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Investing.com -- Fitch Ratings has upgraded Smurfit Westrock (NYSE:WRK) plc’s Long-Term Issuer Default Rating (IDR) and senior unsecured debt rating to ’BBB+’ from ’BBB’ with a Stable Outlook.
The upgrade reflects Smurfit Westrock’s position as a global leader in stable packaging markets, with improved geographical and product diversification following the merger between Smurfit Kappa Group (LON:SWR) plc and Westrock Company.
The newly formed entity is expected to generate USD30 billion in combined revenues and USD4.8 billion in Fitch-adjusted EBITDA for 2025. The rating agency anticipates EBITDA margins to improve toward 18% by 2028.
Fitch cited the company’s enhanced market position within key geographies and additional product diversification as key benefits from the merger. The combined group now has a leading corrugated packaging focus in both North America and Europe.
The rating agency views Smurfit Westrock’s vertical integration positively, noting its high raw material self-sufficiency provides strong operational control across the value chain. This integration is expected to provide margin stability during periods of supply chain disruptions and high inflation.
Synergies of USD360 million are expected by 2026, not including additional cost savings identified after the merger. These efficiencies should contribute to the projected EBITDA margin improvement.
Fitch forecasts EBITDA net leverage to decrease from 2.6x expected at the end of 2025 to below 2x by the end of 2027 and 1.6x by the end of 2028, aligning with the company’s financial policy target of under 2.0x.
While free cash flow (FCF) is expected to be only marginally positive in 2025, Fitch projects the FCF margin will increase to 2.1% in 2026 and 2.8% in 2027. The company is estimated to generate about USD2.7 billion in FCF from 2026 to 2028.
In its peer comparison, Fitch positions Smurfit Westrock as the global leader among packaging companies by revenue at USD30.9 billion, ahead of the Amcor/Berry Global entity (USD24 billion) and Stora Enso (OTC:SEOAY) (USD10 billion).
The rating agency’s key assumptions include 42% revenue growth in 2025 due to the full-year contribution from Westrock, followed by 5% growth in 2026 and 4% in 2027. Capital expenditure is projected at 7.7% of revenue in 2025 and 7% from 2026 to 2028.
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