Smurfit Westrock plc (NYSE: SW, LSE: SWR) today announced the
financial results for the third quarter ended September 30,
2024.
Key points:
- Net Sales of approx. $7.7 billion
- Net Loss of $150 million, with a Net Income Margin of negative
2.0%
- Adjusted EBITDA1 of $1,265 million, with an Adjusted EBITDA
Margin1 of 16.5%
- Continuing focus on asset optimization
- Previously announced quarterly dividend of $0.3025 per ordinary
share
Smurfit Westrock plc’s performance for the three months ended
September 30, 2024 and September 30, 2023 (in millions, except
margin percentages):
September 30, 20241
September 30, 20232
Net Sales
$
7,671
$
2,915
Net (Loss) Income
$
(150)
$
229
Net Income Margin
(2.0%)
7.8%
Adjusted EBITDA1
$
1,265
$
525
Adjusted EBITDA Margin1
16.5%
18.0%
Net Cash provided by Operating
Activities
$
320
$
378
Adjusted Free Cash Flow1
$
118
$
214
Tony Smurfit, President and CEO, commented:
“I am pleased to report an excellent performance for the third
quarter, the first for Smurfit Westrock. The Net Loss for the
quarter of $150 million was primarily due to transaction related
expenses and purchase accounting adjustments totalling
approximately $500 million. With Adjusted EBITDA1 of $1,265 million
and an Adjusted EBITDA Margin1 of 16.5%, these results are a strong
foundation to build upon.
“Our established track record of delivering value to our
customers through service, quality and innovation is already
beginning to yield results. Equally, we believe our focus on plant
level autonomy, operational improvement and profitability will
deliver in time, benefits at least equal to the stated synergy
target of $400 million.
“Our third quarter performance, combined with our deeper
knowledge of the Combination and continuing asset optimization,
clearly points to the opportunities ahead for Smurfit Westrock. We
are at the start of our journey to build the ‘go-to’ sustainable
packaging partner of choice, a global leader with an unrivalled
scale, geographic reach and product portfolio. Having spent the
last number of months visiting our plants, it is also clear that
our people are excited and motivated to be a part of this
journey.
“We expect 2024 Full Year Combined Adjusted EBITDA4 of
approximately $4.7 billion and we are increasingly excited by our
immediate and longer-term prospects.”
__________________
1 Adjusted EBITDA, Adjusted EBITDA Margin
and Adjusted Free Cash Flow are non-GAAP measures. See the
“Non-GAAP Financial Measures and Reconciliations” below for the
discussion and reconciliation of these measures to the most
comparable GAAP measures.
2 All results reported for the three
months ended September 30, 2024 do not include the financial
results of legacy WestRock Company (“WestRock”) for the first five
days of July due to the closing of the combination between Smurfit
Kappa Group plc and WestRock Company on July 5, 2024.
3 All results reported for the three
months ended September 30, 2023 reflect the historical financial
results of legacy Smurfit Kappa Group plc, which is considered the
accounting acquirer in the combination between Smurfit Kappa Group
plc and WestRock, which closed on July 5, 2024 (the
“Combination”).
4 2024 Full Year Combined Adjusted EBITDA
is a non-GAAP financial measure. We have not reconciled Adjusted
EBITDA outlook to the most comparable GAAP outlook because it is
not possible to do so without unreasonable efforts due to the
uncertainty and potential variability of reconciling items, which
are dependent on future events and often outside of management’s
control and which could be significant. Because such items cannot
be reasonably predicted with the level of precision required, we
are unable to provide an outlook for the comparable GAAP measure
(net income).
Third Quarter 2024 | Financial Performance
Smurfit Westrock’s net sales increased by $4,756 million, to
$7,671 million in the third quarter of 2024 from $2,915 million in
the third quarter of 2023. This increase was primarily due to the
positive impact from acquisitions of $4,693 million, of which
$4,684 million related to the acquisition of WestRock, and a net
positive volume impact of $98 million (excluding the impact of
acquisitions), primarily driven by an increase in corrugated
volumes. The above increases were partially offset by the net
negative impact of a lower selling price/mix of $30 million and a
net negative currency impact of $5 million.
