Earnings Call: Q3 2026

Oct 28, 2026

Earnings release

Summary

Q3 Adjusted EBITDA was $1.205 billion as inflation, especially energy and freight, pressured results; FY2026 Adjusted EBITDA is forecast at ~$4.7 billion. Price recovery is expected to support 2027 improvement, while cost and demand uncertainty persist.

Today, and thank you for standing by. Welcome to the Smurfit Westrock 2026 Q3 Results Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. 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. Thank you, Sarah. 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.smurfitwestrock.com. Before I hand you over, please note that Tony and Ken are stepping away from the board this morning and rejoining after our call. In the interest of time, I therefore request that you ask no more than two questions. I'll 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. Thank you, Ciaran. As Ciaran has just said, we're hosting today's call from our Três Barras mill in Brazil, Latin America's largest country, with a population of some 213 million people. Três Barras is a state-of-the-art kraftliner mill with an annual capacity of approximately 700,000 tons. This operation is a great example of successful investments of approximately $350 million over the last five 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 Q3 Adjusted EBITDA of $1,205 million, with an Adjusted EBITDA margin of 14.8%. 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 agricultural sector in the U.S., affecting our volumes both there and in Mexico. Since the formation of Smurfit Westrock, I am incredibly proud of the many achievements we have accomplished, especially the way we have brought the two companies together and formed one culture. Operating in 40 countries, we have unified the company under one banner with the 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 our offering to our customer base. We have refocused the company at our end customer 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 and 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 remains 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 have seen a large structural shift towards our paper bag and sack business, where we are the largest producer in the U.S. Finally, while demand in our Mexican business is as weak as I have experienced it 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 regulatory 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 at 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 the 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 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 wider 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 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 am confident of the foundation we are building for 2027 and beyond. With that, operator, we will hand it over to questions. Thank you. If you would like to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now take the first question. This is from George Staphos from Bank of America. Please go ahead. Good morning, everybody. Good afternoon. Thanks for taking the question in detail. I am here with Reinhardt van der Walt in Europe. I guess two questions, Tony. First of all, can you talk about the progression on volumes in North America? At one 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 third quarter in North America. How do we reconcile that? Second, given that energy and freight would seem to be largely a box-related expense, certainly it is going to affect both converting and production. The fact that you are seeing so much pressure on where you had 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? Thank you, and good luck in the quarter. 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 Cyclospora. I have to remember the name of it. Cyclospora. Cyclospora and the E. coli situation that affected our agricultural region very significantly. I think from the good news point of view is, and one 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. Again, as I say, one swallow doesn't make a summer, but I do think that our progress each quarter has been a bit better. As we see the volumes that we gave up last year come out of our business and the comparisons becoming easier, we would say that we are going to be there or thereabouts in Q4, unless something happens with regard to the market that we don't expect. I think the progression is as we expected. What I'm very encouraged about, honestly, George, is when I see the customer wins we're having. They're smaller in size than when you lose one of the big ones, and it takes a lot of them to replace a big one. But our quality and service levels 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 going where we want to go to, maybe sometimes a little bit slower 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. Hey, morning, George. Morning, Reinhardt. Yeah, keep it simple, George. The net positive volume in North America is. Remember, we have a lot of third-party sales, so the positive growth you're seeing there is around third-party paper sales. Okay. On the pricing and the pressure seeing in converting. Yeah. On the converting, I wouldn't say there's anything different. We are having to go to our customers and sort of recognize the fact that we've got other costs than just paper. 