GLT - Earnings call transcript Q1 2018

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

Operator

Good morning. My name is Amanda and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Glatfelter’s First Quarter Earnings 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. you. Thank Instructions] [Operator may conference. you begin Jacunski, your John

John Jacunski

Thank first is quarter Good morning John to Glatfelter’s and welcome earnings I’m Company’s you, the Amanda. Jacunski; CFO. conference call. This

our standard begin Before a I few we reminders. presentation, have

During slides. our use adjusted these measures. as earnings earnings, included financial financial and we measures as the non-GAAP GAAP-based reconciliation release the in results other is term well A this call morning, will of investor to in our today’s

that today are to will also statements We forward-looking uncertainties. and subject make risks

Our obligation both XX-K forward-looking that these to filed over to disclose on today’s the XXXX, results them. now with forward-looking turn Dante Form Officer. from factors the of Chief our will to and SEC could these update speak available statements. actual materially of release, cause These today our no which statements I are call Glatfelter’s as differ Executive only Chairman Parrini, website, and and undertake we

Dante Parrini

us you Thank you, John. joining results. first Good discuss thank morning for XXXX quarter our today and to

delivered materials very a volume of profit and inflation engineered in terms solid despite Our raw growth, material environment. challenging performance businesses

longer high-value As containing these businesses resilient, discussed investments strong our in we created a platforms on have have prior calls, term for growth. portfolio,

levels, Glatfelter Advanced alternatives is as doing first and the February, strategic our possible the report hard the a performance of high-quality program, great Papers machine business. in successful Materials explore range to work announced to oriented people. Glatfelter quarter. for we Smith, Airlaid we business facility This multiyear Arkansas and more completion make strive capital made We’re a excellent a Furthermore, the a in and Airlaid successful focused company, of of also in really decision The dedication our timely is potential proud job. all of milestone customer Fort commercial and shipped that team to startup The brand product growth our Specialty by for product this new for produced Glatfelter. major qualifications, and were

early new the the of in particular that this comments make There still result nothing the stages will are can and topic have will we during process further and alternatives not report. a of in strategic We on today’s call. any outcome, be no review assurance to

Turning now presentation. to the slide three of

the expectations. prior For quarter, year we per business nearly in to share down Papers all although the compared first were of the Specialty reported with $X.XX, declines earnings earnings quarter units adjusted the from results with our $X.XX, our business, line stemming of

positive environment however optimistic future impact the pricing We on the will are stronger about quite have performance.

While basis. raw currency higher total perspective, the X.X% revenue were by improved significant From headwind from X%, on impacted increases material price per earnings an a quarter adversely materials Company in by share for our revenues earnings businesses engineered a up XX% or $X.XX. shipments constant

For X% digit recording and wallcover Composite XX% first Fibers, quarter technical double with volume growth shipments X%. specialties were growing up of

increases. experience Favorable also currency Overall, product material and operating prices foreign some success mitigated certain translation price substantial raising was to in began operations segments. energy on We X%. profit up benefits raw and

growth grew and hygiene commercial place. Materials, This growth. for such categories in to the home Other Fort business finished operating care operational due future new to with contributed increase Smith the first strong by catalyst X%. wipes is facility product, quarter shipments volume. XX% For the in Advanced Airlaid a our now quarter as X%, profit shipping of with And also and in primarily

impacts of this prices. million machine by significantly with reflecting costs higher half shutdown the X.X%, by the down transition affected were weather. also resulting shipments machine Profitability quarter lower the profit Ohio from was the severe quarter, first in decline of in last material year. Papers third the of of Specialty For shutdown Operating was and $XX.X

selling However, when quarter, operating cash and Then, will basis, course point, of of to of of good solid per comments sheet flow quarter XX%. for first our and an quarter provide operating turn the look. fourth this was This over enabled during our average industry favorable compared for us John quarter I’ll increase with balance in-depth consolidated review At On who rates of the will quarter achieve XXXX. growth closing at some and a pricing the X.X% volume was offer environment shape. price the first with the the $XX I forward in remains it more to results. a ton

