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Edited Transcript of WRK.N earnings conference call or presentation 30-Apr-19 12:30pm GMT

Q2 2019 Westrock Co Earnings Call

May 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Westrock Co earnings conference call or presentation Tuesday, April 30, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James Hunter Armstrong

WestRock Company - VP of IR

* Jeffrey Wayne Chalovich

WestRock Company - Chief Commercial Officer & President of Corrugated Packaging

* Patrick Lindner

* Robert Feeser

* Steven C. Voorhees

WestRock Company - CEO, President & Director

* Ward H. Dickson

WestRock Company - Executive VP & CFO

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Conference Call Participants

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* Anthony James Pettinari

Citigroup Inc, Research Division - VP and Paper, Packaging & Forest Products Analyst

* Clyde Alvin Dillon

Vertical Research Partners, LLC - Partner

* Deborah Anne Jones

Deutsche Bank AG, Research Division - Director

* Gabrial Shane Hajde

Wells Fargo Securities, LLC, Research Division - Associate Analyst

* George Leon Staphos

BofA Merrill Lynch, Research Division - MD and Co-Sector Head in Equity Research

* Mark Adam Weintraub

Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst

* Mark William Connelly

Stephens Inc., Research Division - MD & Senior Equity Research Analyst

* Mark William Wilde

BMO Capital Markets Equity Research - Senior Analyst

* Scott Louis Gaffner

Barclays Bank PLC, Research Division - Director & Senior Analyst

* Steven Pierre Chercover

D.A. Davidson & Co., Research Division - MD & Senior Research Analyst

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Presentation

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Operator [1]

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Good morning. My name is Marcella, and I will be your conference operator today. I'd like to welcome everyone to the WestRock Company Second Quarter Fiscal 2019 Results Call.

At this time, I'd like to turn the call over to Mr. James Armstrong, Vice President of Investor Relations.

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James Hunter Armstrong, WestRock Company - VP of IR [2]

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Thank you, Marcella. Good morning, and thank you for joining our Fiscal Second Quarter 2019 Earnings Call. We issued our press release this morning and posted the accompanying slide presentation to the Investor Relations section of our website. They can be accessed at ir.westrock.com or via a link on the right side of the application you are using to view this webcast.

With me on today's call are WestRock's Chief Executive Officer, Steve Voorhees; our Chief Financial Officer, Ward Dickson; our Chief Commercial Officer and President of Corrugated Packaging, Jeff Chalovich; as well as our new President of Consumer Packaging, Pat Lindner and Bob Feeser.

Following our prepared comments, we will open up the call for a question-and-answer session.

During the course of today's call, we will be making forward-looking statements involving our plans, expectations, estimates and beliefs related to future events. These statements may involve a number of risks and uncertainties that could cause actual results to differ materially from those we discuss during the call. We describe these risks and uncertainties in our filings with the SEC, including our 10-K for the fiscal year ended September 30, 2018.

Additionally, we will be referencing non-GAAP financial measures during the call. We have provided reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the appendix of the slide presentation. As mentioned previously, the slide presentation is available on our website.

With that said, I'll now turn it over to you, Steve.

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Steven C. Voorhees, WestRock Company - CEO, President & Director [3]

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Thanks, James. Good morning. Thanks for joining our call today. The WestRock team delivered outstanding results in the second fiscal quarter of 2019. Our adjusted segment EBITDA of $757 million improved by $108 million over last year. The increase in EBITDA was primarily driven by the acquisition of KapStone and our adjusted EPS was $0.80 per share.

We're responding to changing market conditions by matching our production to our customers demand. During this past quarter, we reduced our containerboard and kraft paper production by nearly 300,000 tons, with approximately 100,000 tons from planned maintenance and 200,000 tons from economic downtime across our system.

We're focusing on organic growth opportunities, where we can create customized value-added solutions for our customers that reduce their total cost and/or grow their sales. This focus increased our packaging shipments during the quarter and increased the use of the converting assets across our system. This contributed to the realization of $68 million in productivity in the quarter.

We successfully completed the installation of a new curtain coater at the Mahrt mill in March. This was the first of 3 significant projects in our Consumer Packaging mill system that will be completed by the end of June.

In aggregate, these projects will enhance our ability to meet our customers' developing needs and improve our cost structure. The advantages of our broad paper and packaging portfolio, coupled with the multiple levers we have in our control, provide me with confidence in our team's ability to create long-term value for our customers and our stockholders.

Turning to the financial results for the quarter. We benefited from a flow through of previously published price increases for all of our major paper grades. The positive impact of price increases were offset by lower containerboard export volumes, economic downtime, mill outages and wage and other inflation. However, wood costs were largely offset by lower recovered fiber cost. Our net leverage ratio was 2.96x at the end of March.

Corrugated Packaging adjusted segment EBITDA of $553 million increased by 24% over last year. This represents the sixth consecutive quarter that we reported North American corrugated margins of 20% or more.

During the March quarter, we lowered our inventory levels by 60,000 tons. And so far, in April, we've reduced our inventories by another 30,000 tons and have taken 55,000 tons of economic downtime.

Our box shipments grew 20% year-over-year on a per day basis. After adjusting out the volumes from the KapStone box plants, our volumes grew organically by 2% on a per day basis over last year. Gains in e-commerce, food service, processed food and bakery contributed to this growth.

Let's discuss our integration rate. Our integration rate for the last 12 months has been 77%, and it was 80% this past quarter. Organic growth in box volumes contributed to the increase in integration. KapStone's complementary footprint has supported additional sales to existing WestRock customers who are now able to access our broader geographic footprint. We've integrated an additional 67,000 tons in the annual box shipments through our Victory Packaging system.

Also contributing to the increase in integration has been a decline in our export volumes, which, during this past quarter, accounted for only 10% of our total containerboard shipments. This compares to 15% in the same quarter of last year.

We saw higher year-over-year inflation, especially in wood, freight, energy, labor and benefits. These inflationary pressures were partially offset by lower recycled fiber cost.

We're making progress rebuilding the Panama City mill. We expect the mill's 2 machines to build back up to normal production during the June quarter. Other repairs will be complete by the end of the calendar year.

