Clearwater Paper (NYSE:CLW) Q4 2025 Earnings call February 18, 2026 05:00 PM ET Company ParticipantsAmit Prasad - Equity Research AssociateArsen Kitch - President and CEOSean Steuart - Managing Director in Equity ResearchSherri Baker - SVP and CFOSloan Bohlen - Investor RelationsConference Call ParticipantsMike Roxland - Managing Director and Senior Equity Research AnalystOperatorHello, everyone. Thank you for joining us, and welcome to the Clearwater Paper fourth quarter and full year 2025 earnings confere ...

Core Viewpoint - The company has decided to terminate the investment in the solar backsheet and functional film production base project in Feidong, originally planned with a total investment of 5 billion yuan, due to industry overcapacity and intensified price competition [1] Group 1: Project Termination - The termination of the Feidong project was reached through friendly negotiations with the Feidong government [1] - The company has already invested approximately 1.6341 million yuan in the project, which was signed in 2023 and planned to be constructed in two phases [1] - The first phase of the project’s infrastructure is nearly completed, but equipment installation has not yet begun [1] Group 2: Capacity Adjustment - The company plans to shift the equivalent capacity to the Yichun Economic and Technological Development Zone, where the first phase will produce 350 million square meters of new battery packaging special functional film with a total investment of 290 million yuan [1] - The first phase project has already commenced construction, utilizing existing infrastructure to save on investment and shorten the project timeline [1] - A second phase project is planned to produce 150 million square meters of new battery packaging special functional film, which will be initiated based on market demand after the first phase is completed [1] Group 3: Business Impact - The company asserts that the termination of the Feidong project is a prudent decision that will not significantly impact existing business operations and development [1] - This decision is expected to enhance the efficiency of capital utilization [1]

Group 1: Tire Mold Business - The tire mold business has a systematic pricing mechanism that considers specifications, processing difficulty, complexity, and order cycle, with a gross margin of 40.21% in H1 2025, down by 1.00 percentage point year-on-year due to product structure changes and an increase of over 1,000 personnel [1] - The overseas production capacity for tire molds accounts for approximately 10%, with subsidiaries established in countries including the USA, Thailand, Hungary, India, Brazil, Vietnam, Mexico, and Cambodia [1] - The lifespan of tire molds is influenced by usage and design updates, with increasing frequency of pattern updates [2] - Raw materials constitute about one-third of the cost in the tire mold business, primarily consisting of forged steel and aluminum ingots [4] Group 2: Wind Power and Gas Turbine Business - The company can adjust production capacity between wind power and gas turbines, particularly in casting and precision machining [2] - The large component machinery products are currently operating at full capacity, with significant growth in both wind power and gas turbine components in H1 2025 [2] - Major clients for the gas turbine business include GE, Mitsubishi, Siemens, Shanghai Electric, Dongfang Electric, and Harbin Electric [2] - A new 65,000-ton casting expansion project has been initiated, with an additional 70,000-ton casting capacity planned, subject to market conditions and order changes [2] Group 3: CNC Machine Tool Business - Since launching in 2022, the CNC machine tool products have seen repeat orders, with a revenue of approximately 800 million yuan from January to September 2025 [3] - The CNC machine tool business includes self-produced components such as machine beds and functional parts like cradle turntables [3] - The product range includes vertical five-axis machining centers, precision machining centers, ultra-hard tool five-axis laser machining centers, and horizontal five-axis machining centers, serving industries like electronics, automotive, precision molds, and semiconductors [3] Group 4: General Observations - The company is actively enhancing its global production service system to better respond to market demands and provide localized services [1] - Future business growth may be influenced by market changes, supply-demand relationships, and policy dynamics [2]

