Smurfit WestRock Ltd
SW 10-Q Quarter ended March 31, 2025
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
For the quarterly period ended
March 31, 2025
OR
For the transition period from to
Commission File Number:
001-42161
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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N/A
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(Address of principal executive offices)
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(Zip Code)
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Ac
t:
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Title of Each Class
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Trading Symbol(s)
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Name of Each Exchange on Which Registered
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company”
in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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☒
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
☒
As of May 6, 2025, the registrant had
522,012,629
ordinary shares, nominal value $0.001 per share, issued and outstanding.
2
TABLE OF CONTENTS
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Page
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EXPLANATORY NOTE
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
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Item 4. Controls and Procedures
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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Item 1A. Risk Factors
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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Item 3. Defaults Upon Senior Securities
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Item 4. Mine Safety Disclosures
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Item 5. Other Information
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Item 6. Exhibits
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Signatures
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3
EXPLANATORY NOTE
On April 26, 2024, the United States Securities and Exchange Commission (the “SEC”) declared effective the Registration Statement
on Form S-4 (file number 333-278185), as amended (as supplemented by the prospectus filed with the SEC on April 26, 2024, the
“Registration Statement”), of Smurfit WestRock Limited, formerly known as Cepheidway Limited and re-registered as an Irish public
limited company and renamed Smurfit Westrock plc (the “Company” or “Smurfit Westrock”), to register ordinary shares of $0.001
each in the capital of Smurfit Westrock (the “Smurfit Westrock Shares”) to be issued to the holders of shares of common stock of
WestRock Company (“WestRock”), pursuant to a transaction agreement dated as of September 12, 2023 (the “Transaction
Agreement”), among Smurfit Westrock, Smurfit Kappa Group plc (“Smurfit Kappa”), WestRock and Sun Merger Sub, LLC (“Merger
Sub”) pursuant to which (i) Smurfit Westrock acquired Smurfit Kappa by means of a scheme of arrangement under the Companies Act
2014 of Ireland (as amended) and (ii) Merger Sub merged with and into WestRock, (the “Merger” and, together with the Smurfit
Kappa Share Exchange, the “Combination”). The Combination closed on July 5, 2024. A detailed description of the terms of the
Combination is included in the Registration Statement. Upon the completion of the Combination on July 5, 2024, Smurfit Kappa and
WestRock each became wholly owned subsidiaries of Smurfit Westrock with Smurfit Kappa shareholders owning approximately
50.3% and WestRock shareholders owning approximately 49.7%. Prior to the closing of the Combination, Smurfit Westrock had no
operations other than activities related to its formation and the Combination. Smurfit Kappa was determined to be the accounting
acquirer in the Combination; therefore, the historical Consolidated Financial Statements of Smurfit Kappa for periods prior to the
Combination are presented as the historical financial statements of the Company. Unless otherwise indicated or the context otherwise
requires, references in this Quarterly Report on Form 10-Q to “Smurfit Westrock,” the “Company,” “our Company,” “we,” “our,” and
“us,” and the like terms, refer to the business and operations of Smurfit Kappa and its wholly-owned subsidiaries, which prior to July
5, 2024, did not include WestRock, when referring to the periods prior to the closing of the Combination, and refer to the combined
company (Smurfit Westrock, including, among others, its subsidiaries Smurfit Kappa and WestRock) when referring to the periods
after the Combination.
This Quarterly Report on Form 10-Q is being filed with respect to the interim quarterly period ended March 31, 2025. Accordingly,
the disclosures herein, including the financial statements and related Management’s Discussion and Analysis, describe the business,
financial condition, results of operations, liquidity and capital resources of Smurfit Westrock following the Combination, except as
expressly provided herein. For prior periods, the disclosures herein reflect the financials of Smurfit Kappa, except as expressly
provided herein.
4
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes certain “forward-looking statements” (including within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”))
regarding, among other things, the plans, strategies, outcomes, outlooks and prospects, both business and financial, of Smurfit
Westrock, the expected benefits of the completed Combination of Smurfit Kappa and WestRock Company (including, but not limited
to, synergies as well as our scale, geographic reach and product portfolio,
or impact of announced closure
s), and any other statements
regarding Smurfit Westrock’s future expectations, beliefs, plans, objectives, results of operations, financial condition and cash flows,
or future events or performance. Forward-looking and other statements in this Quarterly Report on Form 10-Q may also address the
Company’s corporate responsibility progress, plans, and initiatives (including environmental matters), and the inclusion of such
statements is not an indication that these contents are necessarily material to investors or required to be disclosed in our filings with
the SEC. In addition, historical, current, and forward-looking sustainability-related statements may be based on standards for
measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject
to change in the future.
Statements that are not historical facts, including statements about the beliefs and expectations of the management of Smurfit
Westrock, are forward-looking statements. Words such as “may”, “will”, “could”, “should”, “would”, “anticipate”, “intend”,
“estimate”, “project”, “plan”, “believe”, “expect”, “target”, “prospects”, “potential”, “commit”, “forecasts”, “aims”, “considered”,
“likely”, “estimate” and variations of these words and similar future or conditional expressions are intended to identify forward-
looking statements but are not the exclusive means of identifying such statements. While the Company believes these expectations,
assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and
unknown risks and uncertainties, many of which are beyond the control of the Company. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and depend upon future circumstances that may or may not
occur.
Important factors that could cause actual results to differ materially from plans, estimates or expectations include:
our ability to deliver
on our closure plan and associated efforts; our future cash payments associated with these initiatives; potential future cost savings
associated with such initiatives; the amount of charges and the timing of such charges or actions described herein; potential future
impairment charges; accuracy of assumptions associated with the charges;
economic, competitive and market conditions generally,
including macroeconomic uncertainty, customer inventory rebalancing, the impact of inflation and increases in energy, raw materials,
shipping, labor and capital equipment costs; geo-economic fragmentation and protectionism such as tariffs, trade wars or similar
governmental actions affecting the flows of goods, services or currency (including the recent implementation of tariffs by the U.S.
federal government and reciprocal tariffs and other protectionist or retaliatory measures governments in Europe, Asia, and other
countries have taken or may take in response); the impact of public health crises, such as pandemics and epidemics and any related
company or governmental policies and actions to protect the health and safety of individuals or governmental policies or actions to
maintain the functioning of national or global economies and markets; reduced supply of raw materials, energy and transportation,
including from supply chain disruptions and labor shortages; developments related to pricing cycles and volumes; intense competition;
the ability of the Company to successfully recover from a disaster or other business continuity problem due to a hurricane, flood,
earthquake, terrorist attack, war, pandemic, security breach, cyber-attack, power loss, telecommunications failure or other natural or
man-made events, including the ability to function remotely during long-term disruptions; the Company’s ability to respond to
changing customer preferences and to protect intellectual property; the amount and timing of the Company’s capital expenditures;
risks related to international sales and operations; failures in the Company’s quality control measures and systems resulting in faulty or
contaminated products; cybersecurity risks, including threats to the confidentiality, integrity and availability of data in the Company’s
systems; works stoppages and other labor disputes; the Company’s ability to establish and maintain effective internal controls over
financial reporting in accordance with Sarbanes Oxley Act of 2002, as amended, and remediate any weaknesses in controls and
processes; the Company’s ability to retain or hire key personnel; risks related to sustainability matters, including climate change and
scarce resources, as well as the Company’s ability to comply with changing environmental laws and regulations; the Company’s
ability to successfully implement strategic transformation initiatives; results and impacts of acquisitions by the Company; the
Company’s significant levels of indebtedness; the impact of the Combination on the Company’s credit ratings; the potential
impairment of assets and goodwill; the availability of sufficient cash to distribute dividends to the Company’s shareholders in line
with current expectations; the scope, costs, timing and impact of any restructuring of operations and corporate and tax structure;
evolving legal, regulatory and tax regimes; changes in economic, financial, political and regulatory conditions in Ireland, the United
Kingdom, the United States and elsewhere, and other factors that contribute to uncertainty and volatility, natural and man-made
disasters, civil unrest, geopolitical uncertainty, and conditions that may result from legislative, regulatory, trade and policy changes
associated with the current or subsequent Irish, U.S. or UK administrations; legal proceedings instituted against the Company; actions
5
by third parties, including government agencies; the Company’s ability to promptly and effectively integrate Smurfit Kappa’s and
WestRock’s businesses; the Company’s ability to achieve the synergies and value creation contemplated by the Combination; the
Company’s ability to meet expectations regarding the accounting and tax treatments of the Combination, including the risk that the
Internal Revenue Service may assert that the Company should be treated as a U.S. corporation or be subject to certain unfavorable
U.S. federal income tax rules under Section 7874 of the Internal Revenue Code of 1986, as amended, as a result of the Combination;
other factors such as future market conditions, currency fluctuations, the behavior of other market participants, the actions of
regulators and other factors such as changes in the political, social and regulatory framework in which the Company’s group operates
or in economic or technological trends or conditions, and other risks set forth under the heading “Risk Factors” in Part I, Item 1A. in
the 2024 Form 10-K, and as may be updated in this and other subsequent Quarterly Reports on Form 10-Q.
The Company’s forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q or as of the date they are
made. Neither the Company nor any of its associates or directors, officers or advisers provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any such forward-looking statements will actually occur. You are
cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with its legal or regulatory
obligations (including under the UK Listing Rules, the Disclosure Guidance and Transparency Rules, the UK Market Abuse
Regulation and other applicable regulations), the Company is under no obligation, and the Company expressly disclaims any intention
or obligation, to update or revise publicly any forward-looking statements, whether as a result of new information, future events or
otherwise.