We recorded income from the $30 million in business interruption insurance proceeds. These proceeds were not included in our guidance for the quarter. After taking these proceeds into account, the contribution to income from the Panama City mill was approximately equal to last year's contribution when the mill was fully operational.

Brazil's adjusted segment EBITDA margins for the quarter declined to 22.2%, down from 26.8% last year. This decline was driven by overlapping cost as the Porto Feliz box plant ramps up and the Valinhos box plant ramps down. This will continue until Valinhos is closed this summer.

Our Consumer Packaging business performed well during the quarter with sales up approximately 2% year-over-year as we realized higher prices from previously published price increases. Adjusted segment EBITDA was ahead of last year. The outage expense related to the Mahrt curtain coater project and significantly higher wood costs, especially for our Covington mill, contributed to slightly lower margins. Without these 2 items, adjusted segment EBITDA margins would have been 180 basis points higher than what we reported.

Our team delivered strong productivity of $41 million as a result of high operating utilization across our converting system and the benefits from ongoing productivity programs and capital investments. Commodity inflation was elevated in the quarter driven by wood costs that were $17 million higher year-over-year due to fiber supply challenges from the extended wet weather. We've seen improvement in wood availability in April, and we expect cost to moderate in the second half of the fiscal year.

Backlogs remained strong across all of our major grades. In the second quarter, we experienced sales growth across our target end markets, especially food service, retail food, beverage, beauty and cosmetics. In beverage, our machinery solutions are enabling customers to replace printed shrink films with more sustainable paperboard multipacks. We've installed more than 20 machines year-to-date, including high-speed machines for soft drink applications and BasketWrap machines for beer to replace printed plastic film. Customer activity remains high, and we have a strong machine pipeline for the second half.

Our team at Mahrt successfully executed the installation of a new curtain coater in March, and the mill is now fully operational. The start-up of the machine has gone extremely well, and we're seeing the productivity benefits and lower cutting costs that we expected. The Covington mill upgrade is underway, as I speak, and it will be complete in May. We're installing a new headbox at the Demopolis mill in June. The cost of the Covington and Demopolis projects will adversely impact our margins in the June quarter. In the September quarter, we'll benefit from the volumes and improved quality and productivity available from all 3 projects: Mahrt, Covington and Demopolis.

Looking into fiscal 2020, we expect improvement in margins from the capital projects and also the additional actions that we'll take across the segment to improve the value that we provide our customers and reduce the cost that we incur to deliver this value.

We've owned KapStone for 6 months. We've made great progress with our integration activities. I'm pleased with the level of engagement that our new teammates have demonstrated, and we're proceeding well with the integration. We've accelerated the realization of the synergy and performance improvements, and we're now at an annual run rate of $70 million. We expect to achieve a $90 million run rate by the end of this fiscal year. We expect to exceed the $200 million of run rate -- of synergy and performance improvements by the end of fiscal 2021. We're executing well across each integration category, including our mill system, our box plant system, logistics, procurement, information technology and administration. We've internalized 67,000 tons of annual box shipments through our Victory Packaging system, and we expect to achieve 100,000 annual tons by the end of fiscal 2019. We're pursuing many opportunities to improve our performance and profitability in the years to come. Between our strategic capital projects and the realization of synergies from KapStone, we see runway to more than $440 million of EBITDA improvement through 2022, of which only the $70 million run rate of KapStone synergies has been realized.

The new Florence paper machine project is progressing well and is on track for the announced start-up in the first half of calendar 2020. As we communicated when we announced the project, the primary benefits of the investment are quality improvements and the increased operating efficiencies gained by operating 1 new paper machine, instead of the 3 older machines.

In Brazil, the first pieces of equipment are already running at the Porto Feliz box plant. We expect to run higher volumes through the facility in the coming months. We've already broken ground at the Três Barras Mill and a significant amount of the machine reorders have been placed. The Três Barras Mill project is well on track to be completed in fiscal 2021.

In total, we expect to realize $80 million in run rate EBITDA in fiscal 2020 from the projects completed this year, with the strategic projects adding $240 million a year in EBITDA by the end of fiscal 2022.

We're delivering value to our customers by helping them lower their total cost, grow their sales, improve their sustainability and minimize their risks. 140 customers buy more than $1 million of product from both our Consumer and Corrugated segments. This accounts for $6 billion in annual sales. We're uniquely positioned to win with our customers and with our broad portfolio of paper, packaging, merchandising, machinery and supply chain solutions.

In February, we expanded Jeff Chalovich's role to lead our commercial efforts across WestRock. Jeff is off to a great start in accelerating our differentiated strategy and bringing added emphasis to top line growth at WestRock.

I'm delighted to report that during this past quarter, WestRock was recognized twice by third parties for our innovation in the manufacturing of sustainable paper and packaging products. The Sustainable Packaging Coalition recognized WestRock with its Innovator Award for a decision to accept polycoated foodservice packaging at our 100% recycled paperboard mills in the United States. Instead of this material going to landfills, we're able to process and recycle this fiber into new paper-based packaging.

We've developed a recyclable and compostable paperboard cup prototype designed to hold hot and cold beverages. This prototype was recently named 1 of 12 winners of the NextGen Cup Challenge, and we're optimistic about our ability to fully commercialize this product.

Our research and development on new more recyclable and compostable packaging designs exemplifies our commitment to working with our customers to find ways to make packaging more sustainable. Our customers are demanding even more environmentally sustainable solutions. Our broad portfolio of customized, value-added, sustainable paper-based packaging solutions is well positioned to capitalize on this shift in consumer preference and is especially applicable when it comes to creating packaging solutions that reduces the use of plastic. Our solutions include the use of innovative materials, new designs and the applications using our machinery platform. Examples of our plastic replacement products today include food service solutions, like EnShield Natural Kraft that replace plastics and bakery applications, and the beverage packaging solutions, such as the Cluster-Pak and the EconoClip. We're seeing growing customer interest in solutions that make packaging more recyclable, such as the non-poly coated ice cream cartons, which enable these products to enter the fiber recycling stream.

We see this interest in sustainable packaging solutions continuing to grow. Over the past year, we've generated $50 million in additional annual sales, and we have the potential to increase this several times over.

