Domtar (UFS) 27 Oct 172017 Q3 Earnings call transcript

Company Profile

Participants

Nicholas Estrela	Director of IR
John Williams	CEO, President and Director
Daniel Buron	CFO and SVP
George Staphos	Bank of America Merrill Lynch
Mark Connelly	Stephens Inc.
Mark Wilde	BMO Capital Markets
Adam Josephson	KeyBanc Capital Markets
Brian Maguire	Goldman Sachs Group Inc.
Gail Glazerman	Roe Equity Research
Steven Chercover	D.A. Davidson & Co.
Clyde Dillon	Vertical Research Partners

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Domtar Corporation Third Quarter 2017 Earnings Conference Call. [Operator Instructions].

As a reminder, today's conference is being recorded today, October 27, 2017. I would now like to turn the meeting over to Mr. Nicholas Estrela. ahead. go Please

Nicholas Estrela

welcome and third XXXX quarter Good to call. earnings morning, our

Financial take Williams, will begin Senior after Chief Chief and be Paper today from our speakers will Michael Personal Garcia President questions. by Vice They they Michael supported which be and Division; Buron, Our Daniel Pulp Daniel Care remarks, John and Division. with from and will prepared and Executive President will Fagan and Officer. the Officer; John

be made find will supporting slides, the During section can references the website. to and you this Investors call, in presentation of the

As the listing of control. of filings you to based statements, not a a which and statements with reminder, are to I invite the subject all of made our risks call that forward-looking outside Domtar's facts for historical during those. review uncertainties, are commissions number securities a many on are

GAAP can of and Finally, reconciliation on to certain and well as presented non-U.S. our closest discussed, in be as GAAP website. measures the find morning's will release measures the you financial the this appendix

with John. it I'll turn over to that, So

John Williams

good and Nick, billion. million we $X.X This sales everyone. items of you, Thank $XXX reported EBITDA on of morning, before morning,

quarter as cash productivity results performance Our strong start the demand soft to to In and and Paper year. improved solid third Paper, Pulp we margins in flow. and reflected good improve continue generate after a

sequentially, X% were higher mostly driven by volumes Our strength. seasonal

with paper more In and we attractive. addition, business, offshore currency prices successfully export our this grown improved making market have

Our further programs. improvement and and benefited we mills from were continuous well. work low, ran our reliability costs Paper

increases paper price covering of announced grades. Finally, number we a

In steadily increasing, cost pulp The continue average opportunities. results a negatively by last productivity and margins, were productivity. When and and quarter and our price ran are and prices to raw combined plan. good had expectations. sales that our impacted the pipeline increase trended benefited compared executing year, sales market progress robust in Pulp was also to targeted on Fluff operations, while our $XX and a resulted higher. we above our while Ashdown improving. selling headwinds In AX in strong, are success demand pulp a to generated basis, quarter machine and was light consolidated volumes. cash quarter, competitive, pressure we're partially maintenance continues million make Personal which, the improved business of with of supply shipments machine the long-term million be year-to-date. growth volumes strategies in global customers. Pulp below material performance infant markets X% from the with and On remains our focusing Care, $XXX third in tight on Operational well quarter, for our we solid qualification performance. a offset Our a near-term It diaper free

So to over the the turn let on for our comments and Daniel? we continue trend financial call me before to well. further review that, outlook. performance making our With Daniel

Daniel Buron

and morning, John, you, Thank good everyone.

net morning financial million second going million X. quarter. of the to this for quarter second to XXXX. third before compared over per the highlights the of quarter on of earnings quarter We of EBITDA per earnings Let's amounted Slide in start $XXX the reported to the for $X.XX $X.XX $XXX items share by share net compared

as rate the the X. a higher quarter Turning businesses. benefits. sales was $X unfavorable Depreciation than the due R&D of Consolidated all previously second higher variable of in $XX million we quarter X%. prices compensation in to tax to tax million In result higher variation recorded the than Slide and second effective tax $X SG&A was the an stock-based third second of the market volumes million than foreign to while were of income of in sequential by compensation, million tax $X unrecognized impacted the quarter, exchange favorably quarter mark was our amortization higher The and recognition and expense higher higher earnings on quarter an or rate variation. an

our been rate. XX%, forecasted tax in have tax this, would line Excluding our rate with

Now turning flow to free resulted operating to the $XX $XX on third quarter. by for expenditures of million activities flows Cash cash provided X. amounted million. flow This statement $XXX to capital while the million in Slide amounted cash

quarter, for increased the higher volume waterfall $XX to million, for on million maintenance by to for of material unfavorable due impact productivity $X and lower prices million partially million, mix EBITDA million compared for were These quarterly second X. $X selling and for items $X turn Slide Let's lower higher $X raw When offset and million. for million, million, freight SG&A foreign costs $X better the higher $X exchange to costs $X before million. an and for other $X higher by

