Mativ(US:MATV)2025-05-08 13:30Financial Data and Key Metrics Changes - Consolidated net sales from continuing operations for Q1 2025 were $485 million, down 3% year over year, and essentially flat on an organic basis [24] - Adjusted EBITDA from continuing operations was $37.2 million, down 19% from $45.8 million in the prior year [24] - The net leverage ratio was 4.7 times, with about 0.8 times headroom versus the covenant level of 5.5 times [28] Business Line Data and Key Metrics Changes - In the Filtration and Advanced Materials (FAM) segment, net sales were $188 million, down more than 7% year over year, reflecting lower volumes and unfavorable currency translation [25] - The Sustainable and Adhesive Solutions (SaaS) segment saw net sales of $297 million, up almost 6% on an organic basis, with adjusted EBITDA performance of $33 million, up more than 3% year over year [26] Market Data and Key Metrics Changes - Demand patterns reflected in Q1 showed sales were flat organically year over year, with SaaS segment growth offset by softness in FAM results due to automotive and construction market challenges [16][18] - Less than 7% of annual sales are currently subject to tariff exposure, indicating a strong localized supply chain [20][22] Company Strategy and Development Direction - The company has established three near-term priorities: enhancing commercial execution, deleveraging the balance sheet, and conducting a strategic portfolio review [8][9] - A focus on cross-selling and moving existing products into adjacent applications is part of the strategy to stimulate top-line growth [10][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current demand environment remains suppressed and is not expected to return to pre-pandemic levels soon [31] - A significant sequential increase in adjusted EBITDA performance is anticipated, driven by volume increases and improved pricing relative to input costs [31] Other Important Information - The company plans to reduce capital expenditures to $40 million per year, down from $55 million in 2024, and aims to reduce inventory levels by $20 million to $30 million in 2025 [14][30] - A goodwill impairment analysis resulted in a pretax non-cash charge of $412 million due to sustained decline in share price [28] Q&A Session Summary Question: Insights on the portfolio review and cash flow generation - Management is evaluating the portfolio to maximize value and strengthen the balance sheet, with updates to be provided as progress is made [40] - A significant increase in cash flow is expected in Q2, driven by inventory reductions and improved EBITDA [42] Question: Margin contraction and dividend policy - Management identified that the FAM business has been the primary impact on margins, with expectations for improvement through cost reductions and pricing actions [49][53] - The board has discussed the dividend and plans to continue it for now, despite the focus on deleveraging [54] Question: Impact of tariffs and inflation - The company has minimal exposure to tariffs from China and is actively managing pricing to cover input costs, with expectations for favorable pricing contributions in Q2 [59][61] - Input costs are not expected to rise significantly, allowing for effective management of the price-cost spread [61] Question: Addressing weaknesses in automotive and construction segments - Management is building a robust pipeline in the optical, medical, and dental fields to offset weaknesses in automotive and construction, with expectations for growth in these areas [65]