6
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
SMURFIT WESTROCK PLC
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Page
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Condensed Consolidated Balance Sheets as of
March 31, 2025
and
December 31, 2024
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Condensed Consolidated Statements of Operations for the
three months ended
March 31, 2025
and
March 31, 2024
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Condensed Consolidated Statements of
Comprehensive Income
for the
three months ended
March 31, 2025
and
March 31, 2024
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Condensed Consolidated Statements of Cash Flows for the
three months ended
March 31, 2025
and
March 31, 2024
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Condensed Consolidated Statements of Changes in Equity for the
three months ended
March 31, 2025
and
March 31,
2024
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Notes to the Condensed Consolidated Financial Statements
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7
Smurfit Westrock plc
Condensed Consolidated Balance Sheets (Unaudited)
(in millions, except share
data
)
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March 31,
2025
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December 31,
2024
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||
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Assets
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|||
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Current assets:
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|||
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Cash and cash equivalents (amounts related to consolidated variable interest entities of
$
$
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$
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$
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Accounts receivable, net (amounts related to consolidated variable interest entities of
$
$
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Inventories
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Other current assets
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Total current assets
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Property, plant and equipment, net
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Goodwill
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Intangibles, net
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Prepaid pension asset
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Other non-current assets (amounts related to consolidated variable interest entities of
$
$
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Total assets
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$
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$
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Liabilities and Equity
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|||
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Current liabilities:
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|||
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Accounts payable
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$
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$
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Accrued compensation and benefits
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Current portion of debt
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Other current liabilities
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Total current liabilities
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Non-current debt due after one year (amounts related to consolidated variable interest entities of
$
million
and
$
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Deferred tax liabilities
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Pension liabilities and other postretirement benefits, net of current portion
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Other non-current liabilities (amounts related to consolidated variable interest entities of
$
and
$
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Total liabilities
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Commitments and Contingencies (Note 15)
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Equity:
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|||
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Preferred stock;
$
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Common stock;
$
shares outstanding at
March 31, 2025
and
December 31, 2024
, respectively
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Deferred shares;
€
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Treasury stock; at cost;
2024
, respectively
|
(
|
(
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Capital in excess of par value
|
|
|
|
|
Accumulated other comprehensive loss
|
(
|
(
|
|
|
Retained earnings
|
|
|
|
|
Total shareholders’ equity
|
|
|
|
|
Noncontrolling interests
|
|
|
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Total equity
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|
|
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Total liabilities and equity
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$
|
$
|
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
8
Smurfit Westrock plc
Condensed Consolidated Statements of Operations (Unaudited)
(in millions,
except
per share data)
|
Three months ended March 31,
|
|||
|
2025
|
2024
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||
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Net sales
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$
|
$
|
|
|
Cost of goods sold
|
(
|
(
|
|
|
Gross profit
|
|
|
|
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Selling, general and administrative expenses
|
(
|
(
|
|
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Transaction and integration-related expenses associated with the Combination
|
(
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(
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Operating profit
|
|
|
|
|
Pension and other postretirement non-service income (expense), net
|
|
(
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Interest expense, net
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(
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(
|
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Other expense, net
|
(
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(
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Income before income taxes
|
|
|
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|
Income tax expense
|
(
|
(
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Net income
|
|
|
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Net loss attributable to noncontrolling interests
|
|
|
|
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Net income attributable to common shareholders
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$
|
$
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Basic earnings per share attributable to common shareholders
|
$
|
$
|
|
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Diluted earnings per share attributable to common shareholders
|
$
|
$
|
|
|
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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|||
9
Smurfit Westrock plc
Condensed Consolidated Statements of
Comprehensive Income
(Unaudited)
(
in
millions
)
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
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Net income
|
$
|
$
|
|
|
Other comprehensive income (loss), net of tax:
|
|||
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Foreign currency translation gain (loss)
|
|
(
|
|
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Defined benefit pension and other postretirement benefit plans adjustments
|
(
|
|
|
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Net gain (loss) on cash flow hedging derivatives
|
|
(
|
|
|
Other comprehensive income (loss), net of tax
|
|
(
|
|
|
Comprehensive income
|
|
|
|
|
Comprehensive loss attributable to noncontrolling interests
|
|
|
|
|
Comprehensive income attributable to common shareholders
|
$
|
$
|
|
|
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
|
|||
10
Smurfit Westrock plc
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in millions)
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Operating activities:
|
|||
|
Net income
|
$
|
$
|
|
|
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
|
|||
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Depreciation, depletion and amortization
|
|
|
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Cash surrender value increase in excess of premiums paid
|
(
|
|
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Share-based compensation expense
|
|
|
|
|
Deferred income tax benefit
|
(
|
(
|
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|
Pension and other postretirement funding more than cost
|
(
|
(
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|
Other
|
|
|
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Change in operating assets and liabilities, net of acquisitions and divestitures:
|
|||
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Accounts receivable
|
(
|
(
|
|
|
Inventories
|
(
|
|
|
|
Other assets
|
(
|
(
|
|
|
Accounts payable
|
(
|
(
|
|
|
Income taxes
|
(
|
|
|
|
Accrued liabilities and other
|
(
|
(
|
|
|
Net cash provided by operating activities
|
|
|
|
|
Investing activities:
|
|||
|
Capital expenditures
|
(
|
(
|
|
|
Cash paid for purchase of businesses, net of cash acquired
|
(
|
|
|
|
Other
|
|
|
|
|
Net cash used for investing activities
|
(
|
(
|
|
|
Financing activities:
|
|||
|
Additions to debt
|
|
|
|
|
Repayments of debt
|
(
|
(
|
|
|
Debt issuance costs
|
(
|
|
|
|
Changes in commercial paper, net
|
|
|
|
|
Other debt repayments, net
|
(
|
|
|
|
Repayments of finance lease liabilities
|
(
|
(
|
|
|
Tax paid in connection with shares withheld from employees
|
(
|
|
|
|
Purchases of treasury stock
|
|
(
|
|
|
Cash dividends paid to shareholders
|
(
|
|
|
|
Other
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(
|
|
|
Decrease in cash and cash equivalents
|
(
|
(
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
Cash and cash equivalents at end of period
|
$
|
$
|
|
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
11
Smurfit Westrock plc
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(in millions, except
per share
data
)
The following table presents a summary of the changes in equity for the
three months ended
March 31, 2025
:
|
Shares of
Common Stock
|
Common Stock
|
Capital in
Excess of Par
Value
|
Treasury Stock
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Total
Shareholders'
Equity
|
Noncontrolling
Interest (“NCI”)
|
Total
|
|
|
Balance at
December 31, 2024
|
|
$
|
$
|
$
(
|
$
|
$
(
|
$
|
$
|
$
|
|
Net income
|
—
|
—
|
—
|
—
|
|
—
|
|
(
|
|
|
Other comprehensive income, net of tax
|
—
|
—
|
—
|
—
|
—
|
|
|
—
|
|
|
Share-based compensation
|
—
|
—
|
|
—
|
—
|
—
|
|
—
|
|
|
Shares distributed by Smurfit Kappa Employee
Trust
|
—
|
—
|
(
|
|
—
|
—
|
|
—
|
|
|
Issuance of common stock net of tax paid in
connection with shares withheld from employees
|
|
—
|
|
—
|
(
|
—
|
(
|
—
|
(
|
|
Cancellation of deferred shares by Smurfit Kappa
Employee Trust
|
—
|
—
|
—
|
|
(
|
—
|
|
—
|
|
|
Dividends declared (
$
|
—
|
—
|
|
—
|
(
|
—
|
(
|
—
|
(
|
|
Balance at March 31, 2025
|
|
$
|
$
|
$
(
|
$
|
$
(
|
$
|
$
|
$
|
(1)
Includes cash dividends and dividend equivalent units declared on certain unvested share-based payment awards.
The following table presents a summary of the changes in equity for the
three months ended
March 31, 2024
:
|
Shares of
Common Stock
|
Common Stock
|
Capital in
Excess of Par
Value
|
Treasury Stock
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Loss
|
Total
Shareholders'
Equity
|
Noncontrolling
Interest (“NCI”)
|
Total
|
|
|
Balance at
December 31, 2023
(1)
|
|
$
|
$
|
$
(
|
$
|
$
(
|
$
|
$
|
$
|
|
Net income
|
—
|
—
|
—
|
—
|
|
—
|
|
—
|
|
|
Other comprehensive loss, net of tax
|
—
|
—
|
—
|
—
|
—
|
(
|
(
|
—
|
(
|
|
Share-based compensation
|
—
|
—
|
|
—
|
—
|
—
|
|
—
|
|
|
Shares distributed by Smurfit Kappa Employee
Trust
|
—
|
—
|
(
|
|
—
|
—
|
|
—
|
|
|
Purchases of treasury stock
|
—
|
—
|
—
|
(
|
—
|
—
|
(
|
—
|
(
|
|
Issuance of common stock
|
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Balance at March 31, 2024
|
|
$
|
$
|
$
(
|
$
|
$
(
|
$
|
$
|
$
|
(1)
Pursuant to the Transaction Agreement, on July 5, 2024 each issued ordinary share, par value
€
0.001
per share, of Smurfit Kappa (a “Smurfit Kappa Share”) was exchanged for
one ordinary share, par value
$
0.001
per share, of Smurfit Westrock (a “Smurfit Westrock Share”). The exchange of shares is reflected retroactively to the earliest period
presented.
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
12
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
Unless the context otherwise requires, or unless indicated otherwise, “we”, “us”, “our”, “Smurfit Westrock” and “the
Company
” refer
to the business of
Smurfit Westrock plc
, its wholly-owned subsidiaries and its partially-owned consolidated subsidiaries.
Smurfit Westrock plc
is a company limited by shares that is incorporated in Ireland.
We are a multinational provider of sustainable
fiber-based paper and packaging solutions. We partner with our customers to provide differentiated, sustainable paper and packaging
solutions that enhance our customers’ prospects of success in their markets. Our team members support customers around the world
from our operating and business locations in North America, South America, Europe, Asia, Africa, and Australia.
We derived the C
ondensed Consolidated Balance Sheet
at
December 31, 2024
from the
audited
consolidated financial statements
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2024
(the “2024 Consolidated Financial
Statements”). In the opinion of management, all normal recurring adjustments necessary for a fair statement of the
Condensed
C
onsolidated
Financial Statements
have been included for the interim periods reported.
The
accompanying Unaudited Condensed Consolidated Financial Statements
have been prepared in accordance with accounting
principles generally accepted in the U.S. (“GAAP”) for interim financial information and with Article 10 of Regulation S-X of the
Securities and Exchange Commission (“SEC”). Accordingly, they omit certain notes and other information from the 2024
Consolidated Financial Statements. Therefore, these
Condensed
Consolidated Financial Statements should be read in conjunction with
the 2024 Consolidated Financial Statements. The results for the three months ended March 31, 2025 are not necessarily indicative of
results that may be expected for the full year.
The preparation of
the
Condensed
Consolidated Financial Statements in conformity with U.S. GAAP requires management to make
certain estimates and assumptions that
affect the
reported amounts of assets and liabilities at the date of the
Condensed
Consolidated
Financial Statements, disclosures about gain contingencies and contingent liabilities and the reported amounts of revenues and
expenses, including income taxes during the reporting period.
Such estimates include the fair value of assets acquired and assumed
liabilities in a business combination, determining goodwill and measuring impairment, income taxes and pension and other
postretirement benefits. These estimates and assumptions are based on management’s judgment. Actual results may differ from those
estimates, and the differences could be material.
We base our estimates on the current information available, our experiences and various other assumptions believed to be reasonable
under the circumstances. The process of determining significant estimates is fact specific and takes into account factors such as
historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniques. We regularly
evaluate these significant factors and make adjustments in the
Condensed
Consolidated Financial Statements where facts and
circumstances dictate.
Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may
not precisely reflect the absolute figures.
13
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
1. Description of Business and Summary of Significant Accounting Policies
- continued
We maintain supplier finance programs whereby we have entered into payment processing agreements with certain financial
institutions. These agreements allow participating suppliers to track payment obligations from
Smurfit Westrock
, and if voluntarily
elected by the supplier, to sell payment obligations from
Smurfit Westrock
to financial institutions at a discounted price. We are not a
party to the agreements between the participating financial institutions and the suppliers in connection with the program, and we do
not reimburse suppliers for any costs they incur for participation in the program. We have not pledged any assets as security or
provided any guarantees as part of the programs. We have no economic interest in our suppliers’ decisions to participate in the
programs. Our responsibility is limited to making payment in full to the respective financial institution according to the terms
originally negotiated with the supplier, which generally do not exceed
120
days
. Smurfit Westrock or the financial institutions may
terminate the agreements upon
30
or
90
days’ notice. These obligations are classified as accounts payable within the Condensed
Consolidated Balance Sheets.
The outstanding payment obligations to financial institutions under these programs were
$
389
million
and
$
450
million
as of
There have been no changes to the Company’s significant accounting policies as described in “Note
1. Description of Business and
Summary of Significant Accounting Policies
” in the 2024 Consolidated Financial Statements.
In November 2023, the FASB issued
ASU 2023-07
, “Segment Reporting (Topic 280): Improvements to Reportable Segment
Disclosures.” This ASU requires an entity to disclose incremental segment information, including enhanced disclosures about
significant segment expenses. ASU 2023-07 is effective for the Company’s annual reporting periods beginning after December 15,
2023 and for interim periods beginning after December 15, 2024. Adoption is a fully retrospective method of transition. Early
adoption is permitted. The Company adopted this ASU in the year ended December 31, 2024 by including the required applicable
segment disclosures in the 2024 Consolidated Financial Statements. The required applicable interim segment disclosures are included
in “
Note
3. Segment Information
”
.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” This
ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate
reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the
Company
’s annual reporting
periods beginning after December 15, 2024. Adoption is either with a prospective method or a fully retrospective method of transition.
Early adoption is permitted. The
Company
is currently evaluating the effect that adoption of ASU 2023-09 will have on its disclosures
in the c
onsolidated financial statements
.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). This ASU requires new financial
statement disclosures disaggregating prescribed expense categories within relevant income statement expense captions. ASU 2024-03
will be effective for fiscal years beg
inning after December 15, 2026, and interim periods beginning after December 15, 2027.
Companies have the option to apply the guidance either on a retrospective or prospective basis, and early adoption is permitted. The
Company
is currently evaluating the impact of this standard on its disclosures in the consolidated financial s
tatements
.
14
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
Transaction agreement with WestRock Company
Pursuant to a transaction agreement dated as of September 12, 2023 (the “Transaction Agreement”), among Smurfit Westrock, Smurfit
Kappa Group plc (“Smurfit Kappa”), WestRock Company (“WestRock”) and Sun Merger Sub, LLC (“Merger Sub”) the following
was completed (i) Smurfit Westrock acquired Smurfit Kappa by means of a scheme of arrangement under the Companies Act 2014 of
Ireland (as amended) (the “Smurfit Kappa Share Exchange”) and (ii) Merger Sub merged with and into WestRock, with WestRock
continuing as the surviving entity (the “Merger” and, together with the Smurfit Kappa Share Exchange, the “Combination”). The
Combination closed on July 5, 2024 (the “Closing Date”). The aggregate merger consideration is
$
13,461
million
.
The purchase price allocation for the Merger is preliminary and is subject to revision as additional information about the acquisition-
date fair value of assets and liabilities becomes available. The preliminary allocation of the purchase price with respect to the Merger
is based upon management’s estimates of and assumptions related to the fair values of WestRock assets acquired and liabilities
assumed as of the Closing Date using currently available information.
There has been no material change in the preliminary purchase
price allocation to the fair value of the assets acquired and liabilities assumed and related goodwill in the period since the 2024
Consolidated Financial Statements.
The Company is still evaluating the fair value of acquired property, plant and equipment,
intangible assets and certain income tax related items in addition to ensuring all other assets and liabilities and contingencies have
been identified and recorded. The Company has reflected the measurement period adjustments to date in the period in which the
adjustments occurred, and will continue to reflect measurement period adjustments, if any, in the period in which the adjustments
occur. The Company will finalize the accounting for the Merger within the measurement period (a period not to exceed 12 months
from the Closing Date).