U.S. was by quarter severe This conditions, particularly weather marked in the unusual

estimate inflation the season. impact million We financial limited next few see impact be and difficult the to the cost our and in due in expect operation had the but our hurricanes quarters fiber, freight quarter chemical Those Southeast. on $X people. hurricane some to to

was compared of quarter Paper of starting and flat to million to Now to compared Pulp the last the year. the business the our in on $XXX period segments, Slide items and segment, before compared sales review the X% $XXX higher when million second EBITDA XXXX. were In X. same when quarter second

last year. our X% the increased versus grades $X versus per before EBITDA all million $X last -- X% quarter same Our for were and paper lower $XXX and paper X. Manufactured the Sales million. was X% ton Paper items QX were on higher same than quarter. Average versus last business quarter the Slide year while to compared quarter last when were X% higher prices transaction shipments lower

versus last Average second $XX up period on increased quarter. quarter pulp the versus higher period before Estimated were quarter business increased same last XX% shipments metric XX. XX% when higher the the $XX year. versus versus Pulp ton Our to million. prices EBITDA were per last items and same and Slide X% second the Sales year. XX% was Pulp compared

pulp quarter increased metric when while Our increased to compared XX,XXX inventory paper inventories XX,XXX by last tons tons.

Personal Care Sales customer the XX. and last compared of as year new to a addition business wins Slide Our increased result HDIS. on of XX%

EBITDA Our largely than the was second lower $XX cost million $X to before in and quarter. quarter, million, movement the some due items currency headwinds unfavorable

Finally, on in third to shown deck, as expect compared and slide we million quarter. increase when $XX maintenance of spending fourth the Page XX to quarter the Paper the Pulp

concludes this my the call that, I'll John. with financial And back So turn review. to

John Williams

factors. was minimal our lack-of-order financial maintenance less tonnage across driven high, was Paper Pulp Paper, had businesses. and downtime delivering was you, The the Total In compared results flow. and our quarter by business outages and good. second results in our to Thank steady and very improvement Daniel. the number in performance is of network a cash production cost We

improved X. end also as Pricing we improved, seasonally on increased price demand of and compared and shipments the specialty market to certain increases at announced and grades quarter. the communication quarter Our packaging

provincial continues price online second and Windsor September. expect over The the ahead second in full the implement with It immediately of We a was the and completed at mill, the XXXX. generator installation quarters, next run-rate of quarter implement the below represent grid our pulp $XX We new we the price In the expect X turbine budget prices Pulp, power increases to into of schedule. generator improved additional selling increases, XX% impact by the as approximately and of efficiency pulp following momentum market global deliver mix. per higher and Pulp of which additional the markets, in year. million trended some announced increases. revenue price momentum and energy mill's and softwood October fluff our over previously we September should

As and average a and China. close both current are of the fluff to America prices NBSK prices point pulp below North in interest, nominal or XX-year

with and will capacity, of is a growth to momentum our business significantly more With becoming Pulp market portfolio. ever X provides part high-quality million scaled growing business that it our pulp tons an add strategy. Our nearly of important us

which growth, well softwood XX% both our wins our continuing year-to-date. customers. with increase fluff, fluff We're SBSK, and and are incremental contract Our up to NBSK volume growing. customers, from positioned shipments, We're to tissue-grade through volumes position existing and capture additional include and are

on continue and in and customer pulp great another We and receiving for we're with timing of progress quarter external qualifications at The track at make to America up poised globe, Ashdown. being Plymouth's locations fluff and to ramp strong the to Ashdown XX% in shipments quarter We're aligned good North optimization Ashdown. across X approximately feedback. with is closely sales fluff in several at sales pulp internal fluff

the pulp the run beyond the at year smaller line decided have our support Plymouth transition. to to end We of

consumption competitive highly NCX, near-term to Personal closure rightsized of will target market. tons well assortment growth to Meanwhile, Care, market market. of Plymouth production North approximately metric outpacing We continue we're Following annualized of retailer, grow, and to expanded continues on an our capitalize the be adult a in fluff category rates with opportunities key pulp. at a partner our incontinence In XXX,XXX growing well them. we America the brand infant above

above Our division which raw sales encouraged with year, this to some so I'm inflation. and well material grow performance to this market. pipeline positioned cost-savings continue strong, in also remains helps our we're far mitigate

wanted and I asset earnings on call. second follow from comments to turning Before repurposing touch on of briefly the my to outlook, up the quarter some

is in permanent We to needed Continuing assets white generate a long-term sustainable we're our earnings preserving our our from mills removal lines. of fiber to when value the are paper our operating ensures committed of fashion.

assets, for expertise have wood to a green at world-class shareholders. products. and of value number alternatives in access our all actively tons to looking the in We XX to maximize available fiber-based fiber of us engaged million nearly We're

can of confirmed a the retained As study. be that containerboard process, we good us with interesting network an has have that part our Engineering Early the converted. provides option within containerboard that to feasibility And Group candidates asset we repurposing. have initiate believe considering when Jacobs we work

will driven be measured our steps, All our in repurposing business. of white in our balance paper supply-and-demand by

to outlook. Now our

Paper. quarter, fourth maintenance higher and we Pulp costs the expect For in

to is prices, seasonally is Paper And favorable questions. unfavorable continue seasonally higher to turn And back costs time or impacted to benefit following call for raw Pulp negatively Care price and expected Additionally, the increases. mix. Personal you Nick should by marketing your and announced from I'll for volumes to expense. lower material recently support. higher be realize Thank expected a

