Earnings call transcript Q4 2022

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Operator

Good afternoon, and welcome to Clearwater Paper Corporation's Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants are in a listen only mode. After the speakers' presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Sloan Bohlen, Investor Relations. you. Thank ahead. go Please

Sloan Bohlen

Good quarter thank XXXX Julian. Clearwater for Paper's fourth earnings afternoon you, you and joining Thank conference call.

the Officer; of Chief today's market on and our of XXXX for XX-K. me call along shortly Arsen quarter are Joining after released Kitch, the Chief fourth Executive Officer. with and Financial Murphy, close, were Mike Financial results today President the filing

Relations slide page a presentation our on of providing a the find including posted company's will clearwaterpaper.com. You the at information, Investor of website outlook current supplemental

covering of Additionally, press information we information will were statements, slide, the rereading this in the this on be the prepared to non-GAAP into going than provided forward-looking providing and release certain two afternoon's our website. non-GAAP discussion. information information Please information A that the in rather supplemental GAAP we note comparable it to remarks. Slide in our by incorporate is reference supplemental of our included reconciliation

me over with turn And the let to call that, Arsen.

Arsen Kitch

and a Good issues. for of million but to EBITDA quarter a in XXXX, in thank Please XXXX. million reported due related in operational sales million $XX strong quarter fourth We billion the $X.X for year and We XXXX. turn net $XXX us Slide to weather three. today. fourth $XXX had afternoon and was and quarter challenging for joining you Adjusted fourth the

a quarter more during in inflation. due robust patterns. consumers a to a share the as fourth Paperboard moderated the tissue me few Private inventories Let customers and but managing late had and seasonal branded in highlights. year, demand increased offset and to share quarter paperboard return year. Prices to normal sought strengthened the tissue both

our fourth the moderate, related site, a While during Lewiston issues weather maintenance it quarter. but quarter. at outage was the still inflation completed several experienced and a started operational major We in headwind to

$XXX total not but XXXX XXXX. million $X million of in We XXXX, debt shares the quarter $XXX we back and quarter. repurchased a in net fourth for did And reduced finally, buy million of in million reduction in the by $X shares since

have We authorization. million buyback our on $XX remaining

discuss additional businesses. our of With details about some that, let's both

paperboard Let's a XXXX, operating start demand. has early on industry the rates our on four high Since experienced with few business. comments with strong Slide

result, a for As increase the market years, including the price $XX two per RISI totaled ton U.S. reported in $XXX XXXX. increases October last that of a over

the expect into We that, implement in fourth continue on price improvements to previously And sequential our XXXX. we announced based increases quarter. early

us financials. RISI's price to As reflected additional changes also in price portfolio for includes reporting. not are and that worth reflected be in our it up a two takes product quarters grades typically that to our reminder, It mechanisms is noting

customers year place experienced seeing inventories comfortable more patterns. was COVID, Prior we to holiday reduce slower see strong late fourth quarter. a take customers typical a slowdown with We in which the earlier We due to patterns of quarter, normal with take believe inventories Converters of and during historically year in as that have return supply. a year to certainty believe used are it more in inventory to and after related to to in the a these this a activity fourth the moderation becoming builds holiday demand the the managing normal return time more seasonal we're downtime. was

given use we resilient products. perspective, consumer is demand believe of paperboard that the a the economically From end

and pharmaceuticals skews heavily Our cosmetics. as consumer towards packaging, portfolio, such in food particular, more applications

healthy. the to expect In based to to optimistic we're and paper addition, paperboard continue will continue we shift that for products demand be

several not need maintenance outage to experienced take expectations. our believe during that, major good negative and we in the our quarter. completed adjusted that news results the $X that operating we Lewiston mill. our We is to turn fourth paperboard next Let's will resulted the The outage at startup impact to versus the setbacks outage approximately of EBITDA XXXX. we until Unfortunately, million early in

experienced at our impacted adjusted that million. These continued Cypress mill primarily related our Additionally, the $XX we into quarter January. operational issues, Bend weather EBITDA other fourth approximately and issues during by