Unaudited Pro Forma Combined Financial Information
ended
March 31, 2024
, as if the Merger had occurred on January 1,
2023
.
|
Three months ended
|
|
|
March 31, 2024
|
|
|
Net sales
|
$
|
|
Net income attributable to common shareholders
|
|
The unaudited pro forma combined financial information above is based on the historical financial statements of Smurfit Kappa,
WestRock, and Smurfit Westrock, and is not indicative of the results of operations that would have been achieved if the Merger had
occurred on January 1,
2023,
nor is it indicative of future results. The unaudited pro forma combined financial information has been
prepared by applying the accounting policies of Smurfit Westrock and includes, where applicable, adjustments for the following
factually supportable items or transactions, directly attributable to the Merger: (i) elimination of intercompany activity; (ii)
incremental depreciation expense from the preliminary fair value adjustments to property, plant and equipment; (iii) amortization
expense from the preliminary fair value adjustments to acquired intangible assets; (iv) incremental stock-based compensation expense
associated with the Merger; (v) interest expense for acquisition financing and the amortization of the fair value adjustment to debt
assumed; (vi) removal of pension and other postretirement amortization expense resulting from the fair value adjustment to acquired
WestRock pension and other post-employment benefit assets and liabilities; (vii) changes to align accounting policies; and (viii)
associated tax-related impacts of adjustments.
15
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
2. Acquisitions
- continued
The unaudited pro forma combined financial information also reflects a pro forma adjustment to remove
$
55
million
of non-recurring
transaction-related costs recorded during the three months ended March 31, 2024
of both
Smurfit Kappa and Westrock
directly
attributable to the Merger and to reflect these in 2023, as if the Merger had occurred on January 1,
2023.
These pro forma adjustments are based on available information as of the date hereof and upon assumptions that the Company
believes are reasonable to reflect the impact of the Merger on the Company’s historical financial information on a supplemental pro
forma basis. Adjustments do not include costs related to integration activities, cost savings or synergies that have been or may be
achieved by the combined business.
For more details related to the transaction with Westrock, refer to “Note
2. Acquisitions
” of the 2024 Consolidated Financial
Statements.
We report our financial results of operations in the following
three
reportable segments:
i.
North America, which includes operations in the U.S., Canada and Mexico.
ii.
Europe, the Middle East and Africa (“MEA”)
and
Asia-Pacific (“APAC”).
iii.
Latin America (“LATAM”), which includes operations in Central America and Caribbean, Argentina, Brazil, Chile, Colombia,
Ecuador and Peru.
Segment profitability is measured based on Adjusted EBITDA, defined as
income before income taxes
,
unallocated corporate costs
,
depreciation, depletion and amortization
,
interest expense, net
,
pension and other postretirement non-service income (expense), net
,
share-based compensation expense
,
other expense, net
,
amortization of fair value step up on inventory
,
transaction and integration-
related expenses associated with the Combination
and other specific items that management believes are not indicative of the ongoing
operating results of the b
usine
ss.
The chief operating decision maker (“CODM”) uses Adjusted EBITDA for each segment predominantly: to forecast and assess the
performance of the segments, individually and comparatively; to set pricing strategies for the segments; and to make decisions about
the allocation of operating and capital resources to each segment strategically, in the annual budget and in the quarterly forecasting
process. The CODM considers budget, or forecast, -to-actual variances on a quarterly and annual basis for segment Adjusted EBITDA
to inform these decisions.
sales primarily include raw materials, direct labor and plant overhead costs. Segment selling, general and administrative expenses
primarily include compensation and benefits, external professional fees and other operating costs. Both segment cost of sales and
segment selling, general and administrative expenses exclude certain adjustments that management believes are not indicative of the
operating results of the business.
16
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
3. Segment Information
- continued
The following tables show selected financial data for our segments.
|
Three months ended March 31, 2025
|
North America
|
Europe, MEA
and APAC
|
LATAM
|
Total
|
|||
|
Net sales (unaffiliated customers)
|
$
|
$
|
$
|
$
|
|||
|
Add net sales (intersegment)
|
|
|
|
|
|||
|
Net sales (aggregate)
|
$
|
$
|
$
|
$
|
|||
|
Less segment expenses:
|
|||||||
|
Segment cost of goods sold
|
$
(
|
$
(
|
$
(
|
||||
|
Segment selling, general and administrative expenses
|
(
|
(
|
(
|
||||
|
$
(
|
$
(
|
$
(
|
$
(
|
||||
|
Segment Adjusted EBITDA
|
$
|
$
|
$
|
$
|
|||
|
Unallocated corporate costs
|
(
|
||||||
|
Depreciation, depletion and amortization
|
(
|
||||||
|
Transaction and integration-related expenses associated with
the Combination
|
(
|
||||||
|
Interest expense, net
|
(
|
||||||
|
Pension and other postretirement non-service income, net
|
|
||||||
|
Share-based compensation expense
|
(
|
||||||
|
Other expense, net
|
(
|
||||||
|
Other adjustments
|
(
|
||||||
|
Income before income taxes
|
$
|
Other adjustments in the table above include restructuring costs of
$
15
million
and losses at closed facilities of
$
2
million
.
17
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
3. Segment Information
- continued
|
Three months ended March 31, 2024
|
North America
|
Europe, MEA
and APAC
|
LATAM
|
Total
|
|||
|
Net sales (unaffiliated customers)
|
$
|
$
|
$
|
$
|
|||
|
Add net sales (intersegment)
|
|
|
|
|
|||
|
Net sales (aggregate)
|
$
|
$
|
$
|
$
|
|||
|
Less segment expenses:
|
|||||||
|
Segment cost of goods sold
|
$
(
|
$
(
|
$
(
|
||||
|
Segment selling, general and administrative expenses
|
(
|
(
|
(
|
||||
|
$
(
|
$
(
|
$
(
|
$
(
|
||||
|
Segment Adjusted EBITDA
|
$
|
$
|
$
|
$
|
|||
|
Unallocated corporate costs
|
(
|
||||||
|
Depreciation, depletion and amortization
|
(
|
||||||
|
Transaction and integration-related expenses associated with
the Combination
|
(
|
||||||
|
Interest expense, net
|
(
|
||||||
|
Pension and other postretirement non-service expense, net
|
(
|
||||||
|
Share-based compensation expense
|
(
|
||||||
|
Other expense, net
|
(
|
||||||
|
Other adjustments
|
|
||||||
|
Income before income taxes
|
$
|
Other adjustments in the table above includes a reimbursement of a fine from the Italian Competition Authority of
$
18
million
.
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Capital expenditures:
|
|||
|
North America
|
$
|
$
|
|
|
Europe, MEA and APAC
|
|
|
|
|
LATAM
|
|
|
|
|
Total reportable segments
|
$
|
$
|
|
|
Corporate
|
|
|
|
|
Total capital expenditures
|
$
|
$
|
|
18
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
3. Segment Information
- continued
Total assets by segment were:
|
March 31,
|
December 31,
|
||
|
2025
|
2024
|
||
|
Assets:
|
|||
|
North America
|
$
|
$
|
|
|
Europe, MEA and APAC
|
|
|
|
|
LATAM
|
|
|
|
|
Total reportable segments
|
$
|
$
|
|
|
Corporate
(1)
|
|
|
|
|
Total assets
|
$
|
$
|
(1)
Corporate assets are composed primarily of Property, plant and equipment, net, Deferred tax assets, Recoverable or refundable
Disaggregated
Revenue
ASC 606, “Revenue from Contracts with Customers”, requires that we disaggregate
revenue
from contracts with customers into
categories that depict how the nature, amount, timing and uncertainty of
revenue
and cash flows are affected by economic factors.
months ended
March 31, 2025
and
2024
.
Net sales
are
attributed to segments based on the location of production.
|
Three months ended March 31, 2025
|
|||||||
|
North America
|
Europe, MEA
and APAC
|
LATAM
|
Total
|
||||
|
Revenue by product:
|
|||||||
|
Paper
|
$
|
$
|
$
|
$
|
|||
|
Packaging
|
|
|
|
|
|||
|
Total
|
$
|
$
|
$
|
$
|
|||
|
Three months ended March 31, 2024
|
|||||||
|
North America
|
Europe, MEA
and APAC
|
LATAM
|
Total
|
||||
|
Revenue by product:
|
|||||||
|
Paper
|
$
|
$
|
$
|
$
|
|||
|
Packaging
|
|
|
|
|
|||
|
Total
|
$
|
$
|
$
|
$
|
|||
Packaging
revenue
is derived mainly from the sale of corrugated and consumer packaging products. The remainder of packaging
revenue
is composed of bag-in-box, packaging solutions and other paper-based packaging products.
19
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
4. Revenue Recognition
- continued
Revenue
Contract Balances
C
ontract assets relate to the manufacture of certain products that have no alternative use to us, with right to payment for performance
completed to date on these products, including a reasonable profit. Contract assets are reduced when the customer takes title to the
goods and assumes the risks and rewards for the goods. Contract liabilities represent obligations to transfer goods or services to a
customer for which we have received consideration and are reduced once control of the goods is transferred to the customer.
Condensed Consolidated Balance Sheets.
|
Contract
Assets
(Short-Term)
|
Contract
Liabilities
(Short-Term)
|
||
|
Beginning balance - January 1, 2025
|
$
|
$
|
|
|
Decrease
|
(
|
(
|
|
|
Ending balance - March 31, 2025
|
$
|
$
|
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Transaction-related costs associated with the Combination
|
$
(
|
$
(
|
|
|
Integration-related costs associated with the Combination
|
(
|
|
|
|
Total transaction and integration-related costs associated with the Combination
|
$
(
|
$
(
|
|
Transaction-related Costs Associated with the Combination
Transaction-related costs associated with the Combination comprise of banking and financing related costs as well as legal and other
professional services which are directly attributable to the Combination and retention payments that are contractually committed to
and associated with the successful completion of the Combination.
Integration-related Costs Associated with the Combination
We incur integration costs post-acquisition that reflect work performed to facilitate merger and acquisition integration and primarily
consist of professional services and personnel and related expenses, such as work associated with information systems.
We consider
transaction and integration costs to be corporate costs regardless of the segment or segments involved in the transaction.
|
March 31,
|
December 31,
|
||
|
2025
|
2024
|
||
|
Gross accounts receivable
|
$
|
$
|
|
|
Less: Allowances
|
(
|
(
|
|
|
Accounts receivable, net
|
$
|
$
|
Allowances
include the reserves for allowance for estimated credit impairment losses, returns, early settlement discounts and rebates
(where netting requirements are met).
20
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
|
March 31,
|
December 31,
|
||
|
2025
|
2024
|
||
|
Finished goods
|
$
|
$
|
|
|
Work-in-progress
|
|
|
|
|
Raw materials
|
|
|
|
|
Consumables and spare parts
|
|
|
|
|
Inventories
|
$
|
$
|
|
March 31,
|
December 31,
|
||
|
2025
|
2024
|
||
|
Land and buildings
|
$
|
$
|
|
|
Plant and equipment
|
|
|
|
|
Construction in progress
|
|
|
|
|
Finance lease right-of-use assets
|
|
|
|
|
Property, plant and equipment at cost, excluding forestlands
|
|
|
|
|
Less: Accumulated depreciation and amortization
|
(
|
(
|
|
|
Property, plant and equipment, net, excluding forestlands
|
$
|
$
|
|
|
Forestlands, net of depletion
|
|
|
|
|
Property, plant and equipment, net
|
$
|
$
|
Depreciation, depletion and amortization expense for the
three months ended
March 31, 2025
and
2024
was
$
569
million
and
$
136
million
, respectively and is recognized within “
Cost of goods sold” and “Selling, general and administrative expenses” in the
Condensed Consolidated
Statements of Operations
.
Non-cash additions to property, plant and equipment included within accounts payable were
$
277
million
and
$
384
million
at
March 31, 2025
and at December 31
2024
, respectively.
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Interest expense
|
$
(
|
$
(
|
|
|
Interest income
|
|
|
|
|
Interest expense, net
|
$
(
|
$
(
|
|
Total cash paid for interest, net of interest received was
$
133
million
and
$
30
million
for the
three months ended
March 31, 2025
and
2024
,
respectively. Of this, capitalized interest paid was
$
7
million
and
$
1
million
for the
three months ended
March 31, 2025
and
2024
,
respectively.
21
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
2 in the fair value hierarchy) were as follows:
|
March 31, 2025
|
December 31, 2024
|
||||||
|
Book Value
|
Fair Value
|
Book Value
|
Fair Value
|
||||
|
Debt with fixed interest rates
|
$
|
$
|
$
|
$
|
|||
The fair value of the Company's debt with fixed interest rates is based on quoted market prices.
