Smurfit Westrock swung to an $88M Q2 profit thanks to smaller restructuring charges and a normal tax rate, but Adjusted EBITDA fell 6% to $1,140M as freight costs and weaker North American pricing hit, and currency supplied all of the 1.1% sales growth.
Revenue
$8.0B
+1.1% YoY
Net income
$88M
Diluted EPS
$0.17
Operating margin
3.8%
Overview
Smurfit Westrock's second quarter of 2026 (three months to June 30) looks like a turnaround on the surface and a step back underneath. The company earned a GAAP net income of $88 million, against a $26 million loss in Q2 2025, and diluted EPS moved from −$0.05 to $0.17. But almost all of that swing came from smaller one-off charges and a lower tax bill, not from the business making more money. Adjusted EBITDA, management's main measure of underlying profit (earnings before interest, tax, depreciation and amortization, excluding one-off items), fell 6.0% to $1,140 million, and its margin slipped from 15.3% to 14.2%.
Net sales rose 1.1% to $8,031 million, and currency did all the work. The 10-Q says the increase "was primarily due to a $146 million net positive foreign currency impact that was partially offset by a lower selling price mix of $60 million." Without the currency boost, sales would have fallen by roughly $55 million, about 0.7%. The weaker dollar made euro and Latin American sales worth more once converted into dollars.
The main thing hurting profit was freight. Cost of goods sold rose $207 million. The filing puts that down to "a $102 million net negative foreign currency impact, $90 million of higher freight costs and $47 million higher depreciation, depletion and amortization expense and $22 million higher energy costs," partly offset by $71 million lower raw material costs (mostly recycled fiber) and $26 million less downtime.
The Smurfit Kappa–WestRock merger closed in July 2024, so both periods in this comparison are fully combined. So unlike comparisons against early 2024, the year-on-year numbers here are not distorted by merger purchase-price accounting. The remaining merger-related items are small: integration expenses were $1 million, down from $21 million a year earlier. The 10-Q gives no new figure for merger synergy savings this quarter.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
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Operating margin is operating profit as a share of sales, after all costs including one-off charges. n/m = not meaningful, because you can't calculate a percentage change from a loss.
Why GAAP profit rose while underlying profit fell
The two sets of numbers point in opposite directions, and the reason is three items that sit outside Adjusted EBITDA:
Impairment and restructuring costs fell from $280 million to $119 million. Q2 2025 included the "April 2025 Announced Closures": the St. Paul, Minnesota recycled paperboard mill, the Forney, Texas containerboard mill, and two converting plants in Germany. Q2 2026's $119 million ($72 million of write-downs and $47 million of restructuring) covers smaller actions. The 10-Q describes these as "not individually material." In the earnings release, the CEO mentions a UK mill closure and eight converting facilities being closed in Europe and North America.
Tax. The effective tax rate, meaning tax as a share of pre-tax profit, was 144.8% in Q2 2025. That's more tax than the company earned before tax, driven by a $13 million increase in reserves for uncertain tax positions and by losses the company couldn't use for tax relief. It turned a $58 million pre-tax profit into a net loss. The Q2 2026 rate was a more normal 31.3%.
Merger integration costs fell from $21 million to $1 million.
On the other side, depreciation, depletion and amortization rose to $678 million from $613 million. Depreciation is the accounting cost of wearing out plants and machinery. This increase is a real, recurring cost, and it follows the heavier capital spending since the merger.
Adjusted basic EPS strips out restructuring, integration and similar items, and it fell 20.5% to $0.35. That's the better guide to how much the business actually earned per share.
Segment performance
Segment Adjusted EBITDA is measured on sales before inter-segment eliminations.
Segment
Net sales Q2 26
Net sales Q2 25
Adj. EBITDA Q2 26
Adj. EBITDA Q2 25
Margin Q2 26
Margin Q2 25
North America
$4,743M
$4,755M
$704M
$752M
14.8%
15.8%
Europe, MEA & APAC
$2,826M
$2,778M
$380M
$372M
13.4%
13.4%
Latin America
$559M
$518M
$124M
$123M
22.2%
23.7%
North America (about 58% of sales) accounts for all of the profit decline. Adjusted EBITDA fell $48 million (−6.4%). The 10-Q says this was "primarily due to a lower selling price mix of $46 million and higher costs of $7 million". "Selling price mix" combines the prices charged with the mix of products sold. The cost line is small only because $61 million of higher freight was mostly offset by $26 million less downtime and $14 million lower raw material costs. In the first half, North American Adjusted EBITDA fell $236 million (−15.4%) to $1,301 million. Part of that was $55 million from adverse weather in Q1, $48 million of extra downtime and $99 million of higher freight. Management says in the release that price increases have been "implemented to recover increased input costs across practically all paper grades", but lower realized prices in Q2 show those increases had not reached the results yet.
