WestRock Company WRK announced that it will close operations at its containerboard and pulp mill located in Panama City, Florida by June 6, 2022. The move will save significant capital investment needed to the operation of the plant, which can now be deployed at high efficiency. growth areas. Moreover, the production of fluff pulp is not in line with the company’s strategy to focus on markets with higher added value.
The mill has an annual capacity of 645,000 tonnes and produces containerboard, primarily heavy kraft, and fluff pulp. As the mill is about to close, some grades of containerboard currently produced will be manufactured at other WestRock facilities. The plant employs around 450 people. They will receive severance pay and outplacement assistance in accordance with company policy and union agreements.
WestRock is committed to improving its return on invested capital and maximizing the performance of its assets. Operating the Panama City plant and making improvements to keep it competitive would have required significant capital investment. This can now be invested in strategic investment projects with attractive returns, and mergers and acquisitions.
The company has invested in its plants and conversion systems to improve the overall cost structure, which will increase profits. The investments will enhance WestRock’s packaging capabilities in its served markets.
With the ramp-up of the TresBarras plant in Brazil, it is well placed to capitalize on the region’s growth. WestRock also started up the state-of-the-art 710,000 ton paper machine in Florence, SC, which replaces three old and obsolete machines. The plant continues to ramp up production and the company expects it to be at full capacity by the end of the fourth fiscal quarter.
WestRock is reconfiguring its North Charleston, SC paper mill to improve its long-term competitiveness. This move is expected to increase the company’s annual EBITDA, primarily due to reduced operating costs resulting from the shutdown of the paper machine and its related infrastructure. Strategic investments and the realization of the KapStone synergy are expected to contribute $125 million to EBITDA in fiscal 2022.
For fiscal 2022, WestRock forecasts sales of $20 billion to $21 billion, suggesting an increase from the $18.7 billion recorded in fiscal 2021. Earnings per share are expected to be $4 to $5.10. The midpoint of the forecast points to 34% year-over-year growth. Adjusted segment EBITDA is expected to be between $3.3 billion and $3.7 billion. The midpoint of the range indicates 19% year-over-year growth.
The company’s results should benefit from strong demand, price increases and the benefits of strategic investments and productivity initiatives.
WestRock shares have appreciated 4.3% since the start of the year compared to the industrydecrease of 1%.
Image source: Zacks Investment Research
Zacks Ranking and Stocks to Consider
WestRock currently wears a Zacks Rank #3 (Buy). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some top-ranked stocks in the base materials space are The Mosaic Company MOS, AdvanSix Inc. ASIX and Allegheny Technologies Incorporated ATI.
Mosaic forecasts a 125% profit growth rate for the current year. The Zacks consensus estimate for MOS earnings for the current year has been revised up 33.3% in the past 60 days.
Mosaic earnings have topped the Zacks consensus estimate in three of the past four quarters and missed once, with the average surprise coming in at 3.7%. MOS is up about 82% so far this year. He currently sports a No. 1 Zacks rank.
AdvanSix forecasts a profit growth rate of 64.8% for the current year. The Zacks consensus estimate for ASIX earnings for the current year has been revised up 58% in the past 60 days.
AdvanSix’s earnings have topped the Zacks consensus estimate in three of the past four quarters and missed once, with the average surprise coming in at 23.6%. ASIX has gained 2% since the start of the year. The company currently boasts a Zacks #1 ranking.
Allegheny, which currently holds a Zacks rank of No. 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 up 45.6% in the past 60 days.
Allegheny’s earnings have exceeded the Zacks consensus estimate in each of the past four quarters, with the average surprise being 127.2%. Year-to-date, ATI has rebounded around 74%.
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