With the exception of debt with fixed
interest rates
, the carrying amounts of all other debt instruments approximate their fair values. The variable nature and repricing dates
of the receivables securitization facilities and the revolving credit facility result in their
carrying values approximating their fair
values
. Both the revolving credit facility and the receivables securitization facilities are classified as Level 2 in the fair value
hierarchy.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
summarizes the fair value of these instruments, which are measured at fair value on a recurring basis, by level, within the fair value
hierarchy:
|
Level 1
|
Level 2
|
||||||
|
March 31,
|
December 31,
|
March 31,
|
December 31,
|
||||
|
2025
|
2024
|
2025
|
2024
|
||||
|
Assets
|
|||||||
|
Other Investments:
|
|||||||
|
Listed
|
$
|
$
|
$
|
$
|
|||
|
Unlisted
|
|
|
|
|
|||
|
Derivatives in cash flow hedging relationships
|
|
|
|
|
|||
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|||
|
Assets measured at fair value
|
$
|
$
|
$
|
$
|
|||
|
Liabilities
|
|||||||
|
Derivatives in cash flow hedging relationships
|
$
|
$
|
$
|
$
|
|||
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|||
|
Liabilities measured at fair value
|
$
|
$
|
$
|
$
|
|||
There were no assets or liabilities, which are measured at fair value on a recurring basis, classified as Level 3 in the fair value
hierarchy for the periods presented.
The fair value of listed financial assets is determined by reference to their bid price at the reporting date.
Unlisted financial assets are
valued using recognized valuation techniques for the underlying security including discounted cash flows and similar unlisted equity
valuation models.
The fair value of foreign currency forwards, cross currency swaps and energy hedging contracts is based on their listed market price, if
available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual
forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on
government bonds).
The fair value of natural gas commodity derivatives is estimated based on observable inputs such as commodity future pric
es.
22
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
10. Fair Value Measurement
- continued
We have financial instruments related to supplemental retirement savings plans ("Supplemental Plans") that are recognized at fair
value. These Supplemental Plans are nonqualified deferred compensation plans where participants’ accounts are credited with
investment gains and losses in accordance with their investment election or elections. The investment alternatives under the
Supplemental Plans are generally similar to investment alternatives available under 401(k) plans. Assets and liabilities held in respect
of these Supplemental Plans were carried at
$
190
million
and
$
163
million
, respectively, as o
f
March 31, 2025
(
December 31, 2024
:
$
185
million
and
$
168
million
, respectively)
.
Assets and Liabilities Measured and Recorded at Fair Value on a Non-recurring Basis
In addition to assets and liabilities that are recorded at fair value on a recurring basis, the
Company
records certain assets and liabilities
at fair value on a non-recurring basis. This includes assets acquired and liabilities assumed as a result of business combinations or non-
monetary exchanges, situations where events or changes in circumstances indicate the carrying value may not be recoverable, or when
they are deemed to be other than temporarily impaired. These assets include property, plant, and equipment, goodwill and other
intangible assets, assets and disposal groups held for sale and other non-current assets. The fair values of these assets are determined,
when applicable, based on valuation techniques using the best information available, and may include quoted market prices,
observable price for similar assets, market comparables, and discounted cash flow projections. These non-recurring fair value
measurements are considered to be Level 3 in the fair value hierarchy.
For more details on the measurement of assets acquired and liabilities assumed as part of business combinations affecting the period
balances, refer to “
Note
2. Acquisitions
”
Accounts Receivable Monetization Agreeme
nts
2025
:
|
Receivable from financial institutions at December 31, 2024
|
$
|
|
Receivables sold to the financial institutions and derecognized
|
(
|
|
Receivables collected by financial institutions
|
|
|
Cash payments to financial institutions
|
(
|
|
Receivable from financial institutions at March 31, 2025
|
$
|
Receivables sold under these accounts receivable monetization agreements as of the balance sheet date were
approximately
$
686
million
.
Cash proceeds or payments related to the receivables sold are included in “Net cash provided by operating activities” in the Condensed
Consolidated
Statements of Cash Flows in the “Accounts receivable” line item. The expense related to the sale of receivables was
$
10
million
for the three months ended
March 31, 2025
. The expense recorded may vary depending on current rates and levels of
receivables sold and is recorded in “
Other expense, net
” in the
Condensed Consolidated
Statements of Operations
. Although the sales
are made without recourse, we maintain continuing involvement with the receivables sold as we provide collections services related to
the transferred assets. The associated servicing liability is not material given the high credit quality of the customers underlying the
23
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
|
|
March 31,
|
December 31,
|
|
|
2025
|
2024
|
||
|
$
|
$
|
$
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
€
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
€
|
|
|
|
|
€
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
€
|
|
|
|
|
€
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
€
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
$
|
|
|
|
|
Commercial paper
|
|
|
|
|
Vendor financing and commercial card programs
|
|
|
|
|
Term loan facilities
|
|
|
|
|
Bank loans
|
|
|
|
|
Finance lease obligations
|
|
|
|
|
Bank overdrafts
|
|
|
|
|
Total debt, excluding debt issuance costs
|
|
|
|
|
Debt issuance costs
|
(
|
(
|
|
|
Total debt
|
|
|
|
|
Less: Current portion of debt
|
(
|
(
|
|
|
Non-current debt due after one year
|
$
|
$
|
For the terms attached to the senior notes, the revolving credit facility, the term loans and the commercial paper programs, refer to the
narrative included in “
Note 14
. Debt” of the 2024 Consolidated Financial Statements. The carrying amount of borrowings which are
designated as net investment hedges, as outlined therein, has not changed materially and no ineffectiveness was recognized in the
period.
At March 31, 2025, all of our debt was unsecured with the exception of our receivables securitization facilities and finance lease
obligations.
24
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
11. Debt
- continued
S
enior Notes Issued and Redeemed
There were no significant transactions during the period
in relation to the senior notes. Certain notes were subject to an exchange offer
filed past the period end. For further details, refer to
"Note
18. Subsequent Events
"
.
Receivables Securitization Facilities
We have
three
trade receivables securitization programs. The first program has a facility size of
€
100
million
and is scheduled to
mature in December
2029.
The second program has a facility size of
€
230
million
and is scheduled to mature in December 202
9
.
The
third program has a facility size of
$
700
million
and is due to mature in
June 2027.
For the terms attached to these programs, refer to
the narrative included in “Note 14. Debt” of the 2024 Consolidated Financial Statements.
As of
March 31, 2025
, the gross amount of receivables collateralizing the
€
100
million
2029 trade receivables securitization program
was
€
312
million
(
December 31, 2024
:
€
318
million
). As of
March 31, 2025
, maximum available borrowings, excluding amounts
outstanding under this facility, were
$
108
million
(
December 31, 2024
:
$
104
million
).
As of March 31, 2025, the gross amount of receivables collateralizing the
€
230
million
2029 trade receivables securitization program
was
€
435
million
(
December 31, 2024
:
€
421
million
). As of
March 31, 2025
maximum available borrowings, excluding amounts
outstanding under this facility, were
$
87
million
(
December 31, 2024
:
$
234
million
).
As of March 31, 2025, the gross amount of receivables collateralizing the maximum available borrowings of the
$
700
million
2027
program was
$
1,079
million
(
December 31, 2024
:
$
1,077
million
).
As of
March 31, 2025
,
maximum available borrowings
were
$
688
million
(
December 31, 2024
:
$
676
million
)
. As of
March 31, 2025
, amounts available for borrowing under this facility (excluding
amounts utilized), were
$
138
million
(
December 31, 2024
:
$
241
million
)
.
We have continuing involvement with the underlying receivables as we provide credit and collection services pursuant to the
The effective tax rate for the three months ended
March 31, 2025
was
2.1
%
. The effective tax rate was primarily impacted by the tax
benefit associated with the resolution of
$
72
million
of unrecognized tax benefits (due to the lapse of the statute of limitations), along
with the release of
$
24
million
of accrued interest and penalties associated with the unrecognized tax benefits.
The effective tax rate
was further impacted by the geographical mix of where earnings are generated and certain non-deductible expenses.
The effective tax rate for the three months ended
March 31, 2024
was
28.5
%
. The effective tax rate was impacted by the geographical
mix of where earnings are generated, as well as certain non-taxable earnings and non-deductible expenses.
During the three months ended
March 31, 2025
and
March 31, 2024
, cash paid for income taxes, net of refunds, was
$
107
million
and
25
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
|
Defined Benefit Pension Plans
|
|||||||
|
U.S. Plans
|
Non-U.S. Plans
|
||||||
|
Three months ended March 31,
|
Three months ended March 31,
|
||||||
|
2025
|
2024
|
2025
|
2024
|
||||
|
Service cost
|
$
|
$
|
$
|
$
|
|||
|
Interest cost
|
|
|
|
|
|||
|
Expected return on assets
|
(
|
(
|
(
|
(
|
|||
|
Amortization of:
|
|||||||
|
Net actuarial loss
|
|
|
|
|
|||
|
Prior service credit
|
|
|
(
|
|
|||
|
Net periodic benefit (income) cost
|
$
(
|
$
|
$
|
$
|
|||
|
Other Postretirement Benefit Plans
|
|||
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Service cost
|
$
|
$
|
|
|
Interest cost
|
|
|
|
|
Net periodic benefit cost
|
$
|
$
|
|
Service
cost is included within “
Cost of goods sold” and “Selling, general and administrative expenses”
while all other components
are recorded within “
Pension and other postretirement non-service income (expense), net
”
.
Pension Plan Contributions and Benefit Payments
Established funding standards govern the funding requirements for our qualified and approved
pension plans
in various jurisdictions.
We fund the benefit payments of our non-qualified or unfunded plans as benefit payments come due.
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Defined Benefit Pension Plans Contributions
|
$
|
$
|
|
|
Other Postretirement Benefit Plans Contributions
|
|
|
|
Multiemployer Plans
As a result of the acquisition of WestRock, we participate in several multiemployer pension plans (“MEPP” or “MEPPs”) that provide
retirement benefits to certain union employees in accordance with various collective bargaining agreements and WestRock has
participated in other MEPPs in the past
. The multiemployer plan expense was immaterial for the three months ended
March 31, 2025
.
In the normal course of business, we evaluate our potential exposure to MEPPs, including potential withdrawal liabilities.
26
Smurfit Westrock plc
Notes to Condensed Consolidated Financial Statements
(in millions, except per share data)
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Numerator:
|
|||
|
Net income attributable to common shareholders
|
$
|
$
|
|
|
Denominator:
|
|||
|
Basic weighted average shares outstanding
|
|
|
|
|
Effect of dilutive share options
|
|
|
|
|
Diluted weighted average shares outstanding
|
|
|
|
|
Basic earnings per share attributable to common shareholders
|
$
|
$
|
|
|
Diluted earnings per share attributable to common shareholders
|
$
|
$
|
|
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. These comprise of restricted stock units, performance stock units and performance
shares issued under the
Company
’s long-term incentive plans.
For the
three months ended
March 31, 2025
, and
2024
, respectively, there were
no
material weighted average share-based
compensation awards excluded from the diluted earnings per share computation because the effect would have been antidilutive.
Brazil Tax Liability
Our subsidiary, WestRock, is challenging claims by the Brazil Federal Revenue Department that we underpaid taxes as a result of
amortization of goodwill generated by the 2002 merger of
two
of its Brazilian subsidiaries. The matter has proceeded through the
Brazil Administrative Council of Tax Appeals (“CARF”) principally in
two
proceedings, covering tax years 2003 to 2008 and 2009 to
201
2. W
estRock was assessed additional taxes, penalties, and interest in both CARF proceedings.
In the proceeding for the tax years
2003 to 2008, WestRock was also assessed penalties and interest for fraud, but WestRock won the fraud claim in the proceeding for
the tax years 2009 to 2012. WestRock subsequently filed
two
lawsuits in Brazilian federal courts seeking annulment of the adverse
CARF decisions. In February 2025, the federal court adjudicating the WestRock challenge to CARF's decision against WestRock for
the 2003 and 2008 period issued a ruling in favor of WestRock nullifying the financial assessments in that case. The decision of the
federal court was appealed by the tax authorities.
We assert that we have no liability in these matters. The total amount in dispute in the
two
cases before CARF and in the annulment
actions relating to the claimed tax deficiency was
R$
761
million
(
$
132
million
) as of
March 31, 2025
, including various penalties and
interest. Resolution of the tax positions could have a material adverse effect on our cash flows and results of operations or materially
benefit our results of operations in future periods depending upon their ultimate resolution.
