Earnings call transcript Q1 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello and welcome to the Clearwater Paper Corporation’s First Quarter 2023 Earnings Conference Call. [Operator Instructions] I will now turn the conference over to Sloan Bohlen, Investor Relations. Please go ahead.

Sloan Bohlen

Thank you, Sarah. Good afternoon and thank you for joining Clearwater Paper’s first quarter 2023 earnings conference call.

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

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

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

that, With over me call the let to Arsen. turn

Arsen Kitch

joining you Good for and us afternoon today. thank

first with reported and in of turn as compared please first solid million. adjusted Now quarter the of Slide a to better $XXX million results had $XX sales of We quarter XXXX. XXXX EBITDA X. to net We

transportation. remaining pulp, and few to Prices demand year. as $XX Let as compared shares have branded a our moderated energy Inflation to on of resolved the We of finally, customers share down we Private and consumers that the last $X.X quarter quarter, fourth in first highlights. and compared Paperboard buyback share increased quarter experienced particularly fourth of issues authorization. XXXX. paperboard during in we million million in tissue quarter as the the repurchased And their inventories. strengthened tissue offset me inflation. as sought both to manage softened the operational

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

Slide experienced operating on X a Let’s industry with XXXX In paperboard our and start rates strong high XXXX, the comments demand. business. few on with

expect year-over-year announced increases U.S. we improvements that As reported into XXXX. per our Based on previously RISI totaled a carry in price XXXX. market $XXX the result, for increases, price ton to

customers That As in due demand softening first April. of experienced quarter. quarter as in continued trend is resulted previously fourth operating the that lower into a spending. data, the well we recent on the consumer the in paperboard the Based most inventories this believe and has industry. rates noted, a AF&PA backlogs reducing to slowdown softening We across late their as in in XXXX and

also increased in backlog the quarter. our Our and inventories first fell,

As balance intent inventory year the we and inventory demand in of our reduced a remainder result, is the second our levels. normalize production supply quarter to manage the It to and levels. for

continue we’re softening experiencing paperboard demand, use a of end economically in given our we While is products. to resilient, believe that the

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

shift expect the will for half Operationally, quarter, a to us. this In behind fourth major with maintenance in the now performance year. our that continue, of we’re improve paper-based and and optimistic paperboard experienced demand in products quarter in operational addition, issues we the to improved second first outage the

X of tissue business comments The business. Please our for underlying turn was performance Slide to the additional strong. on

of XXX,XXX their of March lower than cases data. XX slightly the fourth which on and panel IRI We quarter the branded million shift consumers quarter, the shipments XX.X based in shipped million first XX% first market tissue to offset private XXXX cases. cases see to was than of demand continue our higher quarter in branded inflation. approached to We impact help of the products share Private

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

increases. Our implementing team announced recovering focused has and through margins the previously cost on reduction initiatives price

in expect to sequential the in input and coming additional With decreasing, first and margin costs pulp higher expect saw other the second we quarter prices recovery result, a the As quarters. we in quarter. price benefits see pricing further

are by trends a our business year. strengthening of encouraged this and We the expect tissue

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

Mike Murphy

was turn to consolidated quarter on $X.XX comparison adjusted a and and million X. income share, adjusted XXXX. segment recorded segment Arsen. The per and net share XXXX, first income you, net we X of Thank Slide net Paperboard was our per $X.XX. quarter. and of Slide the company first X. Please corresponding is the income The diluted income In Pulp summary in first and results year-over-year quarter statement diluted XXXX business are EBITDA Slide $XX a shows income for

from last were price freight Volumes and which increases, as partly costs, compared higher material softened. our announced benefited previously demand We to year lower raw inflation. labor were offset by

our You of on relative can to XX. performance XXXX also comparison quarter review quarter Slide fourth first a the

