WestRock: Transformation initiatives progressing well

Atlanta-based paper and packaging producer WestRock Co. reports a “solid” second quarter and says its transformation initiatives are on track—particularly good news for the company which pulled its full-year 2023 guidance in February after a difficult first quarter.

WestRock has implemented a portfolio optimization strategy that most recently involved the closure of its containerboard, uncoated kraft and unbleached saturating paper mill in North Charleston, South Carolina, and the company says it has reduced its North American containerboard mill cost by $8 per ton with portfolio actions to date.

Strategic priorities include driving down production costs and improving return on invested capital, focusing on growth in key markets, increasing vertical integration through profitable packaging growth and a smaller mill footprint and exiting noncore assets and end markets that don’t meet WestRock’s strategic criteria.

The closure of the North Charleston mill will mark WestRock’s exit of the saturating kraft market. Its closure of its containerboard mill in Panama City, Florida, will mark its exit from the fluff pulp market.

As part of its transformation initiative, WestRock also will permanently close its corrugated medium manufacturing operations at its recycled paper mill in St. Paul, Minnesota while still producing coated recycled board at the facility. The shutdown is expected to take effect in November.

The company says its purchase of the remaining stake in Grupo Gondi, the closure of four converting facilities and the process of selling uncoated recycled paperboard assets are some of the notable actions taken to support its transformation.

“We are accelerating our efforts to streamline our operations and drive growth in the most attractive markets,” WestRock CEO David B. Sewell says. “Looking ahead, we remain committed to operating world-class assets and investing our capital to drive the greatest returns.”

WestRock’s second-quarter net sales decreased 9 percent, coming in around $5.27 billion compared with $5.38 billion in the same period in 2022. The company says results were negatively impacted by $58 million in economic downtime, equivalent to 265,000 tons.

The company says price continues to outpace inflation and that backlogs remain steady. It projects a 30 percent decline in natural gas costs in the third quarter but anticipates higher costs for recycled fiber and approximately 121,000 tons of maintenance downtime.

“Our broad portfolio, product innovations and self-help initiatives are enabling us to successfully navigate the current market challenges,” Sewell says.

WestRock’s full second-quarter presentation can be viewed here.