Since the announcement, ResourceWise's Forest Products team has been fielding calls from industry participants looking for help analyzing the merger's impact.
In this first part of our three-part series, we will share insights on how industry stakeholders can assess potential effects on their business.
What Can We Expect from Smurfit WestRock?
Smurfit Kappa is renowned for its industry-leading operational execution and innovation leadership in the European corrugated and containerboard industry, along with its pan-regional presence across the Americas. The organization now unites with the abilities of WestRock, the second-largest packaging company in the United States, with a broad portfolio of packaging solutions serving diverse end markets. This sets the new company up to deliver best-in-class performance and returns.
Improved operating efficiency and increased returns across approximately 500 converting operations and 67 mills.
Immediate and long-term value creation opportunities for both sets of shareholders.
Targeting annual pre-tax run-rate synergies in excess of $400 million at the end of the first full year following completion; delivery of synergies expected to require one-off cash costs of approximately $235 million.
Disciplined capital allocation is expected to deliver improved operating efficiency and increased returns.
Shared sustainability ambitions for a sustainable future.
As we mentioned, Smurfit WestRock has set its sights on achieving synergies surpassing $400 million within the first year of operation. However, other potential synergies that have been explored, including:
Best practice and transfer of knowledge
Greater efficiency on capital spending
Key Considerations for Suppliers
With the announcement of $80 million synergies in the first year, Smurfit WestRock is actively seeking avenues to enhance its procurement practices.
Our FisherSolveBenchmark Cost Benchmarking module is a valuable tool for comparing the costs of various mills within this new ecosystem. This includes factors such as chemical usage, energy consumption, furnish expenses, and materials costs.
Anticipated integration synergies of $240 million indicate that there are numerous potential operational efficiencies. By benchmarking costs, suppliers can identify mills that may be performance outliers. This creates opportunities for suppliers to assist in improving these underperforming mills. It may also pose a challenge if the mills they supply are not performing as well as others.
Smurfit WestRock has expressed its commitment to enhancing operational performance and optimizing its portfolio in the midterm. This raises concerns about the potential impacts on a supplier with mills that could be shuttered or sold.
Conversely, suppliers who serve high-performing mills in the Smurfit WestRock portfolio can find opportunities to help underperforming mills enhance their cost positions. This allows suppliers to contribute their expertise to help mills improve their performance within the merged company.
FisherSolve’s Viability Benchmarking module, as seen below, offers a solution to address this concern. Users can compare their mills to those in the new Smurfit WestRock portfolio, allowing them to assess potential closure risks.
FisherSolve's Viability Module
Learn more about ResourceWise's Viability Benchmarking Module.
In addition, suppliers should consider sustainability. Both Smurfit Kappa and WestRock have previously been dedicated to improving their overall sustainability efforts, and they have pledged to continue in this direction.
FisherSolve’s Carbon and Energy Benchmarking modules provide valuable insights into the current usage and emission levels within the portfolio, highlighting areas where opportunities may arise to improve water usage and reduce carbon emissions.
Harnessing ResourceWise's Expertise for Better Decision-Making
Leveraging our collection of tools, our team of pulp and paper experts at ResourceWise possesses the knowledge and experience to comprehensively analyze how this significant merger might affect your business.
Gaining a deep understanding of how industry developments can potentially disrupt the market is vital for making strategic decisions.
Contact us today to get more in-depth insights into your mill's market position amidst this news.