NYSE:GLT Glatfelter Q2 2024 Earnings Report Earnings History Glatfelter EPS ResultsActual EPS-$3.25Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AGlatfelter Revenue ResultsActual Revenue$329.44 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AGlatfelter Announcement DetailsQuarterQ2 2024Date8/8/2024TimeN/AConference Call DateThursday, August 8, 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 Q2 2024 Earnings Call TranscriptProvided by QuartrAugust 8, 2024 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Good day, and welcome to the Glatfelter Second Quarter 2024 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Ramish Suttigarh. Operator00:00:11Please go ahead, sir. Speaker 100:00:13Thank you, Anna. Good morning, and welcome to Glatfelter's 2024 Second Quarter Earnings Conference Call. This is Ramesh Shedeker, Senior Vice President, Chief Financial Officer and Treasurer. On the call to present our Q2 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, both of which are available on our website. 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 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 100:01:18I will now turn the call over to Thomas. Speaker 200:01:21Thanks, Ramesh. Hello, everyone, and welcome to Glapsalder's Q2 2024 Investor Call. I'm pleased with the continued progress of the proposed merger with Berry's HH and App business during the Q2 as we planned for the closing of the various legal and regulatory activities in preparation for when the business will operate under the name of McNaira with Kurt Begley as CEO, currently President of Berry's HH and S division. For today's earnings call, I will focus on Glatfelter's steadfast 2nd quarter performance as we position the business to successfully launch Mignera. The highlights of our performance included several meaningful outcomes. Speaker 200:02:13We achieved $25,600,000 of adjusted EBITDA for an $8,300,000 improvement compared to the same quarter last year. The Composite Fibers and Spunlays businesses achieved higher EBITDA of approximately $5,000,000 $3,000,000 respectively, compared to the same quarter last year. The results were driven by higher shipments, increased production and rigorous management of price cost gaps. The Airlaid Materials segment continued to experience softer demand and therefore we adjusted production downward resulting in a €2,000,000 decline in EBITDA compared to the same period in 2023. When combined, the segment's performance contributed to improved adjusted free cash flow, which was approximately $43,000,000 higher compared to the Q2 of last year. Speaker 200:03:08While our markets remain mixed, especially in Europe, I'm pleased with the ongoing contributions and disciplined way of managing our business that resulted from our multi year turnaround efforts. The improvements we are seeing in the performance of both Composite Fibers and SpanLase are trending in the right direction. I'm particularly pleased that SpanLase has delivered $20,000,000 of adjusted EBITDA on a trailing 12 month basis. Also, we are actively working to expand our Airlaid product portfolio through new product innovation to address continued demand challenges, which I will speak to towards the end of today's call. For these reasons, I remain confident in our ability to contribute for the long term success of Makenera. Speaker 200:03:57I will now turn the call over to Ramesh. Speaker 100:04:00Thank you, Thomas. Following up on the financial highlights Thomas just provided, Slide 5 shows a summary of 2nd quarter results for the Air Lead Materials segment. Revenues were down 14% on a constant currency basis versus the same period last year driven primarily by lower selling prices of approximately $13,000,000 4% lower shipments. Selling prices were lower mainly due to cost pass throughs reflecting declines in raw material and energy costs in Europe selective price concessions to non floating customers to regain volume. On a net basis, the price cost gap was favorable to earnings by $1,200,000 Volume was lower year over year primarily due to weaker shipments in hygiene and wipes categories. Speaker 100:04:47The decline in hygiene was largely driven by pricing actions taken in 2023 to protect margins and improve our price cost dynamic. Conversely, the decline in wipes category was related to timing of customer orders and we expect higher wipes volume in the Q3. Operations were unfavorable by $2,200,000 versus the prior year primarily due to lower production of approximately 3,800 tons to manage inventory levels. Foreign exchange and related currency hedging negatively impacted earnings by $500,000 mainly due to the weaker euro. And EBITDA margins for the segment improved by 20 basis points versus the prior year quarter. Speaker 100:05:28Slide 6 shows a summary of Q2 results for the Composite Fiber segment. Total revenues were down 6% on a constant currency basis mainly due to lower selling prices of $7,500,000 from floating contracts implemented with larger food and beverage customers and targeted pricing actions to preserve volume. Shipments were higher in all categories except