Smurfit Westrock Stock

Good day, and thank you for standing by. Welcome to the Smurfit Westrock 2026 Q2 Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Ciaran Potts, Smurfit Westrock Group VP, Investor Relations. Please go ahead.

Thank you, Sharon. As a reminder, statements in today's press release and presentation and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to factors identified in the earnings release and in our SEC filings as well as those discussed in our investor update presentation on our medium-term plan.

The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Where applicable, reconciliations to the most comparable GAAP measures are included in today's earnings release and in the appendix to the accompanying presentation which are available at investors.smurfitwestrock.com.

In addition, today's remarks include statements about Smurfit Westrock medium-term financial goals and capital allocation priorities. These goals are aspirational and actual performance may differ possibly materially, and no guarantees are made that these goals will be met.

I'll now hand you over to Tony Smurfit, CEO of Smurfit Westrock.

Thanks, Ciaran. I'm happy to be joined today by Ken Bowles, our EVP and CFO. Our second quarter results demonstrate the continued progress we have made in Smurfit Westrock with an adjusted EBITDA of $1.14 billion and an adjusted EBITDA margin of 14.2%. This is especially impressive when set against the very significant input costs we have absorbed with only early-stage momentum on price recovery.

Cost increases, especially in freight, have been a feature of the quarter and as a result, we have raised containerboard prices. These will be recovered through our converting operations as we progress through this year and into next. Market conditions for practically all paper grades remain as tight as I can remember. Our focus remains on being the most innovative packaging partner delivering superior quality and service for our customers and the go-to sustainable packaging partner of choice. And as such, we remain committed to improving all aspects of our business.

We're also relentless in our approach to cost takeout, which we have again demonstrated through asset optimization with a number of closures in both our North American and EMEA and APAC regions. We've also continued focus on our owner-operator model, which I'm happy to report is showing considerable progress as we develop the new Smurfit Westrock culture.

Turning to the regions and firstly to North America. I'm happy to report progress and development across practically all areas. Most importantly, our full team for the future is now in place and delivering both cultural and operational change. Nearly all our paper mill system is fully booked and no commercial downtime is anticipated for the remainder of the year. We have implemented pricing initiatives in both domestic and overseas markets, and shortage of supply is the current issue surrounding this business area.

In our corrugated box operations, I'm delighted to report continued progress as we adopt our business model. A number of recurring loss makers has considerably reduced, and our focus on innovation and customer service is attracting significant new business. Our quality and service metrics continue to improve. For example, year-to-date, our quality metric has improved by over 25%.

In our consumer business, we have also made significant progress with new investments coming online, which will improve both productivity and our cost position. Importantly, we've also won new business because of our grade agnostic approach that we have adopted.

In our EMEA and APAC region, I'm very proud of the outperformance this region continues to deliver. The region consistently offers customers the most innovative and sustainable packaging as customers navigate a complex environment. Our recent innovation event intended by over 200 customers demonstrated the depth of knowledge that we offer across all paper-based substrates.

In our fully integrated mail system, similar to North America, we're fully booked, and we expect to remain in this position. Our corrugated business remains very solid with a better performance forecast for the second half as we recover input costs with the normal lag period. Our consumer business is now fully integrated, and there are many cross-selling and development opportunities that we're developing across Europe and Asia.

Turning to LatAm region. We continue to see a strong performance across most countries in which we operate with 2 larger countries, Brazil and Colombia performing very well. Our approach to innovation across the region is a significant differentiator, and our market positions give us opportunities for growth. This region is an attractive region for both internal investment and acquisitions as we look to the future.

I'll now turn you over to Ken to take you through some financials.

Thank you, Tony. Overall, this is a strong second quarter performance for the group. And as a reminder, we've included detailed adjusted EBITDA bridges in the appendix for those who want to understand the quarter in more detail. At a high level, freight costs globally represented a significant headwind, driven largely by higher fuel costs and shipping rates due to the ongoing conflict in the Middle East and higher domestic transportation costs in both Europe and North America. Despite that, our teams across all regions did an excellent job mitigating those cost pressures through operational execution, pricing initiatives and disciplined cost management.

In North America, we continue to make significant operational and commercial progress, while corrugated volumes were down 4.8% on a same-day basis or 4.5% on an absolute basis, this is very much in line with our expectations as we continue to execute on our value over volume strategy. Importantly, we are seeing further improvement advance with good order books and a strong pipeline of new corrugated business moving through August and into September.

We remain focused on improving the quality of our customer portfolio, winning business where our decentralized operating model provides real value while exiting lower-margin business that does not meet our return requirements.

Selling price remained a headwind in the quarter due to a small pass-through impact of weaker containerboard index pricing in February and also coming before higher index pricing was realized in some of our paperboard grades which came this month. As mentioned, the region also absorbed a substantial portion of the group's freight inflation, yet still delivered a very resilient performance.

Our mill system remains generally full, order books are healthy and commercial momentum continues to strengthen. In our EMEA and APAC region, Smurfit Westrock continues to outperform through disciplined commercial execution, strong cost management and an unwavering focus on customer service, quality and innovation.

Corrugated volumes were up 1.9% on an absolute basis or 1.5% on a same-day basis. Our mill system operated at full capacity and the integrated nature of our business continues to be a significant source of competitive advantage. Despite ongoing freight and energy cost inflation in the region, which has led to near-term margin compression, the team delivered another strong result supported by positive volume growth and continued productivity, procurement and footprint optimization initiatives.

Latin America, again delivered another excellent quarter. Demand remained healthy across our key markets as corrugated volumes continue to grow. The region continues to benefit from its strong market positions and the operational improvements delivered through recent investment programs. As a result, Latin America continues to generate attractive margins and strong returns while also presenting significant opportunities for future growth.

Our approach to capital allocation remains unchanged. We have a business with strong cash generation, strong balance sheet and a significant opportunity to create value through disciplined investment and execution. As a team with deep industry experience, we continue to view internally deployed capital as the lowest risk and highest quality use of capital, an approach remains central to the future success of our business.

Fundamentally, that is a return-focused approach. Our balanced capital expenditure program is focused on improving our asset base, increasing efficiency and supporting growth in attractive markets. As a reminder, the average annual CapEx across our plan is approximately $2.5 billion a year, with an average project spend of approximately $4 million and no projects of scale in any 1 year. We currently expect to spend between $2.4 billion and $2.5 billion in total CapEx this year, which is well in excess of maintenance capital and in line with our D&A.

As we outlined earlier this year, we also see substantial free cash flow generation over the coming years. And I would note that again today, we announced a quarterly dividend of $0.4523 per ordinary share. Underlying all of this is a balance sheet with significant strength and flexibility. As profitability and returns improve, we believe we are well positioned to continue to invest behind growth and cost takeout opportunities, while at the same time, increasing returns to shareholders.

We are committed to maintaining a strong investment-grade credit rating and are firmly positioned in that space with BAA2 rating and positive outlook from Moody's, BBB with stable outlook from S&P and BBB+ with stable outlook from Fitch.

So the message is a simple one: Disciplined investment, disciplined capital allocation, and a clear focus on creating long-term value for shareholders.

Now as we look to the rest of the year, the main change in our full year outlook is indeed the higher freight cost environment. As we discussed, Advanced outside control have resulted in significantly higher freight costs across the group, and this remains the most significant headwind we faced in 2026. While we haven't implemented pricing initiatives to recover costs, there is naturally a lag before those actions are fully reflected in realized pricing and earnings. As a result, the cost impact has been felt immediately, while the recovery comes through over time.

Current energy costs are broadly in line with the assumptions we highlighted previously, while lower economic downtime in the region of GBP 100 million, alongside continued operational execution and significant cost takeout programs across the group are helping to offset some of that freight and other cost pressures. However, as I'm sure you can appreciate, that inflationary cost environment is not showing signs of abatement and we will continue to evaluate all options available to us as we progress through the remainder of this year.

Taking all of that into account, we now expect full year adjusted EBITDA to be in the range of $4.9 billion to $5.1 billion. However, demand remained healthy across practically all paper grades, and we remain confident in the long-term earnings per share of the group.

And with that, I'll hand you back to Tony for some concluding remarks.

Thank you, Ken. When we set out our medium-term plan in February, we presented a program of self-improvement led by operating excellence and disciplined capital allocation. We're also driving a much sharper commercial focus delivering quality, value and innovation for our customers. I'm very happy to report that we continue to make progress towards these objectives.

Firstly, the performance like culture of Smurfit Westrock is accelerating with the right people, with the right skills and the right motivation to meet our objectives. The company is also progressing the transfer of best practice knowledge and innovation across our regions as we roll out our experience centers to ensure our customers have access to the worldwide knowledge of our over 2,000 designers globally.

As a company, we have always been and will always be committed towards having well-invested world-class assets in a capital-efficient way. We know that this is the secret to ensuring to give our shareholders which include many within Smurfit Westrock longer-term market-leading returns. And I think we're well on our way to this objective.

Global paper markets today are as strong as I have seen in my lifetime within this industry. What we've previously characterized as a generally better industry environment is now a significantly stronger and better operating environment. This provides us with a stronger fundamental backdrop to deliver on our medium-term plan. Our mills provide security of supply to our world-class converting operations, which in turn deliver quality, service and innovation for our customers.

Smurfit Westrock is converting operations, are network to and connected with our over 30 innovation hubs across the continents and regions. This drives the continuous transfer of knowledge, application and innovation enabling Smurfit Westrock to provide our customers future packaging needs today.

As we enter the second half of 2026, we have set a strong platform for the recovery of input costs and enhancement of our returns. This is especially true as we look into 2027 as we continue to execute on our strategic plan across all regions and fully implement all pricing initiatives. As we set out in February in a progressive step-by-step manner, we're building a stronger, better and more resilient Smurfit Westrock as we progress towards our medium- and longer-term objectives.

I'm very confident in our team. I'm very confident in our offering to the marketplace. I'm very confident in our ability to execute, and I'm very confident in the long-term future of our globally integrated platform that will deliver value for all stakeholders.

And with that, thank you for taking the time to listen to us. I will hand it over back to the operator, Sharon, to get questions to us.

And your first question today comes on the line of Gabe Hajde from Wells Fargo.

I wanted to ask, Ken, I'm looking at the bridges in North America, and I think year-to-date, I'm just kind of going from a bridge you're kind of neutralish on gross price. I'm curious if you'd help us pause it how much traffic price or what you would expect sort of realization from just what's been recognized in [ ROCE ] in North America?

I suppose, Gabe, it's probably slightly more nuanced path given where pricing went. I mean that kind of pricing offset from the recovery, you would have seen true corrugated pricing in the first last number once it's probably on the paperboard side, if you remember, life of SBS came down, which is negatively impacting, if you like, the positive sentiment around that kind of pricing column. So we are absolutely beginning to see the benefits of the pricing initiatives that through back end of quarter 1 into quarter 2 in corrugated pricing. But just for this particular quarter, given where SBS went here and your paperwork grades, but principally SBS, you're getting a kind of natural negative offset within the total price for the overall group.

So I think the simplest way to think about it is, yes, progress continues and the recovery happens on the corrugated side, which you'll see more in quarter 3, quarter 4. But for this quarter, you're seeing the impact of paperboard prices lower year-on-year and the impact of that.

Yes. I think, Gabe, you understand and the same in Europe that there is always a lag period as containerboard prices come in, and that can be -- depending on the customer, 1 month to up to 6 months, again, depending on the customer, and depending on the region. And so containerboard prices really rose -- actually fell in EUR 20 in the first quarter and then came back up by EUR 120 in the second quarter.

So the full effect of that is going to be felt in quarter 3 and quarter 4 and any other pricing initiatives will be felt either very late quarter 4 or into quarter 1 of next year.

Okay. Just maybe a point of clarification. I think from the disclosure you guys have given us, it's 8.5 million tonnes in North America of total containerboard.

Yes. Containerboard.

Okay. Yes. And then on the volume cadence, I mean, it seemed like things within 6 weeks tightened up pretty quick. I'm curious from your system perspective, I know you guys have been busy at work, and I think you've mentioned winning over 500 new customers that should be commercializing in the back half. Maybe just a little bit finer point on would you expect, assuming the bottom doesn't fall out in volumes that you should inflect positive at some point in the second half in your own corrugated system. And then any particular markets that you're seeing strength in North America?

Our expectation, Gabe, is that either in the third or fourth quarter, we will be better in volumes than last year. And certainly, in talking to the folks in North America, we would expect to see positive months coming up in August and maybe even September. So our -- the acquisition of new business has continued to pace during the second quarter. Obviously, it takes a little while to get that in. And then we're starting to lap easier comparisons because all of the large e-commerce customer that we didn't continue with, we're not doing that.

So therefore, that will make it a relatively easier comparison as we go into the second half of the year. So I think we're pretty optimistic about either later -- latter part of the third quarter, our fourth quarter being able to be positive versus last year.

Next question today comes from the line of Mike Roxland from Truist Securities.

Congrats on the progress.

Thanks, Mike.

Just first question, I just wanted to follow up on what Gabe said. In terms of you mentioned good order books in August and as you move through September. Any way to quantify or provide some more color around what that means? What order book stand relative to, let's say, historical norms?

Yes, I would say, are you talking about paper? Are you talking about corrugated?

Actually, if you don't mind, Tony, both.

Okay. Well, as I said to you in my narrative, our paper markets, Mike, are as strong as I've ever seen. We are in a -- basically, with the exception of 1 small grade that we produce a little bit of with CRB, we're basically sold out in all paper grades and are -- in fact, we -- one of the reasons why if you look into the fourth quarter, we are very late in deliveries on our export orders.

So we're in very much catch-up mode in our system. As we look through the remainder of this year and even into the first part of next year on all brown paper grades. There are also some things happening on the bag and sack paper market with relation to e-commerce that are causing those markets to be very tight as well.

So when you look at the brown grades, we are really sold out for the foreseeable future, and that obviously is very encouraging. When you look at the -- as I say, the consumer grades our CUK business has been very strong and is sold out and our SBS business as we develop new applications and really target a lot of smaller growth areas, but a lot of smaller things that are adding up to a lot of growth for us. And so we're in our SBS system sold out.

And as I say, we've just got some small very small open capacity in the small business area for us in CRB, but that's not, as I say, very significant. So paper and then that's in the North American market. In the European market, same situation is essentially true. We've tightened up over the summer and really all paper grades are sold out through the end of the year.

And then in our Latin American business, again, similar scenario in our paper markets were short of capacity. So very strong change in the marketplace in the last 6 months in paper. With regard to boxes is a little bit more nuanced, obviously, it depends very much on the markets and within markets, it depends on -- it depends on regions within markets. So for example, the Californian market isn't as strong as we would have expected it to be because of produce and you take, obviously, in Europe, if you take the Southern European markets, the heat wave there are affecting a little bit agriculture. So there's -- it really -- we could spend a long time talking about the nuances of different markets.

But I would say, if you just take it broadly speaking, Latin America is a positive in general, I would say that Europe, with the exception of one or two markets is positive or very positive. And then in North America, depending on the region, it's basically flat to slightly positive for us as we look forward.

But as I say, a lot of the things that we're doing, Mike, are self initiative. We have done a lot of heavy lifting, but we still have a lot of heavy lifting to do. I mean we still have loss-making corrugated box plants, which -- many of which are our own fault, and we will turn those around in time.

if I had a magic wand to be able to turn them around, I would. But they do take a little bit of time. And -- but we've made really very, very considerable progress on our corrugated converting operations in North America. And in our consumer businesses, again, we've made very considerable progress in developing those businesses. We need a little bit more price in some of those. But basically, I'm really happy. And then if you turn to Europe, you look at our business, we have a very strong market position across all of the countries. And we've absorbed all the input costs during the first and second quarter of this year. And now we're about to get it back.

And clearly, if there are more paper-led initiatives, then the benefit of those will be into 2027 across all 3 regions, actually.

Got it. That's great. Just one quick follow-up. You mentioned having a little bit of slack in CRB. And I think that you mentioned last quarter that you're not making enough return on some of your CRB assets. So does the shift of business away from CRB to SBS, CUK afford you the ability to improve your CRB asset base? Or alternatively, does it help you evaluate your current CRB footprint?

Yes. I mean I think we're -- I would say, Mike, as you know us, we continually evaluate our footprint. We've just closed down a long-standing asset in the U.K., which is producing over 200,000 tonnes of recycled board because it came to the end of life, so to speak. And it was either invest or in a suboptimal scenario. But that asset stayed live for a long period of time.

And I would say that the CRB business, we continue to evaluate the mill system that we have. And they're all very cash -- or they're mostly all very cash generative and produce decent enough quality into our integrated system. So we're going to continue to work with them. But obviously, we keep them under evaluation as we do all of our assets. And we'll see what the future holds.

But clearly, they're earning cash and they're in the marketplace, providing the quality and service that we need and they're not in any drag on us. So I think as I say, we want to offer our customers the full suite of products, which is CRB, SBS, CUK and that approach has worked really well as we've looked at over the last 6 months. Giving our customers what they need. And at the end of the day, that approach has worked really well for us, and we've seen some switches out of CRB into SBS add a saving for the customer and also a benefit for us.

And you remember, Mike, as well, this time last year, we were closing St. Paul, that CRB mill to kind of optimize and tighten that system anyway internally.

Your next question comes from the line of Philip Ng from Jefferies.

Tony, I apologize. I had some technical issues, so I may have missed some of this. I guess big picture, when you think about North America and you've always kind of opine on your business being packaging at its core. And certainly, supply-demand is very tight right now, and we're seeing good price momentum. How do you kind of balance that out, right? I mean, the industry is taking price and supply demand is very tight. There's elements in terms of packaging and does this attract more capacity? Like from a philosophy standpoint, how are you thinking about this bigger picture in the longer term?

Yes, Philip, as you know, we are a company committed to profit centers in all aspects of our business. So our box plants have to absorb -- well, first of all, we, as a company, have to absorb all the cost inputs that we're getting then we have to pass those cost inputs into our paper system and ultimately into our box system.

And each one has to make a return -- each of our systems have to make a return because -- otherwise, they're not economically viable. And I always look at it like this, if you're an independent box maker and there are plenty out there, there's obviously not a -- it depends on the market you're in, but if you're an independent box maker, you must make a return on the paper price that's in the market. And so the same holds true for our box facilities if the paper price goes up because of supply/demand or the paper price goes up because it's been forced up because of cost inputs, and we make decent returns in our paper system ultimately.

That doesn't mean that we shouldn't make decent returns in our box system because there's an independent market out there that is buying paper exactly the same price as we are transferring to our box system at, and they have to make a return to.

Otherwise, I can't evaluate where to put capital. And so we have been religious really about how we think about our business. And so our converting operations need to be commercial. What we bring -- as you know, Philip is all of the knowledge of packaging all over the world into our system. And then if we have the owner operator at the packaging plant who's really good what he does, he brings that into his plant.

And then he offers that to his customers, which can be very considerable savings for our customers by packaging differently. And that's what we continue to offer to our customer base globally. And that's what's worked. That's why if you look at our European system, yes, we're in the low period right now because we've absorbed cost. We're starting to push through paper prices. And then ultimately, we get into box prices. And we have effectively, if everything stood still, we'd have 2 profitable systems offering innovative packaging for our customers. And that's our business model, and that's what's worked for us over 90-plus years.

Yes. So, Phil, I think within the -- I think I heard that the idea that the latest round of kind of price increases and the price environment might lead to incremental capacity entering the market. I think I think I sort of go back to that sort of basic point around returns and return on capital because, as you know, on average, the cost to do an ending in North America has increased significantly in the last number of years.

So if you do decide to bring capacity into the market, it's going to be a higher cost you might think, and takes time. In reality, you don't -- you can't bring in capacity today or tomorrow. It takes 2, 3 years to get to port a meaningful kind of ramp-up phase. So I think yes, the current price environment could be attractive for people, but I'd equally say that's got to be asked about the amount of capital that you need to put into the market to kind of ever return that's acceptable over the longer term.

That's really helpful color. And it's a perfect segue guys. I think from a supply-demand pricing on the paper side, clearly, we there's industry data we're seeing price momentum. I think Tony coming in when you guys acquired WestRock out of the gates, the real opportunity was getting a proper return as you kind of alluded just now on the bauxite and converting side in bottom slicing, your less profitable business.

Can you kind of give us some perspective as we look out to '27, where are you in that transition in terms of innings, at least from a baseball analogy in terms of getting your returns to margins, pricing on the converting side in good spot and your mix of customers? Because I think you started flipping perhaps a richer mix as we kind of exit this year. But just give us a little update on where you kind of shake out on that front.

Yes. I actually like to use the baseball analogy. I'd say we're somewhere between first and second base. I think we're not -- we're off first base, and we're heading towards second and we'll get the second and then will be safe on second and then we'll move on to third and then fourth in the next couple of years. I think it's really -- it's amazing to me to see the considerable progress we've made in many of our facilities.

I think we're down to again, it's a little bit difficult to say how many loss makers we are because of the movements in paper prices. But if you said what's the number of loss makers that we have that we're still worried about is probably around 20 of which, for sure, we're going to solve 10 of them. And then the other 5, we'll just have to think -- see how they do over the next period of time, depending on the market, depending on the mix. But so we've come down from 40-plus -- how many?

80.

80 loss makers at the beginning, but -- so we're really doing well. But then getting to breakeven is one thing and then going from breakeven to 8% or 9%, is another. And so it's a journey, and as I say, somewhere between first and second. But really, I'm really happy with the teams and how they're embracing the new culture and the leadership. But it's not perfect everywhere, obviously.

And we continue to bring in new people. And what I'm -- one of the things I'm really happy about is we're continuing to attract real talent into the business, which is the sign of a winning team, not a losing team.

Just from a contract standpoint, you could solve for 10, maybe like 5 to 10 of those customers are loss making. What's the total basis? Is it 100? Is it 90? Just want to make -- or 200, I guess, just to make sure we understand what part of your business potentially could still be a little more challenged in your product portfolio?

It's 10 out of 100.

Okay. All right. That's helpful.

And in Europe, we have 3 or 4 that we look at and then in in consumer, there's 1 or 2. So -- and in Latin America, there's practically none. So that's on the converting side. But that doesn't mean Philip that they're all where they need to be, even the ones that are positive. They need to be -- we've got some great box plants, and we've got some not of great box plants. And those not a great box plants need to improve as well. So it's a continual -- it's a continual work by the team over there, led by Dan and Rick and Nikkiso -- and of course, Laurent.

Your next question, George Staphos from Bank of America.

Actually, I wanted to pick up on that last line of question from Phil. To the extent that you can comment, when we look at the margin in North America, it was 13.3% 1Q, it was 14.8% in 2Q. So good progress there. How much of that to the extent you can share was improvement in margin in the North American box system margin. Said differently, if we go back to the baseball discussion, you just rounded first base. You're trying to get to high single digits. Would North American box be somewhere around 3%, 4% and margin at the present time? And then I had a quick follow-on.

Yes. You're entirely right. We've got -- we're around 3%, somewhere between on a static basis without paper in coming in, we've turned it from being heavily loss-making to a small EBITDA positive, somewhere in the 3% to 4% range depending on the month but that obviously will change as we move forward. So yes, you're about right.

Okay. And then my follow-on -- you might have mentioned it earlier, but I also had some technical difficulties coming in. How much pricing is assumed in your guidance for the year the $100 per tonne that you've announced, is that -- is any of that in your numbers for the 2026? Or is that more of a '27.

George, it's Ken here. No, none of that 100 is assumed none that is assumed in the '26 number because by the time it gets implemented, works through the indices and everything else, you're does not a lot last to '26, very much, very much kind of sets a platform foundation for 2027.