Net income decreased by $379 million, to a net loss of $150
million, with a net income margin of negative 2.0% in the third
quarter of 2024, from net income of $229 million, with a net income
margin of 7.8% in the third quarter of 2023. This decrease was
primarily due to a $4,148 million increase in cost of goods sold
(including an expense of $227 million for the amortization of the
fair value step up on inventory recognized on WestRock’s inventory
acquired) and a $657 million increase in selling, general and
administrative (“SG&A”) expenses, both driven by additional
costs related to the acquisition of WestRock. Additionally,
transaction and integration-related expenses associated with the
Combination increased by $250 million. These increased costs were
partially offset by the increase in net sales.
Adjusted EBITDA1 for the Company was $1,265 million, with an
Adjusted EBITDA Margin1 of 16.5% in the third quarter of 2024,
compared to Adjusted EBITDA1 of $525 million, with an Adjusted
EBITDA Margin1 of 18.0% in the third quarter of 2023.
The Company’s interest expense, net increased by $128 million,
to $167 million in the third quarter of 2024, from $39 million in
the third quarter of 2023 primarily due to increased debt in
connection with the Combination partially offset by higher interest
income on cash balances.
Other expense, net increased to $13 million from $4 million in
the third quarter of last year primarily due to a $12 million
expense recorded in the third quarter in connection with the sale
of receivables under an accounts receivable monetization program
acquired as a result of the Combination and partially offset by
other movements.
Income tax expense decreased by $40 million to $33 million in
the third quarter of 2024, from $73 million in the third quarter of
2023, primarily due to the loss in 2024 compared to a profit in
2023, the change in the geographical mix of earnings and the
significant impact of transaction and integration-related expenses
associated with the Combination which are only partly deductible
for tax.
Net cash provided by operating activities decreased by $58
million, to $320 million in the third quarter of 2024, from $378
million in the third quarter of 2023. The decrease was primarily
due to an increase in tax payments of $29 million, an increase in
net cash interest paid of $162 million and a negative working
capital change of $272 million, partly offset by an increase in
consolidated net income adjusted for non-cash items.
Including capital expenditure of $512 million in the third
quarter of 2024, and $202 million in the same period last year,
free cash flow was an outflow of $192 million in the third quarter
of 2024 and an inflow of $176 million in the third quarter of 2023.
Excluding transaction, integration and restructuring costs of $310
million (net of tax) in the third quarter of 2024, Adjusted Free
Cash flow for the period was an inflow of $118 million. Adjusted
Free Cash Flow1 in the third quarter of 2023 was an inflow of $214
million.
Adjusted EBITDA5 for our Europe, MEA and APAC segment remained
at $411 million in the third quarter of 2024, consistent with the
same period in 2023. This was primarily due to a $37 million
positive impact from the acquisition of WestRock offset by a
reduction in Adjusted EBITDA (excluding the impact of acquisitions)
primarily due to an increase in raw material, payroll and
distribution costs, partially offset by an increase in net sales
and a decrease in energy costs. The Adjusted EBITDA Margin in the
Europe, MEA and APAC segment was 15.5% in the third quarter of
2024, compared to 18.8% in the third quarter of 2023.
Adjusted EBITDA5 for our North America segment increased by $714
million, to $780 million in the third quarter of 2024, from $66
million for the third quarter of 2023. This increase was primarily
due to a $724 million positive impact from the acquisition of
WestRock partially offset by a $10 million decrease in Adjusted
EBITDA (excluding the impact of acquisitions) primarily due to an
increase in raw material costs. The Adjusted EBITDA Margin in the
North America segment was 16.8% in the third quarter of 2024,
compared to 16.4% in the third quarter of 2023.
