SWM - Earnings call transcript Q1 2019

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Operator

Welcome to SWM’s First Quarter 2019 Earnings Conference Call. Hosting the call today from SWM is Dr. Jeff Kramer, Chief Executive Officer. He is joined by Andrew Wamser, Chief Financial Officer and Mark Chekanow, Director of Investor Relations. Today’s call is being recorded and will be available for replay later this afternoon. now to is over the It Mr. to Instructions] my turn pleasure floor [Operator Chekanow. begin. may you Sir,

Mark Chekanow

Thank morning. joining Dmitria. at SWM’s you, Good quarter SWM. Investor Director first Thank Relations of you earnings for XXXX us discuss I’m to results. Mark Chekanow,

I materially Exchange begin, remind to suggested these from in the like comments statements. Actual detail number you filings, of are include comments in conference results call XX-K. would Form forward-looking reasons, quarterly the our on results including Commission more included reports our and a we our Before that for today’s may annual and discussed differ by Securities which XX-Q in on Form report

call presentation financial available and financial release. included This Jeff. measures section measures. continuing non-GAAP stated, are the will financial these are and earnings Unless the and otherwise closest metric Some relate this And to www.swmintl.com. Reconciliations the of appendix comparisons to now the are the GAAP discussed in year period measures I turn earnings this the call are presentation and measures during to our website, on over operational of to operations. Investor prior release of the Relations

Jeff Kramer

reported Mark. $X.XX. and first Thank Yesterday, $XXX results everyone. Good of you, adjusted with sales morning, quarter of we million EPS

had of strong material in good ‘XX strong as customers raw was Our our on by weakness offset system quarter. year completed RTL volumes pipeline. the we unit their delivering AMS we organic as A quarter relative first on for some continued expanding performance in heat-not-burn mixed papers to easing margins our as loaded performance, more was growth the year-over-year fiscal optimization, segment EP demonstrate our and a promises of saw costs. and bit

non-operational items some pressured Finally, business. the

quarter higher are Overall, our expense our prior our versus triggered executing incurred the operating rebound compensation plan the debt and the year euro maintaining price refinancing. unfavorable commitments we year, XXXX interest guidance. related in our deferred to the was accrual, and a rapid we in As stock higher against full

delivered we operating sales to our portfolio with to and leaders organic X% market segments, growth growth. shifting strong pleased Now demonstrate AMS trends as continued our were

macro global remains our healthy. remain, applications specialty key While uncertainties for demand

market Increasing of bullish protection quarter line global quarter. global films distribution, continues transportation consumer our the for in supporting growth customer strong Filtration awareness gains another surface and to XXXX. strong this robust the for that delivered another had also indications particularly outperform product Asia, are remain auto market. sales Our and in

and our care already seeing and strong mirror growing throughout XXXX wound bandage our Our of products, likely flagship this last category hospital materials gains. including quarter Recall, report RO of was fastest we new strength saw also and year. some our a up and advanced consumer business year, last end believe essentially picked their pattern both also lines, momentum. product from quarter. products are construction year’s as We for year quarter same where second muted continuing pleased benefiting water and Infrastructure to for for several versus relatively we were that filtration across will was higher remain demand and the products good medical, we the pickup flat first our finger another specialty

some back expanding are growth line. we on XXXX, challenging margins. plan through quarters margins, with to bottom are translating After Regarding encouraged the that in sales is we

from growth, Austin margins first sales fixed benefit the reduced stemming quarter strong to from closure. addition In site costs

the serve customers. than and and disrupting operational achieve undertaking in diligent goals, As requiring optimization to of late to the financial our site to months other project on sharp was the not level, more XXXX initiative was of tremendous On made the year Concerning AMS our off was our closed quarter XX a of record All deliver while we sites segment profit planning transportation fourth a Europe. footprint commitments, building successful call, told, and complete. more track on than progress synergy is XX% transition have volumes priorities, discussed this growth. our recently in segment. This strategic the execution ability acquisitions start we good a on our in with film to ability strategic our line business demonstrates to further to solid installed

