Glatfelter Corporation (GLT) on Q1 2021 Results - Earnings Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Glatfelter’s Quarterly Earnings Conference Call. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Ramesh Shettigar. Please go ahead, sir. Ramesh Shettigar: Thank you, Patricia. Good morning, and welcome to Glatfelter’s 2021 First Quarter Earnings Conference Call. This is Ramesh Shettigar, Vice President of Investor Relations and Corporate Treasurer. On the call today to present our first quarter results are Dante Parrini, Glatfelter’s Chairman and Chief Executive Officer; and Sam Hillard, Senior Vice President and Chief Financial Officer. Dante Parrini: Thank you, Ramesh. Good morning, and thank you for joining us today. Glatfelter continued to achieve strong overall results, which were ahead of expectations in the first quarter. Despite the pandemic and its associated challenges, we delivered adjusted earnings per share of $0.19 and adjusted EBITDA of $31 million. Slide 3 of the investor deck provides highlights for the quarter. Airlaid Materials performed below expectations due to ongoing softness in the tabletop category related to government lockdowns and delayed restaurant openings. During the quarter, we also experienced lower-than-anticipated demand in wipes, home care and feminine hygiene products as customers and consumers adjusted their buying patterns to account for higher inventory levels. As a result, it was necessary to take additional downtime to manage inventories, which negatively impacted profitability. Although the pandemic is still evolving in our core markets, we remain optimistic about demand recovery for tabletop products as vaccinations increase, infection rates decline, governments relax restrictions on dining establishments and the warmer weather arrives. Composite Fibers posted another strong quarter as robust demand for food and beverage and technical specialties products helped drive results. When coupled with higher asset utilization, profitability for this segment hit its highest level in 4 years. We recently announced an 8% price increase for Composite Fibers products to address cost inflation for raw materials, energy and logistics. We expect the impact of these pricing actions to begin flowing to the bottom line in Q2 with greater realization to occur in the second half of the year. At an enterprise level, we maintained our focus on the health and safety of Glatfelter people. These efforts kept all facilities operational, ensuring uninterrupted supply of essential products to our customers. Sam Hillard: Thank you, Dante. First quarter adjusted earnings from continuing operations was $8.4 million or $0.19 per share, a decrease of $0.05 versus the same period last year, driven by pandemic-related softness in our Airlaid Materials segment and a higher effective tax rate, which I will cover in more detail shortly. Slide 4 shows a bridge of adjusted earnings per share of $0.24 from the first quarter of last year to this year’s first quarter of $0.19. Composite Fibers results improved earnings by $0.01, driven primarily by better mix and improved asset utilization. Airlaid Materials results lowered earnings by $0.06 due to softness in tabletop products as restaurant dining continues to be significantly affected by the pandemic as well as other COVID-related weakness in certain categories. Corporate costs were $0.02 favorable versus last year’s first quarter from lower spending and cost control initiatives and interest, taxes and other items drove earnings lower by $0.02 versus the same period last year, mainly due to a higher effective tax rate. Q1 2021 had a tax rate of 45% versus a tax rate of 39% for the same period last year. The higher rate versus our previous full year guidance of 38% to 40% was driven by unexpected German tax rate changes that occurred during the quarter. Slide 5 shows a summary of first quarter results for the Composite Fibers segment. Total revenues for the quarter were 1.4% lower on a constant currency basis due to lower shipments of metalized products in 2021 compared to Q1 2020. As a reminder, we shipped metalized products the entire first quarter of 2020 from our U.K. and German facilities before the restructuring in early Q2. Excluding metalized, shipments in the quarter were in line with last year. We continue to experience stable growth in our food and beverage and technical specialties product categories, offset by lower shipments in wallcover and composite laminates. Selling prices were flat versus the same period last year but improved mix from higher shipments in food and beverage and technical specialties favorably impacted results by $1.1 million. Dante Parrini: Thanks, Sam. From a strategic perspective, I’m pleased with the ongoing execution of our business transformation and growth strategy. Our portfolio of products tied to essential consumer staples will serve us well and provide greater stability to margins and cash flows in the long term. Demand for Composite Fibers products is robust, and we expect that to continue into the second half. Demand for Airlaid products across the broader industry has been negatively impacted by the pandemic in the short term, although we expect many of these transitory issues to begin to abate as we enter Q3. And we’re adding new innovative product offerings to our portfolio. One example is the recent launch of GlatClean, a cellulose-based surface disinfecting wipe product line. This material was just nominated by INDA for the World of Wipes Innovation Award. Operator: Your first question comes from the line of Anojja Shah from BMO Capital Markets. Anojja Shah: I wanted to go back to this tabletop and Airlaid specifically. It sounds like you’re thinking about a recovery in the third quarter. Is that true, first of all? And then second, I think in the past, you had mentioned that once restaurant traffic comes back, you could actually benefit because restaurants may be looking for more disposable options. Is that true? And does that mean that there will be an additional lift once restaurant traffic does come back? Dante Parrini: Happy to answer that question. I think there are a number of factors lining up that are positive for the tabletop business. Clearly, as the vaccinations increase in our core markets, as infection rates decline and governments relax lockdown restrictions and allow restaurants to open and operate at greater levels of capacity and the warm weather arrives are all very favorable. I would say that the U.S. and North American market is leading that recovery, and we expect the European market to follow behind. Anojja Shah: Great. And then can we just maybe talk about capital allocation, given that this GP transaction is about close. Is M&A still your preferred use of cash? Or are there other -- how are you thinking about capital allocation? Dante Parrini: Sure. So as you know, our transformation and growth strategy was designed to reset the company, establish the correct base for us to build the new Glatfelter and to become a more profitable growth business over time. So clearly, the GP U.S. business fits into that strategy. I envision future acquisitions. And so maintaining good balance sheet capacity is going to be very important. And I expect Glatfelter to be a participant in helping to consolidate the different parts of the market that we participate in. Anojja Shah: Okay. And then a few years ago, I think you mentioned an interest in building out your position in filtration media and technical specialties, things like batteries and other consumer products. Is that still an area of interest for you? And maybe you can give an update on your thoughts there? Dante Parrini: Certainly. As we look at areas for investment and how to expand our portfolio. Certainly, investments that help us broaden and expand our existing platforms will be the most synergistic and perhaps the easiest to understand and convince ourselves that we’re the rightful owners of these assets. The 2 GP acquisitions in 2018 and now in 2021 are perfect examples of those. We’ve also talked about categories, whether that’s the broader categories of filtration, the continuum of technologies that are used to supply health, hygiene and home care markets. We’ve talked about electrical, and we’re seeing part of the reason why I see Composite Fibers continuing to strengthen as the recovery categories in our portfolio are seeing gaining strength, so whether that’s materials that go into battery construction, capacitors and things of that nature, and we think the electrification of the world will continue. So I think those are important and interesting areas to name a few. Anojja Shah: Great. And then my final question is just on the tax rate. I know you mentioned the German tax rate and the U.K. legislative change. But it has been above 40% for, I think, about 2 years now, if I’m not mistaken. What’s driving it higher? If you can just remind us. And is this a long-term sort of level, or are there things you can do over time? Sam Hillard: Sure. So again, we had guided to a rate below 40% for this year. But unfortunately, with these changes in the rates in U.K. and Germany, that’s causing it to tick back up to above 40%. We do think we have the capabilities to bring it back down well below. Now obviously, Anojja, there’s a lot of pending legislation in terms of tax reform around the globe and in the U.S. So it’s hard to predict exactly what’s going to happen. But ignoring what could or couldn’t happen there, I do think we see good potential to lower our tax rate. The biggest driver is the fact that we’re operating at a loss in the U.S. After we sold our Specialty Papers business, we only had 1 facility remaining in the U.S. But, we had U.S.-based corporate costs, U.S.-based interest expense, which are big factors for us. And then we are unable to get deductions for our foreign income taxes due to some of the provisions around GILTI. However, with the acquisition of something like Mount Holly, we closed the gap meaningfully in terms of the losses that we’re generating in the U.S. We’re not out of the woods, and we need to continue to grow our income in the U.S. So additional income in the U.S., either organic or acquisition, will help lower that tax rate over time. Operator: There are no further questions at this time. Speakers, you may proceed. Dante Parrini: Okay. Well, thank you for joining our call today. We look forward to speaking with you again next quarter. Have a great day. Operator: This concludes today’s conference call. Thank you all for participating. You may now disconnect.
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Glatfelter Corporation's Strategic Moves and Merger with Berry Global's Division

  • Glatfelter Corporation (NYSE:GLT) executed a reverse stock split at a 13-for-1 ratio as part of its strategic plans.
  • The merger with Berry Global Group Inc.'s division has led to the formation of Magnera, set to become the largest nonwovens company globally.
  • Glatfelter's stock price currently stands at $21.05, with a market capitalization of approximately $957.7 million.

Glatfelter Corporation (NYSE:GLT) is a global supplier of engineered materials, specializing in nonwoven products and specialty papers. On November 4, 2024, GLT executed a reverse stock split at a 13-for-1 ratio. This strategic move aligns with Glatfelter's recent merger with Berry Global Group Inc.'s Health, Hygiene, and Specialties Global Nonwovens and Films business, forming Magnera, the largest nonwovens company worldwide.

The merger with Berry Global's division has been a significant milestone for Glatfelter. The newly formed entity, Magnera, will begin trading on the New York Stock Exchange under the ticker "MAGN" on November 5, 2024. This transition is a crucial step in Glatfelter's strategic plans, as highlighted by the company's third-quarter results announcement.

Glatfelter's shareholders have approved all necessary proposals related to the merger during a Special Meeting. These proposals included share issuance, charter amendments, an omnibus plan, and an advisory compensation proposal. The merger is expected to be finalized on November 4, 2024, pending the fulfillment or waiver of closing conditions.

Currently, GLT's stock price is $21.05, reflecting a decrease of 6.94% with a change of $1.57. The stock has traded between $20.07 and $22.80 today, with a 52-week high of $35.23 and a low of $15.80. Glatfelter's market capitalization is approximately $957.7 million, with a trading volume of 339,306 shares on the NYSE.

Glatfelter Corporation's Strategic Moves and Merger with Berry Global's Division

  • Glatfelter Corporation (NYSE:GLT) executed a reverse stock split at a 13-for-1 ratio as part of its strategic plans.
  • The merger with Berry Global Group Inc.'s division has led to the formation of Magnera, set to become the largest nonwovens company globally.
  • Glatfelter's stock price currently stands at $21.05, with a market capitalization of approximately $957.7 million.

Glatfelter Corporation (NYSE:GLT) is a global supplier of engineered materials, specializing in nonwoven products and specialty papers. On November 4, 2024, GLT executed a reverse stock split at a 13-for-1 ratio. This strategic move aligns with Glatfelter's recent merger with Berry Global Group Inc.'s Health, Hygiene, and Specialties Global Nonwovens and Films business, forming Magnera, the largest nonwovens company worldwide.

The merger with Berry Global's division has been a significant milestone for Glatfelter. The newly formed entity, Magnera, will begin trading on the New York Stock Exchange under the ticker "MAGN" on November 5, 2024. This transition is a crucial step in Glatfelter's strategic plans, as highlighted by the company's third-quarter results announcement.

Glatfelter's shareholders have approved all necessary proposals related to the merger during a Special Meeting. These proposals included share issuance, charter amendments, an omnibus plan, and an advisory compensation proposal. The merger is expected to be finalized on November 4, 2024, pending the fulfillment or waiver of closing conditions.

Currently, GLT's stock price is $21.05, reflecting a decrease of 6.94% with a change of $1.57. The stock has traded between $20.07 and $22.80 today, with a 52-week high of $35.23 and a low of $15.80. Glatfelter's market capitalization is approximately $957.7 million, with a trading volume of 339,306 shares on the NYSE.