VRS - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to Verso Corporation's Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded a replay of this call will be available on the Investors page of Verso's website after 1:30 p.m. Eastern Time today. At this time, I'd like to turn the presentation over to Verso's Treasurer, Tim Nusbaum.

Tim Nusbaum

Thank you, and good morning.

results market Corporation opened. financial morning announced XXXX the before quarter for were Verso this Second call Verso's The set website, will the of release www.versoco.com. slides available earnings as we refer well to at web page Investors as a are Verso's on during

incorrect, Chief call President we'll remind of Joining and the and our course and from order Officer. like call materially making to understanding Chief that more you Verso's uncertainties or the These Allen statements. actual in forward-looking expectations. one a management's prove should Should of and on are performance, of are risks Adam Financial Officer; results me John, to give be to may Campbell, everyone or the certain risks St. or assumptions in materialize today forward-looking vary President Executive Senior subject these or Vice statements underlying uncertainties. better I'd estimates

and information are If with posted further which the you website, please will on filings, our Investor like various our regarding versoco.com, uncertainties to SEC business, under associated refer our tab. risks the

prepared In considered can useful information evaluating addition, non-GAAP performance. St. will we information, Adam our this At presentation in be be isolation point, The to of I'd whereas this and results should reconciliations turn in available we which not release. during earnings additional call, measures, today's presentation to in over GAAP believe for discuss accordance with a are like substitute our comparable GAAP in measures John. the to

Adam St. John

Tim. Good you, everyone. Thank morning,

continues certainly of to These COVID-XX unprecedented as with started Let's Slide are X presentation. get impact our industry. times the

coated so mills, proactive a said, quarter the model our to others establish and numbers business and for $XX million return our freesheet $XX and significantly. to financial recent impacted groundwood closing $XXX canceled, are and rolls our XX% and are strategy schools home, down the actions Quinnesec. operating our demand Verso. for Escanaba challenges XX%, pulp, for for and our loss down rates reported focus performance. to of free Year-to-date returned shareholders $X events and a at our year-over-year million, staying entertainment ton coated second operating We took capital of $XX The tough and That themselves. products sheet This which strategy operating both profitable coated the we along of has but environment quarter. demand for in graphic ton most reported consolidated decisive of as around result of nation's and the sheets. to respectively, We a accelerate sharpened large-scale two the adjusted with only prices expected, a the stronger grounded lows as we right an We coated not industry. quarter, for over during the a sporting to economic the respond success specialty, with a decreased and speak COVID in freesheet With longer-term also EBITDA coated with with million with revenues

proceeds to as our to $X during quarter June in issuing In back we'll in addition third a second share cash of sale as in cash, debt thanks today, to Stevens the amount per quarterly quarter announced which be cash commencing $XXX a from We're this, sheet, a dividend part with $X of a to dividend, and our to special regular the our the and $XXX do liquidity of solid of position XX. shareholders. returning Androscoggin in significant million million we balance Point commitment mills

long-term us competitive challenging we environment, to short-term but key a build as is sustained sheet balance also look we as the strong advantage Our for navigate value.

Moving on to Slide X.

with Senior team senior X of and impact management Vice a strengthened positions, have have of already Marketing, HR experienced Energy, President VP and in new a and new executive the key their VP are within seen of Sales organization. appointments and we We Senior and Manufacturing a our All executives, excellent, Communications.

team with maintain to an Our including excellent CDC related continues of COVID-XX through while a operations managing local X.XX, TIR complying safety with year-to-date performance all safety and measures, distancing, wearing social the guidelines. and of masks

SG&A of cost continued as process, is implement ongoing sales. the an a maintained a we successfully to throughout and we have strategically This percentage business. Finally, savings low

to Slide X. on Moving

quarter, we and employees decision these cease Wisconsin environment and the off to particularly of an our actions and graphic decision lay the It's the incurrent take difficult. announced Duluth During operations easy made the mill. idling never to

capacity took around we operating these remaining us market our conditions, Strategically, our gives strong operating strategy idling term, consolidating mills and sell-through the reduces idled and by not also reducing aligns adverse better strategy, it our proactive only our However, operating steps X these these operating inventory XX% we costs address of cost mills. the offset the mills. the will sufficient but cash of flexibility. expect that In near to

options opt evaluate option. mills. a Alternatively, could sell we outside for market restart assets. conditions the idle to are working with this there an Should adviser non-Duluth's the as improve, to and the few strategic idled forward, capital mills Moving are we raise we can

close could we permanently. Finally,

our right flexibility position maximizes the in value. drive now, macro believe uncertainty we shareholder environment this Given built-in to the