I taking We these these behind through the teams our us and issues in have now put lessons the addressing opportunity improve difficult processes under conditions challenges learned unexpected are to capture the to our holidays. future. appreciate

issues The approaching tissue comments on EBITDA consumers by turn XX% in cases market is and products continues XXXX to observe tissue please performance the continue also for dollar We than five shipped of of of share third mill approximately on toward cases and private the was fourth of paperboard the outage Slide their offset in quarter inflation. XX help which adjusted quarter, Now based business. impacted panel branded branded The to cases. underlying strong quarter data. the Private impacts was our to additional the to and million quarter. Lewiston -- climb our shifting shipments $X some tissue we negatively IRI demands the XXX,XXX higher of million million exceeded XX.X fourth market

previously has past outpaced over cost increases business price inflation mentioned, in the tissue two years we to margin leading As our compression.

previously a additional trends through and XXXX. We We're expect early price reduction the in of expect tissue margins recovery and increases. by see business we're on sequential focused continued has year. that pricing price strengthening into this benefits initiatives did implementing our seeing cost announced team higher encouraged quarter fourth Our and the

our ask now in quarter detail. to will I Mike fourth results discuss more

Michael Murphy

recorded quarter million, net of $X.XX In year income fourth statement loss Thank you, fourth quarter and the share XXXX, net Slide $X share was adjusted per of six. a turn per loss loss Arsen. to XXXX. company we net Please full diluted for XXXX $X.XX. and diluted consolidated The and summary shows

share net share $XX net year $X.XX was share was per diluted Our income Net million. adjusted per income was and full income -- diluted $X.XX.

seven. relative segment to $X.XX the XXXX. XXX% Our a corresponding The increase Slide adjusted income are share per represents on in net in XXXX results

segment price and EBITDA our We adjusted is for pulp quarter. and comparison eight business a our income paperboard the increases. in Slide previously fourth from benefited year-over-year announced

major quarter outage the XXXX, $X $XX we Whereas of of fourth experienced volume in XXXX, You'll we maintenance major million million in approximately in cost. impact of had in no comprised recall $XX and maintenance million a outages.

of material, Additionally, operational volume due issues our impacted $XX higher were $XX inflation. cost and by impacts million million and raw labor Costs million. $X of also by to freight

fourth slide XXXX a can on relative comparison to quarter You third our review quarter XX. of performance

by nine, XXXX additional with million we negatively an million issues relative Slide full cost this major the largest of were $X made by volume million of outages. have million lower pulp and was had $XX Collectively, The freight $XX impact from and results XXXX costs. mix $XX impact Operational material, raw for up comparison and driven remainder in cost results On Pricing of to maintenance and impact. paperboard. a year $XX higher impacted inflation. labor primarily changes in million

we fourth to comparison quarter. Slide XX, for year-over-year turn Please provide business in where a the our tissue

some the addition benefit. increases, we realized implemented In mix to price

Our were due higher last of year. sales converted to costs offset volume These than products largely pressures. benefits by inflationary were higher

on relative fourth of quarter review a quarter third to performance comparison XX. slide You our XXXX can

$X for a tissue. of cost with largely to by were material, comparison full relative On the structure. net the end fourth quarter in raw by offset million slide year was $XXX fourth have quarter. higher in XXXX. together at XX, our $XXX outlines capital inflation. Liquidity XXXX mix price The reduced volumes We and debt Slide of the freight we million and benefits XX of XXXX million and

or full shares repurchase the back above quarter, our in remaining for not XX year XXXX million XXX,XXX $X approximately we repurchased on fourth did a continue have shares authorization XX. we average and to share price $XX share just dollars repurchase We in shares expect at an While million buying $XX

expect to pay debt. also continue We to our down

quarter, which November renewed ABL fourth the continue size In improve of XXXX financial the to increased to flexibility to our extended $XXX and facility, our we credit million. our and maturity

Our difficult net perspective year adjusted building and XX outlook a debt will expectations. $XXX debt realization million. of blocks price was first be to at predict. continue We quarter EBITDA for Slide times reiterate provides our and to to was on full the XXXX net X.XX inflation want XXXX end to that XXXX