Our next question today comes from the line of Hillary Cacanando from Deutsche Bank.

So just going back to the $100 per tonne price increase that was announced yesterday. I'm just trying to understand why your competitors -- so one of your competitors has announced $140, another one announced $80 per tonne. Could you just help us understand whether the differences in pricing reflect a different view of market conditions or a different customer mix or simply different like building market strategy?

Hillary, obviously, we're not going to talk about what our competitors are doing. We just have to consider what we do. And we are -- we have been thinking for the previous couple of weeks that we would be going for an increase, and we did at the net level that we thought was correct. But Ken, do you want to say something?

Yes. Hillary, I think it's -- really, it's about an inward look, where we see cost inflation in our system, where we see the need to kind of restore margin that we might have given up over that kind of cost inflation, particularly freight across the rest of the year in energy. So really, it's an inward-looking model that takes everything we're doing, balance against cost takeouts and all the programs and the capital we've injected that says that broadly where we think we need to be is at that $100 a tonne in terms of output pricing to kind of get us back to where we need to be.

Okay. Got it. And then as a follow-up, obviously, the containerboard market looks like it's getting really tight and the pricing momentum is building, but we also saw a price increase in the SBS market. July, and I think you also announced the price increase effective August. So are those prices in the SBS market driven by more from rising input costs? Or are you seeing underlying market conditions improve as well through higher demand or customer conversion or industry rationalization?

Yes. The SBS market is much better than it was at this time last year. A lot of the work that we've done over the last 18 months in attracting new business into our SBS system is working, and there are some quite exciting new grades that we're bringing into SBS as well as discussed before, our agnostic approach to grades. So we're able to offer customers SBS instead of CRB or sometimes instead of CUK. But basically, the market is much better. But you do have to remember, Hillary, that the market actually went down at the end of last year.

And so this isn't about price increases, this is about price recovery. And I think that we need a price recovery in this grade when it went down, and we're in a sold-out position. So of course, we've announced the increases to reflect that.

Your next question today comes from the line of Mark Weintraub from Seaport Research Partners.

First, just one quick clarification. On SBS, on the increase, I think you sent out July 10. So that was before Pulp and Paper Week had reflected anything, but I assume that is a second increase. I just wanted to confirm that first.

Yes, market is yes.

It's not reflected in Pulp and Paper Week, yet. Obviously, Mark, given the generally longer lag periods for those grades, it really won't be effective. Assuming that pulp and paper puts it in, it really won't be effective until the start of next year -- into our end customers.

Right. And then just second on EMEA and where we are in terms of passing through higher containerboard prices into boxes because whereas we saw the nice progress in North America 1Q to 2Q. EMEA, we were actually down on the margins because, as you said, the costs hit us first. If we were to kind of hold things static where they are today, but have those prices roll through into boxes. Can you give us a flavor as to where the EMEA margin would be coming out, say, towards the end of this year, early next year?

Obviously, a lot depends on the cost mark, but let me just say that we have announced an EUR 80 a ton increase to our customers and recycle board over the last couple of days. So we expect to see that implemented as we go through September. And that reflects the higher -- significant higher energy costs and other costs that we've had in the European sphere over the last 2 or 3 months.

But maybe I'll just put it into the context that our European business is a tremendously good business with people who've been through this kind of cycle before. And if you look at the last cycle, where we are a better company today than we were then because of their investments, because of our efficiency, our margins were in the 18-plus percent level.

And there's no reason why given a static state that we won't get back to those levels at some future date. Whether that's first quarter, second quarter of next year, I don't know. But clearly, our opportunity is to grow from these relatively low margins that we have, albeit that they are way outperforming the industry from what we've seen, that we believe that those are the kind of margins that we can get back to.

Perfect. I appreciate that. And I just wanted to confirm that we also have the first EUR 100 increase that hasn't really flowed through into boxes yet in Europe very much as well. Is that correct?

That's correct. Yes. I mean our business is always on the way up and way down a lag business. Our box business, it depends on the customer you have. But very few, but some customers are year-to-year contracts. Some customers are 6 months. We have been shortening contracts to be 3 months. But by the time by the time it gets published and then 3 months, it's really 4 months for most of the larger index customers. And so -- but equally, when the prices move down, especially for grade that's as volatile as recycled paper, then clearly, you hold on to the margin that you've recovered.

And also, it's important to note that when the paper price moves, it's most of the time, not just paper price, there's some inflationary cost driven into that as well.

Right. And maybe one just last one. And so up until that, I think the contention has been -- the price increases in Europe have largely been cost reactive. How we should be interpreting these increases, too? Or is there something like in North America, it certainly supply demand as well. In Europe, is any of that in being introduced into this equation? Or is it still really cost reactive?

It depends on the grade, but I would say that in recycled paper is more related to cost when it's related to kraftliner, it's related to supply-demand and cost.

Did you announce on kraftliner as well or just recycle?

We did not, not yet.

Your next question today comes from the line of Detlef Winckelmann from JPMorgan.

Maybe if I could just start quickly on that 8.5 million tonnes that you've got in North America. My understanding is roughly 1/4 of that won't be exposed to domestic price increases that we've seen in linerboard over the last call it year-to-date and potentially another one going forward. How should we be thinking about supply demand, what's driving prices in that other, call it, 2 million tonnes, 2.5 million tonnes that's Mexican export volumes, please?

Detlef as well as that, you have some sack paper in there and you have some bag paper in there. So those are all they're all going up as well as the kraftliner and containerboard piece of our business. So one of the things that we have to get out of is some of the export tons that we have taken. So we're behind delivering on those.

But by the end of this year, hopefully, we'll have finished all of our let's call it, low priced tonnage. And we will be applying to the export markets, the same metrics that we see in the domestic markets. Obviously, depending on the market, the pricing will be somewhat different. But basically, those tonnes will be going up in a similar manner over the coming 6 months or so.

Okay. Great. And then maybe if I can do one more. I mean, presumably, going into kind of 12, 18 months, your box volumes are hopefully going to grow above market. I mean, I think you mentioned kind of back end of Q3, the whole of Q4 kind of growing above market. Can I then assume that export volumes probably shrink can you use more of that capacity internally, domestically display and box plants and that kind of mix changes going forward?

Yes, that's 100% true. That -- I mean, obviously, the local domestic price is higher than the export price at this moment in time, but we have to keep evaluating that. But yes, as a fundamental rule, we believe in integration in our own system, to ensure that we use our own tonnage within our system. But obviously, the system that we've inherited is much bigger than just that.

So we continue to be in the export market and committed to the export market is important because probably some of our export customers are listening to this. We are still committed to the export market. But obviously, we want to make sure that we get paid the correct amount when we deliver into the export market, which will happen going forward. Because as you know, a lot of the supply-demand issues are export people are pulling away from the export market. So clearly, that creates an opportunity for us. at a proper price.

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

Tony, I was wondering if you could talk about your internal inventory levels given the mill system is sold out. Is there any tightness or risk there? Do you need to build inventories in any region or grade? And then just as we look at underlying demand for 2Q, did you see any prebuy in 2Q in containerboard or boxboard, given there are some hikes in the market?

Our inventory level is -- a very good question. We sometimes have inventory in the wrong place, and we sometimes have inventory are the wrong grade. We're still very early into this, Anthony. And so our whole logistics system is still under a rate of change. And yes, the answer to your question is we do have some inefficiencies still because our stock levels are not necessarily where we want them to be. because we don't necessarily have all the right grades and the great optimization program that in a couple of years from now will be, I would say, much, much better because clearly, a lot of A lot of what we bring to the party is making sure that we have the right SKUs in our system and making sure that the paper mills run the right grades of paper that suit those grades of paper in the box stands convert those grades.

So there's still a lot of work to do. And as such, there are some inventory issues that we have to use the wrong papers from time to time. But so far, so good and talking to the team as recently as yesterday, we are managing with some issues, but we are managing. So so far, so good.

With regard to prebuying, I would say that there was very little pre-buying in fact, I would say maybe the opposite. I would say that people did not expect for the market to change so rapidly, and that is why a lot of export orders are unfulfilled still. People were keeping their levels of stock pretty low because they could get paper pretty well when they needed it. And if you remember back to the first quarter, we had a very poor first quarter because of the freezes and all the issues that were happening.

And I think it's been a bit of a surprise how quickly the effects of the supply demand have been felt in the second half -- second quarter. And as such, nobody would have been prebuying to any great extent, nobody would be prebuying during the -- prior to that. So no prebuying at some logistical issues because of the tightness of the market, but we're managing through it.

I think, Anthony, as well, just from a general point, I think total industry levels for North America, but we're still in the range of 2.5 million tonnes, 2.6 million tonnes. So I think that would have been about 2.8 million tonnes, 2.9 million tonnes as the exit the first quarter. So you can see if there are issues, it's coming out of inventories rather than kind of getting down towards low levels of inventory, still fairly well stocked.

Yes. And I think if I could just add one point, Anthony, to your important question is that logistics is playing a hell of a role at the moment. There are some -- especially in the North American market, there are very significant. A costs. I mean we're expecting cost to be $300 million more than we would have anticipated 3 months ago in North America and Europe. And that's a function not only of the price of diesel, but it's also a function of availability of transportation.

And that is creating some issues for delivery on time and things like that. So for sure, logistics is an issue, not only on the cost side but also on the availability side, and that's something that does create some disruption. But as I say, we're managing through it. With some cost, which obviously none of us like the $300 million that we didn't expect. But at the end of the day, that's -- it is what it is, and it's the reason why we need further pricing initiatives in our marketplace because we need to recover these and earn a decent return for our stakeholders.

Our next question comes from the line of Ioannis Masvoulas from Morgan Stanley.

2 questions from my side. The first on cost that you already articulated in some detail. So when I look at the update back in April, the energy headwind was around $220 million. You didn't really change that with today's update. But clearly, there's a big ramp-up in the freight cost. So the spring update how much of that is purely a function of timing effects? How much is your conservative assessment on freight at this point versus April? And if you can give us a sense on the split by region, especially on the freight side?

Ioannis, it's Ken here. I won't do the split by freight by region because we don't really break out the regions forward quarters like that. But I think it's fair to say at the back end of April, we would have seen freight generally as kind of a headwind, they call it, $50 million year-on-year, and that was at a place if you think about it, where it looked like the Middle East was about to be solved an MOU in place past the piece has been identified and the world seems to be stepping down.

I think it's interesting if you look at any of the indices that of have come out, you can see a sharp spike towards the back end of May into June. And as we continue in July, primarily on freight, and we clearly saw that heavily through May and June. So it was very much a changed environment, which led to the changed outlook on freight leases now in the position where we kind of see freight at about $300 million headwind year-on-year. I don't -- I wouldn't necessarily characterize it as either conservative or not.

I think it's our best estimate based on where we see the cost coming out. As Tony said, these are costs that we continue to need to recover given that they seem to remain elevated and not abating.

On the energy side, I think back then, we probably would have said about in a range of, call it, $220 million to probably $250 million, it's probably still there thereabouts, we've seen European TTF for GasCo above $60 again last week, back below $58 to $57 this morning. So still very fluid, but we tend to be helped out through this kind of cost backdrop on energy because of our after kind of hedging policy, which we don't use a lot now given the elevated prices, but we continue to have some hedges which come through and help moderate that slightly.

But again, as Tony said this here, a lot of that is the reason why we've announced an 80-year a tonne increase or Europe is against the cost backdrop for Europe. So generally, I think where we see the outlook as we've seen is if you think about the simple bridge broadly freight from our initial estimate to where we are now. But the price increases that are announced and the ones that were announced this week should help to overcome that cost increase, particularly as we enter 2027 with Lilian back in '26 more importantly, restore margin as we kind of move through this particular phase.

Perfect. That's very useful. And maybe just a second question. On the North American corrugated volumes in Q2, which were somewhat weaker than market expectations. I think on the Q1 call, you talked about April was down 4%. My understanding is that May was at similar levels, which implies a weaker June run rate. Can you talk about what drove that? And I think you have already articulated the messaging on Q3, Q4. So it's more around understanding any specific effects that impacted June?

To be honest with you, Ioannis, I don't remember what was anything specific. I mean we're talking about small deviations. We -- I would say that the thing to try and keep a focus on is that our -- our acquisition of new customers continues to pace our movement towards having local level responsibility and local level acquisitions of customers continue to pace. We continue to see wins in the marketplace. We actually continue to see customers who have left us want to come back because our quality and services have improved very significantly in just a year. We're starting to apply the metrics that we have always done in Europe, in North America, and we're seeing very good progress on the operational side.

So I think given the progress that we're making and a small deviation in a small region for agriculture can can make that kind of difference. The overall level of progress is what I see is very positive. And I'm sure that Nicky and our team on the sales side are going to deliver significant wins in the future to get us back to where we need to be.

This concludes the Q&A session. I will now hand the call back to Tony for any closing remarks.

Thank you, operator, and thank you all for joining us today. I would say that overall, I'm really happy with how the progress of the integration between Smurfit and WestRock, Smurfit Kappa and WestRock has gone. I think that the company has now got all the teams in place to make this company one of the great companies of the world. Obviously, we continue to be hit by costs that are non expected and a significant cost environment that we are in the process of passing through and have full confidence that we will pass those costs through and we're really setting ourselves up for a better second half and a very good 2027.

So thanks for your support. Thanks for your interest, and we look forward to meeting many of you and talking to many of you in the weeks and days and weeks ahead. Thank you all.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Smurfit Westrock 2026 Q1 Results Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to Ciaran Potts, Smurfit Westrock Group VP, Investor Relations. Please go ahead.

Thanks, Evan. As a reminder, statements in today's press release and presentation and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings as well as those discussed in our investor update presentation. The company undertakes no obligation to revise any forward-looking statements.

Today's remarks will also refer to certain non-GAAP financial measures where applicable reconciliations to the most comparable GAAP measures are included in today's earnings release and in the appendix to the accompanying presentation, which are available at investors.smurfitwestrock.com. In addition, today's remarks include statements of Smurfit WestRock's medium-term financial goals and capital allocation priorities. These goals are aspirational and actual performance may differ, possibly materially, and no guarantees are made that these goals will be met. To ensure that we have time to answer from as many as possible, given time constraints, we'd appreciate if each analyst could limit themselves to 2 questions.

I'll now hand you over to Tony Smurfit, CEO of Smurfit Westrock.

Thank you, Ciaran, and thank you to all participants for joining us today. I'm joined on the call as usual by my colleague Ken Bowles, our Executive Vice President and Group CFO.

Set against a challenging environment, we delivered a solid first quarter performance, essentially in line with plan with adjusted EBITDA of $1,076 million and an adjusted EBITDA margin of 14%. Our adjusted EBITDA outcome for the period was impacted by weather events that started in January and continued into February, costing approximately $65 million across the group. We continue to make progress both internally with our people, our operating model and our capital plans and externally where we continue to provide customers with the broadest offering and the widest set of tools and applications.

Our recent innovation event in the Netherlands was a clear example of where Smurfit Westrock is truly differentiated from the competition. I'm particularly happy with how the integration and culture of Smurfit Westrock is progressing with excellent networking and people development, which was on display last week in Amsterdam at the aforementioned innovation event. Back in February, we were happy to launch our medium-term plan. That plan demonstrates an accelerated path to growth to 2030 and beyond. The goal of the plan is to deliver significant adjusted EBITDA growth with a CAGR of 7% and margin expansion of over 300 basis points. Consistent delivery against this plan, which is our collective focus will, we believe, realize Smurfit Westrock's true potential. Our scale is a core competitive advantage for Smurfit Westrock and a key reason customers are more and more choosing to partner with us. We think global but act local.

Operating across regions allows us to support customers consistently while combining global capability with strong local execution. Our footprint enables us to serve our customers seamlessly across geographies, share in best practice, providing security of supply, delivering consistent service levels while remaining both to local markets. Equally, our footprint gives us better visibility across markets, enables optimization of assets and capital deployments. In summary, our presence underpins how we compete and how we win, whether that be in corrugated, consumer, bag and box or any of our other niche businesses. It allows us to support customers across regions, scale innovation quickly and build deeper, more durable partnerships, supporting our statement that we are the go-to packaging partner of choice locally, regionally or globally.

And of course, having so many talented people across the world means better and better innovation, which in the interest of time, we will expand upon the second quarter results.

Now turning to our regions, starting with North America. The quarter delivered adjusted EBITDA of $597 million and an adjusted EBITDA margin of 13.3%. This result was heavily impacted by weather issues of approximately $55 million, which primarily occurred in February and downtime costing $74 million, of which approximately half was unplanned. The quarter was also characterized by generally tepid demand as consumer confidence remained muted as well as experienced some logistical difficulties in Mexico as a result of local domestic security-related issues. As we begin the second quarter, we are seeing much improved demand with strengthening order books across all grades of both paper and converting products. Price increases have been announced for all containerboard grades and some specific consumer grades. We continue our progress to our owner-operator model, and we are seeing the success and benefits of our approach, both in terms of recruitment of talent and motivation within the company.

During the quarter, we entered into contracts with over 600 new corrugated customers across a wide range of sectors and segments. This has continued at a stronger pace in April. These customer wins offset in part, less economic business, and we expect to see growth during the latter part of the year as we onboard our new partners. Bringing together our global knowledge in packaging is having a material benefit as customers see the suite of our capabilities through our experience centers, which are currently being rolled out in the United States. In our consumer business, we've seen great success in our great agnostic approach with over 250 million converted or in the process of being converted to our SBS and CUK offering.

Finally, we continue to invest in our system for growth and cost takeout with a number of new and exciting projects being implemented across the region as well as continually optimizing the system through considered capacity rationalization decisions.

Turning now to our EMEA and APAC business, which delivered a very solid quarter with an adjusted EBITDA of $421 million and an adjusted EBITDA margin of 15.2%. We are significantly outperforming our peers as our innovation platform delivers great value to our customers, whether they're looking to grow, reduce costs or be more sustainable. With our network of 34 innovation centers across the globe, that innovation offering and sharing of best practice is something our entire global customer base is now benefiting from. We've just recently hosted over 200 customers at the sustainability and innovation event in Amsterdam, where we demonstrated our industry-leading suite of tools, which help customers win in their marketplace and ease the burden of compliance with regulatory issues. Our optimal improvements continue in all businesses as we invest for cost takeout and selectively in growth regions.

We also continue to optimize our system with the [ regretable ] but necessary recent announcements of the consultations of closure of 4 smaller converting operations in the U.K. and the Netherlands, and 1 paper mill operation in the U.K., which is a capacity of approximately 200,000 tonnes per year. While we have not been affected in the last quarter by higher energy prices, primarily as a result of our hedging policy, we expect to see the effect of energy price rises in the following quarters. As a result of this and a generally much better demand environment, we have implemented higher recycled paper prices of EUR 100 per ton as well as increases in kraftliner and some specialty grades, which we expect to result in higher prices for our converting products as we progress through this year.

Now turning to Latin American business, which again performed strongly with an adjusted EBITDA of $109 million and an adjusted EBITDA margin of over 20%. This performance once again shows the strength of our operations in LatAm, where we are the only pan-regional player. It is also important to remember that as the truly global player in paper-based packaging, our LatAm operations play a key role in supplying both our global and regional customers. During the quarter, we completed a corrugated box plant acquisition in Ecuador, in line with the objective of building on our position in the region through both organic growth and selective acquisitions. This acquisition is also beneficial beyond the region as we will integrate paper from our North American mill system.

Our business in our 2 larger countries Brazil and Colombia performed well with good volume growth and further significant growth opportunities. Business conditions remain good across the region with generally tightening markets and improved pricing. As I said at the outset, our medium-term plan sets out specific targets and performance measures through 2030. By 2030, we aim to deliver $7 billion of adjusted EBITDA and a group adjusted EBITDA margin of 19%. Over the life of the plan, we aim to generate $14 billion of discretionary free cash flow providing us with significant financial flexibility to capitalize on growth opportunities within our business, further strengthen our balance sheet and increase capital returns for our shareholders. Quite simply, our objective is to unlock the full potential of our North American business continued to outperform in EU, EMEA and APAC and continue to deliver dynamic growth and strong margins in Latin America.

Finally, before I wrap up, you would have noticed our decision to carry out a review of our listing on the London Stock Exchange. The outcome of that review may result in us delisting from the LSE. The review is focused on ensuring our listing structure reflects where our shares trade while reducing complexity and ongoing costs. We anticipate completing this work during May, and we'll update shareholders when the review concludes. On industry outlook specifically, in February, we said that the year had begun with a generally better industry environment, although impacted by weather and more recently, global tensions. Today, we see a stronger and generally better industry outlook Assuming these conditions prevail, we expect to deliver an adjusted EBITDA for the quarter 2 of between $1.1 billion and $1.2 billion, and I'm pleased to reaffirm our previous expectation of an adjusted EBITDA outcome for the full year between $5 billion and $5.3 billion.

And with that, operator, I will hand it over for questions.

[Operator Instructions] Our first call comes from the line of George Staphos of BofA securities.

Tony can [indiscernible] for details calling here, Reinhardt van der Walt, my colleague in Europe. I just wanted to ask some questions on demand and the interplay with pricing, Tony. So you mentioned that, and we thank you for the detail that roughly half of the outage or downtime in the quarter, North America was unplanned. Can you tell us what implications, if any, you think that means for the mill system as it exists today? And do you think that with all the need to rightly pass forward some of the cost pressures you're seeing that it might be leading to more demand weakness than you'd otherwise like to see either you or for other players in the industry? And then I had a follow-on.

Okay. Well, what I would say, George, is in my experience, and unfortunately, I'm a veteran in this business. I've been in the business a long time. And I haven't seen a shift in the whole business demand in a long period of time in practically in my career. We have seen a very strong uptake across really all paper grades with maybe one exception in CRB a little bit. But basically, all paper grades are in effectively sold our position right now.

And that happened really quickly. I mean that happens is -- we strengthened up in March, but in April, it's become very strong indeed across everywhere. Now is there some pre-buying due to price increases announced by us and others in the marketplace that's very possible. But it's not something that we see a lot of. And at some point or another, the capacity that came out of the system has -- over the last 18 months or so is having an effect. And I think this is what we're seeing right now. is that globally speaking, there is strong demand. And obviously, we're buying in Latin America. We're buying in Europe, and we see very much stronger market in practically everything. And even surprising is how our SBS market has strengthened up in the last month. And again, we're in a sold out position in that grade at the moment.

So I think it's changed very radically. The unplanned downtime that we had in February was a result of our volumes not picking up as we anticipated. And we had a couple of issues in our mill in a couple of key mills for us. One was to do with an electric -- nothing to do with weather actually, but to do with an electricity outage near one of our big mills cable, and we lost power for a few days. And that obviously many this go down. So we had a couple of issues in February that were, as we say, unplanned, and they're not going to reoccur. We do not anticipate any material downtime in Q2. As I say, we're sold out. And I think that's why we are taking the decision we're taking in the marketplace.

Quickly, it's nice to hear about the, if you will, the mixing up of your business over time as you have new customers coming in both in March -- in the first quarter and now in April, I think you said 200 customers were more is there way to dimensionalize what that might mean for your margin, how those customers are coming in relative to your margin expectations? Any thoughts relative to kind of your longer-term projections in North America?

I think that we are very comfortable with the business that we're bringing in, George, is what I would say. I mean, obviously, every customer is different and every innovation that we bring to our customers is different in every service level that we'll bring to our customers is different. What I look at is just generally the totality. And we've had each month from January, February, March, more number of new customers coming in. And April is actually -- our new customer volume is actually 30% up on March's number in volume terms. So I'm really comfortable with the way we're going, but obviously, we still have to wash through some of the business that we lost that we have was on economic. That's why at this moment in time, I'm very comfortable that in the second half, we'll start to lap. And of course, our comparators are much easier, but we'll certainly start to show growth against the previous year.

