WestRock Reports Fiscal 2022 Fourth Quarter Results

WestRock Company, a leading provider of sustainable paper and packaging solutions, today announced results for its fiscal fourth quarter and year ended September 30, 2022.

Fourth Quarter Highlights and other notable items:

• Record fourth quarter net sales of $5.4 billion increased 6.1% year-over-year
• Net income of $345 million increased $21 million year-over-year, or 6.4%. Adjusted Net Income of $366 million increased $34 million year-over-year, growing 10.4%
• Record fourth quarter Consolidated Adjusted EBITDA of $920 million increased 4.8% year-over-year
• Earned $1.34 per diluted share (“EPS”) and $1.43 of Adjusted EPS compared year-over-year to $1.20 and $1.23, respectively, increasing 11.7% and 16.3%, respectively
• Announced dividend increase of 10%, to an annualized rate of $1.10 per share

Full Year 2022 Highlights:

• Record full year net sales of $21.3 billion increased 13.4% compared to $18.7 billion in the prior year
• Net income of $945 million increased $106 million year-over-year, or 12.7%. Adjusted Net Income of $1.245 billion increased $338 million year-over-year, growing 37.2%
• Record Consolidated Adjusted EBITDA of $3.459 billion increased 15.3% compared to $2.999 billion in the prior year
• Earned $3.61 per diluted share and $4.76 of Adjusted EPS compared to $3.13 and $3.39 in the prior year, respectively, increasing 15.3% and 40.4%, respectively
• Generated net cash provided by operating activities of $2.0 billion and Adjusted Free Cash Flow of $1.2 billion
• Returned $860 million in capital to stockholders, specifically $600 million in stock repurchases and $260 million in dividend payments

“WestRock delivered record net sales of $21.3 billion in fiscal 2022 and continued our track record of strong operating cash flow by generating more than $2 billion in the same period,” said David B. Sewell, chief executive officer. “I want to thank the WestRock team for their efforts this past year to deliver these outstanding results.

“Our team remains relentlessly focused on partnering with our customers to help them meet their needs for sustainable paper and packaging solutions as we deliver on our overall transformation initiatives,” continued Sewell. “Looking ahead to fiscal 2023, we will continue to strengthen our business as we drive innovation across our portfolio. While market conditions remain uncertain as our customers work through the current high inventory levels, WestRock’s ability to serve a variety of end markets with our diverse portfolio provides resiliency that will serve us well. We remain confident thatour business model, scale and ongoing transformation initiatives will continue to drive long-term shareholder value.”

Consolidated Financial Results

WestRock’s performance for the three months ended September 30, 2022 and 2021 (in millions):

		Three Months Ended
		Sep. 30, 2022		Sep. 30, 2021		$ Var.		% Var.
Net sales		$	5,402.5		$	5,090.5		$				312.0						6.1	%
Net income		$	344.5		$	323.7		$				20.8						6.4	%
Consolidated Adjusted EBITDA		$	919.7		$	877.9		$				41.8						4.8	%

Net sales increased $312 million, or 6.1%, year-over-year. Corrugated Packaging segment sales increased $182 million, or 8.3%; Consumer Packaging segment sales increased $147 million, or 12.7%; Distribution segment sales increased $26 million, or 7.4%; Global Paper segment sales decreased $33 million, or 2.3%; and intersegment sales increased $10 million.

Net income increased $21 million year-over-year to $345 million. The impact of higher selling price/mix and ransomware insurance recoveries were nearly offset by increased cost inflation, lower volumes and higher operating costs. Net income was impacted by $37 million of insurance recoveries related to the fiscal 2021 ransomware incident: $31 million related to business interruption costs that were recorded as a reduction of cost of goods sold and the balance related to ransomware recovery costs that were recorded as a reduction of selling, general and administrative excluding intangible amortization.

Consolidated Adjusted EBITDA increased $42 million, or 4.8%, year-over-year, primarily in the Corrugated Packaging and Consumer Packaging segments. Ransomware insurance recoveries accounted for $26 million of the year-over-year increase in Consolidated Adjusted EBITDA.

Additional information about the changes in segment sales and Adjusted EBITDA by segment are included below.

Restructuring and Other Costs

Restructuring and other costs during the fourth quarter of fiscal 2022 were $35 million. The charges were primarily related to the previously announced permanent closure of the corrugated medium manufacturing operations at the St. Paul, Minnesota mill, the previously announced closure of the Panama City, Florida mill and acquisition and divestiture costs.

Cash Flow Activities

Net cash provided by operating activities was $540 million in the fourth quarter of fiscal 2022 compared to $678 million in the prior year quarter primarily due to increased working capital.

Total debt was $7.8 billion at September 30, 2022, $7.6 billion excluding $175 million of unamortized fair market value step-up of debt acquired in mergers and acquisitions, and $7.4 billion after further excluding cash and cash equivalents of $260 million. Total debt declined $236 million in the fourth quarter of fiscal 2022. The Company had approximately $3.7 billion of available liquidity from long-term committed credit facilities and cash and cash equivalents at September 30, 2022, excluding the $1.0 billion Delayed Draw Term Loan available to be used to acquire the remaining 67.7% interest in Grupo Gondi.

During the fourth quarter of fiscal 2022, WestRock invested $293 million in capital expenditures and returned $64 million in capital to stockholders in dividend payments.

