Smurfit Westrock (SW) Q2 2024 earnings summary

Executive summary

• The merger of Smurfit Kappa and WestRock was completed in July 2024, creating Smurfit Westrock, the world's largest listed packaging company with a global footprint across 40 countries and a focus on sustainable packaging and innovation.

• Management emphasizes a performance-led, decentralized culture, customer-centricity, disciplined capital allocation, and sustainability.

• The new entity aims to deliver significant long-term value through operational excellence and integration.

• Smurfit Westrock is now listed on the NYSE and included in the S&P 500.

Financial highlights

• Q2 2024 net sales were approximately $3 billion, down 3% year-over-year, with adjusted EBITDA of $480 million (16.2% margin), and net income of $132 million, impacted by $60 million in transaction-related expenses.

• Adjusted free cash flow rose to $186 million from $83 million year-over-year; net cash from operations increased to $340 million.

• Net leverage ratio was 1.6x at June 2024, up from 1.3x at December 2023; total borrowings reached $6,432 million and net debt was $3,107 million.

• Quarterly dividend of $0.3025 per share declared, payable in September 2024.

• For H1 2024, combined net sales were $15.4 billion with adjusted EBITDA of $2.24 billion and a 14.5% margin.

Outlook and guidance

• Q2 2024 is expected to be the cyclical low, with price increases and synergy realization anticipated to support improved performance in H2 2024 and into 2025.

• $400 million in cost synergies targeted by end of 2025, mainly from paper integration, logistics, and distribution.

• CapEx for 2024 is expected to remain in the $2.2–$2.5 billion range, with more precise 2025 guidance to be provided in early 2025.

• Management expects to provide preliminary purchase price allocation for the business combination in the next quarterly report.

• Management targets a net leverage ratio below the current pro forma 2.5x over time.