SWM - Earnings call transcript Q1 2022

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Operator

Hello and welcome to SWM's 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, Thank you.

Mark Chekanow

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

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

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

Jeff Kramer

morning already are materializing. pleased two start are everyone. and share that themes to we we critical most Mark you, XXXX and Thank out play off year this good good a the to I'm to that expected to

have been offsetting the foremost, our in actions earnings we successful and pricing call raw on First material discussed higher costs. last

say sales inflation versus reaffirming financial very EPS tough up we our and the a and that which did X%. strong explained though not Though that remain for to of issues by uncertainties are so the Even mostly Second, accelerated be supply versus quarter remain, XXXX guidance year, from momentum portfolio year. then year, quarter impacting additional was the and with we last second of results an our to it though a had the demand in for quarter and down the global can confident pleased organic first remains until chain good robust second we the last entered there. begin fact are were across are expecting we year. remainder comparison

EPS We to $X.XX, XX% growth to adjusted XX%. expect adjusted of supported $X.XX continue of by to EBITDA

markets I'll strategic of cost Recall sales quarter. synergies the Sales to end delivered the quarter year, of sales growth, year. signs only many with post-COVID organic chain minimal first back review benefit come As Scapa first organic opportunities the portfolio the supply in we but we the equals a strategic as expansion balance with cash and technologies the which about year and of sheet delever than significantly of geographic we strong excited highly incredibly of from such, more merger throughout avenues the least, and actionable of remainder the for expect creation from Neenah. combination, last, accelerating value cross-selling ranging the the that back were and surged We to sales And long-term that Starting benefits increasing million strong expanded AMS. see of flow free the will as year. $XX last complementary throughout certainly pending accelerate XX% multiple increased the disruptions including with not remain but would progresses, transaction me XX% up with X%. later, recovery optionality. acquisition, the let the with

lagging have acknowledged recognition be we have last and of that with demand of well. have sales efforts we're discussions demand, partners the posted our offset but challenging to a construction we us results pricing our comments price our the Bottom our continue to this and the And have effective. customers, focus several challenges of increases, allowed recognize we on inflationary last little and supply growth had we has to healthy, addressed quarter of unprecedented range yet offsetting provide are measured situation on the chain the will strained line, highlighted process and we rapidity on still monitor for importance they being the dive environment. price actions continue escalating organic our underlying previously show implemented that In the To most competitive in has to increases so call, the of comparison quarters they already end This most as my that industrial and issue additional On shares. products we Unfortunately quarter. pricing and of markets confident aware construction due in into approached that extraordinary Water continued reliable under we value proactively costs, with conditions, deeper this are we Given were as not the over industrial. active growth pricing trust that environment the an And sales is way. in performing the a our remains global environment. and to strong these with been industry filtration across broad of drivers our maintain to earlier pressures. to sales key uncertain inflation XXXX. are initiated filtration, settled,

even on demand constraint raw key to of ability availability In fact, capitalize certain degree was an the greater main of materials. our on

materials quarters some liners. release the in We variety varied by to that such a spectrum adhesives in specialty of select as impacted the continue be across materials to from tightness

the shortage some variety been One see though raw key forward. and of a suppliers have to from our actively sourcing starting that material constraint has for films. been We are area relief transportation going a sales remains

value a that across manufacturers. the a As key all in of global is shared is shortage chain up supply limiting ingredient there we've

we organic broad remain strength that go-to excluding leading would about the have materials and aggressive supplies raw portfolio. X%, the are the material sales these there If producer situation recent customers growth. for see transportation been the help although expansions back actually films, AMS the transportation, alleviate for sales XXXX, of until As us worldwide source should assess of tight to sales but up were segment move to we showing announcements

