Earnings call transcript Q2 2023

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Operator

Thank you for standing by. My name is Dina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Clearwater Paper’s Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Instructions] [Operator

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

Sloan Bohlen

XXXX Thank thank you, conference quarter you and call. earnings for joining Dina. Clearwater Paper’s Good afternoon, second

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

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

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

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

Arsen Kitch

thank and today. afternoon Good for joining you us

we you execution, driven of our saw we than release, a by second the margins. EBITDA As supplementals a $XX quarter, than and better which was strong press of great of operational quarter improved adjusted of million, our higher costs summary million lower consolidated of $XXX which results. X $X last our input had tissue in and provides expected, Slide second sales We reported year. net is million

last in adjusted by the doubling million this million year. EBITDA $XX drove year business Our $XX the its improvement than to tissue second quarter of from more

ways benefited of both tissue of quarter highlights our Tissue supply our a as demand particularly XXXX, costs strong, increased Prices to to compared the of and and balanced compared business was inventories. input transportation. consumers XXXX. paperboard share private reached continue few high offset an to fiber, performance all-time branded with first you. look me quarter we second the Let inflation. and as energy to for both and Lower in as share more in manage Operational to

debt during remained Paperboard the supply with some $XX by our million provide buyback shares soft our reduced demand spending. remaining turn With of to and reduced each $XX remained and slowed million me outstanding on as million repurchased improving costs. and their overview, chain tissue strong, And customer that we segments finally, of X our demand authorization. let inventories while customers our to service net Our due delivered consumer we details. additional quarter,

Let’s begin our with X. Slide paperboard on business

inventory across by As quarter year-to-date a caused we of late decrease slowdown Industry high XX.X% and last operating was rates versus chain. based the with We in data. second that these quarter XXXX levels decrease the slowing believe continuing value year. X.X% a that shipments fourth spending year-to-date demand the this year, data reflected in in AF&PA consumer trends on XXXX with and trend through year this began last of in noted a

this RISI, in two under of XX% of to XX% RISI carton volume decrease folding financials. takes to reflected first $XX quarters in now our July, our reported contracts per trend, be prices changes is Approximately to it up more for evidence further in a indexed As in years. three decrease us these typically to than the ton and price

second of half. expecting third volumes the While demand in the improvement we’re remains an soft in at our the beginning quarter,

second capacity approximately in XX% our of downtime first call, mentioned we resulted the I quarter. second the in reduced during our quarter inventories, which earnings production quarter manage plant As to in

inventory levels. continue remainder the to of the supply year our for Our to to get balance intent demand targeted is to and

to is believe continue While the economically end of demand, products. given the resilient industry is that experiencing use in paperboard we a the slowdown

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

shift that more the this for to service provide consumers products food the long should us expect packaging believe also in to opportunities accelerate We paper-based run. growth with seeking with We sustainable products. more and

X leading year, first Please service improvements rate our doubled turn X% margin more solid, to second additional rate driven volume transportation. $XX and of pulp, comments and costs energy Revenue to an higher between over performance lower on of performance input Adjusted by XX% Input improved costs. great shipments. driven was than Slide in for strong very XX%. by million. year-over-year, sequentially and The year-over-year Operating particularly this and with with was tissue. pricing customer higher eased business the significant higher EBITDA of over in results a and retail quarter by higher performance to also fill of and on-time pricing,

these maintaining our The lowering and chain levels overall team at targeted delivered results while inventories costs. supply

all-time better an June turn XX.X% to data. believe Let’s broader in consumers data. some panel branded Circana on for high tissue that are Private continuing to based look share XX.X%, We values May, to of reached RISI market offset we and tissue and which for Based economic on uncertainty. believe capacity a healthy be to their daily utilization inflation level. data purchases rose to

been continued we announced benefit with continued year, and since We a the consumer relative benefits continued through costs lower price first and year strong XXXX. in the previously stability increases. input from rest our have expect decline trajectory a the of Pulp downward quarters quarter tissue in on from business strength of forecasting RISI costs coming in the demand, this as

reminder, reflected financials. a in approximately to takes As three fully our months changes for it pulp prices in be

also Transportation year, availability haul financials. greatly line our impacting improved rates with lower positively costs since last have and

let in in me Barckley. Thank key Becky our long supporting is Controller during introduce team this Becky, Corporate tenured transition. Interim CFO, Becky overview, a our you, has leader the that industry. and products With and finance forest us for experience