Adjusted EBITDA5 for our LATAM segment increased by $42 million,
to $116 million in the third quarter of 2024, from $74 million for
the third quarter of 2023. This increase was primarily due to a
positive impact of $56 million from the acquisition of WestRock
partially offset by a reduction in Adjusted EBITDA (excluding the
impact of acquisitions) primarily due to an increase in payroll and
other costs. The Adjusted EBITDA Margin in the LATAM segment was
23.1% in the third quarter of 2024, compared to 22.0% in the third
quarter of 2023.
__________________
5 For the three months ended September 30,
2024, Adjusted EBITDA and Adjusted EBITDA Margin for the segments
are our measures of segment profitability because they are used by
our chief decision-maker (“CODM”) to make decisions regarding
allocation of resources and to assess segment performance in
accordance with Accounting Standards Codification 280. These
financial measures comply with GAAP when used in that context. For
the three months ended September 30, 2023, segment information
reflects performance of legacy Smurfit Kappa Group plc.
Earnings Call
Management will host an earnings conference call today at 7:30
AM ET / 11:30 AM GMT to discuss Smurfit Westrock’s financial
results. The conference call will be accessible through a live
webcast. Interested investors and other individuals can access the
webcast, earnings release, and earnings presentation via the
Company’s website at www.smurfitwestrock.com. The webcast will be
available at https://investors.smurfitwestrock.com/overview and a
replay of the webcast will be available on the website shortly
after the call.
Forward Looking Statements
This press release includes certain “forward-looking statements”
(including within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended) regarding, among other things, the plans,
strategies, outcomes, outlooks, and prospects, both business and
financial, of Smurfit Westrock, the expected benefits of the
completed combination of Smurfit Kappa Group plc and WestRock
Company (the “Combination”), including, but not limited to,
synergies, and any other statements regarding the Company's future
expectations, beliefs, plans, objectives, results of operations,
financial condition and cash flows, or future events, outlook or
performance. Statements that are not historical facts, including
statements about the beliefs and expectations of the management of
the Company, are forward-looking statements. Words such as “may”,
“will”, “could”, “should”, “would”, “anticipate”, “intend”,
“estimate”, “project”, “plan”, “believe”, “expect”, “target”,
“prospects”, “potential”, “commit”, “forecasts”, “aims”,
“considered”, “likely”, “estimate” and variations of these words
and similar future or conditional expressions are intended to
identify forward-looking statements but are not the exclusive means
of identifying such statements. While the Company believes these
expectations, assumptions, estimates and projections are
reasonable, such forward-looking statements are only predictions
and involve known and unknown risks and uncertainties, many of
which are beyond the control of the Company. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to events and depend upon future circumstances that may
or may not occur. Actual results may differ materially from the
current expectations of the Company depending upon a number of
factors affecting its business, including risks associated with the
integration and performance of the Company following the
Combination. Important factors that could cause actual results to
differ materially from such plans, estimates or expectations
include: economic, competitive and market conditions generally,
including macroeconomic uncertainty, customer inventory
rebalancing, the impact of inflation and increases in energy, raw
materials, shipping, labor and capital equipment costs; the impact
of public health crises, such as pandemics (including the COVID-19
pandemic) and epidemics and any related company or governmental
policies and actions to protect the health and safety of
individuals or governmental policies or actions to maintain the
functioning of national or global economies and markets; reduced
supply of raw materials, energy and transportation, including from
supply chain disruptions and labor shortages; developments related
to pricing cycles and volumes; intense competition; the ability of
the Company to successfully recover from a disaster or other
business continuity problem due to a hurricane, flood, earthquake,
terrorist attack, war, pandemic, security breach, cyber-attack,
power loss, telecommunications failure or other natural or man-made
events, including the ability to function remotely during long-term
disruptions such as the COVID-19 pandemic; the Company's ability to
respond to changing customer preferences and to protect
intellectual property; the amount and timing of the Company's
capital expenditures; risks related to international sales and
operations; failures in the Company's quality control measures and
systems resulting in faulty or contaminated products; cybersecurity
risks, including threats to the confidentiality, integrity and
availability of data in the Company's systems; works stoppages and
