On July 30, 2024, Smurfit WestRock PLC (SW, Financial) released its 8-K filing detailing the financial results for the second quarter ended June 30, 2024. Smurfit WestRock, formed from the merger of Smurfit Kappa and WestRock in summer 2024, is the largest producer of containerboard globally, with significant operations across North America, South America, and Europe.
Performance Overview
Smurfit WestRock PLC (SW, Financial) reported a decrease in net sales and net income for Q2 2024 compared to the same period last year. Net sales fell by 3% to $2,969 million from $3,076 million in Q2 2023, primarily due to lower average box pricing in Europe. Net income dropped significantly by 50.6% to $132 million from $267 million, impacted by transaction-related expenses and lower sales.
Financial Achievements and Challenges
Despite the decline in net sales and income, Smurfit WestRock achieved notable financial milestones. Adjusted EBITDA stood at $480 million, with an adjusted EBITDA margin of 16.2%, down from $556 million and 18.1% respectively in Q2 2023. The company also reported an increase in net cash provided by operating activities, which rose by 11% to $340 million from $307 million in the previous year, driven by reduced tax payments and positive working capital changes.
Income Statement Highlights
| Metric | June 30, 2024 | June 30, 2023 |
|---|---|---|
| Net Sales | $2,969 million | $3,076 million |
| Net Income | $132 million | $267 million |
| Adjusted EBITDA | $480 million | $556 million |
| Adjusted EBITDA Margin | 16.2% | 18.1% |
| Net Cash Provided by Operating Activities | $340 million | $307 million |
| Adjusted Free Cash Flow | $186 million | $83 million |
Balance Sheet and Cash Flow
Smurfit WestRock's total borrowings increased to $6,432 million as of June 30, 2024, from $3,747 million at the end of 2023. Net debt was $3,107 million, resulting in a net leverage ratio of 1.6x, up from 1.3x at the end of December 2023. The company's free cash flow improved to $163 million in Q2 2024 from $83 million in Q2 2023, excluding transaction costs associated with the merger.
Segment Performance
In Europe, adjusted EBITDA decreased by $77 million to $355 million, with an adjusted EBITDA margin of 16.1%, down from 18.4% in Q2 2023. This decline was due to lower net sales and increased costs. Conversely, the Americas segment saw a 4% increase in adjusted EBITDA to $146 million, with a stable adjusted EBITDA margin of 19.2%.
Management Commentary
“I am pleased to report a strong set of results, and continued delivery of quality and service for our customers. This has been driven by our performance-led culture, together with the continuing benefits of our prior year capital allocation decisions. These results were also achieved against a backdrop of significantly higher recovered fiber costs and lower corrugated box prices. We expect these increased costs will be recovered through increased box pricing with the customary time lag.” - Tony Smurfit, President and CEO
Conclusion
Smurfit WestRock PLC (SW, Financial) faced challenges in Q2 2024 with decreased net sales and income, primarily due to lower box pricing and transaction-related expenses. However, the company demonstrated resilience with increased operating cash flow and free cash flow, positioning itself for future growth. The merger with WestRock is expected to bring synergies and strengthen its market position as a leading sustainable packaging company.
For more detailed financial information, please refer to the 8-K filing.
Explore the complete 8-K earnings release (here) from Smurfit WestRock PLC for further details.
