Clearwater Paper(US:CLW)2021-08-08 01:31Financial Data and Key Metrics Changes - The company reported net sales of $406 million for Q2 2021 and adjusted EBITDA of $15 million, which was better than expectations [5][20] - The net loss for Q2 2021 was $52 million, with a diluted net loss per share of $3.10 and an adjusted loss per share of $1.07 [20][21] - Liquidity at the end of the quarter was $297 million, and net debt was reduced by $4 million [8][26] Business Line Data and Key Metrics Changes - The paperboard business experienced strong demand, leading to implemented price increases across the SBS portfolio [6][10] - The tissue business saw a decline in shipments, with 10.2 million cases shipped in Q2, down approximately 36% year-over-year and 13% sequentially [16][24] - The major maintenance outage in the paperboard business impacted adjusted EBITDA by $22 million [12][22] Market Data and Key Metrics Changes - The U.S. tissue market is traditionally split into 2/3 at-home and 1/3 away-from-home, with total demand around 10 million tons per year [13] - Retailer shipments of finished goods bottomed out in April, indicating a recovery period beginning in May [15][16] - The company expects tissue shipments to grow by 10% to 15% in Q3 relative to Q2 [30] Company Strategy and Development Direction - The company is focused on reducing costs and improving cash flow, particularly in the tissue business, while also maximizing production in the paperboard segment [39][44] - The closure of the Neenah tissue mill is part of a strategy to exit the away-from-home market and reduce overall costs [18][35] - The company is planning to shift some capital projects to 2022 to accommodate strong paperboard demand [33][77] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains challenging due to inflation and competitive pressures, but they are optimistic about long-term growth in both business segments [40][43] - The company anticipates continued recovery in tissue demand and expects to manage production levels to align with market needs [30][39] - Management highlighted the importance of monitoring consumer and channel trends, especially in light of the Delta variant [81] Other Important Information - The company expects input cost inflation to be between $60 million and $70 million for 2021, primarily driven by pulp prices [34] - The anticipated financial impact from raw material inflation is expected to increase in the coming quarters [24][29] Q&A Session Summary Question: What are the inflation expectations for the year? - Management indicated that inflation expectations have slightly improved due to offsetting factors in pulp and freight costs [46] Question: Can we expect further price increases in SBS? - Management confirmed that sequential improvements in SBS pricing are expected from Q3 to Q4 [47] Question: How does the company view the tissue market post-COVID? - Management believes that the current year reflects a more normal baseline for tissue demand compared to the COVID-impacted year [49] Question: What is the outlook for tissue shipment volumes? - Management expects tissue shipment volumes to grow by 10% to 15% in Q3 compared to Q2 [30][67] Question: How is the company managing inventory levels? - Management stated that inventory levels are still higher than desired, but they are actively working to reduce them [62] Question: What is the status of the Neenah site closure? - The closure is expected to improve the overall cost structure and avoid losses associated with the site [35][18] Question: What are the expectations for capital expenditures? - Management indicated that capital expenditures have been reduced this year, with a focus on scrutinizing spending [76][77]