Core Insights - Smurfit Westrock Plc (SW) is benefiting from asset optimization and business improvement initiatives, positioning the company for long-term growth and profitability [1][8] - The company faces challenges from merger-related costs, higher freight and chemical costs, labor shortages, and supply chain issues, which are expected to impact margins [2][14] Company Transformation - Since 2023, Smurfit Westrock has closed underperforming facilities, divested non-core assets, and streamlined operations to enhance efficiency and cost savings [1][7] - The merger of Smurfit Kappa and WestRock on July 5, 2024, is expected to deliver significant growth potential due to their complementary portfolios and geographic reach across 42 countries [3][4] Operational Developments - In Q1 2025, Smurfit Westrock invested in containerboard, corrugated, and consumer systems, expanding its Bag-in-Box offerings and upgrading mill systems for efficiency and environmental improvements [5][9] - The company has closed 32 packaging facilities and three mills since early 2023, with a capacity reduction of approximately 600,000 tons [7][8] Market Demand - There is a growing demand for sustainable, fiber-based packaging solutions, particularly in the beverage, healthcare, retail, and food sectors [9][10] - The rise in e-commerce activities is expected to further support demand for packaging solutions, with global e-commerce revenues projected to reach $4.32 trillion by 2025 [11] Financial Performance - In Q1 2025, Smurfit Westrock's cost of sales increased by 173.9% year-over-year, with transaction and integration-related costs amounting to $395 million [12][13] - The company's stock has declined by 14.8% over the past six months, compared to an 8% decline in the industry [15]

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $90 million with a margin of 11% for the first quarter [9] - Adjusted operating earnings were $0.68 per share, with free cash flow expected to be lower than the previous quarter due to timing issues [10][9] - The company returned nearly $40 million in cash to shareholders, including an $18 million dividend and $20 million in share repurchases [8] Business Line Data and Key Metrics Changes - The company faced operational challenges in North America, impacting financial performance by approximately $10 million [11] - Planned maintenance outage costs increased by $9 million due to major outages at specific mills [13] - Volume decreased by 30 million, primarily due to seasonally weak demand in Latin America and operational challenges in North America [12] Market Data and Key Metrics Changes - In Europe, demand decreased by 7% year-over-year, while Latin America saw a 3% increase in demand, mainly driven by Brazil [17] - North American apparent demand was down about 1% year-over-year, influenced by higher imports [17] - The company anticipates real demand to decline by 3% to 4% for the year, with domestic industry supply reduced by 10% due to mill closures [18] Company Strategy and Development Direction - The company plans to leverage its global footprint to improve product mix and customer service in North America [19] - A focus on reducing costs and improving product mix is emphasized, particularly in the European market [23] - The company aims for a significantly better adjusted EBITDA performance in the second half of the year, driven by lower maintenance costs and improved operations [20] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about a global economic slowdown and potential inflation risks on raw materials and transportation [24] - The company is well-positioned to manage through tariff uncertainties, with over 90% of raw materials sourced locally [26] - Future capital allocation strategies will focus on maintaining a strong financial position while investing in business growth [28] Other Important Information - The company has reduced its debt significantly, with a leverage ratio now at 1.1 times, and has no major maturities until 2027 [14] - A seamless CEO and CFO succession plan is in place as the current CEO prepares for retirement [31] Q&A Session Summary Question: Can you provide more detail on the operational issues? - The operational issues were primarily reliability problems at the Ticonderoga and Eastover mills, with an intermittent issue expected to be resolved soon [37] Question: How do you expect to recover orders in the third quarter? - The company anticipates a benefit of less than $10 million from recovering orders that were pushed into the third quarter due to operational challenges [39] Question: What upgrades are being made at the Saia mill? - Investments in new capabilities at the Saia mill will allow entry into specialty roll segments, improving product mix [50] Question: How are you addressing wood cost increases at the Newmala mill? - Strategies include sourcing directly from landowners and importing lower-cost wood, targeting at least a 10% reduction in wood costs [53] Question: What is the outlook for capital spending for the year? - The company maintains its full-year capital spending guidance of $220 million to $240 million, with significant cash flow expected in the second half of the year [62][63]

Financial Performance - Smurfit Westrock reported Net Sales of $7656 billion[26] - Adjusted EBITDA reached $1252 billion[8, 26] - Adjusted EBITDA Margin was 164%[8, 26] - North America's Net Sales were $47 billion with an Adjusted EBITDA of $785 million and an Adjusted EBITDA Margin of 168%[28] - EMEA & APAC's Net Sales were $26 billion with an Adjusted EBITDA of $389 million and an Adjusted EBITDA Margin of 151%[28] - LATAM's Net Sales were $05 billion with an Adjusted EBITDA of $115 million and an Adjusted EBITDA Margin of 225%[28] Strategic Initiatives - The company is investing across all three regions in containerboard, corrugated, and consumer systems[14] - Smurfit Westrock is rationalizing its operations with four closures, reducing capacity by approximately 600kt[17] - The company expects approximately $350 million will be captured in Adjusted EBITDA in 2025, with approximately $80 million achieved in Q1 2025[32] Guidance - Q2 2025 Adjusted EBITDA is guided at approximately $12 billion[32] - FY 2025 Adjusted EBITDA is projected to be between $50 billion and $52 billion[32, 43]

