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    SW
    Earnings call· Jun 2026(Q2 FY26)

    Smurfit Westrock Q2 FY26 earnings call SW

    Jul 29, 2026 Source

    Executive summary

    Smurfit Westrock Q2 FY26 — Strong EBITDA and Pricing Initiatives Amidst Cost Headwinds

    Smurfit Westrock delivered a strong Q2 FY26 performance, marked by resilient adjusted EBITDA and operational improvements across all regions, despite facing substantial and unexpected freight cost inflation. The company is actively implementing pricing initiatives to recover these costs, with full realization expected in 2027, while maintaining a focus on disciplined capital allocation and self-improvement programs.

    Highlights

    5

    • Adjusted EBITDA reached $1.14 billion with a 14.2% margin, demonstrating resilient performance against significant cost increases.

    • North American paper mill system is fully booked with no commercial downtime anticipated for the remainder of the year.

    • EMEA and APAC region continues to outperform, with corrugated volumes up 1.9% and mills operating at full capacity.

    • Latin America delivered another excellent quarter with healthy demand and growing corrugated volumes.

    • Quality metric in North American corrugated box operations improved by over 25% year-to-date.

    Concerns

    4

    • Significant freight cost headwind of approximately $300 million more than anticipated, primarily due to higher fuel and shipping rates.

    • Selling price remained a headwind in North America due to pass-through impact of weaker containerboard index pricing and lag in realizing higher index pricing.

    • Near-term margin compression in EMEA and APAC due to ongoing freight and energy cost inflation.

    • Full-year adjusted EBITDA guidance revised to $4.9 billion to $5.1 billion, down from previous expectations due to higher freight costs.

    Guidance & targets

    6
    CategoryTargetConfidence
    Full-year Adjusted EBITDA
    $4.9 billion to $5.1 billion
    high materiality
    High
    Annual Capital Expenditure (CapEx)
    approximately $2.5 billion
    medium materiality
    High
    Capital Expenditure (CapEx)
    $2.4 billion and $2.5 billion
    medium materiality
    High
    Quarterly Dividend
    $0.4523 per ordinary share
    medium materiality
    High
    Containerboard Price Recovery
    Full effect felt
    high materiality
    High
    EMEA Recycled Board Price Increase
    EUR 80 a ton increase
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    North America
    Significant operational and commercial progress, mill system generally full, healthy order books, and strengthening commercial momentum. Selling price was a headwind due to weaker containerboard index pricing. North American box system margin is around 3-4% EBITDA positive.
    Corrugated volumes: down 4.8% (same-day basis)Corrugated volumes: down 4.5% (absolute basis)Quality metric: improved by over 25% (year-to-date)
    		———14.8% (Q2 FY26 Adjusted EBITDA margin), up from 13.3% (Q1 FY26)
    EMEA and APAC
    Outperforming through disciplined commercial execution, strong cost management, and focus on customer service. The integrated nature of the business is a significant competitive advantage. Absorbed ongoing freight and energy cost inflation.
    Corrugated volumes: up 1.9% (absolute basis)Corrugated volumes: up 1.5% (same-day basis)Mill system: operated at full capacity
    		———Near-term margin compression
    Latin America
    Delivered an excellent quarter with healthy demand across key markets. Benefits from strong market positions and operational improvements delivered through recent investment programs. Presents significant opportunities for future growth.
    Corrugated volumes: continue to grow
    		———Attractive margins and strong returns

    Operational metrics

    10
    Adjusted EBITDA margin
    14.2%
    Q2 FY26

    Company-wide adjusted EBITDA margin.

    Freight cost headwind
    $300 millionvs. prior estimate of ~$50 million
    FY26

    Year-on-year headwind, revised estimate due to higher fuel and shipping rates, primarily in May and June.

    Energy cost headwind
    $220 million to $250 million
    FY26

    Year-on-year headwind, broadly in line with previous assumptions, moderated by hedging policy.

    Number of loss-making corrugated box plants
    20down from 80
    Current

    Number of loss-making corrugated box plants, with plans to solve 10 more.

    Containerboard capacity
    8.5 million
    Current

    Total containerboard capacity in North America.

    European TTF GasCo price
    above $60
    Last week

    European TTF for GasCo price, showing volatility.

    European TTF GasCo price
    below $58 to $57
    This morning

    European TTF for GasCo price, showing volatility.

    Economic downtime
    GBP 100 millionlower than expected
    FY26

    Lower economic downtime helping to offset cost pressures.

    Paper inventory levels (industry)
    2.5 million to 2.6 millionvs. 2.8 million to 2.9 million tonnes (exit Q1)
    Current

    Total industry inventory levels for North America.

