Smurfit Westrock (SW) 2026 年第三季法說會：7 億美元成本逆風與 2027 年復甦

Smurfit Westrock (SW) 表示，第三季獲利能力受高於預期的能源與貨運通膨施壓，而紙張與包裝產品的漲價則按正常的滯後時間持續傳導至整個系統。管理層預期成本回收與內部效率舉措的效益將在 2027 年更加明顯。

重點提要

• 2026 年第三季調整後 EBITDA 為 1.205 百萬美元，調整後 EBITDA 利潤率為 14.8%。
• 管理層目前預估 2026 全年調整後 EBITDA 約為 47 億美元。
• 預計 2026 年能源與貨運將帶來約 7 億美元的年減逆風，顯著高於先前預估。
• 北美售價自第二季至第三季季增約 5%，而歐洲售價上漲約 2%。
• 北美加工利潤率降至 2% 以下，主因是紙張價格上漲已影響加工業務，但尚未完全轉嫁給紙箱客戶。
• 管理層表示 2030 年計畫保持不變，儘管居高不下的成本轉移了各年份之間獲利改善的時間點。

核心財務數據

業務與營運績效

北美

第三季瓦楞紙出貨量較上一季改善，儘管涉及螺旋體（Spiro）和大腸桿菌（E. coli）的農業污染事件拖累了美國與墨西哥的出貨量。管理層表示 10 月出貨量與去年同期大致持平，且在法說會召開時 11 月的訂單狀況看起來相當不錯。

造紙廠系統的大多數紙等產能持續售罄，使公司能夠排定訂單優先順序並改善業務組合。管理層預期財務效益將在 2027 年更加顯現。

公司亦報告持續爭取到新客戶、服務指標改善，並在減少虧損合約方面取得進展。然而，加工利潤率降至 2% 以下，因為內部紙張轉嫁反映的是市場價格，之後較高的成本才能完全轉嫁至紙箱。管理層預計這種滯後情況將在 2027 年第一季與第二季消除。

在消費包裝方面，食品與飲料加工出貨量與去年同期持平，而 HPA 出貨量增加約 2%。公司的 SBS（漂白硫酸鹽紙板）產能售罄，並正推動漲價。管理層未在 CRB（塗佈廢紙板）看到類似的漲價動能。

歐洲、中東、非洲及亞太地區

能源成本上升仍是主要的營運壓力。管理層表示，歐洲天然氣價格約為每 BTU 30 美元，相比之下北美約為 3 美元，形成 10:1 的比例。

紙張漲價正逐步轉嫁。公司表示其牛皮面紙廠對天然氣依賴度較低，並能自行產生更多能源，從而支撐了相對獲利能力。在相同工作天數基礎上，10 月歐洲出貨量成長了幾個百分點。

管理層預計，若造紙廠無法在目前的能源成本下實現獲利營運，產業停產減產的情況將持續。管理層亦表示，長期壓力可能導致進一步漲價或關廠。

拉丁美洲

儘管面臨區域成本壓力，調整後 EBITDA 利潤率仍保持在管理層所稱的優異水準。Smurfit Westrock 同意收購 CMPC 的包裝資產，管理層表示這將鞏固其在智利的地位並提升紙張整合度。

公司亦在哥倫比亞啟動了一項約 1 億美元的生質能鍋爐投資案，以抵銷能源成本。儘管巴西在過去三個月因選舉相關的不確定性致使需求走弱，但管理層表示獲利能力並未受影響。

管理層指引

管理層預估 2026 全年調整後 EBITDA 約為 47 億美元。該展望主要反映了預估年減約 7 億美元的能源與貨運逆風。

公司預期最新的漲價措施將在 2027 年第一季實現完全的成本回收。來自紙張、出口及紙箱價格上漲的效益應於 2026 年第四季末開始顯現，並在 2027 年第一季與第二季更趨顯著。

管理層尚未完成 2027 年預算，亦未提供正式的 EBITDA 指引。儘管如此，管理層表示在市場狀況保持相對穩定的前提下，有信心 2027 年的業績將顯著改善。若成本持續居高不下，可能會考慮進一步的緩解措施或漲價行動。

公司重申其 2030 年計畫結構上未變。管理層將 2026 年的未達標主要歸因於時間點問題，而非該計畫潛在內部機會的改變。

風險與關注焦點

• 能源與貨運成本仍高度波動，可能需要採取額外的漲價、停產或整頓行動。
• Smurfit Westrock 進行的能源避險規模少於平常，因為管理層認為目前的價格對長期避險不具吸引力。
• 紙張漲價與紙箱價格回收之間的滯後，暫時壓抑了加工利潤率。
• 若居高不下的能源成本進一步對客戶及整體工業經濟施壓，歐洲需求可能會轉弱。
• 儘管 10 月出貨量改善且獲得新客戶，北美需求仍具不確定性。
• 墨西哥表現持續疲軟，而巴西則因選舉相關因素出現需求疲軟。
• 歐洲新增的箱紙板產能可能會影響供需，儘管管理層預期生產商將優先選擇停產與回報率，而非降價填滿造紙廠產能。

分析師問答亮點

價格與成本回收：管理層表示，產業最初每噸約 100 美元的漲價幅度已大幅涵蓋上升的成本。近期更多的漲價應能提供更大的利潤率支撐，儘管能源與貨運的持續上漲延後了該效益。

