Magnera (MAGN) 8 Aug 242024 Q2 Earnings call transcript

Good day, and welcome to the Glatfelter's Second Quarter 2024 Earnings Release Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Ramesh Shettigar. Please go ahead, sir.

Anna. you, Thank welcome Call. and XXXX Quarter Second Good to Conference Earnings morning, Glatfelter's This Chief Vice Treasurer. Senior is Shettigar, Ramesh President, Financial and Officer

On Executive our Fahnemann, present myself. the results, call, Thomas is second President of Officer quarter Chief Glatfelter, and and to

presentation, begin a have our few Before reminders. I we standard

earnings term included to financial our and our reconciliation measures. are release During the of this in our well slide, as these which we morning, earnings call measures GAAP-based website. A is results as today's use financial investor of the will adjusted other in non-GAAP both on available

We will forward-looking that today to are subject also make uncertainties. risks and statements

to XX-K, statements undertake and has factors no cause of disclose only differ XXXX filed with them. these results as we could which forward-looking statements. materially today's Form speak today, from These release, obligation the SEC, and that update Our actual to been our

over turn now Thomas. to will the I call

business name activities as diligently later legal with Call. operate regulatory plan HHNF progress the everyone, closing with various Second Berry's continued when quarter President pleased of in currently will business Glatfelter's CEO, Hello, of the the this preparation division. and to transaction the progress of the under the merger of Magnera, we as I'm and to Ramesh. second Thanks, welcome proposed XXXX with the for during Quarter for Investor Begle year. continued team The the Curt HHNS Berry's

million outcomes. same businesses EBITDA of to production I Composite higher $XX.X compared position last rigorous million same quarter our Magnera. gaps. shipments, by price Fibers approximately The the increased of year. respectively, call, of million, We on earnings The quarter and year. we $X the launch compared meaningful results The an cost EBITDA driven the achieved included for to last were million today's For higher Spunlace successfully and as steadfast achieved $X several and of quarter $X.X adjusted performance will to improvement focus management Glatfelter's second business performance, highlights

experience to EBITDA demand flow, a adjusted to was to $X to the downward, The the production resulting in second When the cash decline softer approximately same year. XXXX. $XX adjusted we improved therefore, and contributed performance free compared segment's Airlaid continued which higher million Materials in period in of combined, segment quarter million last compared

our trending our million markets of contributions the particularly in pleased improvements performance and seeing has pleased EBITDA I'm I'm our basis. delivered the especially trailing on way efforts. are The Spunlace managing mixed, Europe, XX-month in both of the from Fibers in ongoing Spunlace While are multiyear remain right we disciplined business that with and that direction. $XX turnaround Composite of adjusted a resulted

working continued which actively product would the portfolio to challenges, to towards of end our through speak expand to demand are we new Airlaid Also, address call. innovation product today's I

For these success the contribute of reasons, I Magnera. long-term remain confident for in our ability to

I will now call Ramesh. to the turn over

Thank Thomas. you,

basis currency by Slide X% segment. constant results Following the the prices summary down just Airlaid year, up Materials Thomas quarter of period lower lower a financial shipments. driven second and of same million last were on versus XX% provided, X for selling approximately primarily Revenues on shows $XX highlights the a

gap a energy net customers to mainly cost reflecting in nonfloating earnings volume. to cost the to due selective basis, lower declines raw Europe million. was price and were prices to and by Selling concessions $X.X favorable pass-throughs, materials in price regain costs On

cost in largely actions wipes lower year-over-year, shipments hygiene our dynamic. Volume The improve hygiene in margins and XXXX pricing decline by weaker categories. taken was in driven to was to due price primarily and protect

to versus customer was quarter. expect million of the primarily the Operations in were approximately by to levels. timing third manage tons category inventory Conversely, due orders, the unfavorable we to of decline $X.X X,XXX production volume and higher lower prior related wipes year, in wipes

