Wausau Paper 2nd Quarter Profit Grows
July 25, 2007 - Wausau Paper yesterday reported net earnings for the second quarter of $4.8 million or $0.09 per share, compared with $3.7 million, or $0.07 per share, the year before. Net sales increased 7 percent to $317.2 million while shipments increased 3 percent to 238,000 tons, both records for any quarter.
Second-quarter results included an after-tax gain of $1.8 million, or $0.04 per share, from the sale of timberlands and stock incentive credits of less than $0.1 million, or less than $0.01 per share. Prior-year second-quarter results included after-tax timberland sales gains of $0.8 million, or $0.02 per share, and stock incentive credits of $0.4 million, or $0.01 per share.
Commenting on the positive year-over-year second-quarter comparison, Thomas J. Howatt, president and CEO, stated, "Each of our three business segments achieved year-over-year sales improvement, reflecting market share gains, selling price increases, and product mix enhancements. Combined with operational improvement and cost containment, sales and volume gains allowed us to offset fiber price increases of $12 million as compared to last year," continued Mr. Howatt. "Our progress can be attributed to a continued focus on our strategic initiatives - niche markets, product development, customer service, and operational excellence. On a year-to-date basis, approximately 28 percent of revenues came from products developed in the last three years, exceeding our corporate target of 25 percent, and productivity increased approximately 3 percent, further building upon the improvement achieved in recent years."
For the first half of 2007, Wausau Paper reported net earnings of $19.7 million, or $0.39 per share, compared with net earnings of $3.2 million, or $0.06 per share, during the comparable period last year. Results for the current year included after-tax timberland sales gains of $2.2 million, or $0.04 per share; one-time state tax benefits of $11.6 million, or $0.23 per share, related to the January 1, 2007, restructuring of the company's subsidiaries; and stock incentive credits of less than $0.1 million or less than $0.01 per share. Year-ago six-month results included after-tax timberland sales gains of $1.8 million, or $0.03 per share, and stock incentive charges of $0.8 million, or $0.02 per share. Net sales increased 6 percent to $616.6 million while shipments increased 2 percent to 464,000 tons.
Specialty Products reported second-quarter operating profits of $2.2 million compared with profits of $1.6 million last year. Net sales and shipments increased 13 percent and 6 percent, respectively. "Selling price increases and mix enhancement more than offset higher input costs, most notably market pulp, resulting in strengthened profitability," Mr. Howatt said. "While market conditions have improved somewhat in certain specialty paper markets, our focus remains on driving long-term profitability by increasing operational efficiencies, maximizing mix upgrade opportunities, and maintaining the pace of new product introductions."
Printing & Writing reported second-quarter operating losses of $2.3 million compared with losses of $3.4 million last year. Net sales increased 2 percent while shipments improved less than 1 percent. "Second-quarter shipments reached record levels despite a significant decline in industry-wide demand for uncoated freesheet papers," Mr. Howatt noted. "Market conditions remained highly competitive as capacity reductions within this industry sector have been insufficient to generate the pricing leverage and meet the product mix expectations necessary for us to fully offset rising fiber costs. As a result, the pace of improvement in the financial performance of our Printing & Writing business has been slower than expected. Our focus remains on driving long-term profitability by minimizing our exposure to highly competitive commoditized segments of the uncoated freesheet market. We will continue to pursue niche-oriented opportunities such as consumer products where shipments increased 6 percent through the first half of this year."
Towel & Tissue's second-quarter operating profits of $11.3 million were essentially flat with the record $11.4 million reported last year. Shipments were in line with the prior-year results and reflect an 8 percent sequential increase over first-quarter 2007 levels. Net sales increased 5 percent on a year-over-year basis. "Selling price gains and mix enhancement allowed us to offset wastepaper and purchased parent roll price increases of approximately $3 million and maintain profitability at record second-quarter levels," Mr. Howatt said. "Through the first six months of the year our shipments increased 3 percent, essentially doubling the growth rate reported for the 'away-from-home' market. Importantly, our volume gains continue to come from innovative value-added products, such as our Green SealŪ certified products and our recently introduced new products targeting the premium office buildings market."
Mr. Howatt also noted that the company sold approximately 1,400 acres of timberlands in the second quarter. "Since announcing our plans in 2005 to sell 42,000 acres of non-strategic timberlands, we have sold 17,000 acres for an after-tax gain of more than $14 million," Mr. Howatt stated. "We expect to sell the 25,000 acres remaining in our program within the next three years." Also during the second quarter the company repurchased 128,000 shares of common stock, and has approximately 1.4 million shares remaining under a previous board authorization.
Commenting on the third-quarter outlook, Mr. Howatt said, "Our performance in Towel & Tissue remains strong and momentum is building in our Specialty Products business. The outlook for Printing & Writing is less clear with uncoated freesheet markets remaining highly competitive and pricing leverage limited. On a corporate-wide basis, our efforts to contain costs, improve operational efficiencies, and enhance sales are expected to offset rising fiber prices and drive operating earnings improvement compared with year-ago levels. As a result, we expect third-quarter earnings in the range of $0.11 and $0.13 per share, including timberland sales gains of approximately $0.02 per share." Third-quarter 2006 results were $0.14 per share and included $0.08 per share in timberland sales gains.
Wausau Paper produces and markets fine printing and writing papers, technical specialty papers, and "away-from-home" towel and tissue products.
SOURCE: Wausau Paper