Nicholas Estrela

John. Thank you,

So both for John questions. [Operator will Daniel Instructions]. and available be

please. up the So Anthony, can you questions, for lines open

Operator

[Operator Instructions].

with Staphos Lynch. George comes Our of from Bank first America question Merrill

George Staphos

are kind third us missed and Pulp I of where your it, question, realizations update quarter give or you already versus guess, your currently and an an average? on shorter-term one. in but Can exiting perhaps a update -- first average mentioned Paper on I you

John Williams

question? mean You of to that quarter price of the opposed Is end average? where sort as the is

George Staphos

are Or they on but we if sit Correct, where as here yes. even to today, you comment want either/or.

Daniel Buron

Okay.

far. so mean about I let's So increase in we've September October pulp talk price first. announced and

that of -- little of in our QX actually none or is is So results. very actually that

when and of the price -- that far looking paper on at pulp are the not the exiting they on I'm sorry, business side. on So the versus average side price, the

the On paper side...

George Staphos

pulp? On

Daniel Buron

on Yes, pulp the side.

So had were market, the pricing increases that versus too. QX. close flat, quarter sorry, QX on versus given $X -- side, I you look moved also to mean currency price fact -- I paper export. It's due actually our increase actually we our the price our this average very But were and mostly good there, our last in mean, I export some if our to $X quarter per closing at of price mean, or the business, ton, -- given the $X our price the momentum. of foreign

John Williams

Does that help, George?

George Staphos

$X Yes. didn't Was that find Was versus thought on that a exit I ton. that XQ XQ? heard exactly. reflection a price? I I per

Daniel Buron

Yes.

George Staphos

Got it.

John Williams

to that's QX. No, QX

George Staphos

tweaks might conference feel this need you for tell discussion return generate to secondly, okay. And investments? Yes, see forward? in going going And question you your us the call maybe Personal we from relative there and recognizing any had Are follow-up your can to the on how Care, I strategy a itself, containerboard. expectations then is ultimately is that

John Williams

Sure.

mean, I let's piece. the talk So about Personal Care

of sort mean, prior quarter competitive is to you've this baby pricing, seen has X and average us to bounce George, back diaper our expectation we in very closer a our the become was I disappointing XXXX from So market slightly that. particularly space. The in on quarter. in that

a their month that's in is marketplaces per are their price their So struggling incontinence budgets our either customers share. business Europe, lower-quality governments less to they're in prescription, hold are offering In the where prescription be having balance with aggressive business, to competitive. become so operating so the product. or Obviously, make adult people to euros

We a that in have in business space. big Spain

share and We've new I those actually in are products regain think going an answer what some beginning we to now to some we're to products. have do. launched

strategic the do we anything you year with I in of simply X mean, As some has a our one Europe. resonates margins we'll has bit growth way those in share, certainly from business, end a and brand mean, been think, until a is of your for products at get some where partner can't X because and keep more going look model I we're margins and little page gain and raw back business this think, this have traction, may I momentum, -- do or us. our Southern more we I our seen at And when come to that very see pipeline no materials. issues look contract. certainly compelling. about you I helped have we contract quite the the of customers. still really that And there's of the doubt that our we standpoint, making we've

that's that was quarter good that's And news, Sometimes sometimes news. X, good in news. not not-so-good

that's think that Does help? I how it works. basically

George Staphos

to Yes, you're it you recognize of at there early terms I I expect containerboard in potential, North have it's that I question, investments saying -- at think, least I some what exists I'll review. that's do And Or of the you challenges any given that the How and quarter. thoughts contend -- you're days, How do investment framework conversion only of wanted, your terms does are broadly? guess. because for terms you last your terms helpful, The this, new in on there look integration on that? last unfair in here don't market. a with in John, containerboard? investing Certainly, Personal it in to you you what potential as channels touched the maybe have model think achieved in And return. market question, yet but given Care, in of ask an not growth and guide potential America

John Williams

Yes, that's great a question.

of what the we assets buying we're in have what already to fantastic the to where Personal we businesses. So work we to where Care, very course, have apply to difference do is have of here intensity place, this is make different would in capital had

Here, assets. essentially, already repurposing competitive we're pretty

So fluff on been it that we have and, side, with with story. X achieved. before, it's paper done We've with what compelling think, once think, very have grades I a times actually pulp, I lighter-weight twice pleased

confidence. terms of got in of to So ability repurpose, I think I've lot our a

honest, early In terms of many route think, I to are choices. to market, you're we right, tell. open to But it's be to too

There there thinking assets So are are may there people may out who be who of be folks there supplying particular thinking around joint theirs. around venture. out

white assets though, I we'll as have to paper about have to forward. my in kinds I and been fairly to I've would So where as not months, open-minded people -- think, discussions remain mind open be optionality just reiterate the have learned X is I all we a optionality, white think held sell. certain that of all last repurposing paper move we this do when

based timing recent we've gone of that see of more how supply-demand months, with around our And on actually to capacity some course, the So some has -- in comfortable we out. feel this balance moving. begun our is as really

Operator

Our next comes Connelly Stephens. question Mark with from

Mark Connelly

you things. paper... expect Two white Do

John Williams

Mark, you're very you. having sorry, you faint. we're trouble -- Can hearing

Mark Connelly

Let me try harder.

