Westrock Company

Just as a reminder, statements in today's earnings release and presentation and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Those risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings. The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are included in today's earnings release and in the appendix to the presentation, which are available at investors.smurfitwestrock.com. Before handing over to Tony, given we have a full day of investor engagement, I would ask you to limit your questions to two, and should you require any clarifications on what we are discussing today, myself and Frank will do our best to make ourselves available after the call. I will now hand you over to Tony Smurfit, CEO of Smurfit Westrock.

Thank you, Kiran. Good morning, good afternoon, everyone, and thank you for taking the time to join us today. As you will have seen from this morning's release, we have reported a strong fourth quarter performance with an adjusted EBITDA of $1.166 billion, and an adjusted EBITDA margin of 15.5%. Importantly, for the full year 2024, we delivered a combined adjusted EBITDA outcome of $4.706 billion, fully consistent with our stated guidance back in October. On July 5th last year, Smurfit Kappa combined with Westrock to create the new Smurfit Westrock company. The scale and dimension of this company is quite remarkable. As you can see from this map, we have many operating facilities in many regions across the world, with principal operations in North America with approximately 60% of our business, EMAA and APAC with 33% of our business, with the balance being in Latin America, and that's based on revenue. Our combination created the go-to sustainable packaging partner of choice, with an unrivaled product portfolio expertise and scale. To put that into numbers, the number of converting facilities, whether they be in corrugated, consumer, bag-in-box, sack conversion, or specialty packaging, is over 500 units, with 62 mils, again, in different areas of sustainable packaging, corrugated papers, consumer papers, and some specialty papers. To support our paper mills, we have over 14 million tons of waste paper which we process, as well as having our own forestry of some 300,000 acres, principally in Brazil and Colombia. With over 100,000 people worldwide, operating in 40 countries, generating net sales of over 31 billion last year, it's important to remember that in creating this company, we didn't want it to be just big, but we wanted it to be the best. And you can only be the best in any industry if you have the right management team. Every business will, of course, say that people are their greatest assets, to the point that one can be jaded by this statement. But I will say that the Smurfit West Rock leadership team, right through all levels, is a team that is stable, experienced, and has navigated many different challenges over the years, while at the same time consistently delivering against all performance metrics. This team and the broader team grew the EBITDA margin of legacy Smurfit Kappa from 13.8% to 18.5%, ROSI from 12 to 17.1%, reduced the leverage from multiple from 2.8 times to 1.4 times and increased the dividend 10 times. In parallel, we've invested capital to continually improve the asset base and to support customer growth. I'm proud to say we have built an irreplaceable and high quality asset base and footprint that is globally unique. In short, most of this team were responsible for the transformation of the former CAPA group and successfully delivered for its stakeholders. We have done this by very simply sticking to our knitting. We apply an owner-operator model and a performance-led culture with decentralized operations where every manager has P&L responsibility for their own operating unit. This, of course, means a sharp commercial focus whereby the company supports management to improve efficiency, operating costs, and to deliver for our customers. And of course, this can only be done if we reward and continually train our people at all levels of the organization to make them feel unique and part of a unique culture. This is what essentially has led to the success of Smurfit Kappa. So in essence, our team and many of our new colleagues from Legacy Westrock have joined together so that we can have a successful, bigger, and brighter future together at Smurf at Westrock. A lot has already been done. Firstly, we delivered to plan at 4.7 billion of adjusted EBITDA. We did what we said we were going to do. Secondly, we developed a synergy program, which we are more than confident we're going to meet if not exceed the 400 million. And this will be completed by the end of the current year with the benefits realized this year and next. Thirdly, as we've delved into the business, we've seen many more opportunities than initially thought, at least in excess of 400 million, an additional 400 million. We believe that by unleashing the power of our people, there are significant operating improvements through cost takeout, commercial approach, and quick win CapExes to release greater profitability. As you know, I and my senior colleagues have now visited a significant majority of the facilities. And while there will always be work to be done in our operations across the world, in the current year, we have revised our