NYSE:GLT Glatfelter Q1 2024 Earnings Report Earnings History Glatfelter EPS ResultsActual EPS-$4.29Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AGlatfelter Revenue ResultsActual Revenue$327.26 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AGlatfelter Announcement DetailsQuarterQ1 2024Date5/9/2024TimeBefore Market OpensConference Call DateThursday, May 9, 2024Conference Call Time11:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Glatfelter Q1 2024 Earnings Call TranscriptProvided by QuartrMay 9, 2024 ShareLink copied to clipboard.There are 4 speakers on the call. Operator00:00:00Good day, and welcome to the Glatfelter's Q1 2024 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ramesh Shethigarh. Please go ahead. Speaker 100:00:13Thank you, Ruth. Good morning, and welcome to Glatfelter's 2024 Q1 earnings conference call. This is Ramesh Shethigarh, Senior Vice President, Chief Financial Officer and Treasurer. On the call to present our Q1 results is Thomas Fahneman, President and Chief Executive Officer of Glatfelter and myself. Before we begin our presentation, I have a few standard reminders. Speaker 100:00:38During our call this morning, we will use the term adjusted earnings as well as other non GAAP financial measures. A reconciliation of these financial measures to our GAAP based results is included in today's earnings release and in the investor slides. We will also make forward looking statements today that are subject to risks and uncertainties. Our 2023 Form 10 ks, which has been filed with the SEC and today's earnings release, disclose factors that could cause our actual results to differ materially from these forward looking statements. These statements speak only as of today, and we undertake no obligation to update them. Speaker 100:01:15I will now turn the call over to Thomas. Speaker 200:01:18Thank you, Ramesh. Hello, everyone, and welcome to Glatfelter's Q1 2024 Investor Call. I'm pleased to report that the business produced solid but mixed results at the segment level as we continue to face industry wide market headwinds and challenges from the volatile global economic environment with Europe representing our most difficult market currently. We achieved adjusted EBITDA of $23,800,000 for the quarter or approximately $1,000,000 lower than the same quarter last year. Also, in relation to the proposed merger of Klapfelter with Berry Global's HHNF business, we reached a significant regulatory milestone with the expiration of the HSR waiting period. Speaker 200:02:07I will speak more to the work that is underway related to the proposed merger towards the end of today's call. Turning now to the highlights of Glatzelter's Q1 performance. The Standish segment continues to gain momentum having generated $5,000,000 higher EBITDA versus the Q1 of 2023. This performance was driven primarily by ongoing pricecost GAAP improvements combined with approximately $2,400,000 of operational efficiencies throughout our Spamless sites. In addition, we continue to hold pricing benefits for our branded Sonterra products and realized further gains in our Soles France facility following the site's 2023 restructuring. Speaker 200:02:56Also in Span Lace, I'm pleased to report that our Tennessee facility is fully operational following the tornado that swept through the community in December. I commend the team for their hard work and dedication to restoring operations, while ensuring customer commitments were met during the recovery efforts. Transitioning to our Composite Fiber business. This segment continues to demonstrate a positive trajectory based on steps we have taken to maintain solid performance against the backdrop of a difficult European market. The Composite Fibers team delivered approximately $2,000,000 higher EBITDA compared to the Q1 2023. Speaker 200:03:40This performance was achieved primarily through pricecostgap improvements despite a nominal volume increase. Overall, Composite Fibers continues to be managed using a combination of carefully targeted pricing actions to effectively balance volumes, inventories and operational uptime, while mitigating volatile raw material and energy costs. Our most challenging segment in the Q1 was Airlaid as its European markets remained quite tenuous. The segment generated $9,000,000 lower EBITDA with approximately $8,000,000 of the decline attributed to the prolonged European market weakness, which resulted in lower shipments and production along with adverse pricing dynamics. In addition, Airlaid continues to experience growing competition from producers of related substrates. Speaker 200:04:39Despite the segment's dynamics, we are accelerating our efforts with new innovative products that have the potential to address customers' ongoing demand for sustainable plastic free alternatives and new creative applications using Glubfelda's AirLED materials. And I'm excited to share that we recently qualified a key customer for a brand new AirLED solution with production targeted for Europe. Shipping volume for this application when fully ramped up has a potential to generate meaningful volume annually. Also, we recently shipped our 1st commercial plant based caps to Blue Ocean closures for use by a Swedish manufacturer of nutritional supplements. These innovation initiatives are part of our overall Airlaid business strategy to reduce customer concentration in the segment. Speaker 200:05:32I will now turn the call over Speaker 100:05:34to Ramesh. Thank you, Thomas. Slide 3 of the investor presentation provides a summary of our Q1 results. Adjusted EBITDA was $23,800,000 approximately $1,000,000 lower compared to the same period last year, while EBITDA margins improved by 70 basis points. Airlaid Materials EBITDA was lower by $9,000,000 versus a very strong quarter last year. Speaker 100:05:58The drop in earnings was mainly driven by weaker European demand leading to lower shipments and consequently lower production to manage inventory levels. Composite Fibers EBITDA improved by $2,000,000 mainly from favorable price cost gap. Spun Lace EBITDA was higher by $5,000,000 compared to the same quarter last year, driven by favorable price cost gap, headcount reduction and operational improvements. Slide 5 shows a summary of Q1 results for the Airlaid Materials segment. Revenues were down 18% on a constant currency basis versus the same