區域紙張定價：公司引述北美淨紙價每噸上漲 170 美元，歐洲每噸上漲 140 美元。由於北美指數化合約比例較高，其轉嫁速度通常快上幾個月。

2027 年獲利驅動因素：管理層指出價格與成本回收、客戶組合改善、虧損合約減少、北美出貨量提升、造紙廠升級以及營運效率舉措為關鍵驅動因素。官方未提供正式的 2027 年指引。

歐洲供應狀況：管理層預期若能源成本維持高檔，將會出現額外的停產。管理層認為，整合型生產商的普及與獨立造紙廠的減少，降低了單純為了爭取產量而降價的誘因。

資本支出：公司將數個專案延後了幾個月，但表示其投資計畫保持不變。管理層指出，約 1.5 億美元可能會轉移至 2031 年或 2032 年，而非大幅增加 2027 年的支出。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good day, and thank you for standing by. Welcome to the Smurfit Westrock 2026 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 go ahead.

Ciaran Potts

Thank you Sara. 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. 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.merfitwesttock.com.

Before I hand you over, please note that Tony and Ken stepping away from the Board this morning and me joining after our call in the interest of time, I therefore request that you ask no more than 2 questions. I stay on the line should we have any technical issues in Brazil.

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

Anthony P. J. Smurfit

Thank you, Ciaran. As Ciaran has just said, we're hosting today's call from our Tres Barras Mill in Brazil. Latin America's largest country with a population of some 213 million people. Tres Barras is a state-of-the-art kraftliner mill with an annual capacity of approximately 700,000 tonnes. This operation is a great example of successful investments of approximately USD 350 million over the last 5 years delivering superior returns. It is integrated downstream into our Latin American box system, primarily in Brazil, Argentina and soon to be Chile, and significantly integrated upstream into our sustainably sourced forestry operations.

As you will have seen, we've announced third quarter adjusted EBITDA of $1.205 million with an adjusted EBITDA margin of 14.8%. The -- these results show great resilience in the face of unprecedented and greater-than-anticipated cost inflation, predominantly but not limited to energy and freight. To counteract these cost increases, we have, by necessity, implemented price increases across most paper grades, which are being passed on with the normal time lag.

The period was characterized by a number of one-off events, such as extreme heat waves in Europe, earthquakes in Colombia and a significant contamination issue in the agriculture sector in the United States, affecting our volumes, both there and in Mexico. Since the formation of Smurfit WestRock, I'm incredibly proud of the many achievements we have accomplished, especially the way we have brought the 2 companies together and formed 1 culture. Operating in 40 countries we have unified the company under 1 banner with a focus being the owner-operator model, which resonates and is well understood both internally and externally.

We have developed a strategic plan, which we presented to you in February, that takes the company to a different level through our own actions and investments to improve efficiency and are offering to our customer base. And we've refocused the company at our end customers through innovation, quality and service.

Turning now to a regional overview. Our North American business continues to improve in most areas, although this improvement is masked by the amount of increased costs that we have incurred. The third quarter showed sequential improvement in our corrugated volumes with a continued and developing strong pipeline.

Our people have embraced our new Smurfit WestRock performance-led an owner-operator culture and this is reflected by our improvements across all customer service metrics and our attention and retention of talent. Today, our mill system across practically all grades remain sold out, allowing for us to prioritize orders and improve our business mix. The real benefits of this will be apparent as we move into 2027.

In our converting businesses, we are progressively getting better through continuous investments with teams of highly motivated people across both business areas of corrugated and consumer. As we roll out our innovation centers, we continue to benefit from our cross-selling opportunities as a major competitive advantage.

In another business area, we've seen a large structural shift towards our paper bag and sack business where we are the largest producer in the United States. Finally, while demand in our Mexican business is as weak as I have experienced in recent years, our footprint is continually being strengthened by significant cost takeout initiatives and rationalization measures.

Now turning to our EMEA and APAC region, where we continue to outperform our integrated peers. Our innovative offering delivers solutions to our customers that help them navigate an increasingly complex regulatory environment, especially in Europe. By partnering with Smurfit WestRock, our customers take regular compliance as a given, solving a key supply chain issue for them.

As in other regions, we have implemented paper price increases to recover costs, which are being progressively passed through. These increases are primarily a consequence of the spiraling cost of energy that has shown no signs of abatements during the year and is reaching levels that we have rarely seen.

Over the last number of years, we have made many investments in both our mill system and conversion operations that have considerably improved our quality and service KPIs, giving us further competitive advantage. Some of those investments are also targeted continuing to reduce our cost base and drive operating efficiency, which have helped somewhat to offset some of the cost pressures we have seen this year.

We have also continued to rationalize our footprint, making our asset base more efficient, which will enhance future returns. Our experienced management team in this region has a skill to both navigate the current difficult macro environment and continue to outperform. In Latin America, while the region faces many of the same challenges experienced in other regions, our returns and, in particular, our adjusted EBITDA margin remain at excellent levels.