A great example of how we create innovative, sustainable packaging solutions for our customers are the projects that we have underway for Diageo, the owner of Guinness. We're transitioning their packaging from plastic to paper and eliminating their use of shrink film and plastic rings. We're providing a better billboard for their product on the shelf, which will give them the opportunity to grow their sales. This is a powerful combination, and we're able to provide this turnkey solution for Diageo with the right substrate, right packaging design and our highly productive and flexible machinery that are working in concert to help Diageo achieve their environmental and financial goals.

I'll now hand it over to Ward to discuss our outlook. Ward?

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Ward H. Dickson, WestRock Company - Executive VP & CFO [4]

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Thanks, Steve.

Turning to Slide 12, we outline our key assumptions for our fiscal third quarter guidance. We expect adjusted segment EBITDA in the third quarter to be between $830 million and $870 million as compared to $757 million in our second fiscal quarter and $754 million last year.

Sequentially, higher seasonal volumes across both segments should add $20 million to $40 million in EBITDA compared to our second quarter.

We expect significant sequential cost deflation driven by declines in recycled fiber, seasonally lower energy costs and some moderation in virgin fiber costs. We do not anticipate any business interruption insurance recoveries for the Panama City mill until the fiscal fourth quarter.

We estimate slightly higher depreciation and interest expense and a tax rate of 23.5% in our fiscal third quarter. These items impact the quarter by a negative $0.03.

We are aligning our outlook to the recent changes in the containerboard market. For the full year, we now expect adjusted segment EBITDA of approximately $3.3 billion to $3.4 billion.

Turning to our balance sheet. We remain committed to returning to our long-term leverage ratio of 2.25x to 2.5x and expect our leverage ratio to be less than 2.9x by fiscal year-end 2019.

We expect fiscal 2020 capital expenditures will decline to a level of $1 billion to $1.2 billion and that capital expenditures will be approximately $1 billion in fiscal 2021 as we complete our strategic capital projects. We remain committed to a stable and growing dividend, and our primary use of free cash flow near term will be debt reduction.

And now I'll turn it back over to Steve for closing remarks.

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Steven C. Voorhees, WestRock Company - CEO, President & Director [5]

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Thanks, Ward. I'm going to take a couple minutes and talk about where WestRock stands at this moment in time from an investor perspective.

I think it starts with markets, and while I appreciate the concerns about global supply and demand, I will point out that there's other trends to consider, the most significant of which is that buyers of packaging are interested in much more than price. Our customers are interested in reducing their total cost across their entire supply chain, growing their sales and minimize their risks by having a supplier that performs well, day in and day out, and, finally, achieving their sustainability objectives.

Paper-based packaging is well situated to help customers achieve these goals. WestRock has the world's most comprehensive portfolio of paper and packaging products, and we're well positioned to help our customers succeed. We deliver value by creating customized value-added solutions for our customers. And our talented and engaged workforce is committed to delivering value for our customers and profitably growing our company.

WestRock has multiple levers to improve our results. These levers include our commercial approach that supports organic growth, our strategic capital projects and the capture of the KapStone synergies that will lower our costs. As is the case with many companies that have grown by acquisition, we're simplifying our business with systems and processes and, along the way, building our capabilities to be successful in very competitive markets. As we do it this, we're reducing our exposure to commodity markets and increasing the stability of our business by providing value-added products and services for our customers. While we're doing this, we're generating strong cash flow and paying an attractive dividend, and we remain committed to returning our leverage to 2.25 to 2.5x target.

Before we turn to your questions, I'd like to take a moment to thank Bob Feeser for his 32 years of service. Today is Bob's final day with WestRock. Bob, I appreciate your leadership and commitment to WestRock. We could not have integrated 2 companies into WestRock as well as we did without your presence and your passion, so I thank you for all that you've done. And all of us at WestRock wish you and Sue the best in the next phase of your life.

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Robert Feeser, [6]

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Thanks.

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Steven C. Voorhees, WestRock Company - CEO, President & Director [7]

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And I'm pleased to welcome Pat Lindner to WestRock as President of WestRock's Consumer Packaging business. Pat's 20 years of global business experience provides valuable perspective to all of us at WestRock. Pat's got a proven history of being a strong driver of operational excellence, innovation and growth, and we're fortunate to have him on our team.

That concludes my prepared remarks. James, we're ready for Q&A.

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James Hunter Armstrong, WestRock Company - VP of IR [8]

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Thank you, Steve. (Operator Instructions) Marcella, can we take our first question, please?

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Questions and Answers

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Operator [1]

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Your first question comes from Chip Dillon from Vertical Research.

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Clyde Alvin Dillon, Vertical Research Partners, LLC - Partner [2]

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Thanks for the details, and Bob, all the best to you as you move forward. It looks like the CapEx guide for '20 and '21 is a little lower than what, I think, you had said in the past. And yet you're maintaining obviously the high-profile projects you went through. Could you just tell us where you're finding some savings, if I'm correct to that assessment?

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Ward H. Dickson, WestRock Company - Executive VP & CFO [3]

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Chip, this is Ward. Thank you. Yes, you are correct. We're just balancing our capital investments with our current view of supply and demand conditions. And we're very focused on returning to our long-term leverage target of 2.25 to 2.5x. We've talked in the past about a maintenance CapEx level of $500 million, ongoing return generating capital projects of approximately $500 million. We have flexibility to defer or scrub those 2 categories, and that's what we're doing in the outlook. We are continuing to devote the capital required to complete the strategic capital projects on time because of the significant EBITDA generation opportunities that those represent.

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Clyde Alvin Dillon, Vertical Research Partners, LLC - Partner [4]

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Okay. The quick follow-up, this might be for Jeff, I'm not sure. But one of your big competitors down in Brazil announced a major -- the Puma project, a major expansion in kraft linerboard. And the first of those expansion projects involves just only eucalyptus-based pulping, which we always understood that hardwood was not really compatible with containerboard. Maybe there's a lightweightness to this or something unique about this. If you could just help us understand what you think they're doing.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [5]

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Chip, I can say that the technologies advanced with paper science, chemicals, fiber that you can make a decent sheet, in fact. In our business in Brazil, we're mixing eucalyptus along with short wood fibers and making tremendous paper for that market and for export. So I don't know what markets, where they're going to use the paper, but I think the science and with chemicals that the paper should be fine. I don't really know what else they're thinking of though.