Our next question comes from the line of Philip Ng of Jefferies LLC.

Results in Europe was certainly very impressive given the backdrop, Tony, remind us how hedged you guys are for the next 1 or 2 quarters on gas. Certainly, that's come up quite a bit. And with the timing of the box implementation in Europe, I think, the lag 6 to 9 months, are you in a position to continue to drive earnings growth in, call it, 2Q and maybe 3Q as well and maintain your margins? Just give us some color in terms of the environment you're in and your ability to kind of push price on the box side of things?

Well, let me do the second part of your question, and then I'll hand it to Ken for the first part. Basically, we are out in the marketplace today, and you already see the more commodity side of our business as in sheet feeding implementing the first price increases, and that's going through in practically all markets in Europe. We are also out there raising our converted products prices to noncontractual customers. And that should -- you'll see a very minor uptick, I'd say, in Q2. And then Q3 and Q4 you'll start to see the implementation of those increases plus some of the contracts, normally speaking, the contracts are 3 to 6 months depending on the customer. And then you'll start to see that feeding through in quarter 3 and quarter 4. So we'll see full implementation of our paper prices. And frankly speaking, we and the industry need it. So therefore it's going to happen.

And so I'd say second half of the year, you'll see the benefit of the price increases feeding through into converting products.

Philip, broadly speaking, for the second quarter, about 50% hedged and about 1/3 and 1/3 for quarter 3 and quarter 4 as we sit here today. Clearly, it's a very active policy we run and you're just trying to kind of find spots in the market where you do a bit more, a bit less. But equally, you don't overhedge because that can lead to the wrong side of where pricing might go. So yes, 50% for quarter 2, 1/3 for 3 and 4 as we sit here now.

Okay. Great color. And just sticking with Europe, a little surprised with the announcement on the potential closure in U.K., which would certainly be helpful for just the broader market, it's oversupplied. But what does that mean for Smurfit? Are you -- I mean, does that mean you're going to have to buy paper in the open market? Are you able to kind of move some production internally? And just give us a little more perspective on the mill that you're considering and having that contemplation is a high-cost mill and just effect of how you're going to manage through this?

Yes. I mean, obviously, we don't take decisions to close any asset without a great deal of thought. And clearly, the supply to our very good and strong U.K. and Irish business is critical to us. And that mill in the U.K. and Birmingham played a very important role in that. But it was, frankly speaking, one of our highest, if not our highest cost mill, and it operates in the U.K. and has the wrong width for the long term. So that mill always had a finite period where it could last for. And so once we sorted out the supply arrangements, which we have obviously done both internally and some externally for a period of time, we've then decided to conclude it. It needed investment that mill.

And clearly, we invest in mills that we believe have a long-term future and will be low cost, and that's been the mission of Smurfit -- old Smurfit Kappa and will be the mission of Smurfit Westrock. And this mill, unfortunately, this didn't have a long-term future based upon a lot of the constraints that they had, and so it wasn't worth longer-term investing in. But we don't have a problem to supply the mill because we've organized that. That's why we didn't announce it, frankly speaking, in February because we wanted to make sure all the Ts were crossed and my [indiscernible] were dotted.

We will now take your next call. The next question comes from the line of Gabe Hajde of Wells Fargo.

Just want to confirm on the most recent price announcement that RISI picked up for June implementation. It is kind of standard practice for you all to not embed that into your outlook until it's reflected in the formal publication. And then, Ken, at the beginning of the year, you kind of gave us a rundown of some of the key inputs and sort of tailwind headwinds associated with those. Would you kindly give us an update on those?

Yes. No problem, Gabe, yes. Just on the first point, obviously, that was a relatively recent decision. So we are seeing content increases coming into many of our grades. We're in a sold out position. So I'm not sure that it's necessarily fully bedded in, but then neither are all the costs fully bedded in. So I don't think that we're sort of saying that the $50 that we have announced to our customers a couple of days ago, is in these forecasts totally. But obviously, some of it will to be offsetting some of the very material cost increases that we're seeing, whether that's freight or whether that can be energy or whether it can be anything, frankly, that we're buying today, you'll obviously have picked up that many of our customers are coming to us with -- or sorry, suppliers are coming to us with necessary increases or that they're looking for because of their own supply constraints.

One of the things, Gabe, to bear in mind is that I think for the first time in a little while that we are seeing the security supply question come back on the table. And during the whole COVID period, we and Smurfit Kappa were excellent with our customer base in ensuring that we got gave them security of supply. And clearly, that's something that we're continuing to emphasize to our customer base that we are an integrated system. We have everything we -- so therefore, they don't need to worry about their boxes when they get them from us or their consumer packaging when they get them from us. But there are obviously many customers out there that are somewhat affected by some of the issues that are going on in the supply chain at the moment.

Gabe, yes, I suppose, look, really, I suppose the one1 moving part, as you can imagine, is the energy piece. I think back in February, if memory serves me correctly, we would have guided [indiscernible] got $80 million higher year-on-year for the group. I think that's probably based on everything we've done, probably more like between [ $2.70 ] and [ $2.90 ] in terms of total impact for the year. So there is kind of cost inflation that we wouldn't have had back in February. Equally, really was an indirect impact of all of that is an increase in freight cost. I mean even within the first quarter alone, we had a decent impact from just freight. We expect that to carry through [indiscernible], probably a slight relief in terms of labor, a slight relief in terms of OCC.

But broadly, when you think about the big moving part is energy and really then volumes, as Tony kind of alluded to, picking up during -- as we get towards the back half of the year. Pricing, as you say, to come true be bedded in. But really, when you look at the cost inflation fees, you take the puts on the calls and all the bits and pieces, you kind of broadly end up where the range kind of sits. But really the big mover from what we said back in February, probably energy.

All right. As expected. And then just one obviously, you talked about pivoting kind of the growth at some point in the second half given the onboarding of new customers on the corrugated side. Just maybe on more of the, I'll call it, open markets piece of the containerboard business in North America. Can you talk at all about what you've seen in the export markets in North America?

In North America, well, I would say what I'd say -- what we've seen in Latin America because that has a direct impact, is that literally, as I said at the very outset to the first question, things have changed really quickly. Now obviously, I can't put my hand on my heart and say they're not going to change quickly back again. But as we sit here today, I've never seen the speed of change so quickly. So for example, in Latin America, they were getting paper from Europe for a period of time at very discounted prices.

Now if you look for paper in Europe, you've been told, well, we can make it in June -- July and we can ship it and so it can be with you in October, September, October. So -- and by the way, we're not -- we haven't discussed pricing. So -- and there isn't a whole lot of paper coming out of the United States. I think the number, if I'm right, Ken, is about 30% less paper being shipped out of out of the U.S. to Latin America. So the market has changed very quickly. And I think if you look at it in the context, Gabe, the worldwide containerboard markets, call it $100 million, just to make the math easy. The world still has been growing over the last number of years, 1%, 2%, and that's generally speaking, needing containerboard. And there's been a lot of capacity come out. And we haven't seen the effect of that capacity coming out really because the economy hasn't been strong enough in some of the North American and European markets.

As there's some degree of strengthening, then all of a sudden, you see a shortage because people have been keeping their stocks low. And so that's probably what's happening in the export market. And clearly, that's something that will be beneficial to us as we roll through the year.

Our next question comes from the line of Mike Roxland of Truth Securities.

Congrats on all the progress. First question, just you mentioned, Tony, seeing much improved demand and strength in order books. And it seems like you sold out of most paper grades. What do you think is driving that, given that the consumer is further stretched due to higher cost just like some of these CPGs are likely to input price increases to cover their costs? And relatedly, can you talk about the monthly volume progression in 1Q in North America and what volumes have done thus far in April?

Okay. That's quite granular, Mike. I mean basically, we have been -- we're down -- as you saw, we were down 8.5% or so percent during Q4. We're down 7-odd percent this quarter. As we sit here today, we're down 4% in April versus last year. And we're -- we didn't lose a whole lot of business in Q1 and Q2 last year. So we're lapping higher comparators than we would have.

What I would say is that we are seeing, as I say, significantly new customer wins as -- and more importantly, Mike, we're seeing good people coming to work with Smurfit Westrock. And we talk about our model and empowering our people and having the right culture. And for me, that's critical to longer-term success. And I think that's what we're starting to see the benefits of that as people are coming into the company and realizing it's a good place to work and has got the right values and the right culture. So I think -- and I mean, I hope you experienced a little bit of that yourself when you were in Amsterdam recently. So I think I think I would say that we're moving in the right direction. I mean it's never as quick as you want it to be. Let's be honest. I mean, I would love it to be snapping my fingers and getting 600 customers, new customers a month, that's not reality. You lose a big piece of business, it takes a while to get a number of smaller pieces of business in and remodeled.

I'll give you a very good example. When we acquired -- sorry, when we combined with WestRock, we had a large facility in one of our Latin American countries. And they were doing about 350 million square meters, and they were losing about $20 million a year. They're now doing 280 million square meters, and they're making $15 million a year. So that kind of turnaround is done, but we've lost volume, but we're making much more money. And that's the kind of model that we want to get to with all of our facilities. Some of that requires some investments. Some of them require people change, some requires a total mix change. But we're on the path, and we'd like it to be quicker, but the reality is you can only do things at the pace that the organization and people are able to go with. The first part of your question was...

With the drivers of improved demand. I suppose that Tony kind of alluded to earlier on, some of that could potentially be a bit prebuying given what's coming. But I think also, like I think we all experience it in our day-to-day lives. I mean ultimately, shelves do need to be refilled at some point is only so far I can push things out buffer stocks and every other stock. So I think some of that is just the supply chain where it can begin to normalize given the volatility of the world outside. I mean people have -- one of the things starting to come back on to our radar as a kind of key strength of or for WestRock in this environment, is security of supply. I mean, that's something that our customers are begging to not only push for, but value more in this kind of environment.

So we've seen it equally through the areas that maybe had been lagging for a while. Home improvements, white goods, those kind of areas are strong indicators and green shoots of demand, too. So there could be an element here of confidence, could be element here of the world begin to understand the volatility and try and find normalcy kind of through that.

Yes. And the only other thing to add to that, Mike, would be that we are in a seasonally busier period. So we are April through, let's say, November is a busier period. So we should expect to see some pickup. And if people have low stocks and those pick up, then there's naturally bump on that. So it's probably -- it's a combination of all things. But I do agree with you that it is kind of a little counterintuitive given everything that we read in the news every day. But hey, I'll take it.

Got it. That's really great color. And then just for my follow-up, realizing some of the incremental costs that you're currently experiencing made transitory and you pointed out the energy whatever you have available to you internally to offset those higher costs. There are cost takeout programs. I believe that to offset inflation. Is there any way to accelerate those programs. And this is all side, obviously from announcing further price increases, which you just did.

Yes. Michael, I think you would have seen, again, at the event last week, you've seen a lot of programs and plans in innovation where we are designed specifically to take costs out, not just for us but for our customers. I think the short answer is yes. I mean as an organization, we take the view that when you wake up on January 1, general wage inflation means you're already behind for the year that you just had. So we always have a very active cost takeout program plant by plant, which is part of our budget process to primarily at offsetting inflation.

I think when you get areas of volatility like this in energy, I think some projects that might have been slightly under long finger probably become much more valuable around cost [indiscernible] for head count reduction, those kind of underlying projects, some projects in mills, which have a direct impact on energy consumption and those kind of things we try and bring through, they don't come through quickly, but some we will have started 2, 3 years ago. And as they come online this year, they have a better impact. But I think we've always taken a view that if you're looking at earnings, you got to look right down to P&L. There's no point to stopping at sales and the margin. It's every piece of cost that goes into mill is something that our box spends that you need to kind of look at and take a view on.

But no cost [indiscernible] is kind of a basic principle for everybody in the organization because quite frankly, if you think about beyond these years of inflation before that, we were dealing with low inflation environment where we're going to get price increases, too. And the only way you can manage that cost base and grow margins is by taking cost out fundamentally.

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

Good morning. in North America, I'm wondering if you can talk about when you would expect to see the most recently realized price hike, the $50 a ton net from Pulp and Paper week in April. Like when should that flow through for you? And then the $50 a ton that you've just announced, I believe it's for June, assuming that, that would be fully implemented, like what month or in terms of quarterly cadence, when should we expect to see that in the results?

Well, the first $50, you should fully see it implemented by July 1. So practically speaking, there might be 1 or 2 that don't happen. But by and large, the first $50, I should say, the minus 20 plus 70, it should be fully implemented by July 1, but they'll be progressive through May and June. And then the second $50, if it's to be successful, we will wait and see. I mean, obviously, that's early days. I would suspect that by the end of the -- by September, it will be fully implemented. If it goes through.

Yes. Yes. No, that's helpful. And then in North America, there's a comment around the substrate agnostic approach delivering for you. Can you just talk a little bit about your consumer business and how that is performing relative to your expectations around profitability CRB, SBS kind of substitution dynamics. Just wondering if you could talk on how that business is performing.

Yes, it's interesting. I mean, I think when you talk about that business, you have to go through the very different substrates of the business. I mean, SBS, as you will all know, has been a very challenged business. But as I mentioned, we are now in a sold-out position in because we've won a lot of customer wins and the -- a lot of our projects have come through. So we're in a good position, except obviously, our pricing isn't as good as it was a couple of years back. So demand has picked up, and we are selectively pushing prices up in certain areas of SBS.

And in our CUK business, that's a solid business. It's a system business and continues to do well, and we're comfortable and strong about that business, and we're investing behind it. And in our CRB business, obviously, our mills are little bit older in that area, and we are actively moving from some CRB products into CUK and SBS and giving the same performance for a better performance for our customers. and that's working very well and is obviously beneficial to us as well as a company. So overall, I think we are with perhaps the exception of CRB, we're in a very good space. I would say that -- if you ask me about the results, I don't think we make enough return on some of our assets in that. And that's something that is work in progress. And some of it's to do with our own planning. And so we have some work to do still.

But it's fundamentally a very good business with very, very good people, and I have been incredibly impressed with some of the assets that we have and some of the people that we have in that business. So there's no reason why we can't be very, very successful in that business for the long term. But what to do on our CRB mills some facilities, we still have work to do and reliability. But our positioning is very strong, and we have really good people.

Our next question comes from the line of Mark Weintraub of Seaport Research Partners.

First, I think during the Investor Day, you talked about maybe getting about half of the business back in targeted by the end of next year, maybe like the fourth quarter. And as you said, you were down high single digits or close to 10% in the fourth quarter. Does that mean you could potentially be up 5% in the fourth quarter? And are you I mean it sounds like you're doing really well in regaining business. Are you on the trajectory that you hoped you had been on?

I think I would say -- I don't know about sticking to a 5% number, but because a lot -- a little bit of that will depend on what the market is. But I think I am really happy with the trajectory of our sales team and sales organizations and how we're moving -- not all our plants are perfect yet, Mark. We have still some work to do. We still have some investments to make. We still have some people to bring in. So it's still working -- I'm sorry, we'll always be work in progress. I mean corrugated box plants are their own organism, so to speak, that they actually -- each one is its own business. And they don't all act the same and perform the same. But overall, the direction of travel with the people that we have is really strong.

And as I say, I'm really encouraged by the quality of people we're bringing into our organization. I mean, we're doing a, I won't say, management training course, that's the wrong word, but we're doing a -- we're bringing every single manager from North America into a -- this is how to operate type course. And everybody seems to like it and likes the direction that we're taking the company internally. But that doesn't mean to say I can wave a magic wand and everything will change automatically. It won't. It just takes a little bit of time. But we have some standout performers and standout managers and we just need to have everybody to be a standout performer and standout manager. And that's what's behind the drive. As I've said, to go from 0 or negative in our corrugated system to margins of between 8% and 12%. And that's where we will get to. The question is when. And obviously, we're trying to drive it as quickly as possible.

And then just as the second question. So you talked about how in the consumer business still tuck in SBS from a profitability standpoint. So I'm kind of curious, you're sold out. You're not making enough money in that business relative to what you think you should be. You've announced price increases broadly in a number of the other grades. And you did mention -- you mentioned you've done some in SBS. Maybe if you could clarify, is that just in the extruded grades? Or is that more broadly? And if not more broadly, what is it that we need to wait for until we can start seeing the SBS business making a lot more money and hopefully lifting up the U.K. or at least protecting CUK and CRB as well?

I mean I don't think I should be really talking about forward pricing. But I mean, obviously, as I said, what we've done is selectively increased some SBS pricing -- or announced increases of some SBS pricing. And we'll just have to wait and see, Mark, when we believe our -- maybe the market will believe it's up to -- it's not just up to us it's when we believe the time is right. I mean it's a relatively new phenomenon that we've got sold out. I mean, if you were -- when we were together in February, we wouldn't have imagined that we will be in this position, and we are in this position as we go into May.

So on the assumption that, that position stays stronger and on the assumption that stayed the same and on the assumption that we're not comfortable with our profitability. That's something that we will obviously keep a weather eye on as a company and then take it from there.

Our next question comes from the line of Detlef Winckelmann from JPMorgan.

Maybe my first one would be, I mean, we know Q2 is obviously going to have a lot of cost. We've seen that through the Middle East inflation coming through. But at the same time, we've seen a raft of price increases both in Europe and the U.S., 30 in the U.S. so far since you run started and, let's say, about 100 cumulative in Europe. I would just love your thoughts in terms of price cost where you think we've kind of landed at the end of this, assuming you don't get the other $50 per ton price increase that you just announced, my sense is that you probably recovered more than cost inflation in Europe and maybe matched it in the U.S. so far. Is that a fair statement? Or any color on that would be great.

Well, Detlef, it's Ken here. It's a tricky one because we tend not to go into the segments for quarter-on-quarter. But broadly, I think when you look at price -- I mean remember, price increase in Europe for paper in the last number of weeks. It takes a bit of time to work through the system, particularly given the level of integration we have. So -- but I think you're seeing probably a couple of impacts, and you rightly point out. Energy continues to be -- as we go into the second quarter is when it begins to kind of hit a little bit. So many may be slightly higher for the group in the second quarter.

Recovered fiber is definitely higher for the group in the second quarter, probably around $20-odd million. I think you referenced slightly earlier on, like freight is one of those things has an indirect impact of the cost of energy, it is showing some increases again in the second quarter, probably another $10 million. I think the big delta that we have from a credit perspective, if you like, on the bridge second quarter around downtime, fundamentally downtime in the second quarter last year, it was a lot heavier than the second quarter this year. In fact, that was quarter 1 this year. And so quarter-on-quarter, you're probably getting the benefit of about, call it, $40 million lower downtime year-on-year, so -- or quarter-on-quarter. So I think between the [indiscernible], the code in [indiscernible] race, you probably end up back at if you can get a bit better volume if a bit better on price than it comes through a piece, but the underlying cost movements are being broadly offset by the impact of lower downtime quarter-on-quarter.

Yes. And I'll just add to that, Detlef. We did not follow any price increases that were announced by the industry in October and neither in February because we didn't think the conditions were viable for that. I'm talking Europe here for a second, I did not think that conditions were correct for that. And at that point and you only have to look at results of our competition, you'll see that how terribly underwater everybody is in the business.

And we're still doing reasonably well. But now the demand has picked up and now that our order books are good and they're good in Europe, too. And I can tell you that we've won a lot of new business, not only out of the initiatives that we're doing on innovation. But because of our service and our quality and our long-term position in this business, and I would say somewhat our stability in this business. that we won a lot of new business that's coming through as we go into the second half and even into next year. So there was an absolute necessity to recover something by the industry. because everybody was dying. And now that there is a bit of momentum, a bit of demand, then clearly, we've seen the -- that's the time that we would push in, as I say, just to use my anecdote about Latin America, there was paper available from Europe basically at any price 3 months ago, and now you can't get it until September, if you're lucky. And I don't even know the price.

Our next question comes from the line of Andrew Jones of UBS.

I just wanted to just go back to the bridge for this year. I mean, you mentioned that obviously, freight will be -- or we saw like nearly $50 million in the first quarter. What's the overall number you're kind of seeing at sort of spot rates for this year? And then I think you said some labor cost relief, so with the cost takeout on labor side, you're expecting that to be a tailwind. Was that correct? And also, can you just drill into some of the -- sort of cost related moving parts, specifically things like chemicals, where we probably have a bit less clarity on? And also, could you give us some sensitivity around the gas prices move significantly from where we are on the spot today, like maybe a rule of thumb with the hedging taking into account for how much of that energy cost estimate could move with like a EUR 10 move in ETF or the dollar move in Henry Hub something like that. Can you help on that side?

That will be -- that's one that mathematics on gas prices, Andy. I think I'll leave that to Ciaran, [ Darren and Frank ] to take the mechanical. It's not as simple as given the size of the system and how we purchase and buying given the level of hedging, it's really not as simple to say if [ TTF ] goes up by 10%, that equates to [indiscernible] because that involves where you produce, when you produce, how you produce. It's the system is much more delicate and balance around that than a straight input output gas price. I just missed the first part of the bridge, we're looking for there, Andy, was on which element?

First of all, freight, but also things like chemicals and just clarify and belabor what you were saying around the year-over-year impact.

Yes, yes. No, on labor, it was less a common trend. It's been a tailwind as we go through the year, less of a headwind as we work to the year simply because of either projects to be implemented, some of those quick win projects we talked about before or generally good work done around things like CLAs and wage negotiations and some -- and quite frankly, some of the rationalizations too.

So I think broadly, where back in February, we might have seen labor be $100 million of a headwind. It's probably more like $50 million to sit here now, for example, things like chemicals and starches and all that kind of stuff really as a bundle, it's not a meaningful driver for the business, and we don't tend to break them at. It's quite low level in terms of the overall cost. Big drivers for us tend to be energy, OCC, labor and freight, as you say, that's going to enter the picture, but simply as a kind of indirect impact from what's happening on energy.

So fiber broadly will be slightly better, probably flat where we said in February, so [indiscernible] is still there. On freight, though, freight probably, given what we've seen in the first quarter to extrapolate that, freight's probably a $50 million headwind as we get through the year based on where we sit now, that can clearly change. But they're really the big buckets. And as I said to depth up there, probably the big delta quarter 1 to quarter 2 was around downtime of lower downtime, call it, $40 million. But I think [indiscernible] guys be happy to take more detailed questions on energy. As I will be happy for them to take more detailed questions of energy offline.

Yes. No, that's fine. So do you say $50 million headwind for the year on, right? So basically, we've seen that in [indiscernible]?

Yes, because it's really -- really the impact there is where you see gas prices. And clearly, as you work through the year, you've got a bit more hedging or price changes would be. So that's kind of where we see it now. But look, at the half year, we'll update that for you anyway, Andy.

Our next question comes from the line of Lewis Roxburgh of Goodbody.

I think most of the questions have been asked, I think. It's just a follow-up on the North American box system. You previously talked about around 60% of those box plants, loss making box plants still to work through. Another 40% as seen as a realistic improvement target over the next few years. So I just get a sense of progression of uplift that might be to our margins as the next phase is delivered or whether that's changed given the current cost outlook.

No. Lewis, it's Tony. I would say that what we said was that we had got to about 30 or 29 loss makers instead of 60 or 70 at the beginning. And now we've got it down to 29. And obviously, that's continued work in progress. That is very little to with very little to do with the cost side of things is to do with the operating side of things, and that's something that we're working on all the time. And so we we'll probably always have some that are loss making for one reason or another, but I would certainly hope that we would get that into -- through the cycle in single digits.