27
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
15. Commitments and Contingencies
- continued
Asbestos-Related Litigation
We have been named as a defendant in asbestos-related personal injury litigation, primarily in relation to the historical operations of
certain companies that have been acquired by the
Company
. To date, the costs resulting from the litigation, including settlement costs,
have not been significant. We accrue for the estimated value of pending claims and litigation costs using historical claims information,
as well as the estimated value of future claims based on our historical claims experience. As of
March 31, 2025
, there were
approximately
690
such lawsuits. We believe that we have substantial insurance coverage, subject to applicable deductibles and policy
limits, with respect to asbestos claims. We also believe we have valid defenses to these asbestos-related personal injury claims and
intend to continue to contest these matters vigorously. Should the
Company
’s litigation profile change substantially, or if there are
adverse developments in applicable law, it is possible that the
Company
could incur significantly more costs resolving these cases. We
record asbestos-related insurance recoveries that are deemed probable. In assessing the probability of insurance recovery, we make
judgments concerning insurance coverage that we believe are reasonable and consistent with our historical dealings and our
knowledge of any pertinent solvency issues surrounding the insurers. The
Company
currently does not expect the resolution of
pending asbestos litigation and proceedings to have a material adverse effect on the
Company
’s results of operations, financial
condition or cash flows. As of
March 31, 2025
, the
Company
had estimated liabilities in respect of these matters of
$
69
million
and
estimated insurance recoveries of
$
45
million
.
Italian Competition Authority Investigation
In August 2019, the Italian Competition Authority (the “AGCM”) notified approximately
30
companies, of which Smurfit Kappa
Italia, a subsidiary of Smurfit Westrock, was one, that an investigation had found the companies to have engaged in anti-competitive
practices, in relation to which the AGCM levied a fine of approximately
$
138
million
on Smurfit Kappa Italia, which was paid in
2021.
In October 2019, Smurfit Kappa Italia appealed the AGCM’s decision to the First Administrative Court of Appeal (TAR Lazio),
however Smurfit Kappa Italia was later notified that this appeal had been unsuccessful. In September 2021, Smurfit Kappa Italia filed
a further appeal to the Council of State which published its ruling in February 2023. While some grounds of appeal were dismissed,
the Council of State upheld Smurfit Kappa Italia’s arguments regarding the quantification of the fine. As a result, the AGCM was
directed to recalculate Smurfit Kappa Italia’s fine. On March 7, 2024, the AGCM notified Smurfit Kappa Italia that its fine had been
reduced by approximately
$
18
million
. Smurfit Kappa Italia has appealed the amount of this reduction and a decision on that appeal is
expected later in 2025.
Separate to these proceedings regarding the fine, in May 2023, Smurfit Kappa Italia filed an application with the Council of State for
revocation of the February 2023 ruling to the extent that it failed to consider certain pleas that had been raised by Smurfit Kappa Italia
on appeal. One such plea is to be (re-)assessed by the Council of State, which, if successful, could determine the partial annulment of
the August 2019 AGCM decision, although this would not impact the size of the fine levied on Smurfit Kappa Italia. A decision is
expected later in 2025.
After publication of the AGCM’s August 2019 decision, a number of purchasers of corrugated sheets and boxes initiated litigation
proceedings against Smurfit Kappa companies, alleging that they were harmed by the alleged anti-competitive practices and seeking
damages. In addition, other parties have threatened litigation against Smurfit Westrock seeking damages (either specified or
unspecified). The Company believes it has significant defenses to the damages claims and intends to vigorously defend the current and
any future litigation.
28
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
15. Commitments and Contingencies
- continued
International Arbitration Against Venezuela
Smurfit Kappa, which is now a subsidiary of Smurfit Westrock, announced in 2018 that due to the Government of Venezuela’s
measures, Smurfit Kappa no longer exercised control over the business of Smurfit Kappa Carton de Venezuela. Smurfit Kappa’s
Venezuelan operations were therefore deconsolidated in the third quarter of 2018. Later that year, Smurfit Kappa’s wholly owned
subsidiary, Smurfit Holdings BV, filed an international arbitration claim against the Bolivarian Republic of Venezuela before the
World Bank’s International Center for Settlement of Investment Disputes (“ICSID”) seeking compensation for Venezuela’s unlawful
seizure of its Venezuelan business as well as for other arbitrary, inconsistent and disproportionate State measures that destroyed the
value of its investments in Venezuela. Following the exchange of written submissions, an oral hearing was held in September 2022 in
Paris.
On August 28, 2024, upon the completion of its deliberations, the arbitral tribunal issued an award granting Smurfit Holdings BV,
then a wholly owned subsidiary of Smurfit Westrock, compensation in excess of
$
469
million
, plus legal costs of
$
5
million
, plus
interest from May 31, 2024, until the date of payment (the “Award”). In September 2024 Smurfit Holdings BV initiated proceedings
against the Bolivarian Republic of Venezuela to enforce the Award. In December 2024, the Bolivarian Republic of Venezuela applied
to ICSID to annul the Award. An Annulment Committee has since been formed by ICSID to decide on this application.
Other Litigation
We are a defendant in a number of other lawsuits and claims arising out of the conduct of our business. While the ultimate results of
such suits or other proceedings against us cannot be predicted as of the date of this Quarterly Report on Form 10-Q, we believe the
resolution of these other matters will not have a material adverse effect on our results of operations, financial condition or cash flows.
Trade Receivables Securitization Arrangements
The
Company
is a party to arrangements involving securitization of its trade receivables. The arrangements required the establishment
of certain special purpose entities namely Smurfit Kappa International Receivables DAC, Smurfit Kappa Receivables plc and Smurfit
Kappa European Packaging DAC (a subsidiary of Smurfit Kappa Receivables plc). The sole purpose of the securitization entities is the
raising of finance for the
Company
using the receivables generated by certain operating entities, as collateral. All entities are
considered to be Variable Interest Entities (“VIEs”).
The
Company
is the primary beneficiary of Smurfit Kappa International Receivables DAC, Smurfit Kappa European Packaging DAC
and Smurfit Kappa Receivables plc, through various financing arrangements and due to the fact that it is responsible for the entities’
most significant economic activities.
The carrying values of the restricted
asset
and limited recourse liability as of
March 31, 2025
(
$
809
million
and
$
162
million
,
r
espectively) and as of
December 31, 2024
(
$
765
million
and
$
5
million
,
respectivel
y)
approximate
their fair values due to the short-
term nature of the securitized assets and the floating rates of the liabilities.
Timber Note Receivable Securitization Arrangement
The
Company
is also a party to an arrangement involving securitization of its note receivable. Pursuant to the sale of forestlands in
2007, a special purpose entity (“SPE”) namely MeadWestvaco Timber Notes Holding, LLC (“MWV TN”) received an installment
note receivable in the amount of
$
398
million
(“Timber Note”). Using this installment note as collateral, the SPE received proceeds
under secured financing agreements, which is recorded as a non-recourse liability.
29
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
16. Variable Interest Entities
- continued
Timber Note Receivable Securitization Arrangement
- continued
Using the Timber Note as collateral, MWV TN received
$
338
million
in proceeds under a secured financing agreement with a bank.
Under the terms of the agreement, the liability from this transaction is non-recourse to the
Company
and is payable from the Timber
Note proceeds upon its maturity in October 2027. As a result, the Timber Note is not available to satisfy any obligations of the
Company
. MWV TN can elect to prepay at any time the liability in whole or in part, however, given that the Timber Note is not
prepayable, MWV TN expects to repay the liability at maturity from the Timber Note proceeds.
The
Company
is the primary beneficiary of MWV TN through various financing arrangements and due to the fact that it is responsible
for the entity’s most significant economic activities. This entity is considered to be a VIE.
The carrying
values
of the restricted asset and non-recourse liability as o
f
March 31, 2025
(
$
388
million
and
$
333
million
,
re
spectively
) and as of
December 31, 2024
(
$
387
million
and
$
333
million
, respectively) approximate their fair
values
due to their
floating rates. The fair values of the restricted assets and non-recourse liabilities are classified as level 2 within the fair value
hierarchy.
Green Power Solutions
Green Power Solutions of Georgia, LLC (“GPS”) is a joint venture providing steam to the
Company
and electricity to a third party
client. The
Company
owns a
48
%
interest in GPS and the majority of the debt issued through the entity SP Fiber Holdings Inc. (“SP
Fiber”), a
100
%
owned subsidiary. Based on the commercial and financial relationships in force between SP Fiber and GPS, it has
been determined that the SP Fiber has a controlling financial interest in and is the primary beneficiary of GPS. The vehicle held
unrestricted cash
of
$
2
million
and
$
2
million
as of
March 31, 2025
and
December 31, 2024
, respectively.
the following table:
|
March 31,
|
December 31,
|
||
|
2025
|
2024
|
||
|
Assets
|
|||
|
Current assets:
|
|||
|
Cash and cash equivalents
|
$
|
$
|
|
|
Accounts receivable
|
|
|
|
|
Non-current assets:
|
|||
|
Property, plant and equipment, net
|
|
|
|
|
Other non-current assets
|
|
|
|
|
Total assets
|
$
|
$
|
|
|
Liabilities
|
|||
|
Current liabilities:
|
|||
|
Accounts payable
|
$
|
$
|
|
|
Current portion of debt
|
|
|
|
|
Other current liabilities
|
|
|
|
|
Non-current liabilities:
|
|||
|
Non-current debt due after one year
|
|
|
|
|
Other non-current liabilities
|
|
|
|
|
Total liabilities
|
$
|
$
|
30
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
March 31, 2025
and
2024
:
|
Foreign
Currency
Translation
|
Cash Flow
Hedges
|
Defined Benefit
Pension and
Postretirement
Plans
|
Other Reserves
(1)
|
Total
(2)
|
|
|
Balance at December 31, 2023
|
$
|
$
|
$
|
$
(
|
$
|
|
Other comprehensive loss (income)
|
|
|
(
|
|
|
|
Balance at March 31, 2024
|
$
|
$
|
$
|
$
(
|
$
|
|
Balance at December 31, 2024
|
$
|
$
|
$
|
$
(
|
$
|
|
Other comprehensive (income) loss
|
(
|
(
|
|
|
(
|
|
Balance at March 31, 2025
|
$
|
$
|
$
|
$
(
|
$
|
(1)
This relates to a reverse acquisition reserve which arose on the creation of a new parent of the
Company
prior to the United
Kingdom and Ireland listings.
(2)
All amounts are net of tax and noncontrolling interest.
March 31, 2025
, and
2024
, is as follows:
|
Three months ended March 31,
|
|||||||
|
2025
|
2024
|
||||||
|
Pre-Tax
|
Tax
|
Net of
Tax
|
Pre-Tax
|
Tax
|
Net of
Tax
|
||
|
Foreign currency translation gain (loss)
|
$
|
$
|
$
|
$
(
|
$
|
$
(
|
|
|
Defined benefit pension and other post-retirement benefit plans:
|
|||||||
|
Net actuarial loss arising during period
|
|
|
|
(
|
|
(
|
|
|
Amortization and settlement recognition of net actuarial loss
|
|
|
|
|
(
|
|
|
|
Amortization of prior service credit
|
(
|
|
(
|
|
|
|
|
|
Foreign currency (loss) gain - pensions
|
(
|
|
(
|
|
|
|
|
|
Derivatives:
|
|||||||
|
Changes in fair value of cash flow hedges
|
|
|
|
(
|
|
(
|
|
|
Consolidated other comprehensive income (loss)
|
|
|
|
(
|
(
|
(
|
|
|
Less: Other comprehensive (income) loss attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) attributable to common shareholders
|
$
|
$
|
$
|
$
(
|
$
(
|
$
(
|
|
31
Smurfit Westrock plc
Notes
to the Condensed Consolidated Financial Statement
s
(Unaudited
)
(in millions,
except
per share data)
Offer to Exchange Previously Unregistered Notes
On April 3, 2025, the Company and certain of its direct and indirect wholly owned subsidiaries (the “Obligor Group”) filed with the
SEC a registration statement on Form S-4, with respect to an offer to exchange unregistered senior unsecured notes of
$
2,750
million
principal amount previously issued on April 3, 2024 (see “Note 2. Acquisitions” of the 2024 Consolidated Financial Statements) and
unregistered senior unsecured notes of
$
850
million
principal amount previously issued on November 26, 2024 (collectively, the
“Original Notes”) for registered notes of the same aggregate principal amount, interest and maturity dates and coupons (the “New
Notes”). The terms of the New Notes are identical in all material respects to the Original Notes except for the New Notes will not have
any transfer restrictions, registration rights or additional interest provisions. No new proceeds will be received by the Obligor Group in
connection with the exchange offer. The SEC declared the registration statement effective on April 23, 2025 and the exchange offer
commenced that same day and is scheduled to expire on May 21, 2025.
Capacity Reduction and Facility Closures
On April 30, 2025, the Company announced it will permanently close the Company’s coated recycled board (“CRB”) mill in St. Paul,
Minnesota, U.S. and will discontinue production at its containerboard mill in Forney, Texas, U.S. (the “Mill Closures”). The Company
has also initiated consultations with local works councils in Germany with a view
to permanently closing
two
converting facilities
there (together with the Mill Closures, the “Closures”). Approximately
650
employees in the U.S. and Germany will be impacted as a
result of the Closures. The Mill Closures are expected to reduce the Company’s containerboard and CRB capacity by over
500,000
tons
annualized.