John Jacunski

Thank Dante. you,

of last results customer and transition first increased increase wallcover Shipments of were Total impact Papers a major year a results $X.XX, flat $X.XX, the of Growth currency a per Fibers shutdown four million the $X.XX and first as first reported revenue results net per we were strong adjusted in beverage $XX.X to $XX.X per a by million of to share was quarter to of year. were raw XX% rising X%, primary the inventory items, this up $X.X Composite Food XXXX. share we earnings higher. and per earnings share compared of quarter debt growth by business X%. from management this reduced market prior million Advanced business. severe and year bridge non-recurring new on Slide lowered with and results compared $X.XX quarter. share segment shows with million we borrowing the share interest in volume for income or an the paper or of constant earnings net the costs with when Materials X%. expense for non-core Ohio, Specialty or $X.XX by as result basis. reported of share, a After XX%, $X.XX million, to shows quarter Airlaid specialties earnings was material of quarter, being of compared first share the slightly summary per by driven the in in high adjusted $X.X the For share energy prices, five machine first by technical higher Composite or $XXX $X.XX XXXX. driven drivers up weather per business excluding growth per per X%. levels. and volumes first Slide related rates Fibers this and transitioned limited of And in quarter program. of during a earnings

increase segment prices of We healthy market a Selling in expect rising as from this the result input initiatives, growth year. costs. the balance up through we of as price were slightly move

by contributed benefit healthy the a million translation. bottom meet line from foreign from From prices, the Operating perspective, up and demand from grew purchased pulp. the products were raw quarter We expect driven raw we wallcover Industry the compared are efficiencies. impact of year continue these a X% and in price this Results to during million more our overall currency. pulp negatively primarily to well for for by in benchmark customers year. a negatively watch prices. the by $X.X be $X.X the including cost production ran currency for currency quarter second of higher of material million the extremely to quarter profit half the to for recent tea meaningful Russian prices further from the weakening a higher $X.X drove ago, a impacted some about initiatives quarter Operations ruble could material fluctuations impacted impact XX% the a and of this negative as

projected on higher be and constant to expected Materials XX% are shipments Airlaid raw first quarter business. increase or X% mix the for improvement Selling rose be energy basis. was Overall, improved XX% first prices hygiene quarter, the the material increase For quarter. moderately. Total with X% Advanced with to quarter the in the year quarter are quarter expected versus revenue second wipes million, six results to currency X%. a growing first summary an shipments prices X% are a were product up $XX Slide shows with the shipments to for of while prior line while compared an a

our planned, up general during to growing for help the for customer quarter. volume Overall, Our products supply targeted facility And demand expect improvements quarter Airlaid than for in America. facility and The first run Fort being up demand growth tight new in will more X% quarter. profit the in bit compared third its than slower and wipes is ramp the other we in price Canadian produced higher Arkansas product the was by and facility last the with commercial hit to costs the although this alleviate and the rate of a volume address North selling offset Smith, cost capacity volume balance shipped year, input inflation.

earnings the $XXX,XXX currency contributed Foreign and lifted line. bottom translation to

XXXX, In XX% material volume For coming expect quarter, increase improvement selling than higher XX% be prices prices, of drive are to the half of Ohio Total slightly. at reflecting the expected than a in to paper lower second majority we X% the September to down of expect quarter same summary quarter the new while our last Specialty quarter provides first shipping the for year. raw in Slide of shipments impact approximately of overall year. Shipments a Papers. energy of and or shutdown and the revenue X% capacity year. seven the to for with $XXX first last growth were was the facility results million machine our second the we the period X.X%,

increases and changes with last Engineered $XXX,XXX of gain improve to While price when are of products negative the working This this total $X.XX. traction inflation quarter signs the first $XX the show year, strength to the when quarter. has primarily products volumes were to which volumes up increases prices, segments raw by X.X% sold. few carbonless quarter business to selling the compared were on affected dynamics Other down, was announced trended we over to compared quarter XX%. year-ago significantly within basis, to material a per book mix up of were weeks. an impact Operating continued aggregate operating trended portfolio and last price wood, products Well, additional of was impact improved have X% in pulp profit Pricing up have sequential up prices with rates the with for energy industry grew was that X%. as this ton. higher up which allowed publishing overall

weather, profitability quality during machine shutdown, the costs the In was transition addition, pressured issues by and related continued severe water to quarter. paper

was of higher elevated continue the also $XXX,XXX, in We supply to environmental by reflecting And constraints last completed impact year. industry. depreciation costs compliance the the freight projects due trucking see to

million the quarter our to impacts. offset negative efforts of year last reduction savings some provided these Finally, for workforce yielded which $X.X

