Glatfelter Reports First Quarter 2018 Earnings
"Our engineered materials businesses continued to deliver solid performance in the first quarter despite a higher raw material inflation environment." – Dante Parrini, Chairman and CEO, Glatfelter.
May 1, 2018 - Glatfelter (NYSE:GLT) today reported first quarter of 2018 net income of $5.7 million, or $0.13 per diluted share compared with $11.6 million, or $0.26 per diluted share in the first quarter of 2017. Adjusted earnings for the first quarter of 2018 were $8.6 million, or $0.19 per diluted share compared with $17.2 million, or $0.39 per diluted share for the same period a year ago.
Consolidated net sales totaled $410.6 million and $390.7 million for the three months ended March 31, 2018 and 2017, respectively. Foreign currency translation favorably impacted the year-over-year comparison by $21.8 million. On a constant currency basis, Composite Fibers' net sales were essentially flat and Advanced Airlaid Materials' increased by 7.8%. Specialty Papers' net sales declined 3.1% in the year-over-year comparison.
“Our engineered materials businesses continued to deliver solid performance in the first quarter despite a higher raw material inflation environment,” said Dante C. Parrini, Chairman and Chief Executive Officer. “Our Advanced Airlaid Materials business grew shipments by 6% over the prior year period driven by hygiene, wipes and home care products. This business also achieved a major strategic milestone this quarter — beginning production and commercial shipments from our new facility in Fort Smith, Arkansas. In Composite Fibers, growth in wallcover and technical specialty products drove a 3% increase in shipments and a 6% improvement in operating profit.”
Mr. Parrini continued, “Profitability for our Specialty Papers business was down, but in-line with our expectations. However, we are encouraged by improving supply-demand conditions from industry capacity reductions that have resulted in an increase in operating rates and improved pricing dynamics. This enabled us to achieve volume growth of 1.3% and an increase in average selling prices of $33 per ton compared with the fourth quarter of 2017. We expect prices to continue moving higher in the coming quarters as operating rates remain high.”
“Looking ahead, our engineered materials businesses represent significant opportunity for Glatfelter as we remain focused on accelerating growth. We are excited about the prospects for Advanced Airlaid Materials, and we expect the Fort Smith facility to enable this business to deliver projected volume growth of 10% to 12% this year. Demand for our Composite Fibers products remains strong and we believe its performance will continue to strengthen throughout the year. We will continue our unrelenting pursuit of cost efficiencies and process improvements across our business as we work to offset rising input costs. In addition, we anticipate our cash flow profile to improve significantly with the major capital programs now behind us,” Parrini concluded.
As announced in February, the Company made the decision to review strategic alternatives for its Specialty Papers business. Its review is ongoing and there can be no assurance that this review will result in a particular outcome.
FIRST QUARTER BUSINESS UNIT RESULTS
Composite Fibers' net sales increased $16.5 million, or 13.2%, primarily due to a 3.2% increase in shipping volumes, a $16.7 million favorable impact from currency translation and $0.3 million from higher selling prices.
Composite Fibers' first quarter of 2018 operating income totaled $15.3 million, an increase of $0.9 million compared to the year-ago period. The benefit of higher shipping and production volumes partially offset the $3.5 million unfavorable impact from higher raw material prices. Foreign currency translation favorably impacted operating income by $1.3 million.
Advanced Airlaid Materials
Advanced Airlaid Materials' net sales increased $9.8 million, or 16.3% primarily due to a 5.9% increase in shipping volumes, a $5.1 million favorable impact of currency translation and $0.7 million from higher selling prices.
Operating income for the first quarter of 2018 totaled $7.2 million, or 1.8% higher than the comparable period a year ago. Higher selling prices were more than offset by higher input costs and other general cost inflation totaling $1.2 million. Foreign currency translation increased operating income by $0.4 million.
Specialty Papers' net sales decreased $6.3 million, or 3.1%, reflecting the permanent shutdown of a machine in the third quarter of 2017, partially offset by a more favorable mix of products sold.
Specialty Papers' operating income totaled $2.4 million in the first quarter of 2018, a decrease of $11.2 million compared with the same period a year ago. Higher raw material and energy prices adversely impacted results by approximately $5.6 million. Higher freight costs and depreciation expense negatively impacted results by $1.1 million and $0.9 million, respectively. In addition, transition costs associated with the machine shutdown, severe weather and water quality issues, partially offset by the benefits of workforce reductions efforts, adversely impacted earnings by $3.4 million.
Composite Fibers' shipping volumes in the second quarter of 2018 are expected to be approximately 5% higher than the first quarter with an improved mix. Selling prices are expected to be in-line with the first quarter and raw material and energy prices are expected to increase moderately.
Advanced Airlaid Materials' shipping volumes in the second quarter of 2018 are expected to be approximately 3% higher than 2018 first quarter. For the full-year 2018, we anticipate shipping volumes to be 10% to 12% higher than 2017. Selling prices and raw material and energy prices are expected to increase slightly when compared to the first quarter of this year.
Specialty Papers' shipping volumes in the second quarter are expected to be 5% below the first quarter of 2018 reflecting the annual maintenance outages at both mills. Average selling prices are expected to increase $30/ton and we expect raw material and energy prices to increase slightly; however, energy consumption is expected to be seasonally lower in the second quarter. The adverse impact of operational challenges related to machine transition costs, weather and water quality issues totaling approximately $5 million in the first quarter are not anticipated to impact the second quarter. The Company also plans to complete the annual maintenance outages at its U.S. facilities in the second quarter of 2018, which are expected to adversely impact operating income by approximately $26 million to $28 million compared with $22.9 million in the second quarter of 2017.
Consolidated capital expenditures for the year are expected to be between $67 million and $72 million.
The effective tax rate on adjusted earnings is expected to be approximately 33% in 2018 compared with 19% for 2017.
Glatfelter is a global supplier of specialty papers and fiber-based engineered materials, offering innovation, world-class service and over a century and a half of technical expertise. To learn more, please visit: www.glatfelter.com.