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WestRock achieves record net sales in 2021 fiscal year

Demand for containerboard stayed strong and grew throughout the year.

November 11, 2021

Atlanta-based WestRock achieved record net sales for its 2021 fiscal year, which ended Sept. 30. According to the company’s latest earnings report, the sustainable packaging producer achieved net sales of $18.7 billion in 2021, up 7 percent compared with $17.6 billion for its 2020 fiscal year. The company says it achieved net sales of $5.1 billion for its fourth quarter, up 14 percent compared with $4.5 billion in the fourth quarter of 2020.

The company achieved net income of $838 million in the 2021 fiscal year compared with a net loss of $691 million in 2020. For the fourth quarter, WestRock achieved a net income of $324 million compared with a net loss of $1,156 million in the prior-year quarter, which included a $1,314 million goodwill impairment net of tax. WestRock’s adjusted segment earnings before interest, taxes, depreciation and amortization (EBITDA) was $3 billion in its 2021 fiscal year compared with $2.8 billion in its 2020 fiscal year, and adjusted segment EBITDA was at $878 million in the fourth quarter, up 22 percent compared with $721 million in the prior-year quarter.

“The WestRock team delivered strong results in fiscal 2021, with record net sales and strong cash flows for the full fiscal year,” says David B. Sewell, chief executive officer of WestRock. “We executed on our capital allocation priorities, and I’m pleased to announce that we reached our target net leverage ratio in the quarter. In addition, we recently announced another increase to our dividend, which will result in a 25 percent increase since February.”

Since the fourth quarter of 2020, WestRock has published several price increases for its packaging materials due to inflation. According to the company’s earnings presentation Nov. 9, WestRock raised its North America containerboard prices by $160 per ton and coated recycled board (CRB) prices by $270 per ton this year. The company reported that some key inflation drivers include recycled fiber, virgin fiber, energy, freight and chemicals.

WestRock’s Corrugated Packaging segment net sales increased $500 million in the fourth quarter of the year compared with the prior-year quarter. The company attributes the segment’s net sales increase to higher selling price and mix, higher volumes and favorable impact of foreign currency. WestRock reports that the Corrugated Packaging segment delivered a segment EBITDA margin of 17.8 percent and a North American adjusted segment EBITDA margin of 19 percent. Additionally, the company says Corrugated Packaging segment income increased $93 million in the fourth quarter of the year compared with the fourth quarter of 2020 primarily due to the margin impact of higher selling price and mix as well as higher volumes that were partially offset by net cost inflation and other items.

The company reports that its Consumer Packaging segment net sales increased $156 million in the fourth quarter compared with that same time frame last year. That segment’s income also rose $60 million in the fourth quarter compared with the fourth quarter of 2020.

Demand for containerboard also was strong in the 2021 fiscal year, and WestRock worked to build its recycled fiber inventory levels this year in response to that demand.

“We knew we had a heavy outage in the first quarter [of 2021] with maintenance, and we had to delay some of that maintenance because of the ransomware attack and with COVID getting contractors into our mills,” Sewell said during the earnings call Nov. 9. “So, that kind of created the perfect storm for our first quarter. But if you look at the inventory builds that we wanted to do, we did build inventory coming into this [fourth] quarter. I would say it wasn’t as much as we would have liked because of the demand that we’re seeing. So, we’re probably a little behind in the inventory levels we’d like to be at, but we were able to build a little bit going into this first quarter.”

2022 outlook

During the earnings call, Sewell said the company wants to remain focused on developing sustainable, recyclable packaging solutions in the future.

He said, “Tim Hortons recently announced our partnership to test a recyclable and compostable hot beverage cup. We look forward to this work with a valued customer to move the recyclability of cups forward.”

He added that the company had received a Sustainability Award of the Year from the Paperboard Packaging Council for the packaging producer’s partnership with Coca-Cola Europacific Partners on the CanCollar.

Looking to the first quarter of its 2022 fiscal year, the company reported during its earnings call that it expects to take about 200,000 tons of maintenance downtime in the first quarter. The company expects the first quarter to be its peak maintenance outage period for the 2022 fiscal year.

“We have 10 major mill maintenance outages in the first fiscal quarter, one of the largest amounts in one quarter in WestRock’s history,” Sewell said. “These assumptions, combined with three fewer shipping days and the normal seasonality in our consumer business, results in forecasted adjusted segment EBITDA of $660 million to $700 million. In fiscal 2022, we expect solid demand across most of our end markets and continued flow-through of the previously published price increases.”

Additionally, the company expects to see inflation increase in the first quarter of the year, driven by higher fiber and energy costs.

Sewell added, “We have a resilient business model, which was reinforced with record adjusted free cash flows in fiscal 2021 in the face of many challenges. Our outlook for fiscal 2022 continues the remarkable trend of growth in sales and adjusted segment EBITDA as well as strong cash flow.”