For shipments our maintenance the we X% we the annual first as to be second quarter, outage to compared enter expect quarter season. lower

and elevated of the increase in energy scope generator prices selling work offset We broader cost second in that million maintenance quarter Average expect which million seasonally range, cogent on a expected the quarter. material maintenance from to to more Raw and $XX last schedule. per this first ton are to $XX a includes due turbine to be to $XX energy year’s boiler from be slightly, are to frequent increase the lower consumption. expected of and by year but prices

weather, incurred severe Finally, $X issues related continue to in operating expected and quarter corporate the the are and transition, Slide water items. machine not shows to quality costs eight into financial second shutdown first million costs quarter. other totaling

we to onetime alternatives. quarter, of first startup related to Smith the and Fort the in our During Airlaid of the related new costs exploration costs facility incurred strategic

of from from the first quarter were and lower slightly proceeds expense quarter and was excluded earnings. these during also the Corporate some pension XXXX. than received items timberland first We costs sales adjusted

the our in free Looking nine in quarter costs ahead, we with expect line flow. quarter. to corporate cash shows Slide first second the be

capital first flow was expenditures at $X.X line were the compared was lower the comparison of environmental the also from operations lower mainly Capital to last million, cash working year, improvements. year. in adjusted driven by compliance in projects EBITDA quarter, During with completion although significantly last

than As flow the better free cash slightly ago quarter. a was quarter result, this adjusted year

XXXX expenditures significantly cash major additional behind with to detail improve provides XX on flow capital us. and the related programs expect We now capital Slide costs.

Slide last we and equipment and total some $XX with capital now million. years, for liquidity costs of lower capital Our of million. shows be to related and residual facility certain $XX of XX range couple Arkansas the largely complete information capital XXXX metrics. Except the systems, is some spend $XX this sheet spending million estimated Smith, our major significantly ancillary in concludes balance to Fort over the in programs expect to startup

of by on seasonal debt $XXX up of use $XXX the million, Our and expansion net liquidity of project. $XXX driven XXXX, end total $XX million We quarter the from capital finished XX with capacity Airlaid cash primarily March on totaled and available million. working hand, million the

of the sheet continues concludes call end our shape X.X balance strong growth comments. initiatives. is at based This adjusted Our remain good times our in quarter, and Liquidity on Dante. leverage back turn I’ll EBITDA. was to the the support and my net to debt to

Dante Parrini

John. Thanks,

of I I all units. our ahead, about for remain optimistic As business of three the look the rest year

engineered poised for stands Papers term industry Specialty Our while dynamics. with improving from materials are longer favorable fundamentals operating rates demand businesses and to growth strong pricing benefit

growth continuous healthy Our such Composite Fibers improvement, product mitigating solid specialties. business experience growth. near-term, technical key demand outlook coffee, raw tea, continues volume categories long-term as actions and price material with to pricing wallcover focused a efforts are our escalation through on for In the and

product of supplier long our being of to the term, solutions strategic Over the developing choice. strategy innovative for and we customers remain committed

of the Airlaid Advanced Materials Our poised in business Smith. strong for startup is the Fort new facility with Airlaid growth

optimizing geographic robust, the be of focus. ongoing will our for an base remains demand mix, Airlaid customer facilities right and product area As

be keep pursuing Our Fort will volume at to on the shipments production facility, execution opportunities. on near-term additional successful schedule and continued Smith actions while

expect traction guidance. We meaningful at half in see previous the our from second for to to with half total volume projected this lower shipping of business grow the this year efforts of these

opportunity exposure coupled Specialty our increase tightening provides to with profile as grades, and For our conditions to specialty the capacity encouraging strive of profit selective we more is with pricing favorable business. be the thereby environment mix the more this improving us Papers, to

also higher inflation improvement are continuous Our we focus operating. in help offset remain material currently will which our program the to raw environment on

of programs, future initiatives. cash will flow fund to is cash our profile capital now major years leverage generation the provide capital a I’ll open significantly the questions. improve our our of conclusion your after to of set the heavy with investing. couple growth call necessary and Finally, liquidity for This lower

