Westrock Company

Thank you very much, operator, and good morning or good afternoon, depending on your location, and thank you for joining this call at short notice. I'm delighted to be joined on this call by David Sewell, CEO of Restrock, and he's joining me from Atlanta, and we're sitting here in Dublin. Before we present, I will refer you to the specific disclaimers included at the outset of this presentation. Today represents a truly defining moment within the global paper and packaging industry. We are incredibly excited to announce this combination to form Smurfit Westrock, a global leader in sustainable packaging and the go-to packaging partner of choice. As of 30th of June, on an LTM basis, Smurfit Westrock had combined LTM revenue and EBITDA of $34 billion and $5.5 billion, respectively. While these figures are impressive, they are historic and understate the combination's true potential. It is this potential for our combined future that is so exciting for all stakeholders. Our intention is in time to realize this potential. The combination of Smurf at Westrock will deliver an unparalleled geographic reach with operations in the most attractive product segments and growing markets. Our products, sustainable by their very nature, are the most effective transport and merchandising medium that exists today. The depth and range of Smurfit Westrock's sustainable product portfolio is unparalleled. Supported by an extensive network of innovation hubs, applications, and data, we believe that we will provide our customers with the industry's most compelling packaging offering. Many of you that know me understand the value I place on culture and people. Our culture has been variously described as both performance-led or as owner-operator type culture, familial-led professional. but always grounded in what and how we deliver better for our customers day in and day out. We see that same approach within Westrock, with David and his team sharing a strong customer focus. That cultural alignment is fundamental to our combined potential and is one of the key reasons why we are here today. We're combining two highly complementary portfolios with limited geographic overlap to create a global leader in innovation and sustainable packaging on terms that we believe are highly attractive for both sets of shareholders. As you would expect, we see significant scope to deliver value across every time horizon, something that we have done before. You've also heard me say for a number of reporting periods now that our business has never been in better shape strategically, operationally, and financially. That strength together with the combined operating cash flows in excess of 3.4 billion provides Smurfit Westrock with significant capital allocation flexibility to continue and to accelerate the transformation journey. I don't propose to dwell on the detail of this slide, except to say that the transaction is unanimously recommended by the boards of both Smurfit Kappa and Westrock as being in the best interest of their respective shareholders. The transaction multiple is in line with Smurfit Kappa's trading multiple and significantly below comparable transactions over the last decade. It is also worth noting Smurfit Westrock's commitment to a strong investment grade credit rating and equally our intent to sustain a dividend in line with the current attractive dividend policy of Smurfit Kappa Group. There are a couple of points beyond the slide that I think are worth pointing out. Some of the guiding principles for me and for Smurfit Kappa Group I've always believed that opportunity comes to pass and not to pause. Similarly, our philosophy has always been to do things when you can and not when you have to. These principles have guided our approach and are fundamental to our belief that this combination represents a unique point-in-time opportunity to create value for all stakeholders. I'm now really delighted to hand over to David, who will take you to the next few slides. David.

