01—Abstract
Summary
Summary of the 10-Q filed November 8, 2024. Cited figures are marked; the original filing is the authoritative source.
Smurfit Westrock plc's Form 10-Q for the quarter ended September 30, 2024 reflects the first full quarter after the Combination with WestRock closed on July 5, 2024.
Smurfit Kappa was the accounting acquirer, so historical results are Smurfit Kappa's, and WestRock contributed net sales of $4,684 milliona and a net loss of $132 million from the closing date through September 30, 2024. Net sales rose to $7,671 million in the three months ended September 30, 2024 from $2,915 million a year earlier, while the company reported a net loss attributable to common stockholders of $150 million, compared with net income of $229 million in the prior-year quarter. The filing attributes the swing mainly to $267 million of transaction and integration-related expenses and a $227 million inventory fair value step-up amortization charge.
For the nine months, net income attributable to common stockholders was $173 millionb versus $777 million a year earlier, and operating cash flow fell to $702 million from $948 million. Total debt rose to $13,964 million (excluding debt issuance costs) from $3,769 million at December 31, 2023, and the company reported $951 million of cash and about $5.7 billion of total liquidity, including undrawn committed facilities of about $4.7 billion. Adjusted EBITDA for the three months was $1,265 million versus $525 million, and for the nine months $2,220 million versus $1,682 million, per the company's non-GAAP reconciliation.
Investors should note that management concluded disclosure controls and procedures were not effective because of a material weakness in internal control over financial reporting, tied principally to legacy Smurfit Kappa processes. The company also reported a preliminary goodwill of $4,359 millionc from the Merger and an Award of over $469 million against Venezuela, which Smurfit Holdings BV has begun enforcing. Dividends declared were $0.30 per share for the quarter and $0.95 per share for the nine months.
02—Key points
Key Highlights
- Net sales of $7,671 million for Q3 2024, up from $2,915 million, with $4,684 million attributed to the WestRock acquisition.
- Net loss attributable to common stockholders of $(150) million for Q3 2024, versus net income of $229 million in Q3 2023, driven by $267 million of transaction and integration expenses and a $227 million inventory step-up charge.
- Nine-month net income attributable to common stockholders of $173 million, down from $777 million, and diluted EPS of $0.50 versus $3.00.
- Total debt of $13,964 million at September 30, 2024, up from $3,769 million at December 31, 2023, after the $2,750 million Notes Offering and assumed WestRock debt.
- Adjusted EBITDA of $1,265 million for Q3 2024 versus $525 million, and Adjusted Earnings Per Share - Basic of $0.53 versus $0.99.
- Management reported a material weakness in internal control over financial reporting, and disclosure controls were concluded not effective as of September 30, 2024.
- Arbitral tribunal awarded Smurfit Holdings BV compensation in excess of $469 million against Venezuela on August 28, 2024; enforcement proceedings were initiated in September 2024.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2024, Smurfit Westrock lost $0.02.
- Revenue$7.67B100.0%
- Cost of revenue−$6.32B82.4%
- Gross profit$1.35B17.6%
- Operating costs−$1.29B16.9%
- Operating income$55.0M0.7%
- Interest, other & tax−$205.0M2.7%
- Net income−$150.0M2.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed November 8, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $7.67B$2.92B | +163.2% |
| Cost of Revenue | $6.32B$2.17B | +190.9% |
| Gross Profit | $1.35B$742.00M | +81.9% |
| SG&A Expenses | $1.01B$371.00M | +171.4% |
| Operating Income | $55.00M$354.00M | −84.5% |
| Net Income | -$150.00M$229.00M | −165.5% |
| EPS (Basic) | $-0.30$0.89 | −133.7% |
| EPS (Diluted) | $-0.30$0.88 | −134.1% |
| Shares Outstanding (Basic) | 508.00M258.00M | +96.9% |
| Shares Outstanding (Diluted) | 508.00M259.00M | +96.1% |
05—Questions
Frequently Asked Questions
Why did the company report a net loss in the third quarter of 2024 after net income a year earlier?
The filing says the decrease was primarily due to an increase in transaction and integration-related expenses associated with the Combination, which totaled $267 million in the quarter, and a $227 million cost of goods sold charge for amortization of the fair value step-up on WestRock's acquired inventory. Net loss attributable to common stockholders was $(150) million, compared with net income of $229 million in the third quarter of 2023.
How much debt does Smurfit Westrock carry and how is it being managed?
As of September 30, 2024, total debt excluding debt issuance costs was $13,964 million, of which $753 million was current. The company redeemed EUR 250 million of senior notes due 2025 and discharged $600 million of 3.75% senior notes due 2025, funded partly from the April 2024 Notes Offering of $2,750 million. Its New RCF of $4,500 million had no amounts outstanding at quarter end.
What liquidity does the company have?
The filing states that at September 30, 2024, the company had approximately $4.7 billion in undrawn committed facilities under the New RCF and receivables securitization facilities, plus cash and cash equivalents of $951 million, for approximately $5.7 billion of liquidity. Management believes this, together with operating cash flows and capital market access, will be adequate for the next 12 months and the foreseeable future.
What did management say about internal controls?
Management concluded that disclosure controls and procedures were not effective as of September 30, 2024, due to a material weakness in internal control over financial reporting. The weakness relates principally to processes at historical Smurfit Kappa that were not previously subject to Section 404 of the Sarbanes-Oxley Act, covering review documentation, manual journal entries, and general IT controls. The company has begun remediation but cannot yet estimate the time to complete it.
What dividends has the company declared?
The company declared dividends of $0.30 per share in the three months ended September 30, 2024, and $0.95 per share in the nine months ended September 30, 2024. Cash dividends paid to stockholders were $493 million for the nine months, and the filing notes there are no guarantees as to the payment or level of future dividends.
06—Continue