wallcover when compared to the same period last year. Overall, the price cost gap for composite fibers remained favorable with prices declining by $7,500,000 versus lower prices for key raw materials, energy and freight, which improved earnings by $8,400,000 versus the same quarter last year. Operations and other was favorable by $1,700,000 mainly due to higher inclined wire production. Speaker 100:06:18Foreign exchange was slightly favorable by $100,000 and EBITDA margins for the segment improved by 4.50 basis points versus the prior year quarter. Slide 7 shows a summary of 2nd quarter results for the Span Lace segment. Revenues were up 4% on a constant currency basis driven by higher shipments of 5% mainly in the critical cleaning and hygiene categories. This was partially offset by lower selling prices of approximately $2,000,000 coming from raw material cost pass through provisions, primarily in the hygiene and wipes category. Raw material, energy and other inflation were favorable by $4,100,000 resulting in positive price cost gap. Speaker 100:07:02Operations were $1,100,000 favorable mainly driven by higher production. Foreign exchange negatively impacted earnings by $1,000 coming from the weaker euro. And EBITDA margins for the segment improved by 4 10 basis points versus the prior year quarter. Slide 8 shows corporate costs and other financial items. Corporate costs were approximately $1,900,000 lower versus the same versus the Q2 of last year. Speaker 100:07:31This was primarily driven by a loss recovery related to a fiber vendor for faulty material supply to Glatfelter in 2022. Strategic initiatives costs were again higher this quarter driven by our proposed transaction with Berry's HHNF business, which we are expecting to close in the second half of this year. Slide 9 shows our cash flow summary. For the Q2 of 2024, our adjusted free cash flow was approximately $43,000,000 higher versus the same period in 2023. This was largely driven by higher earnings of approximately $8,000,000 and lower working capital usage of approximately $40,000,000 primarily from accounts payable. Speaker 100:08:11Capital expenditures were lower by $2,000,000 while other operating items lowered cash flow by approximately 7,000,000 dollars largely driven by fewer vendor rebates this quarter compared to the same quarter last year. Slide 10 shows some balance sheet and liquidity metrics. Our leverage ratio as calculated under the bank credit agreement was 3.5 times as of June 30 and we had available liquidity of approximately $112,000,000 at the end of Q2. This concludes my prepared remarks. I will now turn the call back to Thomas. Speaker 200:08:43Thank you, Ramesh. As demonstrated by our first half results, I'm pleased with the underlying performance of our business despite a challenging market backdrop, especially in Europe. Now turning to our efforts in innovation, we have made very good progress on a few key initiatives during the Q2. One initiative in particular targets a filtered media specialty material to be manufactured within our Airlaid segment in Europe, which should generate a favorable mix relative to our hygiene portfolio. We have entered into a supply agreement with a new customer for this product and we will continue to enhance the product to its full potential in the months ahead. Speaker 200:09:25Equally exciting for our customer and the team, this product is biodegradable and meets the standards established by the EU Single Use Plastics Directive. In closing today's call, I want to take this opportunity to again thank our Glatfelter employees for their commitment and dedication to the company. As we are now well underway with the Q3, I commend the entire team for their hard work these past several years and especially this year, having to successfully run the day to day business, while also preparing for the transition to Makenera. I'm proud to lead this team and I feel very good about the capabilities of our people and look forward to their continued success for many years to come. I will now open the call for questions. Operator00:10:41And we'll now take our first question from Mike Jennings with TPG. Angelo Gordon. Speaker 300:10:49Good morning, guys. Congrats on the quarter. Nice progress out of Q1. I guess maybe starting with some questions on the Airlaid segment. There's typically been a stronger performance in the back half of the year. Speaker 300:11:05What are you seeing out of seasonality in the business in the first instance? And then I guess kind of secondarily, we've been talking about these volume related issues now for a couple of quarters, primarily in Europe. Any sort of thoughts or visibility on those matters, whether it's either the market itself or the initiatives that you guys have undertaken to find other sales channels? Speaker 200:11:27Okay, Mike. Maybe taking the second part of your question first. If we look at the volumes, yes, we have seen some weakness in the market. What we're seeing right now is that North America is clearly healthier than Europe. We are still faced with some issues in Europe, but we're also seeing a little bit of an