The Company expects to incur aggregate (i) pre-tax cash charges of approximately
$
99
million
associated with the Closures,
consisting of approximately
$
42
million
in severance payments and
$
57
million
in other restructuring costs and (ii) pre-tax non-cash
asset impairment charges of approximately
$
188
million
. The Company will recognize
$
226
million
of the charges in the second
quarter of 2025 and the remaining amount of
$
61
million
is expected to be recognized over the remainder of 2025 and into 2026.
Headcount reductions are subject to local regulatory requirements. The estimate of charges that the Company expects to incur and the
timing thereof are subject to a number of assumptions and actual results may differ from current expectations and initial
estimates
.
Dividend Approval
On May 1, 2025, the Company announced that its Board approved a quarterly dividend of
$
0.4308
pe
r share on its ordinary shares.
The quarterly dividend of
$
0.4308
per ordinary share is payable June 18
, 2025
to shareholders of record at the close of business on
May 16, 2025.
32
Item 2. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion and analysis of Smurfit Westrock’s financial condition and results of operations should be read in
conjunction with Smurfit Westrock’
s Unaudited
Condensed Consolidated Financial Statements and their related notes included
elsewhere in this Quarterly Report on Form 10-Q and our audited Consolidated Financial Statements and their related notes for the
year ended December 31, 2024, as well as the information under the heading “Management’s Discussion and Analysis of the
Financial Condition and Results of Operations” that were disclosed in the Form 10-K for the year ended December 31, 2024, as filed
with the U.S. Securities and Exchange Commission (the “SEC”) on March 7, 2025 (the “2024 Form 10-K”). This discussion contains
forward-looking statements that involve risks and uncertainties. Smurfit Westrock’s future results could differ materially from the
results discussed below. More information regarding these risks and uncertainties and other important factors that could cause actual
results to differ materially from those in the forward-looking statements is set forth under the heading “Risk Factors” in Part I, Item
1A. in the 2024 Form 10-K, and as may be updated in this and other subsequent Quarterly Reports on Form 10-Q.
Please also refer to
the section above entitled “Cautionary Note Regarding Forward-Looking Statements" for additional information.
Smurfit Kappa was determined to be the accounting acquirer in the Combination; therefore, the historical consolidated financial
statements of Smurfit Kappa for periods prior to the Combination were also considered to be the historical financial statements of the
Company. Unless otherwise specified or the context otherwise requires, all references to the “Company” and “Smurfit Kappa” refer
to Smurfit Kappa Group plc and its subsidiaries and their operations when referring to periods prior to the closing of the
Combination, and references to the “Company” and “Smurfit Westrock” refer to the combined company, Smurfit Westrock and its
subsidiaries, including, among others, Smurfit Kappa and WestRock, when referring to periods after the Combination.
OVERVIEW
Smurfit Westrock is one of the world's largest integrated manufacturers of paper-based packaging products in terms of volumes and
sales, with operations in North America, South America, Europe, Asia, Africa, and Australia. Smurfit Westrock partners with its
customers to provide differentiated, sustainable paper and packaging solutions that enhance its customers’ prospects of success in their
markets.
Transaction Agreement and Combination with WestRock
As described in
“Note
2. Acquisitions
” of the
Condensed
Consolidated Financial Statements,
the Combination closed on July 5, 2024
.
The consolidated financial statements of Smurfit Westrock following the Smurfit Kappa Share Exchange are a continuation of the
financial statements of Smurfit Kappa and therefore, the historical consolidated financial information for periods prior to the
Combination, including the comparatives presented, reflect the pre-Combination carrying values of Smurfit Kappa except for the
retrospective adjustment to reflect the Company’s legal share capital as the successor after giving effect to the Smurfit Kappa Share
Exchange.
Refer to “Note
2. Acquisitions
” of the
Condensed
Consolidated Financial Statements for additional information related to
the
accounting for the Combination.
Recent Developments
Capacity Reduction and Facility Closures
On April 30, 2025, we announced our plan to permanently close our CRB mill in St. Paul, Minnesota, U.S. and discontinue production
at our containerboard mill in Forney, Texas, U.S.. The Company has also initiated consultations with local works councils in Germany
with a view to permanently closing two converting facilities there. The mill closures are expected to reduce our capacity by over
500,000
tons. The mill closures and two converting facility closures are not expected to have a significant impact on our net
sales
as
we aim to match our supply with customer dem
and.
33
We expect to record approximately
$287 million
of
certain pre-tax charges associated with
these
closures
(including $188 million of
pre-tax non-cash asset impairment charges) over the remainder of 2025 and into 2026. See “Note
18. Subsequent Events
” of the
Condensed
Consolidated Financial Statements for additional informatio
n.
Excluding these charges, the elimination of corresponding
fixed costs is anticipated to increase overall profitability
.
EXECUTIVE SUMMARY
Smurfit Westrock’s net sales
increased
by $
4,726
million, to $
7,656
million in the
three months ended
March 31, 2025
, from
$2,930
million
in the
three months ended
March 31, 2024
.
As described in greater detail below, t
hi
s increase was primarily due to the
acquisition of WestRock along with a higher
selling price
mix, partly offset by a negative foreign currency impact and a negative
volume impact.
Net income attributable to common shareholders
increased
by
$193 million
, to
$384 million
in the
three months ended
March 31,
2025
, from
$191 million
in the
three months ended
March 31, 2024
. This increase was primarily due to the acquisition of Westrock,
with the positive impact of the Combination partially offset by
higher interest expense. Refer to “Results of Operations” for a detailed
review of Smurfit Westrock’s performance.
Net cash provided by operating activities
increased
by
$193
million, to $
235
million in the
three months ended
March 31, 2025
, from
$
42
million in the
three months ended
March 31, 2024
, primarily due to a
$627
million increase in net income adjusted for non-cash
items, including depreciation, depletion and amortization, cash surrender value increase in excess of premiums paid, share-based
compensation expense,
deferred income tax benefit
, and pension and other postretirement funding more than
cost
. The increase in net
income adjusted for non-cash items was partially offset by the
$434
million increase in the cash outflows from changes in operating
assets and liabilities as a result of the Combination and
a
higher selling price mix
. During the
three months ended
March 31, 2025
,
Smurfit Westrock invested $
477
million in capital expenditures
.
The Company’s net cash inflow from changes in debt was
$444
million
, and it paid $
225
million of cash dividends to shareholders. See the section entitled “Liquidity and Capital Resources” below
for additional information.
SIGNIFICANT FACTORS AND TRENDS AFFECTING SMURFIT WESTROCK’S RESULTS
Smurfit Westrock’s operations have been, and will continue to be, affected by many factors, some of which are beyond the Company’s
control. Smurfit Westrock’s net sales are primarily derived from the sale of containerboard, corrugated containers, paperboard,
consumer packaging, and other paper-based packaging products. As such, Smurfit Westrock’s net sales during any period are largely
influenced by volumes, prices and costs of the corrugated containers and consumer packaging products that Smurfit Westrock sells
during that period.
Volumes
In general, demand for corrugated containers and consumer packaging is closely correlated with overall economic growth and activity.
It also directionally correlates with levels of industrial production and is impacted by the trends affecting the choice of medium (paper,
plastic, glass, metal, or wood) used in the packaging of these products. As a result, demand is driven by the need for: (i) packaging
products for consumer and industrial goods, (ii) higher value-added corrugated products used for point-of-sale displays and consumer
and shelf-ready packaging, and (iii) packaging of pharmaceutical products and the growth of related industries. Normal patterns of
demand growth can be disrupted by other macroeconomic trends, including inflation, pandemics (such as the COVID-19 pandemic
and related lockdowns), and global economic and geopolitical developments
(including tariffs or other trade restrictions
), among
others.
Consumer patterns also play a significant role in demand for corrugated packaging and consumer packaging. In recent years, shifting
consumer behaviors have accelerated, particularly with the rise of e-commerce and increased awareness of unsustainable packaging
solutions. These trends have, to date, been beneficial for paper-based packaging, which is typically made from renewable, recyclable
materials.
Changing demographics can also influence demand trends in the pharmaceutical industry, a major user of consumer
packaging.
34
Prices and Costs
Prices of corrugated containers and consumer packaging are primarily a function of the cyclical nature of Smurfit Westrock’s industry,
capacity and competition in the markets it operates in, prevailing raw material prices, and other operating costs, such as energy,
chemicals, and transportation, overlaying supply and demand balances.
As paper costs generally represent a large portion of the cash cost of production for corrugated containers or consumer packaging,
containerboard price movements tend to impact the prices of corrugated containers. In turn, the cost of paper is influenced by
movements in the price of its major raw materials—wood or recycled paper—along with other supply and demand factors. Smurfit
Westrock’s production processes are energy-intensive, making production costs also sensitive to the price of energy (primarily gas and
electricity), which have historically been volatile. Other key cost drivers include employee benefit expenses, largely determined by
workforce size, and shipping and handling costs, which are generally affected by fuel prices and overall labor inflation.
While many of Smurfit Westrock’s customer contracts include price adjustment clauses that allow cost increases to be passed on to
customers, these clauses may not in all cases be effective to offset rising costs. Additionally, for corrugated and consumer packaging
products, even when Smurfit Westrock is able to implement price increases, there is typically a three- to six-month lag between raw
material price hikes and the realization of higher pricing from customers.
Foreign Currency Effects
Smurfit Westrock operates in multiple countries across North America, Europe, MEA, APAC, and LATAM. As a result, currency
fluctuations can have both direct and indirect impacts on its financial statements, which are presented in U.S. dollars.
35
RESULTS OF OPERATIONS
The following table summarizes Smurfit Westrock’s consolidated results for the periods presented ($ in millions):
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Net sales
|
$
7,656
|
$
2,930
|
|
|
Cost of goods sold
|
(6,079)
|
(2,220)
|
|
|
Gross profit
|
1,577
|
710
|
|
|
Selling, general and administrative expenses
|
(988)
|
(380)
|
|
|
Transaction and integration-related expenses associated with the Combination
|
(36)
|
(23)
|
|
|
Operating profit
|
553
|
307
|
|
|
Pension and other postretirement non-service income (expense), net
|
9
|
(10)
|
|
|
Interest expense, net
|
(167)
|
(25)
|
|
|
Other expense, net
|
(5)
|
(5)
|
|
|
Income before income taxes
|
390
|
267
|
|
|
Income tax expense
|
(8)
|
(76)
|
|
|
Net income
|
382
|
191
|
|
|
Net loss attributable to noncontrolling interests
|
2
|
—
|
|
|
Net income attributable to common shareholders
|
$
384
|
$
191
|
|
Results of operations for the
three months ended
March 31, 2025
, compared to the
three months ended
March 31, 2024
Net Sales
Net sales
increased
by
$4,726 million
, to
$7,656 million
in the
three months ended
March 31, 2025
, from
$2,930 million
in the
three
months ended
March 31, 2024
. This increase was primarily due to the impact of
$4,736 million
related to the acquisition of WestRock.
Excluding the impact of this acquisition, net sales decreased by $10 million primarily resulting from a $175 million net negative
foreign currency impact and a negative volume impact of $43 million, largely offset by a $209 million positive impact due to a higher
selling price
mix. See “Segment Information” below for more detail on Smurfit Westrock’s segment results.
Cost of Goods Sold
Cost of goods sold
increased
by $
3,859
million, to
$6,079 million
in the
three months ended
March 31, 2025
, from
$2,220 million
in
the
three months ended
March 31, 2024
. The increase in cost of goods sold was primarily due to the impact of the acquisition of
WestRock of $3,930 million
.
Excluding the impact of this acquisition, cost of goods sold decreased by $71 million
primarily due to
net positive foreign currency movements and lower volumes, partly offset by higher input prices.
Selling, General and Administrative (“SG&A”) Expenses
SG&A expenses
increased
by $
608
million, to
$988 million
in the
three months ended
March 31, 2025
, from
$380 million
in the
three
months ended
March 31, 2024
. The increase in SG&A expenses of $
608
million was primarily due to additional SG&A expenses of
$570 million related to the acquisition of WestRock.
36
Transaction and Integration-related Expenses Associated with the Combination
The Company incurred transaction and integration-related expenses associated with the Combination of
$36
million and
$23 million
in
the
three months ended
March 31, 2025
and
2024
, respectively.
Transaction-related expenses associated with the Combination were
$2 million
and
$23 million
in the
three months ended
March 31,
2025
and
2024
, respectively. Transaction-related costs associated with the Combination comprised of banking and financing related
costs as well as legal and other professional services which were directly attributable to the Combination and retention payments that
were contractually committed to and associated with the successful completion of the Combination.
Integration-related expenses associated with the Combination were
$34 million
in the
three months ended
March 31, 2025
.
We incur
integration costs post-acquisition that reflect work performed to facilitate merger and acquisition integration and primarily consist of
professional services and personnel and related expenses, such as work associated with information systems.
