WestRock Reports Fiscal 2021 Fourth Quarter Results: Record Net Sales of $5.1 Billion Up 14%

WestRock Company (NYSE:WRK), a leading provider of differentiated, sustainable paper and packaging solutions, today announced results for its fiscal fourth quarter and year ended September 30, 2021.

Notable items in the fourth quarter include:

• Record net sales of $5.1 billion increased 14% compared to $4.5 billion in the prior year quarter
• Net income of $324 million compared to a net loss of $1,156 million in the prior year quarter, which included a $1,314 million goodwill impairment net of tax
• Adjusted Segment EBITDA of $878 million increased 22% compared to $721 million in the prior year quarter
• Earned $1.20 per diluted share and $1.23 of Adjusted Earnings Per Diluted Share compared to a loss of $4.45 and adjusted earnings of $0.73, respectively, in the prior year quarter

Full Year 2021 Highlights:

• Record net sales of $18.7 billion increased 7% compared to $17.6 billion in the prior year
• Net income of $838 million compared to a net loss of $691 million in the prior year
• Adjusted Segment EBITDA of $3.0 billion increased 7% compared to $2.8 billion in the prior year
• Earned $3.13 per diluted share and $3.39 of Adjusted Earnings Per Diluted Share compared to a loss of $2.67 and adjusted earnings of $2.75, respectively, in the prior year
• Generated net cash provided by operating activities of $2.28 billion and record Adjusted Free Cash Flow of $1.49 billion; ended the year with a net leverage ratio of 2.38x

“The WestRock team delivered strong results in fiscal 2021, with record net sales and strong cash flows for the full fiscal year,” said David B. Sewell, chief executive officer. “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% increase since February. Looking forward, we believe we remain well positioned to successfully partner with our customers to meet their growing needs for sustainable, fiber-based packaging solutions.”

Consolidated Financial Results

WestRock’s performance for the three months ended September 30, 2021 and 2020 (in millions):

Operating Highlights for the Three Months Ended September 30, 2021 compared to September 30, 2020:

Net sales increased $619 million compared to the prior year quarter. Corrugated Packaging segment net sales increased $500 million and Consumer Packaging segment net sales increased $156 million. Segment income increased $153 million compared to the prior year quarter, with Corrugated Packaging segment income increasing $93 million and Consumer Packaging segment income increasing $60 million.

Additional information about the changes in segment net sales and income is included below.

Restructuring and Other Items

Restructuring and other items during the fourth quarter of fiscal 2021 was $12 million, primarily related to plant closure activities, including items such as impairment costs and certain lease terminations.

Net Cash Provided By Operating Activities and Other Financing and Investing Activities

Net cash provided by operating activities was $678 million in the fourth quarter of fiscal 2021 compared to $732 million in the prior year quarter. Total debt was $8.2 billion at September 30, 2021, or $8.0 billion excluding $192 million of unamortized fair market value step-up of debt acquired in mergers and acquisitions, and $7.7 billion after further excluding cash and cash equivalents of $291 million. During the fourth quarter of fiscal 2021, total debt declined by $479 million and Adjusted Net Debt declined by $215 million. The Company had approximately $3.7 billion of available liquidity under long-term committed credit facilities and cash and cash equivalents at September 30, 2021. During the fourth quarter of fiscal 2021, WestRock invested $310 million in capital expenditures, returned $122 million to stockholders through stock repurchases and paid $64 million in dividends to stockholders.

Segment Results

WestRock’s segment performance for the three months ended September 30, 2021 and 2020 (in millions):

Corrugated Packaging Segment

Operating Highlights for the Three Months Ended September 30, 2021 compared to September 30, 2020:

Segment net sales increased $500 million, primarily due to higher selling price/mix, higher volumes and favorable impact of foreign currency. The Corrugated Packaging segment delivered a Segment EBITDA margin of 17.8% and a North American Adjusted Segment EBITDA margin of 19.0%.

Segment income increased $93 million, primarily due to the margin impact of higher selling price/mix and higher volumes that were partially offset by net cost inflation and other items.

Consumer Packaging Segment

Operating Highlights for the Three Months Ended September 30, 2021 compared to September 30, 2020:

Segment net sales increased $156 million, primarily due to higher selling price/mix, higher volumes and favorable impact of foreign currency. The Consumer Packaging segment delivered Segment EBITDA and Adjusted Segment EBITDA margins of 15.9%.

Segment income increased $60 million, primarily due to the margin impact from higher selling price/mix, productivity improvements, lower economic downtime compared to the prior year period and higher volumes that were partially offset by net cost inflation and other items.

Conference Call

WestRock will host a conference call to discuss its results of operations for the fiscal fourth quarter ended September 30, 2021 and other topics that may be raised during the discussion at 8:30 a.m., Eastern Time, on Tuesday, November 9, 2021. The conference call, which will be webcast live, an accompanying slide presentation, and this release can be accessed at ir.westrock.com.

Investors who wish to participate in the webcast via teleconference should dial 888-330-2022 (inside the U.S.) or +1 646-960-0690 (outside the U.S.) at least 15 minutes prior to the start of the call and enter the passcode 8741412. Replays of the call can be accessed at ir.westrock.com.

About WestRock

WestRock (NYSE:WRK) partners with our customers to provide differentiated, sustainable paper and packaging solutions that help them win in the marketplace. WestRock’s team members support customers around the world from locations spanning North America, South America, Europe, Asia and Australia. Learn more at www.westrock.com.