There are no further questions. Speakers, please continue.

Okay. Well, thank you all for spending the time with us this afternoon or this morning. It was a challenging quarter, Q1, weather-related and somewhat demand related. But we're out of that now. And when we look forward, we see a lot more optimism than we've seen for a long period of time. Obviously, we're cautiously optimistic rather than aggressively optimistic, but what we see is pretty good right now, and we're hoping that continues as we go through the second quarter and into the rest of the year.

Clearly, the world is a little bit of a challenge place, and we all hope that everyone on this call and everywhere stay safe and look after themselves. So thanks a lot for joining us, and we look forward to seeing many of you in the coming months.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good morning, everyone, and thank you for joining us today for our fourth quarter and full year 2025 results.

As a reminder, statements in today's press releases and presentations and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings as well as those discussed in our investor update presentation on our medium-term plan. The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Where applicable, Reconciliations to the most comparable GAAP measures are included in today's earnings release and in the appendix to the accompanying presentation, which are available at investors.smurfitwestrock.com. In addition, today's remarks include statements about Smurfit WestRock's medium-term financial goals and capital allocation priorities. These goals are aspirational and actual performance may differ, possibly materially, and no guarantees are made that these goals will be met. For additional information, please refer to our medium-term plan related presentation.

Tony will now present an abridged version of our fourth quarter results, after which we will take some questions before moving on to the medium-term plan. You'll note the additional level of disclosure in the appendix to the fourth quarter results presentation facilitating that shorter discussion. In the interest of time, I request those asking questions to restrict themselves to 1.

I'll now hand you over to Tony Smurfit, CEO of Smurfit WestRock.

Thank you, Ciaran, and good morning or good afternoon to everyone from a warming up New York City. Today, I'm joined by Ken Bowles, our Executive Vice President and Group CFO, along with Saverio Meyer, Laurent Sellier and Alvaro Henao, who run our regions as we'll be presenting, as you know, the medium-term plan later.

Before I get into the quarter, you'll have seen our recent announcement on the closure of our SBS machine in Lethu, Quebec, which is another step in our portfolio optimization. Decisions such as this, while always difficult, are always carefully considered and any further portfolio optimizations will be done in an equally considered manner.

In the context of what were difficult market conditions across many of our countries, I am very pleased with the performance we've delivered during the quarter and, of course, for the year. In the quarter, we reported USD 1.172 billion of adjusted EBITDA and an adjusted EBITDA of USD 4.939 billion for the year. This is, by far, the largest outturn by any packaging company in the world. And I'm incredibly proud of the performance of everyone in the company who has contributed towards this. In addition, in our first full year of operation, we have focused on cash, generating USD 679 million of adjusted free cash flow for the quarter and over $1.5 billion for the year. I view this as a key metric of our success.

Finally, while this is far away from the summit of our ambitions, our adjusted margin at 15.5% for the quarter and a similar number for the year provides a great launching pad for our future success.

Looking now at the results by region for the quarter. Our adjusted EBITDA in North America was down modestly year-on-year at $651 million and a margin of 14.7%. Conversely, our European margins expanded during the quarter to over 16% and an adjusted EBITDA of $438 million.

And lastly, but by no means least, once again, we had a very strong performance in our Latin American region, with margins of over 24% and an adjusted EBITDA of over $130 million.

With regard to volumes, you will see a sharp fall in our North American volume with stable volumes in Europe and a stronger growth in our Latin American region. We'll talk to these figures in a few moments as I go through the regions.

Turning now to the group and regional highlights. I am very proud of the medium-term plan that we have created and will be presenting to you very shortly. This has been the accumulation of a year-long effort that has been done bottom up. While all of us here steered the direction of the plan every individual operating unit within the company has developed their ideas for the future and the outcomes of which you'll see shortly. During the first full year, the group continued to put its balance sheet on an ever more positive footing with successful refinancings and associated redemptions of bonds pushing the next maturity out to 2028 with an average interest rate of 4.64%. It is a fundamental philosophy of all of us in the group to have balance sheet strength. And you will see at year-end, we have reduced our leverage to 2.6x moving towards our target of 2x.

Reflecting the confidence we have, we continue to have a progressive dividend. And again, as was noted last week, we have increased our dividend by a further 5%. Smurfit WestRock as was the case in Smurfit Kappa continue to see the dividend as a key pillar of our capital allocation framework. This was evidenced quite clearly during the COVID years when others cut or delayed their dividend but we paid in full.

Turning now to the regions. Let me start with North America. When we arrived in the legacy WestRock organization and following our first 6 months, we identified there was business in our portfolio that was heavily loss-making for the company and for the individual operating units. Our fundamental philosophy, and that is why we have successfully stood the test of time is that every unit must be able to justify its own existence. As such, we have shared uneconomic business, which will be replaced.

To give you and me confidence, half of the 1.2 billion square meters we have lost has already been replaced and is in the process of being implemented in our system. And our prospects in what we call our pipeline significantly exceed the business that has been lost, both in terms of volume and quality. The short-term effect of the low volume loss is the need for us to take additional downtime in the mill system, which we've taken in Q4 amounting to a cost of about $85 million. A hallmark of this company, our company, has always been working capital management and cash generation. So this action has been necessary to make sure we optimize our system.

In the year gone by, we have significantly reduced the number of loss makers already within the organization. We have also optimized our footprint with some closures, which we will continue to proactively evaluate reflecting our recent announcement and other closures during 2025. We've already started implementing our investment programs, and most importantly, we've been putting in place the right people to take our North American business forward.

With regard to EMEA and APAC, we have a very, very good business in this region, and our margins reflect that. If you consider how the rest of the whole industry is performing and you see where we currently sit. I'm sure you'll recognize that our positioning in this area is indeed very strong. What is also very interesting is that our consumer business is adding a lot to our offering, to our strong customer base as we -- and we'll talk about this shortly, as we see nothing but opportunities to continue to progress this business alongside our strong corrugated business.

Of course, in light of the current paper market situation, we are looking at our footprint with a continuing focus on portfolio optimization.

Our Latin American business remains incredibly strong with great margins and a seamless integration achieved between both legacy Smurfit Kappa and WestRock. I'll let Alvaro reflect on this in a few moments.

As I stated at the outset, our full year -- our first full year of operation, integration and development at Smurfit WestRock has been truly outstanding. Notwithstanding that the general economic environment has been as difficult as I have seen in my lifetime for such an extended period of time. Our significant achievements, which everyone in the company is proud of as it sits within our vision is that we have been recognized by Forbes, Fortune and Time Magazine as a leader in 1 of the world's great companies. Our designers continue to meet and exceed our customers' needs and our operations continue to deliver superior performance in quality and service. And this is regularly recognized with over 230 awards received by customers and suppliers. Our consistent improvement in quality, productivity and utilization and on-time and full delivery for customers, it is what is driving many of the recognitions and awards we have received.

In closing out the year, we recognize that we have well overachieved our initial synergy target of $400 million. And while this is -- much of this is masked by the general economic activity we see we believe this sets us up to be a much more efficient and leaner organization into the future. And lastly, as I mentioned, our improved balance sheet of 2.6x levered has been recognized by Fitch with an upgrade to BBB+.

Finally, turning to our outlook, notwithstanding that we've had significant weather events, both in Europe and, of course, here in the United States, and we're continuing to work through the impact of these. The year has begun with a generally better industry operating environment. Given our progress of developing new and high-quality business, the enthusiasm of our teams and our expectation for an improving economy in the second half of the year, we currently expect the first quarter adjusted EBITDA of between $1.1 billion and $1.2 billion with a full year 2026 adjusted EBITDA between USD 5 billion and USD 5.3 billion.

With the plan that we have in place to invest and grow our business, we remain extremely confident in the future of Smurfit WestRock as the go-to paper and packaging company for customers, for talented employees, for suppliers and, of course, for shareholders in the years ahead.

In summary, full year 2025 has been about establishing a strong foundation for future performance and for future success. I thank you all for your attention. And now Ken and I will take any questions on the results before moving on to the medium-term plan. Thank you.

Tony, in terms of the -- and in terms of the outlook for this year, can you talk to the extent that pricing is already baked into your forecast or not? And then ultimately, recognize you don't manage the business week by week, month by month. what is the expectation for volume progressions, especially within corrugated, but in Boxboard over the course of the year?

No, we don't do it week by week, it's day by day, but Ken, I'll let you take the pricing piece. Our expectation, George, is that we saw a firming up of order books in the latter part of December. We felt that the first part of the fourth quarter was weak, and then that sort of improved as we went through the quarter. And we were seeing a decent order books across most of the businesses in which we operate, countries in which we operate as we progress in January. That has been somewhat interrupted a little bit by the weather and that will have an effect. We've seen that the vast majority of the effects, but they're still -- we're still working through some of the logistics of that. disruption as we're even in middle of February. It seems a little bit warmer now than it was, but it's still -- it's only last Saturday that it started to warm up a little bit. So we would see volumes in the latter half of the year, get back to more normalized levels. And certainly, with regard to the stimulus that could be happening here in the United States, we think that, that could be a positive for the business here. and in the rest of our businesses.

George, so the long and the short answer is no. So for the first quarter, clearly not because you wouldn't expect anything anyway. But for the year, no, we haven't baked in any aspect of it because our style if like would be to wait until it's in before we can consider it. I think also you can focus on the price increases, there's outputs there in terms of other paper grades might happen there. So the net-net is we feel comfortable with the 5% to 5.3% based on where everything is now baking and anything else.

Philip?

Phil Ng from Jefferies. Tony, can you give us a little feel for where you are in the process of churning some of these lower loss-making contracts? And you talked about a robust pipeline where you can more than offset that. What does that actually mean? Have you secured contracts? And how does that kind of layer in, I guess, to the puts and takes of those dynamics?

Phil, that's a great question. I'm going to hand that over to the guy you want to hear from on that is the guy, the coal face, which is Laurent, but basically, I think I am really happy. Most of the bad stuff has gone. We still got a couple of contracts that will phase out or we might keep or we might lose because we're under contract with really bad volumes there. So -- but the price is so bad, I would expect we'll keep it, but at a much higher margin. But then I'll let you talk Laurent about the -- there's a mic there.

About how successful we've been. And I'm really, really happy with how we're doing. So it's something that unravels over time, as you can imagine. So the contract when we lose the volume, that tends to go pretty fast because we terminate the volumes and then you need to rebuild. What Tony referred to in terms of pipeline, is you can imagine layers of conversations, 1 very close to happening. Other one, a little bit less warm and others that are more like prospects. But the overall perspective and prospect is very encouraging. And that's the reason why we've gone exactly this way. We had very underperforming contracts. We needed to stop them at some point and be ready to take on more volume and very good margin conditions over time.

The way I'd rephrase it is you're not going to make an omelet unless you break an egg. So therefore, we had to get rid of this stuff. So we have now machine capacity for our people to sell. And you've got a couple of hundred salespeople across the United States who have capacity to sell now. And some of those will be incredibly successful at selling and some of them will be less successful. Those that are less successful won't be in the company longer term. and we'll make sure that we are successful because we have capacity to sell and get paid for it. And that's -- when you lock yourself up fill with really bad volume, that you can't make any money on, then you're stuck. So we have to break that egg, so to speak.

Just a follow-up to that, Tony. In terms of approach, I guess, going forward, how is the sales force prospecting these types of customers perhaps differently under your watch versus a year ago? And any more perspective on these contracts that are perceived to be good. Obviously, it's focused on profitability, but any more color in terms of, is it more commoditized versus noncomm business regional versus national accounts? Just give us a little more perspective on what makes a good customer.

A good customer is a customer you can bring value to and who you can solve their problems. And every customer has a different problem that you need to identify with and a good salesperson is finding those problems and identifying what -- how we can help solve our customers' problems. I mean, we'll talk about it in the medium-term plan, but our suite of tools, our suite of applications is second to none in the world. And so we're able to solve any customer's problem to make them help them in their own marketplaces. And that's how we get to the point where we're not selling just a box. We're selling packaging solutions for them. It could be redesigned. It can be supply chain. It can be environmental. It can be whatever they need, and it's up to us to make sure that our sales teams both regionally and nationally are able to sell. And that's what we've been doing for decades in North America, in Latin America, and it's something that we're just good at, frankly, that -- and we'll bring -- make sure that, that kind of knowledge transfer, both from -- because there are some great things done here in North America. I mean, you want to see some of the designs that are done in our merchandising and display business where we have a great team that's innovating. So the mix of having everything together is incredibly powerful. It doesn't mean to say that it's easy. We're not going to be successful every day with every customer. But over time, with just 20% of the market here, then we can -- we've got 80% to go for. And maybe some of that is lousy, and we don't want it, but a lot of it is pretty good, and we'll get it.

I think as well, Phil. And Tony will spoke both spoken about across the year is that kind of key underpin of quality and service in terms of out of the customer. I think it's fair to say that in the last year or so. OTIF and PPM and all those kind of metrics that are very much part of how we do business and it goes to what we bring to the customer and how we can bring value on time unfold and quality are kind of the key underpins to that. So to enable Laurent to have the conversations that we have and has to come back to quality and service. And I think that's been a step change in thinking how you equally approach the customer.

And the 1 thing we've changed in addition is the organization bringing the sales force much closer to the operating units. So that gives a lot of flexibility and also much more direct contact between the sales force and the potential customers, which I think is a great plus sell in the making, but that's happening at place.

And just 1 final point before I move off , we also allow our salespeople to entertain our customers, make sure that they can buy them a drink, which was nothing was allowed to be done before. They just said just pure sell on price. And that's not what we do. We sell on making sure that we give our customers the value for what they have. I'll wait and give them.

Lewis Roxburgh from Goodbody. And just on that value over volume piece. Just wondered sort of how that piece will contribute. Do you think that will translate to pricing outperforming the benchmark or maybe cost takeout from rightsizing and efficiency? Or in terms of volume, we've seen some deliberate drop off this year, just seeing how that -- how you see that sort of evolve? Do you think that will sort of close more towards, as you said, normalized levels of demand towards the end of this year?

Thanks, Lewis. We will certainly -- I mean, I think if you look at our performance in Europe, for example, we've gained market share because of our real laser-like focus on our ability to serve our customers with high quality, good design and value for the customer. So that's what we've done, and that's where we're gaining market share. if your question is, should we be lapping positively this time next year? The answer is yes. I'll be very disappointed if we're not. And I -- as I've said and as Laurent has said, we've got a lot of irons in the fire with customers, and I would expect to land a lot of those. We have landed a lot, and I've been very, very happy with the momentum of our business. I don't know, do you want to add anything?

Mark Weintraub, Seaport Research Partners. Thank you, first of all, for the bridges, which you provided kind of on the look back that's super helpful. and so get a little, ask for a little more. So as we look at the 2026 outlook, pricing, you're not using that as sort of an ingredient on what you have is an improvement 26 over 2025. Presumably, inflation is going to be working against us as it always is. Can you help us, is it -- are these synergies, cost takeouts I'm assuming the first half of the year on volume is tough, so maybe you're going to be better year-over-year in the second half. Can you help us understand how we can get to better EBITDA in 2026 than 2025 with those drivers?

Yes. Mark, thank you. Yes, the bridges were -- we appreciate your patients on the bridges, but trust me, they cost us as much frustration as they did you in getting there. So it's a big organization to put together. But thankfully, I think you've got everything you need. In terms of '26 and what's happening there, price and volume will be what it is. We've talked about that. I think if you think about the synergy program, there's still some synergies to come through in 2026 in that program, and that's probably in the range of $40 million to $50 million in reality. In terms of energy is probably a net negative in the range of kind of 60% to 70% maybe. And then fiber generally is covered about 50% of a tailwind. So I suppose at a place where generally at the start of the year, there's a lot of moving parts. But in terms of certainty pieces based on forward prices, fiber energy and the synergy piece and probably the fixed pieces in terms of how they might trade out. Price and volume will be what it is. But I think it's also -- you talk about inflation, but remember, Laurent, Saverio, Alvaro have very active cost acre programs that are designed just to offset inflation. So not part of the synergy program because we know that when you wake up on Jan 1, you're already behind in terms of wage inflation, for example, labor inflation. So you know you've got a job to do it before you start. And that's fundamentally built into the budget process and everything else. So we tend to take cost takeout inflation as kind of 1 bucket at this point. So no, that's our job to kind of sort that out in terms of how we deal with that cost. The other moving parts are price volume for the market and those kind of discrete items that I can give you now. But the range of 5 to 5.3 is probably designed to give a bit of flex and latitude in terms of how we see the moving parts of early February versus how the year might trade out. I think you're probably correct. I think everybody kind of sees the second half as being progressively better than the first half based on -- and you'd get that anyway from the simple math. So I think that's probably what we're thinking the same way. A second half is better than the first half. But moving parts, relatively set for some things, but a lot of payer for the rest.

Mark, just before you ask your second question, I just want to make a point that Smurfit old Smurfit was always about looking for the most optimized way to spend capital as quickly as possible to get the best return. And maybe to your point that you were making yesterday about quick wins.

That program that we've rolled out almost at the onset of the coming together of the 2 companies, which has identified low-hanging fruits that might not necessarily be very significant amount, but you do send a message in the organization that if you guys have a good return come up and that will be fast tracked in the system. And that message goes around, as you can imagine, pretty fast.

Great. And so actually just real quick follow-up is just to understand downtime kind of in the thought process because obviously, that was costly this year. Is that a big component of potential upside or now are we going to potentially have a lot more potential there in 2027 and beyond because you're still embedding in a fair bit of downtime for '26?

I think it's fair to say, to be seen, Mark. I mean we clearly proactively manage down time. You'll have seen that in the fourth quarter and our philosophy and Tony spoke about it very directly there is the reality is you can ignore the reality of building stocks for no purpose and tying up working capital and external warehouses and the additional incremental cost that goes with that. So our preference would be to manage downtime as we see fit in the context of the external market. I'm not going to predict an time going forward yet. That's not where we are. But clearly, downtime is worthwhile when you just don't see the demand for the product on the outside, but you're building unnecessary stocks. You don't get a working capital inflow or you don't get a free cash flow result like we have, would have been proactive about the whole picture. And I suppose that the risk sometimes is that you focus on 1 side of the equation in terms of the EBITDA side, but you have to be willing to take the brave step and say, no, no, actually, the real job here is to manage the inventory in the system and wait for demand to come back and then fill it. So downtime, quarter 1 is always a heavy quarter for maintenance downtime. So that would clearly be there. But beyond that, we'll wait and see how the demand environment picks up.

I think 1 of the big opportunities we have is to reduce stocks quite significantly, and we certainly didn't want to build them to then start to work on reducing them. So if you look at what Saverio is doing and we've done in Latin America under Alvaro and now what we're starting to do in North America and Laurent is to really grade optimize our system so that we don't have as many with. I don't know how many widths have we come down from in Latin America? We've come down from 18 widths down to 3, which creates a little bit more waste in your corrugated plant but way less working capital needs. But you also have to adjust your working capital at the same time. So that might result in some downtime that we take in North America, we're only at the start.

The number of indents were very high. And so probably you're starting from a position of 200 different types of options and the objective for -- as the first plan is to bring it down to 40% and then bringing that further. But the discipline there is also what matters and getting on board, and we've had incredible support from all sides in the business, understanding how this improves the overall in a very positive manner.

Anthony Pettinari from Citi. Tony, you talked about the consumer business adding a lot to the company. And I guess, just with -- in that regard and with the Lettuce announcement, can you just talk a little bit more about kind of the current performance of the North American consumer business maybe expectations for 26 that are embedded in your guide? And then just generally kind of the dynamic between the 3 grades that you produce, market conditions and what it is that you think that really adds to the company for consumer being there?

That's a very big question, Anthony. It takes a long time. Well, let me start by saying we have an incredible consumer business here in the United States with, let's say, 80% of them at the very top of their market. And then the other 20, we still have to -- we're 20% we have to work with. So we have a very, very strong footprint. We have very strong potential for profitability and cash generation. And so we think this is a very good business on the converting side. with very good customers, and there is a very big lean to -- across our customer base, we're serving our customers with both consumer board and with corrugated is a very big positive for them. And that translates across the region. So we just landed a large contract with a large drinks company, whereby we're going to be serving them on both sides, both continents and much more business now in our corrugated business than we had before because of our consumer relationship. And that's something that Saverio's leveraging off on heavily for the consumer business because we're a very big business in Europe and our consumer business was very centered on very big accounts in Europe with the exception of the health and beauty, but and so we have a lot of leverage that we are bringing forward to our consumer business to really very much improve those businesses in Europe. And I think we're very happy that, that's a business area of expansion for us. With regard to mills, that's a very big question. What I would say that 1 of the -- I don't want to steal your thunder from later on, but we're great agnostic. We have 3 grades that we produce.

I'm going to let Laurent do it, because I'm going to steal his thunder for later on.

I can do it the second time later on. No, but this principle that Tony just referred to of being great agnostic is really central. I mean a lot of the grades can be interchanged and it's all going to be about visibility on the shelf, brightness. I mean, all sorts of different factors basically that you can play with. And the strength that we have is operating from a space where we can offer whatever the customer requires as opposed to trying to feed them with something that we would have in excess or in any form of shape driven. And that has created an outstanding response with our customers, addressing their needs and working with them to understand how best to fit their purpose. It's actually -- it goes beyond just within the realm of consumer packaging in some instances, can also offer microfluid for instance, corrugated instead of consumers. So this whole suite of options is really creating very high-quality conversations. And we're in a unique position in that standpoint.

Gabe, Wells Fargo. A couple of questions. Just on the downtime, can you remind us what it was for the full year? And if you're willing to split it out between the corrugated and the consumer business, so a point of clarification there. But more importantly, you talked about $85 million of downtime. And from your vantage point, what is the optimal asset utilization on the mill side? Like what do you think about? And if you distinguish between U.S. and Europe, that would be great. And then lastly, you talked about, I think, getting half of the 1.2 billion square meters back. Give us a time frame on that. And then does that inform your decision on future asset optimization or those kind of mutually exclusive decisions.

That's a big one. The -- we are in the process of getting half that business back, and that will be probably all implemented, I would guess, Q1 latest early part of Q2 of the business that we've lost. -- we've got half of it back. I would say that the other $1.2 billion that we have in our pipeline, I would expect about half of that to come back in this year. and the rest will flow in through the start of next year. But then that's going to be a moving thing. There'll be some will come in, some come off. So and we're likely to lose some of this other business that's still under contract that's very badly priced. So there's always swings and roundabouts in business coming and going. With regard to time downtime.

Gabe, so for the year, $220 million in the final account that between being corrugated and consumer for segmented reasons and disclosure reasons, 85% in the fourth quarter. In terms of utilization rates, I'm looking at the 2 men know better than me. But in Europe, 92% in the Bovis probably where I'd like to be mid-90s for North America is where he'd like to be generally. And in Europe, clearly, that's easily achieved given the level of integration. So we always operate with to simply because we don't need to do anything else bar. Why less in the outside Laurent is working actively towards the mid-90s rate system.

So we'll stop right there. If anybody wants to grab a quick coffee, we'll go straight into the medium-term plan. Yes. So do you want to grab a coffee quickly or order or whatever.

[Break]

So thank you all. If you could please take your seats again. We'll get stock into the medium-term plan presentation.