estimated capital spend to somewhere between $2.2 and $2.4 billion, which reflects the strong positioning of the assets. But as I've said before, assets without people are nothing. Bad assets can make you money if you have good people, and the contrary is also true. I've been so happy in my visits, both in Atlanta and the operations around the world, to see the enthusiasm and buy-in of people to contribute to the success of the new Smurf at Westrock. In the seven months, I believe there has been a tremendous foundation and platform for growth for the future. Of course, along the way, with our model of decentralization and making accountability lie at the closest area it can to customers, it has been necessary to streamline the business. And in this process, so far, North America, Mexico, and the rest of the world Over 1,000 people have or will be leaving the company. That said, we've also initiated a major program to train and develop our talent as we invest behind our people. Like you in the investment community, we believe in investing in good management. In addition to this, over the years, we're continuously optimizing our production. Difficult decisions have been made to streamline assets, and you will see from this slide that both Smurfit and Westrock continue to optimize production in both converting and in mills over the recent period. While these are always difficult decisions, they make for a much healthier and stronger company in the long term. While, of course, closing is always difficult, investing for growth is something we've been continually doing also. Across our world, whether it's in North America, EMEA, and APAC, or Latin America, converting mills are specialties where we see opportunities for growth, we will invest behind them. Examples on this page represent over $750 million of investment in just a few plants, phased over a number of years, highlighting the commitment we have to ensuring this company continues to get stronger in order to serve our customers in an efficient and productive way. These examples are purely for illustrative purposes because across all of our facilities worldwide, we're investing for growth or cost reduction to ensure our future success, assuming, of course, these projects meet our expected rate of returns. While we're at the beginning of our journey, it seems hard to believe it's only been just a little over seven months since we completed our combination July 5th. What we clearly see is that we will be able to capitalize on our excellent market positions and asset quality to ensure our customers receive their products in the most efficient and reliable way. We see the opportunity to continue to empower and motivate our people who are and want to be part of our winning team. We believe that we are sharpening our commercial focus across the organization to ensure our efforts and investments have attractive returns. We're committed with our vast data bank of innovative solutions in all areas of our business to ensure that we give our customers the right innovations and at the right price. And there'll be no change to our operating financial model, which is a proven success. We are aligned as senior management as shareholders in the company. and we'll continue to think of capital as a scarce resource which must pay off so that any capital allocations and decisions that we make are in the best interest of all stakeholders. It is a philosophy that has been around this company from the 1930s all the way through to today. I now pass you to Ken, who will take you through the financials.

Thank you, Tony. Good morning and good afternoon, everyone, and thank you again for joining us. As you can see from the highlight slide here on slide 14, The business delivered a strong fourth quarter performance with net sales of over $7.5 billion, adjusted EBITDA in line with our guidance of $1.166 billion, an EBITDA margin of 15.5%, and adjusted free cash flow of almost $260 million. We are starting 2025 in our transformation journey from a position of significant strength, thanks to the hard work of the teams globally and their dedication to the customers and to creating the most innovative and sustainable paper-based packaging company in the world. Turning now to the reported performance of our three segments in the quarter and starting with North America, where our operations delivered sales of $4.6 billion with adjusted EBITDA of $710 million and a very solid adjusted EBITDA margin of 15.4%. Looking at the historical performance of the segment on a combined non-GAAP basis, as per the 8K files on 24th September last, we saw significant margin improvement year-on-year, primarily due to higher selling prices, with cost headwinds on items such as fibre sourcing and labour, being more than offset by lower energy and distribution costs and by reduced economic downtime. Corrugated box pricing was higher compared to the prior year, while box volumes were broadly stable on both an absolute and same-day basis. Our third-party paper sales saw mid-single-digit growth in the quarter, and consumer packaging also performed well, with volume growth of over 2% when compared to the prior year. As Tony mentioned, we have taken significant actions to streamline the central functions of the segment, and to continue to optimize and invest in the asset