asset balances [181]. - The company recorded aggregate pre-tax restructuring and other costs of $33.0 million in Q1 FY2023, compared to $2.3 million in Q1 FY2022 [178]. - Restructuring and other costs rose significantly to $33.0 million in Q4 2022 from $2.3 million in Q4 2021, marking an increase of over 1300% [244]. Cash Flow and Capital Structure - Net cash provided by operating activities for Q1 fiscal 2023 was $265.9 million, an increase from $252.8 million in Q1 fiscal 2022, primarily due to reduced working capital usage [161]. - Cash and cash equivalents were $415.2 million at December 31, 2022, down from $260.2 million at September 30, 2022, with total debt increasing to $9,462.8 million [210]. - Net cash provided by operating activities increased by $13.1 million to $265.9 million in Q1 FY2023 compared to Q1 FY2022, primarily due to a $68.4 million net decrease in working capital usage [219]. - Capital expenditures for FY2023 are expected to be approximately $1.0 billion, focusing on safety, environmental, and maintenance projects [221]. - The company plans to optimize its capital structure and may seek to refinance existing indebtedness to improve terms and reduce costs [230]. Future Outlook - The company expects a sequential increase in net sales and net income in Q2 fiscal 2023, driven by seasonal volume increases and a full quarter of Grupo Gondi results [162]. - Scheduled mill maintenance outages are expected to result in approximately 132,000 tons of maintenance downtime in Q2 fiscal 2023 [163]. - The company anticipates paying approximately $12 million annually in withdrawal liabilities for fiscal 2023, excluding accumulated funding deficiency demands [228]. Risks and Liabilities - The company faces various risks including economic conditions, supply chain disruptions, and competition, which could impact future performance [247]. - A 100 basis point increase in market interest rates would lead to an estimated annual interest expense increase of $26 million [249]. - A 10% change in the price per MMBtu of natural gas would impact the cost of goods sold by approximately $6 million, based on open contracts as of December 31, 2022 [249].