WestRock Company

Third-quarter net sales were $5.1 billion, down 7.2% year over year. Consolidated adjusted EBITDA was $802 million, down 20.2%, and consolidated adjusted EBITDA margin was 15.7%, down 250 basis points year over year. Adjusted EPS was $0.89. Adjusted free cash flow was $479 million, which was used to repay $479 million of debt; net leverage ended at 2.51x. For the fourth quarter, WestRock guided to consolidated adjusted EBITDA of $675 million to $725 million and adjusted EPS of $0.66 to $0.83, assuming stable costs, 32,000 tonnes of scheduled maintenance downtime, and an adjusted tax rate of 8% to 10%.

David Sewell struck an upbeat, self-help-focused tone, saying the company exceeded guidance through strong execution, productivity gains, and moderating input costs. He emphasized that demand trends are stabilizing in corrugated, with July up mid-single digits sequentially and backlogs at their highest all year, while consumer packaging should improve in the first half of fiscal 2024 as inventories normalize. He also framed portfolio actions, the Tacoma closure, and growth investments like Longview and Mexico as part of a broader effort to improve margins, ROIC, and long-term growth.

Alex Pease focused on the financial bridge: lower volumes and economic downtime outweighed benefits from pricing/mix, lower operating costs, and input cost deflation. He quantified the quarter’s drivers, including $85 million from price/mix, $66 million from lower operating costs, and $37 million from input deflation, offset by $243 million from lower volumes and $89 million from economic downtime; non-cash pension costs also reduced EBITDA by $39 million. He said the company generated $479 million of adjusted free cash flow, ended with net leverage of 2.51x, remains focused on debt reduction toward its 1.75x to 2.25x target range, and expects fiscal 2023 adjusted free cash flow of $800 million to $1 billion. He also said Tacoma will trigger $345 million of restructuring charges, with about two-thirds non-cash, and that roughly one-third of that is cash, mostly in years one and two.

Analysts pressed management on corrugated shipment cadence, consumer packaging restocking, the economics of mill closures, enterprise sales, machinery installs, capital spending, and whether more industry capacity exits are needed. Management said corrugated was stable in Q3 but improved in July, consumer customers took time off to rebalance inventories and are signaling growth in 2024, and the closures are intended to be EBITDA- and ROIC-accretive rather than a source of earnings leakage. On capital allocation, Alex reiterated the strategic investment range of $200 million to $500 million on top of $1 billion of base capital, while David said the company is not anticipating major near-term footprint actions beyond those already announced. They also clarified that the RTS sale was not complete and is expected in September, and that it was a $375 million sale in the consumer segment.