The world's largest cardboard box maker Smurfit Westrock expects US consumer spending to be squeezed significantly if 25% tariffs on Mexican goods go ahead, its CEO said after the company's shares dropped on disappointing fourth quarter earnings.
US President Donald Trump this month suspended a 25% tariff on goods from Canada and Mexico until March.
Smurfit Westrock has large production facilities in all three countries following last year's $11 billion merger between Europe-focused Smurfit Kappa and US rival WestRock.
While Smurfit Westrock largely sells to customers within each of the 40 countries it operates in, it said many of its Mexican customers use its packaging to sell food such as fruit and vegetables into the US.
"There will be, I would say, a very significant customer effect," Smurfit Westrock chief executive Tony Smurfit said on a call with analysts regarding the potential tariffs on Mexican goods.
"Tariffs are on the consumer so at the end of the day is the consumer going to pay 25% more for their avocados and their oranges...or whatever they buy? We'll have to wait and see because that'll be up to the American consumer and how that affects demand," he said.
He added that Smurfit Westrock would have to "take a good look" at its large mill in Canada that exports paper to the US if a 25% tariff is applied as it would very quickly become uncompetitive.
Smurfit Westrock reported full-year core profit of $4.7 billion and while that was in line with its expectations, earnings before interest, taxes, depreciation and amortisation of $1.166 billion in the final three months of 2024 were below the $1.258 billion expected by an average of 6 analysts with LSEG SmartEstimate.
The Irish-headquartered company said it expects to make a core profit of $1.25 billion in the first quarter and that the year has "started well"."
Smurfit Westrock is the world's largest cardboard box maker.
As previously announced, the company had declared a quarterly dividend of $0.4308 per ordinary share, an increase of 42% on the same time the previous year.
CEO Tony Smurfit said that while the company was at the beginning of its journey, he was immensely proud of what the team has achieved in its first six months as Smurfit Westrock.
"The operational and financial expertise that are hallmarks of this management team are already being applied as we transform the combined business," the CEO said.
"Our synergy programme of $400m is on track and will be completed by the end of this year. Moreover, there are significant operational and commercial opportunities, at least equating to that synergy target," he said.
"Smurfit Westrock with its unrivalled scale, geographic reach and product portfolio has an unparalleled capacity to deliver innovative sustainable packaging solutions. As a world leader in paper-based packaging, our unique characteristics will enable us to deliver significant long-term value to our extensive customer base," he added.
Tony Smurfit also said that the year has started well and in the first quarter of 2025, assuming current market conditions prevail, Smurfit Westrock anticipates delivering an adjusted EBITDA of about $1.25 billion.