And negatively for and to quarter. hedging related $XXX,XXX, impacted XX mainly euro. weaker the exchange due prior versus currency the by margins basis segment year points EBITDA earnings the Foreign improved by

X quarter targeted constant segment. from Composite summary to of second for of revenues on $X.X X% selling to mainly were and results basis, down Fibers actions preserve customers food beverage a currency the with implemented lower prices shows Slide a contracts floating volume. due million Total and larger pricing

price were quarter cost compared remained raw materials, with earnings by which last in by million million freight, to year. $X.X Composite period Fibers energy year. Overall, higher when categories except the wallcover favorable versus prices gap for lower all and Shipments declining same last improved $X.X key for versus same prices the the

was and to by wire higher $X.X other production. mainly due inclined Operations favorable million,

slightly the was by favorable quarter. margins for XXX prior versus $XXX,XXX, exchange and points basis EBITDA improved segment by the year Foreign

the pass-through was a This X Spunlace a X%, for on by critical lower hygiene higher hygiene and up X% category. basis, Slide cost selling coming approximately provisions, constant by shows Revenues summary wipes were quarter raw in primarily $X in partially second the from prices shipments of results categories. of cleaning the segment. driven material of offset mainly currency million and

production. inflation Raw resulting by $X.X $X.X million, material, other were Operations were in favorable, driven million cost gap. mainly favorable by energy positive and price higher

prior negatively margins weaker by year by exchange EBITDA the the the euro. basis impacted improved for points versus XXX And $XXX,XXX, quarter. earnings Foreign segment from coming

X Glatfelter items. and recovery our to was the loss this of expecting with to for supply business, are costs the fiber again HHNF This initiatives a Strategic material corporate we driven faulty which in primarily second year. costs driven by half transaction close costs vendor were financial year. quarter, Berry's versus Corporate lower were XXXX. approximately $X.X in of to related quarter higher by other proposed Slide last this shows second million

shows our Slide X cash flow summary.

was our usage earnings of $XX of was higher quarter driven approximately second million largely free flow million, $X the and $XX primarily working payable. capital lower XXXX. of accounts the For in period approximately by million versus cash XXXX, same adjusted This higher approximately from

last items by $X lower approximately operating same to year. $X vendor other lowered Capital rebates while compared by flow quarter largely cash expenditures quarter this million, by fewer driven the million, were

shows metrics. XX sheet balance liquidity some and Slide

leverage Our agreement, approximately XX, QX. of credit under of and million X.Xx liquidity end was calculated we ratio, June at as of the $XXX had the bank available as

now call I my This Thomas. back remarks. concludes turn to will the prepared

Thank you, Ramesh.

demonstrated As results, by with business the underlying our first half backdrop, a our market I'm of in performance challenging Europe. pleased despite especially

innovation. Now to our efforts turning in

One hygiene to a portfolio. be which favorable a particular in progress should We have material few in Europe, manufactured during second Airlaid initiative on a made the filter segment targets quarter. media very generate to specialty initiatives our key within our mix relative good

with exciting into agreement for this this the directive. a the product, plastics EU team, product our entered and a the to new biodegradable full standards meets ahead. supply single-use Equally established by the continue its customer we product and is months customer for in have to the potential will We enhance and

call, to today's employees to the opportunity I closing company. our thank In want to Glatfelter commitment and again this take dedication for their

we business to especially the As third past quarter, good to for about the forward continued their team, lead this successfully success commend very Magnera. to team many underway preparing now this several feel to having look I proud years to and the I'm for day-to-day our their come. for the years people entire transition run I while the also and year, hard well with are work these capabilities of and

now open will the questions. I for call

from first now TPG with Instructions] take [Operator Gordon. our we'll Ginnings And question Mike Angelo