John Williams

Perfect. That's much Thank better. you.

Mark Connelly

Do higher industry operating rates to in white XXXX? paper you materially be expect

John Williams

capacity the been that's closures balanced think going I supply/demand. is announced, by to that answer of depending the on depend timing -- Well, have

what -- think be and to think our I really I look I honest, we to capacity. about operating have that at means.

going run feel actually in and capacity. see year where be of you to think to how mills. industry And operating we're blinded to we by we're balanced pretty supply/demand, our our terms get I customers selling the can going we next

Mark Connelly

fair. seen was then couple right of you No, is and I years reason get the and last the rates, asking The Yes. that's struggle over operating give we've industry back. with it price some

containerboard So a to hold would strategy be that's question, But Care your I'm on second put why growth pursue Personal curious. to you willing growth?

John Williams

the if containerboard we at us sort I afford no is, you we question, guess think would if But Well, which take capital can allocation where of be might could no story, -- depending capital to there's were timing, if a where both. repurposing, that on sheet fairly because think balance of -- compelling look term, doubt is containerboard, in is and doubt, return short to probably again leave do fluid, I on it from a our that's timing it we kind the story. compelling the there's

remains that a So priority.

across What winning of really large pricing don't and need do that business. through, we the have looking fighting Care, Personal dropped a to on terms stuff can at M&A. man going the today I'm runway get We've got into we really erupt is solid for. the sales. that we through in get If moving new of of think to I base of and to asset kind $XXX do business we street get returns million need the that I'm

Operator

Our with next from comes BMO Wilde question Capital Mark Markets.

Mark Wilde

wonder I'm about ago we few has your weeks filing this what Appvion if a on by impact talking could and just bankruptcy off start John, that business.

John Williams

Certainly.

So long-term in remains a place. as know, you supply have that agreement we

Our done brilliant of a money. sure finance have job we folks lost making haven't any

So lost money. any have we not

a good have pretty them. with We relationship

announced you As increase. a they've know, price just may

piece of So remains Mark. I supply think still attractive, that of business and piece that

not every it XXX,XXX tons where supplier So no falls, we -- to because there's very it lightweight. but critical kind are where them grade it's We doubt of an supply It's very falls Marlboro that out of easy an of business. year absolutely paper XXX,XXX, competitively.

volumes. are carefully, we but at are watching So we minute, the shipping

volumes, for paid it. getting As I'm we ship

Mark Wilde

of market be I kind out at shrinking seems rate. to single-digit this a carbonless just John, high mean, Okay. of curiosity,

they're presumably year. Because less Marlboro? needing use you how affect that does less how each just and So

John Williams

the is profile, real paper. thermal But their I thermal, Mark, mean, so on growth

getting at some receipt is see pretty paper, So kind actually opportunities minute, and to the there, globally. They're growth regionalized this build that lottery they of paper.

part we're actually, not a the So volume that seeing is Carbonless decline. of small portfolio.

Mark Wilde

just All you seems a than Can market. has needed now industry the the what And turning these talk price freesheet pricing like And rate initiatives. increases make about uncoated Okay. indications operating at on any it then to stick. historically, higher right. of early right to kind we're

John Williams

can't customers a only well I mean, us. can I I see we've talk talk pretty increase. of think, The shipping we following. other industry. price what Well, make. I about I the been can again, yes. have with lot responded, I But mean, really people

customers early to so I pretty think on I my full is prices, the i.e. adjust their but we it's days, into we to me, good need run are normal lag. I'm so And going happen is a selling So, adjusting prepared quarter "Okay, I XXXX, said think to market." Some confidence this rate probably second think it. pretty already how selling that's remarks, but in as far,

Mark Wilde

And rise then okay. One by under X so curious other just has is pulp Yes, coming the think, were, the think global been tightening some brightness rules sort in I'm they affected the affect about I because importers standard weren't in there the factors prices. of the around some of this. how just And I duties. trade antidumping

John Williams

Yes.

because the producers uncoated market themselves industry think that So also paper legally, space. worrying -- it should coated whether coming over that making next capacity the of Also, months. seen you've it has rather one is be they're be think going closures coated in I announced in XX% will out, in. solved because, in about those think are the think I may than -- not so going particular, so now about be Linn coated interesting West we've so flow come XX to patently, through being is, I they problem to

I not all are all, an our supply-demand now. may right that own But think, opportunity. was balance, that at So feeling if look okay. I tight thought be we people in It

Mark Wilde

were Yes. And do some John, they that closed, how idea, uncoated actually any mills the coated into for have you of market? much have you putting these think

