Cardboard box-maker Smurfit Westrock still expects to post full-year earnings growth of as much as 11 per cent to $5.2 billion (€4.5 billion), as it continues to turn around its North American operations even as tariffs weigh on consumer demand box sales.
The group said it has delivered “significant improvement” in North America, which essentially relates to underperforming legacy operations of the former Westrock company in the US, which Smurfit Kappa merged with last July to create the world’s largest paper and packaging group.
Chief executive Tony Smurfit told analysts that the group has walked away from loss-making contracts in legacy Westrock plants, turning some of them into profitable facilities. He said that 40 per cent of previously loss-making plants are now profitable at earnings before interest, tax, depreciation and amortisation (Ebitda) level.
“There will be some factories that will be unsaveable, but the vast majority will be saveable,” he said.
RM Block
Ebitda amounted to $1.21 billion for the second quarter of this year, Smurfit Westrock said in a statement on Wednesday. That was marginally higher than its forecast for a figure of $1.2 billion.
“This performance is driven by the significant improvement in our North American business and continued excellent results from our Latin American operations, somewhat offset by a resilient performance from our EMEA and APAC businesses,” chief executive Tony Smurfit said.
EMEA stands for Europe, the Middle East and Africa, while APAC refers to the Asia-Pacific region.
Smurfit Westrock reiterated that it expects full-year Ebitda to amount to between $5 billion and $5.2 billion.
Mr Smurfit said that he expects cardboard box volumes to remain depressed in the second half of the year as the impact of US tariffs on trading partners drag on consumer confidence. His chief financial officer, Ken Bowles, said that the incoming 15 per cent tariff on European imports to the US will be unlikely to affect the flow of paper into that market, even if suppliers’ margins might be eroded.
The group’s Mexican operations face the largest risk from tariffs, even if this is indirect. The US imports a large amount of consumer goods and foods from there, and the fear the impact of tariffs on end products may cause packaging demand to decline.
Still, Mr Smurfit said that he is “increasingly excited about the performance and prospects of the business”.
“With our geographic reach, unrivalled product portfolio and most importantly our people, we see extensive opportunities across all our regions,” said Mr Smurfit.
“In North America, we believe the implementation of our operating model will drive continued significant improvement. In our EMEA and APAC region, we have a well invested asset base and strong market positions, primed to take advantage of an improved demand environment. Latin America remains a region of substantial growth opportunities, both organic and inorganic.”
Inorganic growth typically refers to acquisitions.
Last July, Smurfit Kappa merged with Atlanta-based cardboard box-making rival Westrock, and moved its listing to the US. The move effectively doubled the company size, with more than $30 billion of annual revenues.
The enlarged group expects to deliver synergies running at an annual rate of $400 million from the deal by the end of 2025, and that it would generate at least a similar scale of operational and commercial improvements.