to business the Congrats kind of thoughts issues Europe. on whether stronger or primarily guess for instance? questions talking year. the starting it's visibility some I half the quarter. sort of in of in back the itself What There's other progress typically find channels? maybe of a you Nice sales you first I have Airlaid out of guys the the these And out then a the performance about secondarily, with are seeing of initiatives the on QX. now those couple guess, in quarters, segment. on either Any market seasonality we've that been or in volume-related matters, undertaken been

in Maybe seeing part taking the your we is Mike. of If now have at look we're clearly weakness What Europe. market. the second North volumes, right America that than question the seen yes, healthier first. is Okay, some we

we bit this really contract. market, Europe. the definitely, I'm have mentioned and get to much before, happy done, very little But with We portfolio, and we Europe. product we into are a are Europe. What in But we seeing we than still also faced is healthier some an looking diversifying in a our we improvement that are America North able new signed of product in issues were really filter a product,

we're of at So signs market And challenges, the this us. than in all in that the if first I half. the already volume, And second kind be stronger will also seasonality, seeing really in you half July. the despite that of helps look Airlaid year some expect would

think sort in in I we that And last in can from how perspective Excellent. terms a as where are I America was quarter, in around commentary know where there about terms of utilization Airlaid that some provide to Thomas, of you contextualize any of color of sort on we rate, Europe? are guess, utilization maybe we North and

XX% So in the of terms of first utilization side, XXXX. Airlaid half were the in roughly we on around utilization, Mike,

For than half, maybe the second that. slightly higher

the of of when probably was second year, XX% years, that to some we half Historically, range. we're pickup, demand Going compare to into XX% been this couple mentioning. last Thomas in as the seeing the we've

that with the softness adjust Airlaid, had our utilization. we've see So to in you clearly production can also and

So down. naturally that's come

in utilization In around assets. half the especially for the was first XX%, wire Composite Fibers, inclined

kind be then around in also, expect and XX%. the between half, that XX%. same to helps. if to we're expecting half. in we been Second and been XX% historically historically, roughly half And XX%, maybe XX% And Spunlace, the going we've second into XX%, And XX% that utilization, first around the we've of was

the comment Yes. -- maybe the But X coming Spunlace. on to

in little always million delivered we is of see I filling this we at there's as think also, positioning you kind I north that $XX if again, And as of XX upside far last a EBITDA are in And I of capacity lot months. the the now concerned. market. a in mean, look we that mentioned capacity Spunlace

really still room and -- capacity there available. have that's for because there's improvement again, So we

Correct.

if maybe guess, the X questions last year, are you'll over thinking capital the that? about And of balance of evolution Excellent. working me. I in Ramesh, indulge you how terms

second entire expecting the look half. I capital, you favorable would Mike, at say, if working

cash half. will a working is of some and production We're up lower. Fourth so to Third going production focused use into the ramp quarter, likely quarter here most kind of a as bit inventory, we continue on. on be usually, second capital

the strongest out first that second of half half So typically this a of a in from working fourth flow user expect we we've is But in and seen our XXXX. year, net-net, capital. cash the get quarter of been quarter you've perspective cash our coming unwound of to here then

favorable So into working as year. capital of second the this half get we

and forma guarantees Great. could guess, just the And on in kind still of left of a structure, updates refresh of then, the timing lastly, what liens the transaction, kind that's I on lastly, debt the Any debt then being sort complete And the the you just just at are have? on capital order and debt to amount transaction? both us the closing on of existing that? new will and including the pro new items not then refinanced of remind

then Sure. [indiscernible]____XXXX_cap Maybe _. let structure, Ramesh talk and issues, about regulatory the about can just talk me the

to So regulatory all the Mike, able antitrust approvals we done. were get

are that with one. we done So

we on our private ongoing. order get we actually, thing shareholder the which This to received our letter shareholders all which IRS. transaction. also still this working still from from the to to approval is filings, is do And We the We're the for in need have ruling meeting do.

very to this concerned, still as are far half be second of really is close transaction. timing in we'll So optimistic able as the we the that year,

right time, kind no you issue So everything There's is if will. of big on now.

