Clearwater Paper Corporation (CLW) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed sentiment. While there is a positive increase in net sales and adjusted EBITDA, the net loss and noncash goodwill impairment are concerning. The Q&A reveals uncertainty around demand improvements and extended curtailments, which adds risk. The share repurchase is a positive, but the lack of concrete decisions and unclear management responses temper enthusiasm. Overall, the sentiment balances out, leading to a neutral prediction for the stock price movement.
Key Financial Performance
Net Sales Net sales increased by 12% year-over-year, driven by a 14% increase in shipments, primarily from operating the Augusta mill for a full year.
Adjusted EBITDA Adjusted EBITDA was $107 million, an improvement of $71 million versus the prior year, driven by exceptional cost control and execution.
Major Maintenance Outages Total direct costs of $50 million, marking a significant improvement in execution and cost versus 2024.
SG&A Expenses SG&A declined to 6.5% of net sales, down from 8.4% in 2024, due to $16 million in SG&A savings, which should improve long-term earnings potential.
Share Repurchase Repurchased $17 million worth of shares during the year, with $79 million remaining under authorization.
Liquidity Maintained a strong balance sheet, ending the year with more than $400 million in liquidity.
Net Income (Q4 2025) Net income from continuing operations was $3 million or $0.20 per diluted share, including $17 million of insurance proceeds.
Net Sales (Q4 2025) Net sales were $386 million, flat versus Q4 of 2024 as higher shipments were offset by lower pricing.
Adjusted EBITDA (Q4 2025) Adjusted EBITDA from continuing operations was $20 million, driven by cost reduction efforts and $6 million of insurance proceeds.
Net Loss (Full Year 2025) Net loss from continuing operations was $53 million or $3.28 per diluted share, primarily driven by a noncash goodwill impairment.
Insurance Recovery Received an initial settlement payment of $23 million, with $6 million related to operating costs incurred in 2025.
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Operating Highlights
Launch of Valora: A new lightweight paperboard product line, incorporating mechanical pulp in the middle layer, designed to compete with FBB. Scheduled for launch in Q2 2026.
CUK Investment Feasibility: Completed engineering feasibility for a $60 million CUK investment at Cypress Bend facility, targeting 100,000 to 150,000 tons of independent converter market.
Cost Reductions: Achieved $50 million in fixed cost reductions, including $16 million in SG&A savings, reducing SG&A to 6.5% of net sales.
Maintenance Execution: Completed 3 major maintenance outages on schedule with $50 million in direct costs, improving execution and cost efficiency.
Insurance Recovery: Received $23 million in initial settlement payment from representation and warranty insurance, with $75 million coverage remaining.
Tissue Business Separation: Successfully separated tissue business and integrated Augusta mill ahead of schedule, marking a strategic shift to a paperboard-focused business.
Price Adjustments: Announced price increases of $60 per ton for cup grades and $50 per ton for other products to offset inflation and support asset investments.
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Risk or Challenges
Demand Recovery: Demand recovery for packaging has not materialized as expected, with industry shipments of SBS largely flat year-over-year. This is compounded by lackluster CPG and QSR volumes, pressured by inflation, economic uncertainty, and the potential impact of GLP-1 drugs on consumption.
Industry Supply and Pricing: A competitor added more than 500,000 tons of new capacity in 2025, leading to a 10% increase in industry supply. This has resulted in industry operating rates decreasing to the low 80% range, causing pricing and margin pressure. Current margins are unsustainable for long-term reinvestment in capital-intensive assets.
Pricing Headwinds: The company faces a $70 million pricing headwind in 2026 due to changes in the RISI Index, with $50 million attributed to the fourth quarter price decline.
Operational Disruptions: Severe weather at the Augusta and Cypress Bend facilities in early 2026 caused operational disruptions and higher costs, resulting in $15 million to $20 million in incremental costs.
Cost Pressures: The company is experiencing cumulative inflationary pressures, necessitating price increases to offset these impacts and maintain investment in assets.
Strategic Execution Risks: The company plans to balance supply with demand in 2026, which may include extended curtailments on assets and further cost variabilization. Additionally, the feasibility of a $60 million CUK investment and other diversification efforts pose execution risks.
