By the numbers: Q3 2024
Net sales: $393.3M
Up 41% year over year
Paperboard sales volumes: 314K tons
Up 67.2% year over year
Net income: $5.8M
Compared with $36.6M in Q3 2023
- Overview: Clearwater Paper reported this week that demand improved in the third quarter, although challenges remain in the solid bleached sulfate market. The company experienced a $5 million negative impact from Hurricane Helene in Q3 and expects as much as a $3 million hit in Q4. The significant net sales increase over Q3 2023 primarily is due to incremental volumes from the bleached paperboard mill in Augusta, Georgia, that it acquired from Graphic Packaging International in May.
- Tissue sale: On Friday, Clearwater announced it closed the $1.06 billion sale of its tissue business to Sofidel America to become a paperboard-focused business. Proceeds also allowed the company to “significantly deleverage” its balance sheet, said CEO Arsen Kitch on Monday’s earnings call. “We're now able to sharpen our focus on growing and improving our paperboard business,” he said. “We will do this by driving operational and cost improvements, as well as finding ways to become more relevant to our customers by expanding our product range.”
- Independent supplier status: Kitch said the tissue business sale strengthens Clearwater’s position as an independent paperboard manufacturer that serves independent converters. He said the company is partnering with converter customers to innovate and service three key market trends: demand for lighter-weight paperboard that retains quality, compostable solutions, and offerings that include alternative fibers and postconsumer recycled content.
- Expected investments: Kitch gave insight into the types of projects that Clearwater is exploring for investments to grow its business. It’s looking to increase mechanical and recycled pulp consumption on paper machines, add unbleached pulping capabilities and develop biodegradable barriers and coatings. “In addition to internal investments, we will consider opportunistically acquiring assets that are a good fit for our network. We recognize that these acquisition opportunities are infrequent and difficult to predict,” Kitch said.
- Augusta mill: Executives detailed the $5 million hit from Hurricane Helene due to disruptions at the Augusta mill as well as its tissue mill in Shelby, North Carolina. While Augusta did not sustain significant equipment damage, it was shut down for six days. Despite costs from storm damage and upcoming maintenance, executives say the Augusta site supports its paperboard focus going forward.
- Slow recovery: Although demand has pulled up from its low point during post-pandemic destocking, executives noted the slow recovery is ongoing. “While we believe that a recovery is underway, industry shipments remain below pre-COVID levels, with the continued recovery expected into 2025 and 2026,” said CFO Sherri Baker.
- Outlook: Fourth-quarter earnings will include one month of tissue results, and the tissue business sale is expected lower adjusted earnings before interest, taxes, depreciation and amortization in Q4 to between $20 million and $30 million. Additionally, a planned maintenance outage at Augusta in Q4 is expected to cost $15 million to $20 million. Clearwater executives announced the intention to reduce the company’s overall fixed cost structure by approximately 10%, aiming for more than $50 million of annual run-rate cost savings by the end of 2025.