improvement in Europe. Speaker 200:11:49But definitely, North America is much healthier than Europe. What we have done and we mentioned this before, we are really looking in diversifying our product portfolio. And I'm really very happy that we were able to get a new product into the market, filter product, we signed a contract. So that really helps us. And from if you look at seasonality, I would also expect that the AirLED volume, despite all the market challenges, will be stronger in the second half of this year than in the first half. Speaker 200:12:23And we're already kind of seeing some signs in July. Speaker 300:12:29Excellent. And I guess as Thomas, as we think about how to contextualize that maybe in terms of utilization rates, I know there's some commentary around that last quarter. Any color you can provide on Airlaid in terms of sort of where we are from a utilization perspective in North America and sort of where we are in Europe? Speaker 100:12:48Yes. In terms of I can tell you. Okay. Go ahead. So in terms of utilization, Mike, on the Airlaid side, we were roughly around 80% utilization in the first half of twenty twenty four. Speaker 100:13:01For the second half, maybe slightly higher than that going into the second half of this year. We're seeing some demand pickup as Thomas was mentioning. Historically, when we compare that to the last couple of years, we've been probably in the 85% to 90% range. So you can clearly see that with the softness in Airlaid, we've also had to adjust our production and utilization. So that's naturally come down. Speaker 100:13:26In Composite Fibers, utilization for the first half was around 90%, especially in the inclined wire assets. Second half, we're expecting that to be maybe around 80%, 85%. And historically also we've been in the 80% to 85%. And then in spunlace, first half was around 70% utilization and we expect roughly the same going into the second half. And historically, we've been kind of between 60% 70%, if that helps. Speaker 300:14:02Excellent. No, that's super helpful. Speaker 200:14:04Yes. But coming to the maybe one comment to the Span list, I think we always mentioned that there's a lot of upside as far as capacity is concerned. And you see now that we are kind of filling this capacity, positioning in the market. And again, also, I mean, we delivered 20 little north of $20,000,000 in EBITDA and spend less if I look at the last 12 months. So that's really and again, and there's still room for improvement there because we have capacity available. Speaker 100:14:36Correct. Speaker 300:14:39Excellent. And maybe 2 last questions, if you'll indulge me. I guess, Ramesh, in terms of working capital evolution over the balance of the year, how are you thinking about that? Speaker 100:14:49I would say, Mike, expecting favorable working capital. If you look at the entire second half, Q3 will most likely be a use of cash as we kind of continue to ramp up some production here going into the second half. Q4 usually production is a bit lower. We're focused on inventory, working capital and so on. So our Q4 is typically our strongest quarter from a cash flow perspective coming out of working capital. Speaker 100:15:21But net net, you've seen we've been a user of cash in the first half of this year and then we expect that to get unwound here in the second half of 2024. So positive favorable working capital as we get into the second half of this year. Speaker 300:15:38Great. And then I guess just lastly on the closing of the transaction, could you just remind us what items are still left in order to complete the transaction? Any updates on timing on that? And then lastly, just a refresh on the pro form a capital structure, including the guarantees and liens that both kind of the new debt and the amount of new debt and then the existing debt that's not being refinanced will have. Speaker 200:16:03Sure. Maybe let me just talk about the regulatory issues and then Ramesh can talk about the financial structure. Now Mike, we have you as you've seen, we were able to get all the antitrust regulatory approvals done. So we are done with that one. We also received the private letter ruling from the IRS. Speaker 200:16:26We are still working on all the filings, which we have to do. This is ongoing. And actually, the thing which we still need to do is our shareholder meeting in order to get approval from our shareholders for this transaction. So as far as timing is concerned, we are still very optimistic that in the second half of this year, we'll be able to really close the transaction. So everything is kind of on time, if you will. Speaker 200:16:54There's no big issue right now. Yes, those are the 2 key steps, the S-four filing and then the Speaker 100:17:00proxy vote. On the cap structure, Mike, and the financing, I think what has been previously communicated still holds true, new capital raise of about 1,600,000,000 dollars This will take into account the pay down of our Angelo Gordon term loan. It will also take into account the pay down of our existing revolver borrowings. So kind of between those two existing pieces of debt, we're