We have strong market positions, a well-invested world-class asset base together with, again, skilled and experienced operators. We continue to look for ways to develop our offering in the region, and I was particularly happy to announce our agreement to acquire the world-class packaging assets of CMPC during the quarter. This acquisition will strengthen our position in both Chile and the wide region as well as adding further paper integration to our system. Also during the quarter, we started up our circa $100 million investment in our biomass boiler in Colombia, which is helping to offset energy price increases in that country. Paper prices are rising in the region as international shortages feed into the market.

For the full year 2026, we now expect adjusted EBITDA margin of approximately $4.7 billion. This primarily reflects the unprecedented cost inflation we continue to experience across the business. Freight and freight and energy costs alone are expected to represent approximately $700 million year-on-year headwind in 2026, materially above our earlier expectations.

As we move into 2027, we believe the actions we've taken during the year will more than offset these costs. What I'm most satisfied with is the great work that has been done across the organization in every region to improve efficiency, reduce our costs, further develop our innovation offering and improve our asset base.

As a truly global paper and packaging company with an unparalleled product portfolio and the widest geographical reach, it is ultimately our customers who benefit most from our extensive offering. As we develop the company through our investment program and through our culture, I'm confident of the foundation we are building for 2027 and beyond.

And with that, operator, we will hand it over to questions.

Operator

[Operator Instructions]. We will take our first question. This is from George Staphos from Bank of America.

分析師問答

George Staphos

I am here with Reinhardt van der Walt in Europe. So I guess 2 questions, Tony. First of all, can you talk about the progression on volumes in North America at 1 point you expect to be up at some point in the back half. Is that still the projection relatedly, I think you had a profit improvement in terms of the bridge from volume, even though volumes were down in the third quarter in North America, how do we reconcile that?

And then second, given that energy and freight would seem to be largely a box related expense. Certainly, it's going to affect both converting and production. But does the fact that you're seeing so much pressure on where you had the most -- the least amount of margin headroom to begin with in converting, does that change your philosophy in terms of how you try to push pricing and improve commercial terms over time?

Anthony P. J. Smurfit

Thank you very much, George. With regard to progression, as I said that we expected either in the third or the fourth quarter, that we would start to be there or thereabouts with the previous year. Obviously, the third quarter has been very heavily impacted by this silo. I have to remember the name of it, Spiro and the E-coli situation that affected our agricultural region very significantly -- and I think from the good news point of view is -- and 1 swallow doesn't make a summer, but for October, we are line ball with last year.

And it looks like our order books are reasonably good for November at this stage. So I mean, again, as I said, once wallet doesn't make a summer, but I do think that we have our progress each quarter has been a bit better. And as we see the volumes that we gave up last year come out of our business and the comparison is becoming easier, we would say that we are going to be there or thereabouts in Q4 with -- unless something happens with regard to the market that we don't expect.

So I think the progression is as we expected. What I'm very encouraged about, honestly, George, is when I see the wind customer wins we're having. They're smaller in number in the -- sorry, smaller in size than when you lose one of the big ones, but it takes a lot of them to replace a big one. But they are -- our quality and service levels are being -- have improved very significantly our attitude because of the owner-operator model is very well liked by our customers and liked by our internal people.

And our innovation offering as we start to roll that out is really a very big positive. So I see us getting going where we want to go to, maybe sometimes a little bit slow because the underlying market is not as strong as we would have liked. But overall, I think it's going exactly as we would have anticipated.

With regard to your bridges, I'll hand it over to Ken.

Ken Bowles

Yes, keep a simple, George, the net positive volume in North America is -- remember, we have a lot of third-party sales. So the positive growth you see there is on third-party paper sales.

George Staphos

Okay. And then on the pricing and the pressure seeing and converting?

Anthony P. J. Smurfit

Yes. On the converting, I mean, I wouldn't say there's anything different that we are having to go to our customers and sort of recognize the fact that we've got other costs than just paper. And clearly, we have to recover those as we go through the year and either through negotiation or through making sure that we have a special tag on for certain customers. So there's nothing -- we're continuing to develop our margins in our corrugated business.

We have reduced our loss makers very considerably. I think we're less than 30 loss makers some of them -- it's a bit difficult when the paper price goes up, obviously, there's a period of time where the corrugated operations flip backwards because they have to go into the market and get those paper prices up to see where we are right now. But overall, I think that we are making very good commercial progress across the business, and I'm really happy with our commercial team and the customer wins, they're winning and getting pricing going forward.

Ken Bowles

And George, and I think you can see that, George, a little bit. If you look at the North American margin quarter 1, 2 and 3, you see progression on the margin build there. And equally, while we're dealing with a normal time lag, you can see progression in pricing also, right? So sequentially, quarter 2 into quarter 3, North America pricing up about 5%. And then Europe equally, pricing will be 2% quarter 2 to quarter 3. So the impact of the price increases from paper to box is beginning to take hold, as Tony said in his prepared remarks, really setting that foundation of '27. So the actions we're doing are still on track. So no change to philosophy in that.

Anthony P. J. Smurfit

George, we would love it to be quicker, but the reality is that we're being waxed by these massive cost increases in energy that we are going to get back. And as you know, we announced EUR 100 a ton increase. The publication recognized EUR 70 of that. And obviously, from our perspective, we would have expected to get 100%, but we'll wait and see what happens going forward.

George Staphos

Understood. Enjoy the trip.

Operator

We'll take the next question today. This is from Hillary Cacanando from Deutsche Bank Securities.