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. It's a bit difficult when the paper price goes up. Obviously, there's a period of time where the corrugated operations slip 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 am really happy with our commercial team and the customer wins they are winning and getting pricing going forward. George, I think you can see that a little bit if you look at the North American margin quarter one, two, and three, you see progression on the margin build there. Equally, while we are dealing with the normal time lag, you can see progression on pricing also. So sequentially, quarter two into quarter three, North American pricing up about 5%, and in Europe equally pricing up about 2% quarter two to quarter three. So the impact of the price increases from paper to box is beginning to take hold. As Tony said, and as for Bernard, really setting that foundation for 2027. So the actions we are doing are still on track, so no change to philosophy on that then. All right. Tell everybody George, we would love it to be quicker, but the reality is that we are being whacked by these massive cost increases in energy that we are going to get back. As you know, we announced the EUR 100 a ton increase. The publication recognized 70 of that, and obviously from our perspective, we would have expected to get 100, but we will wait and see what happens going forward. Understood. Enjoy the trip. See you soon. Thank you. Thanks, George. Thank you. We will take the next question today. This is from Hillary Cacanando from Deutsche Bank Securities. Please go ahead. Hi. Thank you for taking my question. Just going back to the North American converting business. Last quarter, you mentioned that corrugating converting margins were roughly 3%-4%. Can you update us on where that converting margins stand today? 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, 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 box system. But the underlying trend of margin improvement within our corrugated business is quite significant, and you will see that as we go into Q1 and Q2 of next year as we pass through this latest paper price increase. Got it. Thanks, Tony. 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? Hi, Hillary. It's Ken here. Yeah, essentially it's timing. In reality, the plan was set up to bring us from call it 2026 to 2030. Nothing within the plan from a structural perspective has changed. If you recall when we talked in February, that plan was largely built on internal actions and a lot of kind of internal opportunities that we had to kind of get through, like kind of working through the unprofitable contracts and getting some positive volume growth in North America, for example. Pricing wasn't necessarily part of that kind of proposition, if you like. But clearly the backdrop in cost for 2026 has kind of impacted the timing, but not the recovery or achievement of the targets, but only the timing in terms of when we get there. But the 2030 target is still bang on in terms of timing. It will just be kind of a flex in between the ears with how we get there. Great. No change to 2030 plan. Great. Thank you so much. Thanks, Hillary. Thanks, Hillary. Thank you. We will now take the next question. This is from Phil Ng from Jefferies. Please go ahead. Phil Ng from Jefferies, your line is open. Please ask your question. We can come back to him, Sarah. Sure. Let's move on to the next question. This is from Mike Roxland from Truist Securities. Please go ahead. Yeah. Thank you, Tony, Ken, Ciaran, and team for taking my questions. 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? I would say that the first 100 is really just basically recovering the cost. Obviously, Mike, the cost thing is a moving target, as you have seen from our numbers, because when we were here 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. We would have thought that the first 100 would have had some margin improvement in it. Clearly, I would say the vast majority of that has been gone in these current high prices. As we translate the other increases through the more recent increases, that would probably be all margin enhancement, I would say, broadly speaking. Yeah, and I think as Tony kind of referenced it there, the July increases, that $100 a ton we put back end of July. I think up to that point, the increases to that date would have really dealt with the cost recovery piece and probably a bit of recovery on margin. That 100 would have overcome any remaining piece, but also purely margin. But as Tony just said, since then, clearly the cost backdrop has continued to be elevated and unanticipated. Still, a lot of cost with a bit of margin in there, but probably again, pushing out the timing slightly in terms of 2027 versus where it might have been, but still on track. Got it. Very clear. Just one, when you think about 2027, in terms of EBITDA, given the lower stepping off point, can you provide us with an initial peek at what you are expecting in terms of either demand, maybe some of the larger buckets or guideposts around what is going to drive EBITDA next year? Thanks. Mike, we have not done our budgets yet. 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 are going to come out of last year. But we have not actually got to do our budgets yet. We are doing those next week. But I would say that 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. Clearly, there is still a lot of uncertainty in the world. If we have some relief on cost, then that will be very positive to us. But equally, if we do not 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. Understood. Thank you. Thanks, Mike. Thank you. Next question today is from Mark Weintraub from Seaport Research Partners. Please go ahead. Great. Thanks very much. Obviously, we are in a pretty extraordinary period from a cost standpoint. 