other labor disputes; the Company’s ability to establish and
maintain effective internal controls over financial reporting in
accordance with SOX, and remediate any weaknesses in controls and
processes; the Company's ability to retain or hire key personnel;
risks related to sustainability matters, including climate change
and scarce resources, as well as the Company's ability to comply
with changing environmental laws and regulations; the Company's
ability to successfully implement strategic transformation
initiatives; results and impacts of acquisitions by the Company;
the Company's significant levels of indebtedness; the impact of the
Combination on the Company's credit ratings; the potential
impairment of assets and goodwill; the availability of sufficient
cash to distribute dividends to the Company's shareholders in line
with current expectations; the scope, costs, timing and impact of
any restructuring of operations and corporate and tax structure;
evolving legal, regulatory and tax regimes; changes in economic,
financial, political and regulatory conditions in Ireland, the
United Kingdom, the United States and elsewhere, and other factors
that contribute to uncertainty and volatility, natural and man-made
disasters, civil unrest, pandemics (such as the COVID-19 pandemic),
geopolitical uncertainty, and conditions that may result from
legislative, regulatory, trade and policy changes associated with
the current or subsequent Irish, US or UK administrations; legal
proceedings instituted against the Company; actions by third
parties, including government agencies; the Company's ability to
promptly and effectively integrate Smurfit Kappa's and WestRock's
businesses; the Company's ability to achieve the synergies and
value creation contemplated by the Combination; the Company's
ability to meet expectations regarding the accounting and tax
treatments of the Combination, including the risk that the Internal
Revenue Service may assert that the Company should be treated as a
US corporation or be subject to certain unfavorable US federal
income tax rules under Section 7874 of the Internal Revenue Code of
1986, as amended, as a result of the Combination; other factors
such as future market conditions, currency fluctuations, the
behavior of other market participants, the actions of regulators
and other factors such as changes in the political, social and
regulatory framework in which the Company's group operates or in
economic or technological trends or conditions, and other risk
factors included in the Company's filings with the Securities and
Exchange Commission. Neither the Company nor any of its associates
or directors, officers or advisers provides any representation,
assurance or guarantee that the occurrence of the events expressed
or implied in any such forward-looking statements will actually
occur. You are cautioned not to place undue reliance on these
forward-looking statements. Other than in accordance with its legal
or regulatory obligations (including under the UK Listing Rules,
the Disclosure Guidance and Transparency Rules, the UK Market Abuse
Regulation and other applicable regulations), the Company is under
no obligation, and the Company expressly disclaims any intention or
obligation, to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise.
About Smurfit Westrock
Smurfit Westrock is a leading provider of paper-based packaging
solutions in the world, with approximately 100,000 employees across
40 countries.
Condensed Consolidated Statements of Operations
in $ millions, except share and
per share data
Three months ended
Nine months ended
September 30,
2024
September 30,
2023
September 30,
2024
September 30,
2023
Net sales
$
7,671
$
2,915
$
13,570
$
9,231
Cost of goods sold
(6,321)
(2,173)
(10,817)
(6,878)
Gross profit
1,350
742
2,753
2,353
Selling, general and administrative
expenses
(1,028)
(371)
(1,797)
(1,144)
Transaction and integration-related
expenses associated with the Combination
(267)
(17)
(350)
(17)
Operating profit
55
354
606
1,192
Pension and other postretirement
non-service benefit (expense), net
8
(9)
(31)
(29)
Interest expense, net
(167)
(39)
(225)
(109)
Other expense, net
(13)
(4)
(13)
(19)
(Loss) income before income
taxes
(117)
302
337
1,035
Income tax expense
(33)
(73)
(164)
(258)
Net (loss) income
(150)
229
173
777
Less: Net (loss) income attributable to
noncontrolling interests
-
-
-
-
Net (loss) income attributable to
common stockholders
$
(150)
$
229
$
173
$
777
Basic (loss) earnings per share
attributable to common stockholders
$
(0.30)
$
0.89
$
0.51
$
3.01
Diluted (loss) earnings per share
attributable to common stockholders
$
(0.30)
$
0.88
$
0.50
$
3.00
Segment Information
Following the completion of the Combination we reassessed our
operating segments due to changes in our organizational structure
and how our chief operating decision maker (“CODM”) makes key
operating decisions, allocates resources and assesses the
performance of our business. The CODM is determined to be the
executive management team, comprising the President and Chief
Executive Officer Anthony Smurfit and the Executive Vice President
and Group Chief Financial Officer Ken Bowles. The CODM is
responsible for assessing performance, allocating resources and
making strategic decisions.