Cautionary Statements

This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on our current expectations, beliefs, plans or forecasts and are typically identified by words or phrases such as "may," "will," "could," "should," "would," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "prospects," "potential" and "forecast," and other words, terms and phrases of similar meaning. Forward-looking statements involve estimates, expectations, projections, goals, forecasts, assumptions, risks and uncertainties. The Company cautions readers that a forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. Such forward-looking statements include, but are not limited to, that we believe we remain well positioned to successfully partner with our customers to meet their growing needs for sustainable, fiber-based packaging solutions. With respect to these statements, the Company has made assumptions regarding, among other things, developments related to the COVID-19 pandemic, including the severity, magnitude and duration of the pandemic, negative global economic conditions arising from the pandemic, impacts of governments' responses to the pandemic on the Company’s operations, impacts of the pandemic on commercial activity, the Company’s customers and consumer preferences and demand, supply chain disruptions, and disruptions in the credit or financial markets; the results and impacts of acquisitions; economic, competitive and market conditions generally, including the impact of COVID-19; volumes and price levels of purchases by customers; competitive conditions in the Company’s businesses and possible adverse actions of our customers, competitors and suppliers; labor costs; the amount and timing of capital expenditures, including installation costs, project development and implementation costs, and costs related to resolving disputes with third parties with which we work to manage and implement our capital projects; severance and other shutdown costs; restructuring costs; utilization of real property that is subject to the restructurings due to realizable values from the sale of such property; credit availability; and raw material and energy costs. The Company’s businesses are subject to a number of risks that would affect any such forward-looking statements, including, among others, the level of demand for our products; our ability to respond effectively to the impact of COVID-19; our ability to successfully identify and make performance and productivity improvements; increases in energy, raw materials, shipping and capital equipment costs; reduced supply of raw materials; adverse legal, reputational and financial effects on the Company resulting from cyber incidents and the effectiveness of the Company’s business continuity plans during a ransomware incident; fluctuations in selling prices and volumes; intense competition; the potential loss of certain customers; the scope, costs, timing and impact of any restructuring of our operations and corporate and tax structure; the occurrence of severe weather or a natural disaster or other unanticipated problems, such as labor difficulties, equipment failure or unscheduled maintenance and repair, which could result in operational disruptions, including those related to COVID-19; our desire or ability to continue to repurchase company stock; the scope, timing and outcome of any litigation, claims or other proceedings or dispute resolutions and the impact of any such litigation; and adverse changes in general market and industry conditions. Such risks and other factors that may impact management's assumptions are more particularly described in our filings with the Securities and Exchange Commission, including in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The information contained herein speaks as of the date hereof and the Company does not have or undertake any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures and Reconciliations

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 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 WestRock’s performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, WestRock’s GAAP results. The non-GAAP financial measures we present may differ from similarly captioned measures presented by other companies. 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.

Adjusted Segment EBITDA and Adjustments to Segment EBITDA

WestRock uses the non-GAAP financial measure “Adjusted Segment EBITDA”, along with other factors, to evaluate our segment performance. Management believes adjusting “Segment EBITDA” for certain items provides WestRock’s board of directors, investors, potential investors, securities analysts and others with useful information to evaluate WestRock’s performance across periods or relative to our peers, and that adjusting “Segment EBITDA” to “Adjusted Segment EBITDA” more closely aligns those results to the adjustments in Adjusted Net Income that relate to “Segment EBITDA”. The consolidated financial results and segment tables include a reconciliation of “Adjusted Segment EBITDA” to “Segment EBITDA” by adding certain “Adjustments” to “Segment EBITDA”. These “Adjustments” are reflected in the “Adjusted Net Income” reconciliation tables below.

Adjusted Segment Sales and Adjusted Segment EBITDA Margins

With respect to Adjusted Segment Sales, management believes that adjusting Segment Sales for trade sales is consistent with how peers present their sales for purposes of computing margins and helps WestRock’s board of directors, investors, potential investors, securities analysts and others compare companies in the same peer group. WestRock uses the non-GAAP financial measure “Adjusted Segment EBITDA Margins”, along with other factors, to evaluate our segment performance against our peers. Management believes this measure is also useful to investors to evaluate WestRock’s performance relative to its peers. “Segment EBITDA Margin” is calculated for each segment by dividing that segment’s Segment EBITDA by Segment sales. “Adjusted Segment EBITDA Margin” is calculated for each segment by dividing that segment’s Adjusted Segment EBITDA by Adjusted Segment Sales.

Adjusted Net Income, Adjusted Earnings Per Diluted Share

WestRock uses the non-GAAP financial measures “Adjusted Net Income” and “Adjusted Earnings Per Diluted Share”. Management believes these measures provide WestRock’s board of directors, investors, potential investors, securities analysts and others with useful information to evaluate WestRock’s performance because they exclude restructuring and other costs and other specific items that management believes are not indicative of the ongoing operating results of the business. WestRock and its board of directors use this information to evaluate WestRock’s performance relative to other periods. WestRock believes that the most directly comparable GAAP measures to Adjusted Net Income and Adjusted Earnings Per Diluted Share are Net income (loss) attributable to common stockholders, represented in the table below as the as reported results for Consolidated net income (loss) (i.e. Net of Tax) less net income attributable to Noncontrolling interests, and Earnings (loss) per diluted share, respectively. This release includes a reconciliation of Earnings (loss) per diluted share to Adjusted Earnings Per Diluted Share and reconciliations of Adjusted net income to Net income (loss) attributable to common stockholders for the periods indicated (in millions).

Reconciliations of Net Income (Loss) to Adjusted Segment EBITDA

Reconciliations to Adjusted Net Income

Reconciliation to Adjusted Earnings Per Diluted Share

Set forth below is a reconciliation of Adjusted Earnings Per Diluted Share to Earnings (loss) per diluted share.

Set forth below are reconciliations of Adjusted Segment Sales, Adjusted Segment EBITDA and Adjusted Segment EBITDA Margins to the most directly comparable GAAP measures, Segment Sales and Segment Income, for the periods indicated (in millions, except percentages):