Hillary Cacanando

Just going back to the North American converting business. Last quarter, you mentioned that corrugating converting margins were roughly 3% to 4%. Can you update us on where that converting margins stand today?

Anthony P. J. Smurfit

It's a little bit lower than that now, Hillary, because we take in the paper price into our converting business we transfer at the market price. So therefore, it will be a little bit less than the 2% number now because we have to then go to the market and get that increase into our boxes, but the underlying trend of margin improvement within our corrugated business is quite significant.

And you'll see that as we go into Q1 and Q2 of next year as we pass through this latest paper price increase.

Hillary Cacanando

Got it. And then as a follow-up, with 2026 EBITDA now expected at roughly $4.7 billion. How should we think about that lower starting point relative to the medium-term plan? Is the shortfall predominantly timing around price cost recovery, such that the underlying 2030 earnings opportunity is largely unchanged. How should we think about that relative to the 2030 plan?

Ken Bowles

Hillary, it's Ken here. Yes, essentially, it's timing. In reality, the plan was set up to bring us from, call it, '26 to 2030 nothing within the plan from a structural perspective has changed. And if you recall, when we talked to you in February, that plan was largely built on internal actions and a lot of kind of internal opportunities that we have to kind of get through like kind of working through the unprofitable contracts and get into positive volume growth in North America, for example.

So pricing wasn't necessarily part of that kind of proposition, if you like. But clearly, the backdrop in costs for 2026 is going to impact the timing but not the recovery or achievement of the targets, but only the timing in terms of when we get there. But the 2020 target is to bang on in terms of timing. It will just be kind of a flex in between the years but how we get there.

Hillary Cacanando

Great. So no change to 2030 plan.

Operator

We'll now take the next question. This is from Philip Ng from Jefferies.

Anthony P. J. Smurfit

We can come back to him, Sarah.

Operator

Sure. Let's move on to the next question. This is from Mike Roxland from Truist Securities.

Michael Roxland

First one I had, the industry has gotten about $170 per ton of price this year. Of that amount, how much do you estimate is for cost recovery versus margin for you guys in particular?

Anthony P. J. Smurfit

I would say that the first 100 is really just basically recovering the cost. I mean, obviously, Mike, the cost thing is a moving target as you have seen from our numbers because when we were here in 3 months ago, we did not expect TTF gas to be at 97% or 98% as it is this morning. Nor did we expect diesel to be where it is or some of these other energy costs.

So we would have thought that the first 1 would have had some margin improvement in it. But clearly, I'd say the vast majority of that has been done in these current high prices. As we translate the other increases through the more recent increases that would probably be all margin enhancements, I would say, broadly speaking.

Ken Bowles

Yes. And I think Tony kind of referenced it there. The July increase is that the $100 a ton we put back into July. I think to that point, the increases to that date would have really done with the cost of for repeat and probably a better recovery of margin, that 100 would have overcome any remaining fees, but also purely margin.

But as Tony just said, since then, the cost backdrop has continued to be elevated and unanticipated. So still a lot of costs but a bit of margin there, but probably again pushing out the timing slightly in terms of 27% versus where it might have been, but still on track.

Michael Roxland

Got it. Very clear. And just one -- when you think about '27, given -- in terms of EBITDA, given the lower stepping off point? Can you provide us with an initial peak at what you're expecting in terms of either demand, maybe some of the larger buckets or guidepost around what's going to drive EBITDA next year?

Anthony P. J. Smurfit

Mike, we haven't done our budgets yet. So I just -- I do know that our guys are very comfortable and confident that our numbers will be significantly better based upon the run rate that we're going to come out of last year, but we haven't actually got to do our budgets yet. We're doing those next week. But I would say that we still the early view is that we are very comfortable and confident that next year will be a very good year for us if everything stays relatively where it is today. I mean, clearly, there's still a lot of uncertainty in the world. And if we have some relief on costs, then that will be very positive to us.

But equally, if we don't have relief on costs, we will have to look again as to what actions we might take to mitigate those costs as we go into Q1, Q2 next year.

Operator

Next question today is from Mark Weintraub from Seaport Research Partners.

Mark Weintraub

Great. Obviously, we're in a pretty extraordinary period from a cost standpoint. And so I was just hoping if we could maybe get a little more color on some of the sensitivities and things like hedging as well as the timing on price recovery as you roll containerboard through into boxes in the different regions. So it was kind of a big picture stuff. -- wouldn't normally be asking this. But again, we're in a really volatile market, and it's hard for us on the outside to get our arms around some of the timing, in particular, around these items.

Anthony P. J. Smurfit

Yes. We have said that we expect to get the full cost recovery of the latest increase in Q1 of next year. And all of the paper the paper price increases as we deal with some of the later -- earlier taken orders as we get rid of those out of our system, those will translate into much higher export prices -- we talked -- I mentioned in my script that we see very strong paper bag business that's growing very strongly because of some structural shifts -- so all of that will start to feed through into later in this quarter, all the paper stuff later in this quarter, but really strongly into early next year.

So as we go through Q1, Q2, we should start to see material increases in our numbers based upon these increases that will be passed from from corrugated into -- sorry, from paper into corrugated and into export markets and into other grades of paper. And that is the normal -- that it would be a normal situation for us.