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. It was kind of the big-picture stuff. I would not normally be asking this, but again, we are in a really volatile market, and it is hard for us on the outside to get our arms around some of the timing, in particular, around these items. Yeah. We have said that we expect to get the full cost recovery of the latest increase in Q1 of next year. All of the paper price increases as we deal with some of the earlier-taken orders, as we get rid of those out of our system, those will translate into much higher box prices. I mentioned in my script that we see very strong paper bag business that is growing very strongly because of some structural shifts. 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. 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 corrugated into, sorry, from paper into corrugated and into export markets and into other grades of paper. That it would be a normal situation for us. Europe has been a little bit more volatile in up and down pricing. This is completely normal for the European business to have this time lag period. Obviously when prices go down, that is also a benefit for the company holding onto margin. We are not seeing anything different other than the fact that if costs, as you say, Mark, it is a time when all of us are dealing with these escalating costs. If they continue to escalate, we will have to do something about it because clearly they are affecting our numbers, and we need to recover. Q1 will be a continuing benefit from what we have seen in the announcement of the $70. Then we will keep an eye on what we have to do based upon costs. Hey, Mark, it is Ken here. I think, in 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 had a decent bit of hedging in the tank. Clearly at these levels, we have taken a different view across the year. We have stepped into the market every now and again when the price has 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. The energy committees in both North America and Europe, and indeed Latin America, have been smart about how they have incrementally added small hedges along the way. But we would not be at the levels where we would normally be, and that is clearly as a function of the market and where we see costs. But clearly, that is why the price increase we have announced on paper in both regions, net $170 in North America, net EUR 140 in Europe, are designed to kind of take account of that situation too. But still a level of hedging, but not at the levels we would like, and the ranges would be quite wide in terms of the strike prices for that. We look at the forward curve equally. You would not be stepping into this market given where the forward curves for energy are. I think on the freight side, probably the most meaningful sensitivity for you, is around where diesel sits for us. We kind of estimate that kind of 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 is probably more like kind of $120 million to $130 million in total impact for the year for a North American system. That is probably the most meaningful sensitivity for that region versus, say, energy for Europe. Super. That is super. Ken, could you give us the sensitivity to nat gas in Europe, either how much you are consuming or similar to like the dollar translates into X million dollars? What it would be for Europe. It is a trickier proposition given the fact that we do a lot of our own internals through CHPs and our own kind of takeoff. It is a much trickier. What I will do is, Mark, I think we will deal with that one separately because it is a much deeper modeling question, given you cannot 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 is quite a different, more detailed answer, if that is okay. I think, Mark, it is very interesting. At the current levels, just put into an American context, the TTF is about $30 per MMBtu for natural gas in Europe and in North America, it is call it $3. So it is a 10 to one ratio for the European industry. And the reason why we are getting paper price increases in Europe is not because of the capacity situation. There is a lot of people that actually cannot afford to run the mills, and that is why the prices are absolutely necessary. And if this continues, there will obviously have to be other actions, either by closures or other pricing actions, because there is 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. Obviously from our perspective, we have our kraftliner mills which don't use as much gas and generate themselves. So it's making them very profitable. As we get these box paper price increases, we have to pass them on through the box system which we will be doing and are doing. 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 pass through the contractual price increases that we have. Appreciate the color. Thank you. Thanks, Mark. Thank you. Next question comes from Anthony Pettinari from Citigroup. Please go ahead. Good morning. Hey, Anthony. Tony. Hey. In North America, I think you indicated you are sold out in most consumer grades. I am 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. I guess we have gotten these hikes in containerboard, but in consumer, we have not necessarily seen the same kind of pricing traction. I am just kind of wondering if you can comment on that. Yeah. On consumer, I would say that it is steady as she goes on the CUK market. That is carrier board market. There has not been any real decreases, nor has there been any real increases there. We had a look at that way back when, and it did not seem like the right time. SBS, as you remember, went down about $100. We are in the market with increases currently and we are sold out in that grade, so therefore we believe that 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 grade for us. We have a very differentiated offering. 