Smurfit Westrock’s shares fell on Wednesday in New York as the world’s largest cardboard box-maker, created last summer by merger, disappointed the market with its fourth-quarter earnings and outlook for early 2025.
The Dublin-based group’s earnings before interest, tax, depreciation and amortisation (Ebitda) jumped 160 per cent to $1.17 billion (€1.13 billion), driven by Smurfit Kappa’s purchase last summer of US rival Westrock. However, the figure was $40 million behind consensus expectations.
Chief executive Tony Smurfit said the group expects to post $1.25 billion of Ebitda in the current quarter, which Citigroup analyst Anthony Pettinari described as being “light”.
“Smurfit WestRock’s first full-year consolidated results fell slightly short of fourth-quarter consensus expectations,” said Lewis Roxburgh, an analyst with Goodbody Stockbrokers.
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Still, he described as “positive” that there were no major negative surprises, given that demand for paper packaging products remains weak and the group is grappling with high fibre costs.
“This is a resilient set of results, and positions the business well as pricing pressures ease and volumes start to recover in 2025,” said Mr Roxburgh.
Shares in Smurfit Westrock were down 5.5 per cent in early trading on Wall Street, though they remain up almost 10 per cent from when the merger went through last July and the group adopted the New York Stock Exchange as the venue for its main stock listing. The combined group, which has a market value of $26.5 billion dropped its quotation in Dublin in the process.
Analysts hope that Mr Smurfit, the former chief executive of Smurfit Kappa, and his chief financial officer Ken Bowles, who now lead the entire group, will turn around the underperforming legacy WestRock assets.
“Our synergy program of $400 million is on track and will be completed by the end of this year. Moreover, there are significant operational and commercial opportunities, at least equating to that synergy target,” said Mr Smurfit.
However, a tentative recovery in demand for paper packaging products last year, following a downturn in 2023, had run out of steam by the end of last year. Smurfit Westrock said that corrugated cardboard volumes in its North America, Europe, Middle East and Africa and Asia Pacific regions were flat in the fourth quarter, while Latin American volumes dropped 3.4 per cent.
Management estimates that the threat of tariffs being imposed on Mexico and Canada could have a significant impact on the group. US president Donald Trump said over the weekend that the two countries had not done enough to boost border security to stave off steep tariffs that he had agreed on February 3rd to pause for 30 days.
The group’s Mexican operations face the largest risk, even if this is indirect. The US imports a large amount of consumer goods and foods from there, and the fear the impact of tariffs on end products may cause packaging demand to decline.
Smurfit Westrock has one mill in Canada that exports to the US. A 25 per cent tariff could make this business uncompetitive, according to analysts.