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

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

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

was payments free typical and fourth flow quarter semiannual incentive our of first well and Slide as our relative performance cash to our due on to including the on million quarter cash payouts maintenance the interest Slide quarter, outlines first quarter fourth You cash was XX during structure. capital did first not related annual Liquidity generate quarter outflows, bonds major the as XX. can outage. a the of end XXXX comparison we $XXX to large review payments quarter. This at our

balancing also intend a of working cash be inventories over demand and in which manage net to the impacted by inventories negatively expect in to We million. flows. coming by notably source capital increased supply Our our with quarters Paperboard, $XX cash

$XX of price million quarter. of the shares XX,XXX at in $X.X for per share We total a also average above just repurchased an

remaining $XX year. continue during to share back on approximately and million buying expect repurchase shares the have our authorization We

for provides a and full XX outlook Slide XXXX quarter on our perspective expectations. year second building XXXX blocks

volumes quarter: $XX lower first Paperboard margin for lower the million quarter tissue the second improvement That and $XX following the input We operational in our relative supply our in demand operating to and balance is results previously blocks relative to primarily increases by costs, The improved outage Our will range adjusted price is inventory. performance. major of with of current million. improve the following and midpoint from million expectations that and EBITDA million to building address $XX are assumes announced expenses believe XXXX, as to approximately due lower $XX for ‘XX we maintenance ‘XX.

As anticipated, we quarterly pulp in declines prices. are seeing sequential

these reminder, X a it As earnings. takes us months realize to approximately in benefits our

beneficial demand in the paperboard. the we’re a is these half. decreases seeing to half of relative the some that be tissue should XXXX As more softness in the first Currently, strength of in result, second mitigating

in our quarters. we overall, strong the coming expect year you We another thinking and on will update latest

following spend anticipating $XX interest and XXXX. expenditures, between XXXX: in million million expense $XX million million $XX million. $XX expect to million, also for $XXX the depreciation we to $XX capital We’re and On and amortization between

concurrent Our completed Lewiston expected XXXX, boiler in is early million, major to replacement our recovery maintenance which approaching expenditure is project, be outage. $XX planned to estimated require with capital

$X the XXXX million this spent costs We in on project. $X in an XXXX million and spend of to estimated additional expect

$X of XXXX capital that our device is Approximately precipitated this important approaching In $XX the Lewiston project, and is to we also million mill expected life. is planned in at included spend to the expectations. its be that total of is XXXX. a installed an Bend on addition are a our Cypress emissions year approximately This capital spend million project expecting in end replacement to useful of control total in

This tax that depreciation, we rate estimates. to full exceed our will refunds our to expectations cause utilize largely timing than our our tax is XXXX, current on book which to expected effective some offset payments effective rate. tax expected future to assumes XX% cash higher between rebates our and be and year XX%. slightly Our the tax rate current to differences modestly tax effective tax for is be are for Based cash expected to

Let call back turn me Arsen. over to the

Arsen Kitch

priorities spend Thanks, value minutes Mike. discussing shareholder key our I want few to for creation. a

have we XX, our prioritized Page on follows. shown as capital allocation As

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

boiler in and replacement expect in precipitator as that near in tube We invest Lewiston medium-term in level above Cypress to such the to the target projects recovery the Bend. replacement

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

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

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

and investments. We value-accretive will external evaluate internal

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

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

to shares. quarter expect to our again in the also grants from of to share first impact mitigate shares active We back buying were employees. dilution the back We buy

value opportunities focused delivering disciplined first be to out would to and across like our in will will right The capital, XXXX start continue slower on businesses. free emphasize create quarter. we in both the is team seek the we that despite flows of a cash of I allocators strong to

closing, would customers. thank customers their and our trust operations to do for I and for us. running our support safely and continued in In keep thank for placing want to like all that people I their our our to for our servicing they efficiently also shareholders

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

Operator

RBC Thank Paul you. line ahead. from Please with Markets. [Operator of Instructions] comes go Capital question Quinn Your first the

Paul Quinn

Yes. guys. Thanks. Good afternoon. Thanks,

us of how you realizing delay lower the you’re much to buying hardwood pulp Is did on XXX% in QX? in maybe remind see benefit pulp in pricing, it start Just any on X-month you And side? side. the that pulp? can sort The