Okay. So good morning, again, and good afternoon to those of you looking from Europe. Thank you for your attention. As I mentioned a few minutes ago, I'm delighted to be joined by Ken Bowles, our Executive Vice President and Group CFO. And Canadian with vast experience. And together, we saw of an attack to our independence and successfully created 1 of the world's largest fiber-based packaging companies. Also in attendance is Laurent Sellier, who you just met, who's CEO of Smurfit WestRock North America, a man who's worked his way up during a 30-year career from Europe to Latin America and now to North America. Saverio Meyer, our CEO of EMAA and APAC is actually in the business longer than I am. Saverio's career began selling boxes and over subsequent 40-year period. Has held many senior management positions, including 10 years ago when he became CEO of Europe. And I think you'll all agree Europe's performance and indeed, it's consistent outperformance during the period speaks to his talent and leadership. And again, but last but by no means least, Alvaro Henao, our Latin American CEO. He's been with the company for over 35 years. He's held many financial and operational rules before becoming CEO of our incredible Latin American business. As you have gathered from earlier on today, I'm extremely proud of this proven management team as they not only hold the values of the company close to their heart, but more importantly, they instill those values in both existing and new employees in Smurfit WestRock. They are the best reflection of our performance-led culture, which you'll hear about later today. Thank you, guys, for being with us.

We are a global leader, delivering value for customers, for our employees, and we passionately believe in delivering value for our shareholders. The team presenting today are also very significant shareholders. The plan being presented to you has not been prepared, as I mentioned earlier, top down by myself and Ken and this team sitting in an office. It presents opportunities identified by the teams with boots on the ground who see and want to grasp those opportunities. That does not mean to say that we'll get everything right, of course, not all the time. But given a normal market, a normal world, we believe we will execute this plan and deliver the numbers you see on this slide. A key opportunity is significant profit growth in North America. As we change and sharpen our operational and commercial focus and introduce new ideas and further investment in this region. EMEA is expected to continue to deliver strong performance against peers, remaining at the top of the tree in innovation, sustainability and adjusted EBITDA margin.

In Latin America, our goal is to continue to deliver higher margins and significant growth. This region presents significant opportunity for superior growth, both organically and inorganically. The goal of our plan is to -- is and adjusted EBITDA growth to USD 7 billion by the end of 2030, with an adjusted EBITDA CAGR growth of 7% per annum and margin expansion of over 300 basis points. We expect to generate significant adjusted free cash flow of some $14 billion between 2026 and 2030, with an adjusted free cash flow CAGR of 17%.

As part of the plan, subject to the usual caveats of course, is our Boards and our company's commitment to continue to return capital to shareholders. Assuming our assumptions and market conditions hold, we expect, subject to appropriate board approvals and discretion, dividends of approximately USD 5 billion during the period and to commence share buybacks from 2027 onwards. It is important to note that this plan does not include any pricing momentum.

When I took over as CEO of Smurfit Kappa now Smurfit WestRock, I set out a vision for this company. It is to dynamically deliver and sustainably deliver secure, which means a strong balance sheet, superior, which means outperforming all of the vast majority of our competitors and returns, which aim to deliver long-term value, not at the expense of short-term value for our shareholders. I've always set out that I want Smurfit WestRock to be 1 of the great companies of the world because great companies attract great people who deliver great performance. Our values are at the core of everything that we do in Smurfit WestRock.

First, we must ensure that all of our employees go home safely from their jobs. One accident is too many. And our mantra is no job is so important that it cannot be done safely. Loyalty is very important to us as we see it as mutual. We want loyal people who will bring their experience, their knowledge, their talent to the organization. We must have people with the utmost integrity, which we define as doing the right thing when even when no 1 is looking. And we ask for respect throughout the organization for anyone who interacts within the company. because our values guide and meaningfully contribute to our performance. Smurfit WestRock is the leader in innovation and sustainable packaging. There is no 1 like us in the world. With USD of 31 billion in sales, we have approximately 97,000 employees operating in 40 countries and our largest region will be in North America, representing 58% of our sales.

What has been the best -- the #1 global player mean? It means we are able to continuously adopt best practice, best transfer of information. best transfer of ideas, best transfer of people, best transfer of knowledge across our world in a seamless way. We can also transfer capital and capacity across regions to continually optimize our asset base and asset efficiency. We've been at this for a long time. We are multicultural whereas many other companies are not. This is a particular skill set of our company, and it's the culture we've always had during our existence. We operate in 40 countries and the #1 or #2 player in most of those. This strong position allows our customers to work with us easily in any country. supported by clear and constant communication. Whether it's sharing break practice, our decisions around capital allocation, we aim to make sure that the lines of communication are as short as possible. not layered with bureaucracy. This is just part of our DNA. Our geographic spread and our ability to serve across regions and countries is highly valued by customers who also operate globally. This team, our team, your team are passionate about what we do, and we have a long and proven track record of superior performance and delivery which is why we have been around as long as we have been.

Our longevity is supported by our product range in both corrugated and consumer packaging. Fiber-based packaging is essential is growing and is not only a transport medium but is increasingly a merchandising medium. Fiber-based packing is and remains the most renewable, the most recyclable the most prior degradable and the most environmentally friendly sustainable packaging medium that exists today. Smurfit WestRock has an unrivaled geographically balanced and highly integrated packaging solutions business, delivering value for customers. Our product range of corrugated and containerboard business covers all areas of this packaging from heavy-duty boxes for chemicals to lightweight packaging for applications such as e-commerce. We also offer specialty printing from digital to life lamination to preprint to give our customers the widest possible choice. And we're also 1 of the largest producers globally in the growing and dynamic bag and box market. Our consumer packaging operations offer our customers even more breadth and depth in fulfilling their packaging needs. Our consumer business provides packaging in primarily food and beverage and health and beauty with bespoke machinery applications. This direct-to-end-consumer business adds another strong leg for future performance and growth. Our fiber-based products are complementary and highly valued by our customers fulfilling both their primary and secondary packaging needs. We bring innovation to life through leading edge technology and a global team of over 2,000 designers interlinked. Every day, they create packaging that helps our customers win in their markets, optimize their supply chains, improve their sustainability credentials. It is global intelligence available delivered locally.

Our innovation ecosystem is powered by our digital Inno tools used nearly 1,000 times a day, and we're only starting from Utah to Bass from Shanghai to Warsaw, supported by a network of over 34 experience centers, which operate as our innovation hubs, if you will. These AI data field applications win business and ensure we better implement solutions that are possible, profitable, desirable and better for the planet. Shelf Smart AI is an advanced AI tool based on insights from over 400,000 shopper studies to instantly predict on-shelf impact of packaging design. SupplySmart analyzer uses data from 160,000 supply chains to optimize packaging and logistics, reducing over packaging and improving efficiency.

In a book with over 2,000 designers inputting, share 9,000-plus creative solutions, giving every customer access to the creative power of over 2,000 designers across our world. And paper to box AI, a packaged a material design engine powered by machine learning algorithms has over 50 million data points engineering fit-for-purpose boxes with the right materials and low environmental impact. Innovation is ultimately about delivering better solutions and ensuring they are implemented fast and right first time to create real tangible results for our customers. Our unique design to market approach combines our AI-driven into tools with our globally connected innovation system to deliver market-ready solutions in weeks instead of months. This approach has proven to be massively successful with a near 50% success rate for new business.

So what is our secret sauce, our winning formula in Smurfit WestRock? It begins and ends with our culture, performance led, customer-centric, which drives both accountability and returns. The first step is attracting, retaining and developing the right people. While you hear everyone say that people are their greatest asset, we clearly believe it, and we invest behind it. In order to make sure we have the talent, not only for today but for the future, our best-in-class development programs, such as our 10-year partnership, our open leadership program with Incada were over 700 managers of senior leadership have participated, and they're all aimed at ensuring both our culture and our values are retained. Our company, as I hope you gathered is completely focused on innovation and quality. This leads to a consistent and relentless focus on creating value for customers through our knowledge base and applications. Our capital allocation framework is proven, disciplined, returns-focused with flexibility and agility built in. We invest to develop world-class assets in a step-by-step dissilient way, avoiding Grandiose projects all the time making sure that our shareholders are rewarded through a progressive dividend policy and maintaining strength and flexibility of our balance sheet.

And finally, in order to attract, retain and foster talent, we make sure that our long-term incentive programs are aligned with shareholders. Let me be clear, our global integrated platform is a competitive strength delivering value for our customers and for our shareholders.

I'll now hand you over to Laurent, who's going to explain to you how we're going to unlock the significant value from our North American business. Laurent?

Thanks, Tony, and good morning again, everyone. Without a doubt, the North American business, which I have the privilege to run is the biggest value creation opportunity in our medium term plan. The region has the scale to move the needle as well as the potential to unlock even more value for shareholders and customers. We're positioning this business to lead the industry, and I feel very excited about the future. The North American region covers the U.S., Mexico and Canada, and we are already starting from a place of leadership, either #1 or #2 in all of our core segments. We're supported by just under 50,000 people across more than 300 locations in the region, which gives us unparalleled geographic presence. We generated $19 billion in revenue and $3 billion in adjusted EBITDA, representing roughly 60% of our company's earnings. We offer an unmatched and fully integrated product range from raw material to paper to converting in both corrugated and consumer packaging as well as a series of specialty businesses, such as machine system, merchandising and display that all contribute to an unrivaled end-to-end offering. This allows us to serve a broad customer base. And no matter what the packaging challenges we are best positioned to deliver a customer-centric fiber-based solution. Separately, given our position in both paperboard and containerboard, we can support our growth in LatAm and our European business.

In our first full year, we acted decisively and effectively and have already made significant progress towards building a stronger foundation. We completed a successful integration effort exceeding our regional synergy target. We also declared the organization and reduced our head count by more than 4,600 people since the combination. We introduced the owner-operator model, which promotes a performance-led culture that empowers local teams and gives them the space and tools to be successful. Each plant is now a profit center and intercompany transactions between paper and conversion are strictly at arm's length. Commercially, we have focused on value creation. We've made intentional choices that reduce short-term volumes from loss-making accounts, allowing us to rebuild positions at better margins over time. We brought our commercial organization closer to the customers and the plants that serve them. We bolstered the already strong innovation capabilities of the legacy companies. There is a lot of potential here, which I will expand on in a minute.

Since I arrived in North America 18 months ago, I had the opportunity to surround myself with a phenomenal new team of very experienced and determined people who deliver day in, day out, and we will continue to invest, to make the team stronger and more impactful. Regarding operations, we've taken decisive actions to shut innovation capacity, both in paper and in converting, in addition, we have significantly reduced the number of loss-making operations within the region despite a very challenging backdrop.

Finally, we invested over $1.2 billion last year in the business which includes a number of high-return Quick Wins program with more to come. All these actions are both structural and deliberate. They simplified how we operate, increased accountability and positioned us for long-term value creation. Despite the progress we've already made, North America still represents the largest opportunity region within our company, as I said.

Our strategic plan outlines a path to bring our $3 billion in adjusted EBITDA to $4.2 billion over the next 5 years, which represents around a 7% CAGR, ending the period at over 20% margin. This is a margin enrichment of 400 basis points, 200 of which come from base business investment and $200 million coming from strategic actions. We believe that innovation is core to our value creation proposition as emphasized by Tony. The combination of our 3 regions offers a wealth of expertise and we're determined to shamelessly leverage the European and Latin American knowledge as I am sure they're determined to leverage ours. In particular, the suite of tools that Tony indicated in his presentation, is a very powerful way to deliver customer value consistently, delivering growth by solving customers' challenges. Great restructurings in paperboard and rebalancing our long position in the most exposed grades such as SBS is essential. Monday's announcement of the Lethu PM4 shutdown is a perfect example. Were present in old grades, intend to remain in all grades but making the system stronger. I have already seen some significant wins within our SBS business. Strategic investments will cover both conversion focusing on automation, capabilities and quality and on paper, focusing on operational excellence, performance packaging and lightweighting, both of which will deliver substantial value. This, of course, is underpinned by significant investments in systems and AI tools that accelerate our progress and make it more sustained.

Finally, we will continue to review our system to optimize our industrial footprint which will allow us to optimize the cost base of the business. I mentioned customer value creation on the previous slides. One of the key enablers to succeed on that promise is our unique end-to-end fiber-based packaging offering, as I said. Our full suite of containerboard and paperboard grades allows us to be substrate agnostic. In consumer packaging, for instance, we have successfully migrated some packaging from CRB to SBS from CRB to CUK and so on, purely responding to customer needs. Similarly, in containerboard, the availability of virgin and recycled grades as well as the full range of white containerboard allows us to proactively solve problems with a customer-first mindset. We can also respond to customer requests to move from corrugated to consumer packaging or vice versa. A range of capabilities allows us to be a one-stop shop, whether the customer is looking for primary packaging secondary shelf-ready packaging or tertiary logistics packaging, a display solution to increase visibility at point of sale or all of the above. We can help. We can also offer a full suite of options regarding print that allows for unrivaled product visibility, including a state-of-the-art e-commerce and packing experience if needed. And if our customers require machine systems to increase their packing efficiency and automation, we can do that, too.

Finally, and once again, we strongly believe in innovation. By increasing profit for customers via top line growth, cost improvements or both, we expand the room for our own margins and gain the right to win. Our innovation capabilities covers performance packaging, supply chain efficiency, plastic substitution, sustainability and on-shelf presence. In addition to our Dallas and Mexico City Experience Centers, we've recently opened a new 1 in Richmond, next to our paper lab with more to come. These centers are key tools to creating value-centric conversations with our customers and bring to life what makes us unique. In conclusion, I am a strong believer that all these elements make for a winning formula and will create the most compelling proposition in the industry. It will enable us to make our ambition a reality. We have a clear plan. Our progress is already visible and our momentum is building.

I will now hand over to Saverio Mayer, CEO of our EMEA and APAC region. Saverio?

Well, thank you, Laurent. And again, once again, good morning, everybody. I'll now cover EBA in Asia Pacific. So EMEA and Asia Pacific, we operate as an integrated platform, which is a key competitive advantage in these markets. Our integration starts with the containerboard system covering both recycled and kraftliner, which feeds into our corrugated operation across the region. In parallel, we have now consumer packaging operations. In Europe and Asia Pacific, serving a broad range of end markets with differentiated solutions and allowing us to have a holistic approach on their packaging needs. In addition, we operate bag-in-box platform that is present both Europe and in the Americas, giving us scale, innovation capability and cross-regional leverage in this high-value segment.

In 2025, the region generated approximately $11 billion of sales and $1.6 billion of adjusted EBITDA with around 36,000 employees across 27 countries and holds #1 position in corrugated containerboard and bag in box with a proven track record of continued outperformance. We believe this level of integration allows us to optimize the system end-to-end, protect and grow margins and respond quickly to customers and market dynamics. We have successfully integrated the Consumer Packaging business and harmonized in the owner operator model with P&L ownership developing cross-selling opportunities across corrugated and consumers, where customers are valuing the combined approach between corrugated and consumer. While also delivering ahead of target on the synergy program. We are also recognized as a reference point for both our customers and the wired industry on sustainability and we hold the highest number of innovation awards in the industry, this reinforcing our leadership position. Over the last number of years, we have delivered on 2 previous strategic plans, which have helped create a structurally stronger player in the market. Even in a challenging environment, the region has grown volumes, gained market share and increased EBITDA by focusing on functional value and differentiation.

Innovation has been a key enabler. Our Inno tools are now used across all regions, supported by a network of 28 experience centers and powered by a community of around 1,000 designers and innovators across our plants in EMEA alone. Altogether, this supports our goal of adjusted EBITDA increasing from $1.6 billion in 2025 and to around $2.1 billion by 2030, with margins expanding from 14.9% to returning to over 16% as reached in the past. And this is based on conservative market assumptions and with upside as conditions improve. So this year, we are starting our new strategic plan for 2026, 2030. Our differentiation strategy along with the integrated model have been key to driving our margin resilience and creating long-term value. Over the years, we have built a proven playbook that has positioned us for growth, and we will continue to adapt and develop our region into 2030 built around 3 pillars: to be the company of choice through disciplined capital allocation and continuous efficiency improvement in our core markets.

A key differentiator here is our proven business model, which allows us to deploy capital at the original system level rather than at a single asset level. This means we can involve all relevant assets within a region to deliver on a given investment, a unique competitive advantage and 1 which has the ability to support strong growth with an attractive returns on capital.

To be the supplier of choice to our customers, by accelerating proven innovation, delivering sustainable, high-performance packaging and provide superior functional value through quality and service. And of course, to be the employer of choice to our people by strengthening engagement, inclusivity and well-being and by empowering strong local leadership across the organization.

To support this strategy, we are investing in highly targeted and disciplined way. We invest in new converting technology where we see clear opportunities to create value and strengthen our offer to customers. As an example, let me mention the box in bag-in-box, the greenfield investment in Anderson in the U.S. This is a business we know very well since we already operate 2 bagging box plants in North America, and it's part of a global platform. We saw a clear opportunity to further develop the U.S. market and the investment builds directly on existing capabilities together with our U.S. colleagues. Through this disciplined approach, we aim to make investments that are well targeted and deliver attractive returns.

In summary, EMEA and Asia Pacific provide a stable, high-quality earnings base for the group. The region has consistently delivered margin resilience, strong cash generation and disciplined growth and will play a key role in supporting the group's 2030 value creation targets.

Let me now hand over to my colleague Alvaro now, CEO of Latin America.

Thanks, Saverio, and good morning to everyone. It's really a privilege to be here with you today and have the opportunity to give you a clear data-driven view of why Latin America is not only a strong contributor to Smurfit WestRock but a region with extraordinary potential for long-term profitable growth. Actually, I firmly believe we are an absolute jam, not only because of our leadership position in the region and market share and footprint, but because we have great assets and because we have great local management that really knows the markets and the countries in which we operate.

Let me begin with our competitive advantage. We are the #1 corrugated supplier across the region with leading positions in Brazil, Colombia and Argentina. And in the region, we also offer the broadest portfolio of paper packaging and full solutions, which includes consumer packaging, sacks, forestry, recycling and both recycling and virgin-based papers, such as our lightweight and eucalyptus-based papers. We are in a region that has higher margins and many growth opportunities. This combination of regional reach completely integrated process and a broad portfolio of paper-based solutions is unique to Smurfit WestRock and very difficult to replicate. Hence, it is a source of sustainable competitive advantage. As I will explain later, we have a proven track record and what really makes us different and experienced management team, built upon a capacity to attract the best talent in each of the countries in which we operate.

Since the combination of Smurfit Kappa and WestRock, we integrated approximately 100,000 tons of paper from North America into our Central America and Caribbean operations, basically converting the whole region into a completely integrated system. This gives us access towards secure supply of North American paper that will allow us to grow in the future in the region organically and inorganically. From a management and sales point of view, the market now only see Smurfit WestRock, not the legacy companies.

Finally, we were able to take advantage of synergies across the mill and forestry divisions that we have in both Colombia and Brazil. But let me tell you, the real differentiator in the region now at Smurfit WestRock is that we are fully leveraging on the European corrugated tools that we just -- that was spoken about and practices that have really made us successful and helped us increase our margins and also that we have a North American mill system that is there to support us.

It's really a winning formula for the region. We have an unrivaled footprint. We have the broadest portfolio in the region, offering paper-based packaging solutions such as corrugated Consumer Packaging and Sacks, which has allowed us to reach more than 4,500 customers from our 44 facilities in 10 countries, a really, really unrivaled footprint. Our current strength is built on a long track record of disciplined execution and the experience and knowledge of having been in the region for more than 80 years. The example to our success in the last 10 years is. We have doubled our adjusted EBITDA. We have expanded the adjusted EBITDA margins by more than 500 basis points, reaching 23%, and we delivered steady growth with a 4% CAGR in corrugated. This performance reflects our ability to navigate the economic volatility and strengthen our cost position and invest with discipline. And it shows something that is crucial. When we invest, we grow and when we grow, we deliver.

Now let's look forward. We have a clear ambition, grow our adjusted EBITDA with a CAGR of 11%, reaching $800 million by 2030 and increased margins to 28%. We will get there through 4 growth engines, organic growth and market share expansion. Latin America offers significant opportunities in segments like agribusiness, protein, beverages, consumer goods, and export-driven industries, especially in markets where we are not yet leaders. Cost efficiency and operational discipline, we continue to strengthen our competitive cost structure. Through scale, automation and logistic optimization, additional capacity. We have a well-defined CapEx road map aligned with high-growth geographies, particularly Brazil, the MDM region in Central America. We will invest in consolidating our corrugated and packaging leadership, and we'll also invest and continue to lower our costs, further increasing our competitive advantages in the region, accretive acquisitions. There are meaningful opportunities for strategic acquisitions that we believe can take our number above the adjusted $800 million mark. We want to grow in places where we are 1 of the leaders but there is room to increase our market share like Brazil and also target regions where we're still in the process of expanding our business like Central America, Ecuador and Chile. And reinforcing all of this is our value-added proposition powered by 3 experience centers and more than 150 designers who co-create solutions with our customers from the early stages of product development. We are the only company in the region that can offer a pan-regional footprint, if that is what our customers want or if they want local solutions, we have their knowledge and the capabilities to deliver them.

In short. We believe we have a clear plan to reach an adjusted EBITDA of $800 million with a margin close to 28%. And if we make some bolt acquisitions, not included in these numbers we will exceed that target. The combination of local market knowledge, experience management, access to a global network of corrugated and paper tools and knowledge and secured paper availability coming from North America we believe will allow us to further expand our position as the corrugated and packaging leader in the region. As I expressed before, when we invest, we grow and when we grow, we will be delivered.

Now I will hand over to Ken, who will explain the financials.

Thank you, Alvaro. Good morning, everyone. I want to talk to you about delivering the path to delivering shareholder value over the medium term and why we believe that this path is both credible and executable. What you'll see though the next few slides is not a change in philosophy. But a continuation, but most importantly, an acceleration of a business model that has proven itself over many years now applied across a broader global platform.

I want to take a step back for us, though, for a few minutes to look at the pre-combination performance of Smurfit Kappa and most importantly, our track record. It tells a very clear story. Consistent delivery. Consistent delivery in all market conditions, a period, not unlike today, you might think, with many challenges and macro hurdles, but also a period where we outlined a medium-term plan for the business and more than delivered on that plan. This kind of performance does not happen by accident. It's the product of a proven operating model executed by the leadership team with a deep understanding of our industry and our markets. Over this period, we delivered an adjusted CAGR EBITDA of 6.5%, more than double the peer average. This outperformance isn't the result of any single initiative. But of a disciplined and agile capital allocation strategy our unique owner-operator culture and a core philosophy of placing the customer at the center of everything we do. Alongside this, we expanded our adjusted EBITDA margin by over 450 basis points. Again, significantly ahead of our industry peers. What this demonstrates is not just growth but consistent profitable growth through the cycle. Over these years, we believe we cemented our position as the most innovative and sustainable packaging company in the world, and this enabled us to deliver significant value for our customers. Supported by integrated model, a relentless focus on quality and service and an unrivaled portfolio of value-added packaging solutions. And importantly, our strong financial and operation delivery translated into meaningful returns for our shareholders. Over this period, we returned $2.8 billion to our progressive dividend policy and all the while reducing our net leverage from 2.4x to 1.4x, reflecting our long-standing commitment to balanced, disciplined capital allocation.

With the integration of WestRock now complete, we have the platform capabilities and leadership team in place to replicate and build on that track record going forward. That sound foundation underpins the medium-term plan we're presenting today.

And turning now to the plan itself, which really captures the scale of the opportunity ahead of us and how we are positioned the business to deliver on that opportunity. We are setting out specific and actionable financial goals through 2030. These goals are grounded in a detailed bottom of plan across all our operations. As you can see, by 2030, we aim to deliver approximately $7 billion of adjusted EBITDA and a group adjusted EBITDA margin of approximately 19%. This goal reflects the strength of our global operations, the benefits of our performance at culture and the earnings quality we're building and maintaining across each of our 3 regions as maintained -- as mentioned by Laurent, Saverio and Alvaro.