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Operator [6]

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Your next question comes from the line of George Staphos from Bank of America.

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George Leon Staphos, BofA Merrill Lynch, Research Division - MD and Co-Sector Head in Equity Research [7]

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Thanks for the details. Congratulations to Bob and Pat and everyone on their new roles. And I guess the first question that I had, to extent that you can comment, what do you think was driving the recent industry weakness in box shipments, recognizing that you did better in the last quarter? And if you could sort of parlay that into what are you seeing in terms of early fiscal third quarter trends, both in terms of your shipments and what customers are saying. And then I had a follow-on.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [8]

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George, it's Jeff. So I can speak and articulate what we're seeing in our markets. As we reported, we're up 2% organically and 20% overall with KapStone. I think it's important to note the year-over-year comparisons, too. So if you look at this quarter, last year was a strong comp quarter. And just to give you some insight to sort of put your #2 question in, what our customers are saying, they're -- our independent customers are saying they're flat, they may be a bit down, but they're coming off 2 record years, and their view is bullish on the economy and what they're seeing in their marketplaces. So that's what that they're telling us. What we see, our e-commerce business continues to grow double digit. We're strong in processed foods. Our ability to put innovation with our machinery business into multiple segments is allowing us to grow and, I think, has helped us the last 24 months grow the business because we're driving and answering critical customer challenges. That's in omnichannel. So these -- our big CPG customers are looking to compete in box stores, in retail stores and also in the e-commerce channels. We're uniquely positioned to provide solutions for that. Add that to sustainability, our opportunity to drive cost out of their system and with a very good graphics business in the corrugated space, paired with what we can do on our display business and our Consumer business, we can hit all of the critical customer challenges, and that's continued to enable us to grow the business. We're up in April slightly year-over-year. We haven't finished yet, so it's up a bit, and it's another tough comp. We're up 14% last year in the aggregate and over 3% on a per day basis. So our box business remains solid, and we will continue to grow organically in the business.

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George Leon Staphos, BofA Merrill Lynch, Research Division - MD and Co-Sector Head in Equity Research [9]

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Okay. Thanks for the comments on that, Jeff. The related question, I think you mentioned in the prepared remarks that you had 20 machine installations in the quarter. Can you help us sort of quantify that in terms of what kind of growth you're seeing year-on-year in terms of installations, whether there's more of a shift towards Consumer or to Corrugated, recognizing some cases that it's marrying both? And I know you can't give a lot of detail on this, but is this helpful to your margin, helpful to your return or kind of average? Any thoughts on that would be great.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [10]

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Sure. I'm going to let Pat answer on the 20. The 20 was Consumer and then I can talk about Corrugated.

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Patrick Lindner, [11]

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Great. Thanks, George. This is a Pat. And so, yes, the 20 box shipments are machine shipment that we had really represent a nice increase over last year. We expect that to continue into the rest of this year. What this really does, it helps us add additional value to our customers at downstream because, obviously, we cannot only bring our folding carton capability to and our boxboard capability to the customers, but also design that in a custom way into their solutions. And maybe one example of this is the one that Steve shared around Diageo where we actually not only sold the board and help them design the board, but we also helped install the machine and designed that. And one of the reasons we won that piece of business was because it had much higher productivity than any other solution. And it's not clear how the outcome may have been different if we didn't have that machinery component to our offering. So we really think when we look at our business innovation and especially these plastics, the paper conversion from design to material science with our paperboard substrates and then machinery, we think all of that is really important to our ability to serve our customers.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [12]

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And then George, I'll comment. We had 48 installations in the quarter. And our automation platform continues to drive differentiation across and volume growth. And paired with our Consumer business in beverage, it's giving us unique opportunities, and I'll give you an example. We had a large install, almost a $27 million project for a customer, so it wrapped up $50 million in sales for us. We drove almost $3 million in cost out of their business, so when you talk about quantifying value for the customers, we're able to do that with the solutions. But it also gave our Consumer group a chance at over $40 million of business that we're looking at, and we're looking at the Consumer business just not making machines for beverage, but moving into other machinery. Their platform is tremendous. And so we we're looking at doing a full integrated install in this customers' business with an opportunity for the Consumer business also. We're also looking at new innovation in our box size from Box on Demand, so we came to market with a pack-on-demand pouch that we just rolled out at ProMat, so it gives us some opportunity for a fully recyclable pouch. And then if you look at our box size or -- that we just acquired, we already have sold packaging into a retailer that had 15 SKUs, was looking to go to 5 SKUs, was looking at DIM weight reduction, had been shipping to retailers, but wanted to go to direct in e-commerce. So when you talk about the sustainability platform, it took out all the filler packs that this customer was using. It reduced their working capital because their inventory went from 15 SKUs down to 5. And it drove out cost because they had an automated solution. So these are things that are continuing to drive organic growth for us and differentiating us in the marketplace to our customers and driving margins.

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Operator [13]

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Your next question comes from the line of Anthony Pettinari from Citi.

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Anthony James Pettinari, Citigroup Inc, Research Division - VP and Paper, Packaging & Forest Products Analyst [14]

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And congratulations to Bob and Pat. On containerboard, you indicated in your comments that 10% of your total shipments are now export versus, I think, 15% last year. Is 10% a good way to think about where you are early in fiscal 3Q? And then we've obviously seen a big deterioration of export prices. Just wondering if you've seen any kind of stabilization into the regions that you sell into and sort of how you would characterize levels of inventory and supply/demand from an export perspective.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [15]

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Anthony, it's Jeff. So 10%, I think, is a good way, it may go up a few percent, down a few percent. But in general, 10% I think is a good way to think about our export. And then if you break that down to the world, 60% of our 10% goes into the Latin America market, which is more stable, more direct customers for us. And the pricing has not been as pressured as the other areas of the world. 30% is Europe, Mid-East, Africa combined. And so what we've seen in those markets has been some higher inventories, some pricing pressure and then that turns to that definitely high inventory, some pressure on the pricing. However, what we're seeing now is the volumes in our exports is as we've expected, so we're seeing steady orders at least in the areas we participate. We've had some areas, I'll call out Turkey, Israel, that are trying to lock in prices for 6 months. Typically, that's a sign that they believe that the markets bottomed. And as they worked on inventories, I'd expect our business to stay stable in that market, but much reduced. As you know, we've done a lot of work integrating into the North American box business, so that's been part of the strategy, and we've been executing against that.