Europe, MEA & APAC grew Adjusted EBITDA by $8 million to $380 million. That came from $58 million of lower raw material costs, partly offset by $24 million more freight and $18 million more energy. It was also helped by a $10 million currency benefit and held back by an $18 million lower selling price mix. Of the $48 million sales increase, $77 million came from the euro strengthening against the dollar, so volumes (−$11 million) and prices (−$18 million) were both slightly negative. The CEO's statement that the region "continues to outperform" is supported by its stable margin, not by growth in sales.
Latin America kept its position as the highest-margin region. Its 22.2% margin was down from 23.7% because of higher energy costs ($7 million), and currency accounted for the sales growth.
Across the three regions, segment Adjusted EBITDA was $1,208 million, down $39 million. Group Adjusted EBITDA was $1,140 million, down $73 million. The larger group decline means corporate and other unallocated costs took a bigger bite, about $68 million versus about $34 million a year ago, which the release does not explain.
Volumes and pricing
The filing gives no box-shipment or tonnage figures this quarter. It reports volume only as a dollar impact on sales. In Q2 that impact was small: −$11 million in Europe and a +$10 million favorable product-mix effect in North America. The bigger volume hit came in the first half, when lower volumes cut North American sales by $258 million, mostly in Q1. Pricing has been negative in every region: −$60 million at group level in Q2 and −$67 million for the half. The CEO describes the mill system as "generally running full with strong order books" going into Q3. The Q3 results will show whether that turns into higher realized prices.
Cash flow and balance sheet
Operating cash flow of $765 million minus capex of $465 million left about $300 million of free cash flow in Q2, meaning cash left after investment in plants. For the half, operating cash flow was $969 million and capex $1,089 million, so free cash flow was about −$120 million, while $474 million was paid in dividends. The company borrowed to cover the gap: the 10-Q reports a $439 million net cash inflow from debt in the half.
Total debt (current plus non-current) was $14,164 million at June 30, against cash of $677 million. That's up from $13,773 million of debt and $892 million of cash at December 31, 2025. Net debt, meaning debt minus cash, rose from about $12.9 billion to about $13.5 billion.
The quarterly dividend is unchanged at $0.4523 per share. With about 524.5 million shares outstanding, that's roughly $237 million a quarter, which is most of Q2's free cash flow.
Takeaway: The swing from a loss to an $88 million profit is almost entirely lower restructuring charges and a normal tax rate compared with a distorted prior year. The business's underlying earnings fell: Adjusted EBITDA was down 6% and adjusted EPS down 20%. Freight costs and weaker North American pricing caused the drop, and currency accounted for all of the sales growth. The full-year guidance only works if Q4 is by far the strongest quarter of the year.
Outlook
Management guidance (from the earnings release): Q3 2026 Adjusted EBITDA of "approximately $1.3 billion," and full-year 2026 Adjusted EBITDA of $4.9–5.1 billion, "with input costs remaining elevated, especially freight." The CEO says, "we fully expect to recover input cost inflation through the second half of the year and beyond."
Our read: First-half Adjusted EBITDA was $2,216 million, so the guidance implies $2.68–2.88 billion in the second half. If Q3 comes in at about $1.3 billion, Q4 would need about $1.38–1.58 billion. That's 21–39% above Q2's $1,140 million, and well above both Q2 2025's $1,213 million and Q1 2026's roughly $1,076 million (first-half $2,216 million minus Q2). The plan depends mostly on the North American price increases showing up in results, because Europe is already running at a steady margin and Latin America is small. Three things to watch in the Q3 report:
Selling price mix in North America. It needs to turn clearly positive after a −$46 million impact in Q2.
Freight. It added $90 million to Q2 costs across the group. Management calls it the main source of cost pressure and hasn't said when it expects it to ease.
Cash coverage of the dividend. First-half free cash flow was negative after capex while dividends took $474 million. Unless second-half earnings rise as guided, the dividend will keep being partly funded with debt.
The Q3 figure is the near-term test. A result near $1.3 billion keeps the full-year range plausible. Anything close to Q2's $1.14 billion would make the bottom of the range hard to reach.
Source: Smurfit Westrock plc Form 10-Q for the quarter ended June 30, 2026 (filed July 31, 2026). Guidance, Adjusted EBITDA reconciliation and CEO remarks are from the Q2 2026 earnings release (Form 8-K Exhibit 99.1, July 29, 2026).