Clearwater Paper Corporation Q2 FY2025 earnings call

• Delivered $40 million of adjusted EBITDA in Q2, which was in the middle of the guidance range of $35 million to $45 million.
• Net sales were $392 million, up 14% vs prior year and 4% vs Q1 2025.
• Successfully completed major maintenance outage at Cypress Bend mill at ~$9M, in line with estimates. Installed new emissions control device.
• On track to deliver $30 million to $40 million of fixed cost reduction in 2025.
• Repurchased approximately $4 million of outstanding shares in Q2, with $18 million repurchased since the new authorization in November 2024.
• Focused on expanding product offering, nearing decision on CUK expansion, working on compostable and lightweight products development.

In the second quarter, Clearwater Paper delivered $40 million of adjusted EBITDA, which was within the guidance range of $35 million to $45 million. Net sales were $392 million, up 14% versus prior year, primarily driven by the Augusta acquisition and partly offset by lower market-driven pricing. Net sales were also up 4% versus the first quarter of 2025, mainly due to increased shipments in the food service business. SG&A expenses were down nearly 14% versus last year to 6.7% of net sales, within the target range of 6% to 7%. Revenue contribution: Augusta acquisition boosted net sales, while pricing was down approximately 3% versus prior year reflecting broader market trends.

• Q3 2025 adjusted EBITDA guidance: $10 million to $20 million, impacted by $23 million to $25 million direct cost of Lewiston major maintenance outage and 5% lower production volumes versus Q1.
• Full year 2025: Revenue expected in the $1.5 billion to $1.6 billion range. On track for $30 million to $40 million of fixed cost savings. CapEx guidance remains $80 million to $90 million, with $56 million incurred year-to-date. Major maintenance costs expected to be $45 million to $50 million across 3 mill network. Long-term target: 13% to 14% adjusted EBITDA margins when industry utilization rates recover to 90% to 95%.

• Industry utilization rates below historical norms due to new capacity addition.
• Mixed demand signals with current demand softness.
• Dependence on factors like net SBS capacity decrease in 2026, tariffs, trade investigations, and antidumping actions for margin recovery.
• Impact of major maintenance outages on production volumes and costs.

Q: Asked about year-over-year demand improvement, unmade SBS orders, and changes in import outlook.

A: Arsen Kitch said there are mixed demand signals in Q2 with industry shipments down sequentially and year-over-year but backlogs up 14% vs Q1. Near-term economic uncertainty is hard to decipher. On imports, tariffs and trade actions could impact the ~700,000 to 800,000 tons of bleached paperboard and finished goods imported annually.

Q: Discussed Q3 EBITDA guide, incremental pressures.

A: Sherri Baker said Q3 adjusted EBITDA guidance of $10 million to $20 million is impacted by ~$23 million to $25 million Lewiston major maintenance cost, 5% lower production volume absorption, and modest tariff impact.

Q: Asked about swing factors for EBITDA range and Q4 shipment outlook.

A: Arsen Kitch said the Lewiston outage execution, demand stability, and impact of competitor new capacity are key swing factors. For Q4, there may be slight seasonality impact with potentially lower shipments due to outages.