Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Clearwater Paper Corp (NYSE:CLW) delivered $30 million of adjusted EBITDA in Q1 2025, at the high end of their guidance range.
• Net sales increased by 46% to $378 million, largely driven by the successful integration of the Augusta acquisition.
• The company is on track to deliver $30 to $40 million in cost savings in 2025, with a targeted annual run rate of $40 to $50 million.
• Clearwater Paper Corp (NYSE:CLW) repurchased approximately $11 million of shares in Q1 2025, contributing to shareholder value.
• The company is investing in product development, including compostable food service products and lightweight folding carton products, to broaden its portfolio.

Negative Points

• Clearwater Paper Corp (NYSE:CLW) reported a consolidated net loss of approximately $6 million from continuing operations in Q1 2025.
• Input cost inflation, driven by higher fiber and chemical prices, negatively impacted financial performance by approximately $3 million.
• Paperboard pricing headwinds resulted in a $9 million year-over-year impact, despite stable prices quarter over quarter.
• The company faces potential cost impacts from tariffs, with a hypothetical 25% tariff on imports potentially costing around $25 million annually.
• Industry utilization rates remain below the cross-cycle average, with new capacity expected to further challenge market conditions.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with CLW.

Q: Can you provide insights on the recent trends in FDB imports and the geographic distribution of your $20 to $25 million purchases from outside the US and Canada? A: Imports were up in 2024, while exports were down. For 2025, imports are expected to decrease by 5% and exports to increase by 1%. Most of our imports are from Canada, with some from other parts of the world, including potentially China. We are monitoring these supplies closely to mitigate any cost increases due to tariffs. - Arson Kitsch, CEO

Q: There seems to be a shift in paperboard sales mix between folding carton and food service. Is this a seasonal change or due to customer dynamics? A: The shift is primarily due to the inclusion of the Augusta mill, which altered our sales mix. There were robust shipments at the end of the year with food service customers, but no significant market-related slowdown. - Arson Kitsch, CEO

Q: What criteria will you use to evaluate potential M&A opportunities, particularly in expanding your product offerings like CRB? A: We are looking for strategic fits with good quality assets that align with our network. We need to ensure we have a competitive advantage in the space and will evaluate both the market and potential assets. - Arson Kitsch, CEO

Q: Regarding the lightweight folding carton product under development, what are the expected costs for paper machine upgrades, and how will this product fit into your overall volumes? A: The upgrades will be on existing machines, and we expect the costs to fit within our current capital range. This is more of a mix shift rather than incremental revenue growth, targeting both existing and new customers. - Arson Kitsch, CEO

Q: How significant will the cost savings be in Q2, and what progress have you made on the Augusta synergies? A: We expect to see roughly double the cost savings in Q2 compared to Q1, with benefits continuing into the second half of the year. For Augusta, we are seeing volume synergies, but achieving the full $40 to $50 million will require returning to cross-cycle margins. - Sherry Baker, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.