we this with products in film at putting ramping qualifying Furthermore, forward product our up are line We looking the site. Chinese year. in sales another and line momentum, to are global given customers looking

to We are continues as also specialty our build. traction gaining in order launch our filtration book product paper new

declined excluding a the from offset X% of Moving first not decline, sales quarter to of Engineered volume only X% mainly very euro. due benefit our A strong nearly overall X% weaker all X%, but was to which products. tobacco-related Papers, currency impacts, price/mix

costs. positive two the on in volume in price the to Mix as by decidedly effect well also took contracts mitigating wood impacted the of performed LIP On cigarette paper side, portfolio. pulp pulp year-over-year increase based the negatively was factors. escalators relative the volumes Unfortunately, overall key positive was most wood quarter,

with our products, have as it deemphasized we our and biggest were deliberately lower commoditized. is down being area non-tobacco the contributor an First, volumes margin writing printing and

of first some were had not versus importantly, lower customers’ quarter burn More supporting activities. last we recon we a heat year our strong launch volumes very when

area. have several times, indicated remains exciting we growth As an this

the Segment customers the well by as our launch costs. outside our volume overall various the U.S., were in for geographies products margins develop impacted as higher as maybe decline However, patterns quarter order and lumpy.

contractual portion pulp’s wood Our escalators increase. of large a price year-over-year recovered

turn over energy. I we However, now cost pressures some to continue materials feel call to Andy. other for the and will

Andrew Wamser

In will review profit adjusted first with operating and last million. XXX year points sales to X% the our versus Jeff. AMS to net several XX% positive increased adjusted factors. was operating performance. due XX.X%, basis you, to $XX $XXX margin results, financial million segment now quarter, increased up profit starting Thank AMS I

markets. end of had key First, strong demand we good our growth from organic several across

And sales last of first mix the Papers XXXX. contracted Austin during quarter our X% first during have to X% in The X%, the expectations. a prices of AMS volume tough P&L impact comparison in segment’s an XXXX though We quarter. All down the the heat-not-burn. down Second, offset X% favorable the the result nearly Engineered performed from only were well for net quarter, decline, was quarter told, comparisons lower-cost Favorable inventories the as currency. strong rate excluding given quarter. third profit quarter ease should through began currency exchange Polypropylene full and coming lastly, price note synergies. of moving the with compared our had growth consistent quarters strongest year’s first costs from euro-dollar foreign we quite the encouraging site achieving peak were closure of resin

products segment performance discussed, was management as We volume recovered margin impacts price by Wood pressures. as The versus versus with negative input down this for as volume some in basis adjusted well lower were other LIP the mix As which higher most higher for our The costs. strong strategic well margin efficiency mix escalators. costs XXX non-tobacco key contractual lower continued of proven margin de-emphasis paper of pressure did factors. combat from has pulp of see we of decline operating materials. driven up an prior effective raw energy year, was And and year-over-year points method certain the year. to XX.X%, last was

our XXXX of Corporate during quarter result the The a deferred highlighted note Regarding the also I since during primary resulted as million we that expenses. $X.XX was impacted segment. quarter $X.X share market Recall million last EP year-over-year rapid in a share hit that our factors. $X.XX call, $X the increased fourth due expenses during compensation our benefit highest per margin that a or SWM’s stock in for the item stock to of price year first quarter comparisons, year-over-year to The volatility higher most rebound unallocated quarter significant EPS. beginning two of would approximately was has XXXX the price. earnings