looking at about $300,000,000 to $400,000,000 And if you look at the $1,600,000,000 dollars capital raise, so we'll have call it $1,000,000,000 of a dividend roughly going up to Berry and then the remaining proceeds will be used to pay off any closing transaction costs. So the instruments as of right now still in the form of a term loan B for the $1,600,000,000 capital raise. Speaker 100:18:03Magnera will also have a $350,000,000 asset based revolving credit facility. And then coming to our bonds, the $500,000,000 Glatfelter bonds, those will continue to remain outstanding, but they will become secured at the closing of the deal. And those will also be equally and ratably guaranteed by the same guarantors as the term loan B, which is the new financing. So our bonds, while they will remain outstanding, they will become secured. Got it. Speaker 300:18:36Thanks guys. Yes, no, that was perfect. I appreciate all the time and again congratulations on the quarter. Speaker 100:18:44Thank you. Thank you, Mike. Operator00:18:47We'll now take our next caller who is Roger Spitz with Bank of America. Speaker 400:18:53Thanks very much. I'm glad you confirmed the bonds will become ratably secured upon the current of the $600,000,000 term loan. So thank you for that. The price cost spread was positive in Q2 in all three segments. I'm just curious, how are you able to do that during this period of rising pulp price market environment? Speaker 200:19:25Okay. Yes, Roger, I mean, again, in general, we have 2 different types of arrangements, if you will. We have our pass through customers. So that's more or less an automatic pass through of raw material or energy price increases or if the price goes down, we adjust it downwards. You have to think about this. Speaker 200:19:49We have a time lag there. So normally, I would say 3 months, sometimes even 6 months for one customer. But normally, there's a quarter time lag. And sometimes it hurts you and sometimes you gain a little bit. But this is one part of the customers. Speaker 200:20:03And the other one, and again, this was one of the really focus areas, which we said because we were kind of caught a little bit in 2022 when we had a huge gap there. We are raising prices. We are with customers and kind of raise prices. And this is actually the result that if I look at actually for customers who are not on a path through right now, we captured this and this was actually then the result is that we are still positive. And you should also see more coming in the 3rd quarter based on the raw material increases we are seeing in the Q2. Speaker 100:20:44And this is all part Speaker 200:20:45of the turnaround strategy? And that's a part of the strategy where we kind of made it very clear also and our salespeople did a good job and Speaker 100:20:53there was Speaker 200:20:53a lot of discussion. But yes, so that's kind of these two areas. And again, people who are not on a formula, we can do it relatively fast. There's always a little delay, but we can do it relatively fast. People on path through 3 months, 4 months delay. Speaker 400:21:11Got it. Thank you for that. And you just spoke a little bit about guidance on working capital. I guess, the last two quarters, you haven't sort of updated your original guidance likely due to the pending merger. But are you able to give any 2024 guidance overall like updating the guidance for the EBITDA, FX, etcetera? Speaker 200:21:37Okay. I mean, let me just talk about the EBITDA, Roger. I mean, we have given some guidance and there's really no change to the guidance. That's why we didn't mention it. And so from that standpoint, we still feel pretty good. Speaker 100:21:49100 and 20. Speaker 200:21:51100 and 10 to 120. If I look at right now, maybe a little bit of a lower end than the higher end of the $110,000,000 to $120,000,000 But we feel pretty confident that we there's no change to our guidance. Speaker 100:22:04And Roger, if you I can hit the other elements like cash interest still around $70,000,000 CapEx between $30,000,000 $35,000,000 still holds true cash taxes between $15,000,000 and $20,000,000 Working capital still roughly around breakeven, I would say to maybe slightly positive. And then we've got other cash costs as part of the turnaround strategy, as part of the strategic initiatives and so on between 20 to 25. So I would say net cash flow is still walking down to about a negative 30 for full year. Speaker 400:22:44Perfect. Thank you very much. And that's it for me. Speaker 100:22:47Okay, good. Happy to do it. Thanks so much. Operator00:22:51And that concludes today's question and answer session. I'd like to turn the conference back over to Mr. Fondman for any additional or closing comments. Speaker 200:22:58Okay. Yes, thank you. Thank you so much to take the time for our quarter update and the call. Wish everybody a great day and we'll talk to you later. Speaker 100:23:10Thank you. Thank you. Operator00:23:13And once again, that conclude today's conference. We thank you all for your participation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallGlatfelter Q2 