John Williams

you, To be no. honest no, with Mark,

noise put more it volume, than way. I that think there's

Mark Wilde

fourth you thing about XXXX and for quarter full just, pulp right. into the last if maybe then wanted we increase us, I'm have because kind the struck about help at of some prices. The been can ask XXXX cadence, of prices the year fixed I of hearing to into All as Okay. kind look us sort already is deals in for

So fourth quarter you and could. XXXX, if

John Williams

can. the I I you the color answer mean, is to give no. guess little I largely and I'll can obviously, try bit I

last. of momentum how great the So this course, is does long debate,

Our we tell after to We here, about quarter. view waste waste talking paper the It's Because are on their is fourth -- hard go going the -- mixed too Chinese -- see into really Where if quarter. ban their though, ban that certainly keep fourth going it really. the momentum pricing. does would the see is the and still this at you look just anything look This I top I just but pricing. And out, if is us, at not mid-cycle when you this remind take of really And pricing. runway. really overall I cycle demand, inflation here way pricing, up that? mid-cycle it's

people my events, to need more are than maybe the dynamics are little shocking mind, don't positive. any runway a necessarily anticipating. So and have We market bit we

Operator

next with Our from Adam comes KeyBanc. question Josephson

Adam Josephson

not? call months containerboard of producers obviously, since at your or Has about containerboard. paper has a X thinking have that white And potential couple conversions why conversion? -- machines all affected to changed why that their of your a announced John, ago,

John Williams

a great that's question. Well,

time. So let some that me give

we that ourselves, level be, Typically, to we before. product, just a remind we'll will have it's have i.e. always longer that got than manufacturing. So white no we is certain isn't Patently, paper of runway for assets downtime. we as had believe around closures, that happen demand more that we we fit, there what see take market repurposing, may whenever look whatever at

And when a the we'll the here, we've business certainly, asset. those network, thousands we of move market we're been it it how the about historically. has into since facility. done X rest I've then tons the done of That's that repurpose into of the then the there's I that's that way and and times, going left, -- we'll tens the As few to we're thinking asset downtime repurpose, steer tons specific know

a timing idea?" building really, more And a is help? still this we've this is it so before. had some good that would I Does the all repurposing I just that question than still "Is around versus And options is us a of optionality remind of question. think, that really

Adam Josephson

Sure.

in prices year. Just related move export containerboard question, this sharp the

parity yesterday the domestic machine they sell think export those of current just prices, your One potentially would Does prices on all on all with conditions. converting reach that based producers be the just given cetera? export-oriented of converters that to finding [indiscernible] challenges said could thinking export about a at largely affect tons to, et

John Williams

would Yes. else not you've It tons, to you're likely, there so an more potentially. feeling excellent those makes appear quite to nobody you're be doing opportunity it I obviously, business you they of if a got And in say, numbers do, choices. terms that of would wants course, because, know more

Adam Josephson

increases expect The about pulp more exit I a prices. that couple you based me kind others. on And numbers, just implemented? with, you've the benefit, of you just talked could what -- help sequential Can pricing just you benefit rough know in you've the prices a little

Daniel Buron

I have are to main I regions shipping think both into. and shipping you in Those America. divide the X answer North into China we're that X. we're mean, the

North realization. on contracts, depending It between could So X a months. and actually there's normally to be between, announcement lag X America,

a China month, should of U.S. a October, the in more little that of see increase. So September, we is market. half terms in bit

QX at in of so America whatever leads China, end conclude in we QX, the the have fall So whatever's tail far that market we'll me been that than a America, should which time. China of North in that the is increase more be will and little to North in announced see bit

and in So a increases bit price with we -- a current bit we believe little of little runway have the runway announced, QX a good QX. in

Adam Josephson

and one cost there your And expectations in about future on of hurricanes are? terms the inflation what the any Can in you talked us quarters. magnitude rough last give one from you

Daniel Buron

very I -- mean, mean, reconstruction. It's calculate. a I to more freight there's share to availability. hard need for is

in there's So bit a versus a there's tightness. terms That's storm so I think more and our chemical market, more little or creating, trucks less thing in was bit driving middle costs. that's full situation. the same And tight actually of wood there the past, lot of was of was the that more mills in little -- there already the being actually plant by a an tight a

So But be we market in cost it's to a there. an increase to supply fight -- price of try our increase. little our we sources, X to more going the tighter structure. expectation That's components of thing. And find price bit all inflation or an should see but than procuring working are believe we're actual actually, one hard will people alternative

Operator

Goldman from comes question Sachs. next Brian Our Maguire with

Brian Maguire

you Just earlier. the could wondering if on -- following pulp comments

And Just continue wondering be if the now? as maybe October. strong Or get in the up you trends, strength? markets we could to any XQ comment does to been recognizing they've it into of change but some and particularly China holding seeing in how been on recent have markets, that export strong, are you

John Williams

Well, it strong. continues be to

on just I think in fluff, price North and remind the about mean, in weeks, X in ton I China; $XXX increase we a ourselves, America. to So October; on NBSK China SBSK, of have in and announced sort $XX $XX on $XX last in

those we'll you patently, see terms grades. Certainly, in if RISI comes we softwood mean, made it take, much very at again, momentum demand -- point yet in think as some if out, its pricing we but I last look at from like, momentum. of are have So to goes -- well because the got obviously. but you if can through, I now mean, that It was standpoint, a just move doesn't China that around, Daniel's