Thank you, Tony. It's a pleasure to be with you all on the call this morning. This is really an exciting day for Smurfit Kappa and Westrock, for our shareholders, our customers, and our team. With today's announcement, we are bringing together two companies with highly complementary portfolios to create the global leader in sustainable packaging. Smurfit Kappa is the leading integrated corrugated packaging company in Europe with a large-scale pan-regional presence in the Americas. Through its industry-leading operational excellence and innovation, they've consistently delivered best-in-class performance and returns. Westrock is a leading corrugated and consumer packaging solutions company in the United States with strong positions in Brazil and Mexico. In addition, we have a strong international consumer packaging business as well. We pride ourselves on building deep customer relationships across diverse growing in markets and our reputation for driving innovation and sustainable packaging. Together, we are creating a global leader with unparalleled scale, quality, product diversity, and geographic reach in the most attractive packaging markets. And we are thrilled to be joining forces with Smurfit Kappa through this combination. I've gotten to know Tony and his team well in the lead up to today. And I can say with confidence that we have found a like-minded partner, one who shares our dedication to providing customers with industry-leading services and sustainable solutions. We look forward to partnering with Smurfit Kappa to build a leading global platform that leverages the strength of our combined portfolio and presents a truly comprehensive offering of packaging solutions for customers around the world. The new Smurfit Westrock will be uniquely positioned to offer a full range of sustainable solutions, including corrugated packaging, consumer packaging, machinery and automation, and paper. With our combined capabilities, Smurf at Westrock will offer impressive breadth and depth across renewable, recyclable, and biodegradable packaging solutions. Leveraging our combined size and scale, we will have a balanced and unparalleled geographic reach across over 40 countries, with a significant presence across important markets in Europe and the Americas. The combined company will serve a diverse range of end markets, including food and beverage, industrial, e-commerce, healthcare, and beauty. Through our broad portfolio, attractive geographic footprint, and diverse end market exposure, we will become the global leader in sustainable packaging. Turning to slide 10, as you can see here, how Smurfit Westrock's strategies are strongly aligned. At Westrock, we serve many existing customers with both corrugated and consumer needs, and our differentiated machinery business enables our customers to drive efficiencies and adopt many of our innovative solutions. With the addition of Smurfit Kappa's expansive and international corrugated customer base, state-of-the-art machinery, and complementary solutions, the combined company will capture meaningful, cross-selling opportunities across our businesses, creating deeper customer relationships and long-term growth opportunities. Smurfit Westrock will be the only global sustainable packaging provider with a full range of solutions, including corrugated consumer and packaging automation. Moreover, as large corporations continue to commit to improving their sustainability profiles, Plastic replacement options are proving increasingly important for customers. Smurfit Westrock will be well positioned to meet this demand and capitalize on the opportunity, with a broad, diverse product offering and differentiated machinery and automation equipment offering customers efficient and innovative solutions. Smurfit Kappa and Westrock have a shared ambition for a sustainable future. Together, we'll be well-positioned to drive positive change and contribute to the well-being of our planet, our stakeholders, and the communities we serve. In today's world, sustainable business practices are more important than ever. We welcome this responsibility, and we are committed to making significant progress toward a more circular, sustainable economy. Both Smurfit Kappa and Westrock have impressive track records of helping our customers improve their environmental footprints and achieve their sustainability goals. But delivering on the promise of a sustainable future goes beyond our customer commitments. Both companies have done the work, and we hold ourselves accountable, creating our own sustainability targets and doing our part to fulfill the promise of a sustainable future. Smurfit Kappa and Westrock's complementary sustainable commitments and targets across reducing emissions, water usage, and waste and further improving sustainable forestry are yet another reason our companies are such a great fit. Ensuring the health and well-being of our team members and communities is critical to building a strong, sustainable future. As a larger company with enhanced scale, Smurf at Westrock will be even better able to invest in our teams and where we work. Smurfit Kappa and Westrock both have a strong track record in developing and delivering product innovations. We have been helping our customers move away from plastics to adopt more sustainable packaging solutions. Individually, we each have a strong foundation to build on, and together we will have unprecedented scale and an industry-leading innovation platform to drive growth with our customers, helping them meet increasing customer demand for renewable, recyclable, and biodegradable packaging. We are committed to advancing sustainability and providing the broadest set of paper-based solutions in corrugated and consumer packaging. With our innovative solutions in enhanced scale, our combined company will be uniquely positioned to capture market share and capitalize on the trend towards sustainable packaging. I'll now turn the call back over to Tony to walk through more detail on Smurfit Westrock's operational footprint and the compelling strategic and financial rationale of the transaction. Tony?

