WestRock Reports Fiscal 2021 Second Quarter Results and Increase in Quarterly Dividend

Notable items include:
- Record second quarter North American per day box shipments up 5.5% compared to the prior year quarter
- Successfully implementing published PPW price increases across all major paper grades
- Quarterly dividend of $0.24 per share declared by Board of Directors, an increase of $0.04 per share, or 20%, as separately announced
- Net sales of $4.4 billion, flat to the prior year quarter despite $189 million of lost sales due to the impact of the ransomware incident and winter weather (“the Events”)
- Earned $0.42 per diluted share and $0.54 of Adjusted Earnings Per Diluted Share
- The lost sales and operational disruption from the Events had a negative impact of $80 million pre-tax, or $0.23 per share, on both earnings per diluted share and Adjusted Earnings Per Diluted Share

“WestRock has a broad portfolio of differentiated products that uniquely positions us to serve our customers and the growing demand for sustainable packaging solutions. We have made a remarkable recovery from the incidents in the second quarter, and I want to thank our teammates for their dedication to our company and our customers,” said David B. Sewell, chief executive officer. “With these events behind us, we are confident in our business and our ability to generate strong cash flow, which is evident by our dividend increase announced today. I look forward to what’s ahead for our company.”

Consolidated Financial Results
During the second quarter of fiscal 2021, we lost approximately 167,000 tons of containerboard and paperboard production due to the Events. The impact on net sales and segment income from the lost sales and operational disruption during the quarter was $189 million and $80 million, respectively. We also incurred approximately $20 million of ransomware recovery costs, primarily professional fees, that were added back to Adjusted Earnings Per Diluted Share and Adjusted Segment EBITDA. We expect to recover the ransomware losses from cyber and business interruption insurance in future periods.

Operating Highlights for the Three Months Ended March 31, 2021 compared to March 31, 2020:
Net sales decreased $10 million compared to the prior year quarter. Corrugated Packaging segment net sales increased $31 million and Consumer Packaging segment net sales decreased $26 million. The volume impact on net sales of the Events was $189 million. Segment income decreased $49 million compared to the prior year quarter. Corrugated Packaging segment income decreased $39 million and Consumer Packaging segment income decreased $10 million.

Restructuring and Other Items
Restructuring and other items during the second quarter of fiscal 2021 was $5 million, primarily related to severance, lease termination costs and costs associated with previously announced plant consolidations.

Net Cash Provided By Operating Activities and Other Financing and Investing Activities
Net cash provided by operating activities was $132 million in the second quarter of fiscal 2021 compared to $168 million in the prior year quarter. The decline was primarily due to lower income as a result of the impact of the Events, as well as an increase in accounts receivable associated with delayed billing due to the ransomware incident. We expect the level of accounts receivable to normalize in the third quarter of fiscal 2021.

Total debt was $8.94 billion at March 31, 2021, or $8.74 billion excluding $201 million of unamortized fair market value step-up of debt acquired in mergers and acquisitions, and $8.41 billion after further excluding cash and cash equivalents of $334 million. The Company had approximately $3.6 billion of available liquidity under long-term committed credit facilities and cash and cash equivalents at March 31, 2021. During the second quarter of fiscal 2021, WestRock invested $132 million in capital expenditures, paid $53 million in dividends to stockholders and received $59 million of proceeds from the sale of the Summerville, South Carolina sawmill.

Segment Results
WestRock’s segment performance for the three months ended March 31, 2021 and March 31, 2020 (in millions):

Corrugated Packaging Segment
Operating Highlights for the Three Months Ended March 31, 2021 compared to March 31, 2020:
Segment net sales increased $31 million, primarily due to higher selling price/mix on sales that was partially offset by unfavorable foreign currency impacts and lower volumes. The estimated impact of the Events on segment net sales was $117 million. The Corrugated Packaging segment delivered a Segment EBITDA margin of 14.9% and a North American Adjusted Segment EBITDA margin of 16.5%. Record second quarter North American per day box shipments increased 5.5% compared to the prior year quarter.

Segment income decreased $39 million, primarily due to net cost inflation and the impact of the Events, which were partially offset by the margin impact from higher selling price/mix and other items.

Consumer Packaging Segment
Operating Highlights for the Three Months Ended March 31, 2021 compared to March 31, 2020:
Segment net sales decreased $26 million, primarily due to lower volumes that were partially offset by favorable foreign currency impacts and higher selling price/mix on sales. The estimated impact of the Events on segment net sales was $72 million. The Consumer Packaging segment delivered a Segment EBITDA margin of 13.3% and an Adjusted Segment EBITDA margin of 13.4%.

Segment income decreased $10 million, primarily due net cost inflation and the impact of the Events, which were partially offset by the margin impact from higher selling price/mix, productivity improvements and other items.