Glatfelter Reports First Quarter 2017 Earnings
"Advanced Airlaid Materials continued to show healthy margin expansion as volumes improved over the previous year and further production efficiencies from continuous improvement initiatives resulted in an 8% increase in operating income." – Dante Parrini, Chairman and CEO, Glatfelter.
May 2, 2017 – Glatfelter today reported first quarter of 2017 net income of $11.6 million, or $0.26 per diluted share compared with $16.2 million, or $0.37 per diluted share in the first quarter of 2016. Adjusted earnings for the first quarter of 2017 were $17.2 million, or $0.39 per diluted share compared with $16.3 million, or $0.37 per diluted share, for the same period a year ago. Adjusted earnings is a non-GAAP measure.
Consolidated net sales totaled $390.7 million and $402.2 million for the three months ended March 31, 2017 and 2016, respectively. Lower selling prices and foreign currency translation unfavorably impacted the quarter-over-quarter comparison by $6.8 million each.
“Glatfelter's overall results for the first quarter were in line with expectations,” said Dante C. Parrini, Chairman and Chief Executive Officer. “Our engineered materials businesses reported a strong opening to 2017. Composite Fibers returned to growth after a challenging 2016, as demand improved in all market segments, including tea, single-serve coffee and wall covering products. This improved demand, when combined with our cost optimization program, drove a 29% increase in Composite Fibers' operating income over the prior-year period.
“Advanced Airlaid Materials continued to show healthy margin expansion as volumes improved over the previous year and further production efficiencies from continuous improvement initiatives resulted in an 8% increase in operating income. The Specialty Papers business unit's performance continues to be challenged by highly competitive market conditions, despite improved productivity and cost reduction actions.”
Mr. Parrini continued, “We are making significant progress in our initiatives to manage costs and drive continuous improvement throughout our organization. Specifically, our Composite Fibers business is on track to deliver $10 million in savings this year through the cost optimization program we began in the fourth quarter of 2016.
“We also remain committed to investing in our growth platforms. The build-out of our new facility in Fort Smith, Arkansas, is proceeding as expected and is positioned to support the growth opportunities for our Advanced Airlaid Materials business, with start-up expected late this year.”
FIRST QUARTER BUSINESS UNIT RESULTS
Composite Fibers' net sales increased $1.6 million, or 1.3%, primarily due to a 5.1% increase in shipping volumes partially offset by a $5.7 million unfavorable impact from currency translation and $1.9 million from lower selling prices.
Composite Fibers' first quarter of 2017 operating income totaled $14.4 million, an increase of $3.3 million compared to the year-ago period primarily due to higher volumes and a $4.1 million benefit from improved operating efficiencies including the impact of the Company's cost optimization program. These favorable factors were partially offset by higher raw material and energy costs and foreign currency translation.
Advanced Airlaid Materials
Advanced Airlaid Materials' net sales decreased $1.0 million in the year-over-year comparison primarily due to a $1.1 million unfavorable impact from currency translation and $0.4 million of lower selling prices reflecting the impact of cost pass-through arrangements. Shipping volumes increased 1.2%, primarily due to continued growth of wipes and personal hygiene products.
Operating income for the first quarter of 2017 totaled $7.1 million, or 8.2% higher than the comparable period a year ago. Results benefited by $1.2 million from higher volumes and improved productivity required to meet growing demand. Foreign currency translation reduced operating income by $0.3 million.
Specialty Papers' net sales decreased $12.1 million, or 5.6%, due to a 4.2% decrease in shipping volumes and a $4.5 million impact from lower selling prices.
Specialty Papers' operating income totaled $13.2 million in the first quarter of 2017, a decrease of $1.7 million compared with the same period a year ago. A $3.6 million benefit from improved operations and cost control initiatives was more than offset by the adverse impact of lower selling prices and $1.2 million of higher raw material and energy costs.
Composite Fibers' shipping volumes in the second quarter of 2017 are expected to be approximately 5% higher than the first quarter. Selling prices are expected to be in-line with the first quarter and raw material and energy prices are expected to increase slightly.
Advanced Airlaid Materials' shipping volumes are expected to be slightly higher than the 2017 first quarter. Selling prices and raw material and energy prices are expected to be in-line with the first quarter.
Specialty Papers' shipping volumes in the second quarter are expected to be slightly below the first quarter of 2017. Selling prices are expected to decline slightly. We anticipate raw material and energy prices to increase slightly. The Company also plans to complete the annual maintenance outages at its U.S. facilities in the second quarter of 2017, which are expected to adversely impact operating income by approximately $22.0 million to $24.0 million compared with $26.3 million in the second quarter of 2016. In addition, to manage inventory levels, the Company expects to incur approximately $3 million of costs due to market related downtime in excess of the first quarter of 2017.
Consolidated capital expenditures are expected to total between $125 million and $140 million for 2017.
The effective tax rate on adjusted earnings is expected to be approximately 28% in 2017 compared with 16.5% for 2016.
Headquartered in York, Pennsylvania (USA), 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.