Europe has been a little bit more volatile in up and down pricing. And so this is completely normal for the European business to have this time lag period. And obviously, when prices go down, that is also a benefit for the company holding on to margin. So we're not seeing anything different other than the the fact that if costs, as you say, markets, it's a time when all of us are dealing with these escalating costs.

And if they continue to escalate, we'll have to do something about it because clearly, they're affecting our numbers, and we need to recover. So Q1 will be a continuing benefit from what we've seen in the announcement of the $70 and then -- and then we'll keep an eye on what we have to do baseball costs.

Ken Bowles

Mark, it's Ken here. I think overcomplicating either sensitivities on energy or freight, I think when we think about energy and hedging, clearly, coming into the year and where prices were. We still have a decent bit of hedging in the tank.

Clearly, at these levels, we've taken a different view across the year. We've stepped into the market every we and again when the prices come to a level where we think it makes sense to hedge, but not hedging at these kind of levels because in reality, that can go against you if the price drops.

So the energy committees in both North America and Europe and Latin America have been smart about how they incrementally added small hedges along the way, but we would not be at the level where it would normally be, and that's clearly a function of the market and where we see cost with there, that's why the price increase we've announced on paper in both regions, net 170 North America, Net140 in Europe are designed to kind of take account of that situation, too, but still a level of hedging, but not not at levels we'd like and the ranges would be by wide in terms of the spot prices for that.

So -- and we look at the forward curves equally, you wouldn't be stepping into this market given where the forward curves or energy are I think on the freight side, probably the most meaningful sensitivity for you is around where diesel fiscal. So we kind of estimate that, call it, every dollar on diesel probably has a direct impact to the business of something like $80 million, but then when you add in the downstream impact of that through the rest of the system, that's probably more like kind of $120 million to $130 million in total impact for the year for a North American system. That's probably the most meaningful sensitivity for that region versus, say, energy for Europe.

Mark Weintraub

Super. That's too far. And Ken, just could you give us a sense of the sensitivity to nat gas in Europe, either how much you're consuming or similar to like the dollar translates into it million. What it would...

Ken Bowles

The trickier proposition, given the fact that we do a lot of our own internal through and on kind of take off. It's a much stickier. What I'll do is Mark, I think we'll deal with that 1 separately because it's a much deeper modeling question given you can't take the total energy piece and kind of model it out it has a lot of kind of moving parts around internal energy where we use renewables, how we step into renewables, the CHP and the corrugated systems, it's quite a different, more detailed answer, if that's okay.

Anthony P. J. Smurfit

I think, Mark, it's very interesting, like at the current levels, just put into an American context, the TTF is about $30 per BTU for natural gas in Europe and in North America is, call it, $3. So it's a 10:1 ratio for the European industry. And like the reason why we're getting paper price increases in Europe is not because of the capacity situation. There's a lot of people that actually can't afford to run the mills.

And that's why the prices are absolutely necessary. And if this continues, we obviously have to be other actions, either by closures or other pricing actions because there's just no way that at these cost levels that -- our European industry in paper, but also many European industries will be able to continue to operate in any way profitably. So obviously, from our perspective, we have our kraftliner mills, which don't use as much gas and generate themselves.

So that's -- it's making them very profitable. And as we get these box paper price increases, we have to pass on through the box system, which we will be doing and are doing and you already see the prices moving up in Europe. Step by step, and we'll start to see a big benefit of that in Q1 as we go into -- as we pass through the contractual price increases that we have.

Operator

Next question comes from Anthony Pettinari from Citigroup.

Anthony Pettinari

Tony, in North America, I think you indicated you're sold out in most consumer grades. And I'm wondering if you could give any more detail on where the consumer business is in terms of cost recovery or just sort of overall performance versus expectations? And I guess we've gotten these hikes in containerboard, but in consumer, we haven't necessarily seen the same kind of pricing traction. So just kind of wondering if you can comment on that.

Anthony P. J. Smurfit

Yes. On consumer, I would say that it's steady as she goes on the CUK market. There's that's carrier board market. There's not -- there hasn't been any real decreases nor has there been any real increases there. we try -- we had a look at that way back when, and it didn't seem like the right time. SBS, as you remember, went down about $100.

We're in the market with increases currently and we're sold out in that grade. So therefore, we believe that the -- it merits some increases to get more than back what we lost in the last quarter of last year as we move into next year -- as we move into 2027. So that is a very strong rate for us.

We have a very differentiated offering. We're not in the -- we are a little bit in the commodity side of that business, but we tend not to try and be in all the commodity side of that business in plate stock and cross stock and we've got some specific areas which we've grown. And as we've talked about before, we've made some switches away from CRB to SBS and indeed to see U.K. with customers and giving them benefit for that.

So I think I feel good about the SBS market right now. I would -- the way that we are positioned at least. And then the CRB market we don't have -- our mills are not the strongest in that area, and we continue to be an alternative supplier for customers and our own internal usage. And that's an area which we don't necessarily see when I talk about most grades, that's the one area that we don't really see any pricing momentum. You'll know the reasons why that is, Anthony.

Ken Bowles

Ken here. I think to follow on to at the converting end in terms of consumer, we've seen reasonable progress in terms of volumes in Q3 over last year. I mean, for food and beverage, broadly flat, but most pleasingly, probably in our HPA segment. Broadly volumes up about 2% year-on-year. So it's kind of aligned to kind of sell their position on most of the consumer grade word-wise, but also seeing progress in terms of volumes on the converting side is equally pleasing.

