Smurfit Westrock (NYSE:SW) reported third-quarter adjusted EBITDA of $1.205 billion and an adjusted EBITDA margin of 14.8%, as higher energy and freight expenses weighed on results. Chief Executive Officer Tony Smurfit said the company faced “unprecedented and greater-than-anticipated cost inflation,” with energy and freight costs expected to create an approximately $700 million year-over-year headwind in 2026.
The company now expects full-year 2026 adjusted EBITDA of approximately $4.7 billion. Management said the revised outlook primarily reflects higher-than-expected cost inflation rather than a change in the company’s longer-term operating plan.
Smurfit spoke from the company’s Três Barras kraftliner mill in Brazil, which has annual capacity of about 700,000 tons. He said the operation reflects approximately $350 million of investment over the past five years and is integrated with the company’s Latin American box system and forestry operations.
Pricing Actions Target Higher Costs
Smurfit Westrock has implemented price increases across most paper grades in response to rising costs, though management said the increases move through the business with normal timing lags. Chief Financial Officer Ken Bowles said North American pricing increased about 5% sequentially from the second to the third quarter, while European pricing rose about 2% over the same period.
In North America, the company said price increases in paper are progressively being passed through to corrugated-box customers. Smurfit said converting margins have temporarily declined as the company transfers paper into its converting operations at market prices before recovering those higher costs from customers. He said the underlying trend in corrugated margins remains positive and should become more evident during the first and second quarters of 2027.
Management characterized much of the pricing achieved this year as cost recovery. Smurfit said the first $100 per ton of industry price increases was largely used to offset inflation, while more recent increases could contribute more meaningfully to margin expansion if costs stabilize.
Bowles said the company expects to recover the full costs associated with its latest price increase during the first quarter of 2027. He said the timing of recovery differs somewhat by region, with North America generally moving more quickly because of its index-based pricing arrangements, though the overall pattern is similar across North America, Europe and Latin America.
North America Volumes Improve, Though Demand Remains Uneven
Smurfit said North American corrugated volumes improved sequentially during the third quarter, although volumes were affected by an agricultural-sector contamination issue involving Cyclospora and E. coli that hurt activity in the United States and Mexico. The company also cited extreme heat waves in Europe and earthquakes in Colombia among the one-time events affecting the quarter.
For October, Smurfit said North American volumes were roughly in line with the prior year and that November order books appeared “reasonably good.” He said the company expects fourth-quarter volumes to be near prior-year levels unless market conditions deteriorate unexpectedly.
The company’s North American mill system is sold out across nearly all grades, according to Smurfit, allowing management to prioritize orders and improve product mix. Bowles noted that the positive volume effect shown in the company’s North American earnings bridge reflected growth in third-party paper sales rather than corrugated-box volumes.
Smurfit said the company has improved customer-service metrics, talent retention and commercial execution under its owner-operator model. He added that the company has reduced the number of loss-making customers to fewer than 30 and is seeing customer wins, although replacing large lost accounts requires numerous smaller gains.
In consumer packaging, Smurfit said coated unbleached kraft, or CUK, markets have remained stable, while solid bleached sulfate, or SBS, pricing is being pursued after prices had fallen by about $100 previously. The company is sold out in SBS grades, he said. By contrast, management said it does not see substantial pricing momentum in recycled paperboard grades.
European Energy Costs Drive Industry Pressure
Europe remains the company’s most acute energy-cost challenge. Smurfit said European natural gas prices were roughly 10 times North American levels, citing a price near $30 per million British thermal units in Europe compared with about $3 in the United States.
He said higher energy expenses have made paper price increases necessary and warned that continued elevated costs could lead to further downtime, price actions or mill closures across the European industry. Smurfit said some producers are taking downtime because selling at previous pricing levels can be unprofitable.
Bowles said the company has maintained some energy hedges but is not hedging at the levels it normally would because current prices are unusually high. He said the company has added smaller hedges selectively when prices appeared attractive. For North America, Bowles estimated that a $1 increase in diesel prices has a direct annual impact of about $80 million, rising to roughly $120 million to $130 million when downstream effects are included.
Management said it was less concerned about recently added European containerboard capacity because the new mills are operated by established industry participants with broader systems to manage. Bowles said producers may be more likely to take downtime than reduce prices to fill new capacity.
Latin America Investment and Long-Term Plan Remain Intact
In Latin America, Smurfit Westrock said returns and adjusted EBITDA margins remain at strong levels despite regional challenges. During the quarter, the company agreed to acquire packaging assets from CMPC, a deal Smurfit said would strengthen its position in Chile and elsewhere in the region while adding paper integration.
The company also started operations at a roughly $100 million biomass boiler investment in Colombia, which management said is helping mitigate higher local energy costs. Smurfit said paper prices are rising in Latin America as international shortages affect the market, though demand in Brazil weakened over recent months amid election-related uncertainty.
Bowles said the company’s 2030 targets remain unchanged. He described the lower 2026 EBITDA outlook as a timing issue, noting that the longer-term plan is based largely on internal operational actions, efficiency improvements, reducing unprofitable contracts and improving North American volumes rather than relying on pricing.
Smurfit said the company delayed several capital projects by a matter of months, reducing 2026 capital expenditure guidance by about $150 million, but said no necessary projects had been canceled. He said the company remains confident that its actions, including cost reductions, investments, customer-service improvements and price recovery efforts, position it for stronger results in 2027.
About Smurfit Westrock (NYSE:SW)
Smurfit Westrock plc (NYSE:SW) is a global provider of sustainable paper and packaging solutions. The company produces containerboard, corrugated packaging, folding cartons, paper bags, displays and other packaging products designed for consumer, retail, industrial and e-commerce applications. It also provides packaging design, supply-chain support and recycling services.
Smurfit Westrock was formed in July 2024 through the combination of Smurfit Kappa Group and WestRock. The transaction brought together two established packaging businesses with roots in Europe and North America.