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.comWarning: “DOGE Collapse” imminentElon Strikes Back You may already sense that the tide is turning against Elon Musk and DOGE. Just this week, President Trump promised to buy a Tesla to help support Musk in the face of a boycott against his company. But according to one research group, with connections to the Pentagon and the U.S. government, Elon's preparing to strike back in a much bigger way in the days ahead.April 28, 2025 | Altimetry (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 5 speakers on the call. Operator00:00:00Good day, and welcome to the Glatfelter Second Quarter 2024 Earnings Release Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Ramish Suttigarh. Operator00:00:11Please go ahead, sir. Speaker 100:00:13Thank you, Anna. Good morning, and welcome to Glatfelter's 2024 Second Quarter Earnings Conference Call. This is Ramesh Shedeker, Senior Vice President, Chief Financial Officer and Treasurer. On the call to present our Q2 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, both of which are available on our website. 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 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 100:01:18I will now turn the call over to Thomas. Speaker 200:01:21Thanks, Ramesh. Hello, everyone, and welcome to Glapsalder's Q2 2024 Investor Call. I'm pleased with the continued progress of the proposed merger with Berry's HH and App business during the Q2 as we planned for the closing of the various legal and regulatory activities in preparation for when the business will operate under the name of McNaira with Kurt Begley as CEO, currently President of Berry's HH and S division. For today's earnings call, I will focus on Glatfelter's steadfast 2nd quarter performance as we position the business to successfully launch Mignera. The highlights of our performance included several meaningful outcomes. Speaker 200:02:13We achieved $25,600,000 of adjusted EBITDA for an $8,300,000 improvement compared to the same quarter last year. The Composite Fibers and Spunlays businesses achieved higher EBITDA of approximately $5,000,000 $3,000,000 respectively, compared to the same quarter last year. The results were driven by higher shipments, increased production and rigorous management of price cost gaps. The Airlaid Materials segment continued to experience softer demand and therefore we adjusted production downward resulting in a €2,000,000 decline in EBITDA compared to the same period in 2023. When combined, the segment's performance contributed to improved adjusted free cash flow, which was approximately $43,000,000 higher compared to the Q2 of last year. Speaker 200:03:08While our markets remain mixed, especially in Europe, I'm pleased with the ongoing contributions and disciplined way of managing our business that resulted from our multi year turnaround efforts. The improvements we are seeing in the performance of both Composite Fibers and SpanLase are trending in the right direction. I'm particularly pleased that SpanLase has delivered $20,000,000 of adjusted EBITDA on a trailing 12 month basis. Also, we are actively working to expand our Airlaid product portfolio through new product innovation to address continued demand challenges, which I will speak to towards the end of today's call. For these reasons, I remain confident in our ability to contribute for the long term success of Makenera. Speaker 200:03:57I will now turn the call over to Ramesh. Speaker 100:04:00Thank you, Thomas. Following up on the financial highlights Thomas just provided, Slide 5 shows a summary of 2nd quarter results for the Air Lead Materials segment. Revenues were down 14% on a constant currency basis versus the same period last year driven primarily by lower selling prices of approximately $13,000,000 4% lower shipments. Selling prices were lower mainly due to cost pass throughs reflecting declines in raw material and energy costs in Europe selective price concessions to non floating customers to regain volume. On a net basis, the price cost gap was favorable to earnings by $1,200,000 Volume was lower year over year primarily due to weaker shipments in hygiene and wipes categories. Speaker 100:04:47The decline in hygiene was largely driven by pricing actions taken in 2023 to protect margins and improve our price cost dynamic. Conversely, the decline in wipes category was related to timing of customer orders and we expect higher wipes volume in the Q3. Operations were unfavorable by $2,200,000 versus the prior year primarily due to lower production of approximately 3,800 tons to manage inventory levels. Foreign exchange and related currency hedging negatively impacted earnings by $500,000 mainly due to the weaker euro. And EBITDA margins for the segment improved by 20 basis points versus the prior year quarter. Speaker 100:05:28Slide 6 shows a summary of Q2 results for the Composite Fiber segment. Total revenues were down 6% on a constant currency basis mainly due to lower selling prices of $7,500,000 from floating contracts implemented with larger food and beverage customers and targeted pricing actions to preserve