Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Glatfelter Corp (GLT, Financial) achieved $25.6 million of adjusted EBITDA, marking an $8.3 million improvement compared to the same quarter last year.
- The composite fibers and spunlace businesses reported higher EBITDA of approximately $5 million and $3 million, respectively, compared to the same quarter last year.
- Adjusted free cash flow improved by approximately $43 million compared to the second quarter of last year.
- The spunlace segment delivered $20 million of adjusted EBITDA on a trailing 12-month basis, indicating strong performance.
- Glatfelter Corp (GLT) is actively expanding its airlaid product portfolio through new product innovation to address demand challenges.
Negative Points
- The airlaid materials segment experienced a $2 million decline in EBITDA due to softer demand and adjusted production.
- Revenues for the airlaid materials segment were down 14% on a constant currency basis, driven by lower selling prices and 4% lower shipments.
- The composite fibers segment saw total revenues decline by 6% on a constant currency basis due to lower selling prices.
- Foreign exchange negatively impacted earnings by $500,000 in the airlaid materials segment and $400,000 in the spunlace segment.
- Corporate costs were higher this quarter due to strategic initiatives related to the proposed transaction with Berry's HHNF business.
Q & A Highlights
Q: Can you provide insights on the airlaid segment's performance and any seasonal trends you are observing?
A: Thomas Fahnemann, President and CEO, noted that North America is showing healthier market conditions compared to Europe, where some improvement is also being seen. The company is diversifying its product portfolio, which includes a new product launch. Seasonally, airlaid volumes are expected to be stronger in the second half of the year, with positive signs already visible in July.
Q: What are the current utilization rates for your segments, and how do they compare historically?
A: Ramesh Shettigar, CFO, explained that airlaid utilization was around 80% in the first half of 2024, expected to be slightly higher in the second half. Historically, it has been 85%-90%. Composite fibers were at 90% in the first half, expected to be 80%-85% in the second half, consistent with historical levels. Spunlace was at 70% in the first half, expected to remain the same, with historical levels between 60%-70%.
Q: How do you expect working capital to evolve over the rest of the year?
A: Ramesh Shettigar stated that the third quarter might see a use of cash due to production ramp-up, but the fourth quarter is typically strong for cash flow due to lower production and focus on inventory. Overall, they expect favorable working capital in the second half of 2024.
Q: What are the remaining steps for closing the transaction with Berry's HHNF business, and can you update us on the capital structure post-transaction?
A: Thomas Fahnemann mentioned that all antitrust approvals are complete, and they are working on necessary filings. The shareholder meeting for transaction approval is pending, with closure expected in the second half of the year. Ramesh Shettigar added that the capital raise of $1.6 billion will cover existing debts and transaction costs, with a new term loan B and a $350 million revolving credit facility. Existing bonds will become secured.
Q: How did you manage to maintain a positive price-cost spread in all segments despite rising pulp prices?
A: Thomas Fahnemann explained that they have pass-through arrangements for raw material and energy costs with some customers, which have a time lag. For other customers, they have been proactive in raising prices to recapture costs, which has resulted in a positive price-cost spread. This is part of their turnaround strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