I quarter ask detail. now introduction, more will that our to second Becky in With discuss results

Becky Barckley

on In quarter summary for The shows net the income quarter second recorded income share statement income of $XX.X second diluted Slide The takeaway consolidated healthy per of we Thank is of stronger X. XXXX, lower the segment XXXX. improvement in you, consolidated Arsen. income with Slide the cost, a Please $X.XX. profitability. net operating basis, a million, are of key well results adjusted per corresponding driving performance net business turn on that and performed XXXX The to share diluted X. results and $X.XX of

Adjusted quarter rose last the year. XX.X% EBITDA XX% margin in compared to as to

paperboard comparison while our structure. a absorption of overall segment is higher and On and lower adjusted for impacted business. Slide basis the EBITDA higher cost year-over-year our pricing X cost cost offset a volumes year-over-year production income

quarter of this year. first comparison mix, sales a the quarter second It to the of in reflects lower XX flattening production Slide appendix with the shows sequential costs. the lower volumes

tissue Slide year-over-year business. and X segment EBITDA for adjusted income a is our comparison of

discussed, impact between a in pulp are that this until previously second relatively XXXX year. we As lower not price announced second of benefiting quarter the increases, is volume price did flat of and significant higher input costs. the leading increases Arsen our from to note last cost important comparison half It year financials to year, the to

XX reflects costs first this transportation. we lower and to the seeing Slide that the significant particularly sequential of It input the quarter the second comparison from are appendix benefits year. quarter pulp, of shows in in energy the

our outlines capital structure. XX Slide

improved very sheet $XXX strong, balance totaling now liquidity and our million. remains Our quarter-over-quarter,

year-to-date versus cash reduced During million cash we the the million net quarter, On million a generated quarter. we by in flow $XX flow. free first basis, and generated debt in $XX free $X

typical due reminder, quarter as quarter had outflows. a XXXX As higher-than-normal quarter balance of flows from first cash the fourth during as trade well we negative first to payables a the

free Our price repurchased net debt-to-EBITDA X.X of end ratio $X $XX.XX average share. flow stock We of translates repurchase during XXX,XXX shares times over per used the into at at the was million cash quarter. the quarter. our an That to of

$XX We authorization. repurchase have share million left roughly our on

Let’s our million well to of third an of the Slide adjusted the on the outlook year full $XX updates input EBITDA and $XX on we Based now to XX move continued quarter. million moderating as momentum expectations. tissue range as the to in expect some quarter in costs, for XXXX, for

will performance. favorable full expect to fewer maintenance terms of by better we operating to million relative XXXX $XX results major be and outages assumptions, our operating due In that year

due we and input of lower impact $XX a Additionally, million the expect $XX million now announced increases benefit price to costs. previously of to

Lastly, expense should on amortization full in includes remain be the Arkansas. year should which $XX precipitator capital should Interest depreciation million, tube million in the to $XX $XX for range, key expenditures the our expense million project on be and between boiler unchanged. million million approximately be $XXX replacement assumptions million $X replacement other $XX Lewiston to $XX $XX and recovery our and million, million

to a the will million require $XX precipitator million. the in projected $XX project recovery approximately As boiler require total while spend, reminder, is

rate tax be should our mid-XX% finally, the in range. And

over back call the Let me turn Arsen. to

Arsen Kitch

I’d our call brief create we of prioritizing allocation capital Becky. overview a how conclude to Thanks, value. the shareholder like to are with

approach. Slide XX is our a framework to

sustaining assets. and Lewiston priority competitiveness average work the replacement top the boiler the is an our excluding this such recovery that million precipitator large Arkansas. annually, $XX of in to Our projects million in $XX requires We of as believe

ago, maintain Second, maintain the did take of A sheet few us with and that opportunities, in advantage continue provides capacity than improve much provides intend and cycle. balance a including with We flexibility. we we financial position. down the sheet years now a balance intend to a balance strong to stronger sheet us potential have we our to to investment

at look create various acquisitions value investments, and to through will opportunities opportunistic shareholders. finally, to And returning we return-generating capital

worth in repurchasing You quarter by the million do shares. of saw $X us second that our

right businesses. going a our The continue to quarter, and year. of We’re capital, both second second of create the team we’ll to in allocators this disciplined about be optimistic we’re across seek value the delivered of half business our and strong to opportunities

that our our they our efficiently. safely to support. for for to thanking by and like us trust I our people close in running customers would me continued and also for operations placing all their thank keep their Let shareholders do