currency. On second is into smaller approximately targeted in per the or was our $X.XX IT $X.XX The EPS, factored $X ago. continued of which support $X.XX growth quarter and earnings increase about Shifting of in impacts XXXX was was piece previously expense, GAAP a our issuance we to an we last guidance. EPS $X.XX maintaining had February versus as to annual the share consolidated Recapping million referenced This line investment though and less in in spending was the are expenses of Adjusted of from impact increased fundamentals, currency, first our guidance. prior $XX.X last results plan interest basis, higher adjusted business was the our IT just EBITDA These we was versus related EPS net year year. the AMS higher Adjusted have of bond result year, would discussed. $X.XX in from business. without profit a and the compensation with $X.XX down first reasons X%. would consider sales for year million higher and consolidated but both decreased operating earnings, quarter $XX.X versus deferred of $X.XX million, to that we $X.XX were X%, $X.XX a it

subside, last easier forecast as comparisons volatility rates, the that have currency, this and lap compensation will could comparisons issuance of of such While interest stock might deferred the expense as euro later timing year difficult some items, the say to we interest the drivers bond underlying the of higher and price it’s these to ease fair September.

standpoint XXXX our both the was XXXX. quarter that which for create a easier could of Lastly, material segments, an earnings we comparison note toughest third likely raw quarter in growth for from

to rate with our rate for compared XXXX slightly first higher last XX.X%, full Our quarter tax year year. normalized tax consistent for was expectation

to end terms credit remains we was XXXX annualizes for our EBITDA the guide Moving first seasonally over million end to the which this $XX $XX the net is our of flow flow quarter, in within a million cash CapEx of million for from quarter free cash million to at unchanged. $X flow X.Xx the year range. was at year and and cash of were quarter, leverage our flow, first outlook $XXX of up X.Xx slightly adjusted free XXXX. debt liquidity, perspective, at $X From facility, million. low full cash quarter approximately our Recall,

to back Jeff. Now,

Jeff Kramer

Thanks, we our by Andy. quarter, they expectations. our results were encouraged as with were line our To in summarize

how marketplace underscoring our see I results. our spots are I several are we the consider As bright positioned performing, and operations in how

site we off quarter start. resin And we First, heat-not-burn to costs following and business were closure issues Austin the in AMS pronounced come the segment volatility we successful. related contributing our were our a key margins versus seeing subside outstanding to price is hope growth. are the recently, us, in last months, our of and remains first past did strong see The while savings. but for behind are overall year, directions tough down the efforts story segment product profit stock some our most have and both EP, comparisons On all growth Within obviously, to Sales cigarette well to lines X healthy. movements, of out over that in costs, and those control. improvement mix paper had drive to unallocated fluctuations price remains

We operations, strategic initiatives Our key long-term management our of running in still M&A that team evaluate on interest in potential to set additional continue to remarks. remains support. to the continued capitalize opportunities the while the appreciate committed your business, your we excellence up advancing for and to course, and day-to-day questions. us open the growth. concludes our Dmitria, please line drive long-term That enterprise

Operator

our Dan may proceed. with Sidoti And first Instructions] [Operator Sir you & from Company. Jacome comes question

Dan Jacome

Hi good morning.

Andrew Wamser

Dan. morning Good

Jeff Kramer

Dan. morning Good

Dan Jacome

flat, for expect know cost little raw details? outlook Can about material costs costs I possibility touched Can a talk resin to some segment? you us and you raw hold it some then that and decline raw wood AMS themselves Are some further? that costs market on spot there pulp costs these ease. those that earlier leverage? little to as you somewhat just first material year the going of give you the plays now more the a could pricing suggesting you bit the you bit the material is on have are Or out, the and