During the three months ended September 30, 2024, we identified
three operating segments, which are also our reportable
segments:
- Europe, the Middle East and Africa (MEA), and Asia-Pacific
(APAC).
- North America, which includes operations in the U.S., Canada
and Mexico.
- Latin America (“LATAM”), which includes operations in Central
America and Caribbean, Argentina, Brazil, Chile, Colombia, Ecuador
and Peru.
These changes reflect how we manage our business following the
completion of the Combination. No operating segments have been
aggregated for disclosure purposes. Prior period comparatives have
been restated to reflect the change in segments.
In the identification of the operating and reportable segments,
we considered the level of integration of our different businesses
as well as our objective to develop long-term customer
relationships by providing customers with differentiated packaging
solutions that enhance the customer’s prospects of success in their
end markets.
The Europe, MEA and APAC, North America, and LATAM segments are
each highly integrated within the segment and there are many
interdependencies within these operations. They each include a
system of mills and plants that primarily produce a full line of
containerboard that is converted into corrugated containers within
each segment, or is sold to third parties.
In addition, the Europe, MEA and APAC segment also produces
types of paper, such as solid board, sack kraft paper, machine
glazed and graphic paper; and other paper-based packaging, such as
honeycomb, solid board packaging, folding cartons, inserts and
labels; and bag-in-box packaging (located in Europe, Argentina,
Canada, Mexico and the U.S.).
The North America segment also produces paperboard and specialty
grades; other paper-based packaging, such as folding cartons,
inserts, labels; and displays and also engages in the assembly of
displays as well as the distribution of packaging products.
The LATAM segment also comprises forestry; types of paper, such
as boxboard and sack paper; and paper‑based packaging, such as
folding cartons, honeycomb and paper sacks.
Inter-segment transfers or transactions are entered into under
normal commercial terms and conditions that would also be available
to unrelated third parties.
Segment profit is measured based on Adjusted EBITDA, defined as
(loss) income before income taxes, unallocated corporate costs,
depreciation, depletion and amortization, amortization of fair
value step up on inventory, transaction and integration-related
expenses associated with the Combination, interest expense, net,
pension and other postretirement non-service benefit (expense),
net, share-based compensation expense, other expense, net.
restructuring costs, legislative or regulatory fines and
reimbursements, losses at closed facilities and impairment of
goodwill and other assets.
Segment Information (continued)
Financial information by segment is summarized below and in the
schedules with this release.