Anthony Pettinari

Okay. Okay. That's very helpful. And then just a quick follow-up on Europe and kind of your response to Mark's question. Given the spike in energy and freight, and I'd imagine some volume pressure for the industry, I'm just -- are you seeing changes in industry supply/demand in terms of supply coming off. Has that -- I guess, has it surprised you that you haven't seen more supply come off. I'm just wondering if you can give any kind of general commentary on supply-demand situation in Europe? And what's obviously kind of a stressed environment?

Anthony P. J. Smurfit

I think it's inevitable that it will happen. I think we've seen a lot of people taking a lot of downtime because, obviously, if you're going into the market and selling at the old prices, you're just -- you're losing a lot of money on every ton. And as this price continues to rise for energy, then you're going to see continued stress either through downtime as you know, Anthony, in Europe, governments don't like to see paper mills shut down, so they try and keep them open as long as possible and they give all sorts of subsidies and health. And you'll have seen some of our competitors announced their results and they're making 0 EBITDA on brand-new assets.

So the question is how long they can continue to do that for? And I don't have an answer to that because there is some time -- there is often government support that keeps them going. But inevitably, if the economics will jump out, then there will be some closures at these levels.

Operator

Next question is from Andrew Jones from UBS.

Andrew Jones

I just wanted to ask about the situation in Europe. We've had large price hikes, obviously driven by that cost pressure that you've mentioned. But I'm curious what your thoughts are on as we go into the next year, some of this new capacity is coming online in Italy and obviously that short million for U.K. I mean are you seeing pricing sort of holding in the current cost environment the last? Or do you think that we'll start to see some pressure as we go into 2027?

Ken Bowles

I think -- Andy, Ken here. I think the reality is that of all the new capacity coming on, there are all people who have given the game already, if you like, in terms of a system in place. So you got to think about this in kind of a pure capital allocation perspective or at least I would, in the sense that it wouldn't make any sense logically to be kind of trying to capture volume for new mill on lowering price given the amount of capital that it takes either to convert these mills -- or are they started a new one.

So for like the shot when you mentioned there or even the mill equally in the U.K. in the early part of next year, you have to assume a kind of similar logic or a pattern that we've seen in the last number of years, which is around Antonio's reference downtime, prioritizing maybe downtime in the mill system over reducing price in order to kind of make sure that the returns stay reasonable because irrespective of how you might want to fill a mill, the firing of the mills, the energy costs of those mills and the need trying to find a market in a kind of an okay kind of demand environment will all impact the overall return.

And also it comes down to the ability to generate cash flow to be successful. So I think we've seen in Europe, 2 things happened over the last number of years. One, it may a predominance are going to take additional downtime in order to manage that kind of market better than it might have done before. But equally, the lack of independent players means that idea of a robe mill trying to capture -- capture new volume on price is not really there anymore. It is a lot of systems who have a bigger game to play in the context of having managed overall market share.

Anthony P. J. Smurfit

Yes. I think, Andy, Ken just made a good point. There's 2 very large independents have gone out of the market once a [ psyche ] one to Mondi in Germany, Schumaker and TIM Group. And so the independent market per se is shrinking. So therefore, independent mills that are coming into the market like what the 2 that Ken has mentioned, have a less and less markets go for other than they go for export. And that's not -- that's a road to prediction really.

So I think you'll find that for them to be chopping pricing will be, as I say, it will be a disaster for them. And you see that already with one of the larger competitors in the free market competitors who make nothing in their containerboard system, and that's before the recent price rises. So I think I worry less about that than how the energy price affects the demand outlook for our end customers.

And that's something that we don't obviously have a crystal ball on -- but so far, at least because of our offering in Europe, we've grown this year. We continue to see in October, reasonably good growth in October. So I'm very comfortable with our own system. But the overall environment, how Europe energy effects Europe is something that we have to think about at least.

Operator

And the next question comes from Detlef Winckelmann from JPMorgan.

Detlef Winckelmann

My first question, you did call out, I think you said something to the effect that look, price increases always lagged. Cost inflation has come first. That's fine. But over the next -- on an annualized basis, price cost is firmly positive or price will more than offset cost inflation. Just curious, I mean, is that only on the North American side? Or should we be thinking the same thing in Europe as well, just after considering your kind of kraftliner kind of mix in the energy efficiency, that kind of side on that as well, please? And then I've got a follow-up, please.

Ken Bowles

It's Ken. No, you should assume that for all regions, the mechanism, if you like, in terms of paper price increase into the index or indeed the free negotiated is probably slightly quicker in North America than Europe by a couple of months, but ultimately, it's exactly the same pattern. And indeed, in Natera argue maybe even quicker again, given it's a region that generate deals stations quite well. So no, the pattern in terms of normal time lags that we talk about very similar for North America and Europe. And given the level of index versus nonindex is probably slightly higher in North America, you tend to get it quicker. But overall, you end up at the same place.

Detlef Winckelmann

Okay. Cool. And then one more follow-up just on Europe. We've been hearing in the last couple of company releases that there's a bit of discounting downstream at the box plant level. It does seem to be isolated to certain regions -- but just curious, are you seeing anything of that sort that that could hurt you down the line as you pass on the price increase through the box prices?