X. Slide Now to on

With closer of going composition strategy operating our product financial now and the strength take look their a let's mills, look, at the forward. and the X streamlining business, the a

and paper products is stand-alone X the are pension managing markets, specialty moving with we positioned print premier The appropriately, SG&A, our valuable should graphic a mills cash-generating the spend parts managing provide X platform. asset is CapEx for a key there centrally mill a also Together company. asset. Escanaba efforts a healthy on and have mill and world-class of funding a Quinnesec these the close to markets lot of believe is margins. while in operating strong a our producer it's to and is and important now, right pulp mills very a that First, understand basis,

over and our this we specialty have refined chart. expect time, these to pulp pie product of And graphics, core a product We strategy portion see become categories, around larger pulp. in specialty

let's our around areas. Now X XX% one these papers the revenues products. in first is highlights strategy growth XXXX and half of get Specialty Slide of into Quinnesec Escanaba.

We have we're a in focused base specialty, a increasing as customer segment and built long-standing percentage revenue. this of on

Our consumer around is growth packaging. for focused strategy labels

by specialty pharmaceutical Our in with labels as highly necessary labels e-commerce. well for the technical used used customer. brand and to engineered These food, products hygiene interact are for products products the that as are are

supplier producing products for American market. this facilities and label We are the integrated multiple only release growing North with

and mills. to We Moving been XX% The historically first look closer applications. sector growth has was on for to take pulp Escanaba of Slide the revenues X. tied its market a which at XXXX moderate our Quinnesec diverse half pulp,

opportunity we where a Slide asset. mill, asset, this look product Quinnesec ourselves low-cost is low-cost lot at at already are improving a grow take at hardwood it low-cost high-quality We the makes pulp us and This further market. our our mill, On as a pulp margin our We a position XX, of have driving high-quality our of can for strategy business. sense to for we a business, pump financially. producer established a have our we in this Expanding great market and the growing of growth. production graphics margin Quinnesec increase

on and to graphics a cash as Our support maximize specialty growth business goal supplier is generation with positioning business. to the capitalize our to premium in pulp

customers up our We new is down, product come as sector category. competitors from product and and expect capacity to strategy this will pick away to move continue

company. capital are established, XX, the while and our the Our sheet strategy business output manage and maximize On marketplace. well we for frame recognition brands continue Plus maintaining at this will facilities. Sterling of strong cash to leveraging longer-term and we're near-, Anthem out mid- Premium generation, the Slide we To aggressively, in the

employees first of priority in I'm keep proud near done do has to to term Our feel workplace. so, employees our our the the comfortable team work and is and continues the safe.

business the operating enables strategy. returns. create Beyond cash against strengthened and to This that, generation quarter, us execute capital-efficient we've maximize profitability during reset to and the to shareholder

term, as mills specialty strategy if in each Over returns, the our to sales. idle demand also When at stay capital-efficient the markets to for have the medium mills our pulp of needed. capacity and growing our focused current X percentage expect against have on and restart a we executing we of option

We are can't in factors we many times dealing uncertain with control.

So will I'm not demand return predict going when and to levels. to try what at

stabilization think the we we and upward are that point seen into we see we'll as XXXX. trends look and However, optimistic low have

consolidation far -- control, now to factors to our with and multiple efficiently grow. streamlining the As under our grow levers we as business, have proactive of

business our capital-efficient focus growth our long-term Our of is to growth on vision and strategy. drive areas

the create to to turn to evaluate strength our we also I'll that With shareholders. have aligned now that, and Allen the growth We financial for with call the strategy are the performance. believe nonorganic financial opportunities value review over

Allen Campbell

Thank XX, downturn as Net mill in Adam. of overall of impact economic COVID-XX Point On key sale Good $XXX our the some the decreased you, of first quarter, Androscoggin and morning. quarter. the the loop sales combined pandemic. by review for resulting we caused Stevens million, the the metrics from the well Slide to closure of mills the