period last year, driven primarily by lower selling prices of approximately $20,000,000 and 4% lower shipments. Speaker 100:06:42Selling prices were lower mainly due to cost pass throughs reflecting declines in raw material and energy costs in Europe and selective price concessions to non floating customers to regain volume. On a net basis, the price cost gap was unfavorable to earnings by $2,400,000 Volume was lower year over year, primarily due to weaker shipments in categories like hygiene, home care and tabletop in Europe. The decline was largely driven by pricing actions taken in 2023 to protect margins and improve our price cost dynamic. However, ongoing market softness in Europe continued to put downward pressure further impacting volume. In addition, mix was unfavorable compared to last year when we had much stronger color tabletop shipments. Speaker 100:07:29These two factors combined unfavorably impacted results by approximately $1,800,000 Operations were unfavorable by $3,800,000 versus the prior year, primarily due to lower production of approximately 2,800 tons to manage inventory levels. Also, wage and other general inflation were higher compared to the same period last year. Foreign exchange and related currency hedging negatively impacted earnings by $1,000,000 primarily due to hedging gains from the prior year. Slide 6 shows a summary of first quarter results for the Composite Fibers segment. Total revenues were down 13% on a constant currency basis mainly due to lower selling prices of $11,000,000 from floating contracts implemented with larger food and beverage customers and targeted pricing actions to preserve volume. Speaker 100:08:21And although shipments overall were nominally higher by 1% mainly from the composite laminates and metallized categories, mix also contributed to lower revenue for the quarter compared to the same period last year. Overall, the price composite fibers remains favorable with prices declining by $11,100,000 versus lower prices for key raw materials, energy and freight which improved earnings by $13,600,000 versus the same quarter last year. Operations and other was unfavorable by $800,000 mainly due to lower production and foreign exchange was unfavorable by $200,000 Slide 7 shows a summary of first quarter results for the spunlace segment. Revenues were down 8% on a constant currency basis driven by lower selling prices of approximately $4,000,000 coming from raw material cost pass throughs primarily in the hygiene and wipes categories. Volume was lower by 2% driven by softer shipments in the wipes, healthcare and hygiene categories, but partially offset by stronger shipments in critical cleaning. Speaker 100:09:31Raw material energy and other inflation were favorable by $7,400,000 resulting in positive price cost gap. Operations and other items were $2,400,000 favorable through intense focus on manufacturing efficiencies, headcount reductions and lower operational spending. Slide 8 shows corporate costs and other financial items. Corporate costs were $700,000 lower versus the Q1 of last year, largely driven by lower professional services spending this year. However, strategic initiatives costs were higher this quarter driven by our proposed transaction with Berry's HHNF business. Speaker 100:10:13Slide 9 shows our cash flow summary. For the Q1 of 2024, our adjusted free cash flow was $9,000,000 lower versus the same period in 2023. Cash interest was elevated by approximately $5,000,000 related to our refinancing in Q1 2023 and the higher interest rate environment. Working capital cash usage was higher by $2,000,000 and cash taxes paid in 2024 were higher by $1,000,000 Slide 10 shows some balance sheet and liquidity metrics. Our leverage ratio as calculated under the bank credit agreement was 3.7 times as of March 31 and we had available liquidity of approximately $85,000,000 at the end of Q1. Speaker 100:10:54This concludes my prepared remarks. I will now turn the call back to Thomas. Speaker 200:10:59Thank you, Ramesh. The team and I remain excited by the prospects of Glatfelter merging with Berry Global's HHNF business, which is anticipated to close in the second half of twenty twenty four. Extensive efforts are underway to prepare for integrating the 2 businesses into a combined organization that will create a leading such as organizational structure, including the formation of a Board of Directors and the leadership team, while assessing talent throughout the organization. In addition, the work is focused on business processes and IT systems along with operational excellence that leverages the combined company's complementary product and manufacturing technologies. The integration is being guided by a carefully planned schedule, which is well underway, and I'm pleased by the tremendous efforts of our collective teams. Speaker 200:12:11As we approach closing of the proposed transaction, I look forward to sharing additional details regarding the integration and the efforts to ensure a meaningful performance of Glatfelter in the coming months. I will now open the call for questions. Ruth? Operator00:12:29Thank you. We'll go first to Josh Wuhl with Carlson Capital. Speaker 300:13:00Hey, Thomas, Ramesh, good morning. Thanks for taking my questions. Speaker 200:13:04Good morning. Good morning. Speaker 300:13:09Before I get to some questions on Q1, a few questions just on the Berry deal and the process from here. I know you noted HSR approval. I also saw a press report in late April talking about the financing preparations. When do you and Barry expect to place the new financing? And outside of financing, when do you expect to file a preliminary S-four? Speaker 300:13:30And is there a target for when you could announce a name for NewCo and some of the kind of the corporate branding? Speaker 200:13:39Yes. Thanks for the question, Josh. Again, we are still heavily working on all the different things we have to do and conditions we have to meet in order to close the transaction, which includes approval by Glatfeller shareholders securing several regulatory approvals outside of the U. S. So we are still very optimistic that we are closing the transaction in the second half of this year. Speaker 200:14:10And as far as your question about financing is concerned, that's still to be determined and it depends. First of all, we need to get all