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Anthony James Pettinari, Citigroup Inc, Research Division - VP and Paper, Packaging & Forest Products Analyst [16]

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Okay. That's very helpful. And then just switching to the Consumer side, we've seen this kind of divergence within SBS grades. You've got stock stronger. Folding carton is seeing a small price decline, and pulp and paper weak. And then the delta between SBS and CUK is kind of in sort of a different place than it has been historically. I was wondering what's driving this. If you can kind of frame how it impacts your portfolio in terms of your mix between cup stock and folding cartons. And just sort of what you're seeing in those boxboard end markets.

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Patrick Lindner, [17]

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Yes. Thanks, Anthony. This is Pat. And so the dynamics around SBS and CNK pricing that you mentioned, of course, we can't comment on the forward pricing dynamics that are out there in the industry. But I certainly can give you some perspective on what's happening in the markets. And I'd like to focus most of this on CNK because I think this is a pretty dynamic marketplace where we're seeing really strong demand for this product. And it's really been driven by a number of things. And the beverage market has been driven by the demand for wet and high-strength applications, beverage as well as frozen food. And I think really capitalizing on the opportunity from plastics into the paper-based products. And so we expect that demand to continue. I think as Steve mentioned, we've got $50 million-or-so of sales into the plastics to paper conversion that's certainly driving strength in CNK. We continue to have strong backlogs there. And we expect to get $100 million of sales this year in that type of a conversion, again, from plastics to paper and in many more -- many times over that going into the future. And I think the other thing around CNK that's pretty interesting right now is that the brown side of CNK is viewed by consumers as environmentally friendly and, again, adding to the strength that we see there. So we're pretty bullish on what we see in CNK. And we're also excited about having the Mahrt mill back up and running with that big investment that we had there and getting back to serving -- servicing our customers the highest level that we can.

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Operator [18]

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Your next question comes from the line of Mark Weintraub from Seaport Global.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [19]

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Just one detailed question. The insurance recovery impact on EBITDA in the quarter, was that $60 million?

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Ward H. Dickson, WestRock Company - Executive VP & CFO [20]

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Mark, this is Ward. Remember the -- there are 3 categories of the insurance recoveries and the claim. We've had -- we've incurred M&R expense, right? I mean just direct cost, repair cost. And those costs and those recoveries have been adjusted out of adjusted EBITDA and adjusted EPS. And then the business interruption, the lost production volume, the lost profits, that has flowed through adjusted EBITDA and adjusted EPS. And the recoveries have flowed through adjusted EBITDA and adjusted EPS. And then finally, there is the reimbursement for the capital investments. So the total recovery was $60 million, and it was in 3 buckets. A portion of it was devoted to the capital investment that we have to replace, the direct cost that we exclude from adjusted EBITDA and adjusted EPS and then the business recovery for the business interruption losses. So the amount that flowed through adjusted EPS and adjusted EBITDA in the quarter was the recovery related to the business interruption claim.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [21]

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Got it. And so that was the $30 million net income number.

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Ward H. Dickson, WestRock Company - Executive VP & CFO [22]

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Yes.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [23]

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And so can we assume it was roughly $40 million in terms of the EBITDA contribution?

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Ward H. Dickson, WestRock Company - Executive VP & CFO [24]

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No. It was $30 million of EBITDA. We tax-effected it to the -- to get to the $0.09.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [25]

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Okay. Great. Super. And how much more potentially could we be seeing from Panama City in Q4 that would flow through the EBITDA adjusted number?

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Ward H. Dickson, WestRock Company - Executive VP & CFO [26]

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It would -- we're envisioning an amount that's not that much different than what we experienced in the first half. The other thing, as you think of Panama City, as we ramp up to full production, and we look at the second half versus the first half, we were actually incurring operating losses in the first half before the business recovery -- the business interruption recovery. And then we start those losses are reduced greatly in Q3 and then we return to full operation as we move into Q4.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [27]

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Great. Super helpful. And maybe one real quick follow-on. If we were to look at KapStone pro forma, would the box shipments for the quarter still have been up for WestRock in total year-over-year?

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [28]

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It's Jeff. Yes. So 2% year-over-year without KapStone.

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Mark Adam Weintraub, Seaport Global Securities LLC, Research Division - MD & Senior Research Analyst [29]

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And if we were to include KapStone, is it pretty close to that same number? Or does that actually move -- I realize it's pretty small. I wouldn't think it would move the dial. But does it move the dial? If we look at what KapStone did last year, add that to what WestRock did last year and then compare it to what WestRock did in total this year, is it still pretty close to 2%?

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [30]

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I;m going to need an abacus for that. I'm not quite -- so we're up 20% combined. I'm not clear what their box shipments in the quarter were, but I know we were up 2% organically. And with KapStone included, we're up 20%.

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Operator [31]

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Your next question comes from the line of Mark Connelly from Stephens Inc.

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Mark William Connelly, Stephens Inc., Research Division - MD & Senior Equity Research Analyst [32]

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Steve, we've seen WestRock and Rock-Tenn respond to containerboard market imbalances with higher exports, with plant closures and economic downtime. Can you help us understand how you think about those options with a bigger system, with higher potential -- export potential? And with respect to downtime, has your approach to taking downtime shifted or you're thinking about it? You used to talk about one mill as a swing mill. I'm curious, with the new system and with lower OCC, whether that approach has changed.

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Steven C. Voorhees, WestRock Company - CEO, President & Director [33]

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I think first on the downtime, we have a larger system so we have more flexibility. And we're continuing to match our production to meet customers' demand. So just -- our system does have a lot more flexibility, so it's -- you really can't identify one mill as a swing mill. As far as approach to the market, we're -- our approach is to focus on our customers and grow organically. I think the more we can sell boxes, the better. And I think that's one of the key things that -- it's really an advantage of KapStone's box plant system. We're able to have a broader platform to be able to do that. And I think it's contributed to the increase in our integration rate.

