Smurfit Westrock Q3 Sales Rise as Inflation Weighs on EBITDA

Smurfit Westrock (NYSE: SW) reported higher third-quarter sales but lower earnings and margins as freight, energy and raw-material inflation outweighed benefits from pricing and volume. The packaging company expects full-year 2026 adjusted EBITDA of approximately $4.7 billion, including about $1.3 billion in the fourth quarter.

Net sales for the three months ended September 30 rose 2.0% to $8.16 billion from $8.00 billion a year earlier. Net income declined to $219 million from $245 million, while net income margin narrowed to 2.7% from 3.1%.

Adjusted EBITDA, a non-GAAP measure, fell to $1.21 billion from $1.30 billion. Adjusted EBITDA margin contracted to 14.8% from 16.3%.

The company’s EBITDA bridge showed $111 million of benefit from selling prices, $33 million from volume and $2 million from foreign exchange. Those gains were more than offset by a $243 million reduction from other factors, including $88 million each from higher energy and freight costs.

For the first nine months of 2026, net sales increased to $23.90 billion from $23.60 billion. Adjusted EBITDA declined to $3.42 billion from $3.77 billion, and net income fell to $370 million from $601 million. The nine-month adjusted EBITDA margin was 14.3%, compared with 16.0% a year earlier.

North America Faces Cost Pressure

North America generated aggregate net sales of $4.9 billion and adjusted EBITDA of $760 million, down from $810 million in the prior-year quarter. The segment’s adjusted EBITDA margin was 15.6%, while days-adjusted corrugated volumes declined 3.4%.

Pricing contributed $95 million to the region’s year-over-year EBITDA bridge, but other factors reduced earnings by $157 million. That category included approximately $62 million each of freight and raw-material inflation.

Smurfit Westrock said its North American mill system remained sold out in containerboard and most consumer grades. The company implemented further linerboard price increases in September and said its converting operations continued to make progress, although opportunities for improvement remained in Mexico and agriculture-related volumes. It is also continuing to implement its owner-operator model and making measured investments to support customers and improve efficiency.

EMEA and APAC Volumes Edge Higher

EMEA and APAC reported aggregate net sales of $2.8 billion and adjusted EBITDA of $379 million, compared with $419 million a year earlier. Adjusted EBITDA margin was 13.4%, and days-adjusted corrugated volumes increased 0.4%.

The region received $21 million of benefit from volume and $7 million from selling prices, while other factors reduced EBITDA by $64 million. The presentation identified a $70 million energy-cost headwind within that category.

The company said European containerboard pricing strengthened again in September, its mill system was full and the corrugated business recorded year-over-year growth. Management expects containerboard price increases to be fully recovered during the first half of 2027.

Latin America Posts Highest Regional Margin

Latin America produced aggregate net sales of $600 million and adjusted EBITDA of $126 million, up from $116 million a year earlier. Its adjusted EBITDA margin reached 21.4%, the highest among the company’s reported regions, despite a 1.8% decline in days-adjusted corrugated volumes.

Smurfit Westrock said the CMPC acquisition is expected to strengthen its presence in Chile, improve its customer proposition and deepen regional paper integration. The ramp-up of a biomass boiler in Cali, Colombia, was progressing as expected.

2026 Outlook Reflects Elevated Inflation

Management described 2026 as a year of significant operational progress obscured by unusually high cost inflation. Smurfit Westrock estimates that freight and energy costs will each increase by approximately $350 million for the full year compared with 2025. For the fourth quarter alone, it expects year-over-year increases of about $130 million for freight and $230 million for energy.

The company forecasts approximately $2.3 billion of capital expenditure in 2026, along with about $700 million of cash interest and $500 million of cash taxes. It expects an effective tax rate of roughly 29% and depreciation and amortization of approximately $2.6 billion.

Smurfit Westrock did not reconcile its adjusted EBITDA outlook to projected GAAP net income, citing uncertainty and potential variability in items dependent on future events.

The outlook remains subject to changes in demand, the company’s ability to offset elevated costs through pricing, execution of planned closures and integration of the Smurfit Kappa and WestRock businesses. Other disclosed uncertainties include tariffs and protectionist measures, raw-material and energy availability, currency movements, cybersecurity threats, restructuring costs, indebtedness and the company’s ability to achieve anticipated combination synergies.