volume. Shipments were higher in all categories except wallcover when compared to the same period last year. Overall, the price cost gap for composite fibers remained favorable with prices declining by $7,500,000 versus lower prices for key raw materials, energy and freight, which improved earnings by $8,400,000 versus the same quarter last year. Operations and other was favorable by $1,700,000 mainly due to higher inclined wire production. Speaker 100:06:18Foreign exchange was slightly favorable by $100,000 and EBITDA margins for the segment improved by 4.50 basis points versus the prior year quarter. Slide 7 shows a summary of 2nd quarter results for the Span Lace segment. Revenues were up 4% on a constant currency basis driven by higher shipments of 5% mainly in the critical cleaning and hygiene categories. This was partially offset by lower selling prices of approximately $2,000,000 coming from raw material cost pass through provisions, primarily in the hygiene and wipes category. Raw material, energy and other inflation were favorable by $4,100,000 resulting in positive price cost gap. Speaker 100:07:02Operations were $1,100,000 favorable mainly driven by higher production. Foreign exchange negatively impacted earnings by $1,000 coming from the weaker euro. And EBITDA margins for the segment improved by 4 10 basis points versus the prior year quarter. Slide 8 shows corporate costs and other financial items. Corporate costs were approximately $1,900,000 lower versus the same versus the Q2 of last year. Speaker 100:07:31This was primarily driven by a loss recovery related to a fiber vendor for faulty material supply to Glatfelter in 2022. Strategic initiatives costs were again higher this quarter driven by our proposed transaction with Berry's HHNF business, which we are expecting to close in the second half of this year. Slide 9 shows our cash flow summary. For the Q2 of 2024, our adjusted free cash flow was approximately $43,000,000 higher versus the same period in 2023. This was largely driven by higher earnings of approximately $8,000,000 and lower working capital usage of approximately $40,000,000 primarily from accounts payable. Speaker 100:08:11Capital expenditures were lower by $2,000,000 while other operating items lowered cash flow by approximately 7,000,000 dollars largely driven by fewer vendor rebates this quarter compared to the same quarter last year. Slide 10 shows some balance sheet and liquidity metrics. Our leverage ratio as calculated under the bank credit agreement was 3.5 times as of June 30 and we had available liquidity of approximately $112,000,000 at the end of Q2. This concludes my prepared remarks. I will now turn the call back to Thomas. Speaker 200:08:43Thank you, Ramesh. As demonstrated by our first half results, I'm pleased with the underlying performance of our business despite a challenging market backdrop, especially in Europe. Now turning to our efforts in innovation, we have made very good progress on a few key initiatives during the Q2. One initiative in particular targets a filtered media specialty material to be manufactured within our Airlaid segment in Europe, which should generate a favorable mix relative to our hygiene portfolio. We have entered into a supply agreement with a new customer for this product and we will continue to enhance the product to its full potential in the months ahead. Speaker 200:09:25Equally exciting for our customer and the team, this product is biodegradable and meets the standards established by the EU Single Use Plastics Directive. In closing today's call, I want to take this opportunity to again thank our Glatfelter employees for their commitment and dedication to the company. As we are now well underway with the Q3, I commend the entire team for their hard work these past several years and especially this year, having to successfully run the day to day business, while also preparing for the transition to Makenera. I'm proud to lead this team and I feel very good about the capabilities of our people and look forward to their continued success for many years to come. I will now open the call for questions. Operator00:10:41And we'll now take our first question from Mike Jennings with TPG. Angelo Gordon. Speaker 300:10:49Good morning, guys. Congrats on the quarter. Nice progress out of Q1. I guess maybe starting with some questions on the Airlaid segment. There's typically been a stronger performance in the back half of the year. Speaker 300:11:05What are you seeing out of seasonality in the business in the first instance? And then I guess kind of secondarily, we've been talking about these volume related issues now for a couple of quarters, primarily in Europe. Any sort of thoughts or visibility on those matters, whether it's either the market itself or the initiatives that you guys have undertaken to find other sales channels? Speaker 200:11:27Okay, Mike. Maybe taking the second part of your question first. If we look at the volumes, yes, we have seen some weakness in the market. What we're seeing right now is that North America is clearly healthier than Europe. We are still faced with some issues