Steve Voorhees Focuses on WestRock Culture, Buying KapStone, Growing Offshore, Doubling Profit

GREG RUDDER
WestRock CEO Steve Voorhees is a consolidator. His company in the last three years has completed the most M&As of any in the industry. He’s done this with a focus on integrating workers from different companies into a single company that is to be superior and more efficient than the individual ones.

Since WestRock was developed in 2015 from the merging of packaging giants RockTenn and MeadWestvaco, the company under Voorhees completed nine acquisitions (see graphic), including the US$2.28 billion buy of Multi Packaging Solutions (MPS) in 2017, as well as the spin-off of its specialty chemicals business, the sale of its dispensing business, and the sale of most of its land and development assets. The acquisitions dramatically grew WestRock in size, and gave it greater geographic and end-product reach for its containerboard, corrugated boxes, boxboard, and folding cartons. The firm also gained increased downstream integration from its board mills to its box and carton plants. WestRock, on track to US$16 billion in revenue and with 45,000 employees, is the second largest US paper industry company, behind International Paper (IP). It is ranked No. 2 in containerboard and No. 1 in boxboard, based on RISI capacity figures for North America.

Westrock CEO Steve Voorhees.

“He’s a rare successful US industry consolidator—with sustained shareholder returns to prove it,” a consultant for consumer and paper companies said.

Wall Street and North American industry analysts selected Voorhees as the RISI North American 2018 CEO of the Year. It is the second year in a row that a top American containerboard and corrugated company leader won the award. Packaging Corp. of America’s (PCA) Mark Kowlzan won in 2017.

Voorhees told PPI Pulp & Paper Week that he learned from the cultural challenges of integrating Smurfit-Stone Container and RockTenn after completing the US$3.5 billion acquisition in May 2011. For acquisitions, he said, combining employee cultures is critically important. That occurred much more successfully with the MeadWestvaco merger than with Smurfit-Stone. “(RockTenn and MeadWestvaco) together are significantly better than either would have been had they continued as individual companies,” Voorhees said.

He credited long-time MeadWestvaco leader John Luke with playing an important role in the merger’s success. He said the RockTenn/MeadWestvaco merger was the most important one to him in his five years as the CEO of first RockTenn, and now WestRock. The deal that created WestRock “brought scale for creating a unique company that has a tremendous future,” Voorhees said.

WestRock expects to complete the US$5 billion purchase of fifth-ranked containerboard producer KapStone Paper and Packaging at the end of the third quarter or in the fourth quarter 2018, according to Voorhees. It’s an important deal. With Kapstone and its 4.1 percent capacity share, WestRock’s containerboard share in North America would increase to an estimated 24 percent, behind IP’s 32.1 percent, according to WestRock and RISI capacity figures. North American containerboard capacity was 40.9 million short tons in 2017 and RISI packaging analyst Ken Waghorne expects it to increase to 42 million tons in 2018.

Voorhees expects Kapstone will help “fill out” the company’s US corrugated business, with top box plants in the Pacific Northwest that increase WestRock’s position in the West.

“It’s just a great fit for our business,” he said.

He does not flinch when saying the anticipated 16.1-million-ton-capacity WestRock (including the 2.69 million from KapStone) will look at options for future growth and acquisition opportunities in paper and packaging. While IP was unsuccessful recently in acquiring Ireland-based Smurfit-Kappa Group, Voorhees said there’s a strong probability that WestRock might expand outside the US. For now, the company has a group of internal growth projects for the next two years, including two outside the US. He noted its Grupo Gondi venture will start up what is to be the largest containerboard machine in Mexico at 400,000 metric tpy in Monterrey next year, and WestRock recently put US$108 million toward the Voith machine by upping its stake in Gondi to 32.3 percent; in Brazil, a new US$125-million box plant is planned for start-up in mid-2019 and will be “the best one around,” Voorhees said. And, in Florence, SC, WestRock plans to install North America’s largest kraft linerboard machine.

20 PERCENT SALES OUTSIDE NA
He cited potential growth in the company’s US$1 billion consumer packaging business in Europe, and a US$600-$700 million corrugated business in China and Asia (including India), which includes five plants in China. The WestRock plants in China include three making cartons, one MPS literature consumer packaging plant, and a joint venture corrugated facility. This diversity means that about 20 cents of every average US$1 in sales for WestRock is from outside North America.

Voorhees (in suit) with employees at WestRock’s Chatanooga, TN, mill.

Also, 20 percent of the company’s corrugated box demand—in its biggest individual business, at US$9 billion/yr—is from customized box-making systems and WestRock machinery, he said.

Voorhees speaks confidently about the paper packaging business, while looking at a horizon highly influenced by Amazon, new US consumerism, and e-commerce expansion. He is not bashful about the benefit from e-commerce, nor its challenge. “Packaging is going to adapt … and continue to adapt,” he said.

WestRock helps customers adapt their packaging in many ways, including with more than 2,000 corrugated box-making machines installed at customer locations for making custom boxes when and where the customer needs them. This year, WestRock enhanced this offering by acquiring Plymouth Packaging for US$202 million. Nearly a majority of Plymouth’s systems are at e-commerce companies, according to WestRock.