key the steps, S-X the then and Yes, those vote. the proxy X filing are

still On previously what the in the holds think been Mike, structure, has true. financing, cap I communicated

our capital term take the New existing the will loan. of revolver This pay billion. Gordon of also raise of paydown our It account account borrowing. Angelo will take into into about $X.X down

X million remaining $XXX closing if transaction to billion to to will existing capital billion at debt, raise, those going look the it, $XXX roughly we'll used you $X be between looking $X.X dividend so and about any of of then up costs. pieces have, kind Berry proceeds pay off So we're of at million. And call the

for instruments a now facility. the have form the right billion raise. $XXX also of Magnera still in the capital loan as a B of asset-based So will term revolving million credit $X.X

closing but B, by still remain then be the same they of new ratably which guarantors is will outstanding, at the will And bonds, the bonds, also equally as the million the to become coming secured Term guaranteed our Loan financing. and $XXX the Glatfelter those those deal. to will continue And

bonds, will our they while outstanding, remain So secured. they become will

who Bank is Spitz We'll now caller, take with Roger our next of America.

you confirmed billion become upon of term the ratably I'm the glad loan. secured occurrence will the bond $X.X

in of thank just during So environment? for was rising spread pulp cost all to you curious do how QX you were I'm that. in this period positive X The that segments. able market price price

I of we arrangements, X Roger. in general, types mean, again, Yes, will. Okay. if have you different

We have our pass-through customers.

that's more increases, it automatic or down, less goes we pass-through or So or price adjust material downwards. price if raw an the of energy

You we have lag this, there. to have about think time a

sometimes there's time would even But a X quarter say, I months normally, normally, months, lag. So customer. X X for

X the bit. and said, because areas, was huge is customer. And other But a sometimes the of hurts really and we caught part there. it the sometimes we kind And one, XXXX, little little gain a a bit this of when in X gap of focus had were we again, which this you you

We are raising prices.

We you right customers then kind customers are on based the increases not we should this pass-through this, capture quarter. second in are who a we of result raw the if quarter with now, the actually, we actually are see the the that raise result material and coming And are more is actually is I prices. that for at, positive. still look and in on seeing third also And

strategy. part And of this was turnaround all the

clear very our people and sales kind a and where good discussion, that's there of we it lot the strategy made a did was a but also And job, yes. of of part

it X always X X a fast. on kind we who that's of delay, do delay. are can relatively people relatively pass-through, a little on months, it these So areas. People again, And fast. we not but There's do months formula, can

guidance of updated the the the spoke et to But EBITDA, on you likely guidance overall, for give are I XXXX your merger. pending to guidance And like capital. quarters, original little guidance, it. working just about a X Got bit last cetera? guess haven't the sort you able you CapEx, due any updated

guidance, to Okay. me some EBITDA, That's we have just I given I talk and the mean didn't change it. really guidance. Roger. let why mean, the there's mention about we no

right million. to bit higher standpoint, I $XXX now, we And to lower that million our the If feel to end so a from of guidance. look a still we maybe million, $XXX the end -- $XXX confident million feel but little at that of change $XXX than pretty there's no

elements, $XX And million like Cash between million true. roughly other Roger, hit and to between $XX still slightly million CapEx capital, and around part can around breakeven, I maybe million. taxes strategy, other $XX turnaround as we've XX% Working cash interest, I million. costs the positive. to say, of And would still as then between holds strategic the of initiatives on of part got XX%. $XX still the cash so $XX and

flow So year. million down still about to $XX is for I would walking full say a net negative cash

to concludes like session. over or for to that back question-and-answer today's the closing turn And Fahnemann comments. conference additional any Mr. I'd

our to wish Okay. day, Thank time the Thank we'll talk you the much and call. quarter update everybody a I so take great to and you you. later. for

Thank you.

your that conclude once We does participation. thank And today's you for all again, conference.

You may now disconnect.