Thank you very much, David. As you know, North America is a strategically important and very attractive market where our existing presence is de minimis. By combining with Restrock, we have now solved this. The geographic distribution of our revenue will now be 54% approximately in North America, 12% in LATAM, with Europe and other at 34%. This is a truly better balanced business. The combination creates a business of scale, of quality, and most importantly, of potential. The combination spans five continents, over 40 countries, with some 67 mills, nearly 500 converting operations, and a team of over 100,000 people. The next slide graphically illustrates the scale of this combination. Smurfit Westrock will have an LTM revenue of $34 billion. We think enhanced scale will benefit both sets of shareholders and customers alike, creating greater and greater opportunity, as David has just mentioned. From an operational perspective, this slide outlines the geographic balance of the combination. creating a leader in sustainable packaging in North America, Europe, and Latin America. The limited geographic overlap with two highly complementary portfolios provide a truly compelling product offering for our customers. Again, as to the strategic and operating rationale, I don't propose to go through this slide line by line, as many of the points have already been covered. Those that know us also understand the importance we place on people and values, which include loyalty, integrity, and respect. Everybody says it, but we live it. We believe this combination will provide a substantially broader opportunity set for all employees as we combine the best talent to unlock Smurfit Westrock's true operating potential. Smurfit Kappa Group's established track record of performance and balance sheet strength will, we believe, deliver improved operating efficiency and, in time, increased returns for the combination. In essence, we believe the combination will accelerate the journey of transformation, a familiar journey for us, which we embarked on in 2015. As I've said before, the Smurfit Kappa Group of today is quite simply a very different and very much better business. Through the operational excellence, highly effective capital allocation decisions, and above all else, the quality of our people, We have consistently delivered industry-leading performances. Within that timeframe, we reduced our leverage multiple from 2.6 to 1.4 times today, delivering a consistent EBITDA margin in the 18% to 19% range, and a ROCE in excess of our target of 17%. We've more than doubled our earnings, and during the timeframe, acquired 34 businesses with a proven track record of effective integration. As builders of long-term value, while we have naturally prioritized the strategic and operating rationale, the financial rationale is also compelling. The combination creates a larger listed packaging company, which we believe that the New York Stock Exchange listing will provide not just enhanced liquidity, but also a far sharper valuation benchmark. As you would expect, we see scope to create immediate and long-term value with the transaction being accretive on an EPS and free cash flow basis in the first full year following the completion, including synergies, and increasing in years two and three. As I've said a couple of times now, the greatest scope to create significant value lies in realizing this combination's true potential. At the outset, we're targeting synergies of at least 400 million, distributed as you will see from this slide. That target does not include many potential benefits which may accrue from complementary portfolios and the transfer of knowledge and best practices across our operations. It is worth saying, again, that the opportunity before us significantly outweighs any synergistic benefits. That said, hard synergies are important and we have clearly defined them. We fully expect to realize these benefits within the committed timeframe as we have always done. This slide outlines some of the high level pro forma financials. Again, these are historic numbers which understate the combination's true potential. We think the EBITDA margin differential presents opportunity. From a credit or rating agency perspective, the combination in fact carries less balance sheet risk by reason of geographic scale and product diversity. We are committed to a strong investment grade status. At 2.3 times historic, the combined balance sheet enjoys significant financial flexibility. With operating cash flow in excess of 3.4 billion, we believe we can deliver improved operating efficiency and increase returns over time through disciplined yet effective capital allocation decisions. The transaction multiple of 5.9 times historic and 7 times current is substantially below both recent and historic comparable packaging sector transactions. We combine Smurfit Kappa's leading footprint in Europe and LATAM, together with Westrock's leading presence in paper, corrugated, and consumer packaging in North America, Brazil, and Mexico. Westrock is at the beginning of its transformation journey, as evidenced by the recent closures of two high-cost mills, together with its investment plans to reduce costs and improve efficiency. Smurfit Kappa is already some way through our journey. By combining, we present a unique point in time opportunity to accelerate transformation and to create significant value. When we set out our own capital plans at Smurfit Kappa Group some seven years ago, we promised all stakeholders a brighter future. I believe we've delivered that, realizing our potential with a business today that is quite simply in the best shape it's ever been. That has never, though, been the summit of our ambitions. I hope you'll find that today's announcement to create a global leader and the go-to packaging company represents the next and most exciting chapter in the Smurfit Westrock future. With that, operator, I will hand it back to you to take, and David and I will be happy to take any questions from people on the call.