the approvals from the different authorities. Speaker 300:14:25Okay. Thanks for that. And then on Q1, normally I ask about volumes generally and then price cost generally. But given the performance in Airlaid, I thought I would just kind of focus on that segment as a whole. And it seems the biggest driver of the weakness was the economic downtime. Speaker 300:14:44And so I guess I'm trying to understand a little bit kind of how you guys were caught so off guard. I mean, I realize shipments were down year over year, but they improved sequentially. And I think the year over year decline was a little bit less than Q4. And maybe as it relates to that question, some of the CPG data I've seen has continued to improve sequentially, including some of what I'm hearing from Europe, like the guys that make label stock, which can usually be a leading indicator. So kind of like what was the issue with either planning or forecasting that or why you had to take kind of such a severe downtime to get your inventory back in line? Speaker 200:15:29Okay. Josh, I think let me just go through segment by segment because we have a different picture in the segment. Maybe let's start with Composite Fibers. In Composite Fibers, we saw a 10% volume growth from Q4 2023 to Q1 '24. And this growth was mainly driven by composite laminates and wallcover. Speaker 200:15:51The food and beverage side was slightly lower and that was mainly driven by tea, but we're expecting that this kind of sub segment tea will pick up in Q2. We are still seeing and again, in the other areas, I think the destocking has more or less vanished. It's gone. The only segment where we're seeing it a little bit is still in the food and beverage area, mainly coffee, where we are still kind of that's still lagging the trend of all the other areas. And then what's really positive in the CF area, composite laminates, we are running right now at a rate which would actually if we continue doing this would be 20% higher than in 2023. Speaker 200:16:40So that's kind of the app. On the SpanLase side, also SpanLase is actually improving. We have an overall 5% volume growth from Q4 2023 to Q1. And the growth in that area was mainly driven by hygiene and wipes because we have seen some large customers bought additional volume in Q1. And going into Q2 Q2 and seeing April a little bit, I mean, we also see some upside here on the volume and also on the mix side. Speaker 200:17:18Santara, and you might remember when we talked about this a year ago, we said we are qualifying and all that. But we are seeing right now, Santara shows a 10% increase, mainly in the critical cleaning with higher volumes from new business development but also with existing customers. So that's kind of the Span Lace area. And on Airlaid, we really have to look at the different regions. If I look at Airlaid, in North America, we have an overall volume increase of 13% in Q1 versus Q4. Speaker 200:17:57And we are seeing this really in all different categories. It's not just one category. We see it in hygiene and wipes, tabletop, home care. And also here, we think the destocking has been done. Unfortunately, Europe is a totally different story. Speaker 200:18:15In Europe, the markets are much more challenging and our volume dropped by 7% from Q4 to Q1. And the decline in that area in Europe was mainly driven by hygiene with probably minus 10%, minus 11%. And here, we had to take actions to really protect our margins. And our goal and you know that we have an overall strategy to really be less dependent on big customers and widen our product portfolio. But we have to offset this with new products. Speaker 200:18:51We have made some really good progress with new products and new customers. And we are kind of at the edge right now of that we are kind of really making supplying customers with the first shipments and all this. And we'll see actually better results than in Q in the second half of this year, but probably in 2025. But Europe is the big issue as far as AL8 is concerned. And what we're also seeing is competition from other substrates, competition from Asia, Turkey. Speaker 200:19:23Europe is the issue in Airlaid. Speaker 100:19:25And Josh, we did kind of flag Europe as being an issue, right, when we kind of came out of the Q4. But clearly, things have gotten worse there for us from a geographic standpoint and that's why the dramatic decline in kind of year over year earnings. Speaker 300:19:48Now the context is helpful, including around the other segments. But just to kind of home in a little bit more on just kind of the inventory and the downtime. How unusual I don't have a table of your economic downtime in Airlaids, but like give us some context. How unusual is that level of downtime? I'm just trying to understand how much of that is going to be persistent. Speaker 300:20:11Maybe to some extent, we've been spoiled by the reliability in Airlaids for many years, but it just is surprising because it's not like you went from a strong period of demand and volume growth in Europe. So just kind of wondering what could have really happened this quarter that was so much different than your expectation or maybe this happens from time to time? Speaker 100:20:36Yes, I would say clearly as we were seeing the demand kind of soften for us in Europe, we had to dial down our production as well. So the absorption impact of that was quite meaningful. The capacity utilization where we've typically seen this being in the mid to high 80s was kind of in the mid to high 70s. And having a pretty capital intensive business across all three segments, the absorption can play a very, very meaningful role. Also keep in mind that we made some conscious volume decisions with certain customers in terms of going into 2024, which we had also talked about previously that if the business is not if the book of business is not generating enough money then we want to be able to reallocate that capacity to the B and C customers. Speaker 100:21:31And that takes time, right? We want to make sure that we're broadening the customer base. We want to make Speaker 300:21:37sure, yes? Yes, maybe the last question then around this is just so I was saying that the last question I have around kind of the issue in Airlaids is so broadening out the customer base and finding I guess new customers to replace some of that. When do