Operator

from from of Your Mark Capital Markets. [Operator first Wilde question the Instructions] comes line BMO

is line open. Your

Mark wilde

like a wanted issues? little I quality on particularly just first color you the of more these if the drags quarter, Dante, Specialty First, things in could and give some Paper water

Dante Parrini

Sure.

as the were to have John yield had million third rebalance getting and products in from the And MAC transitioning where and the And our was conversion, the to end which outlined, depreciation water anticipated. an Boiler other higher moves products are had costs, had expense bumping than different freight people we penalties higher So, at we we PMXX of the shutdown had severe did Chillicothe, And as dollars. of more couple we uptime related and and to the costs that quarter for and on which we then, efficiency. took moving then place really a people weather machines with impact mill the created issues of quality.

get then cold levels the so had systems that we low with and much which we was the filtration freezing water than water then cause in So, volumes, solids had typical and low comed dirtier extra up weather, water.

this our steam we generation our of way as so the our on work some so through had we several knock of back curtail to events mill. and the and event production, weather in pulp of And had some that

total one-off carry second million, into we all that as quarter. the and which around X won't categorize So would to

Mark Wilde

volume kind ramps Smith, through wondered us can I much you as up? business Fort might then a first on And the and just have how if Then been turning the of through year help move in Fort just drag quarter. to the we Smith cadence of quantify Airlaid

John Jacunski

with as So, those equipment, ramp out Mark, adjusted through carve cost the up earnings. the Fort the we start Smith went of we

in related that we So a were you million to that. had may reconciliation earnings see the few table, dollars

continue impact positive Airlaid actual in earnings have forward, is minor, the the shipments we the quarter, activity, hit The the our business the the we operation go in from to to would we And ramp from it the March. commercial there expect start-up. facility more plan I beginning of up. some ramp-up. to actually was In of in operating as sort negative as that expect but mean quarter second profit business, positive quarter So see for expect in no the deliveries see we the third customer levels we

Mark Wilde

you'd kind hear, this low that Did the thought on Smith? prior of you end -- year kind of of volume Dante, Fort the hit guidance I mention

John Jacunski

volume for year, we've our expected to the bottom reduced that guidance the that so for prior end end XX% guidance. top the and our Right, left was would we unit, XX% We've grow intact. of business the that

So we now just of to really XX% ramp-up expect XX% volumes slightly with out reflecting facility. and that's that slower customers

Mark Wilde

that expected sort you you get get give are you -- anymore us just on didn’t or to forward? pull customers color the Can it customer there

John Jacunski

of running Yes, that that, start we so and is that I'm Smith, address reiterate excited to well. are the the Fort very Mark. I'll about happy very machine

So, quality the targets already in metrics terms levels internal well. and progressing of are qualification additional of and lot speed, is there of are machine products above

fundamental customers, there no market at issues with So all. technology, are

can expect to capital build, with greenfield it's all customers parts synchronize up moving you multiyear As and ramp complicated rates. different your the internal and coordinating of the

original QX optimistic lower So business the for think generate will we the about said, still of help growth We ramp while correctly excited an during that or that team volume while up QX now we a business. the growth very unit as growth shipments and years. are bit and at for getting we full than three so expect in capacity near-term as and it outstanding Airlaid to to estimates, two be the did place XX% the our remain John XX% of future job is to first catalyst it and built in time, XXXX, are the

Mark Wilde

the now through balance I And Fibers, your of volume, to quarter mentioned the back then the kind finally beverage could coffee the of of you weaker year, and wondered I expected you impact ruble? bounce food terms of volumes, just expectations and that you're the over turning right full Composite second beverage us the just in wondered volume year. and seeing if anything if in give you for

Dante Parrini

beverage, program localized food stated, during that quarter had major as for a So, volumes. invoiced for customer John the and successfully an the first first in installed and the of so impact we inventory quarter

above year with our of of the strong. customers very to across outlooks, key and we these the market expect So solid and growth are be fundamentals businesses positions very remainder for demand and have tea still coffee our the

Mark Wilde

the What’s number number? on growth the

Dante Parrini

I am sorry?

