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WestRock (WRK) Divests Summerville Sawmill for $59 Million

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·3 min read
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WestRock Company WRK has completed the divesture of its saw mill based in Summerville, SC to Interfor Corporation for cash proceeds worth $59 million. This move allows the company to align its portfolio of assets with its fiber-based packaging strategy. It will utilize the sales proceeds for reducing debt. Last month, WestRock entered into this divesture agreement with Interfor, which is North America’s one of the largest lumber producers.

The Summerville Mill produced approximately 125 million board feet of lumber as of 2020 end. WestRock recently received a new permit that will allow the mill to produce approximately 200 million board feet of lumber, annually.

Interfor’s focus on lumber production makes it an excellent fit for the sawmill going forward. Also, WestRock’s Charleston, SC-based paper mill will enter into an agreement with Interfor to supply chip and biomass. Management had previously announced that the company is reconfiguring its North Charleston, SC paper mill to boost the long-term competitiveness of the mill. The move is likely to increase its annual EBITDA, primarily owing to the reduction in operating costs from the shutdown of the paper machine and its associated infrastructure.

WestRock reported first-quarter fiscal 2021 results, wherein both earnings and revenues beat the respective Zacks Consensus Estimate. While the bottom-line figure increased year over year, revenues registered a decline.

WestRock has been witnessing solid trends in the key end markets while focused on partnering with customers to fulfill their growing demand for sustainable, fiber-based packaging solutions. The company is gaining traction from buoyancy in e-commerce activities amid the coronavirus crisis.

Its consumer packaging business is benefiting from fiber-based packaging solutions as well as significant demand in food, food service and beverage packaging categories, which represent 80% of the segment’s sales. Its corrugated packaging business is poised to benefit from an improved box shipment as well as higher demand from industrial and agricultural customers as the economy recovers from the pandemic. Overall packaging volumes expanded 5% in first-quarter fiscal 2021 including e-commerce volume growth of 23% on a per day basis.

Price Performance

Shares of WestRock have surged 129% over the past year compared with the industry’s growth of 112.3%.

Zacks Rank & Stocks to Consider

WestRock currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the basic materials space include Impala Platinum Holdings Limited IMPUY, Fortescue Metals Group Limited FSUGY and BHP Group BHP, all stocks sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 195.9% for the current fiscal year. The company’s shares have soared 84% in the past year.

Fortescue has a projected earnings growth rate of 84.3% for the current fiscal year. The company’s shares have skyrocketed 182% in a year’s time.

BHP Group has an estimated earnings growth rate of 65.6% for the current fiscal year. The company’s shares have appreciated 75% over the past year.

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