Mike Murphy

buy going importantly, of on hardwood more in we is the year little quarter quarter. third bit we’re second and majority So almost The based. late, to I have but of we that open think P&L XXX,XXX downtick pulp a of of see a benefits a market. in pronounced seen the more Paul, vast the both tons the And

positively end February the frame, you time prices in but quarter, third will bit or at in the in kicks pulp So March as little quarter. the saw a impact of second us really in drop that

Arsen Kitch

throughout prices Paul, that, last to increasing pulp year. add to were

it you eucalyptus in example, in QX. – December, $X,XXX went to from $X,XXX largely So falling look here for if and at, January between and started

to seeing start we these in out So the play year. later benefits themselves here expect

Paul Quinn

expect Yes. as that No, I well.

hardwood? is to So a buy eucalyptus for grade that more if American eucalyptus? lot North buy we benchmark Do you were at you’d than trying a hardwood you, look

Arsen Kitch

use for do but think well, primarily. I We That’s a the tissue to has it. North think about that’s right eucalyptus as hardwood in primarily American used been the BEK great. way market

Mike Murphy

add price price. and to a that, list a to Paul, And spot there’s

on might the closer to spot secret The the is. buy be no list price buyers price. think price, to the I market list most the substantial where maybe discount

bit price. you’re list versus think changes, at So the I more as a looking towards little the spot price that

Paul Quinn

Yes.

out that the figured last years. XX I think I over

how here, So is the material baked what paperboard QX settled. of just that QX yes, Maybe I taken think you’ve that’s your sort you into guidance? been that? downtime And in have

Arsen Kitch

We that don’t haven’t – I what think downtime is. prepared share to we’re

a I inventories, the stay think going it’s – year. is And and we think net supply But – a tons. balance expect what capital here what to for of the we’re source of working on manage have going the I our is our year. said to we of commenting balance balance we our said in demand I grew be also There to intent we for away and from the specific is for cash inventories. we’re we comments think to

Paul Quinn

Okay.

there. behind your really that second half? So improve just expectation the paperboard can What’s on in comment expectation your confidence maybe the will you

Arsen Kitch

Yes.

There’s is around. a I what few pieces think – happening. moving here’s think we

they one first and become end the their we’re customers customers as high heading the into inventories what inventories market quite those more were managing supply think down. are I are in as So remained And last has the of that’s hearing available. – is and high inventories year, are managing

I think that’s the first piece.

of piece softening impact. of spending and is sources And of supply that’s alternative activity probably penetration our due having year out there pockets and also increased constraints customers in seeing probably second markets, some seeking is some last the and happening. That’s in that consumer we to we’re supply. import The an saw

we And we – second where we pieces in half. in stand the have we’ll believe QX well we’ve as sort themselves will certainly, from those today, April. a three So softness demand here recovering will seen start out. as think But in

Paul Quinn

over Consumer year. pulp got you’re where QX year falling do are much on price that going just of kind up costs your coming up the you sort Or that give How to down. do expect almost last of to, this given then you up? noticed XX% that year-over-year to you year are last give QX And is forward increase expect here? any I of from But prices to Okay. now, Products,

Arsen Kitch

this. demand will with that start we’ll In both drive supply and think markets, I think I including price. tissue, ultimately

saw increases price we of in pass here last the the our cost tissue, you margins years, over through not were and couple to were as able So into compressed.

process margins of we’re the more to So recovering in healthy levels.

think So on a up market. price between pulp price it’s falling price I – and correlation going or going don’t the direct in down

it’s additions to ultimately, supply And demand have slowed. be And we think going data, supply RISI think demand you at if strong. is I driven. and look

And and in are of rates tissue, going so production are up some well. it’s – I in operating as tissue approaching our think constraints our we

Paul Quinn

Alright. had. That’s guys. Best all I of luck,

Arsen Kitch

I you our that call. if Paul, any conclude So don’t think will follow-up questions, have

Operator

Thank for you, everyone, joining.

disconnect You lines. may your now

Clearwater Paper (CLW) 2 May 232023 Q1 Earnings call transcript