WestRock Q2 on par with prior year
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WestRock Q2 on par with prior year

The packaging producer says net sales were adversely affected by winter storms and a ransomware incident that took place in the quarter.

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WestRock Co., a paper and packaging solutions provider based in Atlanta, reports that its second-quarter net sales were on par with where they were one year ago, despite the ransomware incident and winter storms that occurred in the period.

WestRock says its net sales were $4.4 billion in the second quarter of its fiscal year, which ended March 31. The company says net sales were “flat” compared with the same quarter in 2020, despite $189 of lost sales this year arising from the impact of a ransomware incident and adverse winter weather. Lost sales and operational disruption from those events had a negative impact of $80 million before taxes, or 23 cents per share, on earnings per diluted share and adjusted earnings per diluted share.

During the quarter, WestRock lost about 167,000 tons of containerboard and paperboard due to both the ransomware incident and adverse winter weather. According to its latest earnings report, the impact on net sales and segment income from the lost sales and operational disruption during the quarter was $189 million and $80 million, respectively. The company incurred about $20 million of ransomware recovery costs, primarily professional fees, that were added to the company’s adjusted earnings per diluted share and adjusted segment earnings before interest, taxes, depreciation and amortization (EBITDA).

“We expect to recover the ransomware losses from cyber and business interruption insurance in future periods,” the company states in its second-quarter earnings report.

WestRock says second-quarter North American per-day box shipments were up 5.5 percent compared with the same time in 2020.

“We have made a remarkable recovery from the incidents in the second quarter, and I want to thank our teammates for their dedication to our company and our customers,” says David B. Sewell, chief executive officer of WestRock. “With these events behind us, we are confident in our business and our ability to generate strong cash flow, which is evident by our dividend increase announced today. I look forward to what’s ahead for our company.”

Segment results

During the second quarter of fiscal 2021, WestRock reports that its Corrugated Packaging segment net sales increased $31 million compared with the same time frame in 2020. The company reports that this was primarily because of higher selling price and mix on sales that was partially offset by unfavorable foreign currency impacts and lower volumes. The segment delivered a segment EBITDA margin of 14.9 percent and a North American adjusted segment EBITDA margin of 16.5 percent. The company reports that segment income decreased by $39 million compared with the same time frame in 2020, primarily due to net cost inflation and impacts of both the ransomware incident and winter storms.

The company’s Consumer Packaging segment net sales decreased $26 million, primarily due to lower volumes that were partially offset by favorable foreign currency impacts and higher selling price and mix on sales. The segment delivered a segment EBITDA margin of 13.3 percent and an adjusted segment EBITDA margin of 13.4 percent. The Consumer Packaging segment income decreased by $49 million compared with the same quarter in 2020, primarily due to net cost inflation and impact from the ransomware incident and winter storms, which were partially offset by the margin impact from higher selling price and mix and productivity improvements.