in $ millions, except Adjusted
EBITDA Margin and share and per share data
Three months ended
Nine months ended
September 30,
2024
September 30,
2023
September 30,
2024
September 30,
2023
Net sales (aggregate)
Europe, MEA and APAC
$
2,651
$
2,191
$
7,056
$
7,047
North America
4,649
401
5,499
1,239
LATAM
506
341
1,187
1,000
Total
$
7,806
$
2,933
$
13,742
$
9,286
Less net sales (intersegment)
Europe, MEA and APAC
$
5
$
3
$
13
$
9
North America
118
-
119
-
LATAM
12
15
40
46
Total
$
135
$
18
$
172
$
55
Net sales (unaffiliated
customers)
Europe, MEA and APAC
$
2,646
$
2,188
$
7,043
$
7,038
North America
4,531
401
5,380
1,239
LATAM
494
326
1,147
954
Total
$
7,671
$
2,915
$
13,570
$
9,231
Adjusted EBITDA
Europe, MEA and APAC
$
411
$
411
$
1,158
$
1,330
North America
780
66
900
209
LATAM
116
74
257
217
Total
$
1,307
$
551
$
2,315
$
1,756
Adjusted EBITDA Margin
Adjusted EBITDA/Net sales
(aggregate)
Europe, MEA and APAC
15.5%
18.8%
16.4%
18.9%
North America
16.8%
16.4%
16.4%
16.9%
LATAM
23.1%
22.0%
21.6%
21.7%
Condensed Consolidated Balance Sheets
in $ millions, except share and
per share data
As of
September 30,
2024
December 31,
2023
Assets
Current assets:
Cash and cash equivalents, including
restricted cash (amounts related to consolidated variable interest
entities of $3 million and $3 million at September 30, 2024 and
December 31, 2023, respectively)
$
951
$
1,000
Accounts receivable (amounts related to
consolidated variable interest entities of $823 million and $816
million at September 30, 2024 and December 31, 2023,
respectively)
4,613
1,806
Inventories
3,585
1,203
Other current assets
1,396
561
Total current assets
10,545
4,570
Property plant and equipment, net
23,206
5,791
Goodwill
7,215
2,842
Intangibles, net
1,094
218
Prepaid pension asset
615
29
Other non-current assets (amounts related
to consolidated variable interest entities of $390 million and $-
million at September 30, 2024 and December 31, 2023,
respectively)
2,354
601
Total assets
$
45,029
$
14,051
Liabilities and Equity
Current liabilities:
Accounts payable
$
3,357
$
1,728
Accrued expenses
813
278
Accrued compensation and benefits
954
438
Current portion of debt
745
78
Other current liabilities
1,257
484
Total current liabilities
7,126
3,006
Non-current debt due after one year
(amounts related to consolidated variable interest entities of $337
million and $20 million at September 30, 2024 and December 31,
2023, respectively)
13,174
3,669
Deferred tax liabilities
3,682
280
Pension liabilities and other
postretirement benefits, net of current portion
788
537
Other non-current liabilities (amounts
related to consolidated variable interest entities of $334 million
and $- at September 30, 2024 and December 31, 2023,
respectively)
2,267
385
Total liabilities
27,037
7,877
Equity:
Preferred stock; $0.001 par value;
500,000,000 and Nil shares authorized; 10,000 shares and Nil
outstanding at September 30, 2024 and December 31, 2023,
respectively
-
-
Common stock; $0.001 par value;
9,500,000,000 and 9,910,931,085 shares authorized; 520,056,084 and
260,354,342 shares outstanding at September 30, 2024 and December
31, 2023, respectively
1
-
Deferred shares, €1 par value; 25,000
shares and 25,000 shares authorized; 25,000 and 100 shares
outstanding at September 30, 2024 and December 31, 2023,
respectively
-
-
Treasury stock, at cost (2,037,589, and
1,907,129 common stock at September 30, 2024, and December 31,
2023, respectively)
(93)
(91)
Capital in excess of par value
15,890
3,575
Accumulated other comprehensive loss
(1,011)
(847)
Retained earnings
3,178
3,521
Total stockholders’ equity
17,965
6,158
Noncontrolling interests
27
16
Total equity
17,992
6,174
Total liabilities and equity
$
45,029
$
14,051
Condensed Consolidated Statements of Cash
Flows
in $ millions, except share and
per share data
Three months ended
Nine months ended
September 30,
2024
September 30, 2023
September 30,
2024
September 30,
2023
Operating activities:
Consolidated net (loss) income
$
(150)
$
229
$
173
$
777
Adjustments to reconcile consolidated
net income to net cash provided by operating activities:
Depreciation, depletion and
amortization
564
147
872
430
Cash surrender value increase in excess of
premiums paid
(14)
-
(14)
-
Share-based compensation expense
123
7
154
43
Deferred income tax benefit
(89)
8
(99)
(4)
Pension and other postretirement funding
more than cost
(26)
(10)
(30)
(35)
Other
17
(8)
16
(4)
Change in operating assets and
liabilities, net of acquisitions and divestitures:
Accounts receivable
(186)
93
(422)
63
