Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Clearwater Paper Corp (CLW, Financial) delivered $64 million of adjusted EBITDA in Q3, within their guidance range despite a $5 million impact from Hurricane Helene.
- The company successfully closed the sale of its tissue business for $1.06 billion, netting approximately $850 million in cash after taxes and expenses.
- Clearwater Paper Corp (CLW) announced a $100 million share repurchase program, indicating confidence in their inherent value.
- The company is transforming into a premier paperboard packaging supplier, focusing on servicing independent converters in North America.
- Clearwater Paper Corp (CLW) has a strong geographic footprint with mills strategically located across the U.S., enhancing their service capabilities.
Negative Points
- The paperboard segment's adjusted EBITDA was down from $53 million last year to $42 million in Q3, largely due to market pricing pressures.
- The company is experiencing a cyclical downturn in the SBS market, driven by inventory destocking and new capacity expected in 2025.
- Clearwater Paper Corp (CLW) anticipates a negative price/cost impact of $40 to $50 million in 2025 due to continued downcycle in SBS.
- The company expects a major maintenance outage at the Augusta facility in Q4, estimated to cost $15 to $20 million.
- Hurricane Helene had a $5 million impact on Q3 results, with an additional $2 to $3 million impact expected in Q4.
Q & A Highlights
Q: Can you provide more details on potential investments in mechanical and recycled pulp consumption to create a lighter weight product?
A: Arsen Kitch, President and CEO, explained that these investments are small to medium-sized, aimed at improving pulping capabilities to incorporate mechanical pulp into paper machines. The goal is to produce a lighter weight product that maintains the quality of SBS (Solid Bleached Sulfate) paperboard.
Q: Regarding the unbleached product that could compete with CUK (Coated Unbleached Kraft), is this to take advantage of price spreads or growth potential?
A: Arsen Kitch noted that they are in exploratory stages with this product, seeing an opportunity due to limited CUK supply to the independent market. It could diversify their production mix, especially in certain geographic areas.
Q: Can you elaborate on the actions to reduce fixed costs and the expected timeline for realizing these savings?
A: Arsen Kitch mentioned targeting a 10% reduction in fixed costs and SG&A to 6% of net sales, aiming for over $50 million in annualized savings. They hope to capture $30 to $40 million of these savings in 2025.
Q: Could you provide any updates on pricing actions for cup and plate stock and their impact on Q4 and 2025 expectations?
A: Arsen Kitch refrained from commenting on specific pricing actions but noted that their expectations are included in the Q4 guidance and 2025 outlook, with a projected $40 to $50 million negative price/cost impact due to the continued SBS downcycle.
Q: What impact did the hurricane and port strikes have on Q3 results, and should we expect any impact in Q4?
A: Sherri Baker, CFO, stated that the hurricane had a $5 million impact in Q3, with an additional $2 to $3 million expected in Q4, which is included in their guidance. There was no impact from port labor issues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