Segment Reporting Structure

In the first quarter of fiscal 2022, the Company reorganized its reportable segments due to changes in its organizational structure and how the Company makes key operating decisions, allocates resources and assesses the performance of its business. The Company believes the change provides greater visibility into the vertical integration between our mills and converting operations as well as the value of a diversified portfolio of assets, and helps to highlight the performance of its portfolio.

Our reportable segments are:

• Corrugated Packaging, which consists of our integrated corrugated converting operations;
• Consumer Packaging, which consists of our integrated consumer converting operations;
• Global Paper, which consists of all third-party paper sales; and
• Distribution, which consists of our distribution and display assembly operations.

As a result of the reorganization, the Company reports the benefit of vertical integration with its mills in each reportable segment that ultimately sells the associated paper and packaging products to our external customers. Prior to the reorganization, the Company had two reportable segments, Corrugated Packaging and Consumer Packaging.

The Company’s measure of segment profitability for each reportable segment is Adjusted EBITDA in accordance with Accounting Standards Codification 280, “Segment Reporting” because it is the measure used by the Company to make decisions about allocating resources and assessing segment performance. Certain items are not allocated to our reportable segments and, thus, the information that the Company uses to make operating decisions and assess performance does not reflect such amounts. Items not allocated are reported as Non-allocated expenses or in other line items outside of Adjusted EBITDA. Adjusted EBITDA is defined on page 10 under “Consolidated Adjusted EBITDA and Adjusted EBITDA”. Prior period amounts for our reportable segments have been recast to conform to the new segment structure. These changes did not impact the consolidated financial statements.

Segment Results

Corrugated Packaging Segment

		Three Months Ended
		Sep. 30, 2022		Sep. 30, 2021		Var.		% Var.
Segment sales		$	2,386.1		$	2,203.9		$				182.2					8.3	%
Adjusted EBITDA		$	383.9		$	361.4		$				22.5					6.2	%
Adjusted EBITDA Margin			16.1%			16.4%		-30 bps

Corrugated Packaging segment sales increased $182 million, or 8.3%, primarily due to higher selling price/mix that was partially offset by lower volumes.

Corrugated Packaging Adjusted EBITDA increased $23 million, or 6.2%, primarily due to the margin impact from higher selling price/mix and ransomware insurance recoveries, which were largely offset by increased cost inflation, higher operating costs and lower volumes. Corrugated Packaging Adjusted EBITDA margin was 16.1% and Adjusted EBITDA margin excluding trade sales was 16.7%.

Consumer Packaging Segment

		Three Months Ended
		Sep. 30, 2022		Sep. 30, 2021		Var.		% Var.
Segment sales		$	1,305.7		$	1,158.6		$				147.1					12.7	%
Adjusted EBITDA		$	219.2		$	198.1		$				21.1					10.7	%
Adjusted EBITDA Margin			16.8%			17.1%		-30 bps

Consumer Packaging segment sales increased $147 million, or 12.7%, primarily due to higher selling price/mix and higher volumes that were partially offset by the unfavorable impact of foreign currency.

Consumer Packaging Adjusted EBITDA increased $21 million, or 10.7%, primarily due to the margin impact from higher selling price/mix and higher volumes that were partially offset by increased cost inflation, higher operating costs and the unfavorable impact of foreign currency. The Consumer Packaging segment delivered an Adjusted EBITDA margin of 16.8%.

Global Paper Segment

		Three Months Ended
		Sep. 30, 2022		Sep. 30, 2021		Var.		% Var.
Segment sales		$	1,429.2		$	1,462.3		$				(33.1	)					-2.3	%
Adjusted EBITDA		$	306.4		$	307.2		$				(0.8	)					-0.3	%
Adjusted EBITDA Margin			21.4%			21.0%		40 bps

Global Paper segment sales decreased $33 million, or 2.3%, primarily due to lower volumes that were partially offset by higher selling price/mix.

Global Paper Adjusted EBITDA was essentially flat, primarily due to the margin impact from higher selling price/mix and ransomware insurance recoveries, which were offset by increased cost inflation, lower volumes and higher operating costs. The Global Paper segment delivered an Adjusted EBITDA margin of 21.4%, an increase of 40 basis points year-over-year.

Distribution Segment

		Three Months Ended
		Sep. 30, 2022		Sep. 30, 2021		Var.		% Var.
Segment sales		$	374.1		$	348.4		$				25.7					7.4	%
Adjusted EBITDA		$	26.0		$	23.4		$				2.6					11.1	%
Adjusted EBITDA Margin			7.0%			6.7%		30 bps

Distribution segment sales increased $26 million, or 7.4%, primarily due to higher selling price/mix that was partially offset by lower volumes.

Distribution Adjusted EBITDA increased $3 million, or 11.1%, primarily due to the margin impact of higher selling price/mix and an increase in productivity, which were partially offset by the increased cost inflation and lower volumes.

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About WestRock

WestRock partners with our customers to provide sustainable paper and packaging solutions that help them win in the marketplace. WestRock’s team members support customers around the world from locations spanning North America, South America, Europe, Asia and Australia. Learn more at www.westrock.com.

Contact:

Robert Quartaro – Senior Vice President, Investor Relations – robert.quartaro@westrock.com – (470) 328-6979

Source: WestRock Company