Clearwater Paper sees losses in first half of 2024

Clearwater Paper lost $25.8 million in April, May and June, its 2024 second quarter, leaving the company with a loss of $8.6 million for the first half of its 2024 fiscal year.

The second quarter loss followed the first quarter in 2024 where Clearwater Paper reported earnings of $17.2 million.

Lewiston, the home of Clearwater Paper’s largest manufacturing complex, played a significant role in the results, according to a Tuesday news release from Clearwater Paper.

The business experienced a decrease in operating income and adjusted earnings before interest, taxes, depreciation and amortization for pulp and paperboard (EBITDA) compared with the same time last year, according to the news release.

Pulp and paperboard had an operating loss of $12 million for the second quarter of this year compared with an operating income of $42 million in the second quarter of 2023, according to the news release.

Adjusted EBITDA was $11 million in the 2024 second quarter, compared with $51 million in the 2023 second quarter.

The declines were driven by a scheduled major maintenance outage in Lewiston and lower sales prices, which were “partially offset by lower wood costs and an insurance recovery” related to cold weather in Lewiston last winter, according to the news release.

Clearwater Paper invested $75 million at its Lewiston site this year, with the largest share of the money, $35 million, going to rebuild one of two recovery boilers used in a process that converts wood chips into pulp for tissue and paperboard, according to a March update.

The 15-story-tall recovery boiler was originally constructed in 1988 and is where the expensive chemicals required for pulp making are recovered so they can be reused.

The recovery boilers and a wood waste boiler create steam, which runs equipment and is channeled through turbines that generate electricity.

The work was “more challenging” than Clearwater Paper expected and the company is now planning to move to annual maintenance outages to make them “smaller” and more predictable, said Arsen Kitch, Clearwater Paper’s president and CEO, in a conference call Tuesday for stock market analysts.

Sales volumes in paperboard rose by 46% to 272,585 tons compared with the same time last year, primarily driven by the company’s May 1 acquisition of a paperboard plant in Augusta, Ga., Kitch said.

But average net sale prices in paperboard decreased 14% to $1,216 per ton for the second quarter of 2024, compared with $1,413 per ton for the same time last year, according to the news release.

A “bright spot” in paperboard, which makes paper dishes and packaging for food service, is that it is showing “solid and growing demand,” Kitch said.

“Our backlogs have grown and we’re becoming capacity restrained,” he said. “As a result, we’re implementing a previously announced price increase to our customers for these grades, including plate and cup stock.”

Frigid weather in January had a financial impact of $17 million for Clearwater Paper for expenses such as damaged equipment and a temporary discontinuation of operations, said Jules Joy, a spokesperson for Clearwater Paper.

The company had an insurance deductible of $4 million and received $10 million in proceeds from insurance, she said.

The $700 million acquisition of a Graphic Packaging Holding Company mill in Augusta, Ga., is part of an overall strategy that involves adding more paperboard products, Kitch said.

“Our goal is to build on our position as a scaled paperboard packaging supplier in North America with a compelling product offering, outstanding service and a consistent track record of value creation for our shareholders,” he said.

At the same time, Clearwater Paper is exiting its tissue business with a sale of those operations to Sofidel, a company headquartered in Lucca, Italy, for $1.06 billion in a transaction expected to close by the end of this year.

Lewiston’s tissue operations as well as its plants in Shelby, N.C., Las Vegas, and Elwood, Ill., are part of the deal. Clearwater makes tissue then converts it into tissue, toilet paper, paper towels, paper napkins and facial tissue for store brands in Lewiston, Shelby and Las Vegas, which have packaging facilities. Elwood has converting and packaging operations.

A total of about 500 of Clearwater Paper’s 1,300 Lewiston employees work in tissue. They will be hired by Sofidel when the deal closes, Kitch said.

The transaction includes a lease of land and facilities in Lewiston and a services and use agreement for Lewiston, he said.

“We expect net proceeds from the sale to be approximately $850 million, which we intend to use to repay existing debt and meaningfully deleverage our balance sheet,” Kitch said.

The performance of Clearwater Paper’s tissue segment in the second quarter of 2024 was similar to the same time last year.

Retail tissue sales increased 3% to 81,196 tons in the second quarter of 2024, compared with the same time last year, according to the news release.

Average net selling prices for retail tissue decreased 3% to $3,104 per ton, compared with $3,214 per ton for the same time last year, according to the news release.

Williams may be contacted at ewilliam@lmtribune.com or (208) 848-2261.