Anthony P. J. Smurfit

I mean there is some one player, particularly that is trying to get a little bit of volume. And so that has created some noise in the market. But overall, I would say -- I wouldn't say it's that much difference to any other pricing environment where people are are struggling and trying to get some volume.

So I wouldn't say it's a particular massively different situation to what it normally is, but there are some players that try and use these times to get some volume in the downstream market, and you have to -- because of your quality of service, I mean, when you look at the quality and service that we bring to our customers and the complexity we deal for them and look after for them, that we expect to get paid for that.

And clearly, our our whole innovation offering, it is making a difference. And so I wouldn't worry too much about that per se that lift.

Operator

Next question is from Detlef Winckelmann from Goodbody.

Lewis Roxburgh

My question is on holding on to pricing. So cost and energy inflation has clearly been challenging, but it will turn at some point. So I guess, what degree do you believe that you'll have to give pricing back as Europe, in particular, more vulnerable? -- did that given the oversupply in containerboard and energy security and comparably is the U.S. and Lat Am in a better place, given the industry consolidation type supply, et cetera.

Anthony P. J. Smurfit

Yes, I think that's a fair characterization, Lewis. I mean, if all of a sudden energy was to fall back, I think that it would put more pressure on the European containerboard price. But I think that I don't think there will be the case per se in Latin America or the United States out of the North American market, I think the the structural change that's happened in North America has been very significant.

And as I say, we've been in a sold-out position for the last number of months, and we have still orders to fulfill from April and May. And so I'm not -- I have no idea about the others, but I assume they're in the same sort of situation. And we have a window into Latin America. And while Latin American customers tend to have larger supplies.

Prices are going up in Latin America, and that is going to feed into a better situation next year and beyond irrespective. So unless something really bad happens in the world, I think that's -- your statement is correct.

Operator

Next question, we are going to retry the line for Phil Ng from Jefferies.

Philip Ng

Sorry, about that I had some technical issues this morning. I don't know if you addressed this already, I apologize in advance. I think, Ken, you were talking about earlier the question that in Europe, you feel pretty good that your box prices would catch up the containerboard pricing you would offset inflation. I guess the one variable that be helpful to kind of give us some color as nat gas hedges just because you had some hedges.

So based on what you have in place and your traction you're seeing, how do you feel about that dynamic? And how should we think about that hitting your P&L and your ability to kind of be on a positive spread next year?

Ken Bowles

Phil, but the price increases we announced that net 140 on test center would have ultimately taken into account a lot of what we've done on hedging and in effect, generally, the hedging will be a net incremental positive to anything you do on that paper price. There's no incremental P&L hit in that sense. They're not future out.

Ultimately, you're just contracting gas a kind of standard set prices rather than start in that sense. So everything we've done on builds around price increases around test liner, particularly in Europe, takes into account where we sit in the hedging curve. January, a conservative view on where that might go, but always with the idea that hedging plus the price increase should land you in a slightly better position overall at the end of the game.

So in reality, not that the hedging doesn't necessarily matter in that sense. It always acts as a better moderator or better basis in terms of how you get through in terms of full margin recovery. But the price increases do take account of all the hedging we have and had in place in the free.

Anthony P. J. Smurfit

I'd just add to that. We wouldn't hedge at these levels because if the energy price falls backwards in a hurry and your stock at $100, you're going to be really seriously uncompetitive for a period of time. So we just think that it would be -- and I don't -- we don't believe that anyone in the industry or to any great extent is hedging at these levels because they're so remarkable that nobody would have actually ever anticipated that gas could get to this level.

And now people would be very afraid like us that if you hedge at these levels, you could get -- you could get caught with your plants down. So we're not going to be in that situation. And we'll write it. And as I say, if if it stays at these levels, either there'll be a lot of downtime are -- there'll be further increases or there will be closures and because it just can't your 10:1 ratio versus the United States and gas, which is just unsustainable for European industry.

Ken Bowles

Because you still really what you're thinking about in the context where hedging sits in an integrated system like Europe, which is probably 100% integrated. It's about cost on the mill side that you don't tell me to get trapped on 1 side or the other that kind of hedging curve. And if you go back to kind of very high prices eventually back in '21, '22 equally would have stepped out the hedging market while that happened. And I brought back in when we need it. So it's about -- through an integrated model, it really does cost certainty to start and recover at the end.

So hedging tends to be a bit reflected in the middle. It's been a wonderful trend in the past, and it will be in the future. At the moment, as Tony said, it's not a pace to go.

Philip Ng

Okay. Helpful color. And I guess, paper picture, Tony, you've all the Watch Rock asset for some time now in terms of your journey in terms of some of the goalposts that you would want to call out and things that you still want to work on as we think about 2017 and beyond, what are some of the things you want to highlight? -- it might be your customer mix in terms of the mix of regional versus national -- but anything to this call just because obviously, the profitability has been masked by the inflation.

So just kind of give us some goalposts where you are and what are some of the next things we should look forward to as we look out to '27 and beyond.

