The business of Smurfit Westrock
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What is the main topic discussed in this episode?
Breakfast Business with Enterprise Ireland on Newstalk.
What recent changes have affected Smurfit Westrock's profit expectations?
The biggest cardboard box maker in the world, Smurfit Westrock, has trimmed its expectations for annual profits and the markets didn't like it. In its third quarter financial statements, the US listed but Irish headquartered giant says it expects to earn around $5 billion in profits this year, down from 5.1. The company said that demand for confectionery, and ergo more cardboard boxes, hasn't come back as much as it had thought. It's been just over a year since Smurfit Kappa formerly merged with Westrock and the business is still betting in changes.
How has the merger with Westrock impacted Smurfit Kappa's operations?
And Ken Bowles is the Chief Financial Officer with Smurfit Westrock. Good morning, Ken. Morning, Joe. Tell us why you had to issue this profit warning.
Um, not really a warning, more trimming of where we thought we'd be given this, this point of the year, Joe, I suppose, look, we all kind of look out our windows and we see where demand is. And I think in particular in our biggest market, which is North America and just, you got to realize that North America is about 65% of our business now. Yeah. But when you think about that market alone, you think about things like the government shutdown and the impact on people's spendings. You've seen during the week, you know, the removal of SNAP programs potentially in the next few weeks. You know, there's a demand picture there that hasn't really recovered to the extent that any of us thought it would. As you pointed out, we're seeing it in discrete areas, you know, food, confectionery, durable goods.
People buy the day to day, but people won't make bigger spending decisions. They'll hold on to their money. So it's really just an acknowledgement of where we think we'll be at the end of the year, given what we see is a demand backdrop.
Out of curiosity, is the fall off in confectionery and snacks related to the rise in weight loss drugs such as Wegovi or Manjaro?
It's hard to tell at this point. Certainly, you know, people do believe there's an impact. I heard a stat recently that said that, you know, broadly about 18% of the adult population in North America is taking some form of GLP-1. But, you know, my optimism always comes true, Joe, in the sense that somebody has to make those boxes and we actually make the grade of paper that makes those boxes. So we'd have a natural advantage if that demand does come true. I don't think it is. I think it's more about where people sit in terms of savings and spending and
What factors are influencing demand for cardboard boxes in North America?
given, you know, cost of living, everything else, inflation, and indeed a level of uncertainty given the tariff picture and everything else.
Yeah, the shares were off 12% at one point last night, and the markets really didn't like it, despite it being, as you say, just a trimming back of expectations.
Yeah, listen, I think, you know, some days the markets don't do what you might call rationality. We were surprised, everybody I spoke to was equally surprised at kind of the oversell. But I suppose, you know, our job is not to focus on the one day share price. Our job is to kind of wake up this morning, sell more boxes and talk to more investors, which we'll do. I think generally what we find is when you get that overreaction, I think as we have another peer reporting today and indeed next week, I think people begin to read through the combination of everything and kind of revisit. So You know, yeah, yesterday was a tough day for us all inside. But like, you know, we take it on the chin and go and talk to people.
But we kind of sit back and think, look, where are we? You know, one year post the merger with Smurf or Westrock, we're in good shape. The world outside, when it returns, would be in excellent shape. You know, and that's the story that continues. And that's the one that certainly our long-term holders and owners believe in.
Yeah, and you guys make boxes for physical products. Have you noticed any fall off in physically shipped goods as a result of this tariff war?
No, because generally boxes don't ship very far.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:01–0:08
2
What recent changes have affected Smurfit Westrock's profit expectations?
0:08–0:42
3
How has the merger with Westrock impacted Smurfit Kappa's operations?
0:42–2:15
4
What factors are influencing demand for cardboard boxes in North America?
2:15–5:36