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Mark William Connelly, Stephens Inc., Research Division - MD & Senior Equity Research Analyst [34]

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That's helpful. Just one more question. Working capital was a bigger use of cash than I expected. Can you help us understand why and where you think we might end up for the year on working capital?

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Ward H. Dickson, WestRock Company - Executive VP & CFO [35]

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Yes. Mark, this is Ward. So seasonally, if you think about it, our first half versus second half, let me just step back and just talk about the total cash flow generation. If you look, there is a seasonal element of our cash flow generation. Last year, we generated approximately $1.7 billion or 69% of our full year adjusted operating cash flow in the second half, and this year is no different. We're projecting a similar level of cash flow generation in the first -- in the second half of this year. And the key drivers really are higher EBITDA in the second half. And then working capital has always shifted from a use in the first half to a source in the second half. We've talked about the reduction in inventories. If you think about it, in the first half of our year, we pay out our annual bonuses and then we start to accrue those bonuses as we go throughout the year. So the pattern that we see in the working capital model as we project our full year cash flow generation is really fairly consistent with what we've seen in previous years.

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Operator [36]

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Your next question comes from the line of Steve Chercover from Davidson.

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Steven Pierre Chercover, D.A. Davidson & Co., Research Division - MD & Senior Research Analyst [37]

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So I wanted to start first about what the 6-pack solutions, the EconoClip and Cluster-Pak. I mean this seems to be a real trend now. And -- why did it suddenly become so urgent? Are you guys driving this? Or is it the beverage companies or the consumer?

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Patrick Lindner, [38]

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Yes, Steve. Thanks very much. This is Pat. And I think the short answer is it's really a lot of the consumer and as well as, in turn, the consumer packaging companies. And maybe a little bit of background that I have on this from a personal side. I spent the last 20 years in the plastics industry and was in this industry in packaging in a number of different ways. And as you know, there's been a lot of effort in the plastics industry around recyclability and compostability and making the products more environmentally friendly. But efforts have changed significantly and I would say consumer preferences have changed significantly over the last couple of years. And it was really kind of a tipping point or a turning point. And what they're basically saying -- consumers are basically saying is that we don't want single-use plastics in our stream -- in our consumer stream. And a lot of that is driven by some of the images probably out on social media. You can see the -- a single-use bottle is floating in the ocean and plastic bags in various places. And so that's a big shift. And so our customers are now coming to us asking for solutions. And we have a pretty broad array of solutions that we're bringing to them that capitalize on our capability around design, around material science. And it's not just the paperboard science, but also the coatings technology to make sure that these products are -- meet the customers' needs and the application needs. And as we've talked about, and Jeff articulated nicely, the opportunities we have to leverage our machinery capability there brings us -- it allows us to have a really holistic approach to this. So econo pack and -- or EconoClip and Cluster-Pak, these are real options and real opportunities there being very much driven by end-user demand.

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Steven Pierre Chercover, D.A. Davidson & Co., Research Division - MD & Senior Research Analyst [39]

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Well, congratulations on your shift from the dark side to the right side of history. And speaking of the jihad on plastic, the little box that you show on Slide 10, the EnShield bakery box, so is that -- the see-through window, is that plastic? Or is that like a cellulose-based cellophane?

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Patrick Lindner, [40]

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Yes, that is still plastic. And so those -- there were different solutions that we're looking out for that. But I would like to highlight some of those applications leverage what we call our EnShield technology. One of the challenges with replacing plastics is the -- is achieving the barrier properties that they inherently have around grease and oil resistance and just general moisture resistance. And so we've developed recyclable compostable, environmentally friendly products that are based in water, aqueous dispersions and coatings that we can put on these packages to render and achieve the same types of properties. So we're pretty excited about EnShield and its broad application and really across all of our substrates. And we'll continue to work with our customers wherever we can to replace plastics as driven by consumer demand.

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Steven Pierre Chercover, D.A. Davidson & Co., Research Division - MD & Senior Research Analyst [41]

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Just one quick one on the box side. The 2% organic growth is at odds with industry stats. So can you help us reconcile that? Are you gaining share? Or is there maybe something wrong with the statistics?

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [42]

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I think we have been gaining share based on our ability to differentiate in the marketplace and providing solutions for customers that really add value in the things that Steve articulated earlier. We're helping them reduce the total cost in their supply chains. We're helping them activate brands in some of their product through retail-ready, shelf-ready solutions on shelf displays, graphics in general. We have a naturally sustainable product. And with the jihad you just mentioned on plastics, we're well positioned across our system to take advantage of that. And then we have scale that helps our customers manage risk when you go into change business or install machines or do full-line integrations. The risk is much lower. And it's easy to switch and it's easy to use us across North America, Brazil, Canada, Mexico. So I think all of those things have helped our customers win, and we're winning with them.

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Operator [43]

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Your next question comes from the line of Mark Wilde from BMO Capital Markets.

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Mark William Wilde, BMO Capital Markets Equity Research - Senior Analyst [44]

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And congratulations on a good quarter.

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Steven C. Voorhees, WestRock Company - CEO, President & Director [45]

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Thanks, Mark.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [46]

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Thanks.

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Mark William Wilde, BMO Capital Markets Equity Research - Senior Analyst [47]

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I wondered, to start, Jeff, if we could talk about what looks like a little bit of a potentially a paradigm shift in the business where -- the Corrugated business where you've got new entrants building large converting plants and also mills that use a lot of low-cost mixed waste. And I know a lot of people in the industry have been dismissive of this in the past. But at least one of these players is just steadily marching across the country building mills and building converting plants.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [48]

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I'm sorry. What was the question?

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Mark William Wilde, BMO Capital Markets Equity Research - Senior Analyst [49]

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How do you think about -- is that -- is this really a paradigm shift in the industry?