Inventories
140
29
120
161
Other assets
74
34
(31)
21
Accounts payable
(214)
(110)
(226)
(438)
Income taxes
(29)
(55)
34
(46)
Accrued liabilities and other
110
14
155
(20)
Net cash provided by operating
activities
320
378
702
948
Investing activities:
Capital expenditures
(512)
(202)
(897)
(661)
Cash paid for purchase of businesses, net
of cash acquired
(688)
(29)
(716)
(29)
Proceeds from corporate owned life
insurance
2
-
2
-
Proceeds from sale of property, plant and
equipment
12
10
15
11
Other
1
4
1
2
Net cash used for investing
activities
(1,185)
(217)
(1,595)
(677)
Financing activities:
Additions to debt
315
8
3,127
77
Repayments of debt
(1,607)
(76)
(1,640)
(120)
Revolving credit facilities repayments,
net
-
-
(4)
(4)
Changes in commercial paper, net
(33)
-
(33)
-
Other debt additions, net
17
-
17
-
Repayments of lease liabilities
(11)
-
(12)
(2)
Debt issuance costs
(15)
-
(44)
-
Tax paid in connection with shares
withheld from employees
(21)
-
(21)
-
Purchases of treasury stock
-
-
(27)
(30)
Cash dividends paid to stockholders
(158)
-
(493)
(299)
Other
-
-
(1)
-
Net cash provided by (used for)
financing activities
$
(1,513)
$
(68)
$
869
$
(378)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
4
(32)
(25)
(5)
(Decrease) increase in cash, cash
equivalents and restricted cash
$
(2,374)
$
61
$
(49)
$
(112)
Cash, cash equivalents and restricted
cash at beginning of period
3,325
668
1,000
841
Cash, cash equivalents and restricted
cash at end of period
$
951
$
729
$
951
$
729
Non-GAAP Financial Measures and Reconciliations
Smurfit Westrock plc (“Smurfit Westrock”) reports its financial
results in accordance with accounting principles generally accepted
in the United States ("GAAP"). However, management believes certain
non-GAAP financial measures provide Smurfit Westrock’s board of
directors, investors, potential investors, securities analysts and
others with additional meaningful financial information that should
be considered when assessing our ongoing performance. Management
also uses these non-GAAP financial measures in making financial,
operating and planning decisions, and in evaluating company
performance. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the GAAP results. The
non‑GAAP financial measures we present may differ from similarly
captioned measures presented by other companies. Smurfit Westrock
uses the non-GAAP financial measures “Adjusted EBITDA,” “Adjusted
EBITDA Margin,” and “Adjusted Free Cash Flow.” We discuss below
details of the non-GAAP financial measures presented by us and
provide reconciliations of these non‑GAAP financial measures to the
most directly comparable financial measures calculated in
accordance with GAAP.
Definitions
Smurfit Westrock uses the non-GAAP financial measures “Adjusted
EBITDA” and “Adjusted EBITDA Margin” to evaluate its overall
performance. The composition of Adjusted EBITDA is not addressed or
prescribed by GAAP. Smurfit Westrock defines Adjusted EBITDA as
(loss) income before income taxes, depreciation, depletion and
amortization, amortization of fair value step up on inventory,
transaction and integration-related expenses associated with the
Combination, interest expense, net, pension and other
postretirement non-service (benefit) expense, net, share-based
compensation expense, other expense, net, restructuring costs,
legislative or regulatory fines and reimbursements, losses at
closed facilities and impairment of goodwill and other assets.
Smurfit Westrock views Adjusted EBITDA as an appropriate and useful
measure used to compare financial performance between periods.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by
Net Sales.
Management believes Adjusted EBITDA and Adjusted EBITDA Margin
measures provide Smurfit Westrock’s management, board of directors,
investors, potential investors, securities analysts and others with
useful information to evaluate Smurfit Westrock’s performance
because, in addition to income tax expense, depreciation, depletion
and amortization expense, interest expense, net, pension and other
postretirement non‑service (benefit) expense, net, and share-based
compensation expense, Adjusted EBITDA also excludes restructuring
costs, impairment of goodwill and other assets and other specific
items that management believes are not indicative of the operating
results of the business. Smurfit Westrock and its board of
directors use this information in making financial, operating and
planning decisions and when evaluating Smurfit Westrock’s
performance relative to other periods.