Investment Rating - The industry rating is "Recommended" [3] Core Views - Short-term raw material supply tightness is expected to support nickel prices, with LME nickel spot price reaching $18,630 per ton, up 5.70% from January 16 [1] - The cobalt market is anticipated to see continued price increases due to structural supply tightness, with electrolytic cobalt priced at 438,000 yuan per ton, down 3.74% from January 16 [2][5] - Domestic antimony supply remains tight, supporting antimony prices, with average prices for antimony ingots at 160,500 yuan per ton [6] - Lithium carbonate prices are expected to continue rising, with a market average of 171,100 yuan per ton, up 8.36% from January 16 [8][19] - Supply uncertainties in the rare earth market are expected to support prices, with significant legislative changes in Vietnam impacting global supply [20] - Tin prices are supported by uncertainties in overseas supply, with LME tin prices at $54,200 per ton, up 9.66% from January 16 [11][21] - Tungsten market supply-demand imbalance is notable, with white tungsten concentrate prices at 535,500 yuan per ton, up 5.93% from January 16 [13][22] - Uranium supply tightness is expected to persist, with global uranium prices at $63.51 per pound, significantly higher than historical lows [14][15] Summary by Sections Nickel and Cobalt Industry - Nickel prices are supported by supply constraints, with Indonesia's nickel mining production quota expected to be reduced to 250-260 million tons [1][16] - Cobalt supply is projected to remain tight, with Congo's export quotas confirmed to extend into 2026 [2][17] Antimony Industry - Antimony prices are supported by long-term supply tightness, with domestic production facing seasonal disruptions [6][18] Lithium Industry - Lithium carbonate prices are expected to remain strong due to demand support and ongoing supply constraints, with significant price increases noted [8][19] Rare Earth Industry - Legislative changes in Vietnam are tightening global rare earth supply, with China maintaining a dominant position in the market [20] Tin Industry - Tin prices are supported by uncertainties in overseas supply, particularly from Myanmar and Congo [11][21] Tungsten Industry - The tungsten market is experiencing a supply-demand imbalance, with prices expected to rise further due to limited new supply [13][22] Uranium Industry - Uranium prices are supported by ongoing supply tightness and geopolitical factors affecting production [14][15]

Group 1 - The company expects a net profit attributable to shareholders to be negative in 2025, indicating an anticipated loss due to various adverse factors [1][2] - Key reasons for the expected loss include international geopolitical conflicts, inflation in Europe and the US, and a continued weak global economy leading to lower-than-expected end-product demand [1] - The company is adjusting its product structure and capacity layout in response to industry competition and trends, including relocating some production capacity to Thailand to mitigate international trade barriers [1] Group 2 - Despite the challenging industry environment, the management is actively responding by adjusting development strategies, enhancing R&D innovation, and exploring market opportunities [2] - The company has maintained a good level of operating cash flow, with revenue expected to grow year-on-year, although significant fixed asset depreciation and asset impairment will pressure overall performance [2] - As of the end of Q3 2025, the net profit attributable to shareholders was approximately 50 million yuan, but the company anticipates a full-year loss [2]

Core Viewpoint - The company is actively adjusting its product structure and capacity in response to market changes, aiming to enhance competitiveness and profitability amidst industry challenges such as concentrated capacity release, price competition, and cyclical fluctuations [1] Group 1: Company Strategy - The company is focusing on improving product quality, expanding product varieties, adjusting its structure, and exploring new markets [1] - The company is implementing energy-saving measures and cost reduction strategies to increase efficiency [1] Group 2: Market Conditions - The industry is facing significant challenges including concentrated capacity release and intense price competition [1] - The company is adapting its strategies based on market demand and its strategic positioning [1]