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [50]

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I can't say in the industry, Mark. I think they have a play that they're running in what they're trying to do. I think, from our standpoint, what we're doing in WestRock is we're running offense in the things that we control and that we do. We have a great mix. So one of the benefits of our system of our size, we have a good mix of recycled and virgin kraft liner, so -- virgin kraft fiber. So we're a balanced system and it gives us great flexibility in markets good and bad. And so we like that position. And we've been deliberate about how we've gone about that. We're continuing to invest in our mill system to drive our cost to a lower side of the cost curve. We've built a very solid converting system and then combined our systems with our consumer display. We are unique in our industry. So I think that we have continued to grow our business. We continue to add margin. So I think we're well positioned. And our customers are voting with purchase orders and organic growth for us, so I think we're well positioned in the market. As far as a paradigm shift in the industry, I can't speak to the whole industry. I know what we're doing and how we're executing. And we'll continue to integrate through our box plants and build a system that helps customers win in their marketplaces.

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Mark William Wilde, BMO Capital Markets Equity Research - Senior Analyst [51]

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Okay. And then I -- just for a follow-on. I just wanted to turn back to this machinery issue because a few months ago, you had a company sold at a very high multiple that had very high margins, just turning kind of kraft paper into dunnage inside packaging for Consumer Packaging. And I'm just curious, we have WestRock and KapStone have historically produced a lot of kraft paper. That market gets pretty rough in the downmarket. I just -- what's -- is there an opportunity for you to kind of replicate that strategy or replicate that kind of product going forward? And it seems like that's where all the margin is in the business.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [52]

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That's a great question. We look at our machine platform broadly. I haven't spent a lot of time in those markets, but it's a great question, and we'll think more about that. But it's certainly as we look at machine platforms and opportunities, we've looked at multiple spaces just like that.

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Operator [53]

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Your next question comes from the line of Debbie Jones from Deutsche Bank.

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Deborah Anne Jones, Deutsche Bank AG, Research Division - Director [54]

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The first question I had was on solving -- I'm sorry, on cupstock grade. I think that Anthony asked this part of the question earlier, but it's a little confusing to me if there is going to be a bit of an inflection point beyond what we've already seen in demand for these grades as some of these CPG companies shift away from these non-environmentally friendly applications and this is supported by some of the things you highlighted. But I was hoping that you could talk us through what your expectation is over the next couple of years and then specifically how you're positioned on that.

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Patrick Lindner, [55]

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Yes. So thanks, Debbie. This is Pat. And so I think we're positioned really well across any one of the substrates. We're -- one of the nice things about our portfolio is we're pretty agnostic as to which material or which substrate is actually used. And so across the CNK or CRB, URB, SBS, we really look to meet the customers' needs. And there are going to be natural shifts based on what the customers are really looking for. And we've been able to make some of those shifts over the last couple of years, and we'll continue to do that as it makes sense. And maybe I can have Bob make a comment with respect to...

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Robert Feeser, [56]

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Debbie, it's Bob. Just related to the cups, specifically in food service, that continues to be a big trend. The shift away from foam, in particular, we're seeing high-single-digit growth in that part of the market. And I would expect that to continue going forward as more of those conversions happen. And clearly, the innovation that we're bringing to the market by trying to remove plastic liners in cups is going to further accelerate that as well. That's why we're so excited about the work with the NextGen Cup Challenge as well and feel very good about the innovation that we're bringing to that market.

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Deborah Anne Jones, Deutsche Bank AG, Research Division - Director [57]

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Okay. That's helpful. It just -- it seems like with both McDonald's and Starbucks backing that, but they're quite serious about it. But it's still a little confusing to me as to what the potential uptick is from that, but that's helpful. My second question is just sticking with volumes in the Consumer segment. I think on the last call, you did mention that you thought there would be an inflection at least in the volume bucket at the EBITDA bridge in the second half of the year. And I was just wondering if that's still the case.

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Patrick Lindner, [58]

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Yes. So I think -- this is Pat, again, Debbie. So I think for the rest of the year, first of all, our volumes right now are about flat. As you saw, the top line is up about 2%. That's really some of the price that we're realizing from the price -- previously published price increases. So right now, we expect volume to be -- has been about flat. We may see some increases here. We're thinking the market, in general, all in, is about 1% to 2% CAGR, and we're kind of still holding with that point of view. We've got some things that are improving and increasing. We've got some strength in foodservice. We've certainly got some strength in health care with our MPS portfolio and cosmetics and the beauty segments as well.

But as you know, there's things offsetting that, such as the -- some of the secular decline that's been going on in tobacco and to, maybe a lesser extent, commercial print. And so we're probably looking at -- similar to what we have before. We're looking at overall probably 1% to 2% on our general volume growth for this business, all in.

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Robert Feeser, [59]

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Debbie, it's Bob. Just a quick follow-up on that. We -- we'll see some normal seasonal strength in the second half of the year. And then also, it's important to remember, too, our volumes in the first half of the year have been a bit muted because of the big strategic outages that we've taken in the mills. So in the fourth quarter, that will be behind us. The facilities will be running full, so we should see some modest growth in the fourth quarter.

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Deborah Anne Jones, Deutsche Bank AG, Research Division - Director [60]

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Okay. That's helpful. Can I just squeeze in one more? I wanted to get an update on Grupo Gondi in terms of Mexico? If you could just comment on what you're seeing there and what the expectation is.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [61]

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So we continue to partner with Grupo in Mexico. Their business is solid. Our exports to them and to Mexico have remained solid. So in general, the market conditions remain strong. It's a great business. They continue to invest. The mill project is well underway. They continue to build world-class box plants and continue to grow their business organically. So in general, the relationship is strong. Their business is strong. And I think the opportunity to continue to partner with them with customers in North America is solid.

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Operator [62]

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Your next question comes from the line of Gabe Hajde from Wells Fargo Securities.

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Gabrial Shane Hajde, Wells Fargo Securities, LLC, Research Division - Associate Analyst [63]

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Two questions. One, could you discuss what's going on in the non-containerboard pieces of the KapStone business? There's a little less visibility with respect to sort of supply/demand and/or pricing trends, particularly kind of talking about the extensible kraft grades and what you're seeing with demand and pricing there.

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [64]

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Sure. In general, the kraft markets were a bit challenged not significantly like the containerboard. Pricing is good. And then I think the extensible markets -- I'll talk specifically for us on some of the saturated, so there's kraft extensible and saturated. There's large opportunities on the saturated side for us. We have opportunities to grow that market. The compound annual growth rate is pegged to be between 5% and 7%, so we think there's opportunities to expand in that market where there's not a lot of players across the globe. The segment for us has been steady. Again, there's some challenge in the pricing, but we have locked up some of our large customers in longer-term contracts. And then the extensible market, that's not much different than our kraft market. So in general, that's -- that business is fine.