A key driver of that progress is a significant growth opportunity in North America, which is a significant lever for value creation in the Smurfit WestRock, but it is not the only one. With the operating model now firmly in place and the heavy lifting of integration complete, our teams are empowered, our assets are better aligned and the actions we've taken already delivering higher margins and higher cash conversion. Over the next 5 years, we aim to generate approximately $14 billion of discretionary free cash flow, reflecting not only the earnings power of the business under conservative top line assumptions but also the ongoing benefits of our relentless focus on cost control and operational excellence. This level of cash generation provides substantial flexibility to invest in the business further strengthen the balance sheet and make significant capital returns to our shareholders. At the same time, we see a clear path to delivering a 700 basis point improvement in return on capital employed, driven by margin expansion, improved asset utilization, operating efficiency gains and the advantages of a fully globally integrated system. Return on capital employed has long been a hallmark of our performance at culture and the medium-term opportunity here is significant. And all of this is underpinned by our disciplined capital allocation framework which I'll outline in a few moments, a framework that is flexible, agile and returns focused at its core. We are focused on continuing to strike the right balance between investing in high-return projects and delivering significant capital returns to shareholders, supported by our continuing strong balance sheet.

So let me spend a few moments on the assumptions behind that $7 billion adjusted EBITDA target. Our 2030 targets are supported by a structurally stronger business as our operating model and strategic investments lift the group adjusted EBITDA margin from 16% to 19%. Our plan assumes benign market growth based on third-party sources and through the cycle pricing broadly in line with current levels, reflecting a disciplined and conservative approach to our outlook. I was going to remind you, it does not include the impact of any recently announced paper price increases in North America.

We have assumed market growth of 1.6% in North America, 1.7% in Europe and 2% in Latin America. These market growth rates provide a solid foundation, but is the actions we are taking within the business that truly drives the step change in our earnings. A key pillar of the plan is that we assume below mid-market paper pricing in Europe and no price increase in North America and paper. In other words, the margin expansion we are targeting is not dependent on a pricing cycle. It is grounded in the operational improvements, the commercial focus and asset optimization actions already underway.

As Laurent outlined, we are already successfully executing on our creating value for our customer strategy in North America. A strategy well established in the Smurfit Kappa business. By deepening our customer partnerships, leveraging our innovation offering and driving P&L responsibility at the mill and the box pens, we are enhancing our customer mix, improving quality and service and driving a more resilient earnings model across the group. And as we continue to execute our creating value for our customer strategy and with the alignment and management team's incentives with our strategy, our plan expects all regions to contribute to profitable growth, driving meaningful margin expansion from 16% to 19% by 2030. And while we are confident in the plan as presented, there is potential upside, particularly with respect to the assumptions on growth and pricing as well as choosing to accelerate investment if the right opportunities arise.

Our capital allocation framework continues to be 1 of the most important drivers of long-term value creation and a core element of how we run the business. Over the next 5 years, we expect to deploy $13 billion of total capital expenditure, including maintenance and growth CapEx, with an average annual CapEx spend of about $2.6 billion. This level of investment is fully aligned with our strategy. enabling growth and cost takeout, improving operating efficiency and strengthening our integrated system. Importantly, we expect this investment to contribute to a 7 percentage point improvement in the group return on capital employed to approximately 15%, reflecting the high return nature of the projects we are targeting. As a team with deep industry experience, we continue to view internally deployed capital as the lowest risk and highest quality use of capital, an approach that remains central to the future success of our business. Alongside this, we expect to be able to allocate $10 billion towards, for example, capital returns to shareholders and accretive acquisitions. Dividends remain the cornerstone of our capital return strategy. And as part of this we anticipate returning about $5 billion in dividends over the next 5 years, subject to the necessary board approvals and the consideration of a number of economic and other factors. And from 2027 onwards, we expect to have capacity to undertake share repurchases. As to be determined by the Board, representing an additional avenue to which we're going to turn value to shareholders and underlying our confidence in our strategy and the cash generation profile of the business. Our approach to M&A will always remain disciplined focus now on accretive bolt-on opportunities that strengthen our geographic footprint and complement our product portfolio.

Underpinning all of this is the balance sheet of significant strength and flexibility, 1 that supports investment ensures resilience across cycles and provides the optionality needed to pursue value-enhancing opportunities. Taken together, this framework strikes the right balance between investing for growth and delivering substantial value back to our shareholders. What this next slide highlights is the scale of the value creation opportunity ahead of us and the significant capital we expect to have available for shareholders as we move to 2026 and on to 2030. Over the 5-year period, the earnings power of this business has the potential to generate substantial adjusted EBITDA, which after funding maintenance investment tax and other commitments, leaves us with a significant pool of available capital. From that starting point, we aim to invest behind high-return growth and efficiency projects and fund a progressive, reliable dividend stream. And after doing this, we expect to generate approximately $5 billion of surplus capital. That surplus is a powerful number. It gives us the ability to accelerate investments where we see attractive returns and to introduce buybacks as an additional avenue for value creation.

In short, this waterfall speaks directly to the strategic and financial flexibility of Smurfit WestRock. It shows a business capable of investing for growth, driving meaningful returns and still generating significant excess capital.

Looking more closely at capital expenditure and our approach will remain disciplined and consistent. And as mentioned, we expect to deploy $13 billion in cumulative CapEx across North America, EMEA and LATAM. Approximately $9 billion of this is expected to be allocated to maintenance CapEx with, as I mentioned previously, invested in growth CapEx. We focus on a high volume of small, high-return projects, which translate into a projected annual CapEx spend of approximately $2.4 billion to $2.8 billion over the plan. We have always believed to be in flexible and agile when it comes to capital deployment. And as you will see from the footnote at the bottom of this page, the average CapEx project is less than $4 million, with no project larger than $200 million, and important to reiterate, as Tony mentioned earlier on, there are no grand deals projects in here. And as I have mentioned, we expect our organic investments in the business to generate a 700 basis point improvement in return on capital employed.

Turning now to the balance sheet. A balance sheet of significant strength and financial flexibility will remain a key underpin to our capital allocation strategy. We ended 2025 with net leverage around 2.6x and net debt just below $13 billion, and we are firmly committed to maintaining a strong investment-grade credit profile. Our long-term target remains net leverage below 2x and we are pleased to receive a Fitch upgrade to BBB+ with stable outlook. And as we progress towards that leverage target, the strength of our balance sheet gives us both flexibility to return excess capital to shareholders and to invest in growth when opportunities arise. It's a foundation that ensures Smurfit WestRock can continue to deliver for all of our stakeholders.

And finally, from me, to wrap things up. This slide captures 1 of the most important elements of our value proposition. The significant and growing capital returns we expect to deliver to our shareholders. As discussed earlier, we have a proven track record of delivering progressive dividends. and that remains a core part of our equity story. Over the 2026 to 2030 period, we expect to return approximately $5 billion through dividends alone subject to necessary Board approvals and depending on a number of economic and other factors. From 2027 onwards, we see an opportunity for a strong free cash flow generation to provide capacity for share buybacks, supporting our confidence in Smurfit WestRock's long-term value and strategy.

In summary, this is a plan built on discipline, operational excellence and growing capital returns and 1 we believe positions Smurfit WestRock to deliver sustained value for all shareholders.

And with that, I'll pass it back to Tony for some concluding remarks.

Well, thank you, Ken. As a significant shareholder in Smurfit WestRock, what I and I hope you expect to see is a plan that is ambitious, yet deliverable and a plan that demonstrates a long-term future and a strong foundation to build on. This is what we have presented today. Our competitive strengths include our performance-led culture owner-operator model with the customer being at the heart of what we are and our global integrated platform with short lines of communication continually networking. We also value our leadership and experience. You'll have already heard from my colleagues, their teams are equally strong and motivated. As a consequence of our management development programs, the next generation of leaders will foster the same culture and values that exist today. Our product portfolio and global reach is unique and unparalleled and allows us to serve customers. We offer innovation, customer centricity, solving their pain, delivering value and helping them win in their own marketplaces. And we do this against the backdrop of continual improvement in our operations through disciplined capital expenditure, emphasizing cash flow and ensuring that we're adequately rewarded for the capital that we have employed. For me, shareholder value and owner-operator mindset go hand-in-hand. It's just not philosophical. It's the person who turns the lights off to reduce the costs. It's the salespeople who makes that call at 6:30 instead of going home and it's the manager who looks at the share price every day because he cares about it.

In summary, Smurfit WestRock has been around for 90 years. Many other companies, you'll know in our sector have fallen by the wayside yet. We're still here. And we're here because we do, as we say, and we say as we do. Performance is and always will be the basis of our credibility. We have delivered. We have delivered on acquisitions. We've delivered on our plans. We've delivered because, we have a proven and track operating model, and we've delivered because we're in a business that is a good business. It's a very resilient business. It's a business that the world needs -- it's a business that our customers need, and we've also delivered because we have an unrivaled geographic footprint. The coming together of Smurfit Kappa and WestRock has given us a product portfolio that is unmatched in scale and diversity, which we continue to build on through all the unique applications we've shown you today. This is a world-class management team with a proven track record. And our interested shareholders are fully aligned with yours.

And finally, I want to leave you with this final thought. The plan is not the summit of our ambition. There are many other opportunities to be pursued. And as we did in our previous plans, we'll continually update our thinking. I believe Smurfit WestRock is at the beginning of an incredible journey, an accelerated growth path, a journey that will take us to the decades ahead, we have the magic formula. We have the right culture. We have the right people, and we have the right products. And I hope after today, you see the team, you have the right team to successfully drive this business forward in the years ahead.

I thank you all for your attention, both here in the room and on the net and we look forward to taking any questions from you about this. Our ambitious but deliverable plan. Thank you.

George Staphos, BofA. One question, right? You got it.

Others have taken a license, George. So you might slip in a second 1, if you want.

I'll try to get a part in there. No. So if we look at the progression to $7 billion, for North America, 2 in Europe, 1 roughly in South America. Can you help us understand how important the evolution of consumer is relative to getting to that target across the segments? Why it seems like you see consumer being married to corrugated makes more sense than what we've seen perhaps past companies have had difficulty getting that effectiveness. And frankly, you've even had questions about that when you first put the business together, why you think it makes sense now? And then the last 1 related tell us why South America even though it's the smallest albedo,it's very profitable. Why are you not worried about all the paper that apparently is coming in from Asia, Klabin up PM2, how that fits all in. I'll stop there.

So George, I look at things quite simply. I said, can we be a very good business in consumer? And the answer is yes. We have some really fantastic businesses within our consumer portfolio that are very unique very difficult for any competitors to replicate. And we have some very good mills in the consumer business. What we have to continue to do is improve and adapt over the coming months and years to make all of our system good because there is some still work to be done, and you'll know that our CRB bills are not necessarily the best in the world. But at the same time, they are good for purpose for us, and they're highly cash generating and they don't take a lot of capital. So we always have to continually modify our business and invest in the business to make them high-return businesses. And I believe that the consumer business with its market positioning, together with our corrugated business, gives us a strategic advantage to sell more, to offer our customers a diversified portfolio, as Laurent has said, and allows us to get better returns over a period of time -- over time. There's still work to do but we have some really great businesses within that business. And it's a central plaque for growth for us. I mean, frankly speaking, in many of the countries in Europe, for example, we can't really grow in corrugated that much because we're too big. But we can grow quite a bit in consumer if we find the right acquisition target that gives us value. So I think it's a very good business, and I don't think we should be throwing away good businesses, and it integrates well with our system.

Tony, how much of EBITDA growth is in consumer to your [indiscernible].

We don't segment that, George. But I don't think it's materially different to our corrugated businesses. we expect all improvement across all segments, and there might be a bit on 1 side versus the other, but probably there's a little bit more improvement to get in our corrugated business a little bit, but not material.

Probably the same way George think about is broadly the kind of the profile stays the same through it in terms of percentages and scale.

Alvaro, do you want to take the Latin American question?

Sure. On Latin America and the paper side, I think that One of the big advantages that we have is that now that we have access to the North American paper, we're basically isolated from a paper point of view because we are now -- we used to be short, very short when we were Smurfit feet Kappa. Now our system is completely integrated into North America. So that basically isolates us from any paper swings or scarcity of paper, that region every now and then has. The other issue is that notwithstanding what you have said, the region still continues to be basically supplied by the U.S. We do see every main then paper coming from different regions lately from Europe. But when you look at the import numbers into the region, the region main supplier -- sorry, the main supplier of paper into the region is the U.S. So -- and then in -- going into your comment about the growth of Clariscan investing every now and then in cycles, they invest in their paper mills. Let me say just in Brazil. We have a very nice operation with -- which is very low cost again. And the internal Brazilian market, whenever they do invest is able to absorb the majority of those investments. So I mean I don't foresee any material disruption into the overall paper supply balance and pricing in the region.

We go back -- forward to back. Phil?

Phil Ng from Jefferies. Laurent, I really appreciate you being here. You're actually a perfect person to ask this question because you came from Europe, you had the history of value selling in Europe. How is that transition to the U.S. just because I think a lot of the customers aren't as accustomed to having some new solutions that you guys are offering. So how is that journey? Are you talking to the same people in terms of negotiating? Is it procurement guys or marketing guys? Just kind of give us some context the differences between North America and Europe and the margin difference perhaps on that value solution versus non-value solution.

So I think the impression that we are having altogether is that the timing to introduce that particular thinking process is really right and that the market somehow has been expecting out there as to move or other people to move just happens [indiscernible]. And the timing is really good. And the engagement that we have, whether it's -- as you rightly pointed, procurement, marketing, other people, they're asking what is going to be the next way to get to the optimal packaging costs in their case, but also function and delivery to their system. And the type of people that we're talking to and Tony and all of us have referred extensively to this concept of experience centers. They're not just buzzwords. They are really places where you put the customer in a position to share with us their pain points, their aspirations, also the type of issues that they have to solve, and they really value in the U.S., and we've had great response both in Dallas, where we have historical presence that goes before the coming together of the 2 companies, but now in Richmond and same in Mexico. It has been phenomenal response from very large customers of ours. We really appreciating the type of engagement and the type of discussion. I think really that the timing is right for us to engage in those conversations. And I think it's also feeding the pipeline conversation we're having earlier on.

Any color on the margin difference between the value stuff versus non-value?

So this is when I turn to Ken.

I would say, Phil, that the obviously, if you're giving solutions to customers and you're able to save them money, then you want to share in that benefit. And so typically, if you're doing something for your customer, that's winning -- helping him you tend to get some of that contribution back. So obviously, the more of these that we have, the better it is, but it's more as well that you get given more business. So you're able to optimize your system better. And so it's a -- we're only starting this in the U.S. I mean Laurent mentioned that we're about to open up a second -- we have a second soon. We're about to open up a third experience center in our Chicago region, just so that we can cover the U.S. because it's a big country. And our head of innovation here in the United States, has a great guy we just hired in from where was it in depth somewhere like that. He's only with us 9 months now. So it's -- we're really just at the beginning of this journey of value selling here in the U.S. And there's a whole iteration to go through of training of people. But what I've heard, and I haven't experienced myself directly, but what I've heard with the customers that go to the data center, they just blown away by the opportunities for them to save money. And in that scenario, then everybody wins.

Lewis Roxburgh from Goodbody. Just on growth seems pretty broad-based across sort of businesses and regions, but just sort of highlight any sort of standout focus there. And then just a clarification. The $4 billion amounts to about $0.8 billion each year and you add that on to depreciation, it's about 3.3%. So is the -- are there just sort of depreciation coming less?

No, the depreciation stream will probably stay a little bit more than 2.6 million over the period Part of our DNA at the moment post transaction, you've got an amortizing intangible that kind of trails off at about 140 years. So as you're getting towards the 5 years, you're depreciating 5x 140 coming out of the base, and you're adding back into new CapEx. So broadly, you could consider DNA to be in that kind of 2.6, 2.7 space across the life of the plan as well. It's really the simplest way to think about it.

Lewis, on the capital, I mean, 1 of the mantras we have in our company is adaptability. So we talk about this all the time. So Laurent or Alvaro or Saverio might say, this is our plan for next year in a machine in, I don't know, take it France. And then we find out there's a little bit less growth in France. There's a little bit more growth in Germany. So we adapt. And so there is no -- as Ken said, there's no project bigger than $200 million, and that would typically be paper machine press section winder or something like that, that will be. So there's no really big projects, but there's a lot of small projects. And then as Laurent said, the biggest opportunity we continue to see is, obviously, as wages have gone up and salaries have increased due to inflation. There is -- and robotics is going to become a bigger thing we see a lot of opportunity to invest in machines to take away continuing labor costs. And so that's something that is very much top of mind. And as robotics continues to develop, that's something that we'll latch on to. But within this plan, there will always be some flex because we might say, that project, we haven't seen the growth we expected to see in Brazil. So therefore, will it go to Colombia or we go from Colombia to Mexico or it just depends on the year. But that's why I said in my opening or in my closing that we're always adaptable and we're always looking, and we continue to keep the strap plan on our -- it's hot on our plate every year. And we look at our budgets, we'll be looking at how does that sit with regard to the strap plan, et cetera, et cetera.

On the margin improvement in North America, you talked about going from about 16% to 20%. And then you also include about half of it from base business, half of it from strategic action. So if I look at kind of the column to the right, and we see footprint optimization, obviously, strategic action. What else would be in the strategic action bucket, most of it would seem to sort of be running the business, the base business better. So maybe if you could help us understand what would be in what type of bucket.

Yes. I'll let Laurent elaborate a bit further. But think about the kind of the base piece Mark, as kind of ongoing maintenance CapEx, which you will get a return for but we're not -- it's not really the driver of growth there. In terms of the x200 basis points, that is growth CapEx, where we see back to Tony's point, where you can take cost out, where you see growth coming through, whether it's machines or customers around markets and investing behind that. And indeed, that's part of where that -- the single biggest project is in there, too. So in her on system. But Laurent, do you want to give more color on how you see the strategic piece?

Sure. So basically, what we call base as being a good custodian of your assets, basically making sure that things are in order, what needs to be replaced as replaced, but any time you do that also looking at ways and manners to generate that little extra bit of capacity money or [indiscernible].

Maybe Laurent talk about the latest mill project we just approved for Hopeland, was it?

So you can do an example. You can do like refurbished, for instance, on a paper machine, your drive and because the drive is obsolete not maintained by the manufacturer or whatever, so you need to upgrade that. And in the process, you gain, I don't know, 3 meters per minute or 10 feet per minute on the paper machine that just generates that. So it's been a good custodian of assets. And then when you look to strategic projects, you're more thinking in terms of pockets of growth either by segment or geography where you think that you can line up more capacity because there is a sales backing or a sales opportunity there. And it's potentially redeveloping 1 particular part in paper mill that will give you either different types of products or enhanced matching between the products and what the market desires. So anything that goes beyond the simple upkeep of the assets and usually with a higher return profiles. So typically, we say 200 basis points on both and you have 2/3 on the maintenance piece and 1/3 on the strategic piece, yielding more or less the same result.

And just to clarify on that is how to interpret the margin improvement, not just the use of capital, the way you were describing?

That's right.

Okay. And then just as a quick Tony, you've talked about in the past how there was a great opportunity in the converting assets in North America, the box businesses. Can you maybe kind of update us on how that's progressing and how big a part of the program achieving those types of goals and how you go about it?

It's a huge part of it. We -- Mark, we -- when we came into this -- we had a lot of plans losing a lot of money. And as we've shed some business and adjusted the operating cost of the plans to reflect lower volume, but at the same time, opportunities that have come into the plant as well. You've seen our corrugated business move as a whole from a significant loss maker to -- not significant but somewhat profit-making now, and as I said, we're only at the start of that because as we implement better volume, more valued volume for our customers across our piece and getting rid of bad business, frankly speaking, that you're paying people to run, you shouldn't be paying people to run bad business. So we are bringing in better business, and that will be, I've said 8% to 12% margins in corrugated is our aspiration, and we will get there because we have the tools, we have the knowledge. So you go from negative couple of hundred million to, let's say, $1 billion. It's a material improvement in the business -- the underlying business. I mean the best example I can give you is Saverio will talk to you about plant we have, which was basically 6 or 7 years ago, plus or minus breakeven in the country, and we had another competitor in that country. just 2 of us in that country. And our competitor is now closing down and we're making over $1.5 million a month in that country. from nothing because we've invested and we brought our tools, and we've done all the things that we had to do and our competitors just walked away. And so that's an even bigger opportunity for us. So we we're not going to be able to do that everywhere as quickly as we'd like to do it everywhere. But even in 1 facility we have in Chicago, which is a great well-equipped facility when I went there the first time Mark, I didn't post about it because I was so ticked off about their performance. And then I went back a year later and they're now making close to $1 million a month because they've changed some things. They've adjusted their costs. They've changed some customers, and you have a really motivated management team now who is really -- but we have to do that in 100 plants. I mean it doesn't happen overnight. But that's a -- I don't know if you want to comment.

No, I think it's exactly right. Tony talked about flexibility and so it can. And I think we're there saying there are certainly a number of box plants where they're evident issues about equipment. And there's a kind of mantra going around in the company, you need a good corrugator and you need 1 solid piece of good converting equipment to match our business. And in some cases, we don't have that. So these are fairly obvious places, and it would be built in the plan. But then there's another number of plants that are not performing so well, and it's still unclear whether it's management, or whether it's equipment and rather than rush and put in equipment that would be complicated. If you graft new equipment on a bad team, like you can really make a catastrophe there. So we're taking our time to say. So they're the fairly obvious ones and the less obvious ones that will take the time over the plan to address 1 and the other.

Sorry, let's go back to front because -- sorry Gabe, just -- you get next. You can have 2 questions, just for that.

Richard Burke with Bloomberg Intelligence. Looking at your projections for 2030, notice that the North American EBITDA margin is 20% and Europe is only 16% being kind of more U.S.-centric focused for my career. I was just trying to understand is there structural differences that the margins won't get in Europe won't ever get to the U.S.? Or are we a different point in the cycle? Or just kind of your thoughts behind that?

Yes. Richard, it's a very good question because we ask ourselves the same question. So thanks for that. I mean the reality is that Europe has always been a couple of points behind Europe, maybe for the embedded costs in Europe. But -- over time, we have improved ourselves and that number is far away from where we have been before. I mean I think we've been up to 19% in Europe. And frankly speaking, we're putting together what the guys gave us having obviously been reviewed at length by ourselves. And I will be very disappointed in Saverio if he is only 16% margin. So that's easy.

I think, Richard, as well -- sorry, I think Rich as well, if you flip that down to the balance sheet and capital allocation, you get what we're buying for your book in terms of capital going into Europe versus North America from a cost perspective. So in defensive, my good friend, Saverio, I'd say that his return on capital employed is probably mid-teens versus where Laurent is. And that's been a sustaining factor for the strong balance sheet. The free cash flow generation has always been much better in Europe, equally working capital, where severe would hang up below 10% and or on a slightly ahead. So it sort of goes back to the fundamental thesis, I think, what we're speaking about, which is you take a business across 3 regions and you take the pooled capital and the pooled resource around free cash flow and you allocate and get the returns out whether it's the returns from an EBITDA perspective and margin are the returns from a cash flow, balance sheet and shareholder return perspective, but it's pooled resources.

I think another interesting point and Saverio has mentioned it in his presentation. He's been through 2 strategic processes. And in addition, that Smurfit and Kappa came together in 2005. So we've been spending the last 15 years, 20 years nearly years one. I was never good at accounting. We've been spending the last 21 years, making Europe a great organization and investing in Europe and developing our asset base. So we have a fabulous position with fabulous people with fabulous assets. about 21 years ago when you came to Smurfit and Kappa, you would have said they weren't such great assets, but now anybody who would look at our company in Europe would say, "Wow, these are fantastic businesses, fantastic assets, fantastic people. and certainly should earn more than 16% EBITDA margins. I agree with you. So Saverio, that's...