Financial Data and Key Metrics Changes - The first quarter adjusted operating earnings per share was $0.23 compared to a negative $0.02 in the fourth quarter, indicating a significant recovery [26] - The company expects nearly $800 million of run rate quarterly EBITDA in the first half of the year, accelerating to $1.1 billion by Q4 [10] - The company anticipates free cash flow for the full year to be in the range of $100 million to $300 million [24] Business Line Data and Key Metrics Changes - The Packaging Solutions North America business saw higher sales and adjusted EBITDA due to the addition of the DS Smith North American business and benefits from sales price increases [29] - The adjusted EBITDA contribution from DS Smith operations in North America was $7 million for two months of the first quarter, with expectations for an additional $25 million in the second quarter [33] - The Packaging Solutions EMEA business benefited from two months of the former DS Smith European legacy business, contributing $104 million to adjusted EBITDA for the first quarter [37] Market Data and Key Metrics Changes - Industry demand in North America was down 2% in the first quarter, with expectations for this level of demand to continue into the second quarter [13] - Demand across European markets was soft in the first quarter but is expected to remain stable on a quarter-to-quarter basis [13] - The company noted a significant gap closure to market by approximately 500 basis points in the North American packaging business [19] Company Strategy and Development Direction - The company outlined three pillars of its strategy designed to drive sustainable value creation, focusing on building an advantaged cost position, superior customer experience, and profitable market share growth [8] - The company is targeting $1.9 billion of cost reductions by the end of 2027, with approximately $400 million already achieved [15] - The integration of DS Smith is a key focus, with significant synergies expected from the combination [16] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the economic environment, noting strong negative consumer and business sentiment [12] - The company is prepared for three different scenarios regarding demand, with a focus on controlling its own destiny through strategic execution [14] - Management emphasized the importance of maintaining a disciplined approach to strategy execution despite external challenges [70] Other Important Information - The company will report legacy IP and DS Smith businesses in North America as Packaging Solutions North America and in EMEA as Packaging Solutions EMEA [20] - The strategic option process for the global cellulose fiber business is ongoing, with several interested parties in the due diligence phase [21] Q&A Session Summary Question: What demand assumptions are being used for the full year EBITDA guidance? - Management indicated confidence in landing between 3.5% and 4% EBITDA if demand remains stable, with April showing signs of stabilization [49][50] Question: How has the tariff situation impacted the pulp business? - Management noted a mid-single-digit risk to demand due to tariffs, but overall demand remains stable [62][63] Question: Can you provide more details on market share gains in North America? - Management reported improvements in service and reliability, leading to a turnaround in market share, particularly among small to medium-sized customers [78][79]

Financial Data and Key Metrics Changes - The first quarter adjusted operating earnings per share was $0.23 compared to a negative $0.02 in the fourth quarter, indicating a significant recovery [30] - The company expects a run rate quarterly EBITDA of nearly $800 million in the first half of the year, accelerating to $1.1 billion by Q4 [12][16] - Free cash flow for the full year is expected to be in the range of $100 million to $300 million [26] Business Line Data and Key Metrics Changes - The Packaging Solutions North America business saw higher sales and adjusted EBITDA due to the addition of the DS Smith North American business and benefits from sales price increases [33] - The adjusted EBITDA contribution from DS Smith operations in North America was $7 million for two months of the first quarter, with expectations for an additional $25 million in the second quarter [37] - The Packaging Solutions EMEA business benefited from two months of the former DS Smith European legacy business, contributing $104 million to adjusted EBITDA for the first quarter [41] Market Data and Key Metrics Changes - Industry demand in North America was down 2% in the first quarter, with expectations for this level to continue into the second quarter [15] - Demand across European markets was soft in the first quarter but is expected to remain stable in the second quarter [15] - The company noted a significant gap closure to market by approximately 500 basis points in the North American packaging business [34] Company Strategy and Development Direction - The company is focused on three strategic pillars: building an advantaged cost position, enhancing customer experience, and driving profitable market share growth [10] - The company aims to achieve $1.9 billion in cost savings by the end of 2027, with approximately $400 million already realized [17] - The integration of DS Smith is a key focus, with a target of achieving $600 million to $700 million in synergies [22] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the economic environment, noting strong negative consumer and business sentiment [15] - The company is prepared for various scenarios, including potential economic deterioration, and is focused on controlling its own destiny [16] - Management remains optimistic about achieving the targeted range of earnings improvements if demand remains stable [15] Other Important Information - The company is implementing an "eighty-twenty" performance system to drive significant earnings improvement and commercial excellence [20] - The company is actively pursuing a strategic option process for its Global Cellulose Fibers business, with several interested parties in the due diligence phase [23] Q&A Session Summary Question: Demand trends and EBITDA guidance - Management indicated that if demand remains stable, they feel confident in achieving an EBITDA target between $3.5 billion and $4 billion [53][64] Question: Impact of tariffs on pulp business - Management noted that there is mid-single-digit risk to demand due to tariffs, but overall demand remains stable [66][67] Question: Market share gains in North America - Management reported improvements in service and reliability, leading to modest market share gains in local accounts [81][85] Question: Operating rates and portfolio assessment - Management confirmed stability in demand and indicated ongoing footprint optimization efforts [86][89] Question: EBITDA bridge from first half to second half - Management explained that the second half is expected to see a significant increase in EBITDA due to cost savings and price realization [97][100]