Mark Wilde

Would growth estimate out you year? for there a want put the full to

Dante Parrini

put don’t segment I we mean by to on year. I’ll over it kick typically volume but John, guidance by

John Jacunski

Mark, these X% growing it to expect range, and beverage go and that of X% food for not growth is we products through market would as balance as the year. is above at say we market just we rates the

So, expectation. it’s somewhat -- that’s dimensionalizing your

Mark Wilde

I was looking all for. That's

Dante Parrini

we’re the the more then is of our in with and I And on say market pronounced off year-over-year wallcover -- that just a a versus mean weakening question environment, still relatively the stable. ruble uptick I Russian would with came first and products. economy wallcover ruble seen XX%, would say when a in it’s I was XX% It's the XX% stable volatility very we’ve tea and the regarding had The about market about pleased that up categorize I your value we’ve currency growth. euro. that Russian quarter little XXXX as the would seen strong effect versus

XX of kind level. we’re that at So,

this we pay and for much you the closer people been exchange ago, markets to as we substantially markets a in opposed gradual move, And absorb start and area several had pace depreciating translation which business might years in volatile so, and ratios move is easier to that's case the slower and expect when it's it's it's currency. attention. which, very as And an just not the to value, where

our the past are years record quarters demand around challenging a they the currently the our were So a say, we more the bit itself environment position are steady overall, as ago. continue. I levels, it's over the that track now better things of in suggest expect past, geopolitical wallcover than as in profile, business attention, to said solid just several more uncertainty, this region lend a And few forecasting are And makes little can to view pre-crises that remains but much volumes something a market. we've and and would we’re paying

Operator

question comes Deutsche from next Jones line the Our of from Debbie Bank.

Your line is open.

Debbie Jones

First on just question Fibers. to I Composite ask wanted

I year everybody if year kind descent for cost some your QX? is then this pass the like you peak that inflationary flat are at clarify I'd you to for of the think as the means saying clarify like You've so commentary, go guidance just here it are costs to that else. just What up really seen wondering, that prices you seems here in just me? And Could you sequentially. in continue progresses? through that margin to means I'm line, and recourse that

Dante Parrini

Sure, Debbie.

be in, relatively we mentioned, So, improvement a as minor. phased price spend we expect that's the have seen price quarters here. albeit increases times, some situation we and take Often few to

we would in the half solid we and see to expect mix. at guidance that prepared in expect we the X%, pricing will that also second better pretty now point pricing. volume second of up and growth we But improve So expect this are we quarter where specific to the the year more we on provide mention

tea we'd also are peak that all margin levels one by we we've think coffee volumes expect in first improve part program talked in we balance for about volumes only help customers, X% and inventory larger of the tea the driven so as year-over-year and our implementation quarter our that in of any and so improvement year. our we coffee out and look the mix, localized was this for up were as the by at So our stretch

now that we this opportunity business the has good through profitability go year. to expect improve We as

Debbie Jones

expecting it is on I because I just modeled could an My triangular you what the wasn’t like schedule. you of bit you question uptick just that last just outrage, planning Was maintenance accelerated if on? explain in that a maintenance have are much some typical just little a sort that year? second Or of more

Dante Parrini

Sure.

that items in are done outrages So, some this year's pretty include frequently.

of that an and be had total year, year. this during then can so generators, period some outrage XX And little falls this the X Cogen, of the falls -- we taking spend. these typically this bit a on cycles. heavier again XX a every And to years months it's it So are so

So same that's that items last year. periods year have the maintenance around we this those it's really into fall that the dollars driver primarily two didn’t these

Debbie Jones

The Specialty I and walk was you called and anything know magnitude Papers. since through sense you out raw that it us call last I'm question others? you it, they're could X than million just assuming the more the out you but them of but I give of here mean all materials on a really contributing to the

Dante Parrini

I February. the that driver I bit think of in three items was January No, of the we've the highlighted largely half the a that little real mean are first quarter,

are we pretty we that second the quarter. encouraged are items So, good in we feel these

Debbie Jones

Actually and works pipeline change here, that any can is now the just does notable? last right six M&A of months squeeze how I or your so kind over in

John Jacunski

nothing I comment specific on of mean there’s work, expect nothing might specific Debby an ongoing but to part our on. to comment it’s you as