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Gabrial Shane Hajde, Wells Fargo Securities, LLC, Research Division - Associate Analyst [65]

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Okay. And shifting gears a little bit. Historically, I think the industry, and at least WestRock has talked about, boxes performing to specs as opposed to the specific linerboard or medium that goes into them whether it's recycled or kraft content. Given where recycled fiber costs are, have you had any sort of influx of customers asking for more recycled boxes or anything like that just on the margin?

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [66]

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No, Gabe. I think you articulated well upfront. So what we have basically across our box customers is a request for performance-based specs. So they want us to build a box that's suited for how they use it and the conditions that go into DCs and warehouses. So we're building a box to the spec. The quality of our paper products across our mill system, whether that's recycled or virgin, we're using liners that are recycled or virgin in applications that meet our customers' demands. So we could do that with a 42-pound virgin kraft liner or 42-pound recycled liner, same thing with high-performance liners. So either ECT values or performance-based specs are what our customers are moving to, and we're well positioned to meet that demand.

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Operator [67]

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Your last question comes from the line of Scott Gaffner from Barclays.

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Scott Louis Gaffner, Barclays Bank PLC, Research Division - Director & Senior Analyst [68]

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Congrats, Bob and Pat, on the changes.

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Patrick Lindner, [69]

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Thanks.

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Scott Louis Gaffner, Barclays Bank PLC, Research Division - Director & Senior Analyst [70]

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I just wanted to talk a minute, go back to the -- some of these new products that you mentioned, Cluster-Pak and EconoClip. I was hoping maybe you could help us out a little bit with the addressable market there just given the fact that a lot of the market, as you mentioned, is in plastic rings today. I know there's some customers that are agnostic to price, especially some of the premium customers you mentioned. But how should we think about the addressable market there for, say, paper versus plastic on those types of applications?

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Patrick Lindner, [71]

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Yes. Thanks, Scott, this is Pat, for the question. Really appreciate it. The -- I think there are a lot of markets that could really capitalize on this, and maybe I'll start with Europe. The plastics challenges that have been out there were, I think, they're probably most acute and most -- first really recognized in Europe. And so we have seen a number of customers come to us and ask for solutions and as quickly as we can deliver them, and that's particularly in the beverage market, but also in the health care market. There's this -- as well as cosmetics and beauty, there's this initiative that P&G is very involved with called EcoPush, which is another example on a very different market, beauty and cosmetics, where they're trying to get rid of any type of container that is environmentally unfriendly. And so plastics certainly fit into that. And so when you specifically think about the addressable market, it's really hard to put an exact figure on. We've kind of thought that we've -- as we said, we've got maybe $100 million worth of sales into that conversion expected this year. We're certainly well on track for that. As far as where this goes from here, we've talked about, and I think talked, in the past about maybe $400 million of sales. But we we're not sure that, that's represents the entire market as we go global with this conversion. So somewhere in the neighborhood of north of 50,000 tons, could be 70,000 tons, somewhere in that neighborhood is kind of what we we're projecting. But we're really bullish on it. We're really excited about it. And the number of applications that we have continue to increase.

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Scott Louis Gaffner, Barclays Bank PLC, Research Division - Director & Senior Analyst [72]

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Understandably. Thanks for the detail there. Jeff, if we just look at the box shipments in 1Q, I mean, you mentioned the tough comps, but we didn't know about the tough comps maybe coming into the quarter. Clearly, things downshifted a little bit in 1Q. Is there anything outside of weather that you're seeing, whether it's the KapStone business in the Pacific Northwest, where they're shipping not just actual containerboard, but shipping boxes to customers in the region where you're seeing a slowdown? Or anything regionally or end-market-wise that you could point to outside of the weather for the slowdown in 1Q box shipments relative to expectations?

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Jeffrey Wayne Chalovich, WestRock Company - Chief Commercial Officer & President of Corrugated Packaging [73]

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So from our standpoint, we're not -- we're -- so I'll start with that, if you're talking about what we're seeing industry-wise, but we're not -- we're up 2% organically and 20% total, so our shipments continue to grow. There are some regional challenges. The West Coast is challenged in ag. It's off to a slower start, but we'll see a pickup there. I think the sheet feeder business in the country has had some weakness. But in general, I think the biggest industry-wide one is ag that's been slower to start, that's been really weather. And then, of course, you had a bunch of weather events in Q1 that was hurting the overall shipments, I think.

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Scott Louis Gaffner, Barclays Bank PLC, Research Division - Director & Senior Analyst [74]

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Okay. Fair enough. Just lastly, the $150 million EBITDA reduction at the midpoint of the guidance then if volumes are kind of as expected, is it more just external shipments, whether that's export, pricing, et cetera? If you could just sort of bridge the old to the new, what were the buckets that really moved? Appreciate it.

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Ward H. Dickson, WestRock Company - Executive VP & CFO [75]

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Scott, this is Ward. So our current guidance range reflects potentially lower volumes for both domestic and export containerboard and lower volumes relative to our previous expectations on the kraft side as well. We've also flowed through the impact of the $10 per ton published price decrease for the balance of the year. Now we have had some benefits in lower recycled fiber. But as we talked about, we had elevated virgin fiber and energy cost in Q2. Although we are seeing moderation in the second half, it's moderating from a higher point. And then we've taken -- we've highlighted the downtime that we've taken in the month of April. Our full year outlook for the Consumer business is really largely unchanged. So the primary drivers have been a reflection of the supply/demand conditions that we've seen in Corrugated. And beside all of that, we're still focused on all the things that are in our control. We're executing the strategic capital projects. We're focused on capturing the synergies and completing the integration of KapStone. So we feel good about how we are performing in these conditions.

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James Hunter Armstrong, WestRock Company - VP of IR [76]

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Thank you, and thank you to our audience for joining our call today. As always, reach out to us if you have any questions. We're always happy to help. Have a great day.

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Operator [77]

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This concludes today's conference call. You may now disconnect.