you think that could get the operating rate and absorption back to a more normal level? Is that like a net Q2 or is it more second half? Just some context there. Speaker 200:22:14Okay, Josh. Now what we're seeing right now is that we are seeing first shipments in Q2. But these are again, we are ramping up its new application and all this. We see already coming some volume in the second half of this year and then the full impact you'll see in 2025 and 2026 where we can replace it. And again, as I mentioned in my remarks earlier, it's really exciting. Speaker 200:22:44We have nice absolutely new applications where we can position Airlaid. And also in a segment which is also providing enough profitability because that's the biggest issue because we get faced with other substrates, which have a totally different price point, and we cannot we just can't do that. We don't see that in the U. S. Yet, but we're seeing it in Europe, mainly coming from Turkey and Asia. Speaker 200:23:12And we already initiated the strategy back 15, 16 months ago, and it's coming to fruition. But again, coming back to your question, you'll see something in a little bit in the second half of this year and then in 2025, 2026. Speaker 300:23:30Okay. And let's talk about the price of pulp. And here you can speak to Airlaids as well as composite fibers. But just kind of looking at pulp prices in North America and Europe, they entered 2023 at a very elevated level. They dipped pretty hard through the summer and now they've been rising again, albeit they're below the last peak. Speaker 300:23:53When should we see the impact of rising pulp prices in your margins? And will the experience be any different this year, positive or negative, given either changes to contracts or the fact that you're not also being squeezed on energy or maybe negatively because of what you said competition with other substrates and that competitiveness getting worse as the price of pulp goes up? Speaker 200:24:20Okay. Okay. I mean, we are seeing the pulp price increases in Q2. So we are holding normally a 2, 2.5 months inventory. Then if I look at our floating customers, we will pass that on with, I would say, around about 3 months time lag. Speaker 200:24:39So we'll get it, but there's a time lag. And contracts are a little bit different, but it's on average, it's roundabout 3 months. And also we have, as you know, implemented some of these floating mechanisms in our food and beverage segment and with other customers. So that will help. There's always a time lag, but it will help and we'll pass that on. Speaker 200:25:06If I look at the non floating side, we already were able to increase our prices roughly by 2%, 3% in North America. And this was generally accepted. Again, here Europe is much more challenging with a very competitive market conditions, but we are working on that as we speak. Speaker 300:25:33Okay, helpful. Just one last question and then I can get back in the queue. Around cash flow, just any context on the performance in Q1 versus your expectations and kind of normal seasonality? And are there any guideposts around seasonality and also the timing of some of the restructuring spend over the balance of 2024 that can kind of help us model that out? Speaker 100:26:00Sure. So Josh, I would say in terms of seasonality in the cash flow, typically the Q1 is a heavy cash outflow for us and we've seen that over the last several years. I would say from a working capital standpoint, if inflation stays moderated, we can continue to have at least a breakeven to slightly positive working capital profile. And that's what we've been expecting. But if inflation starts to creep up here whether it's an input cost, whether it's an energy that could have a similar impact like we saw last year as well where working capital was quite strained. Speaker 100:26:43But our going and expectation is having the pass throughs structured appropriately. We should be able to manage the working capital situation this year as well. So overall, as we think about the rest of the year, the second half of the year is typically more positive cash flow from a seasonality perspective. But some of these one time restructuring costs, the costs that we're incurring related to the kind of pre merger integration and the HHNF transaction, all of that is kind of fairly spread out throughout the year all the way until closing. So we're going to be continuing to manage that appropriately. Speaker 100:27:26But as of right now, our cash flow picture going into this year versus where we are right now is largely unchanged. Speaker 300:27:38Okay, perfect. I'll get back in the queue. Thanks guys. Speaker 200:27:42Thanks, Josh. Speaker 100:27:53Ruth, is there anyone else in the queue at the moment? Operator00:27:57There are no others in the queue at this time. Speaker 100:28:00Then why don't we give Josh an opportunity to ask any further questions if he does have. Operator00:28:07Yes, sir. Mr. Wall, if you do have a question, please press star 1. Speaker 300:28:16Yes, that's it for me guys. I appreciate it. And thanks for taking the question. Speaker 100:28:23Thanks, Josh. Great. Thank you, Josh. Operator00:28:30There are no other questions at this time.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallGlatfelter Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Glatfelter Earnings HeadlinesMagnera Corp (MAGN) Q1 2025 Earnings Call Highlights: Revenue Growth and Strategic Synergies ...February 7, 2025 | finance.yahoo.comEarnings call transcript: Magnera Q1 2024 shows steady growthFebruary 6, 2025 | msn.comNow I look stupid. Real stupid... I thought what happened 25 years ago was a once- in-a-lifetime event… but how wrong I was. Because here we are, a quarter of a century later, almost to the exact day, and it’s happening again. April 28, 2025 | Porter & Company (Ad)Magnera Corporation: Magnera Reports First Fiscal Quarter Results - Provides Outlook for Fiscal 2025February 6, 2025 | finanznachrichten.deBerry Global, Glatfelter complete deal that creates MagneraNovember 9, 2024 | markets.businessinsider.comOne new option listing and two option delistings on November 5thNovember 7, 2024 | markets.businessinsider.comSee More Glatfelter Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Glatfelter? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Glatfelter and other key companies, straight to your email. Email Address About GlatfelterGlatfelter (NYSE:GLT), together with its subsidiaries, engages in the manufacture and sale of engineered materials worldwide. It operates through three segments: Composite Fibers, Airlaid Materials, and Spunlace. The Composite Fibers segment offers food and beverage filtration materials for single-serve coffee and tea products; wallcover base materials for wallpaper manufacturers; metallized products that are used in labels, packaging liners, gift wraps, and other consumer product applications; composite laminates consisting of decorative laminates for use in furniture, household and commercial flooring, and other applications; and specialty engineered products, which are used in electrical energy storage, home, hygiene, and other engineered fiber-based applications. The Airlaid Materials segment supplies absorbent cellulose-based airlaid nonwoven materials that are used to manufacture consumer products, such as feminine hygiene and other hygiene products, specialty wipes, tabletop, adult incontinence, home care, food pads, and other consumer and industrial products. The Spunlace segment manufactures spunlace nonwovens for cleaning, high-performance materials, personal care, hygiene, and medical applications. The company was formerly known as P. H. Glatfelter Company. Glatfelter Corporation was founded in 1864 and is headquartered in Charlotte, North Carolina.View Glatfelter ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of Earnings Upcoming Earnings AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Booking (4/29/2025)América Móvil (4/29/2025)Pfizer (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 4 speakers on the call. Operator00:00:00Good day, and welcome to the Glatfelter's Q1 2024 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ramesh Shethigarh. Please go ahead. Speaker 100:00:13Thank you, Ruth. Good morning, and welcome to Glatfelter's 2024 Q1 earnings conference call. This is Ramesh Shethigarh, Senior Vice President, Chief Financial Officer and Treasurer. On the call to present our Q1 results is Thomas Fahneman, President and Chief Executive Officer of Glatfelter and myself. Before we begin our presentation, I have a few standard reminders. Speaker 100:00:38During our call this morning, we will use the term adjusted earnings as well as other non GAAP financial measures. A reconciliation of these financial measures to our GAAP based results is included in today's earnings release and in the investor slides. We will also make forward looking statements today that are subject to risks and uncertainties. Our 2023 Form 10 ks, which has been filed with the SEC and today's earnings release, disclose factors that could cause our actual results to differ materially from these forward looking statements. These statements speak only as of today, and we undertake no obligation to update them. Speaker 100:01:15I will now turn the call over to Thomas. Speaker 200:01:18Thank you, Ramesh. Hello, everyone, and welcome to Glatfelter's Q1 2024 Investor Call. I'm pleased to report that the business produced solid but mixed results at the segment level as we continue to face industry wide market headwinds and challenges from the volatile global economic environment with Europe representing our most difficult market currently. We achieved adjusted EBITDA of $23,800,000 for the quarter or approximately $1,000,000 lower than the same quarter last year. Also, in relation to the proposed merger of Klapfelter with Berry Global's HHNF business, we reached a significant regulatory milestone with the expiration of the HSR waiting period. Speaker 200:02:07I will speak more to the work that is underway related to the proposed merger towards the end of today's call. Turning now to the highlights of Glatzelter's Q1 performance. The Standish segment continues to gain momentum having generated $5,000,000 higher EBITDA versus the Q1 of 2023. This performance was driven primarily by ongoing pricecost GAAP improvements combined with approximately $2,400,000 of operational efficiencies throughout our Spamless sites. In addition, we continue to hold pricing benefits for our branded Sonterra products and realized further gains in our Soles France facility following the site's 2023 restructuring. Speaker 200:02:56Also in Span Lace, I'm pleased to report that our Tennessee facility is fully operational following the tornado that swept through the community in December. I commend the team for their hard work and dedication to restoring operations, while ensuring customer commitments were met during the recovery efforts. Transitioning to our Composite Fiber business. This segment continues to demonstrate a positive trajectory based on steps we have taken to maintain solid performance against the backdrop of a difficult European market. The Composite Fibers team delivered approximately $2,000,000 higher EBITDA compared to the Q1 2023. Speaker 200:03:40This performance was achieved primarily through pricecostgap improvements despite a nominal volume increase. Overall, Composite Fibers continues to be managed using a combination of carefully targeted pricing actions to effectively balance volumes, inventories and operational uptime, while mitigating volatile raw material and energy costs. Our most challenging segment in the Q1 was Airlaid as its European markets remained quite tenuous. The segment generated $9,000,000 lower EBITDA with approximately $8,000,000 of the decline attributed to the prolonged European market weakness, which resulted in lower shipments and production along with adverse pricing dynamics. In addition, Airlaid continues to experience growing competition from producers of related substrates. Speaker 200:04:39Despite the segment's dynamics, we are accelerating our efforts with new innovative products that have the potential to address customers' ongoing demand for sustainable plastic free alternatives and new creative applications using Glubfelda's AirLED materials. And I'm excited to share that we recently qualified a key customer for a brand new AirLED solution with production targeted for Europe. Shipping volume for this application when fully ramped up has a potential to generate meaningful volume annually. Also, we recently shipped our 1st commercial plant based caps to Blue Ocean closures for use by a Swedish manufacturer