Operator

Davidson. next from from Your [Operator the Instructions] comes question Steve of line Chercover

line Your open. is

Steve Chercover

all, should in contributions we or years a of first Fort from rate million run spend? Smith? full get you think two kind ramped $XX three EBITDA What So, it’s how do when of for about the

John Jacunski

the broader XX,XXX we’ve a with is what comes line to that, capacity be short perspective, selling in on term price that commented largely it’s on. Airlaid business. there’s going So, From

guidance production add because get broader of side, the we we what did margins are this as somewhat situation, so -- be facility in not somewhat we margins -- have current to from because North some an the overhead, average so, don’t we on not and average. higher the efficiency more have would specific and providing expect but currently we EBITDA to our -- much On America, that platform we we’re margin benefits to a of with we’re of expect than the than stronger -- we not be nature

Steve Chercover

Chillicothe that And other in your Or pulp this the elsewhere your in Does impacted balance pulp used in purchases? business? pulp indicated QX then by help is $X.X million. higher prices being shutdown you

Dante Parrini

shutdown increases some it the severe to issues machine the weather our quite production us to pulp pulp but us only completely, up inflation neutrality. Composite neutrality the But business. as are first better -- Chillicothe put pulp the our not not the our did used price we and pulp in some from had talked, pulp the quarter we of businesses go affected we and the as there. pretty Specialty ended But really expect get we help The well affected Papers forward around the and and had cost Fibers as to closer or that with pulp of of No, so pulp in we some close water neutral, pulp, purchase Ohio that facilities in we the quality, pulp. additional reduced use so as lieu purchase would of

Steve Chercover

rates? running down offset your remaining higher actually the going machines or is able by And will capacity paper operating overall be capacity machine to the loss of other one that

Dante Parrini

that little we on on machine the the capacity about certainly XX,XXX the produced full we’re so a tons. going of bit capacity. and not annual was The to of an of do rate last basis, was tons but amount can full We run offset the year XX,XXX

is tons called going not replaced, that the of improvements that I certainly be largely might XX,XXX of majority be some there a that say efficiency but incremental bit little nowhere it. So near to would back

Operator

Your next Howard PENN question comes line from Bryerman of Capital. from the

Your open. is line

Howard Bryerman

Just the regarding sheet. balance a quick question

of are at those looking a How couple coming notes? and notes you of refinancing currently they years Your in the X.XXs due are callable. are

John Jacunski

Specialty where years, mentioned for as So, the commented February plan we understand that Dante strategic announced stay our and close business. market Papers are is we've X.X doing on, alternatives in and they to the market our we look at

those will will all what we approach into and consideration we consider when take that So, we to notes. as take refinancing

Operator

of Our from next line question Dan Jacome from comes Sidoti. the

line is Your open.

Dan Jacome

cetera? wondering, because Fort for that gain quick quarter, the or was two? coming any last some you the Just of seen specialty et creation question XX% Smith. on quarter from have was but wipes. nice there in was demand I'm the over new a assuming I Or all that acceleration Obviously, capacity the incremental last wipes guys

John Jacunski

am in sure only our bit I not I out the ship follow question. Smith a of first Fort of quarter. Dan, wipes We little in the facility completely

small what fairly are larger our look was it has to that's you Canadian So facility, service if getting so wipes been growth just through at.

Dan Jacome

That I that for better it's shipment was it am my every reading it out put wipes. quarter question because I the right Is the you numbers getting just like, that correctly? is looks the mean

John Jacunski

one continue of over Smith growth that's seen mean I and XXXX couple solid in that are facility. Fort in the to years the you wipes primary market, capacity new of because and last of particularly we've the drivers Yes, was the expected of that's very

Dan Jacome

Oh, did are so 'XX then market XX%, yes, all seems to legacy the now you XQ improving. That's and capacity coming in why XX% it's and in from the be you

Operator

no are call the I to back at questions Dante closing remarks. this There time. for turn further

Dante Parrini

for thank quarter. day. of we our you to forward look next the speaking your again call today with you and Well, joining Enjoy rest

Operator

conference today concludes call. This

You disconnect. may now

Magnera (MAGN) 1 May 182018 Q1 Earnings call transcript