$XX to EBITDA is fourth midpoint outages, quarter expected million are million maintenance quarter The major which issues. of is $XX related the of that XXXX. range for adjusted $XX, million well million. Our as of $XX sequential is current than absence increases improvement the driven The operational higher expectation primarily by the first of offset as weather $XX announced inflation. price and is to Previously largely

sales tissue volume fourth the flat that quarter. expect will below to slightly We be

maintenance outage building $XX XXXX, will some relative provide and for the believe operating improve in improved me that to blocks quarter approximately we let to first Similar primarily due lower XXXX. to million XXXX our results operational outlook, by performance. expenses Now

the it's during to and that difficult pricing predict the other it's two each will inflation, While expectation year. offset our

in tissue. We expect modest volume growth

the Interest to also to million, anticipating $XX We in following we XXXX. $XX $XX $XXX $XX million capital expect depreciation million amortization million spend million, and $XX between are on million and XXXX. and expense for expenditures, between

major replacement project, along Our additional in our expected is and early million to expected maintenance to recovery an approaching a $X $X expenditure this capital XXXX which XXXX in planned $XX million in We XXXX is Lewiston boiler tube project. with on expect occur to require outage. spent spend million

XX% to expected XX%. for the rate effective to tax Our is full be year

payments tax tax expected refunds our our rate. rate cause utilize Based be current are timing statutory our tax our and This rebates similar expectations largely statutory depreciation, tax our expected and our to that cash between offset some estimates. differences XXXX, mostly future to current book tax to is which assumes to we will exceed on for to

call Let to back over the me Arsen. turn

Arsen Kitch

value made provide I a key Slide more XX clarity. framework. the for minor formal Last Mike. minutes discussing we framework some priorities shareholder want capital on a to our allocation We few communicated to quarter, adjustments Thanks, spend to more creation.

We follows. as have allocation capital prioritized our

excluding of sustain base. that our this top of an believe We priority average is projects. asset $XX annually, capital Our to to million expenditures $XX million large requires

that medium in the near expect to invest We target level term. to above

us we flexibility. sheet Second, intend that maintain balance to provides financial a with

target have of ability we of to with times, financial provides term to greater strong leverage continue sheet the balance us X.X investment cycle. advantage take including a the create ratio down to further flexibility. in around we opportunities, potential While deleverage may long A

and investments to Third, through opportunistically opportunities value returning we create will at shareholders. to capital look various

value accretive evaluate will internal external investments. and We

on versus to Given the expansions. large reduction brownfield current and incremental or cost capacity likely greenfield we're projects environment, prioritize business add acquisitions,

relative based to compare investments will price. share capital potential to shareholders We opportunistically these returning our upon

our the also back to and businesses. capital of of we'll will to from of I We grants to continue right opportunities to that shares emphasize out disciplined would like seek our dilution allocators value expect employees. we impact to mitigate be buy share across to create both the

would I customers our to their closing, for and continued do operations running our keep optimistic economic and support for I and our customers. We to in that despite strong a shareholders our uncertainties, for had various people and In they to our servicing like safely their also thank about in year placing trust us. XXXX efficiently all thank we're for XXXX. want

will remarks your we take that, and prepared questions. end With our

Operator

Our Markets. Instructions] comes from [Operator Josephson ahead. KeyBanc Please Adam Capital from first go question

Your line is open.

Adam Josephson

Hope and well. Thanks. Mike. you're Good afternoon, Arsen

Arsen Kitch

Good about just two questions operational your of and afternoon. one others. assumptions then Mike, couple or

to meaning, more that $XX price price So expecting last inflation increases price cost the whereas mix mix, to inflation, inflation you're about outpace previously you than guess, by you announced that million. I offset largely and expect mentioned your year offset mix slightly

your us versus frame cost just me help can and this assumptions many versus experienced cost Obviously, you increases for anything for what -- you'll you So have perhaps that can paperboard help year. price price the in that price difference with fewer XXXX your last assumptions of and year you your and terms last? that's relationship

Michael Murphy

Yes.

Adam, So, costs move are how difficult to price predict around. to been and going it's

a you're other. tailwind think right. of to of had cost a we're So we offset they're that predicting is terms less in I price bit each year Last mix, what inflation this going year, roughly

price that be a -- seeing. of number where at that and will we're in that's offset so ways out that's we that came we it we mix different inflation think largely that by And looked

Adam Josephson

just or are price tissue that, changes as Mike, operational future And assumptions? part you assuming as of part any of SBS XXXX those

Michael Murphy

about increases. announced talk price all state can is previously our we are based can't of we Adam, increases, off price forward-looking estimates

Adam Josephson

Right.