of nutritional supplements. These innovation initiatives are part of our overall Airlaid business strategy to reduce customer concentration in the segment. Speaker 200:05:32I will now turn the call over Speaker 100:05:34to Ramesh. Thank you, Thomas. Slide 3 of the investor presentation provides a summary of our Q1 results. Adjusted EBITDA was $23,800,000 approximately $1,000,000 lower compared to the same period last year, while EBITDA margins improved by 70 basis points. Airlaid Materials EBITDA was lower by $9,000,000 versus a very strong quarter last year. Speaker 100:05:58The drop in earnings was mainly driven by weaker European demand leading to lower shipments and consequently lower production to manage inventory levels. Composite Fibers EBITDA improved by $2,000,000 mainly from favorable price cost gap. Spun Lace EBITDA was higher by $5,000,000 compared to the same quarter last year, driven by favorable price cost gap, headcount reduction and operational improvements. Slide 5 shows a summary of Q1 results for the Airlaid Materials segment. Revenues were down 18% on a constant currency basis versus the same period last year, driven primarily by lower selling prices of approximately $20,000,000 and 4% lower shipments. Speaker 100:06:42Selling prices were lower mainly due to cost pass throughs reflecting declines in raw material and energy costs in Europe and selective price concessions to non floating customers to regain volume. On a net basis, the price cost gap was unfavorable to earnings by $2,400,000 Volume was lower year over year, primarily due to weaker shipments in categories like hygiene, home care and tabletop in Europe. The decline was largely driven by pricing actions taken in 2023 to protect margins and improve our price cost dynamic. However, ongoing market softness in Europe continued to put downward pressure further impacting volume. In addition, mix was unfavorable compared to last year when we had much stronger color tabletop shipments. Speaker 100:07:29These two factors combined unfavorably impacted results by approximately $1,800,000 Operations were unfavorable by $3,800,000 versus the prior year, primarily due to lower production of approximately 2,800 tons to manage inventory levels. Also, wage and other general inflation were higher compared to the same period last year. Foreign exchange and related currency hedging negatively impacted earnings by $1,000,000 primarily due to hedging gains from the prior year. Slide 6 shows a summary of first quarter results for the Composite Fibers segment. Total revenues were down 13% on a constant currency basis mainly due to lower selling prices of $11,000,000 from floating contracts implemented with larger food and beverage customers and targeted pricing actions to preserve volume. Speaker 100:08:21And although shipments overall were nominally higher by 1% mainly from the composite laminates and metallized categories, mix also contributed to lower revenue for the quarter compared to the same period last year. Overall, the price composite fibers remains favorable with prices declining by $11,100,000 versus lower prices for key raw materials, energy and freight which improved earnings by $13,600,000 versus the same quarter last year. Operations and other was unfavorable by $800,000 mainly due to lower production and foreign exchange was unfavorable by $200,000 Slide 7 shows a summary of first quarter results for the spunlace segment. Revenues were down 8% on a constant currency basis driven by lower selling prices of approximately $4,000,000 coming from raw material cost pass throughs primarily in the hygiene and wipes categories. Volume was lower by 2% driven by softer shipments in the wipes, healthcare and hygiene categories, but partially offset by stronger shipments in critical cleaning. Speaker 100:09:31Raw material energy and other inflation were favorable by $7,400,000 resulting in positive price cost gap. Operations and other items were $2,400,000 favorable through intense focus on manufacturing efficiencies, headcount reductions and lower operational spending. Slide 8 shows corporate costs and other financial items. Corporate costs were $700,000 lower versus the Q1 of last year, largely driven by lower professional services spending this year. However, strategic initiatives costs were higher this quarter driven by our proposed transaction with Berry's HHNF business. Speaker 100:10:13Slide 9 shows our cash flow summary. For the Q1 of 2024, our adjusted free cash flow was $9,000,000 lower versus the same period in 2023. Cash interest was elevated by approximately $5,000,000 related to our refinancing in Q1 2023 and the higher interest rate environment. Working capital cash usage was higher by $2,000,000 and cash taxes paid in 2024 were higher by $1,000,000 Slide 10 shows some balance sheet and liquidity metrics. Our leverage ratio as calculated under the bank credit agreement was 3.7 times as of March 31 and we had available liquidity of approximately $85,000,000 at the end of Q1. Speaker 100:10:54This concludes my prepared remarks. I will now turn the call back to Thomas. Speaker 200:10:59Thank you, Ramesh. The team and I remain excited by the prospects of Glatfelter merging with Berry Global's HHNF business, which is anticipated to close in the second half of twenty twenty four. Extensive efforts are underway to prepare for integrating the 2 businesses into a combined organization that will create a leading such as organizational structure, including the formation of a Board of Directors and the leadership team, while assessing talent throughout the organization. In addition, the work is focused on business processes and IT systems along with operational excellence that leverages the combined company's complementary product and manufacturing technologies. The integration is being guided by a carefully planned schedule, which is well underway, and I'm pleased by the tremendous efforts of our collective teams. Speaker 200:12:11As we approach closing of the proposed transaction, I look forward to sharing additional details regarding the integration and the efforts to ensure a meaningful performance of Glatfelter in the coming months. I will now open the call for questions. Ruth? Operator00:12:29Thank you. We'll go first to Josh Wuhl with Carlson Capital. Speaker 300:13:00Hey, Thomas, Ramesh, good morning. Thanks