Net during the shipments of right quarter the result you or a the pricing the mill for year, compared was loss per in and share of both dynamics, million the these per average $XXX a on to by quarter million assets. significantly driven $X.XX of of net $XX which that decreased improved to second see $XXX loss a of As from the quarter XXXX. million loop can chart ton last or loss write-down second

the of potential longer-term parts which came of to we and maintenance As forward, implemented our have more primarily the million, postponement expected end for we've we the is mill and of outage. Major us excess ahead to to cash did maximize inventory, the revenue $XX Rapids XX,XXX in by cost more mills. year. efforts idling that a of flow Rapids allow will down to shareholder with the move tons savings, quarter We business Wisconsin We of of million also investing attractive in strategy, $XX are these due Wisconsin returns. slightly while focused Duluth believe build of our drive driving

our So customers' the year mills the our positioned quarter next $XX to to XXXX we early and longer XXXX needs. go we and XX, Steven million On well Point EBITDA from to achieved inventory we we own. remainder adjusted results us two. Androscoggin support quarter put no of as that through of will This Page year. walk million XXXX intend The the and sell-through $XX into we in that included two keep

four this million was changes EBITDA $XX mill adjusted basis. had Thus, mix million. on a $XX for and swing million. Duluth remaining a volumes quarter basis, year-over-year While in on highlight million decreased four the lower quarter. $X the $XX The performance mill closed the Mill of a bars Price down was comparable by

$XX took we in the quarter tune addition, downtime of million. the In to

costs generally of On million the side, board, contributing $X favorable input across the positive improvement. are

You can and operations Major in remaining overhead of see in bridge, cost significant improvement the the we where areas in control million maintenance that year-over-year. $XX and we controls could. corporate contributed the part

on XX]. (sic) to Slide XX [Slide Moving

You and dividend by The net quarter, mostly activity year million, driven will free cash of from XXXX. the significantly EBITDA, and interest restructuring, also million quarter This we $X by million, driven in see We've million. for other made costs mills. negative severance, of $X earlier. position, other of two $XX have the quarter million, was cash improved $XX a is the that since third million of the CapEx million has correspondingly, and taxes. up $XX improved our despite the our hidden the pension $XXX in liquidity million sale And buyback burn our debt adjusted $XX of $XXX remained of cash

forward. provides we which XX, balance foundation current financial mills. to profile at for take a very going shareholder the On Our closer value sheet with operating two look today solid a the us drive Slide for

business, deliver which attractive refined historical Quinnesec strategically margins than operating these in higher gross to business the Escanaba and with mills has strong low teens. mills generally for We economics. the been have average margins two our our consist of

we mills, failure was unexpected maintenance million and that major events, was million, but these mill. combined $XX Quinnesec a $XX was wall at one-off we boiler had repairs $XX the million, which two note tank fairly our CapEx wanted million, of and of for that Specifically $XX to

to remain of revenue planned X% SG&A less targeting reductions are than our implemented. We after cost at are

long-term capital this our improvements regular Adam share $X.XX special payment which record through business profile considerable moving reduced payable believe maximize to is the $X, repurchases. strategy, cash With same that major see of of operating XX This dividends the at million, XX, returning of be commitment business shareholder a the in will you'll returns. operating position time. good also A dividend step improved shareholders share now we as are $X margin and we we of shared, $X forward shareholders to expenses, position drive September the the in cash September are per for go-forward cash we XX. Slide to to flow that and of dividend on share paid per as also the sorry, is top on On

Additionally, actively million date, turn With to a or for shares. we And the that, Operator? million have call buying I'd over $XX.X now have like Q&A been back shares. X.X repurchased we to session.

Operator

comes question from Van [Operator Riley. Sinderen Jeff The Instructions] of B. first

Jeff Van Sinderen

speak I maybe worst thinking status of to words, and demand a paper overall to you running? about how that I reopen a or you think those couple as, You I mentioned not balance and getting guess, in better we other your kind when reopen think about to might need of for mentioned In graphic of how supply guess, mills? for may And as that be should the you different happen, in that behind those would there. Can then is far marketplace you more marketplace. you're mills? the options about trough the what you mills the the know are