Pension and Other Postretirement Non-Service Income (
Expense), Net
Pension and other postretirement non-service income (expense), net
decreased
by $
19
million,
to income of
$9
million in the
three
months ended
March 31, 2025
,
from expense of
$10 million
in the
three months ended
March 31, 2024
. This
decrease
was primarily
due to an $80 million increase in the return on plan assets primarily due to acquired pension assets in connection with the
Combination, that was partially offset by an increase in interest costs of $64 million primarily due to acquired pension liabilities in
connection with the Combination.
Interest Expense, Net
Interest expense, net
increased
by
$142 million
to
$167
million in the
three months ended
March 31, 2025
, from
$25 million
in the
three months ended
March 31, 2024
. The increase was primarily the result of interest on debt assumed as part of the Combination and
the senior notes issued in
April 2024 (for further details on these senior notes see “
Note 14.
Debt”
of the 2024 Consolidated Financial
Statements).
The increase was partially offset by higher interest income of
$16 million
primarily due to increased average cash
balances in the period
.
Other Expense, Net
Other expense, net remained at
$5 millio
n
in the
three months ended
March 31, 2025
, consistent with
the
three months ended
March 31, 2024
due to a $6 million net positive impact from foreign currency translation of monetary assets and liabilities and a $4
million
increase in income from equity method investments. This was offset by a $10 million expense recorded in the
three months
ended
March 31, 2025
in connection with the sale of receivables under an accounts receivable monetization program acquired as a
result of the Combination
.
Income Tax Expense
Income tax expense was $
8
million in the three months ended
March 31, 2025
, compared to an income tax expense of $
76
million in
the three months ended
March 31, 2024
. The effective tax rate for the three months ended
March 31, 2025
, was
2.1%
, while the
effective tax rate for the three months ended
March 31, 2024
, was
28.5%
. The effective tax rate was primarily impacted by the
resolution of certain unrecognized tax benefits.
See “Note
12. Income Taxes
” of the
Condensed
Consolidated Financial Statements for the primary factors impacting our effective tax
rates.
37
SEGMENT INFORMATION
Smurfit Westrock has identified
three
operating segments based on how the CODM makes key operating decisions, allocates resources
and assesses the performance of the Company’s business. These operating segments are as follows: (i) North America, which includes
operations in the U.S., Canada and Mexico, (ii) Europe, MEA and APAC and (iii) LATAM, which includes operations in Central
America and Caribbean, Argentina, Brazil, Chile, Colombia, Ecuador and Peru.
No operating segments have been aggregated for
disclosure purposes.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis, but
exclude certain central costs such as corporate costs, including executive costs, and costs of Smurfit Westrock’s legal, company
secretarial, pension administration, tax, treasury and controlling functions and other administrative costs.
Segment profitability is
measured based on Adjusted EBITDA, defined as
income before income taxes
,
unallocated corporate costs
,
depreciation, depletion
and amortization
,
interest expense, net
,
pension and other postretirement non-service income (expense), net
,
share-based compensation
expense
,
other expense, net
,
amortization of fair value step up on inventory
,
transaction and integration-related expenses associated
with the Combination
and other specific items that management believes are not indicative of the ongoing operating results of the
business
.
The following table contains selected financial information for Smurfit Westrock’s segments for the periods presented
($ in millions):
|
Three months ended March 31,
|
|||
|
2025
|
2024
|
||
|
Net sales (aggregate):
(1)
|
|||
|
North America
|
$
4,669
|
$
412
|
|
|
Europe, MEA and APAC
|
2,582
|
2,194
|
|
|
LATAM
|
513
|
341
|
|
|
Segment Adjusted EBITDA:
|
|||
|
North America
|
$
785
|
$
59
|
|
|
Europe, MEA and APAC
|
389
|
385
|
|
|
LATAM
|
115
|
54
|
|
(1)
Net sales before intersegment eliminations
38
The
three months ended
March 31, 2025
, compared to the
three months ended
March 31, 2024
North America Segment
Net Sales
Net sales before intersegment eliminations for the North America segment
increased
by $
4,257
million, to $
4,669
million in the
three
months ended
March 31, 2025
, from
$412 million
in the
three months ended
March 31, 2024
. This
increase
was primarily due to the
positive impact of $4,276 million from the acquisition of WestRock.
Adjusted EBITDA
Adjusted EBITDA for the North America segment
increased
by $
726
million, to
$785
million in the
three months ended
March 31,
2025
, from
$59 million
in the
three months ended
March 31, 2024
. This
increase
was primarily due to the positive impact of $718
million from the acquisition of
WestRock.
Europe, MEA and APAC Segment
Net Sales
Net sales before intersegment eliminations for the Europe, MEA and APAC segment
increased
by $
388
million, to $
2,582
million in
the
three months ended
March 31, 2025
, from
$2,194 million
in the
three months ended
March 31, 2024
. This
increase
was primarily
due to the impact of $378 million which related to the acquisition of WestRock. Excluding the impact of this acquisition, net sales
before intersegment eliminations increased by $
10
million primarily due to a higher
selling price
mix of $138 million, largely
offset by
a net foreign currency impact of $81 million primarily
due to the strengthening of the U.S. dollar against the euro
and a negative
volume impact of $44 million.
Adjusted EBITDA
Adjusted EBITDA for the Europe, MEA and APAC segment
increased
by $
4
million, to
$389
million in the
three months ended
March 31, 2025
, from
$385 million
in the
three months ended
March 31, 2024
. There was a $37 million positive impact from the
acquisition of WestRock. Excluding the impact of this acquisition, Adjusted EBITDA decreased by $33 million mainly due to higher
input prices of $166 million and a net foreign currency impact of $9 million,
partly offset by a higher
selling price mix
impact of $138
million.
LATAM Segment
Net Sales
Net sales before intersegment eliminations for the LATAM segment
increased
by
$172 million
, to
$513 million
in the
three months
ended
March 31, 2025
, from
$341 million
in the
three months ended
March 31, 2024
. This
increase
was primarily due to the positive
impact of $177 million from the acquisition of WestRock.
Adjusted EBITDA
Adjusted EBITDA for the LATAM segment
increased
by
$61 million
, to
$115 million
in the
three months ended
March 31, 2025
,
from
$54 million
in the
three months ended
March 31, 2024
. This
increase
was primarily due to the positive impact of $54 million
from the acquisition of WestRock.
39
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Smurfit Westrock’s primary sources of liquidity are the cash flows generated from its operations, its commercial paper program, and
committed credit lines. The uncommitted commercial paper program is supported by
the
$4,500 million
revolving loan facility with a
separate swingline sub-facility which allows for same-day drawing in U.S. dollar. The amount of commercial paper outstanding does
not reduce available capacity under the revolving loan facility. The primary uses of this liquidity are to fund Smurfit Westrock’s day-
to-day operations, capital expenditures, debt service, dividends and other investment activity, including acquisitions.
As of
March 31, 2025
, Smurfit Westrock held cash and cash equivalents of
$797 million
, of which
$357 million were held in euro,
$173 million
were held in U.S. dollars and $267 million were held in other currencies. At
March 31, 2025
, the Company had $4,833
million in undrawn committed facilities available under the revolving loan facility and receivables securitization facilities. The
weighted average period until maturity of undrawn committed facilities was 4.2 years as of
March 31, 2025
. Combined with cash and
cash equivalents of
$797 million
, the Company had $5,630 million of available liquidity.
As of
March 31, 2025
, Smurfit Westrock had $
14,281
million of debt, excluding debt issuance costs. As of
March 31, 2025
, the
carrying amount of current debt was
$1,300 million
. The carrying amount of the Company’s debt includes a fair value adjustment
related to debt assumed through mergers and acquisitions. At
March 31, 2025
the unamortized fair value market adjustment was
$45 million
. Included within the carrying value of Smurfit Westrock’s borrowings as of
March 31, 2025
are deferred debt issuance
costs of
$62 million
, of which
$8 million
is current, all of which will be recognized in interest expense in Smurfit Westrock’s
Condensed Consolidated Statements of Operations using the effective interest rate method over the remaining life of the borrowings.
See “Note
11. Debt
”
of the
Condensed
Consolidated Financial Statements
for a discussion of the Company’s additional debt-related
information.
The Company believes that the cash flows generated from its operations, cash on hand, its commercial paper program, available
borrowings under its committed credit lines and available capital through access to capital markets will be adequate to meet the
Company's liquidity and capital requirements, including payments of any declared dividends, for the next 12 months and for the
foreseeable future.
Smurfit Westrock uses a variety of working capital management strategies including supply chain financing (“SCF”) programs,
vendor financing and commercial card programs, monetization facilities where we sell short-term receivables to a group of third-party
financial
institutions,
and receivables securitization facilities. The programs are described below.
The Company engages in certain customer-based SCF programs to accelerate the receipt of payment for outstanding accounts
receivables from certain customers. Certain costs of these programs are borne by the customer or the Company. Receivables
transferred under these customer-based SCF programs generally meet the requirements to be accounted for as sales in accordance with
guidance under “Transfers and Servicing” (“ASC 860”), resulting in derecognition of such receivables from the Company’s
Condensed Consolidated Balance Sheets. Receivables involved with these customer-based SCF programs constitute a
pproximately
5
%
of the Company’s accounts receivable balance at
March 31, 2025
. In addition, Smurfit Westrock has monetization facilities that sell to
third-party financial institutions all of the short-term receivables generated from certain customer trade accounts.
S
ee “Note
10. Fair
Value Measurement
” of the
Condensed
Consolidated Financial Statements for a discussion of the Company’s monetization facilities.
40
Smurfit Westrock’s working capital management strategy includes working with its suppliers to revisit terms and conditions, including
the extension of payment terms. The Company’s current payment terms with the majority of its suppliers generally range from payable
upon receipt to 120 days and vary for items such as the availability of cash discounts. The Company does not believe its payment
terms will be shortened significantly in the near future, and does not expect its net cash provided by operating activities to be
significantly impacted by additional extensions of payment terms. Certain financial institutions offer voluntary SCF programs that
enable the Company’s suppliers, at their sole discretion, to sell their receivables from Smurfit Westrock to the financial institutions on
a non-recourse basis at a rate that leverages the Company’s credit rating and thus might be more beneficial to the Company’s
suppliers. Smurfit Westrock and its suppliers agree on commercial terms for the goods and services we procure, including prices,
quantities and payment terms, regardless of whether the supplier elects to participate in SCF programs. The suppliers sell Smurfit
Westrock goods or services and issue the associated invoices based on the agreed-upon contractual terms. The due dates of the
invoices are not extended due to the supplier’s participation in SCF programs. Smurfit Westrock suppliers, at their sole discretion if
they choose to participate in a SCF program, determine which invoices, if any, they want to sell to the financial institutions. No
guarantees are provided by the Company under SCF programs, and it has no economic interest in a supplier’s decision to participate in
the SCF program. Therefore, amounts due to the Company’s suppliers that elect to participate in SCF programs are included in the
“Accounts payable” line item in the Company’s Condensed Consolidated Balance Sheets and the activity is reflected in “Net cash
provided by operating activities” in the Company’s Consolidated Statements of Cash Flows. Based on correspondence with the
financial institutions that are involved with Smurfit Westrock’s two primary SCF programs, while the amount suppliers elect to sell to
the financial institutions varies from period to period, the amount generally averages
approximately
12
-
14%
of the Company’s
accounts payable balance. The outstanding payment obligations to financial institutions under these programs were
$389 million
as of
March 31, 2025
.
Smurfit Westrock also participates in certain vendor financing and commercial card programs to support travel and entertainment
expenses and smaller vendor purchases. Amounts outstanding under these programs are classified as debt primarily because the
Company receives the benefit of extended payment terms and a rebate from the financial institution that would not have otherwise
been received without the financial institution's involvement. Smurfit Westrock also has receivables securitization facilities that allows
for borrowing availability based on underlying accounts receivable eligibility and compliance with certain covenants. See “Note
11.
Debt
” and “Note
16. Variable Interest Entities
” of the
Condensed
Consolidated Financial Statements for a discussion of the
receivables securitization facilities and the amount outstanding under the Company’s vendor financing and commercial card programs.
41
Cash Flow Activity
The following table contains selected financial information from Smurfit Westrock’s Condensed Consolidated Statements of Cash
Flows for the
three months ended
March 31, 2025
and
2024
:
|
Three months ended March 31,
|
||
|
($ in millions)
|
||
|
2025
|
2024
|
|
|
Net cash provided by operating activities
|
$
235
|
$
42
|
|
Net cash used for investing activities
|
$
(476)
|
$
(207)
|
|
Net cash provided by financing activities
|
$
151
|
$
—
|
Net cash
provided by
operating activities
increased
by $
193
million to $
235
million in the
three months ended
March 31, 2025
from
$
42
million in the
three months ended
March 31, 2024
, primarily due to a
$627
million increase in net income adjusted for non-cash
items, including depreciation, depletion and amortization, cash surrender value increase in excess of premiums paid, share-based
compensation expense,
deferred income tax benefit
,
and
pension and other postretirement funding more than
cost
.