Okay.

the what SBS fourth SBS the moderation backlog expecting what sounds quarter? late for I lines the in heard It late quarter, can what you're confirm me demand, are you year but correctly, demand terms like those given In experienced you XXXX? stable along expecting if fourth just you're in that? you help expecting Just this of for and with you

Yes, Adam, our if we retail and skew all approximately resilient packaging this and towards more foodservice. We along. markets two-thirds SBS we've said step consumer back, recession that believe is

yes, in coincidentally to in and moderation experienced similar So we late XXXX. looks QX we demand what very see did that in pre COVID

Our last several higher they've are been in January months. shipments than the

Our are telling believe I to and folding XXXX a customers in us good -- particular them. expect good

So customers. expecting in we're we're stage, a expecting our a solid -- seeing that's at what demand this and from and hearing we're year

Adam Josephson

Thanks. it. so. I noticed significant capacity have been last the in from just risk over the in Got that or potential XX-K the announced your factor And year your adverse impact investments on one you one. that FBB several business filed your SBS and noting past

not your of those have your global peers doing? about particularly of more of position are investing given how investments, not millions of that that your you thinking and dollars peers So or integrated globally are and you been domestically as some given you're as hundreds competitive domestic as some both

Arsen Kitch

to what our avoid absorb investments the doing we our assume demand does the challenging demand strategy low I'll and market they're market. step margins if what doing. still market large XXXX capacity in XXXX? that moderate in we and in this supply sure a our market So back SBS that's U.S. in potential and question on like becomes, are me. to beyond is growth. There you and need retain to The implement. for to the unclear position at to specifics of balance at look But retain obviously commenting looking growth And we're the make growth. and in is you These look What and that they're

obviously we're sure it and through that positioned beyond. working So make to we're well XXXX

Adam Josephson

it. appreciate I

both just the are Lewiston, you these supply have about U.S. issue as particularly one, integration new this thought that that's given years and from at converters? past, in might the all Just will in it coming how about how distinct target elsewhere thinking presumably you

Arsen Kitch

actually of [indiscernible] an Historically, that our we than last great many proposition still great a value portion few them. the decades. care demand the customers And way. us viewed North with SBS that and American not them many to for of that the view and been years done in There's of a being job still our over years market supply we as supplier that's integrated large part saw taking we've and it and market more we've of a

still So view that as value proposition. we a

going makes to that still our tomorrow. we're value we're part to continue at earlier, our mentioned today, proposition. to as sit strategy I view I As sense from look make what sure doing we that still where today of But

Adam Josephson

much, Arsen. so Thanks

Operator

comes question Markets. Paul Capital next Quinn go from Please from Our RBC ahead.

open. line is Your

Paul Quinn

afternoon, Yes. Thanks guys. much. Good very

Lewiston. previously million the announced side, of -- the doesn't even of quarter, at sort pulp than inflation QX question and come outage on us I as the to expected catch I Anything particular, it Just right? case. the in line in paper offset a that price and up, seemed with got you on but sort weaker seem tissue to side, mean, tissues to on $X but the given more decent but be increases it I pretty Did described in hit

Arsen Kitch

remind I'll Paul, in we you pressures with some lag seen have that effect that of that still we've the the So business. inflationary

sort but expecting, for notably last say for relief of good those quarter fourth of was material What it was quarter. year we're some pulp. just we'd and hoping So throughout seen tissue raw in a the on hadn't inputs, some

Paul Quinn

with you issues that take your confident that at all that moves having I you outage expectation shouldn't the But early to get just Lewiston down XXXX sorts you major soon. a until startup. have on shut had XXXX that fact And mill? are reconcile how trying get Okay. of you in I'm you'll to to then hope that maintenance through without that

Arsen Kitch

And this XX the and of timing be on comfortable at of saw The inspections outage outage timing related. going we and from -- around last intent the was startup was in we project were to the what time. in outage. take the that, need XXXX outage the So do dependent outage stating the on the we're that major based that same our issues outage that to to next

there's we're are in we've this we the As saying given Paul, in you that the something in point, addressing. mills, working these last always comfortable But on one is know, at what types seen XXXX. and of outage, next early

Michael Murphy

Arsen, to that. issues, related add let boiler. recovery to outage me Paul, the The startup were not

equipment outage. piece of that the this So in examining key was we're that

good question asked. you a So it's that

Paul Quinn

That's just And CapEx I Okay. helpful. to then million million $XX $XX understand this of year. got you've next so CapEx,

million so $XX spread. is million, $XX Your basic million there's basically to $XX

on spending if and advance then $X $X I for the got in basically You're XXXX million discretionary million on Lewiston project on that?