base. Crucially, our long-standing philosophy of delivering value over volumes began on day one, and has been embraced right across the legacy operations. Knowledge transfer and the rollout of our unique innovation applications has commenced, and we are changing the business model to drive profit responsibility at the mill and the boss plants, while retaining strong central capital controls, where we see significant opportunities to replicate a performance-led and owner-operator culture to deliver for our customers and to drive profitable growth. Looking now at our MENA PAC division, where the segment delivered sales of $2.5 billion with adjusted EBITDA of $371 million and an adjusted EBITDA margin of 14.7%. Set against the backdrop of what was a challenging year for the wider sector, which we now believe is behind us, in the region our operations continue to demonstrate exceptional resilience as sales remain stable, with adjusted EBITDA margin only modestly lower compared to the prior year, mostly due to higher recovered fibre and to a lesser degree, higher labour costs, which were only partially offset by lower energy and distribution costs and higher box volumes. Corrugated box prices were broadly unchanged while box volumes were 1% higher on an absolute and flat on a same-day basis. Our commitment to innovation, cost discipline and quality has reinforced our reputation as not only the largest integrated player in the region, but also the most reliable packaging and supply chain partner for our customers. We have continued to make significant investments in our operations through new converting machines, upgrades to corrugators and safety systems, and substantial investments in our bag and box business, all ensuring we meet the evolving needs of our customers with market-leading innovation, quality, and service. Our LATAM segment again remained very strong in the fourth quarter. As you can see here, with slides of half a billion dollars, adjusted EBITDA of $121 million, and an adjusted EBITDA margin of over 23%. Again, when looking at the comparative performance for the segment on a combined non-GAAP basis as per the September 8K, year-on-year adjusted EBITDA and EBITDA margin were significantly higher in the fourth quarter of 2024. Corrugated box funds were 3% lower on a same-day basis, with Argentina being an outsized drag on the region's demand picture at the fourth quarter, along with our value over volume strategy seeing some pockets of volume contraction in places like Brazil and Colombia as we continue to roll through some legacy contract structures. Nonetheless, by leveraging our strong track record in quality and service, we successfully implemented pricing initiatives that more than offset a negative foreign currency translation impact and the lower volumes in our box business to deliver this strong result. Latin America is a region we have operated in since the 1950s and is built on the best of both legacy companies. The region benefits from growing economies and a diverse customer base. And by leveraging our deep understanding of each local market, Smurfa Westrock is well positioned to continue to drive long-term success. And finally, I want to outline how we think about capital allocation at Smurfa Westrock. Those who have followed Smurfa Capital over the years will know how this framework is both flexible and returns focus at its core. As a team with deep industry experience, which you saw earlier on in the presentation, we see internally allocated capital, the lowest risk and highest quality form of investment. And that is a key to the future success of our business. Upon closing the combination on July 5th last year, we conducted a comprehensive assessment of our capital needs right across the business. And as outlined at the end of October, CapEx for full year 2025 will be in the range of 2.2 to 2.4 billion, well ahead of depreciation. The dividend is also a cornerstone of our capital allocation strategy, and the Smurfit Westrock Board recently approved the quarterly dividend of 43.08 cents per share, up from 30.25 cents per share, again delivering on our promise to pay a dividend stream in line with Legacy SKG's progressive policy as we start our full year at Smurfit Westrock. The balance sheet at Smurfit Westrock has significant strength and flexibility, and we are committed to maintaining a strong investment-grade credit rating and, indeed, given the scale of operations and our ability to generate significant free cash flow, we are targeting a long-term leverage ratio of below two times through the cycle. We will also maintain a disciplined approach to M&A and will benchmark any opportunities against all other capital allocation alternatives. And the inclusion of other forms of shareholder returns underscores the flexibility of the framework to ensure that all avenues to create and return value to our shareholders are considered and benchmarked against all options. Ultimately, the framework at its simplest is about creating long-term value for all stakeholders. Lastly, as we know from the release, the year has started well. Based on that and assuming current marketing conditions prevail, we anticipate delivering an adjusted EBITDA of approximately $1.25 billion for the first quarter. And with that, I'll pass you back to Tony for concluding remarks.