01—Abstract
Summary
Summary of the 8-K filed July 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Smurfit Westrock plc filed this Form 8-K on July 30, 2024 to furnish its Second Quarter 2024 earnings press release (Exhibit 99.1).
The results cover Smurfit Kappa Group plc for the three months ended June 30, 2024 and do not include WestRock Company, because the combination of Smurfit Kappa and WestRock closed after quarter-end. As of June 30, 2024, and before the combination, the registrant had no assets, no operations and only nominal capitalization. The filing states that combined results will be reported from the third quarter of 2024.
For the Smurfit Kappa business, net sales were $2,969 milliona, down from $3,076 million a year earlier, driven mainly by lower average box pricing in Europe. Net income fell to $132 million from $267 million, reflecting $60 million of transaction-related expenses tied to the combination. Adjusted EBITDA was $480 million, with a margin of 16.2% versus 18.1% in the prior-year quarter.
Net cash provided by operating activities rose to $340 millionb, and adjusted free cash flow was $186 million versus $83 million. Net debt was $3,107 million at June 30, 2024, giving a net leverage ratio of 1.6x compared with 1.3x at December 31, 2023.
Management stated that higher recovered fiber costs are expected to be recovered through increased box pricing with the customary time lag. The release also notes the company's NYSE listing and S&P 500 inclusion on July 8, 2024, the completion of the WestRock transaction on July 5, 2024, and credit ratings of BBB/BBB/Baa2 from S&P, Fitch and Moody's.
02—Key points
Key Highlights
- Net sales of $2,969 million, down from $3,076 million, mainly due to lower average box pricing in Europe
- Net income of $132 million versus $267 million a year earlier, including $60 million of transaction-related expenses
- Adjusted EBITDA of $480 million with a 16.2% margin, compared with $556 million and 18.1% in Q2 2023
- Europe adjusted EBITDA of $355 million (16.1% margin) versus $432 million; Americas adjusted EBITDA of $146 million (19.2% margin) versus $140 million
- Adjusted free cash flow of $186 million versus $83 million, with net cash from operations of $340 million
- Net leverage ratio of 1.6x at June 30, 2024, up from 1.3x at December 31, 2023; total borrowings of $6,432 million
- Quarterly dividend of $0.3025 per ordinary share previously announced; combined results to be reported from Q3 2024
03—Questions
Frequently Asked Questions
Why do these results not reflect the combined company?
The combination of Smurfit Kappa Group plc and WestRock Company was completed after June 30, 2024. As of that date, the registrant had no assets, no operations and only nominal capitalization, so the release reports Smurfit Kappa's results only. The filing states that combined results will be reported starting in the third quarter of 2024.
What drove the decline in net sales and net income?
Net sales fell by $107 million, or 3%, mainly because of lower average box pricing in the European business. Net income fell by $135 million, primarily due to the lower sales and $60 million of transaction-related expenses for the combination, partly offset by a $12 million decrease in cost of goods sold from lower raw material and energy costs.
How did the company's cash flow and leverage change?
Net cash provided by operating activities increased to $340 million from $307 million, helped by a $58 million reduction in tax payments. Adjusted free cash flow was $186 million versus $83 million. Total borrowings rose to $6,432 million from $3,747 million at December 31, 2023, and the net leverage ratio increased to 1.6x from 1.3x.
What does management expect regarding recovered fiber costs?
Management said the company faced significantly higher recovered fiber costs and lower corrugated box prices in the quarter. It expects these higher costs to be recovered through increased box pricing with the customary time lag.
What corporate events did the release mention?
The release states that the WestRock transaction was completed on July 5, 2024, and that Smurfit Westrock listed on the NYSE and was included in the S&P 500 on July 8, 2024. It also reports credit ratings of BBB from S&P, BBB from Fitch and Baa2 from Moody's.
04—Continue