for taking my questions. Speaker 200:13:04Good morning. Good morning. Speaker 300:13:09Before I get to some questions on Q1, a few questions just on the Berry deal and the process from here. I know you noted HSR approval. I also saw a press report in late April talking about the financing preparations. When do you and Barry expect to place the new financing? And outside of financing, when do you expect to file a preliminary S-four? Speaker 300:13:30And is there a target for when you could announce a name for NewCo and some of the kind of the corporate branding? Speaker 200:13:39Yes. Thanks for the question, Josh. Again, we are still heavily working on all the different things we have to do and conditions we have to meet in order to close the transaction, which includes approval by Glatfeller shareholders securing several regulatory approvals outside of the U. S. So we are still very optimistic that we are closing the transaction in the second half of this year. Speaker 200:14:10And as far as your question about financing is concerned, that's still to be determined and it depends. First of all, we need to get all the approvals from the different authorities. Speaker 300:14:25Okay. Thanks for that. And then on Q1, normally I ask about volumes generally and then price cost generally. But given the performance in Airlaid, I thought I would just kind of focus on that segment as a whole. And it seems the biggest driver of the weakness was the economic downtime. Speaker 300:14:44And so I guess I'm trying to understand a little bit kind of how you guys were caught so off guard. I mean, I realize shipments were down year over year, but they improved sequentially. And I think the year over year decline was a little bit less than Q4. And maybe as it relates to that question, some of the CPG data I've seen has continued to improve sequentially, including some of what I'm hearing from Europe, like the guys that make label stock, which can usually be a leading indicator. So kind of like what was the issue with either planning or forecasting that or why you had to take kind of such a severe downtime to get your inventory back in line? Speaker 200:15:29Okay. Josh, I think let me just go through segment by segment because we have a different picture in the segment. Maybe let's start with Composite Fibers. In Composite Fibers, we saw a 10% volume growth from Q4 2023 to Q1 '24. And this growth was mainly driven by composite laminates and wallcover. Speaker 200:15:51The food and beverage side was slightly lower and that was mainly driven by tea, but we're expecting that this kind of sub segment tea will pick up in Q2. We are still seeing and again, in the other areas, I think the destocking has more or less vanished. It's gone. The only segment where we're seeing it a little bit is still in the food and beverage area, mainly coffee, where we are still kind of that's still lagging the trend of all the other areas. And then what's really positive in the CF area, composite laminates, we are running right now at a rate which would actually if we continue doing this would be 20% higher than in 2023. Speaker 200:16:40So that's kind of the app. On the SpanLase side, also SpanLase is actually improving. We have an overall 5% volume growth from Q4 2023 to Q1. And the growth in that area was mainly driven by hygiene and wipes because we have seen some large customers bought additional volume in Q1. And going into Q2 Q2 and seeing April a little bit, I mean, we also see some upside here on the volume and also on the mix side. Speaker 200:17:18Santara, and you might remember when we talked about this a year ago, we said we are qualifying and all that. But we are seeing right now, Santara shows a 10% increase, mainly in the critical cleaning with higher volumes from new business development but also with existing customers. So that's kind of the Span Lace area. And on Airlaid, we really have to look at the different regions. If I look at Airlaid, in North America, we have an overall volume increase of 13% in Q1 versus Q4. Speaker 200:17:57And we are seeing this really in all different categories. It's not just one category. We see it in hygiene and wipes, tabletop, home care. And also here, we think the destocking has been done. Unfortunately, Europe is a totally different story. Speaker 200:18:15In Europe, the markets are much more challenging and our volume dropped by 7% from Q4 to Q1. And the decline in that area in Europe was mainly driven by hygiene with probably minus 10%, minus 11%. And here, we had to take actions to really protect our margins. And our goal and you know that we have an overall strategy to really be less dependent on big customers and widen our product portfolio. But we have to offset this with new products. Speaker 200:18:51We have made some really good progress with new products and new customers. And we are kind of at the edge right now of that we are kind of really making supplying customers with the first shipments and all this. And we'll see actually better results than in Q in the second half of this year, but probably in 2025. But Europe is the big issue as far as AL8 is concerned. And what we're also seeing is competition from other substrates, competition from Asia, Turkey. Speaker 200:19:23Europe is the issue in Airlaid. Speaker 100:19:25And Josh, we did kind of flag Europe as being an issue, right, when we kind of came out of the Q4. But clearly, things have gotten worse there for us from a geographic standpoint and that's why the dramatic decline in kind of year over year earnings. Speaker 300:19:48Now the context is helpful, including around the other segments. But just to kind of home in a little bit more on just kind of the inventory and the downtime. How unusual I don't have a table of your economic downtime in Airlaids, but like give us some context. How unusual is that level of downtime? I'm just trying to understand how much of that is going to be persistent. Speaker 300:20:11Maybe to some extent, we've been spoiled by the reliability in Airlaids for many years, but it just is surprising because it's not like you went from a strong period of demand and volume growth in Europe. So just kind of wondering what could have really happened this quarter that was so much different than your expectation or maybe this happens from time to time? Speaker 100:20:36Yes, I would