in Europe, but we're also seeing a little bit of an improvement in Europe. Speaker 200:11:49But definitely, North America is much healthier than Europe. What we have done and we mentioned this before, we are really looking in diversifying our product portfolio. And I'm really very happy that we were able to get a new product into the market, filter product, we signed a contract. So that really helps us. And from if you look at seasonality, I would also expect that the AirLED volume, despite all the market challenges, will be stronger in the second half of this year than in the first half. Speaker 200:12:23And we're already kind of seeing some signs in July. Speaker 300:12:29Excellent. And I guess as Thomas, as we think about how to contextualize that maybe in terms of utilization rates, I know there's some commentary around that last quarter. Any color you can provide on Airlaid in terms of sort of where we are from a utilization perspective in North America and sort of where we are in Europe? Speaker 100:12:48Yes. In terms of I can tell you. Okay. Go ahead. So in terms of utilization, Mike, on the Airlaid side, we were roughly around 80% utilization in the first half of twenty twenty four. Speaker 100:13:01For the second half, maybe slightly higher than that going into the second half of this year. We're seeing some demand pickup as Thomas was mentioning. Historically, when we compare that to the last couple of years, we've been probably in the 85% to 90% range. So you can clearly see that with the softness in Airlaid, we've also had to adjust our production and utilization. So that's naturally come down. Speaker 100:13:26In Composite Fibers, utilization for the first half was around 90%, especially in the inclined wire assets. Second half, we're expecting that to be maybe around 80%, 85%. And historically also we've been in the 80% to 85%. And then in spunlace, first half was around 70% utilization and we expect roughly the same going into the second half. And historically, we've been kind of between 60% 70%, if that helps. Speaker 300:14:02Excellent. No, that's super helpful. Speaker 200:14:04Yes. But coming to the maybe one comment to the Span list, I think we always mentioned that there's a lot of upside as far as capacity is concerned. And you see now that we are kind of filling this capacity, positioning in the market. And again, also, I mean, we delivered 20 little north of $20,000,000 in EBITDA and spend less if I look at the last 12 months. So that's really and again, and there's still room for improvement there because we have capacity available. Speaker 100:14:36Correct. Speaker 300:14:39Excellent. And maybe 2 last questions, if you'll indulge me. I guess, Ramesh, in terms of working capital evolution over the balance of the year, how are you thinking about that? Speaker 100:14:49I would say, Mike, expecting favorable working capital. If you look at the entire second half, Q3 will most likely be a use of cash as we kind of continue to ramp up some production here going into the second half. Q4 usually production is a bit lower. We're focused on inventory, working capital and so on. So our Q4 is typically our strongest quarter from a cash flow perspective coming out of working capital. Speaker 100:15:21But net net, you've seen we've been a user of cash in the first half of this year and then we expect that to get unwound here in the second half of 2024. So positive favorable working capital as we get into the second half of this year. Speaker 300:15:38Great. And then I guess just lastly on the closing of the transaction, could you just remind us what items are still left in order to complete the transaction? Any updates on timing on that? And then lastly, just a refresh on the pro form a capital structure, including the guarantees and liens that both kind of the new debt and the amount of new debt and then the existing debt that's not being refinanced will have. Speaker 200:16:03Sure. Maybe let me just talk about the regulatory issues and then Ramesh can talk about the financial structure. Now Mike, we have you as you've seen, we were able to get all the antitrust regulatory approvals done. So we are done with that one. We also received the private letter ruling from the IRS. Speaker 200:16:26We are still working on all the filings, which we have to do. This is ongoing. And actually, the thing which we still need to do is our shareholder meeting in order to get approval from our shareholders for this transaction. So as far as timing is concerned, we are still very optimistic that in the second half of this year, we'll be able to really close the transaction. So everything is kind of on time, if you will. Speaker 200:16:54There's no big issue right now. Yes, those are the 2 key steps, the S-four filing and then the Speaker 100:17:00proxy vote. On the cap structure, Mike, and the financing, I think what has been previously communicated still holds true, new capital raise of about 1,600,000,000 dollars This will take into account the pay down of our Angelo Gordon term loan. It will also take into account the pay down of our existing revolver borrowings. So