No, no. It's -- we've been there before. I mean, we went to '18, '19, and this is -- and as I said, this is not including any pricing or market condition that through the cycles will be there again. And so we expect to -- that we can deliver back where we deliver. Today, the 16% mark in Europe, it's an ambitious target. It's a good target, which doesn't mean, as we did in the past, we cannot go above that. I mean as situation improves, the conditions are improving in general.So we'll get there.

I think what's interesting is that Europe has been a bit of a funk since the Ukrainian war. I mean, obviously, if you take a view that that's all going to end then you could see a very big rebuilding in Europe. It's 380 -- how many million people in Europe? I mean...

It's 400 million.

400 million people. It's a very big economy. And we have #1 and #2 positions in most of the markets there, and we've got the best market position. So it's a really exciting place for us if there's any sort of economic growth. And as I say, we've got an incredible meal system. We've got an incredible paper system -- or sorry, corrugated system, and we've got incredible specialty businesses there that are today earning 14%, 15% in a market where most of our competitors are earning next nothing. Or very low single digits.

Gabe, sorry.

Gabe Hajde, Wells Fargo. Thank you, Tony. First, give credit where its due. Initial report card, $4.9 billion of EBITDA, the guide was pretty consistent at least with our expectations, so putting points on the board. When I try to dissect or translate the $1.2 billion in North America, and I translate from, I guess, margin to dollars. The margin profile would suggest on the current business, about $800 million of improvement. And then the most difficult thing to lock down or pin down has been the $1.6 billion growth in North America. So if I do the math on that, it suggests about $300 million, $350 million of contribution from market growth. A, is that about right? And then, b, would you identify that as the most risky piece of the North American ambition?

Listen, the market last year was not good. I mean we actually attribute about 3% to 4% of our negative 10 to the market. If you look at the FBA numbers, if you look at our 2 competitors that have reported, they've been -- they're on negative 2, all of them. And so -- if you look at that, then you'd sort of say, well, we've lost a little share because of the market -- the business we've given up. So maybe the market and they've gained the share. So therefore, the market is 3%, 4% down. And it is specifically hit maybe a company like ours a little bit harder because a lot of the big branded goods, which is where we were selling a lot of have been hurt during the last year. I don't think that's going to continue, Gabe, to be honest. I think that sooner or later, there will be more promotions by a lot of companies. There'll be more competition by a lot of our competitors to -- sorry, not competitors by our customers as they start to go into trying to sell more themselves. And that should actually be good for inflation in the United States and ERGO will be for box demand in the U.S. So I do believe that this is still a very strong economy in the United States, and I do believe that they'll get back to growth. And I do believe that -- and that's what we all believe and I think that we'll be a big beneficiary of that. So I do believe the numbers that Naveen have put out of 1.5% are doable. And so I would then think that our numbers are going to be possible to make.

I think, Gabe, maybe to help your thinking slightly is broadly, when we think about 1% volume growth, that generally equates to somewhere around, call it, $60 million of EBITDA for the group. That's probably helpful for your thinking.

This is Nico Pacini with Truist Securities. I just wanted to dial in on rebalancing your long SBS position and if that's going to be derived more from converting like CRB business into SBS or if there's further opportunities like the La 2 closure. And with the converted business, how sticky is that given prices will likely ultimately rebalance between SBS and CRB?

Laurent?

Probably a combination of all the things that you've suggested, I think the work we're doing -- first of all, SBS has undergone secular pressures. But equally, and I mentioned that in my presentation, we are seeing very interesting opportunities in that particular segment. The other thing is SBS and, as we said, like this subset agnostic is something that we've really put in motion and is helping. And potentially, ultimately, as we see fit and if required, then further consolidation. In 1 form or the other, it doesn't necessarily have to be related to restructuring, but reducing the exposure on SBS can be part of the solution as well. So -- and they're all being worked on at the moment. And whenever those projects come to fruition, then we'll come back to you with all the information. But it's going to be essentially a combination of all the options that you've indicated.

I think the switching -- the stickiness is an important point. I think the customers that we've seen that are switching for quality, yes, SBS price coming down is helpful for sure, to make them switch. And if there was a massive jump in SBS pricing versus CRB, maybe they'll switch back. But what is fundamental is that the product ranges from CRB to SBS, it's a quality and visual issue, and it's not a price issue anymore because of the price of SBS. Once they go there, will they switch back if the price of SBS go zooming up or not, I can't say. But they are switching because it's a better product in many instances for the fridge or for the shelf, fridge for CUK because it's all craft based. And shelf because it's brighter for SBS. So there is a quality issue. There's also a machine issue, but the machines actually run better with regard to CUK rather than CRB. That's not to say that CRB doesn't have a place. It has a very strong place, too. I mean, we are -- I mean, we're great agnostic. We will work with our customers on exactly what they want, what their belief is if they want to recycle board, we have it. We're the #2 producer despite the fact that our mills are not necessarily more modern, we're the #2 producer in the United States of CRB with acceptable mills and good quality that our customers do not want to be locked into any single supplier. So it's a very positive position that we have. And as I say, we're a great agnostic and say, "Listen, you want this, this or even as Laurent said, which I think is really important to remember, very microfluid corrugated which is an important opportunity as well for them.

Okay. Well, I think we've had our time. I really appreciate you all making the effort to come and join us. It's been a privilege to be able to present this plan to you. And we do really thank you for your effort of being here this morning bright and Breeze. And thankfully, we've warmed up New York for you to walk on so. Thank you.

Good day, and thank you for standing by. Welcome to the Smurfit Westrock 2025 Q3 Results Webcast and Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Ciaran Potts, Smurfit Westrock Group VP, Investor Relations. Please come ahead.

Thank you, Sarah. As a reminder, statements in today's earnings release and presentation and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings.

The company undertakes no obligation to revise any forward-looking statements. Today's remarks also refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are included in today's release and in the appendix to the presentation, which are available at investors.smurfitwestrock.com.

I'll now hand you over to Tony Smurfit, CEO of Smurfit WestrRock.

Thank you very much, Ciaran, for the introduction. Today, I'm joined by Ken Bowles, our Executive Vice President and Group CFO, and we appreciate all of you taking the time to be with us. I am very happy to say that we have again delivered on guidance in what is a challenging environment with an adjusted EBITDA margin number of USD 1.3 billion and an adjusted EBITDA margin of 16.3%.

The quarter was characterized by some challenging months, specifically July in our North American region and August in Europe. Nonetheless, we were able to come through with the numbers we predicted and planned. Since our combination, our North American business has shown great improvement over the course of the last 16 months on both the commercial and operational front, that's reflected by an improved adjusted EBITDA margin of 17.2% for the quarter.

As you will have heard us say, as we got to understand the legacy Westrock business, we have taken strong actions to remove uneconomic volume within our portfolio of businesses. This, of course, has resulted in a loss of volume as we transition and reposition our business. While there will be a time adjustment to this reposition, we believe we are clearly on the right track as we are already seeing quality customer wins.

In addition to changing our customer portfolio, we're also continuing to rightsize the business by closing down inefficient our loss-making operations including the recently announced closure of a corrugated facility in California in addition to the 8 previously announced closures.

In paper, we have already announced approximately 500,000 tons of capacity closure in both containerboard and consumer board grades. These footprint optimizations will be a continuing feature as we develop and grow our business.

Turning now to EMEA and APAC. Our adjusted EBITDA margin of 14.8% is highly creditable given the environment that exists in the European sphere. We believe it clearly demonstrates the power of the integrated model, which is producing this resilient margin in an environment of paper overcapacity. Our mills continue to run optimally, while at the same time, our converting business are capitalizing on their outstanding leadership position in innovation.

We believe this, combined with our insights into sustainability and the significant pending regulations from the European Union should give our customers confidence to help them in navigating this environment.

In our LatAm business, with an excellent EBITDA margin of over 21% due to our strong market position principally -- these are principally in Brazil and our central cluster. Our sequential margin showed a small fall in the last quarter as a result of some operational issues in 1 of our larger mills in our central cluster, which is now being resolved. The region still has significant growth opportunities for us to develop in the years ahead.

Turning now to the group and regional highlights. What I'm very happy with is the initial potential of the combination as evident in our cash flow performance in the quarter. With operating cash delivered USD 1.1 billion and an adjusted free cash flow of approximately $850 million -- USD 580 million.

One of the things that especially pleases me about this number is that we're really only starting to get going on working capital optimization as we continue to focus on operating excellence. I'm also very happy to have the people in the new Smurfit Westrock have come together and adapted to the culture of the company and its values of loyalty, integrity and respect and safety adoption by everyone in the workplace.

The group has also been working effectively on the synergy program, which Ken will speak on further, which is exceeding our expectations, especially when one looks at the commercial improvements that we can see across the businesses.

Finally, in the group, not only in North America, but also in Latin America and Europe, we continue to optimize our asset base with the recent closure of a facility in Brazil and the transfer of equipment to other operating units. Together with constant trimming of our assets in our European sphere.

In terms of the regions, as I've mentioned, we continue to make excellent progress across our North American system. For example, in corrugated, our loss-making units have declined by almost 50% in a 1-year period with today, over 70% of our corrugated operations solidly profitable. And we expect significantly more progress to occur as we replace and swap out uneconomical volume.

In our consumer business, this business is very well positioned with substantial investments and restructuring already done. With strong positions in SBS and CUK we're actively working to transfer customers from CRB to these grades and have already switched about $100 million worth of business. We do, however, believe in offering all 3 substrates to our customer mix.

Our first Global Innovation Summit was held in Virginia in September. And the rollout of our experience centers in our North American region, while in its infancy, is now happening. In EMEA and APAC, our integrated model is really proving the success of our business. Our mills are well utilized and our outstanding position and innovative offering is retaining and developing customers.

One of the great opportunities for us has been the effective integration of our consumer operations into our European business. We have a vastly greater customer base to introduce to our consumer operations into Europe and moving these businesses back to local sales and manufacturing accountability has already started to see some significant benefits.

And finally, during the quarter, the rationalization of 2 of our German converting plants has been agreed. This will significantly strengthen our leading German position as we await the inevitable upturn.

Turning to Latin America. I'm increasingly excited about our Brazilian operations. The legacy Smurfit and legacy Westrock businesses are a perfect fit with one concentrated on recycled containerboard and the other on virgin kraftliner. Our converting businesses have quickly adopted our value over volume focus, which is already showing significant improvements.

In our Colombian business, we experienced significant growth of 8% and due to our commercial offering and the market developing as a growing exporter of fruits and vegetables. Across the region, we're capitalizing on many of the growth and development opportunities we have -- for example, in Chile and Peru, where our volumes grew by 15% and 25%, respectively, during the third quarter.

I'd like to give you a sense of the excitement that exists and is building in within Smurfit Westrock company today. We're a stronger and better company through the adoption of the owner-operator model. Everyone across our world is now responsible for their own P&Ls. This has unleashed a tremendous enthusiasm and internal competition to do better and lends itself perfectly into having a performance-led culture where everybody is responsible for what they do.

I'm especially pleased that we have now initiated global and regional leadership programs, whereby over 300 managers will have started our group programs.

In Smurfit Westrock, people are at the heart of everything we do and we ensure that they have the tools to succeed in their job and to realize their potential. Our synergy programs and optimize asset base, together with our innovation offering and transfer of best practice will, we believe, contribute to superior performance in the future.

I'll now hand you over to Ken, who will take you through the financials.

Thank you, Tony. Good morning, everyone, and thank you again for taking the time to join us.

On Slide 8, you'll see the business again delivered another strong performance in the third quarter, with net sales of $8 billion, adjusted EBITDA in line with our stated guidance of $1.3 billion, a very solid adjusted EBITDA margin for the group of over 16% and a strong adjusted free cash flow of $579 million.

The performance reflects the strength and resilience provided by a diversified geographic footprint and product portfolio, particularly in the challenging macroeconomic environment, and of course, the commitment and dedication of our people to delivering for all our customers.

Turning now to the reported performance of our 3 segments and starting with North America, where our operations delivered net sales of $4.7 billion, adjusted EBITDA of $810 million and adjusted EBITDA margin of 17.2% and [ Axendoco ].

In the region, we saw continued margin improvement, predominantly due to higher selling prices, our operating model in action and the benefits of our synergy program. alongside input cost relief on recovered fiber, which combined to more than offset lower volumes and headwinds and items such as energy, labor and mill downtime. Corrugated box pricing was higher compared to the prior year, while box volumes were 7.5% lower on an absolute basis and an 8.7% on a same-day basis. an outcome very much in line with our ongoing value over volume strategy, which we estimate accounts for about 2/3 of that volume performance.

Third-party paper sales were 1% lower, while consumer packaging shipments were down 5.8%. And with shipments in our smaller mixing operations being lower than our U.S. business, which saw volumes down 3.7%. Our differentiated innovative and sustainable approach to packaging continues to resonate with customers which, coupled with the empowerment of our people to drop uneconomic business and the implementation of our owner-operator model is driving continuous business improvement across the region.

Looking now at EMEA and APAC segment, where we delivered net sales of $2.8 billion, adjusted EBITDA of $419 million and adjusted EBITDA margin of 14.8%. -- despite the challenging market backdrop, our operations remained resilient with adjusted EBITDA moderately ahead of the prior year. This performance reflects the scale of our local teams in managing a highly volatile cost environment and underscores the effectiveness of our integrated operating model, where we have consistently delivered an operating rate in our containerboard mills in the mid-90s.

Higher corrugated box prices year-on-year, alongside lower recovered fiber costs and a net currency translation benefit were partly offset by headwinds on energy and labor and lower third-party paper prices. while corrugated box volumes remained flat on both an absolute and same-day basis.

We believe we are the market leader in Europe with strong market positions and a proven operating model. Supported by our best-in-class asset base, which allows our people to continue to deliver high-quality sustainable packaging solutions for all our customers. This position is supported by our approach to innovation where we have a large data set and bespoke applications that place the customer at the center of that conversation.

Our LatAm segment again remained very strong in the quarter with net sales of $0.5 billion, adjusted EBITDA of $116 million and adjusted EBITDA margin of over 21%. Corrugated above lines are flat year-on-year or 1% higher on a same-day basis, with the demand picture in the region showing a marked improvement with strong demand growth in Argentina, Colombia and Chile, amongst others.

All while our value over volume strategy continues to deliver strong results in Brazil as we have now largely phased out unprofitable legacy contracts with volumes, with volumes that are moving into a more neutral position.

The region successfully implemented pricing initiatives to offset higher operating costs delivered a consistently strong performance with a small step down in EBITDA margin year year due to a never resolved issue in one of our operations during the quarter. As the only pan-regional player, we believe that Latin America continues to be a region of high-growth potential for Smurfit Westrock, both organic and inorganic, and one where we are well positioned to drive long-term success.

Slide 10 outlines our proven capital allocation framework. I don't propose to go through each of these that today, but I would note that in February, we plan to provide detail on how we see capital allocation underpinning the achievement of our long-term business goals. What is new is that our CapEx target for 2026 will be between $2.4 billion and $2.5 billion, broadly in line with the current year.

We continue to invest ahead of depreciation and so this level remains accretive to earnings as we invest behind identify growth, efficiency, sustainability and cost takeout opportunities. The core tenet of our capital allocation framework is that it must be flexible and agile. This was our approach at Smurfit Kappa and continues to be our approach at Smurfit Westrock. It is a proven track record of delivery, and we are already seeing the benefits of it since forming Smurfit Westrock a little over a year ago.

Our approach to allocating capital is disciplined and rigorous and requires that all internal projects are benchmarked against all of the capital allocation alternatives and is, therefore, always returns focused. On our synergy program. I'm pleased to confirm we are delivering as planned and on track to deliver $400 million of full run rate savings exiting this year.

And finally for me, as noted in the release, the year-to-date has been characterized by a challenging demand backdrop, and as a result, we expect to take additional economic downtime in the fourth quarter to optimize our system. If you recall, we set out our guidance for the year in April.

Given the impact from the above, we are now marginally adjusting that guidance range to where we now expect to deliver full year adjusted EBITDA of between $4.9 billion to $5.1 billion.

And with that, I'll pass it back to Tony for some concluding remarks.

Thank you, Ken. I hope you get a sense from my earlier commentary and Ken's performance summary that we believe that Smurfit Westrock is very well positioned for continued performance as well and the economic growth as it revives I would say the company has never been in better position.

Throughout the company, all of the people that are aligned with this approach, and we can already see the tangible benefits of this as many loss-making operations move into profit and thankfully, with much more to come.

Reflecting the generally well-invested asset base, our capital spend for full year 2016 is expected to be in a $2.4 billion to $2.5 billion range. We believe this level enables us to accelerate cost takeout increase operating efficiency and capitalize in high-growth areas.

In parallel, we recently announced restructuring initiatives, which also allow us to continue to optimize our asset base. As a more general point, our philosophy has generally been to buy and not build. As we have typically acquired at a fraction of the replacement cost is invariably cheaper with an enhanced returns profile.

On acquisition, our objective is always to optimize through measured capital allocation decisions. We will discuss this further in February, and Ken has already touched on this. The delivery of our synergy program, together with our ongoing capacity rationalization remains a constant focus. With a significant headcount reduction of over 4,500 people and an unrelenting focus on the owner-operator model, we believe our performance to date is an indication of our potential.

We remain confident that our footprint remains unrivaled with strong and leading market positions in the majority of the markets and grades of paper in which we operate. There is no question in our minds that since Smurfit Kappa and Westrock combined, we are building a stronger and better business with management aligned with shareholders and developing our performance-led culture.

Over the last 16 months, we have taken significant steps to build this better business, and we are increasingly confident in the future prospects. While for sure, the current economic outlook is somewhat muted. Our view is that the steps we are taking, investments we're making, the alignment we have with shareholders and the culture we're building within Smurfit Westrock positions us to go from strength to strength as economies improve.

We end full year '25 and enter '26 as a better and stronger Smurfit Westrock. To that end, in February 26, we will be setting out our longer-term targets, which are a bottom-up approach from all of our businesses, which will be designated to identify prospects for this company as we look forward into the future.

So thank you for your attention, and I look forward to taking any questions that you may have. Thank you, operator. Over to you.

We will now go ahead with the first question. This is from Mike Roxland of Truist Securities.

Congrats on all the progress. Tony, you mentioned obviously, weakness in the European market from both the demand and price -- is there anything you could do to expedite cost take out? You mentioned, obviously, continuing to trim assets in Europe, rationalizing the 2 driven plans. But given the weakness that persists there right now, can you expedite cost take out to try to get things rightsized faster?

Yes. I think -- Mike, thanks for the question. I would say that we have done a really good job over 15 years of optimizing our capacity in Europe. Obviously, there's always little things to be done, but we're running our system pretty well full in Europe with the exception of August and probably December where we'll take some downtime because those months typically are months where the corrugated box plants closed for holidays, so our system is pretty well optimized.

Obviously, we continue to look at it. We're basically a low-cost producer in the European market. And when you look at our returns and you look at some of the other competitors' returns that have been publicly available. And obviously, we get a sense of how some of the private guys are doing, we're far exceeding the returns in Europe and -- so unfortunately, it is a question you already seen a number of mill closures around the place.

I think we're going to see more and I think that the pain is very, very real, and you can see even some public companies with negative EBITDA margins in the containerboard business in a very significant way. So I think the old saying, the worse it gets, the better it will get, well, it's pretty bad right now. And I think when it turns, it will turn very sharply. And so that's what we are waiting for. Obviously, as I said, that doesn't mean we're sitting on our hands doing nothing.

We're continuing to close a few facilities here and there, not very big ones, but we've done a number of stuff, and we have a very, very active cost takeout program across all of the business to mitigate all of the wage inflation that we've had over the last number of years. But -- so cost reduction programs do not stop. They're continual, and we continue to look at our asset base and will trim if necessary.

Got it. And then just 2 quick follow-ups. Any color you can provide in terms of how demand trended in both North America and Europe in September and what you've seen thus far in October and any outlook in November. And then just quickly on consumer because it was interesting you mentioned transferring $100 million of CRB business to SBS and CUK. Can you just help us frame the logic behind those moves? Is it just a matter of wanting to run SBS more efficiently at a higher rate? And is there any margin uplift associated with that shift?

Yes. Taking your second question first. I mean, basically, as the SBS price has trended downwards. Because SBS, you can run with a different sheet and you can use a lower grammage. It's basically become competitive with CRB and there are positive qualities to SBS versus CRB in the sense of brightness and transportation costs, so -- and runability on printing machines. So I'm not saying that CRB is all bad. It's not.

There are certain customers that will really want CRB. There are certain customers that really want SBS and there are certain customers who want the U.K. And clearly, where the positioning is right now, it's just advantageous for our customers to look at SBS and so we've taken that opportunity. As well as some of the CRB issues where, again, you've got some opportunities to -- especially in the freezer for frozen products to move into CUK, which is something we're actively promoting. And I think, as I said, we've or so already transferred in the last 4, 5 months, and I think more to come.

On the first question, Mike, just remind me what was -- demand trends? Demand trends. I don't -- I could say that we were expecting to see an uptick in October, and we did not see it. Now you have to remember, Mike, one of the things that has happened is that we took on as in legacy WestRock to on business in the latter half and first half of last year that we were running in the second half of last year. And a lot of that business that was taken on was not necessarily very economic for us. So we have been addressing that during the first half of this year.

And inevitably, that's when we tend to see that exiting again. Some of it will come back as we are a good supplier. We're very reliable and high quality and high service supplier. So we expect some of it to return at prices as we've seen already in Brazil, for example. We expect some of it to return at a certain point in the future at the prices that make it economic for us. And if it doesn't, well, so be it, we'll go out and get some other business.

But when you lose big chunks of business, Mike, it tends to go and get 10 chunks of smaller business, it tends to take you a little bit longer, and that's what we're seeing. But we have a huge pipeline of business in our system. We won't land at all.

But certainly, our people are very comfortable and confident that we're going to get it. And as I said in my script, we're already seeing some very significant customer wins in high-quality names at levels that are going to be good for us to run that.

Next question is from Phil Ng from Jefferies.

So Tony, you mentioned you're going to be taking some economic downtime in the fourth quarter. curious what markets is this North America is Europe? How should we quantify the EBITDA impact? And appreciating you're walking away from -- you're taking a value-over-volume approach. But as we kind of think about how that translates. How should we think about that spread of your value versus the market overall, call it, the next 12 months?

Yes. With regard to -- I'll let Ken take the downtime question. But with regard to -- we're sort of figuring out that -- we believe that the market is down somewhere around 3% or 4%, and we're probably down 5% of our loss of volume is due to our own decision making. That's the sort of number that we -- it's not going to be 100% accurate in that. It could be 3%. It could be 4% market down, but you saw one of our larger peers was down was down 3% in the quarter and one would have said that they're probably winning some business in the marketplace. So therefore, taking that as a trend then I would say that the market is probably down a little bit more than that 3%.

Philip, I think to take the second part of that question first, I think the simplest way to quantify the EBITDA impact is broadly, if you think about where our guidance was, where we're bringing the 2, call it, somewhere between $60 million to $70 million is the incremental impact of downtime in the fourth quarter versus what we previously would have said.

I think, look, if we think about operating it in Europe and also in the mid-90s, unlikely to see any material for the remainder the year, any material incremental downtime in Europe. So predominantly, it's going to be across the North American region because Latin America, we don't really see any downtime there either.