Andrew Wamser

at stab me let first that. take a So,

in you related to and So, the AMS where as if we terms recall, the And volatility, if prices of it third you the mark think year went of last polypropylene. as to us. quarter about polypropylene was most was the were what happened really it year, business, the for throughout relates high second

prices, seen raw in in As we pullback those have we the year, prices. this entered material a

to for raw year, where prices elevated the quarter, year-over-year on moderate materials. went the would we we modest pretty the We’ve a for And still first If the we throughout some discuss second as see as our the the Where go you’re I it the increase particularly and throughout was, a will benefit pulp of they the I pulp we’d up well, in was could we what costs. third year. second and But the as go actually relates quarter. in to to but we last so, stand side, in think it would third today say, business. pulp to go quarter EP going benefit through but for potential to be I seen as could at first the the for stable think we’re go year. improvement there’s biggest early be I pulp the There it’s slightly least most think year-over-year for is too easing, that expect quarter, there from we throughout benefit are expectation say quarter,

Dan Jacome

that think the you I you do us on capacity the it’s out? remind going then learning curve year that film segment, AMS to the will sector? again, on is you be Because targeting just speed look And you’re to think transportation that as be going do and films. quick I Europe, to the you line Staying of going helpful. That’s the are expect cost new to how strictly said so the making new what like Okay. new said capacity plays that

Jeff Kramer

Yes.

have. couple that operating, are We of when exact of other disclose and is a but might investment a going types we you those already all to compared is, of that CapEx price don’t what So, the those them it’s not put facility into things. expensive that in lines

So, priced. they’re reasonably very

the learning of already curve, terms qualifying with customers. materials they’re In

team well they’re in was example curve. up. our that And up really high-quality the So, started it really mean a facilities already experts that of going over I U.S. learning and films. expertise nice facility in our there had making getting

has So, relatively the gone and nice start-up smoothly.

overall, customers already through coming have us think to to where the we’re to we We’re second on materials export to European directed be the in where flexibility or location, the of orders the out half back And of. because that’s is early flexibility Certainly, gives I able be see U.S., commercial the of our see to also we to you’ll year it the to depending it. see to of going starting to Asia expecting us primarily but in and pieces that supply try need.

in the supply are us surface that get you’re getting flexibility at increased our that traction system. films use the And And as indicated, as line. targeted to film automobiles starting become people so, aftermarket. that those product see from film, global protection more in And familiar to around primarily be we world the transportation we market seems additional with

Dan Jacome

And down Do EP missed that quick Very X%. so directionally sorry us missed I I looks up. housekeeping, one on were paper LIP and for volumes It the last number the is helpful. this, one, if then Okay. like you delta if earlier? segment, have sorry total volume just

Andrew Wamser

Yes.

Printing battery mentioned, which But there’s we then and the and share. softness of some nontobacco about. talked our in biggest the separator in which heat-not-burn, probably declines also volumes, that mentioned. some writing, some So, was our also of volume were lion’s that’s papers Jeff

Dan Jacome

was LIP what it but change Did year? LIP volume was percentage papers? Yes, the versus the in paper change in what last

Jeff Kramer

was effectively It flat.

Dan Jacome

Flat.

thank you. Okay

Operator

our next from Chercover And Davidson. comes D.A. question with Steve

You may proceed.

Steve Chercover

morning everyone. Good Thanks.

quarter? as diminished? the middle guess fourth will So, expect ramp strong seasonal I good And Do weakness you started improvement since did, year the the that you to the for going strengths past, in still guys AMS. forward of pointed in a in you have and be as you

Jeff Kramer

usually was the quarters are quarter middle fourth start. Yes. slower our first seasonality as quarters. and solid quarters is Typically, the are We think our stronger is first and to off said, – a our we

We could don’t and strong to start we to if second I to continue. would flow quarters. but the in way, know expect seasonality that through read same third you exactly our stronger be the quarters expect still

Steve Chercover

price was embedded then, that I sales forgive And there volume? was Great. AMS got this, Or any I late if but bit a me on in growth? the missed

Jeff Kramer

that volume on from delivering is is year. is There we’re again, sales we’re underlying some the to volume. organic Yes, there see that to growth price. hoping continues small be the throughout the that primarily growth But contribution

Steve Chercover

on Okay. be touched kind a you just this, tailwind. And of will resins but

escalator an apparently pulp rolling over. is paper got right in on just as You pulp the side,

will Or are pricing there if So, that drop we concerned that be in any to initiatives? that your do undermine pulp? kick in a material have deflators it’s

Jeff Kramer

No.

