Smurfit Westrock (NYSE:SW) reported second-quarter adjusted EBITDA of $1.14 billion and an adjusted EBITDA margin of 14.2%, as higher freight costs weighed on results and pricing actions had only begun to flow through to customers.
Chief Executive Officer Tony Smurfit said the company absorbed “very significant input costs” during the quarter, particularly freight expenses, while price recovery remained in its early stages. The company has raised containerboard prices and expects those increases to be reflected in its converting operations over the remainder of 2026 and into 2027.
Bowles said freight is now expected to represent approximately a $300 million year-over-year headwind, compared with an estimate of roughly $50 million at the end of April. Energy costs remained broadly consistent with the company’s previous assumptions, he said, while lower economic downtime of about $100 million and continuing cost-reduction initiatives are helping offset some inflation.
Pricing Actions Expected to Support 2027
Management said price increases will require time to be reflected in earnings because of contract and index-related lags. Smurfit said the company’s newly announced $100-per-ton North American containerboard increase is not included in its 2026 guidance, describing it instead as a foundation for 2027 results.
In Europe, the company recently announced an €80-per-ton increase for recycled board, which it expects to implement through September. Smurfit said recycled-paper pricing actions in Europe are primarily cost-driven, while kraftliner pricing reflects both supply-demand conditions and cost inflation.
The company also discussed pricing in solid bleached sulfate, or SBS, where management said market conditions have improved from a year earlier. Smurfit said the company’s SBS system is sold out, supported by new applications and customers switching among grades including SBS, coated unbleached kraft and coated recycled board. A second SBS increase announced in July is not yet reflected in industry publications and is expected to affect end customers mainly beginning next year, management said.
North American Operations Show Improvement
North American corrugated volumes declined 4.8% on a same-day basis, or 4.5% on an absolute basis, during the second quarter. Bowles said the decline was in line with expectations as the company continues to prioritize value over volume, exiting lower-margin business while pursuing accounts that fit its decentralized operating model.
Management said order books and new-business pipelines have improved heading into August and September. Smurfit said the company expects corrugated volumes to become positive versus the prior year in either the latter part of the third quarter or the fourth quarter, aided by new customer wins and easier comparisons following the exit of a large e-commerce customer.
The North American mill system is generally full, with no commercial downtime anticipated for the rest of the year, according to Smurfit. He said the company is sold out across most paper grades, with limited open capacity in coated recycled board. The company is also working through delayed export orders and plans to reassess lower-priced export tonnage as domestic demand remains strong.
Smurfit said the North American corrugated converting business has moved from being heavily loss-making to generating EBITDA margins of roughly 3% to 4% on a static basis, before the effect of incoming paper-price changes. He said the company had reduced the number of loss-making operations from more than 80 at the start of its integration efforts to approximately 20, with management expecting to resolve about 10 of those facilities.
Regional Performance and Investment Plans
In EMEA and APAC, corrugated volumes increased 1.9% on an absolute basis and 1.5% on a same-day basis. The mill system operated at full capacity, Bowles said, though freight and energy inflation pressured near-term margins. Smurfit said the region expects stronger second-half performance as input-cost recovery reaches corrugated-box customers.
Smurfit said European paper markets are sold out through year-end across most grades. He added that the company’s European operations could return to margins above 18% under a more stable cost environment, though he did not provide a specific timetable for reaching that level.
Latin America delivered another strong quarter, supported by healthy demand, corrugated-volume growth and improved operations following recent investments. Smurfit highlighted Brazil and Colombia as particularly strong markets and said the region provides opportunities for both internal investment and acquisitions.
The company expects capital expenditures of $2.4 billion to $2.5 billion in 2026, above maintenance spending. Bowles said the company’s medium-term capital program averages approximately $2.5 billion annually, with an average project size of about $4 million. Smurfit Westrock also declared a quarterly dividend of $0.4523 per ordinary share.
Bowles said the company remains committed to investment-grade ratings, citing its Baa2 positive outlook from Moody’s, BBB stable outlook from S&P and BBB+ stable outlook from Fitch. Management said its capital-allocation strategy continues to prioritize internally deployed capital, asset improvements, efficiency initiatives and growth investments.
Smurfit said the integration of Smurfit Kappa and WestRock continues to progress, with management teams now in place across the business. He said the company is focused on transferring operating practices, innovation and design capabilities across regions as it works to recover elevated costs and improve returns in the second half of 2026 and through 2027.
About Smurfit Westrock (NYSE:SW)
Smurfit Westrock Plc, together with its subsidiaries, manufactures, distributes, and sells containerboard, corrugated containers, and other paper-based packaging products in Ireland and internationally. The company produces containerboard that it converts into corrugated containers or sells to third parties, as well as produces other types of paper, such as consumer packaging board, sack paper, graphic paper, solid board and graphic board, and other paper-based packaging products, such as consumer packaging, solid board packaging, paper sacks, and other packaging products, including bag-in-box.