Core Viewpoint - The recent decline in polysilicon futures is attributed to tightening market regulations and a shift in policy expectations, leading to a significant price drop after a period of volatility [3][9]. Market Dynamics - Polysilicon futures opened lower and hit the limit down on January 8, 2026, following a peak price of 61,985 yuan/ton on December 17, 2025, driven by the establishment of a new company and its capacity storage plan [3][9]. - The market has seen a shift from early-stage industry coordination to competition driven by technological iteration, as regulatory signals emphasize a market-oriented and legal approach to industry development [3][9]. Supply and Demand - In the traditional off-season of November and December, there was a reduction in production across polysilicon, silicon wafers, battery cells, and modules, with polysilicon production experiencing a 14.5% decrease in November, followed by a recovery to approximately 115,500 tons in December [4][10]. - Despite a 19% reduction in silicon wafer production in December, polysilicon inventory increased from 281,000 tons to 306,000 tons, indicating a mismatch in supply and demand [4][10]. Price and Cost Factors - The surge in silver prices in December raised the cost of battery cell silver paste, leading to tentative price increases across the entire industry chain, with polysilicon prices rising to a range of 55,000 to 63,000 yuan/ton [4][10]. - However, high-priced transactions have primarily been spot trades, and the acceptance of these prices by downstream customers remains uncertain [4][10]. Future Outlook - The path to clearing polysilicon capacity may change, with regulatory measures encouraging a rational return of funds to the market, contributing to price corrections [6][12]. - A technical rebound may occur after the rapid decline, but the extent of this rebound will face pressure from real-world cost factors, with prices expected to test lower integer levels in the short term [6][12].

Core Viewpoint - The European phenolic industry is facing unprecedented pressure due to a significant drop in demand for phenol and acetone, coupled with high production costs, leading to potential capacity adjustments in the industry [1][2]. Production Costs - European phenol production costs are approximately 41% higher than Southeast Asia and 45% higher than the Middle East, primarily due to soaring energy costs after the reduction of Russian gas imports in 2022 and high raw material costs [1]. - The production process in Europe relies heavily on naphtha steam cracking, with propylene as a byproduct, which is affected by low operating rates during weak market demand, impacting phenol production costs [1]. - Limited propane dehydrogenation capacity in Europe further exacerbates the local raw material cost disadvantage compared to other regions [1]. - Strict carbon compliance costs in Europe add to the overall cost burden for producers, alongside aging production facilities that increase operational costs [1]. Downstream Consumption - Since March 2024, European spot prices for phenol have dropped by 49%, while acetone prices have decreased by 61.5%, indicating a significant oversupply in both markets [2]. - The demand for downstream products such as Bisphenol A and phenolic resins is weak, leading to a lack of profitability for producers even when reducing phenol operating rates [2]. - From 2019 to the present, European phenol demand has declined by approximately 30%, with significant reductions in consumption expected by 2025 [2]. Supply Stability - Despite adjustments in downstream capacity, nominal phenol production capacity in Europe has remained stable, with only a 3.1% decrease due to the shutdown of a phenol facility in Poland [2]. - Operating rates for local facilities are maintained between 60% and 70%, which does not alleviate the persistent oversupply in the phenol and acetone markets [2]. Market Dynamics - INEOS has announced plans to close its 660,000-ton/year phenol facility in Germany by the end of 2027 while simultaneously planning to restart a 680,000-ton/year phenol facility in Belgium, adding uncertainty to the supply-demand balance in the European phenolic market [3]. - Global phenol capacity continues to expand, particularly in integrated projects for Bisphenol A and its downstream products, with nominal capacity expected to rise from 11.5 million tons to nearly 13.3 million tons between 2024 and 2029 [3]. - The price of Bisphenol A has surpassed that of polycarbonate products, driven by competitive pricing from Asian imports, with a nearly 44% year-on-year increase in polycarbonate imports from China to Europe observed in the first nine months of 2025 [3]. Trade and Regulatory Challenges - The effectiveness of anti-dumping duties on epoxy resins from certain Asian countries has disappointed market participants, with current prices falling below pre-duty levels [4]. - Westlake Chemical, one of the companies that initiated anti-dumping claims, is set to exit the European market by 2025, indicating ongoing challenges in the industry [4]. - As 2026 approaches, the European phenolic industry will continue to navigate the dual challenges of capacity rationalization and trade flow restructuring, testing the industry's resilience [4].

