Earnings call: Clearwater Paper reports robust Q3 2023 results, explores growth opportunities

Clearwater Paper Corporation (NYSE:) has posted robust earnings for the third quarter of 2023, with significant growth in the tissue business and lower input costs contributing to a strong performance. The company’s net sales reached $520 million, and adjusted EBITDA was reported at $81 million, marking an improvement from the previous year.

Key takeaways from the earnings call:

• The tissue business saw substantial growth, with adjusted EBITDA more than doubling from $21 million to $46 million.
• Despite soft demand, the paperboard business maintained a 20% margin, delivering $52 million of adjusted EBITDA.
• Clearwater Paper reduced net debt by $69 million in the quarter, bringing the total reduction to $416 million since 2020.
• The company repurchased $5 million in shares during the quarter, with $10 million remaining on their buyback authorization.
• Clearwater Paper began the redemption of their 2025 notes, pushing material debt maturities out to 2028 and strengthening their balance sheet.

Clearwater Paper’s tissue business performed well, with an 8% increase in revenue due to higher pricing and retail shipments. The company expects a gradual recovery in the paperboard business starting in 2023, and is exploring options to expand their product offering. They aim to become a supplier of choice to independent converters and believe consolidation is needed in the tissue business to meet the demands of large retailers.

The company provided an outlook for the fourth quarter of 2023, expecting adjusted EBITDA in the range of $60 million to $70 million. For the full year, they anticipate adjusted EBITDA between $278 million and $288 million, driven by improved performance and lower costs. Other key assumptions for the year include interest expense of $28 million to $30 million, depreciation and amortization expense of $97 million to $100 million, capital expenditures between $70 million and $80 million, and a tax rate in the mid-20% range.

During the earnings call, representative Arsen Kitch discussed the growth potential of private branded products, which currently make up 36% of the company’s share. He expressed confidence in the company’s operational position, and stated that they are well-equipped to handle any future pulp price fluctuations. He also noted the need for consolidation in the industry to achieve better returns and make large investments in capacity.

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