other quarterly we Price sales were well. The the many first increase Switching quarters customers as products went expect innovative while Importantly, biodegradable global excited higher customers am with across area. first replacement represented I momentum and as enter are volumes our both we I can Neenah our chains offset the were community to comparisons leadership that to the costs. broad tragedy In for Total will in Heat-not-Burn also market quarter secure sustainable to development materials. saw ongoing X% as they portfolio. sales the Papers. of supply both fast-growing and to increases by markets the of the levels. across expected. XX% we have filter customers, organic contribute about combined strength remiss solutions incredibly I as we this continued with end contractual we customers conflict. increased have increased And and be capabilities innovation. the adapt our in what variety Engineered Russia-Ukraine accelerating In packaging certain to performed the to with in mentioning discuss transaction have quarter in by of European people effective in innovations able the supporting we growth invasion. of normalize, pulp SWM, not single-use of in to to coming from the been further help products were reduced Traditional particular, we and demand and are sales risk over sending working EP the the and by they companies our up in And a sustainable action. of later, impacted with excited supplies regard have from their about inspired would shown to response in customers proud this that quarter shared this

sites details, in both can regional switching we be will customers only supply and certain to who facilities the on While reconstituted and help and SWM continue disclose both to volumes in chains short commitments. production manufacturing products limited able to term tobacco by we multi-year for their paper relied

customers capabilities. proud were to act and with to of support supply we our changes course While actions unanticipated wish challenges we global our swiftly these chain are and unnecessary, address

back Europe, Turning Eastern from specifically.

As the other energy as on pulp we remained engage the are pleased our conflict, detailed the cost Much element costs. But continue in AMS, with customers we and this above our increases covered have including volumes challenge. price higher a and additional to surcharges that highlighted, inflationary of pricing we we implementation discussions.

deliver guidance. to With these success, actions assumed more review XXXX detail. that,. early signs to EP that what operating remain over the call Given will stable I'll segment in profits consistent confident turn was our and the Andy in in of with the financials we ongoing

Andrew Wamser

adding approximately versus strong million. quarter, mentioned. AMS, up was with Thank as XX% $XXX were growth to million year Scapa quarter first a you, sales with Starting X% Organic very prior Jeff Jeff. $XXX

for growth million the to trends Given which current offset nearly cost. more and reported this increased level. addition the organic $X resin pricing we than upcoming higher demand quarters Scapa accelerate input or of levels, operating higher with pricing, XX% profit Adjusted and from expect

components are than offsetting those well. higher last While have as our increases price also other cost been in year, effective

inflationary we increases we we remain we be price appropriate. continue and Simply to than to with pressures increases began. have And watching additional in and act recent higher assessing have needs last how been for first pleased quarters, when year costs. vigilant are We put, in recouped our were as will costs quicker

While significant improvements and quarters, quarter, in margins with the expect were guidance. comparisons XXX down expansion quarter, confident prior the basis told, some year strong of from second fourth our up as the remain we inflationary the saw to will continue hit points AMS our improvement anticipated sequential the embedded versus margin factors, and ease expectations strong in year-over-year upcoming All pricing in half growth the and year is normalize. sequential despite we

and up these growth first X% saw were $X.X margin We contraction. currency however for For not XX% operating with quarter down was movements. Engineered and the year-over-year have portfolio positive favorable expect Adjusted if trends million and profit pricing been Papers, sales across volume would continue. unfavorable to up

energy decline. near inflationary volumes other and prices the higher which peak pulp costs, and drove While factors profit incremental offset higher remain levels

already have acute surcharges offset which this implemented has to been costs. particularly environment, inflationary We energy dynamic for

We for are EP combined profits quarters. deliver volume XXX signs and that to for opportunities our these additional year AMS, the in XXXX to lend in guidance. on EP with upcoming delivered encouraged expect Like confidence expansion operating margin and full basis passing referenced stable consistent saw compression, improvements continued sequential year-over-year early with with points our ability sequential margin costs, Jeff of our for XQ compared but

unallocated to did costs unallocated Scapa decline in absolute due as expenses, we adjusted Regarding but basis the total an XX largely addition overhead, sales, of of a dollars saw increase percentage points.