Voorhees said WestRock’s Corrugated Automated Packaging Systems can make a box right on-site for customers—for example, next to strawberries that need to be packaged in California’s Central Valley. A freight cost reducer, this Meta box comes in 80 standard and customized configurations. WestRock also operates a beverage machinery business in its boxboard consumer packaging business. WestRock said that about 1,000 of its customers use its Beverage Packaging Systems equipment.

Voorhees expects that WestRock someday will operate a box plant next to an Amazon fulfillment center. The online retail giant continues to add box plants throughout the US as e-commerce business grows and customer demand continues for quicker product deliveries to their homes. Voorhees added, however, that WestRock’s box system already is big and spans the US, with 92 of its 103 global corrugated plants in the US. WestRock also operates 56 folding carton plants globally, with 25 in the US.

Voorhees said that WestRock focuses on “making the perfect box, on time, every time”—whether that’s making a box for “hot, fresh pizza” or one with high-end graphics. Last year, WestRock acquired the largest US manufacturer and distributor of pizza boxes, Star Pizza Box.

“The way consumers buy is changing,” he said. “People want product delivered now and (to) where they want it.”

CUSTOMER FOCUS
This changing consumerism influenced by millennials is part of why WestRock stresses that its employees understand customer and shopper needs, and why it is also part of the philosophy of making a larger-mass company as high-performing as possible. Voorhees said working closely with customers requires values and behavior, which he said WestRock “spends a lot of time on” for its employees.

He pointed to the company’s US$410-million new kraft linerboard machine project in Florence, SC. Three old narrow machines will be permanently shut and replaced by one large unit—with 710,000 tpy of capacity—that will have better trim for boxmakers. The new 330-in PM is to start up in first-half 2020. The three old machines run trims of 160- to 170-in that are inefficient for today’s corrugators, which are mostly 98- to 110-in, Voorhees said. The Florence mill will produce a lower-cost, lighter linerboard than it now makes. “It will be a modern state-of-the-art, wide PM that trims better and is more efficient,” Voorhees said.

A MICHIGAN BOY
Voorhees’ faith in investing in his workers comes from his upbringing and his own corporate rise. He and his family moved to Kalamazoo, MI, when Voorhees was in fourth grade. At that time his father, a US Navy commander, was retiring after 20 years to further help raise his own family. Voorhees said he learned about committing to work hard from his father as a youngster mowing the lawn or washing the car; a job not done correctly was redone. One summer, the young Voorhees went on trips with his father, who was a specialty chemical salesman in southwest Michigan. These sometimes included visits and meetings at pulp and paper mills.

After earning an undergraduate degree from Northwestern and an MBA from the Darden School at the University of Virginia (UVA), Voorhees wanted to work in a planning or consulting role in the Southeast. During a recruiting session at UVA, he was interviewed and hired by Jack Ahearn to work at energy company Sonat Inc. in 1980 in Birmingham, AL.

Voorhees learned how Ahearn hired talented people and worked to advance them into an operating role in the company by setting high standards and providing support. “He gave very direct feedback when needed,” said Voorhees. “He invested time in his people.”

Voorhees worked at Sonat until 1999 and was selected by then CEO Jim Rubright in 2000 to be RockTenn’s CFO. Rubright had led the Sonat pipeline group and energy trading group. At that time, Voorhees said, he had limited experience in the paper industry and in leading the finance functions.

Rubright, a two-time RISI CEO of the Year, saw promise in Voorhees. “Rubright had confidence in me,” Voorhees said. “I learned a lot from him.”

RockTenn with Rubright and Voorhees acquired Gulf States Paper, Smurfit-Stone, and Southern Container and Solvay Paperboard. Smurfit-Stone was the largest containerboard producer at the time of the RockTenn acquisition.

RockTenn—and now as WestRock—has grown dramatically over the last 20 years, from US$1.5 billion in sales in FY 2000 when Voorhees joined the company to US$16 billion in sales in FY 2018. The market value of equity of the company expanded from US$300 million in 2000 to more than US$15 billion in 2018, according to WestRock.

DOUBLE THE PROFIT
Voorhees’ top goals now are to continue building the capabilities for WestRock for the long-term and to nearly double the company’s EBITDA from US$2.3 billion last year to US$4 billion by FY 2022.

For these goals, Voorhees returns to an important staple for WestRock: “Hire talented people and provide these people the support they need to succeed as part of WestRock,” he said.

He told of 850 WestRock workers—two percent of its workforce—trained in Six Sigma methodology for completing projects that are to improve quality and productivity.

A timeline of WestRock acquisitions since its formation in 2015 by the merger of RockTenn and MeadWestvaco.

The company’s internal branding—“Winning Together”—sounds as if comes from the playbook of the recent National Basketball Association champion Golden State Warriors. Yet “Winning Together” also had been championed by Amazon, Walgreens, and Dell. It encompasses WestRock’s four values, according to Voorhees: integrity (“do the right thing”); respect (“earn the respect of others through our actions”); accountability; and excellence (“We strive to perform at the highest levels—for ourselves and our customers, investors, and communities.”)

“Our values,” Voorhees said, “resonate across our company and are part of the way we do business every day. Living our values helps us build our culture—one that recognizes and rewards doing business the right way, everywhere we do business.”

Greg Rudder is news editor, RISI, based in San Francisco, CA. He can be reached at: grudder@risi.com.