kind of between those two existing pieces of debt, we're looking at about $300,000,000 to $400,000,000 And if you look at the $1,600,000,000 dollars capital raise, so we'll have call it $1,000,000,000 of a dividend roughly going up to Berry and then the remaining proceeds will be used to pay off any closing transaction costs. So the instruments as of right now still in the form of a term loan B for the $1,600,000,000 capital raise. Speaker 100:18:03Magnera will also have a $350,000,000 asset based revolving credit facility. And then coming to our bonds, the $500,000,000 Glatfelter bonds, those will continue to remain outstanding, but they will become secured at the closing of the deal. And those will also be equally and ratably guaranteed by the same guarantors as the term loan B, which is the new financing. So our bonds, while they will remain outstanding, they will become secured. Got it. Speaker 300:18:36Thanks guys. Yes, no, that was perfect. I appreciate all the time and again congratulations on the quarter. Speaker 100:18:44Thank you. Thank you, Mike. Operator00:18:47We'll now take our next caller who is Roger Spitz with Bank of America. Speaker 400:18:53Thanks very much. I'm glad you confirmed the bonds will become ratably secured upon the current of the $600,000,000 term loan. So thank you for that. The price cost spread was positive in Q2 in all three segments. I'm just curious, how are you able to do that during this period of rising pulp price market environment? Speaker 200:19:25Okay. Yes, Roger, I mean, again, in general, we have 2 different types of arrangements, if you will. We have our pass through customers. So that's more or less an automatic pass through of raw material or energy price increases or if the price goes down, we adjust it downwards. You have to think about this. Speaker 200:19:49We have a time lag there. So normally, I would say 3 months, sometimes even 6 months for one customer. But normally, there's a quarter time lag. And sometimes it hurts you and sometimes you gain a little bit. But this is one part of the customers. Speaker 200:20:03And the other one, and again, this was one of the really focus areas, which we said because we were kind of caught a little bit in 2022 when we had a huge gap there. We are raising prices. We are with customers and kind of raise prices. And this is actually the result that if I look at actually for customers who are not on a path through right now, we captured this and this was actually then the result is that we are still positive. And you should also see more coming in the 3rd quarter based on the raw material increases we are seeing in the Q2. Speaker 100:20:44And this is all part Speaker 200:20:45of the turnaround strategy? And that's a part of the strategy where we kind of made it very clear also and our salespeople did a good job and Speaker 100:20:53there was Speaker 200:20:53a lot of discussion. But yes, so that's kind of these two areas. And again, people who are not on a formula, we can do it relatively fast. There's always a little delay, but we can do it relatively fast. People on path through 3 months, 4 months delay. Speaker 400:21:11Got it. Thank you for that. And you just spoke a little bit about guidance on working capital. I guess, the last two quarters, you haven't sort of updated your original guidance likely due to the pending merger. But are you able to give any 2024 guidance overall like updating the guidance for the EBITDA, FX, etcetera? Speaker 200:21:37Okay. I mean, let me just talk about the EBITDA, Roger. I mean, we have given some guidance and there's really no change to the guidance. That's why we didn't mention it. And so from that standpoint, we still feel pretty good. Speaker 100:21:49100 and 20. Speaker 200:21:51100 and 10 to 120. If I look at right now, maybe a little bit of a lower end than the higher end of the $110,000,000 to $120,000,000 But we feel pretty confident that we there's no change to our guidance. Speaker 100:22:04And Roger, if you I can hit the other elements like cash interest still around $70,000,000 CapEx between $30,000,000 $35,000,000 still holds true cash taxes between $15,000,000 and $20,000,000 Working capital still roughly around breakeven, I would say to maybe slightly positive. And then we've got other cash costs as part of the turnaround strategy, as part of the strategic initiatives and so on between 20 to 25. So I would say net cash flow is still walking down to about a negative 30 for full year. Speaker 400:22:44Perfect. Thank you very much. And that's it for me. Speaker 100:22:47Okay, good. Happy to do it. Thanks so much. Operator00:22:51And that concludes today's question and answer session. I'd like to turn the conference back over to Mr. Fondman for any additional or closing comments. Speaker 200:22:58Okay. Yes, thank you. Thank you so much to take the time for our quarter update and the call. Wish everybody a great day and we'll talk to you later. Speaker 100:23:10Thank you. Thank you. Operator00:23:13And once again, that conclude today's conference. We thank you all for your participation. You may now disconnect.Read morePowered by