sales was basis, on million For the expect on sequential XX% expenses to up would unallocated to basis. to contraction, $XX were adjusted profit approximately consolidated $XXX $XX we organic year-over-year up a X% margin basis million X% million. margin an points. Adjusted a increased basis be but XXX operating year, decreased On with and

expenses GAAP that were versus to items assets First mostly were while We as down. divest was write-down impairment $X.XX, reclassified adjusted quarter and excluded of our from small including a the XXXX $X.XX versus relatively and held-for-sale a $X.XX. $X.XX thus significant restructuring construction EPS plan AMS. to written There related non-cash was EPS of EPS $X.XX GAAP EPS asset adjusted in have been piece business, non-core

Scapa integration the merger $X.XX quarter. which was expenses, Neenah for totaled add-back adjustment the in Another and

non-GAAP Scapa purchase and share adjustments as our acquisition. Lastly, to for the other in to well increased the on non-GAAP reconciliation per from earnings these details share our items $X.XX accounting non-cash Please release as see $X.XX additional XX-Q. due

quarter with As term expected to discussed, are the toughest as favorable be EPS our gains as to year-over-year year was in expected comparison progresses. Sequential comparisons increasingly becoming near XXXX. continue first the

average guidance Echoing results, Given have year our After our the a price the EPS anchored full-year the in to range. end financial even positioned taken profit demand hold, stability XXXX are through in the from remain by XXXX, of fourth and combat are come, we $X.XX, start take results external growth to reaffirming beginning and to continued $X.XX challenging we share Though, about adjusted our a better adjusted comments the some adjusted environment, in fundamentals solid expect put to strong would inflation XX%. already place toward call, deliver financial actions EPS we and in of in it's and from still XX% good we quarter growth guided for quarters, $X early goals. the to first we uncertainties quarter to aggressive are believe well and and AMS on EBITDA are for which second to we quarterly we off view, increases put a EP. per EPS continue to of high adjusted expect to our still fourth XXXX approximately

Moving flow to cash leverage. and

flow reflected cash This to year capital $X working input costs. increase million. due First million last strong quarter compared the outflow to higher operating was a $XX sales in and

flow our and typically flow is Though we first we quarter, in the range quarter year-over-year in in and expected growth XXXX. second beginning project quarter materialize. Strong and in free of seasonally normalizes lowest flow First project year cash delevering negative cash to remainder of for strong flow quarter, capital $XXX EBITDA the working improvements the as the cash the free XXXX. million support profit rapid are cash

about four are towards anticipated full go of expect net our availability liquidity, and the consisting times sit times where the of leverage the drive today. leverage as from QX projected five or one-third and LTM end the on million approximately in more leverage $XX have the comfortably term our turn end of million cash $XXX the covenants by net financials improvement favorable remain would we per revolver. leverage, in approximately of over of down near increasing, from quarter we below year $XXX net to I of a million Despite turn ended we quarter first in leverage until year. While

Jeff. Now, to back

Jeff Kramer

Andy. Thanks,

to I the Before simple turning towards my but merger comments the just from with key the Neenah, want quarter. takeaways reiterate

and cover so recover raw First, costs continue effectively to factors. raised we price inflationary do other to to material

across strong be favorable we the should any XXXX challenges. out And first XXXX chain tough of And way, improvements of material versus with finally, the year-over-year. quarter working segments. all and with remained are supply our address demand to the very remainder both the Second, of sequentially remaining comparison

improved outlook, which for flow reaffirming delevering price XXXX, and our will cash much balance stronger Given increases guidance in and we the demand of are our rapid a result sheet.

