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WestRock (WRK) to Close Containerboard and Pulp Mill in Florida

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WestRock Company (WRK - Free Report) has announced that it will shut down operations at its containerboard and pulp mill located in Panama City, FL, by Jun 6, 2022. The move will save significant capital investment required to operate the mill, which now can be deployed in high-return growth areas. Also, the production of fluff pulp is not in sync with the company’s strategy to focus on higher-value markets.

The mill has an annual capacity of 645,000 tons and produces containerboard, primarily heavyweight kraft, and fluff pulp. With the facility set to close, select grades of containerboard currently produced will be manufactured at other WestRock facilities. The mill employs approximately 450 people. They will be paid severance and outplacement assistance in accordance with the company policy and labor union agreements.

WestRock is committed to improving its return on invested capital and maximizing the performance of its assets. Operating the Panama City mill and making improvements to keep it competitive would have required significant capital investment. This can now be invested in strategic capital projects with attractive returns, and mergers and acquisitions.

The company has been investing in its mills and converting systems to improve the overall cost structure, which will boost earnings. The investments will enhance WestRock’s packaging capabilities in its served markets.

With the ramp-up of the TresBarras mill in Brazil, it is well-poised to capitalize on the region’s growth. WestRock also started the state-of-the-art 710,000-ton paper machine at Florence, SC, which replaces three old and obsolete machines. The mill continues to increase production and the company expects it to be at full-production levels at the end of the fiscal fourth quarter.

WestRock is reconfiguring its North Charleston, SC, paper mill to improve its long-term competitiveness. The move is expected to increase the company’s annual EBITDA, primarily owing to the reduction in operating costs from the shutdown of the paper machine and its associated infrastructure. The strategic investments and the KapStone synergy realization are expected to contribute $125 million to fiscal 2022 EBITDA.

For fiscal 2022, WestRock expects sales of $20-$21 billion, suggesting a rise from $18.7 billion reported in fiscal 2021. Earnings per share are expected to be $4-$5.10.  The mid-point of the guidance indicates year-over-year growth of 34%. Adjusted segmental EBITDA is anticipated between $3.3 billion and $3.7 billion. The mid-point of the range indicates year-over-year growth of 19%.

The company’s results are expected to benefit from strong demand, price increases, and benefits from strategic investments and productivity initiatives.

Price Performance

Shares of WestRock have appreciated 4.3% so far this year against the industry’s decline of 1%.

 

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Zacks Rank & Stocks to Consider

WestRock currently carries a Zacks Rank #3 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the basic materials space are The Mosaic Company (MOS - Free Report) , AdvanSix Inc. (ASIX - Free Report) and Allegheny Technologies Incorporated (ATI - Free Report) .

Mosaic has a projected earnings growth rate of 125% for the current year. The Zacks Consensus Estimate for MOS' current-year earnings has been revised upward by 33.3% in the past 60 days.

Mosaic's earnings beat the Zacks Consensus Estimate in three of the last four quarters and missed once, the average surprise being 3.7%. MOS has rallied around 82% so far this year. It currently sports a Zacks Rank #1.

AdvanSix has a projected earnings growth rate of 64.8% for the current year. The Zacks Consensus Estimate for ASIX's current-year earnings has been revised upward by 58% in the past 60 days.

AdvanSix's earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 23.6%. ASIX has gained 2% year to date. The company flaunts a Zacks Rank #1 at present.

Allegheny, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 661.5% for the current year. The Zacks Consensus Estimate for ATI's earnings for the current year has been revised 45.6% upward in the past 60 days.

Allegheny's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 127.2%. Year to date, ATI has rallied around 74%.


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