Anthony P. J. Smurfit

Yes. I think, Phil, that's a really great question. I mean I'm sitting in the Tres Barras Mill down in Brazil. So just to take it by region, take our Latin American region. This is one of the most -- one of the world's great assets and with great management team and continuing to grow and have great ideas for the future.

So if I look around our Latin American business, really strong, great -- the west rock combination between the 2. I'll give you a very good example because I was here yesterday. They have a huge side real issue in this mill that they would sell at heavily discounted prices. because of the combination, we now have no longer have a side real issue in this mill. So we're able to run full out and get full contribution for all of the paper that we make. And it's made this mill much more profitable. And that's just one small example.

In our European business, the combination. There was no corrugated assets, but the consumer business has improved radically in Europe and is really set for a very strong growth together with our corrugated business as we move to the owner-operator model and being a really successful combination.

And then when you look to the North American market, what I would say the most pleasing thing for me has been how the management team have really adopted what we talk about as being the owner-operator model. They are very enthusiastic. We're seeing customer wins in the corrugated area.

Our consumer business, we need to -- our end market consumer margins are not where we want them to be, but we will get there because the teams -- the plants are in very good shape. The teams are very, very well organized. And so we will progressively move that margin up without anything to do with the underlying paper pricing as we refocus that business in the future.

If you take our mill system, what I would say is we have some really great mills, and we have some mills that continue to need work. And that's that -- once we fix those mills that need to have that need work then the mill system will be as good as any that we have anywhere else in the world.

So our mill system is progressing -- we've got a whole new management team there that is really moving things forward in a positive way. We've recruited some great people into the business. So our people aspect of North America has really progressed very strongly. And -- so if you say why am I excited because I can see the potential of this business.

But of course, I'm really frustrated by the fact that we're making all this progress, and it's not easy for anyone to see because when you get $700 of unexpected costs, $700 million of unexpected costs, you sort of go -- you're scratching your head a little bit to say, okay, we need to recover that. And we do, but it's pushing the game forward, which is never where we want to be.

We want to be running from the front rather than trying to see to catch up. But we are where we are because we don't have control as of things outside of our control. But I am very, very excited about the future of this company and the combination of this company because it's going to be very powerful in the years ahead.

Operator

And the final question today comes from Pallav Mittal from Barclays.

Unknown Analyst

A couple of them. Firstly, clearly, energy on freight costs are much higher than what we were expecting 3 months ago. And you have said hedging levels are low for a very obvious reason. -- if we assume spot rates and things stay this way, how much of an increase on energy and credit costs expected to be in '27 versus '26.

Ken Bowles

Pallav, I haven't got there yet. It sort of back to -- we haven't gotten near or budget yet. I think we have to kind of see that in the round around where we think all those forward curves are, but I wouldn't -- given if you like, my forecasting in energy and freight for this year has been kind of changeable as we got through the year.

I'm not sure I'd sit here, yes on forecast engine rate for next year. I think our opening assumption would be, at some point, that cost backdrop passed to a base slightly. But for the moment, I couldn't give you a view on freighter and for '27.

Unknown Analyst

Sure. And then if I could just check on CapEx, it seems that you have lowered your guidance by $150 million or so for '23. Can you just help us understand what has changed there? And does it mean that '27 CapEx goes up slightly?

Anthony P. J. Smurfit

No, not really. We decided to just slow back a little bit because the -- when we took our number down for last quarter, we said we'll just get the money back in our CapEx. But our plans are still the same. It will probably mean that 2031 will have EUR 150 million more or 2032. But I wouldn't -- we haven't stopped anything that we need to do. It's just that we've delayed a couple of projects by a number of months. It's not -- there's nothing of interest there.

Unknown Analyst

Sure. And if I can just squeeze one on Europe, a quick one. You said the growth has been good in October. Can you just help us understand how your order books are looking for the near future?

Anthony P. J. Smurfit

Well, for the very near future, we're actually okay. I mean, as I said, in North America, this month as in October, we will be line ball with last year. I don't want to predict that that's going to be the same in November and December, but November feels okay.

But we have a large election happening in November. So we'll have to see how that plays out to demand in North America. I think that Europe, we expect to have a -- we're a couple of percent up on a same-day basis during the month of October. So we hope that trend continues for the rest of the quarter, but we don't expect anything for it not to.

And Latin America, we have seen weakness in Brazil actually during the last couple of months as the uncertainty of the election down here fed into the marketplace. And it hasn't hurt our profitability. But the demand levels were not where we would have expected in the last 3 months in Brazil. But still, as I say, it hasn't affected our profitability, and we're still very well positioned in the country.

Operator

Thank you. And there are no further questions. I will now hand back to Tony Smurfit for any closing comments.

Anthony P. J. Smurfit

Yes. Thank you, operator. As I mentioned on the call, I remain incredibly excited about the future of this company. We've done a lot during the last couple of years. And obviously, we're not happy with the fact that we've absorbed so much cost so quickly during the last 3 months and into the next 2 months. So obviously, that has affected our results.

But we are in the process of recovering those costs, and we look forward to 2027 with great confidence in, and we appreciate your support and we appreciate the time you've given us today. So thank you all for being with us, and we look forward to catching up with you either in person or on the next conference call. And if we don't speak to you before year-end, we wish you a very happy Christmas and New Year. I know it sounds a little bit early to be saying that, but nonetheless, good luck in case I don't speak to you.

Operator

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