So [ph] in are like tissue Chapsy manufacturers China. growing,

from of majors of in baby look Most so most adult buy it's China, we if you them. very still market with Personal from the and diapers, Care sell fluff there pulp, Care, right are of Personal And the us. diapers penetration us. We actually, low. majors at where buy

grows, as have we So still that my growth. mind, to

into those those So I look end-use look is the markets of end-use we markets, really grades and accident. you markets. think want the at these mean, pure not mean grades to end-use in I like if support I reason we're

say sort I China, using furnish there's machines. buying pulp smaller, try waste where waste So course, top ban slowdown. a of partly shutting people there to a should lot their no of mixed paper, to of of course, juicing now, that kind are at of actually quite of Chinese course, the that I mills. And is some old-fashioned be and reason line, are think And of they softwood pulp you've this, what's of got the think, paper the right why some some in of

So you put all that together.

like, Does coming think, an you just based accelerant, strong from demand's activity, that help? on market but got if on that So of underlying pretty demand growth. you've I sort also that's

Brian Maguire

yes. was the The recent recent exports I up sort hearing to those are back of of -- just seems we're some to China recycled trends. starting what fiber Yes, reason like ramp It is asked again. just

there? just was I you that of to if changed. Have you of kind So has seen wondering change been juicing referred any market the

John Williams

I have waste legislation, you Yes. million acceptable is absolutely new I as exact won't ways I I numbers, tons mean, under are go. several think of contamination that's -- have mean, mixed far the concerned. certainly, to forget but that, there as

environment around at the look top to the you and list. I of the think be everything if Congress, is you look going Chinese and saying the are -- party

see. let's So

Brian Maguire

get to we'll will the switching and take Any hit target? going sense just we has to challenges then the and out margins of when And when -- to quarters. there kind last Okay. the It obviously are some bottom of how Care. couple long of where Personal had

John Williams

a Sure. question. great No, that's

we of to than were course, this. So is because hoping do it frustrating better

the been in prior I we So back to sort said earlier, we see of a to quarter we've this. -- as numbers bounce doing X

bit continues pressure into next little margin the think year. I a

well-run We third in going sight it's expect I of should think still margins believe anticipated. But have of the see some that quite because, products that, going still business year. slog quarter business. decent, should be have next kind of in not tougher I frankly, are But very fact kick you to a over what wins this in that's than to well-sized, mid-teen a consumer I left we strongly we time,

to need quite now, we a of fill the have that line, that make top get right So margin where scale doing, to obviously challenge sort which I think we're we I successfully, we drop-through. sure think,

Brian Maguire

Okay. And from last me. one one just

targeted from maybe up think last time a Just a capacity. following you've cost if I Ashdown -- and any are referred be minus -- pulping And that seems data then million. plus estimate? main $XXX one Marlboro would right, be location-wise, BSK feedback Jacobs, conversion? the as currently Would containerboard million or Any you gotten question. update I if ones on $XX -- on drivers to I potential think the lot it the my of where determining which only of you've of for the gotten maybe sites is the

John Williams

Yes.

So great question. that's a

And exactly answer the at this point. right, about wood is is cost So this on you're refinement basket. softwood no

attractive, we'd So where where look. that's patently, that's

Operator

from Research. comes Gail next Roe Glazerman Our question Equity with

Gail Glazerman

donating they're of a One producers the products. possibility kind that private seen people that have because top your competitors priced not necessarily label diaper might of of exactly see mentioned bounce donating, the might tier or are hurricanes, if

that something quarter? in anything is wondering, just bounce you fourth of in that the Did that that third the back see quarter? help I'm might So

John Williams

terms who is be their I key interesting. terms the a sales price in show is positioning. is private the customers in say, have obviously, leader I not would battle, Well, diaper that to it actually, of for are market, But honest, midst battle now of really. our guess as with business growth, to largely label aligned decline, of label tries space. of winning diaper global in sort overall back as you I brand kind the think, and Because the because mean, of star that's the baby in ourselves we I private right of fight know,

better seeing private is I generally you're seeing label are products. you in think what

all look private and So -- private private consumer, I so at Lidl, at think, brand, think is I look at feeling no is retailers, better. compromised the look rather I'd but label doing at I purchase. look would More differential, the look how I'll label. longer the it's is put label the pretty sort much price buy Aldi's, Trader more of, it, Joe's, offering mean, these buy actually at I

are diaper with Those actually, offering people weaker doing doing strong not with price being look private So are on so if you quite business, are offering competitive who well. who those price well. a competitive label not are people at a the

Gail Glazerman

of what helpful. in what talk U.S. bit on in Okay, and seeing terms talked color might very -- a of about more forward And And of terms you up you're expect moving going You ? into little terms could kind maybe on you've imports kind maybe RICI also, you just exports trade of in seen magnitude. what

John Williams

Yes.

currency driven. it's It's there's think driven, and domestic a shift. also market been I So

one to announced I price So you've and going where us that can terms And on Europe we in AX, what's X this increases We've that allowed business, bizarre has the got solid find the attractive. more players. of choose do year another now of, size to good one use. just great customers. we've export That got by seen British in business major think, a

business. not look, those to have we our export growth an opportunity of to on bit mainly into it's piece our said -- year, look at gone business little plan next but to we've So And do going here nice dramatic and them, more customers a Europe. in for there's see a if you

that If you because numbers opportunity give margin won't certainly I years a there, we of the a exact opportunity see But don't couple wasn't we you ago. mind, there there don't.