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

Operator

from [Operator Paul, you. question Thank Quinn please comes Markets. Your from RBC go ahead. Instructions] Paul first Capital

Paul Quinn

Hey very guys. Thanks much. Yes.

your sort The this How American and quarter? drop able especially the Consumer you tissue operating quarter came able it How compete the to, North Just second the out production right of pretty shows are tissue rates. sounds are going in it stats segment. like for Products in ancestor, lackluster second competition you is maybe start now? your to with morning,

Arsen Kitch

stable. I’ve And and no is year. have I material we as pretty demand previously, pretty risks mentioned think contract this strong our

doing shares think we’re our job good customers generally I So private them. branded supporting and really of a our speaking – up are doing well,

are we’re strong we able the our in to so is think demand least, – So industry the strong it’s at and also fairly high, us, fairly demand. and – that have for sales, are I support operating rates

Paul Quinn

do to its with pulp? I that of drop sequential shows XX slide, cost. think that then million sort a in $XX And all in Okay. Is improvement

Arsen Kitch

A pulp. lot of it is

from benefiting also well to energy We’re as but story a tissues pulp year. sequentially, going this is be in transportation and big

Paul Quinn

the Okay. then lag Arsen, to hit you And pulp three-month mentioned bottom line. in that really

So pricing this comes that in really in $XX QX pulp in that the into QX? is factor drop million really

Arsen Kitch

That’s part of story. the

Paul. pulp, there, So go it’s two – we back points there’s if important on

in year. one flow The takes through the us you three to that is as of first half for our mentioned, pulp And peaked last months second approximately P&L.

half higher, at this first are prices. but of versus the in year, slightly prices we’re So actually pulp the drop actually, a if seeing last you half meaningful first sequential our look pulp year of

Paul Quinn

switch over then paperboard I side. the just And if Okay. to

carton is the that When you your another that that carton to Or RISI price? pricing. next to mentioned price? folding drop index indexes, folding to pricing XX% in mentioned that – XX% You is

Arsen Kitch

folding I speaking think, and carton cup. its generally

are I indexes. two think RESI the that prices those

on depending we’re the those. So the depending one it’s on volume, customer and of

Paul Quinn

What recovery spread precipitator kind kind on is Arkansas going or costs then lower down a in type biller, pickup you’re the any CapEx lower just expected maintenance in And thing, of the benefits of the get result that. that any I not as you’ve suspect Okay. to a cost of got, forward? about

Arsen Kitch

of but both I a maintenance these we There’s view with projects. precipitator, think, largely generally that project. speaking as benefits probably are the of types replacement mild some

We’re old. replacing that’s decades something

reliability, those better largely as So but coming there of the performance better replacement some we out and should projects. be view it

Paul Quinn

a last on just lot I repurchase had, XXX the in your Okay. I a quarter? looked it than great heck is question allocation. in the you shares mean, shape like balance more then sheet And capital when

Arsen Kitch

take approach in an think our Paul, buybacks. I to we our mentioned as I share opportunistic framework,

purchases when increase better a So our we value. we we’ll see

than quarter purchased I’ll quite we bit quite last few this So at it – a a that. shares just but quarter, more leave

Paul Quinn

opportunity about a it well. to clear that QX. the Well, share in reckon the is got you’ve purchased shares seems given I price suspect what as right QX in you

Arsen Kitch

that at operations look buy Well, shares we’ll continue and to call. back up our

Paul Quinn

That’s Thanks. see do. I had. you that all I

Arsen Kitch

Thank you, Paul.

Operator

and Thank today’s you that for may Ladies disconnect. joining, and you now concludes all gentlemen call.

Clearwater Paper (CLW) 1 Aug 232023 Q2 Earnings call transcript