Core Viewpoint - Since 2025, PVC futures prices have hit a nearly ten-year low due to increased supply and decreased demand, particularly influenced by a sluggish real estate sector [1][2]. Supply - 2025 is expected to be a peak year for PVC capacity expansion, with an additional 2.2 million tons projected, leading to a total capacity of 29.93 million tons by year-end, a year-on-year increase of 7.35% [1]. - As of November 14, domestic PVC social inventory was 1.0282 million tons, a slight decrease of 1.27% month-on-month but a significant increase of 23.75% year-on-year, indicating high inventory pressure [1]. Demand - The current demand for PVC is characterized by "weak domestic and strong external" factors, with 80% of downstream demand related to real estate and infrastructure, both of which have seen declines in investment and new projects [1]. - The low operating rates in consumption areas such as pipes and profiles, along with a lack of positive factors in the infrastructure sector, contribute to overall weak demand [1]. Export - India's PVC demand has been growing, with a demand gap of 3 million tons per year, heavily reliant on imports. China's PVC exports to India surged from 7.3% in 2020 to 50.9% in 2024 [2]. - In the first nine months of 2025, China exported 3.3941 million tons of PVC, a year-on-year increase of 47.78%, with 1.215 million tons going to India, accounting for 41.6% of total exports [2]. Cost - Recent declines in oil and coal prices have weakened cost support for PVC, with prices falling below cost lines, leading to industry-wide losses [2]. - The integrated chlor-alkali enterprises are maintaining PVC production through high profits from caustic soda, but the price of caustic soda has dropped by 30% from its peak, making this strategy unsustainable [2]. Short-term Outlook - In the short term, PVC supply continues to grow while demand remains weak, leading to significant inventory pressure and insufficient upward price momentum [3]. - PVC is currently in a low valuation area, with negative factors largely priced in, suggesting limited downside potential. The market is expected to remain in a "bottoming out" and "capping" oscillation pattern, with the 2601 contract projected to trade between 4,400 and 4,800 yuan per ton [3].

Supply and Demand Dynamics - Since 2025, PVC futures prices have reached a nearly ten-year low due to increased supply and decreased demand, alongside a weak real estate sector [1] - In 2025, PVC production capacity is expected to peak with an additional 2.2 million tons, bringing total capacity to 29.93 million tons, a year-on-year increase of 7.35% [1] - As of November 14, domestic PVC social inventory was 1.0282 million tons, a slight decrease of 1.27% month-on-month but a significant increase of 23.75% year-on-year, indicating high inventory pressure [1] - The current demand for PVC is characterized by "weak domestic and strong external" factors, with 80% of downstream demand related to real estate and infrastructure, which have seen declines in investment and new projects [1] Export Trends - India's PVC demand has been growing, with a demand gap of 3 million tons per year, heavily reliant on imports; China's PVC exports to India surged from 7.3% in 2020 to 50.9% in 2024 [2] - From January to September 2025, China's PVC exports totaled 3.3941 million tons, a year-on-year increase of 47.78%, with 1.215 million tons exported to India, accounting for 41.6% of total exports [2] - It is expected that in Q4 2025, PVC exports to India will increase by 200,000 to 300,000 tons, which will help alleviate inventory pressure and improve the domestic supply-demand imbalance [2] Cost Pressures - Recent declines in oil and coal prices have weakened cost support for PVC; as of November 17, PVC prices fell below the cost line, leading to industry-wide losses [2] - The losses for the calcium carbide method are 700 yuan per ton, while the ethylene method faces losses of 560 yuan per ton [2] - Chlor-alkali integrated enterprises are maintaining PVC production through high profits from caustic soda, but the price of caustic soda has dropped by 30% from its peak this year, making it difficult to sustain this model [2] Market Outlook - In the short term, PVC supply continues to grow while demand remains weak, leading to significant inventory pressure and insufficient price increase momentum [3] - Currently, PVC is in an undervalued region, with negative factors largely priced in, suggesting limited downside potential for prices [3] - The PVC futures market is expected to remain in a "bottoming out" and "capping" oscillation pattern, with the 2601 contract projected to trade between 4,400 and 4,800 yuan per ton [3]