Gail Glazerman

of I'm terms you think just that... in just And Okay. if imports, wondering

John Williams

I'm Say breaking sorry, you Gail, just up. were again. it

Gail Glazerman

is I what between with imports. of... I'm what and a mean, go source seeing on just with kind speaking just of you're might exports that

John Williams

Yes.

see down. imports, no I remain know, why are you wouldn't as reason particular So down. they

markets. there's to domestic if those profitable look are you going there's at -- And currency obviously issue. case now, the economics selling to So find start around people actually, also dumping in themselves There's more their them. the

be they So won't here.

Gail Glazerman

terms us And current just you That's are Okay. growth helpful. remind just expectations market? exactly of that what just your then fluff, can in in for rate the

John Williams

mean, Yes. couple say, I of percent. a would I

pulp, in different terms fluff In very markets. different of

move got developing heavier-weight markets, some product in pulp in slightly the thickness in go. thinness to product. seen like those of quality as results a baby the actually less developed China In which long thinner diaper, So of a the is in and fluff opposed to huge in slightly diaper, adoption markets, because softness normally a still way the and is has somewhere to a where products of runway as

look think -- that's overall geography, -- supplier. growth geography, sorry, going that big where we're over to different based of the all I So but on course, -- global the it's a because we're

mind, my still think plenty runway. to So I of there's

Gail Glazerman

last one just one. And Okay.

product In focus terms mandate current is point? other Or of beyond the this the is and anything at at in Jacobs containerboard, repurposing, that lines? looking

John Williams

point. is well. course, at at this brief particular But of always we we'll pulp the also Their look containerboard look as at, what options

Operator

Our comes Steve next Chercover with question from D.A. Davidson.

Steven Chercover

will. Just if you a questions of pulp, couple on

for you of realizations guys are the list are up First up probably $XXX better. but prices year-over-year, $XX all, or

list? discount the So faster than is the growing

John Williams

So that's a great question.

years, So with a list over is versus the if Steve, you, where list almost point being dramatically up to the discounts price, open price the honest I'm pointless.

Steven Chercover

I Yes, so. think

John Williams

now if I I it's Because you with privately. nobody I almost -- at And about reached point would it, I I that talk mean, theories look it's more why particular have is ludicrous. I that agree than mean, would me. think where happening? some But a

Steven Chercover

think, EBITDA maintenance reason Because, lower of laughable. Yes, the down why year-over-year? help... even so is so you Well can it -- is that this the I year, becoming maybe part is was kind of

Daniel Buron

business. maintenance, year, $XX million maintenance last there the than last Steve, this Actually, year in QX is more year year QX this versus the Pulp

quarter last noise a of year also this million So couple and that's or year. of a versus -- quarter quarter-over-quarter

but actually -- is than reason more last. the main this maintenance So year

Steven Chercover

pulp, the to is your And Care transfer segment? finally, also what the Personal price fluff Okay. of on

John Williams

Yes.

we market. So transfer

But we benefit, them So we and transfer bundle the market a freight freight market. benefit, take depending give a on there's we of prices the if mill.

Operator

from of have America Staphos Bank with It a appears we follow-up George question Merrill Lynch.

George Staphos

I if follow-on, One quick could.

side paper of the were Ashdown at a really more closure you that could was And look the something by I end before. one be next Perhaps within we've least could last not XX% is fluff -- around going hundred this that give liner. us think that is thousand seen One marker you one goes And I if before that your is But roughly you juncture? plan? it for, Or this quarter capacity off. is and if on to release an question coated opportunity? John, couple think it you market, year, to to then touching at actually according So broadly a by all of sign where attractive attractive X, tons. roughly

John Williams

Okay, keep going.

George Staphos

that Asia? hardwood our out you supply of could broader travels to your is, your so trend. thing keep seeing up. up Because picked something markets, as out in we've as you If The of last some on that that's are in interest a of recent well, mills any

John Williams

All right.

first So I the think still can because -- I can one one answer last remember first it. the I

We George. we the So on not but necessity be it's hardwood to, as will hardwood, really answer see grade, kind where a our not. have of preferred

So we're There I was in the couple a ones. that mix other think plenty of going of got on pulp. mix carry was runway. with think we're to There because has we

George Staphos

see in Where Ashdown terms fluff will versus you total... of

John Williams

much as obviously, are So to I we motivated fluff highly mean, sell we as can.

in not by So if certainly, XXs to beyond. output, XXXX high I'd the terms of want year-end kind in of be

Daniel Buron

the dryer close [indiscernible] to in going we're small As the

John Williams

that's inevitable. over time, third one, almost a There Plymouth, was me. In remind

George Staphos

Yes.

not time? really your some over that liner, an as how that that Just opportunity is Or release capacity is of for attractive?