Ken, do you expect your inventory to be in a pretty good spot as you exit this year in North America?

It's getting there, Philip. It's supply chains in North America is different in Europe in the sense that they're very, very long. So it takes a while to kind of get back to what you might like as kind of optimal inventory. The working capital as a percentage of sales for the group is probably around 15%, it is kind of higher than we'd like it to be. Smurfit Kappa were down in kind of 8.9%. Don't expect it to get there over time, but certainly, the somewhere in the middle there, the right answer is.

You have to remember, as a third-party seller, Westrock over the years had grown into a number of different grades and the numbers there with the paper. So part of the optimization here is kind of bringing it back to not quite Henry Ford. We're getting it back to a place where it's a reasonable set of grades and fluid sizes and widths that we feel are optimal for not only the paper system, but the corrugated system and the need for our customers. So it's all part of -- it all really comes back to helping our customers understand what their boxes need rather than just supplying what they think they might want.

So I don't think we'll exit this year in perfect shape, Philip, but I think as we kind of move through '26, it gets incrementally better as we kind of understand the supply chain is a bit better and rationalize kind of external board grades.

Philip, if I can just add on to that, I'm really very excited about as we optimize our supply chain system and were through our board grade combinations that together with the corrugated businesses in our system, that this is going to present a big opportunity for us. But it needs careful thought and planning because, as Ken has just rightly said, the distances in America are very big, and we've got to make sure that we we get that right, but there's a lot of opportunity there for us to reduce stock.

Got it. And sorry, one last one for me. Tony, I thought your comment about pivoting some of your CRB, CUK business to SBS was fastening. That sounds like a pretty attractive value prop for our customers. You gave us the CapEx guidance for 26 as well. Embedded in that -- is there any mill conversions that you're possibly thinking in SBS? Or do you feel pretty good about some of the opportunities you see in front of you on the SBS side, you're going to largely keep your footprint intact at this point?

If you -- if I could just ask you to hold off until February for that because we'll give you a full answer then because clearly, we're working through some different strategies in relation to that, and then we'll give you a better once we've organized that, we'll tell you about that. But basically, we have some very, very good assets that we will continue to look at.

And obviously, there's some that we will continue to evaluate and give you a better answer to those in February.

Next question is from Gabe Hajde from Wells Fargo Securities.

I wanted to ask about the guidance, the CapEx guidance for 2016 and maybe a little bit differently. I'm just curious if the organization for the year, if there's anything strategically that you guys are focused more on cash flow for 2026 versus EBITDA, sometimes that drives different operating behavior I'll just stop there.

Gabe, no, not necessarily. I think it's more a case of the reality is that Smurfit Westrock should be -- and if you look at this quarter, particularly, a strong free cash flow generator in respect of the CapEx cycle.

I think what we've always done, though, is be very disciplined about when we pay capital into the system. And indeed, adopting a kind of portfolio approach where you don't have too many big programs in any particular year, any big systems that are taking all the impact in a particular year and no region that kind of has that impact. But I think it's fair to say that when we went through the cycle this year and to Tony's earlier point, to fill building towards February, when we look at the capital requirements for '26, the reality is that all we feel we need to keep the system going and improving and growing is somewhere between 2.4 and 2.5.

And that ultimately means that we don't end up with any kind of big build for CapEx going into '27 , for example. But it's a normal phased approach. So no, there's never a case of trying to, if you like, trying to get to a free cash flow number at the expense of EBITDA, that never is. I think it actually becomes more of a virtuous circle, which is you place capital into the system, we expect the returns out which should drive return on capital employed and $0.01 and also drive EBITDA.

And then that capital goes back into the system. I sort of I look backwards to look forward a little bit here, Gabe, in the sense that as Smurfit Kappa, we place extra capital in the system, increase Rocky, increase the dividend, delevered and grew. So I think as the model if you like, from an owner operator perspective and a philosophical perspective, that's worked in the past.

So no, it's not that we take that kind of that choice. It's actually -- that's the capital we think the business needs to kind of drive and grow.

Yes. And I'll just add to that, Gabe, that the whole philosophy of our company is to remain agile, as Kenneth said, we adapt to the situation that's around us. And one of the key tenets of our business is never to overinvest and have too much investment going forward that we can't back out of, so to speak, so that we're in a position to be able to flex if we need to because that's what really hurts companies, if you can't pivot depending on the environment, either positively or negatively.

And so that's been the hallmark of the success of Smurfit Group, Smurfit Kappa and now hopefully in the future, Smurfit Westrock.

I wanted to switch gears to Europe. You guys provided a little bit of color as to the -- I know the number kind of jumps off the page where you're underperforming the market. But over in Europe, I think up a little bit 0.2% is pretty impressive. You talked about the mills running mid-90s. Can you provide a little bit of color in the market, whether it's geographic or end use markets where you guys are doing particularly well? And then I guess, maybe a little bit on the margin side. Obviously, prices kind of came up quite a bit in the spring and early summer and have come down, basically kind of given back a lot of that. How should we think about that flowing through -- is that hitting Q4? Or is that really more of an H1 '26 event?

Just on the markets, in general, I would say that the -- there's no real change to what we've said previously that Germany continues to be a laggard -- some of the other markets in the U.K., the Benelux tend to be basically flat with some positive movements in Eastern Europe and in Iberian Peninsula, which is growing strongly.

So in general, there's no real change into how the markets are operating we sometimes flatter to receive in Germany where things get really good for a couple of weeks and then go back to the norm. So I think we haven't seen any material positivity in the German market yet. But inevitably, that will happen. And as I mentioned in my script, we're about to close 2 facilities with improved facilities in the incoming plants that are receiving capital. So when Germany does turn around, we'll be even better positioned than we were before to take advantage of that.

With regard to...

On pricing, actually, third quarter and Europe we saw prices tick up by another 0.5%. So not quite done there yet on pricing. I suppose, ultimately, had a crystal ball and forecasting, I think where pricing goes mirrors dependent to -- read the same question we've had all day, which is where does demand go because that ultimately that to feed into what happens with paper prices. But irrespective of that, it's very much a kind of second quarter, third quarter question on '26 anyway based on where we sit now.

But I think it's fair to say that both regions have done really well in terms of pricing given the backdrop. I think particularly Europe in terms of price increases received and held, if you like, even through the third quarter. But I think it's demand dependent really in terms of where it goes from here.

I think as well, Gabe if you look at where the paper price is at the moment, it's uneconomic for at least 75% of the business, I would say. And I think that we're lucky that we're very integrated. We've got our own customer.

Our paper mills have our own customer, which is ourselves. And we're able to run basically full, but most of the others, demand is relatively weak. And unless you're in the top quartile, you're not making any cash at this moment in time. And I would say you've seen that from the results of a number of players in the marketplace. And inevitably, that will change. The question is, is it first quarter, is it second quarter? Is it third quarter? And how much hurt will be in the market before then.

Next question is from George Staphos from Bank of America Securities.

Congratulations on the progress. Tony and Ken, I guess I have 2 questions for you. First of all, regarding the North American converting operations. in corrugated. I think you had mentioned that 70% of the business now is at -- and I forget exactly how you termed it, but better or acceptably profitable levels. If you could talk a bit more about what that means, recognizing that the margin in North America is maybe 1 of the proof points there. Can you help us quantify how you're determining the 70%, if that's the right ratio?

And what else needs to occur to move the ball further recognize you made a lot of performance already progress already.

Secondly, on the boxboard side, you made a couple of interesting comments about ultimately, in essence, the customer is going to choose a substrate that makes most sense, each of them, whether it's U.K., SBS, CRB has have their own unique aspects the fact that you're being able to move the SPS to a customer, when in theory, they would have already been in a grade that using your discussion point, they already would have liked to have been in, i.e., what's causing the move to SBS? Is it just purely where price is right now? Or what else are you reminding people of in terms of SBS' performance versus the other grades?

Okay. Let me take the second 1 first, and then I'll come back to the North American corrugated. Basically, on the 2, we've seen the SBS piece is more about brightness there's a brighter sheet. Caliper, you can get the same performance from a slightly lower caliper.

And then I would say, printability, stroke, machine efficiency on the customers' lines, which -- the 3 reasons why we've been able to sell SBS versus CRB. Of course, there will be some customers, George, as I said in my thing that will want CRB because it's a fully recycled sheet. And that's fine, too. And if people want that. But we are selling SBS and it's competitive with where SBS price has gone. It's basically competitive now with CRB.

And so therefore, we're comfortable to sell it to customers and we make good money at these current prices because, as I say, the caliper is lower. And we have basically our 2 SBS mills in the United States are very good mills in Demopolis and Covington.

So -- and then the CUK has got some unique properties for the freezer and strength for the freezer and again, a caliper issue that can help make it competitive against against the CRB sheet. So -- but that's -- again, some customers will prefer CRB and we can offer them that too. So what we've been doing is because, obviously, we have got very, very good SBS mills and very good CUK mills that were -- we would offer them that. And as you know, we've closed the CRB mill. So we have open capacity to be able to sell SBS versus CRB.

And that's been a big positive win for us, George, as we look forward, and it's going to be something that's going to continue, I would say.

With regard to our North American corrugated business. I mean, I think this is where you really see the owner-operator model in action. We have empowered our people to to basically act locally, get involved in local markets again, think about their local customers and to think about profitability.

And a lot of business was taken on in legacy Westrock under the basis of a combined profitability. That is not the way we think. We think that's the road to prediction that's road to death in our business where you have -- 2 sets of capital needs and on profitability. And that's the way that we have, I suppose, continue to survive and Smurfit legacy Smurfit legal Smurfit Kappa is that we we treat capital as a very important thing. And if you want to make a capital investment, you better be able to justify it. And if you go operations with one profit that masks where you're making the money, then you're not making the right capital decisions.

So what we've done is we've spent the first 6 months of our tenure as a combination, making sure that the P&Ls were done correctly that the balance sheets of each plant, we're were put into the right order. And then we've told our managers, this is you're now profitable for -- you're now responsible for your profitability. And of course, when you tell them that, and they see customers with negative 30% or 40% margins based upon a fair paper price transfer, they're going to do something about it, and we expect them to do something about it.

And if they don't do something about it, they won't be with us, frankly. So the reality is we are actively moving both at a national level and at the local level to make sure that accounts where you've got terrible margins are not run on our expensive valuable beautiful machines in our converting plants. And that's a process that's ongoing. It's one of the reasons why, as I mentioned to an earlier question, a lot of business was taken on prior to us coming on board, which was not economic, frankly.

And we've had to address that, and that's gone away again. And sometimes, we've gone back to the same homes it came from, which is quite kind of interesting. But so that's how we -- please -- pardon me.

No, please go ahead, sorry.

Sorry, George. So that's how we've moved very quickly from people understanding their profitability to changing a lot of the plants. So we've gone from -- we've cut our loss makers by 50%. And as we continue to address this, and there will be some plans that will make it. But inevitably, I'd say the vast majority will get to profitability in the next couple of years.

Tony, just a quickie and feel free to punt to February, if you'd like. On Boxboard recognizing it's not the majority of your business, clearly. If there's some rollback in tariffs how might that change your overall view of the attractiveness of SBS has said differently, has 1 of the things that's changed in the calculation, your ability to move more SBS being the fact that maybe some of the folding boxboard that was coming to the market has been, I wouldn't say, tariffed out, but certainly has more cost coming into the market? How should we think about that?

Thank you. I don't think tariff really comes into our thinking here. I think Obviously, the price comes into our thinking because the price of SBS has come down a bit. So therefore, it's more competitive as a grade versus other substrates. And obviously, FBB against SBS with the tariff is making it more challenging. But I still think that the FBB is going to be sold in the United States, irrespective because the price -- there's a lot of capacity in FBB specifically in Europe, and they're going to come anyway, I think, to the U.S. with all the added costs that's with it.

So I think it's up to us to sell I think one of the things that for everyone here to understand that SBS is a myriad of different grades. I mean you've got cup stock, you've got plate stock, you've got lottery cards, you've got cereal boxes, you've got freezer there like -- there's very, very many different grades of SBS that are sold at different price points that are sold the different quantities to different customers.

And so our hope and belief is that we can continue to develop newer grades into SBS that will allow us to earn a material return going forward. And there's no evidence to say that, that should be otherwise. We've been getting new customers in lottery cards, for example, which is -- it's only 15,000, 20,000 tons, but every little bit helps, as they say over here. And these are good grades of highly profitable business for us to develop in the years ahead.

Next question is from Charlie Muir-Sands from BNP Paribas Exane.

Just a couple, please. Firstly, on the the revised guidance obviously implies a very wide range of potential outcomes on Q4. Just wondered if you could elaborate on the main outstanding uncertainties for the range.

And then previously, you've been sort of talking about beyond the operational synergies, the $400 million, you talked about at least another $400 million of opportunities. I just wondered if you had any kind of updates on that? And then finally, you mentioned that one-off operational issue in Latin America. I just wondered if you could quantify that given it was relevant enough to call out.

Charlie, I'll take those -- so start with the last one. First, it was a kind of a continuous [indiscernible] ratio in our in Colombia, it probably cost about $10 million in the quarter, but it's $6 million now. So that's the big effect there.

In terms of the guidance range, it really, I think, the more it has in the years gone past, December tends to be the swing factor here in terms of why we've kept a slightly -- and I wouldn't say the range is wider. I think we just moved down the midpoint of it to take account of the downtime piece. But really, it's going to come down to where you see December where we see December. And as kind of Tony alluded earlier on, as they're kind of exiting into the quarter, we're not necessarily seeing a much improved demand backdrop, but equally in our natural sense.

We haven't given up hope and a sense of optimism that things don't get better even before the end of the year. So I don't think we can that negative on the outlook. So really, it's around where does December sit in that conversation.

In terms of the bit in the middle, I think George actually pointed to part of this answer in his question, which is when you look at the margin performance in North America, given everything that they've been dealing with in terms of where volume is, the incremental downtime, the headwinds, the performance of the margin in North America probably tells you that a chunk of that additional operational commercial improvement is coming through in the numbers already.

Where that goes to, that's the kind of how long is the piece of strength to kind of answer because look, it really depends on how many programs we can get at. It sort of goes back to Tony's point earlier on about the owner-operator model and really putting impairment in the hands of every single GM or mill manager to drive their own business for the best returns, their cost takeout, their improving programs, their delivery on CapEx. So yes, we're still, I mean, very comfortable, if not more comfortable with the well in excess of where the synergies ended. But I think it's fair to say we are beginning with being able to quantify it exactly.

We are beginning to see the benefits of that coming through simply in the margin performance in North America alone and particularly in the corrugated division.

Great. And you've obviously given us the 2026 CapEx and elaborated on the rationale for it qualitatively. But just in terms of the returns that you're targeting beyond maintenance or depreciation, what kind of thresholds are you typically setting for the investments you want to make in the business?

As a blend, Charlie, look, it won't be any different than we've had before. It sort of goes back to that portfolio approach of trying to drive the incremental return and return on capital forward. So generally, no more than the old system, we would expect that entire portfolio to kind of be in that sort of 20% IRR range, delivering kind of mid-teens, at least in terms of where Rocky sits as a result. That is, of course, dependent on what those projects do, particularly cost take. You're obviously going to get higher returns from sustainability, energy back-end projects. You might get lower returns in the early years, but history has shown us that as those projects embed and move forward, you have much better returns as they move out.

So not pinning it necessary to a target return in individual projects. But as a portfolio, it has to drive forward in terms of where ROE is because ultimately, that goes back to my comment earlier on, this is about capital in and cash flow out. So not a dissimilar profile to what we would see -- you would have seen previously in terms of how we characterize the deployment of capital and allocating capital in a kind of Smurfit context.

The next question is from Lewis Roxburgh from Goodbody.

Just my first question is on cost. You mentioned in the last quarter you expected some relief on OCC pricing. So I just wondered to see if that was playing out as expected and if you're getting any other relief from the other buckets like energy or that might just spill into next year?

And then just in terms of CapEx, I just wondered some more detail how much of that spend might be related to the legacy Westrock assets versus other projects as well and whether this is sort of the new normal or further increases might be needed to tie into those realization synergies.

I'll take the second piece, Lewis, and then I'll let Ken take the first piece. Basically, the CapEx number is slightly skewed towards the legacy Westrock assets because we are a very well-invested base in Europe and Latin America. So what we're doing is we're putting a little bit more capital into some of the box plants to improve the quality and service aspects to improve the corrugators.

So all the things that we have done over the last 10 years in Smurfit Kappa, we're now implementing over the course of years, not just next year but the years going forward. to continue to improve the legacy Westrock business and make it better -- even better than it is. So there's a slight skewing towards legacy Westrock, but not massively material because, as I say, we're in very good shape.

In Europe, we invested for growth, and we've got very good assets in our European business. And while there's always growth opportunities like in Spain, like in Eastern Europe and specifically a plant by plant. I think that as a whole, the European business is very well invested. And what we've do over the next 3 to 5 years is continue to develop out our Westrock asset base -- legacy Westrock asset base.

Lewis, I'll just take some of the bigger cost books and just alongside fiber because it's probably useful to kind of run some of that for yourself and your colleagues. In terms of fiber, I think at the half year, we probably said that, that was going to be a tailwind of about $10 million -- we probably see that in the bet, as you sit here today, somewhere between $130 million, $140 million of a tailwind.

Energy, I think at the half or we might have said about $250 million of a headwind probably coming in now, we probably see that about the 180 space. Labor, Similarly, we probably thought about 200, probably down around the kind of 180 space as well now. Downtime is probably going the other way in that in a sense where we would have thought downtime was probably going to be 150. It's probably anywhere between 180 and 200 at this space given what we now see for the fourth quarter. So they are really the big cost books in terms of the incremental changes that we would have said Q2 versus where we see the year panning out.

Next question is from Anthony Pettinari from Citi.

On the full year EBITDA bridge, maybe Ken just fill in on the pricing side, can you give us an update on where you maybe thought pricing would shake out midyear versus where you are where you might end up with the full year guide?

Yes. I think it's pricing broadly we would start to plug that in there. I think we probably see pricing coming out somewhere between call a 840 versus where it would have been about 900 at the half year. So a small call off probably because of the fourth quarter where demand is going, maybe a little bit of price weakness there, but not materially down versus what we would have thought.

And would that -- would North America be $700 million or $750 or how is that...

Between North America and Europe, how would that the rage I'll defer that to read the segmental bridge the guys and you get into them. in the trenches with them later on. I think if that's okay. I just have to with me here.

Yes, no problem, no problem. And I guess maybe just one follow-up. You mentioned energy projects and I mean from other industrial companies and paper companies, we've heard a lot about cost inflation and particularly electricity with demand from AI and data centers. Can you just give us kind of a quick recap of where you are with kind of current energy projects, especially in North America and not to steal any thunder from February, but just how you think about the opportunity in energy at your mills going forward?

Well, we just approved a large energy project in our Covington mill, which will actually move away from coal to natural gas. And that's going to be the IRR on that is depending on where you think the price of the commodity is a minimum of 20% and a maximum of 80 -- sorry, not even the maximum, not the maximum is not capped, but realistically, a 50% return for the mill.

So I guess what we will be doing, Anthony, is just taking every energy project as it comes and what kind of return we can get on it. specifically, the only one that we've approved since we've come in is that one. We use gas primarily in most of our facilities. We do a little bit of coal where we have to obviously, in other places where we can remove it, we will be.

We have a large biomass project in Colombia, which is going to be coming on stream next year biomass boiler, which is a considerable saving for us in energy. So we're -- we continue to look at energy projects. But with regard to how these AI data centers are affecting us. I haven't heard that they're driving any major cost increases for our mill systems where our mill systems are located.

I think graft systems by their nature, tend to be fairly well served from a power plant, a back-end perspective anyway in that sense. And so not necessarily totally insulated, but generally CO2 positive. But great source of their own energy from a kind of a turbine perspective.

In addition to what Tony said, we have a kind of progressive program. We electrified some borders in Europe over the years. We continue to invest towards the reduction in CO2. I mean, the added benefit from the project Tony talked about herein Covington is it reduces our group CO2 by 1.2%. So very important, if you like, as you look forward to where our customers need to be on scope through emissions and things like that. So there's always benefits above and beyond the pure EBITDA benefit we find to manage projects, and it sort of goes back to what we're trying to get to in terms of low-cost producer and where those mill sits, which which allows us to kind of be at the forefront of where we do that.

So generally, it's always going to be a progression towards either less reliance on on some fossils and something else and more sustainable renewable fuels. But the system in and of itself is fairly well set as we start off.

And the last question today is from Mark Weintraub from Seaport Research Partners.

A few quick follow-ups. First off, so with other box shipments in North America, do you have a sense as to when you think you might be inflecting more positively versus the industry? How long is the process of sort of the shedding underappreciated business likely going to persist?

Maybe overappreciated business. We've given them boxes for nothing, mark. So yes, I would say that I would hope that this from the third quarter on next year, you'll start to see some positive movements. We're still -- we still have some businesses that are very poor piece of business that are under contract that will run out during the first and second quarter of next year.

And then obviously, we'll have to go out and replace those or we'll retain them. We'll see how the customer reacts to our discussions with them at that time. But if I look at the amount of backlog and pipeline that we have for new business, it's collateral in the sense that I feel very comfortable that we're going to start landing a lot of that business. And we already have landed a lot of that business, frankly, but it just takes a little while to qualify and then get into the plant. So -- when I -- so I would say the third quarter of next year, you'll start to see some inflecting versus this year with better quality business in all of our facilities.

And then what's your strategy? What have you been doing vis-a-vis outside sales of containerboard in North America into either export or domestic channels?

Yes. It's -- the export market, as you know, is weak and a lot of the capacity closures that have been announced in the industry have been geared towards the export market. specifically down into the South American market specifically. And so one of the One of the things that I found out is that these people down in these countries have pretty big inventories.

And I think we need some time for those inventories to shake out before we see movements in export prices to the positive because the export price is clearly too low for it to be viable for for people to survive. We are selling some into the export market, but clearly, we don't want to sell too much into the export market at that price that's there. But I would say it will be -- it will be like a eureka moment at some point, things will change and people -- the price will move up very sharply in the export market because it's too low at the moment. But all of the capacity that's come out of the market isn't really affecting it at this time because the stock levels of most customers down there are very, very high.

And in the domestic channel, I mean historically, the legacy Westrock business had sold a fair bit to independents, et cetera. Has that continued? Or has there been some change in that regard?

We do have outside customers, and they're important outside customers, and they're generally long-term outside customers, people that we've served for a long period of time, and we continue to do that, and there's been no real change on that as I can see it.

Great. And one last quick one, just to squeeze in. So with the SBS from CRB, et cetera, I assume the customers are running that on the same machinery. And so is it pretty easy to switch back and forth between the grades depending on the variables at play.

Yes. I mean, basically, yes, I mean you might need a technician to run a lower caliper product on the board just to adjust the machine slightly, but there's no real big -- 1 of the things that we have heard from our customers is that our -- the SBS runs better than the CRB. But I'm sure if you talk to somebody who runs CRB, they're going to say the opposite, but that's what -- that's what our people tell us from the customer. But I'm sure you can get someone else to say exactly the contrary. But I believe that to be the case because it's a cleaner sheet.

Thank you. I will now hand the conference back to Tony for closing comments.

Thank you very much, operator. I want to thank you all for joining us today. We remain very excited about the future of the Smurfit Westrock business. We're enthused about a lot of the changes that are happening that have happened and that are already happening. -- and we look forward to the future with great enthusiasm. So thank you all for joining us, and I look forward to seeing many of you in the months ahead. Thank you all.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Speakers, please stand by.