Adam St. John

in second the down that about. XX%. did optimistic our were, in have significant grades a Volume we're obviously, uptick Yes. We was all for quarter, July

we hit the we do in goes, So think low as volume far June. as

So things up side the of pick things. starting on graphic really to us are for

mills. work As and the got our I move the purpose to to built would to customers that right now. mills us to through X to, supply on as give a far have we the business in reopening mean other our it sheeting of order we've lot ability inventory

would significant So come us back to have the to consider fairly market operations. those for restarting

Jeff Van Sinderen

it as there's mentioned picking demand just the point? balance then a demand is follow-up of supply better do that is think? because you at just up. to that, you And this because a Okay. Is picking and up, July Or really just

Adam St. John

Yes.

up inventory I down. is demand think picking is coming and

Jeffrey Van Sinderen

for obviously, is in you give us help Okay, this two us contemplate you starting tough -- even improvement, QX, magnitude running or profitability to given any good. order but can mills, volumes assumptions you're we then And but for help can help on maybe us and pricing you that what any I see really give a should of just question, on know -- revenues around QX? know any there? I just that, can give and

Adam St. John

I taken, Rapid We tons XXX,XXX will freesheet out. XXX,XXX significant tons coated volume, Duluth, of we've as tell and in capacity know, you, out took we out. you on took

So the is full. our expectation run other to two

full. we've downtimes we change, but things take to to out if the obviously, capacity inventory, not necessary run feel So we like would build enough taken

we're should pressure XXXX. going in in XXXX. recovery we've we As far RISI goes, there on as normally we be have price and to XXXX says a but -- And right, that price, guide you're know don't continued

So leave that. with I can you

Jeffrey Van Sinderen

just Okay. concentration. are the working more. the mentioned one to wanting kind Projects an Can you're give plans or there? on just around that sense And get maybe paper, specialty increase what detail and you know then concentration, us you to nongraphic of pulp overall of that? the I

Adam St. John

no There's really capital product on those that Yes. spending development efforts. It's plan to make all grades. we

idle a -- makes upped in to mill that more low-cost nice drive the make we're QXX, we've an because can goes mill that's dryer. it time we've the heavyweight, Quinnesec. liner have type -- have -- pulp, machine, don't a in products hardwood of on that's that doing pulp release a we're craft some supply got asset and some we pulp when our pulp obviously, of enough So vail And paper product development there at we to our the Quinnesec,

hardwood. by we the pulp get we mill can of more believe selling So and our more out increase revenue productivity

Jeffrey Van Sinderen

Okay. my All right. questions. Thanks for very taking much

Operator

next go Khorsand Hamed of [Operator from BWS Instructions] The Financial. comes Please ahead. question

Hamed Khorsand

Hi.

would seen if why in capacity I out months? has wanted think million And XX to would over X close already competitors the off, Verso have first So you past yet? competitors tons ask, you close taken

Adam St. John

XX,XXX what All is we downtime about took know we We tons of read. the quarter. in

So reported. downtime. In of XXX,XXX of Sappi, tons XXX,XXX that's in took downtime. worldwide, we know, been That's all America, tons North really

all can So that's time. I at give you this

Hamed Khorsand

mean, Okay. But it I from is from it U.S. you're seeing coming pressures? producers? pricing imports Is or coming

Adam St. John

both. stayed coming It's from flat. Imports

you've period. COVID there. for freesheet. lag a month tons XX,XXX same -- got from a And three the through tons XX,XXX You coming stayed month There's coated groundwood. still month coated That a got the coming

like those they But -- years, So I'm that's are been the been have numbers our to impact have what look see they the interested price. -- forward. And over those to going going do numbers.

Hamed Khorsand

volumes coming what in for you seeing type are then of have July up And customers back creeped that you?

Adam St. John

Mostly merchant.

Hamed Khorsand

last mill savings cost And at right. question All of the level G&A? was how versus will much be the

Allen Campbell

Early of came million in be of SG&A that mill. at a we place majority additional the said on the forward. put now, we that $XX There'll going

Operator

concludes would back conference to Adam St. the This any for I question-and-answer closing John like session. turn to our over remarks.

Adam St. John

you Thank and we the joining to day. just Thanks. a call Yes. want have for great today,

Operator

for attending The conference has concluded. today's Thank presentation. now you

may You disconnect. now

Billerud Americas (VRS) 9 Aug 202020 Q2 Earnings call transcript