The increase in net
income adjusted for non-cash items was partially offset by the
$434
million increase in the cash outflows from changes in operating
assets and liabilities as a result of the Combination and a higher selling price mix.
The increase in the cash outflows from changes in
operating assets and liabilities includes the outflows of
$39 million
resulting from the sale of accounts receivables in connection with
monetization agreements.
Net cash
used for
investing activities of
$476 million
in the
three months ended
March 31, 2025
consisted primarily of capital
expenditures of
$477
million. Net cash
used for
investing activities of
$207
million in the
three months ended
March 31, 2024
consisted primarily of capital expenditures of
$208
million.
Net cash
provided by
financing activities of
$151 million
in the
three months ended
March 31, 2025
consisted primarily of cash
inflows from a net increase in debt of
$444 million
, partially offset by cash dividends paid to shareholders of
$225
million, tax paid in
connection with shares withheld from employees of $
64
million and debt issuance costs of
$5 million
. Net cash
used for
financing
activities of
nil
in the
three months ended
March 31, 2024
consisted of cash outflows from purchases of treasury stock of
$27 million
offset by
cash inflows from a net increase in debt of
$27 million
.
Contractual Obligations and Commitments
Smurfit Westrock is a party to enforceable and legally binding contractual obligations involving commitments to make payments to
third parties. These obligations impact Smurfit Westrock’s short-term and long-term liquidity and capital resource needs. Certain
contractual obligations are reflected on Smurfit Westrock’s Condensed Consolidated Balance Sheets as of
March 31, 2025
, while
others are considered future obligations. Smurfit Westrock’s contractual obligations primarily consist of items such as long-term debt,
including current portion, lease obligations, purchase obligations and other
obligations
.
There
have been no material changes to the contractual obligations and commitments disclosed in “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” of the Form 10-K for the fiscal year ended December 31, 2024.
Off-Balance Sheet Arrangements
As of
March 31, 2025
, Smurfit
Westrock
did not have any off-balance sheet arrangements.
42
NON-GAAP FINANCIAL
MEASURE
Definitions
Non-GAAP Financial Measure
Smurfit Westrock reports its financial results in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
However, management believes “Adjusted EBITDA”, a non-GAAP financial measure discussed below, provides Smurfit Westrock’s
Board of directors, investors, potential investors, securities analysts and others with additional meaningful financial information that
should be considered when assessing its ongoing performance
relative to other periods because it adjusts out non-recurring items that
management believes are not indicative of the ongoing results of the business
. Smurfit Westrock management also uses this non-
GAAP financial measure in making financial, operating and planning decisions, and in evaluating company performance. Non-GAAP
financial measures are not intended to be considered in isolation of or as a substitute for, or superior to, financial information prepared
and presented in accordance with GAAP and should be viewed in addition to, and not as an alternative for, the GAAP results. The
non-GAAP financial measure Smurfit Westrock presents may differ from similarly captioned measures presented by other companies.
Adjusted EBITDA
Smurfit Westrock uses the non-GAAP financial measure “Adjusted EBITDA” to evaluate its overall performance. The composition of
Adjusted EBITDA is not addressed or prescribed by GAAP. Smurfit Westrock defines Adjusted EBITDA as net income before
income tax expense
,
depreciation, depletion and amortization
,
interest expense, net
,
pension and other postretirement non-service
income (expense), net
,
share-based compensation expense
,
other expense, net
,
amortization of fair value step up on inventory
,
transaction and integration-related expenses associated with the Combination
and other specific items that management believes are
not indicative of the ongoing operating results of the business.
Management believes that the most directly comparable GAAP measure to Adjusted EBITDA is “Net income”.
Set forth below is a reconciliation of the non-GAAP financial measure Adjusted EBITDA to Net income, the most directly comparable
GAAP measure, for the periods indicated.
|
Three months ended March 31,
|
|||
|
($ in millions)
|
|||
|
2025
|
2024
|
||
|
Net income
|
$
382
|
$
191
|
|
|
Income tax expense
|
8
|
76
|
|
|
Depreciation, depletion and amortization
|
603
|
148
|
|
|
Transaction and integration-related expenses associated with the Combination
|
36
|
23
|
|
|
Interest expense, net
|
167
|
25
|
|
|
Pension and other postretirement non-service (income) expense, net
|
(9)
|
10
|
|
|
Share-based compensation expense
|
43
|
15
|
|
|
Other expense, net
|
5
|
5
|
|
|
Other adjustments
|
17
|
(18)
|
|
|
Adjusted EBITDA
|
$
1,252
|
$
475
|
|
Other adjustments in the table above include restructuring costs of
$15 million
and losses at closed facilities of
$2 million
for the
three
months ended
March 31, 2025
. For the three months ended March 31, 2024, Other adjustments includes a reimbursement of a fine
from the Italian Competition Authority of
$18 million
.
43
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes during the three months ended March 31, 2025 to Smurfit Westrock’s critical accounting policies
and estimates as identified in Smurfit Westrock’s Annual Report on Form 10-K for the year ended December 31, 2024.
NEW ACCOUNTING STANDARDS
See “Note
1. Description of Business and Summary of Significant Accounting Policies
” of the
Condensed
Consolidated Financial
Statements
for a full description of recent accounting pronouncements, including the respective expected dates of adoption and
expected effects on Smurfit
Westrock
’s results of operations and financial condition.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in Smurfit Westrock’s exposure to market risk as identified in Smurfit Westrock’s Annual
Report on Form 10-K for the year ended December 31, 2024.
Item 4. Controls and Procedures
Smurfit Westrock’s management evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as
such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly
Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure. Disclosure controls and procedures are
designed by the Company to ensure that it records, processes, summarizes and reports in a timely manner the information it must
disclose in reports that it files with or submits to the SEC. Anthony Smurfit, President & Group Chief Executive Officer, and Ken
Bowles, Executive Vice President & Group Chief Financial Officer, reviewed and participated in management’s evaluation of the
disclosure controls and procedures.
Based on this evaluation, Anthony Smurfit, President & Group Chief Executive Officer, and Ken Bowles, Executive Vice President &
Group Chief Financial Officer concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, Smurfit
Westrock’s disclosure controls and procedures were not effective as a result of the material weakness in our internal control over
financial reporting described below.
Previously Reported Material Weakness in Internal Control over Financial Reporting
A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a
timely basis.
As discussed elsewhere in this Quarterly Report on Form 10-Q, on July 5, 2024, we completed the Combination between Smurfit
Kappa and WestRock. Prior to the Combination, Smurfit Kappa, as a public limited company incorporated in Ireland and listed on the
London Stock Exchange and on the Euronext Dublin Market, was not subject to Section 404 of the Sarbanes Oxley Act of 2002
(“SOX”), while WestRock, as a U.S. publicly traded company incorporated in Delaware and listed on the New York Stock Exchange,
was subject to Section 404 of SOX. Upon the completion of the Combination Smurfit Kappa and WestRock became wholly-owned
subsidiaries of Smurfit Westrock.
As a result of the Combination, Smurfit Westrock’s management is in the process of integrating Smurfit Kappa and WestRock’s
legacy internal control frameworks. In connection with Smurfit Westrock’s assessment of its internal control over financial reporting
for the purposes of complying with Section 302 of SOX, we previously identified and reported a material weakness relating to the
company’s selection and development of control activities intended to mitigate the risks to achieving its objectives. This relates to
certain processes and controls principally at historical Smurfit Kappa that were not subject to the requirements of Section 404 of SOX
prior to the Combination.
44
This material weakness resulted in:
•
A lack of formalization of an existing control process for documenting evidence of management review and performance of
control procedures, including the level of precision in the execution of controls and procedures to ascertain completeness and
accuracy of information produced by the Company.
•
Existing controls related to the preparation and review of manual journal entries not designed to adequately mitigate the
associated risks.
•
The need to augment General IT Controls, specifically as they pertain to (i) logical access controls to ensure appropriate
segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to
appropriate Company personnel and (ii) program change management controls to ensure that information technology
program and data changes affecting financial IT applications and underlying accounting records are identified, tested,
authorized and implemented appropriately.
Notwithstanding the identified material weakness, management believes that the
Condensed
Consolidated Financial Statements and
related financial information included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial
position, results of operations and cash flows as of and for the periods presented.
Remediation Plan
The process of designing and implementing remediation measures is underway in respect of this material weakness and to improve our
internal control over financial reporting. These remediation measures include a number of ongoing actions which have been prioritized
in a material weakness remediation strategy that aligns to the most impactful controls:
•
designing and implementing policies and guidance related to the operation of controls – a number of which have now been
designed and issued for execution;
•
developing appropriate controls over the review of manual journal entries – including a phased roll out plan underway for the
implementation of an automated approval workflow for manual journal entries at relevant material locations in addition to a
risk-based interim manual control which has been designed and issued for execution; and
•
enhancing and expanding across the organization the general IT processes and controls – with a prioritized focus on logical
access and change management.
In addition, control operators continue to participate in SOX training and live support sessions, with a specific focus on the priority
areas documented in the material weakness remediation strategy.
While we are working to remediate the identified deficiencies as timely and efficiently as possible, we cannot yet provide an estimate
of the time it will take to complete this remediation plan. The implementation of our remediation measures will require validation and
testing of the design and operating effectiveness of internal controls over a sustained period. In addition, we cannot ensure that the
measures taken by us to date, and actions that we may take in the future, will be sufficient to remediate these deficiencies or that they
will prevent or avoid potential future deficiencies.
Changes in Internal Control over Financial Reporting
Other than the changes that may continue to result from the integration following the Combination and remediation actions described
above, there has been no change in Smurfit Westrock’s internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter ended March 31, 2025 that has materially affected, or is
reasonably likely to materially affect, Smurfit Westrock’s internal control over financial reporting.
45
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The information called for by this item is incorporated herein by reference to Note
15. Commitments and Contingencies
of the
Condensed
Consolidated Financial Statements (
included in
Part I, Item 1).
Item 1A. Risk Factors
Investing in our ordinary shares involves uncertainty and risk due to a variety of factors, including those described
in
Part I, Item 1A,
“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially adversely affect
our business, financial condition, results of operations (including revenues and profitability) and/or ordinary share price. There have
been no material changes in our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information relating to our repurchase of ordinary shares during the three months ended March 31, 2025:
|
Period
|
Total Number of
Shares Purchased
(1)
|
Average Price Paid
per Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Programs
|
Approximate
Dollar Value of
Shares that May Yet
Be Purchased
Under the Programs
|
|||
|
January 1, 2025 – January 31, 2025
|
—
|
$
—
|
—
|
—
|
|||
|
February 1, 2025 – February 28, 2025
|
217,536
|
54.65
|
—
|
—
|
|||
|
March 1, 2025 – March 31, 2025
|
—
|
—
|
—
|
—
|
|||
|
Total
|
217,536
|
—
|
(1)
During the three months ended March 31, 2025, 217,536 ordinary shares that would otherwise have been issued to current or former
employees who were beneficiaries of the SKG Employee Trust in connection with the vesting and settlement of equity awards
granted under the legacy Smurfit Kappa 2018 Deferred Bonus Plan were surrendered to the Company on behalf of such employees.
This was done as part of net share settlement to cover applicable taxes, fees and/or duties paid by the Company or its applicable
subsidiary as a consequence of vesting and settlement of such equity awards. The fair market value of ordinary shares that were
surrendered by the SKG Employee Trust to the Company for no consideration was equal to the value of applicable taxes, fees and/or
duties paid by the Company in respect of such taxes, fees and/or duties. These ordinary shares have been subsequently cancelled.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Trading Plan(s)
In the three months ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1 under the Exchange Act)
defined in Item 408 of Regulation S-K).
46
Item 6. Exhibits
|
Exhibit
Number
|
Description of Exhibit
|
||
|
3.1
|
|||
|
10.1†
|
|||
|
10.2†
|
|||
|
10.3†
|
|||
|
31.1†
|
|||
|
31.2†
|
|||
|
32†*
|
|||
|
101.INS
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL document.**
|
||
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema.**
|
||
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase.**
|
||
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Document.**
|
||
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase.**
|
||
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase.**
|
||
|
104
|
Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
|
† Filed or furnished herewith
* The certification furnished in Exhibit 32 hereto is deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant
specifically incorporates it by reference. Such certification will not be deemed to be incorporated by reference into any filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant
specifically incorporates it by reference.
** Submitted electronically herewith
47
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the
undersigned thereunto duly authorized.
|
Smurfit Westrock plc
|
||
|
Dated:
May 9, 2025
|
/s/ Anthony Smurfit
|
|
|
Name:
|
Anthony Smurfit
|
|
|
Title:
|
President & Group Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
||
|
Smurfit Westrock plc
|
||
|
Dated:
May 9, 2025
|
/s/ Ken Bowles
|
|
|
Name:
|
Ken Bowles
|
|
|
Title:
|
Executive Vice President and Group Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
||
TABLE OF CONTENTS
Part I, Item 1a,Item 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits