Clearwater Paper Reports Third Quarter 2023 Results

Clearwater Paper Corporation (NYSE:CLW),a premier supplier of quality tissue and bleached paperboard products, today reported financial results for the third quarter and nine months ended September 30, 2023.

THIRD QUARTER HIGHLIGHTS

Outstanding performance driven by strong operational results and continued market strength in tissue

Net sales of $520 million, down 3 percent from the third quarter of last year
Net income of $37 million, or $2.17 per diluted share
Adjusted net income of $37 million, $6 million higher than the third quarter of last year
Adjusted EBITDA of $81 million, $3 million higher than third quarter of last year
Adjusted EBITDA margin at 15 percent, up from 14 percent during the third quarter of last year
Redeeming 2025 notes in Q4 2023 with a combination of a new term loan, cash on hand, and drawing on existing ABL facility
Repurchased $5 million of outstanding shares, with $10 million remaining under program
Reduced net debt by $69 million from second quarter of this year, $416 million since 2020

“We had an outstanding third quarter which came in at the higher end of our expectations, driven by good operational performance in both businesses and continued strength in tissue. Demand remained strong in tissue, while we balanced paperboard supply and demand to manage inventory levels,” said Arsen Kitch, president and chief executive officer. “We continued to focus on our financial flexibility by reducing net debt by $69 million in the quarter, for a total reduction of $416 million since 2020.”

Overall Results

For the third quarter of 2023, Clearwater Paper reported net sales of $520 million compared to net sales of $539 million for the third quarter of 2022. Net income for the third quarter of 2023 was $37 million, or $2.17 per diluted share, compared to net income for the third quarter of 2022 of $21 million, or $1.21 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net income in the third quarter of 2023 of $37 million, or $2.19 per diluted share, compared to third quarter 2022 adjusted net income of $31 million, or $1.83 per diluted share. Adjusted EBITDA for the third quarter of 2023 was $81 million, compared to the third quarter of 2022 Adjusted EBITDA of $77 million.

For the first nine months of 2023, Clearwater Paper reported net sales of $1.6 billion, a slight increase compared to the first nine months of 2022. Net income for the first nine months of 2023 was $90 million, or $5.29 per diluted share, compared to net income for the first nine months of 2022 of $52 million, or $3.04 per diluted share. On a non-GAAP basis, Clearwater Paper reported adjusted net income in the first nine months of 2023 of $92 million, or $5.37 per diluted share, compared to the first nine months of 2022 adjusted net income of $68 million, or $3.96 per diluted share. Adjusted EBITDA for the first nine months of 2023 was $218 million, compared to the first nine months of 2022 Adjusted EBITDA of $199 million.

Pulp and Paperboard Segment

Net sales in the Pulp and Paperboard segment were $261 million for the third quarter of 2023, down 13 percent compared to third quarter 2022 net sales of $301 million. Segment operating income for the third quarter of 2023 was $43 million, compared to $64 million for the third quarter of 2022. Adjusted EBITDA for the segment was $52 million in the third quarter of 2023, compared to $73 million in the third quarter of 2022. The decrease in operating income and Adjusted EBITDA were primarily driven by lower sales volumes and sales prices, planned production downtime to manage inventories, partially offset by lower input costs, specifically in wood, energy and freight.

Net sales in the Pulp and Paperboard segment were $812 million for the first nine months of 2023, down 6 percent compared to net sales of $863 million in the first nine months of 2022. Segment operating income for the first nine months of 2023 was $142 million, compared to $166 million for the first nine months of 2022. Adjusted EBITDA for the segment was $170 million in the first nine months of 2023, compared to $194 million in the first nine months of 2022. The decrease in operating income and Adjusted EBITDA were driven primarily by lower sales volumes and planned production downtime to manage inventories partially offset by higher sales prices.

Pulp and Paperboard Sales Volumes and Prices:

Paperboard sales volumes were 187,944 tons in the third quarter of 2023, a decrease of 10 percent compared to 208,298 tons in the third quarter of 2022. Paperboard sales volumes were 563,502 tons in the first nine months of 2023, a decrease of 10 percent compared to 625,557 tons in the first nine months of 2022.

Paperboard average net selling price decreased 4 percent to $1,350 per ton for the third quarter of 2023, compared to $1,405 per ton in the third quarter of 2022. Paperboard average net selling price increased 5 percent to $1,401 per ton for the first nine months of 2023, compared to $1,334 per ton in the first nine months of 2022.

Consumer Products Segment

Net sales in the Consumer Products segment were $259 million for the third quarter of 2023, up 8 percent compared to third quarter 2022 net sales of $241 million. Segment operating income for the third quarter of 2023 was $31 million compared to operating income of $5 million in the third quarter of 2022. Adjusted EBITDA for the segment was $46 million in the third quarter of 2023, compared to $21 million in the third quarter of 2022. The increase in operating income and Adjusted EBITDA were driven by higher sales prices and lower input costs, primarily in pulp, freight, chemicals and energy.

Net sales in the Consumer Products segment were $761 million for the first nine months of 2023, up 9 percent compared to net sales of $696 million in the first nine months of 2022. Segment operating income for the first nine months of 2023 was $61 million, compared to operating income of $10 million in the first nine months of 2022. Adjusted EBITDA for the segment was $105 million in the first nine months of 2023, compared to $57 million in the first nine months of 2022. The increase in operating income and Adjusted EBITDA were driven by higher sales prices partially offset by higher input costs, primarily in freight and energy costs.

Retail Tissue Sales Volumes and Prices:

Retail tissue volumes sold were 80,588 tons in the third quarter of 2023, an increase of 5 percent compared to 76,938 tons in the third quarter of 2022. Retail tissue volumes sold were 236,108 tons in the first nine months of 2023, an increase of 3 percent compared to 228,968 tons in the first nine months of 2022.

Retail tissue average net selling price increased 4 percent to $3,198 per ton in the third quarter of 2023, compared to $3,082 per ton in the third quarter of 2022. Retail tissue average net selling price increased 8 percent to $3,204 per ton in the first nine months of 2023, compared to $2,980 per ton in the first nine months of 2022.

Company Outlook

“We are optimistic that our strong performance in tissue will continue into next year, driven by stable demand and improved cost structure. We also expect a gradual recovery in paperboard volumes starting in 2024. The refinancing of our 2025 notes will improve our financial flexibility and position us to continue to invest in our business and take advantage of strategic opportunities as they arise,” continued Kitch.

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