John Williams

think, the opportunities I mean, the an we coating they're that were where aren't mean, frankly, base kind we relationship, like market that with build there's Appvion I opportunity. mean, I paper quite there it. don't doubt But I other no great George. competitively. there make it's really we'd right if look many, the that relationship, of to in very

Operator

Adam follow-up appears from KeyBanc. Josephson [Operator we with have Instructions]. It question a

Adam Josephson

you JV a converters talked potential And/or to customer plants situation. with one consider them? last direct building to structure? one Just box and the any would going on about you repurposing Have

John Williams

called we've up. that can't Well, us But detail. if much go you don't of discussion to -- in any have mind, that. don't further have that I I want them than some

Operator

with from Our Vertical. comes Chip question Dillon next

Clyde Dillon

is comment. paper can on actually the get page. a AX-sized First, think you okay I more because

John Williams

due. is You're traditional

you for thank Okay, that.

Clyde Dillon

especially other on my all, of I understanding contracts exactly. Listen, and and of of couple fluff, I is at I situation, be But lot on folks, you that questions pulp year-end tend of that Exactly, in was had kind -- had be touched that, market. the first to a in overt renegotiated it. first you a your maybe narrow? that shot softwood those an will a there discounts in will realizations the mechanism of across or discount because price -- boost without of strength fluff, January based the the on quarter often, paper fluctuate increase some Is see grades, might a think

John Williams

knows. nobody read I've really about what I going to if been individual pure don't against I individual negotiations have have I -- try honestly fraternity, mean, obviously they spot where discount to a with and customers. you've list reading. bosses that obviously, I Chip. And try, that's all say But purchasing it'll speculation, And be mean, to know. their would think they're is doing a prove classic well. benchmark to some the that. I for might do someone's they

in whether really I the doable buyer/seller of think, remains of sort or not relationship, So seen. reality the to it's be

Clyde Dillon

amount pricing, you are pulp especially of where question equivalent along maybe with rolled of your in they're then the any you of achieve the "Let's goals, in? lot a Okay. tighten up might be make other instead or most where could the keep say, paper" mill with an not market much paper pretty to the of in paper even them, close order market, getting integrated, white money edges running, one to is, pulp point make a all strong and mills, of strength And and -- spot all the there

John Williams

do. ourselves, the So up we productivity don't pulp question, the patently, pulp. pricing, market really business answer to is patently what we I in as mills mean, a But is, output the add got who where if mid-cycle remind answer is so into good economic your number this And of the divert only a economics now, to because now. that's short But that that's can. some I've just we're much now. possibly only make not right at I And I of have manage and I way pulp to to dryers, make those right we decision, continue want as

Clyde Dillon

pretty you be to Marlboro are might virgin it then one your your think that last mills of mean, paper when how -- about to we fair you which But think obvious -- sense And right say on think repurposing, of the makes a is looking other that I Not if guys some is best now. X,XXX% is, conversion I opportunity. white it, something it's the at pine away seeing not hundred like, the them make want truck you forests you recycled are the rail I'm I like chips pine Southern sense would that might virgin as couple example, that do Kingsport in or from saying more and miles particular just but Or map, up [indiscernible]? for conversion from Hawesville, at conversion? a look and a or

John Williams

all asking we're you're the asking. questions So

early at really whose we're it's we a frankly, too saying, so plan. with. questions to there'll of the build we be it's "Okay. white this by are Chip, plan look are early questions. So the quite we demand." paper to what very So answer need But that's defined as be some And That paper will days, Well, defined And timing kind wrestling white they plan be by demand. will building.

Clyde Dillon

you. both you. And then Got of maybe or lastly for Daniel for

mentioned You CapEx. the

going it's think be than this I we it thought far so lower year. would what

but anything what mentioned next this, have year like? should we realistically So next both year look would what for without repurposing, might -- expect and you this and for for year

Daniel Buron

of indication start an giving believe this by what we you Let's like. year look may

a big million, $XXX risk actually us latest bit forecast quarter still of than the million which our and spending a is that. so bit So between X, little there's less versus a of last $XXX means

Next year, it's very early.

repurposing, business, optimization Care, $XXX So more that, project, needs with that I maintenance, some normally, you still mean Personal around I'll In probably there's plus normal million. in just million. paper it's cost to around some without and maintenance our be $XX done remind

year. with end a finalizing next million, the we're So to market number a plan as total more but we'll our at of the back come $XXX QX of precise for

Operator

no questions it at the this And queue have we time. in appears other

Nicholas Estrela

Anthony. you, Thank

XXXX. results Thank on we'll listening, great So X, and day. year as have fourth reminder, you for quarter a release XXXX and February a Thursday, full our

Operator

participation. for today's your conclude Thank you does conference. That

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