WestRock Co.’s merger with KapStone Paper and Packaging Corp. played a key role in increased sales for the corrugated paper company, according to third-quarter earnings released Thursday morning.
WestRock reported that its third quarter net sales totaled nearly $4.9 billion, an increase of $553 million over last quarter. Company officials attributed the boost to higher selling prices for domestic containerboard and corrugated containers, as well as the acquisition of Kapstone, which included a Longview-based pulp and paper mill.
WestRock gained ownership of the Longview plant — currently the company’s largest mill — in November as part of its $4.8 billion merger with KapStone. The merger made Atlanta-based WestRock one of the nation’s largest producers of paper and packaging products and expanded the company’s market to the West Coast and Asia.
“We’ve always known we are a large player in the market because we are one of the bigger mills in the country. For a giant corporation (like WestRock) to purchase us … is notable,” said Scott Tift, president of the local pulp and paper workers union AWPPW Local 153, in a phone interview Tuesday. About 800 union workers are employed at the mill.
“The members of Local 153 have always produced a quality product here, for almost 100 years now,” Tift said. “Regardless of who owns us, that will continue to happen.”
More merger benefits
In addition to boosted net sales, WestRock officials said they expect the KapStone merger to result in $200 million of “synergies,” or financial benefits gained by combining the two companies, by the end of fiscal year 2021.
The merger had already resulted in $80 million of synergies by the end of June, WestRock Chief Executive Officer Steve Voorhees said during Thursday’s investor call.
“The integration of KapStone has progressed exceptionally well. We are realizing our synergy and performance improvement targets ahead of schedule,” said Voorhees, noting that the company anticipates exceeding its $200 million synergy goal.
Tift said WestRock “jumped right in” to Longview operations when it acquired the plant in November. Voorhees noted during the investor call that “multiple KapStone box plants and the Longview mill have already transitioned to WestRock operating systems.”
Tift said “corporate has definitely taken control of how things are done down here. … WestRock has a corporate model of how they want their mills to function.”
But the union has pushed back against some parts of that corporate model because local employees feel those parts “step on our rights,” Tift said. Though he didn’t note specific examples, Tift said most of the conflict comes from different interpretations of contract language.
The union’s seven-year contract, which lasts through May, 31, 2024, transferred to WestRock during its KapStone merger.
“Initially, the new company very much wanted to talk with the union and work on things with the union,” Tift said. “But as time has gone on, we have told them there are certain things they can’t do (under the contract). … We’ve fought them on several things, and since then there has been a pretty big breakdown of communication between the union leadership and the company leadership.”
Tift added that the merger is “still very new,” and that the union will try to work with the plant’s new owners to find some middle ground on those things they disagree with.
“As for the union, we hope that we can move forward in a productive, cooperative fashion. That’s our biggest hope for our members,” Tift said.
According to the earnings release, WestRock spent about $1.1 million on “integration costs” this quarter, primarily related to its KapStone merger. Another $6 million went to “restructuring costs,” tied to severance and other employee costs related to KapStone.