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 cup stock. 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 CUK with customers and giving them benefit for that. I think I feel good about the SBS market right now the way that we're positioned at least. The CRB market, our mills are not the strongest in that area. We continue to be an alternative supplier for customers and our own internal usage. 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. Okay. Yeah. Hey, Ken here. I think to follow on from that too, at the converting end in terms of consumer, we've seen reasonable progress in terms of volumes Q3 over last year. For food and beverage, broadly flat, but most pleasingly probably in our HBPC segment, broadly volumes up about 2% year-on-year. It's going to align that kind of sell position on most of the consumer grade forward wise, but also seeing progress in terms of volumes on the converting side is equally pleasing. Okay. That's very helpful. Then just a quick follow-up on Europe and your response to Mark's question. Given the spike in energy and freight and I'd imagine some volume pressure for the industry, are you seeing changes in industry supply demand in terms of supply coming off? 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 a stressed environment. 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 losing a lot of money on every ton. 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 help. You'll have seen some of our competitors announce their results and they're making zero 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 often government support that keeps them going. But inevitably if the economics will trump out, then there will be some closures at these levels. Okay. That's very helpful. I'll turn it over. Thanks, Anthony. Thank you. Next question is from Andrew Jones from UBS. Please go ahead. Hi, gents. Hey, Andrew. Thanks. Thanks for the color. 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 am 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 Shotton mill in the U.K. Are you seeing pricing sort of holding if the current cost environment lasts, or do you think that we are going to start to see some pressure as we go into 2027? I think, morning, Andy. Ken here. I think the reality is that of all the new capacity coming on, they are all people who have skin in the game already, if you like, in terms of a system in play. So you got to think about this from 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 a new mill on lowering price given the amount of capital that it takes either to convert these mills or indeed start up a new one. So for like the Shotton one you mentioned there, or even the Palm mill equally in the U.K. in the early part of next year, you would have to assume a kind of similar logic or pattern that we have seen in the last number of years, which is around, Tony has referenced downtime, prioritizing maybe downtime in a 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 cost of those mills, and indeed trying to find a market in a kind of a okay kind of demand environment will all impact the overall return. Ultimately, it comes down to the ability to generate cash flow to be successful. So I think we have seen in Europe two things happen over the last number of years. One, it may have predominance to kind of 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 rogue mill trying to 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 how they manage overall market share. Yeah, I think Andy, Ken just made a good point. There are two very large independents have gone out of the markets, one to Saica and one to Mondi in Germany, Schumacher and Thimm Group. The independent market per se is shrinking, so therefore independent mills that are coming into the market like the two that Ken has mentioned, have a less and less market to go for other than they go for export, and that's a road to perdition really. I think you'll find that for them to be chopping pricing will be, as I say, it will be a disaster for them. You see that already with one of the larger competitors in the free market competitors who makes nothing in their containerboard system. That's before the recent price rises. I worry less about that than how the energy price affects the demand outlook for our end customers. 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. I'm very comfortable with our own system. But the overall environment, how energy affects Europe, is something that we have to think about at least. Yeah. Okay. That's fairly clear. Thanks a lot. Thanks, Andy. Thank you. The next question comes from Detlef Winckelmann from JPMorgan. Please go ahead. Morning, everyone. Maybe 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, 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 there and the energy efficiency, that kind of side on that as well, please? Then I've got a follow-up, please. Hey, Detlef. Ken. Morning. 