combined We this strategic and I feel fit solution specialty around proposed at in attractive we shifting form Neenah merger. of couldn't merger. nearly of $X ideal materials margins billion for and be counterparts about sales. know Now, more frame I'll generating on proposition this to worldwide, excited Together, will at customers, expanded offerings way. comments the same is the the provider can and solution to our combination. synergies scale. And the our heart The customers benefits bring then value we strategic my

wellness, with combined If businesses' mega product alternatives. significantly touch enhanced strong we such for sustainable target coating trends technologies and the solutions water, Our deeper end need markets see points, in we air categories. as shared positions combined at clean performance personal key health look the and and marketplace

fibers our just and and packaging with air, our media solutions; a position in in materials applications; filtration with example, capabilities their to media support tape sustainable filter and our medical water botanical our few. Neenah's industrial specialty and and their positions saturation complement For medical packaging and with health tape applications; backing care their coating name

see line and and increasing marketplace. a solve we segments we more engineering long-term win portfolio, Together, our like the trends, these accelerators customers' geographies underserved product ultimately increased ability with penetration which growth favorable believe of capabilities strategic broader to significantly addition we innovation very in needs challenging our cross-selling development. to most In positions, to top drives in fortified offer

Now, discuss synergies. let's

costs annual over we delivery savings. of remainder million year half millions well including of of and one conservatively comprised creation savings reductions, SG&A synergies By identified And $XX of our organizational reduced run value primarily next the these for measure, of C-suite as could We first to over these half expect as optimization. public and any two. hundreds are dollars execute of over to the About company on have rate in the drive cost shareholders. within

raw Beyond highlight buying savings, benefits of and vendors power I higher duplicative SG&A would and of the purchases improved suppliers. volume materials with

our supply global see cross-source multiple also chains We other's from given each optimize to our and sites opportunities production footprint. materials

In adviser third us a also we synergy party addition validated internal who estimates, help will implement to using them. these assumptions our

highly them So, in to quickly. realize confident we are plans our

greater fit to have of for increased essential down translating customers markets, be the and value opportunity, will optionality strong Other for chains. to strategic suppliers new see relevance and drive bottom in value improved the expanded we component larger financial creation. a capabilities our products companies today. markets The even company our of our increases And combined will smaller presence innovation, increased visibility of increased benefits strong tremendous of and and accelerated top value-creating line have Furthermore, across synergy scale to benefits we in and scale. the investments growth will long-term foundation addition into growth. pursue scale an should and strategic resources combined challenge compelling demand be trends Finally, and up most to needs

stock capital investor the We synergy-driven liquidity, broader expect to also improved enhanced see to access increased markets and growth appeal outlook. given

has highly substantial scale. So, closing, compelling in fit, combination complementary synergies, and of advantages this strategic a

that to debt form while savings dividend continuing down return base and expected earnings make company after investments of us exceeding track free Our enabling the our strong dividend robust filed we flow, a as just as times year-end the cross-functional record process shareholders. each to with company manufacturing understands frame advance to merged I has a lower cash paying committed with intent, to out close strategic pay and reiterate with to with four kicked power investors. the we from a businesses have trend company strong leverage Furthermore, are sheet want long collaborating a S-X short, cost to million to there. technology a to expecting that on cash to across both for a in statement delevering a balance to integration businesses importance key combined be and are our EBITDA and $XXX our half and conjunction track From combined XX-Q. as standpoint, forces. night XXXX, remain We medium, and planning approximately off long-term plans a with challenging second quickly net leaders last we combined join in entity, of our

as and synergy planning opportunity future go-forward I are look work to transactions, faith institutional transaction unique have integration is excited knowledge my our summary, short life. of significant While Schertell Julie apparent the integration, long-term lead and the is up streams confidence to stakeholders. Through the teams the specialty I In oversee And experience compelling staying the are very attractive spring cultures the to possibilities our so and of creation combination be in expand because much to one to consultant forward of The this closing similar growth the strategy. to ahead. reasons higher a a create combined and after the our pro and CEO, executive the on a in Neenah's the our as about shareholders our business. has with organization this will execute scale world-class expertise forma key space. She in value deliver and operational to the materials accelerated the seamless position our fortify commitments, and already a company to for enterprise a margins, of

remarks. that line Gemma, please the open for concludes questions. So, our

Operator

of & have in Company. much. very [Operator Chris, you question please Thank Instructions] is go a Sidoti open, Chris ahead. your line from We McGinnis