Smurfit Westrock uses the non-GAAP financial measure “Adjusted
Free Cash Flow”. Smurfit Westrock defines Adjusted Free Cash Flow
as net cash provided by operating activities as adjusted for
capital expenditures and to exclude certain costs not reflective of
underlying operations. Management utilizes this measure in
connection with managing Smurfit Westrock’s business and believes
that Adjusted Free Cash Flow is useful to investors as a liquidity
measure because it measures the amount of cash generated that is
available, after reinvesting in the business, to maintain a strong
balance sheet, pay dividends, repurchase stock, service debt and
make investments for future growth. It should not be inferred that
the entire free cash flow amount is available for discretionary
expenditures. By adjusting for certain items that are not
indicative of Smurfit Westrock’s underlying operational
performance, Smurfit Westrock believes that Adjusted Free Cash Flow
also enables investors to perform meaningful comparisons between
past and present periods.
Reconciliations to Most Comparable GAAP Measure
Set forth below is a reconciliation of the non-GAAP financial
measures Adjusted EBITDA and Adjusted EBITDA Margin to Net income
and Net Income Margin, the most directly comparable GAAP measures,
for the periods indicated.
in $ millions, except margin
percentages
Three months ended
Nine months ended
September 30,
2024
September 30, 2023
September 30,
2024
September 30,
2023
Net (loss) income
$
(150)
$
229
$
173
$
777
Income tax expense
33
73
164
258
Depreciation, depletion and
amortization
564
147
872
430
Amortization of fair value step up on
inventory
227
-
227
-
Transaction and integration-related
expenses associated with the Combination
267
17
350
17
Interest expense, net
167
39
225
109
Pension and other postretirement
non-service (benefit) expense, net
(8)
9
31
29
Share-based compensation expense
123
7
154
43
Other expense, net
13
4
13
19
Other adjustments (1)
29
-
11
-
Adjusted EBITDA
$
1,265
$
525
$
2,220
$
1,682
Net Income Margin
(Net Income/Net Sales)
(2.0%)
7.8%
1.3%
8.4%
Adjusted EBITDA Margin
(Adjusted EBITDA/Net Sales)
16.5%
18.0%
16.4%
18.2%
(1) Other adjustments for the three months
ended September 30, 2024 include restructuring costs of $19
million, losses at closed facilities of $8 million and impairment
of other assets of $2 million (three months ended September 30,
2023: $- million, $- million & $- million, respectively).
Other adjustments for the nine months
ended September 30, 2024 include restructuring costs of $19
million, losses at closed facilities of $8 million and impairment
of other assets of $2 million partially offset by legislative or
regulatory fine reimbursement of $18 million (nine months ended
September 30, 2023: $- million, $- million, $‑ million & $-
million, respectively).
Reconciliations to Most Comparable GAAP Measure
(continued)
Set forth below is a reconciliation of the non-GAAP financial
measure Adjusted Free Cash Flow to Net cash provided by operating
activities, the most directly comparable GAAP measure, for the
periods indicated.
in $ millions
Three months ended
Nine months ended
September 30,
2024
September 30,
2023
September 30,
2024
September 30,
2023
Net cash provided by operating
activities
$
320
$
378
$
702
$
948
Adjustments:
Capital expenditures
(512)
(202)
(897)
(661)
Free Cash Flow
$
(192)
$
176
$
(195)
$
287
Adjustments:
Transaction and integration costs
307
17
364
17
Bridge facility fees
-
8
-
8
Restructuring costs
45
13
45
13
Tax on above items
(42)
-
(42)
-
Adjusted Free Cash Flow
$
118
$
214
$
172
$
325
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241030343869/en/
Ciarán Potts Smurfit Westrock T: +353 1 202 71 27 E:
ir@smurfitwestrock.com FTI Consulting T: +353 1 765 0800 E:
smurfitwestrock@fticonsulting.com
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