Clearwater Paper(US:CLW)2024-08-06 23:22Financial Data and Key Metrics - Net sales for Q2 2024 were $586 million, up 12% YoY, primarily driven by incremental volume from the Augusta acquisition [8] - Adjusted EBITDA was $35 million, down $36 million YoY, mainly due to a planned major maintenance outage at the Lewiston facility [8] - Consolidated net loss was $26 million or $1.55 per diluted share, with an adjusted loss per share of $0.51 [13] - Liquidity at the end of Q2 was $224 million, with a debt-to-adjusted EBITDA leverage ratio of 3.58 times [16] Business Line Performance - Paperboard net sales increased 23% YoY, driven by a 46% increase in shipment volume due to the Augusta acquisition, offset by a 14% decline in pricing [9] - Paperboard adjusted EBITDA was $11 million, including $9 million in insurance recoveries, but impacted by a $32 million maintenance outage cost [9] - Tissue revenues were flat YoY at $253 million, with 4% volume growth offset by 3% lower cost index-based pricing [11] - Tissue adjusted EBITDA was $41 million, with a margin of 16.4%, marking the fifth consecutive quarter above 15% [12] Market Data and Key Metrics - SBS industry shipments improved sequentially by 1% between Q1 and Q2 2024, with operating rates flat at 84% [10] - Food service demand is strong, leading to capacity constraints and the implementation of price increases for certain grades [11] - Pulp pricing was lower YoY but higher sequentially, with expectations of it being a headwind in Q3 and Q4 2024 [15] Company Strategy and Industry Competition - The company is focusing on becoming a premier independent supplier of Paperboard Products in North America, with plans to expand product offerings and substrates [7] - The acquisition of the Augusta facility and the planned divestiture of the Tissue business are seen as transformational steps to strengthen the balance sheet and position for future growth [5][6] - The company aims to move all Paperboard facilities to an annual outage schedule starting in 2025 to improve operational performance [10] Management Commentary on Operating Environment and Future Outlook - Management remains bullish on long-term market fundamentals for Paperboard, citing consumer preferences and sustainability trends [11] - The company expects continued recovery in Paperboard demand in Q3, with higher production volumes and lower outage costs [19] - Full-year 2024 assumptions include higher volumes and synergies from Augusta, as well as higher outage costs from Lewiston [20] Other Important Information - The company repurchased approximately $3 million of its stock during Q2 to offset dilution from employee equity grants [17] - Ongoing maintenance CapEx is expected to be $70 million to $80 million, excluding large projects, following the Augusta acquisition and Tissue divestiture [21] Q&A Session Summary Question: Growth and Diversification of Paperboard Portfolio - The company aims to provide a more complete offering to converters, including lightweight products, other substrates, and different coatings, depending on customer needs and market opportunities [23][25] Question: Maintenance and CapEx Implications - The major maintenance outage at Lewiston was more challenging than expected, but no material changes to future CapEx outlook are anticipated [26] - The total impact of the outage is expected to exceed $40 million, with the majority reflected in Q3 guidance [27] Question: Annual Maintenance Cycles - The company plans to finalize details on annual maintenance cycles in the coming quarters, with a likely focus on Q2 for Lewiston and Q4 for Augusta [28] Question: Corporate Expense Run Rate in 2025 - The company expects to maintain SG&A expenses at 6% to 6.5% of sales, with further updates provided in future quarters [29]