Chris McGinnis

nice my Thanks quarter. Great. and Good for morning. questions taking

Jeff Kramer

Chris. Thanks

Chris McGinnis

you state just late. did closing Maybe can I merger just little about so far? on that bit If you're I talk the jumped apologize in since off customer the to you reaction a start

what you've to of of the going that you've maybe just two that? maybe that this what I the that of And you're the kind things other stated found -- guess terms overlap other now merge, have been in you base announced Just publicly by how customer companies? since has accepted that

Jeff Kramer

is this a So, just couple Chris, of Jeff, things.

same because complementary. with our from have They're products positive the us our And actually our reaction individually. customers of been the So, right? we don't customers both in highly has working most excited -- play pretty overlap, lot but overwhelmingly of about really been a markets,

to And supply so see so just name it combination benefits it. them chain to capabilities, from you innovation the many they brings

very very, So, I positive think been that. from it's

In we which initial we create announced are able back the to about coming levels with what's these terms since it. they're the the announce is sides what to at high learned said, we and additional of as we've exciting how both They're from value. ideas had assumptions I were integration me additional to teams members started before cross-functional merger, that confirming we with

And so, so it's been positive. very far,

we're call note are is finding across I to reach their think cultures the potential actually that they they're similar that the fairly that finding other to table I -- in our our to approach And they're colleagues, as so similar them factor very me and mentioned to well. cetera. a people to customers very to success that important serving new SWM's innovation as that's et confirming

on I knock think far, positive. so very it's So, wood, been

Chris McGinnis

both just challenges I appreciate the do chain inflationary outside the and bottom sourcing turning know issues been there if you guess way right. to that challenges you I I to heard to up EBITDA? -- the the top related and any the highlighted the X%, is Great. the would have -- add the supply AMS quarter, that. impact you and or up pressure, transportation I cost revenue

Andrew Wamser

I'll just flavor add to Yeah. color that. maybe little bit or a more And

meaningful. liners we the it a cost. supply -- effectively where that I'd see look there transportation impacted I release even up, online. will our health just as about supply lapping couple But say, with say, in at I at some resins. additional So businesses with When some despite first chain of improvement and good saw mean would specialty we the challenges, some of so additional as million costs, I'd $X more input really areas Those care energy one EP much was coming even XXXX film. Jeff obviously in our mentioned, some the we have material more look being were sales quarter And in really and is availability. were when the been of raw TPU had other area

increase about pulp 'XX. think has pulp been QX from QX were we XXXX the I to So year-over-year up where offsetted as XX% it's from our price increase has

So and our it's receptive, surcharges doing that. to customers. what increases energy price our these been offset offset costs along passing we're to But is

So, look to I would XX% in And have growth. the in script to feel my when that the deliver book we to to order the and ability of pricing visibility our high-end EBITDA in I the think actions be really place XX% there's of confident EPS range at we we the potential at that mentioned. terms

we recognize as a feel growth go easy We So in AMS pretty out toughest comparisons. volatile year environment. and both, our But close be pretty as throughout quarter this it's year-over-year we quarter good. expect, this was strong to have going I we and EP and we this

Chris McGinnis

that? things guess Great. the on about up just you lot the Can you in where a they're work of -- you're place. about with And you more room that bit color on do to price little last contractual was the talk the had And at a around changing the just pricing across still portfolio maybe spoke year contractual I one more have accepting increases? Just you And that. how that?

Andrew Wamser

Yeah.

Let AMS I'll And first. me do tackle, EP. then,

-- lot that isn't So really on business generally don't of we AMS contract-based. a

And to we we the higher it's So we're sit we're will But like polypropylene our today bit closely covered at us inflation. would $X.XX price higher And what even we than increases are have able monitoring year. maybe covered. we pricing -- for little than monitoring. thought be a it think as something as we're it's on pass

and we also at pricing between sort We volume. this look mix of that think

we in this forecast our challenges budget forecasted budgeted and chain in for have our supply we would that year. and So