    Logistics cost impact
    $300 millionmore than anticipated
    FY26

    Unexpected cost increase due to price of diesel and availability of transportation.

    Industry KPIs

    6
    MetricValueDetails
    Dividends$0.4523USD per ordinary share
    Net debt leverageBaa2
    CAPEX capital program$2.5 billionUSD
    Volume production growthSold out
    End market demand driversHealthy
    Adjusted underlying EBITDA$1.14 billionUSD

    Risks & headwinds

    4
    Significant freight cost inflation2026

    Approximately $300 million more than anticipated (year-on-year)

    Mitigation: Pricing initiatives, operational execution, disciplined cost management.

    Lag in price recovery for cost pass-throughFull recovery into 2027

    Cost impact felt immediately, recovery comes through over time.

    Mitigation: Ongoing pricing initiatives.

    Ongoing energy cost inflation2026

    $220 million to $250 million headwind (year-on-year)

    Mitigation: Hedging policy, pricing initiatives.

    Logistics issues (availability of transportation)Current

    Creates some disruption, contributes to $300 million cost impact.

    Mitigation: Managing through it.

    What to watch in Q3 FY26

    4

    North American Corrugated Volumes

    Q3 or Q4 FY26
    CurrentDown 4.8% (same-day basis) in Q2 FY26
    TargetPositive growth

    Why it matters

    Indicates success of value-over-volume strategy and new business acquisition.

    Our expectation, Gabe, is that either in the third or fourth quarter, we will be better in volumes than last year. And certainly, in talking to the folks in North America, we would expect to see positive months coming up in August and maybe even September.

    Q&A highlights

    6

    Clarification on North America gross price realization given the bridge, and expectations for corrugated volume inflection in the second half of the year, including specific strong markets.

    Pricing in Q2 was offset by weaker paperboard index pricing (SBS), but corrugated pricing initiatives are gaining momentum for Q3/Q4. The company expects positive corrugated volumes in Q3 or Q4 due to new business wins and easier comparisons, with August and September looking positive. Overall, Latin America is positive, Europe is positive (except 1-2 markets), and North America is flat to slightly positive.

    “Our expectation, Gabe, is that either in the third or fourth quarter, we will be better in volumes than last year. And certainly, in talking to the folks in North America, we would expect to see positive months coming up in August and maybe even September.”

    asked by Gabe Hajde · answered by Anthony P. J. Smurfit

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Excellence and Cost Management

    Smurfit Westrock continues its focus on cost takeout through asset optimization, including closures in North America and EMEA/APAC, such as a long-standing asset in the U.K. The owner-operator model is showing considerable progress, driving cultural and operational change. The company is also leveraging its global knowledge and innovation, with experience centers and over 2,000 designers worldwide, to enhance customer offerings.

    02

    Regional Performance Highlights

    North America demonstrated progress across all areas, with the paper mill system fully booked and pricing initiatives implemented. The EMEA and APAC region continues to outperform through disciplined commercial execution, strong cost management, and full mill capacity. Latin America delivered an excellent quarter, benefiting from healthy demand, strong market positions, and operational improvements from recent investments, presenting significant opportunities for future growth.

    03

    Market Conditions and Pricing Strategy

    Market conditions for practically all paper grades are described as 'as tight as I can remember' and a 'significantly stronger and better operating environment,' providing a strong fundamental backdrop. The company has implemented pricing initiatives to recover significant input costs, particularly freight, acknowledging a natural lag before these actions are fully reflected in earnings. The current price increases are seen as price recovery rather than new increases, especially in the SBS market.

    04

    Capital Allocation and Balance Sheet Strength

    Smurfit Westrock maintains a disciplined, return-focused capital allocation approach, prioritizing internal investment as the lowest risk and highest quality use of capital. The company expects strong free cash flow generation over the coming years and is committed to maintaining a strong investment-grade credit rating, currently holding Baa2 from Moody's (positive outlook), BBB from S&P (stable outlook), and BBB+ from Fitch (stable outlook).

    05

    Corrugated Box Operations Improvement

    Significant progress has been made in improving the North American corrugated box operations, reducing the number of loss-making plants from an initial 80 to approximately 20. The focus on innovation and customer service is attracting new business, and quality metrics have improved by over 25% year-to-date. The North American box system is now EBITDA positive, operating at around a 3-4% margin.

    06

    Integration and Future Outlook

    The integration of Smurfit and WestRock is progressing well, with teams in place and best practice knowledge transfer accelerating across regions. The company is confident in its ability to execute its strategic plan, setting a strong platform for cost recovery and enhanced returns in the second half of 2026 and into 2027, aiming to build a stronger, better, and more resilient company.

    AI-generated summary of the company’s earnings call. Not investment advice.