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 freedom negotiated is probably slightly quicker in North America than Europe by a couple of months. But ultimately, it's exactly the same pattern. Indeed, in Latin America, you'd argue maybe even quicker again, given it's a region that generally deals with inflation quite well. So no, the pattern in terms of normal time lags that we talk about very similar for North America and Europe. Given the level of index versus non-index is probably slightly higher in North America, you tend to get it through quicker, but overall, you end up in the same place. Okay, cool. Then one more follow-up just on Europe. We've been hearing in the last couple 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 could hurt you down the line as you pass on the price increase through to box prices? There is one player particularly that is trying to get a little bit of volume, and so that has created some noise in the market. Overall, I wouldn't say it's that much different to any other pricing environment where people are struggling and trying to get some volume. I wouldn't say it's a particular massively different situation to what it normally is. There are some players that try and use these times to get some volume in the downstream market, and because of your quality service. 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, we expect to get paid for that, and clearly our whole innovation offering is making a difference. I wouldn't worry too much about that per se, Detlef. Cool. Thank you. Thank you. Thank you. Next question is from Lewis Roxburgh from Goodbody. Please go ahead. My question is on holding onto pricing. Cost and energy inflation has clearly been challenging, but it will turn at some point. I guess what degree do you believe that you will have to give pricing back as Europe in particular more vulnerable to that given the oversupply and containerboard and energy security and comparably is the U.S. and LATAM in a better place given the industry consolidation tight supply, et cetera? Yeah, I think that is a fair characterization, Lewis. 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 do not think that will be the case per se in Latin America or the United States or the North American market. I think the structural change that has happened in North America has been very significant. As I say, we have been in a sold-out position for the last number of months, and we have still orders to fulfill from April and May. I have no idea about the others, but I assume they are in the same sort of situation. 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. Unless something really bad happens in the world, I think that your statement is correct. Yeah, that is clear. Thanks. Thank you. Thank you. Next question, we are going to retry the line for Phil Ng from Jefferies. Please go ahead. Your line is open. Hey, guys. Sorry about that. I had some technical issues this morning. Tony, 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 to containerboard pricing, you would offset inflation. I guess the one variable that would be helpful to kind of give us some color is nat gas hedges just because you had some hedges. Based on what you have in place and your traction you are 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? Hey, Phil. The price increases we announced, so that net $140 on testliner would have ultimately taken into account a lot of what we have done on hedging. In effect, generally the hedging would be a net incremental positive to anything you do on that paper price. There is no incremental P&L hit in that sense. They are not futures. Ultimately, you are just contracting gas at kind of standard set prices rather than spot in that sense. Everything we have done and built around price increases around testliner, particularly in Europe, takes into account where we sit in the hedging curve. Generally a conservative view on where that might go. 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. In reality, not that the hedging does not 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. The price increases do take account of all the hedging we have and had in place indeed for these two. I would just add some color to that, Phil. We would not hedge at these levels because if the energy price falls backwards in a hurry and you are stuck at 100, you are going to be really seriously uncompetitive for a period of time. We just think that it would be and we do not believe that anyone in the industry, to any great extent, is hedging at these levels because they are so remarkable that nobody would have actually ever anticipated that the gas could get to this level. Now, people would be very afraid, like us, that if you hedge at these levels, you could get caught with your pants down. So we are not going to be in that situation. We will ride it. As I say, if it stays at these levels, either there will be a lot of downtime, or there will be further increases, or there will be closures because it just cannot. You are a 10 to one ratio versus the U.S. on gas, which is just unsustainable for European industry. Because you know what you have to step back. Phil, really what you are thinking about in the context where hedging sits in an integrated system like Europe, which is broadly 100% integrated, it is about cost certainty at the mill site that you do not, as Tony says, get trapped on one side or the other of that kind of hedging curve. If you go back to kind of very high prices of energy back in 2021, 2022, equally we would have stepped out of the hedging market while that happened and then brought back in when we needed. So it is about through an integrated model, it really is about cost certainty at the start and recover at the end. So hedging tends to be a bit of effect in the middle. It has been a wonderful friend in the past, and it will be in the future. At the moment, though, as Tony says, it is not a place to go. Okay. Helpful color. I guess bigger picture, Tony, you have owned the WestRock 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 