Michael Murphy

discretionary on put is sustaining, blending the to a otherwise $X normalized but you're XXXX, XXXX to there and there. you've think I million yes, out at right spending project in say above a and that range of you're you're slightly

Paul Quinn

just And at QX you're shares debt? in I X.X opposed times Okay. purchased debt to target then as leverage when your under lastly, reduced

Michael Murphy

it's question. So a good Paul,

We have for QX. a wasn't flow an If active and quarter QX neither great will debate cash us internally.

And holding so we cash ended to and up just liquidity. on the

in continue share on to that We examine sensitive Arsen, to XXXX. are here it's and you price do we'll that? the buyback want add something to

Arsen Kitch

that, target. That cross to time X.X a is add to Paul. Yes, cycle

is in times down we if investment we where we continue looking go go it will shares. a around opportunities buy find at a to through likely target, So that that may may in To to XXXX me meaningfully times pay to and right makes debt here the addition we opportunities. cycle below at sense higher X.X to back

Paul Quinn

Okay.

average? current the peer right that infer So that below thinking now cycle does that you're is

Arsen Kitch

us below X.X down We given makes continue to it our environment think that to this and times. the pay for stage, sense at debt

Paul Quinn

much. had. Thanks I very all That's Okay.

Operator

from go Adam comes Josephson from next Capital Our Markets. KeyBanc ahead. question Please

Your line is open.

Adam Josephson

for [indiscernible] a years. separately have from Bearing again But at the more the my mind of that coming by hardwood, mostly over I in the time, call. a South there's fourth for were America did. tissue pricing tremendous supply of new would taking you you bit amount high hoping you. next think couple been in same prices in obviously has Thanks Mike, they mentioned fallen pulp than quarter

Just to seeing your you been So can prices you're you than about just moment? thought? might hardwood the what think have us more thoughts at and market you about have the why perhaps considerably talk resilient

Arsen Kitch

around you know recently. lot what at a XXXX, $XX, from look it and $X,XXX this, different you that's $XX here eased, we've dollars there's index, Adam, to of from that seen the over know, and and eased thoughts I don't if just $XXX gone

go it for demand, so supply and online, you through At what's it higher back us point, If Adam, given was issues coming COVID, forth. make this and chain would on sense and these what's terms would give that coming come I prices you out prices a why beyond are stubbornly staying good already down the can't these But there high. reason in years. in of

Adam Josephson

one just North label consolidation private of And one and just topic America. in from the it. tissue last tissue me, on Got Arsen, industry

that talked for six, any months or consolidation previous you for ago? need and us less now more thought update on what Can wise than seeing you just on supply the calls. there's You've about if demand three, you're what need nine

Arsen Kitch

it's Adam, interesting Yes, an question.

year is at out in we tons of RISI, stage. XX,XXX through XXXX, to according about this there's XXX,XXX unknown tons location into that, of this announced as So capacity look

than considerably, seen it, we've the So that call seen we've in forward lower past. than capacity a -- is curve

with So capacity. seen invest on decisions it's function new compression to make again, to along But the when their industry own get of in competitors a our that I margin interest suspect rates. higher we've

constraints. We capacity to are starting approaching, practical our approach

up you run, market, base, this I to stage. a over this perspective. product the we're if our stepping our the a the for retailers be disaggregated consolidation scale retailers to the mismatch needed is -- and customer So there's the better working look large long the at run given cost given with disaggregated in think from structure and suppliers optimize in and back, buyers But matched supplier to improve long mix

think So we needed. still that's

a next couple of In seems slowdown. capacity of certainly additions the it like in there years, is terms

Adam Josephson

Thanks Arsen. so lot. Thanks much, a

Arsen Kitch

Thank you.

Operator

conclude questions. you for further no This participation. Thank call. have We will your conference today's

You may now disconnect.

Clearwater Paper (CLW) 14 Feb 232022 Q4 Earnings call transcript