But And we're we so to still think those we to be expect continue. covered. going

no we reset. see And And AMS we effectively the if have On we're change sit we more is covered. anything And of that inflationary the contracts -- so, today. environment. act what no really we is, I'd monitor contractual say where rolled where we'll from EP think

of So we're twice that, pulp is customers -- reset that one some and surcharges customers year on we're with energy on instead a getting relates as of additional some our thing volumes. to some they'll energy. finding the But it

pass So in basis. what it stability certain we giving we that's on able us manage where of us sort of at they're the to terms we surcharge customer a a OP look for not if additional an business And were gives volumes. along then

So as on get sort business to we the of the same OP manage place an basis. we

So, kind of we depending customer-by-customer. But feel comfortable it's a we again, where of little on sit. really in bit say, mixed I'd terms

Chris McGinnis

the of appreciate the that strongest Andy. in I thinking just are impacted, then, pretty about No, of growth some AMS And could or think across you given solid the transportation. seeing out where kind -- you just that that Any environment be when that Thanks. back trend growth especially concerns external the pieces portfolio?

Andrew Wamser

higher, Yeah. of I air could strong that accelerate mean, the at even year. health filtration. that Construction solid to of had care, we gone And chain portfolio up plants as industrial didn't the supply get start that's And our in speak. now have produces as look I when some if I some expect alleviated. one these that say, I we really I digits. mean, some as then expect was I effectively a underway issues When of up filtration right mid-single look at mentioned. have would would our that I'd up some Jeff to we issues labor was

the I get sit. everything some with have So even we when supply pretty I we won't out terms understanding look at in door. to of that's of the going And challenges chain that we're backdrop the portfolio, and feel comfortable where

year. our terms So for would even still the feel the I of But in comfortable better. be guidance results

Jeff Kramer

Yes, Chris.

every that's I that a for that, us that's mean you're daily now say uncertainty to is new It's day something now. day. weird stuff the With discussing, become able but to be

planning operational our in And key we're and in our on continue see our just impacting. don't so demand That's we markets why we sales to the because strong. that guidance reflect very Right activities. is now, reaffirming that

to in it, it. have hit think I slowdown some sufficient there's we if even So cover

world then if to a in we'd comfortable with we sitting. now, and Now, readjust the we're handbasket goes to hell where have But feel right ourselves.

Chris McGinnis

talked technology you've some products Can maybe it maybe the coming there some in you're just of And newer Europe. for products question newer about just of about the just seeing what last out then out from maybe one talk some around you have newer there single-use know I of and coming maybe demand? some that maybe then before, EP. you and

Jeff Kramer

too could I details. trends to getting talk without about into Yes. many you

So products, of to in single-use. are the those. Europe the most And legislation currently remove in tobacco filters there's considered

our with And work them. have close so we're actively ties working to And solutions. to on paper-based we innovation customers

into these in But they're us And by sustainability even the capabilities And by sustainable plays the EP with also and materials solutions. of of these also directly materials. that's great our end-use really have. many so mentioned, of there's capabilities strong in something has Neenah. single-use packaging, I that play we as for combining many that's these underway. excited Because There's Neenah Interestingly, a types call, customers.

so asking innovation of of the EP do our the were the that with to can excitement is we sustainability coming all of plays with customer continuing about And addition, reduced one earlier, help them. to customers you feedbacks the about risk actually kind we're them out in

a So, positive story it's actually there.

Chris McGinnis

my for taking QX. on a strong luck And and Thanks answering congrats questions. in good the time QX. And

Jeff Kramer

Thank you, Chris.

Andrew Wamser

Thanks, Chris.

Operator

you. Thank

for so you. lines, have the and We from closing back hand further Thank the team to questions Mark I'll no remarks.

Jeff Kramer

wanted with more about much everyone. you. very our your support. quarter, we're we But but you thank Thank about our Neenah, because future share first really about extensively longer excited to little on was excitement than come bit we appreciate our to It to normal, a talk Well, and that. Okay. also combination our

Operator

call. today's concludes That

very now Have a may your Thank you lines. great disconnect You much. afternoon.

Mativ (MATV) 7 May 222022 Q1 Earnings call transcript