say clearly as we were seeing the demand kind of soften for us in Europe, we had to dial down our production as well. So the absorption impact of that was quite meaningful. The capacity utilization where we've typically seen this being in the mid to high 80s was kind of in the mid to high 70s. And having a pretty capital intensive business across all three segments, the absorption can play a very, very meaningful role. Also keep in mind that we made some conscious volume decisions with certain customers in terms of going into 2024, which we had also talked about previously that if the business is not if the book of business is not generating enough money then we want to be able to reallocate that capacity to the B and C customers. Speaker 100:21:31And that takes time, right? We want to make sure that we're broadening the customer base. We want to make Speaker 300:21:37sure, yes? Yes, maybe the last question then around this is just so I was saying that the last question I have around kind of the issue in Airlaids is so broadening out the customer base and finding I guess new customers to replace some of that. When do you think that could get the operating rate and absorption back to a more normal level? Is that like a net Q2 or is it more second half? Just some context there. Speaker 200:22:14Okay, Josh. Now what we're seeing right now is that we are seeing first shipments in Q2. But these are again, we are ramping up its new application and all this. We see already coming some volume in the second half of this year and then the full impact you'll see in 2025 and 2026 where we can replace it. And again, as I mentioned in my remarks earlier, it's really exciting. Speaker 200:22:44We have nice absolutely new applications where we can position Airlaid. And also in a segment which is also providing enough profitability because that's the biggest issue because we get faced with other substrates, which have a totally different price point, and we cannot we just can't do that. We don't see that in the U. S. Yet, but we're seeing it in Europe, mainly coming from Turkey and Asia. Speaker 200:23:12And we already initiated the strategy back 15, 16 months ago, and it's coming to fruition. But again, coming back to your question, you'll see something in a little bit in the second half of this year and then in 2025, 2026. Speaker 300:23:30Okay. And let's talk about the price of pulp. And here you can speak to Airlaids as well as composite fibers. But just kind of looking at pulp prices in North America and Europe, they entered 2023 at a very elevated level. They dipped pretty hard through the summer and now they've been rising again, albeit they're below the last peak. Speaker 300:23:53When should we see the impact of rising pulp prices in your margins? And will the experience be any different this year, positive or negative, given either changes to contracts or the fact that you're not also being squeezed on energy or maybe negatively because of what you said competition with other substrates and that competitiveness getting worse as the price of pulp goes up? Speaker 200:24:20Okay. Okay. I mean, we are seeing the pulp price increases in Q2. So we are holding normally a 2, 2.5 months inventory. Then if I look at our floating customers, we will pass that on with, I would say, around about 3 months time lag. Speaker 200:24:39So we'll get it, but there's a time lag. And contracts are a little bit different, but it's on average, it's roundabout 3 months. And also we have, as you know, implemented some of these floating mechanisms in our food and beverage segment and with other customers. So that will help. There's always a time lag, but it will help and we'll pass that on. Speaker 200:25:06If I look at the non floating side, we already were able to increase our prices roughly by 2%, 3% in North America. And this was generally accepted. Again, here Europe is much more challenging with a very competitive market conditions, but we are working on that as we speak. Speaker 300:25:33Okay, helpful. Just one last question and then I can get back in the queue. Around cash flow, just any context on the performance in Q1 versus your expectations and kind of normal seasonality? And are there any guideposts around seasonality and also the timing of some of the restructuring spend over the balance of 2024 that can kind of help us model that out? Speaker 100:26:00Sure. So Josh, I would say in terms of seasonality in the cash flow, typically the Q1 is a heavy cash outflow for us and we've seen that over the last several years. I would say from a working capital standpoint, if inflation stays moderated, we can continue to have at least a breakeven to slightly positive working capital profile. And that's what we've been expecting. But if inflation starts to creep up here whether it's an input cost, whether it's an energy that could have a similar impact like we saw last year as well where working capital was quite strained. Speaker 100:26:43But our going and expectation is having the pass throughs structured appropriately. We should be able to manage the working capital situation this year as well. So overall, as we think about the rest of the year, the second half of the year is typically more positive cash flow from a seasonality perspective. But some of these one time restructuring costs, the costs that we're incurring related to the kind of pre merger integration and the HHNF transaction, all of that is kind of fairly spread out throughout the year all the way until closing. So we're going to be continuing to manage that appropriately. Speaker 100:27:26But as of right now, our cash flow picture going into this year versus where we are right now is largely unchanged. Speaker 300:27:38Okay, perfect. I'll get back in the queue. Thanks guys. Speaker 200:27:42Thanks, Josh. Speaker 100:27:53Ruth, is there anyone else in the queue at the moment? Operator00:27:57There are no others in the queue at this time. Speaker 100:28:00Then why don't we give Josh an opportunity to ask any further questions if he does have. Operator00:28:07Yes, sir. Mr. Wall, if you do have a question, please press star 1. Speaker 300:28:16Yes, that's it for me guys. I appreciate it. And thanks for taking the question. Speaker 100:28:23Thanks, Josh. Great. Thank you, Josh. Operator00:28:30There are no other questions at this time.Read morePowered by