WestRock earnings impacted by low paperboard demand in Q1

Despite low demand throughout 2023, paper industry executives are hopeful conditions will improve this year. That remains the case for Atlanta-based WestRock Co., the largest recovered paper consumer in North America, but CEO David B. Sewell doesn’t expect the landscape to change much until the second half of the company’s fiscal year.

“During the quarter, we grew external containerboard shipments, while we felt the impact of lower paperboard market demand,” he says in comments accompany WestRock’s first quarter financial earnings report.

In its most earnings for the first quarter ending Dec. 31, 2023, WestRock reports $4.6 billion in net sales, down slightly from the $4.9 billion in net sales in the first quarter of 2023, and its consolidated adjusted earnings before interest, taxes, depreciation and amortization were $570.7 million compared with $652.1 million in the first quarter of 2023.

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The company says the decline in net sales compared with the first quarter of 2023 was driven by an 18.3 percent decrease in its global paper segment sales as well as a 12.8 percent decrease in consumer packaging sales. The report also notes lower volumes in consumer packaging with several of WestRock’s large customers reducing production and orders in December.

However, WestRock’s corrugated packaging segment saw a 3.5 percent increase in sales in the first quarter of 2024 compared with the same period in 2023, and the company continues to move forward with its optimization strategy.

During the first quarter of 2024, WestRock closed three higher-cost mills and two paper machines at a fourth facility to “improve cost structure,” removing 1.9 million tons of what it says is higher-cost production capacity and reduced its North American average corrugated mill costs by $12 per ton.

WestRock did, however, reduce economic downtime in its containerboard system to 26,000 tons, citing improved demand and footprint optimization.

The company’s converting network also had two positive announcements during the first quarter, including the opening of a corrugated box plant in Longview, Washington, and an investment into a new corrugated converting facility in Pleasant Prairie, Wisconsin, that is expected to open in 2025.

Sewell says the company expects “significantly improved demand” in the second half of its fiscal year with improving economic conditions and seasonality supporting those expectations.

“We are continuing to deliver on, and we expect to significantly exceed, our cost savings targets,” he says. “Our transformation initiatives have strengthened our portfolio, are increasing vertical integration and created significant operational efficiencies. With our broad portfolio of packaging solutions and self-help initiatives, we are well positioned to capitalize on the opportunities ahead.”

WestRock’s full first-quarter financial report can be found here.