Smurfit Westrock executives said during Wednesday’s earnings call that they’re overall pleased with second-quarter performance and anticipate a stronger second half of the year.
North American corrugated volumes were down 4.5% year over year, which was “in line with our expectations as we continue to execute on our value-over-volume strategy,” said CFO Ken Bowles.
Company executives and analysts all noted that the containerboard market is strengthening and has tightened significantly in roughly a six-week period this summer. “People did not expect for the market to change so rapidly,” said CEO Tony Smurfit. “Nobody would have been pre-buying.”
Barring Smurfit Westrock’s limited sales of coated recycled paperboard, the company is essentially sold out for all paper grades and is in “catch-up mode” for the remainder of the year, he said.
“Global paper markets today are as strong as I have seen in my lifetime within this industry,” Smurfit said, adding that conditions for nearly all grades are “as tight as I can remember.”
Reprioritizing paper grades
While the solid bleached sulfate market has been in an ongoing oversupply, Smurfit said it’s much better now than at this time last year. Over the last 18 months, the company worked to attract new business into the SBS system, he said, noting some recent customer switches from CRB to SBS.
That said, “with regard to boxes, it’s a little more nuanced,” Smurfit said, explaining that strength “depends on regions within markets.”
The California market, for instance, isn’t as strong as anticipated with its produce applications. Likewise, a heatwave in Europe is affecting agriculture and thus is hitting corrugated markets in southern Europe. Overall, corrugated in Latin America is quite positive, Europe is positive and North America is flat to slightly positive, he said.
Raising prices
Much of the call centered on Smurfit Westrock’s and the broader industry’s recent rounds of fiber price increases.
On Tuesday, analysts reported that SW announced a $100 per ton increase for both containerboard and kraft paper set to take effect Sept. 1. That followed Packaging Corporation of America’s July 24 announcement of a $140 per ton increase, which many have called unprecedented, kicking off this year’s third round of containerboard industry price hikes that has also included International Paper, among others.
Earlier in July, SW announced a 4% to 6% increase on SBS folding carton, commercial print and foodservice grades as of Aug. 10 — its second SBS increase this year.
SW executives repeatedly mentioned that these increases are necessary due to rising input costs, especially energy and freight, which have skyrocketed largely because of the war with Iran. SW now expects annual North American and European input costs to be $300 million more than anticipated three months ago, Smurfit said.
The rising cost of freight “remains the most significant headwind we face in 2026,” Bowles said. “That inflationary cost environment is not showing signs of abatement, and we will continue to evaluate all options available to us as we progress through the remainder of this year.”
Effects from SW’s two corrugated price increases earlier this year already are starting to materialize, and the majority are expected to come in the remainder of Q3 and into Q4. This month’s pricing announcements are expected to have an effect very late in Q4 but largely in Q1 2027.
“We've absorbed all the input costs during the first and second quarter of this year, and now we're about to get it back,” Smurfit said. “I have full confidence that we will pass those costs through, and we're then setting ourselves up for a better second half and a very good 2027.”
Closing more facilities
Executives discussed a recent mill closure in the U.K. and noted “a number of closures” had occurred in North America, EMEA and APAC. SW also disclosed it’s in the process of closing eight additional converting facilities in both Europe and North America.
Smurfit discussed improvements to existing assets and characterized the remaining “number of lossmakers that we have” as “probably around 20.” That’s down from close to 80 so-called lossmakers when the company formed two years ago after Smurfit Kappa acquired WestRock.
“We’ve got some great box plants, and we've got some not-so-great box plants. Those not-so-great box plants need to improve,” Smurfit said.
Other adjustments
SW delisted from the London Stock Exchange on June 22 and will remain solely on the New York Stock Exchange.
Smurfit said the company is already seeing self-improvement in alignment with the medium-term plan introduced in February.
There’s a “strong pipeline of new corrugated business moving through August and into September” that should help boost performance in the second half of the year, Bowles said. Executives expressed optimism about further volume growth in H2.
The company now projects adjusted earnings before interest, taxes, depreciation and amortization for the year to total $4.9 billion to $5.1 billion, down from earlier projections of $5 billion to $5.3 billion. Executives expect $2.4 billion to $2.5 billion in capital expenditures this year.
