Glatfelter (US:GLT)2021-11-02 18:18Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $0.21, an increase of $0.05 compared to the same period last year, driven primarily by strong earnings in the Airlaid segment and a favorable tax rate [14][8] - Adjusted EBITDA for the quarter was $32 million, reflecting the operational performance improvements [8] - The leverage ratio decreased to 2.8 times as of September 30, 2021, compared to 3.0 times at the end of June, but was higher than year-end 2020 [34] Business Line Data and Key Metrics Changes - Airlaid Materials segment performed well, with revenues up about 40% year-over-year on a constant currency basis, supported by strong recovery in tabletop and wipes categories [24] - Composite Fibers segment faced challenges with total revenues increasing by 3.4% on a constant currency basis, but shipments were down 6% due to softer demand in wallcover products [17][18] - The company announced a 12% price increase across the Composite Fibers product portfolio to mitigate rising input costs [11] Market Data and Key Metrics Changes - The company experienced a sequential volume growth of 10% in hygiene products after a destocking phase in the first half of the year [9] - Energy prices more than doubled in key European countries, significantly impacting the Composite Fibers segment [10][19] - Demand for Composite Fibers products is expected to remain robust across most categories [36] Company Strategy and Development Direction - The acquisition of Jacob Holm is a significant milestone, enhancing the scale and diversification of the product portfolio [6][12] - The company aims to achieve $20 million of annual synergies from the Jacob Holm acquisition while focusing on integrating it into Glatfelter's operating model [13][34] - The near-term focus will be on ensuring successful integration and reducing leverage [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business prospects, with expectations for robust demand in Composite Fibers products [36] - The company is actively managing costs and operational efficiencies to improve EBITDA and free cash flow [37] - Input costs are expected to remain volatile, and the company will continue to monitor developments closely [21] Other Important Information - The company successfully executed a $500 million bond offering to finance the Jacob Holm acquisition [12] - Corporate costs were favorable by $1.7 million compared to the same period last year, with an expectation of approximately $22 million for the full year [29][30] - The tax rate for the third quarter was 27%, lower than previously expected, with an estimated full-year tax rate between 38% and 40% [31] Q&A Session Summary Question: Inflation recovery timing and impact on Q4 - Management expects a significant pickup in inflation recovery in Q4, guiding toward $6 million of improvement in prices for Composite Fibers [44] - Energy prices in Europe are anticipated to be slightly higher in Q4 compared to Q3 due to unexpected spikes [45][46] Question: Impact of fiber costs and mix shift in Airlaid - Management noted that while fiber costs have started to abate, energy prices had a larger impact in Q3 [48] - A mix shift in Airlaid is expected to negatively impact profit by $1 million, primarily due to seasonality in tabletop products [49][50] Question: Production expectations for inclined wire - Inclined wire production is primarily related to food and beverage papers and Composite Laminates, with expectations for Q4 to be in line with Q3 [51][53] Question: Inventory impact from Jacob Holm - Management stated it is premature to provide estimates on the inventory step-up for Jacob Holm as they are still working through purchase accounting [54]