Westrock Company

are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press the star 1 on your telephone. Please be advised that today's conference is being recorded. In addition, if you require any further assistance, please press the star 0. Thank you. I would now like to hand the conference over to your speaker today, Mr. James Armstrong, Vice President of Investor Relations. Sir, please go ahead.

Good morning, and thank you for joining our third fiscal quarter 2021 earnings call. We issued our press release this morning and posted the accompanying slide presentation to the investor relations section of our website. They can be accessed at ir.westrock.com or via a link on the application you're using to view this webcast. With me on today's call are Westrock's Chief Executive Officer, David Sewell, our Chief Financial Officer, Ward Dixon, as well as Pat Lindner, President, Commercial Innovation and Sustainability. Following our prepared comments, we will open the call up for a question and answer session. During the course of today's call, we will be making forward-looking statements involving our plans, expectations, estimates, and beliefs related to future events. These statements may involve a number of risks and uncertainties that could cause actual results to differ materially from those we discussed during the call. We describe these risks and uncertainties in our filings with the SEC, including our 10-K for the fiscal year ended September 30, 2020. We will also be referencing non-GAAP financial measures during the call. We have provided a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures in the appendix of the slide presentation. As mentioned previously, the slide presentation is available on our website. With that said, I'll now turn it over to you, David.

Thank you, James, and good morning. I'd like to start today with a summary of Westrock's performance in the third quarter, as well as provide some perspective on our progress and the work underway since I joined the company. then i'll turn it over to ward who will provide additional detail on our financial performance and outlook for the remainder of the year we delivered very strong performance in our fiscal third quarter with demand for fiber-based packaging continuing to be robust we generated record revenue of 4.8 billion dollars an increase of 14 year-over-year Adjusted segment EBITDA was up 15% to $811 million, and adjusted EPS rose 32% to $1 per share. This was terrific performance in a challenging inflationary environment and positions us well for the future. We had robust sales growth across all of our businesses, with packaging sales up 15% during the quarter. Demand continued to be strong in the key markets we serve, including e-commerce, food, beverage, and industrial. North American per-day box shipments were up 9% year over year. We are implementing the previously published price increases across our major paper grades. These pricing gains, combined with our volume growth and mix improvements, outpaced inflation and drove 15% adjusted EBITDA growth year over year and adjusted EBITDA margins of 16.8%. We continue to generate strong free cash flows that we used to strengthen our balance sheet while also investing in our business and delivering value to shareholders. Overall, net leverage at the end of Q3 is 2.54 times down from 3.13 times at our peak. Last quarter, I talked about the key strategic priorities for Westrock. Leveraging the power of the enterprise. leading in sustainability, accelerating innovation, and executing a disciplined capital allocation program. And I'd like to take a minute to walk through some of our progress in each of these areas and our path ahead. We have been moving quickly in my first four months on the job. During this time, I've continued to visit our facilities and spend time with our customers. These visits have reinforced my belief in the unique opportunity we have to provide value through our broad portfolio of paper and packaging solutions and help our customers meet their most challenging needs for sustainable packaging solutions. We've initiated a detailed review across the business, looking at how to further enhance our focus on attractive end markets where our differentiated portfolio is rewarded. We are still in the early stages of this process, but our recently announced team realignment is a significant step forward in fully leveraging the power of our enterprise. We are strengthening our focus on commercial excellence, innovation, and sustainability across the enterprise and combining these functions. Bringing these critical activities together provides focus, integration, and alignment to the disciplines that will enable us to grow our company and lead in providing sustainable and innovative solutions for our customers. We are focused on growing our packaging business and maximizing our opportunities across the portfolio. We have combined the former NPS and our food and beverage packaging business into one team, unifying these commercial teams and operations better serve our customers and maximize the productivity of our global operations. We have also integrated the sales teams across our consumer paperboard and container board businesses and combined our consumer and container board mills into one system. During the third quarter, we continued to implement our disciplined capital allocation strategy and further strengthened our balance sheet. Over the past three quarters, We've reduced adjusted net debt by $1 billion, raised our dividend by 20%, and completed the investments in our strategic capital projects. So what's ahead for Westrock? The Westrock team is relentlessly focused on leveraging the power of the enterprise to improve margins and returns while continuing to deliver excellent free cash flow. We will invest in our converting systems to support growth and packaging and in our mill system to improve our overall cost structure. These investments will further enhance our packaging capabilities to serve those markets where our customers value our differentiation. This also means working to reduce our exposure to markets where we don't see this potential, such as export container board and low-margin SBS businesses. We also remain disciplined in our capital allocation, We are working to ensure the strength and flexibility of our balance sheet as we invest to grow our business. We remain committed to maintaining our investment-grade credit profile and consistently growing our dividend. We will invest in our future through capital projects and tuck-in M&A opportunities that clearly align with our strategy and provide attractive returns on invested capital. And we will make opportunistic share repurchases to return value to shareholders. The significant progress we have made in reducing our leverage ratio provides additional optionality as we consider our capital allocation priorities going forward. We will be balanced in our approach, always seeking to maximize returns while maintaining the financial strength and flexibility required to execute our strategy. As we strive to lead in sustainability, we announced our commitment to set a science-based target to reduce greenhouse gas emissions. As we work to partner with our customers to improve their sustainability, we are also focused on improving our own. Sustainable fiber-based packaging is critical to realizing the full potential of the circular economy, and we are working to accelerate our innovation pipeline to help our customers meet demand for sustainable packaging. Our new Evergrow product is a great example of leveraging the power of the Westrock enterprise with capabilities that no other packaging company can bring to the customer. This product leverages our design capability, consumer-incorrigated packaging, and our machinery expertise and creates a sustainable fiber-based curbside recyclable alternative to plastic produce packaging. It has great shelf appeal, protects the produce, and can be recycled into new packaging. You can use the QR code on this page for a closer look at this exciting new packaging. And with that, I'll now ask Ward to provide detail about our financial performance in the third quarter.