First of in we’re drop not all, predicting a material pulp.

how are months. hard activity are from the past, good some that. over played bit for acted a get we decrease. us I out But traditionally handle You It’s XX little has news. see But moderate don’t the it coming seeing no, a of good been we year on very would last over say, seeing as pulp hasn’t a to deflator

On when up. them through side, the through, resin price rolling is increase the we prices put were our

you’re raw polypropylene might be going seeing some the up in We’re improvement also that but reversing material back cost, again. and hearing rumors

So, to there to we’re past months. raw to as XX them over volatility just in be have close materials seems to stay the XX to more going

Steve Chercover

Sure. And principal me what is grade of you your forgive pulp me can input? remind

Andrew Wamser

NBSK.

Steve Chercover

it. NBSK, got

impact Okay. are. staying of because the at on the FDA a or... the that grows don’t And on on or positive paper they isn’t that the or recognize permit the sale Either IQOS least U.S. client category would Philip they side, then announced Does I you Tuesday, in Morris But I think guys, have that any negative?

Jeff Kramer

many think The we’ve internal all couple based of it just flow it all so hard hoping this heat-not-burn kinds from a will have see to category, in that opportunity an an technology. in and It’s is approvals that related a us, has say going and They’re does. That’s be similar though. predict afterwards. I the for Hard not on Yes, through there. that to any are and we to smoking other PMI to question. what major products alternative to as us. the to scope. are indicated, for material this different when, is contributor out There But the underscores impact FDA product, big we’re

Steve Chercover

if thinking the whole spin. is was bigger, I so full approval pie final the And that my make could question... glass that’s FDA half

Jeff Kramer

half half for Thank like I full always Well, analyst. you a having thank a you. full,

Steve Chercover

mean full. I like I it to sometimes Well, have

what full story. your along? another are plain cross I’m Just glass How drinking, depending coming but efforts to old sell that’s

Jeff Kramer

group to from In paper terms of group? cross sell our AMS our

Steve Chercover

of if thin mean to, Yes, paper are using whether film, opportunities that your that global the I cross-pollinate kind there I materials, you it’s were extruded or of both sell very you recall, of things and my thought kind sales force. words,

Jeff Kramer

which Yes. Well, full I initial our new we’ve the mean that our on paper our in made in been side, is our because is And of that bit it’s about lot out. talk details very handled of a are filtration material that that. in of rolling garnishing its stages example performance little we customers, paper product. facilities hesitant our good around French paper seeing the a one on quite pickup we’re by again, a The and is though side, filtration AMS and interest the on

So the seeing. that other good continuing we’re cross some of pursue of well. opportunities that’s that to businesses throughout we’re course, some we’re a And of the example as selling seeing

Steve Chercover

Jeff. Thanks, Great.

Operator

of CEO, remarks. now for That Jeff Kramer, like Okay. I our Q&A conference. Instructions] to turn [Operator any the closing call to today’s Dr. now over back concludes would portion

Jeff Kramer

our IT. debt the quarter. want to to our growth support. everyone, key support. refinancing investments, strong you, expectations that the robust. continue continuing think are together euro, we It in at we’re We factors masked well the And bit your we’re story be to to closing we we growth which by the your the we is And we comp some for our talked that impact to here in We investments So, way was again. little deferred continues the as also demonstrate about as putting of consider get SWM, thank hope a is short few but emphasize the met And factors. of a appreciate story

very you thank So, much.

Operator

all and disconnect. the gentlemen, conference. This great attending does today’s day. and Everyone, Ladies you have you a may for program, thank conclude

Mativ (MATV) 5 May 192019 Q1 Earnings call transcript