2027 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 that you just call out, just because obviously profitability has been masked a bit 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 2027 and beyond. Yeah, I think, Phil, that is a really great question. I am sitting in the Três Barras mill down in Brazil, so just take it by region. Take our Latin American region. This is 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 WestRock combination between the two. I will give you a very good example because I was here yesterday. They used to have a huge side reel issue in this mill that they would sell at heavily discounted prices. Because of the combination, we now no longer have a side reel issue in this mill, so we are able to run full out and get full contribution for all of the paper that we make. It has made this mill much more profitable. That is just one small example. In our European business, the combination, there were no corrugated assets, but the consumer business has improved radically in Europe and has really set for a very strong growth together with our corrugated business as we move to the owner/operator model, and has been a really successful combination. 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 are seeing customer wins in the corrugated area. Our consumer business, our end market consumer margins are not where we want them to be, but we will get there because the plants are in very good shape. The teams are very well organized. 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. Once we fix those mills that need work, then the mill system will be as good as any that we have anywhere else in the world. Our mill system is progressing. We have got a whole new management team there that is really moving things forward in a positive way. We have recruited some great people into the business. Our people aspect of North America has really progressed very strongly. If you say, why am I excited? Because I can see the potential of this business. Of course, I am really frustrated by the fact that we are making all this progress, and it is not easy for anyone to see because when you get $700 million of unexpected costs, you are scratching your head a little bit to say, "Okay, we need to recover that." We do, but it is pushing the game forward, which is never where we want to be. We want to be winning from the front rather than trying to catch up. But we are where we are because we do not have control over things outside of our control. But I am very excited about the future of this company and the combination of this company because it is going to be very powerful in the years ahead. Okay. Appreciate the color. Thank you so much. Thank you very much, Phil. Thank you. The final question today comes from Pallav Mittal from Barclays. Please go ahead. Hi. Thanks for taking my questions, a couple of them. Firstly, clearly energy and freight costs are much higher than what we were expecting three months ago, and you have said hedging levels are low for very obvious reasons. If we assume our spot rates and things stay this way, how much of an increase are energy and freight costs expected to be in 2027 versus 2026? Pal, I haven't got there yet. It's back to, we haven't gotten near a budget yet. I think we have to see that in the round where we think all those forward curves are. I wouldn't, given if you like, my forecasting in energy and freight for this year has been changeable as we go through the year. I'm not sure I'd sit here yet and forecast energy and freight for next year. I think our opening assumption would be, at some point, that cost factor has to abate slightly. For the moment, I couldn't give you a view on freight or energy for 2027. Sure. If I could just check on CapEx. It seems that you've lowered your guidance by $150 million or so for 2026. Can you just help us understand what has changed there, and does it mean that 2027 CapEx goes up slightly? No, not really. We decided to just slow back a little bit because when we took our number down for last quarter, we said we'll just get the money back in our CapEx. Our plans are still the same. It will probably mean that 2031 will have $150 million more or 2032. 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. There's nothing of interest there. Sure. 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? Well, in the very near future, we're actually okay. 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. 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 the 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. 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 three months in Brazil. Still, as I say, it hasn't affected our profitability, and we're still very well-positioned in the country. Amazing. Thank you. Thanks, Pallav. Thank you. There are no further questions, so I will now hand back to Tony Smurfit for any closing comments. Yeah. Thank you, operator. As I mentioned on the call, I remain incredibly excited about the future of this company. We have done a lot during the last couple of years, and obviously, we are not happy with the fact that we have absorbed so much cost so quickly during the last three months and into the next two months. 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, and we appreciate your support, and we appreciate the time you have given us today. 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. If we do not speak to you before your 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 do not speak to you. Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect. Speakers, please stand by.