Insurance Recovery Uncertainty: The company has $75 million remaining in insurance claims from the Augusta acquisition but continues to work through the claims process, creating uncertainty in financial recovery.
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Guidance & Outlook
Revenue Projections: Revenue for 2026 is projected to be between $1.4 billion and $1.5 billion, with flat to modest shipment growth.
Pricing and Margin Expectations: The company anticipates a $70 million pricing headwind in 2026 due to 2025 carryover. However, RISI forecasts a recovery in SBS operating rates to 90% and a price increase of $60 per ton in 2026, with a total increase of $130 per ton by the end of 2027. If these projections hold, margins could improve by more than 10%.
Capital Expenditures: Capital expenditures for 2026 are expected to range between $65 million and $75 million.
Cost Management: The company plans to offset 2% to 3% of input cost inflation through net productivity improvements and maintain SG&A expenses at 6% to 7% of net sales.
Market Trends and Demand Recovery: SBS demand is forecasted to grow in 2026, with benefits from substitutions. Imports are expected to decrease by 8%, while exports increase by 5%. RISI forecasts a net capacity reduction of 180,000 tons in 2026, which should improve supply-demand balance.
Strategic Product Launch: The company plans to launch 'Valora,' a new lightweight paperboard product line, in Q2 2026, targeting the FBB market, which represents approximately 10% of North American bleached paperboard demand.
Operational Adjustments: Clearwater Paper plans to balance supply with demand in 2026, potentially including extended curtailments and cost variabilization. The company is also evaluating its manufacturing assets for further cost reductions and margin improvements.
CUK Investment Feasibility: The company has completed engineering feasibility for a $60 million CUK investment at the Cypress Bend facility, with a 12- to 18-month execution timeline. This project could capture 100,000 to 150,000 tons of the North American CUK market and provide flexibility for additional unbleached products.
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Shareholder Return Plan
Share Repurchase: We repurchased $17 million worth of shares during the year, with $79 million remaining under our authorization.
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Key Q&A
Q:What is the current status of rate switching from CRB to SBS, and how is it affecting the company's portfolio?
A:The company is in the early stages of observing rate switching from CRB to SBS. Customers are considering this due to cost pressures, as SBS is currently priced lower than both CUK and CRB. While there is potential for substitution in many applications, this transition is not happening overnight.
Q:What gives the company confidence that demand will improve this year, and what happens if it doesn't?
A:The company believes demand will improve due to signs of growth and optimism from CPG and QSR companies, slowing inflation, and possible substitutions. However, if demand does not improve, the company may need to consider additional capacity reductions to balance the market.
Q:Has the company made any concrete decisions regarding extended curtailments?
A:No concrete decisions have been made yet. The company is evaluating its options and expects to have a strategy by the end of Q2. They are considering long-term cost reductions and extended curtailments as part of their approach.
Q:What is the company's perspective on permanent or indefinite supply closures versus rolling downtime?
A:The company acknowledges underutilized capacity as a fundamental issue and is evaluating its assets for long-term decisions. While they have taken rolling downtime in the past, they are not ready to discuss specific decisions about permanent closures.
Q:Has the company's perspective on share buybacks changed given the recent drop in share price?
A:The company continues to prioritize investing in assets and maintaining a strong balance sheet. Share buybacks will be considered when free cash flows improve, but the focus remains on strategic capital investments and long-term viability.
Q:Is there any risk to fiber costs in Georgia and North Carolina due to reduced pulpwood harvest?
A:No, the company has not identified any risks to fiber costs in these regions. They expect inflation of 2% to 3%, primarily in labor, chemicals, wood, and transportation, but believe productivity improvements will offset these costs.
Q:How should the $20 million working capital improvement be expected to progress throughout the year?
A:The $20 million working capital improvement will be heavily weighted towards the back half of the year.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers to questions about specific decisions on extended curtailments and permanent supply closures. They also used vague language when discussing long-term strategies and did not provide detailed data or timelines for these decisions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bend facility
CPG
Index RISI
Paper
Price Index
RISI Price
SGA sale
action
coverage limit
decrease
dynamic
factor improvement
flexibility
improvement cost
increase ton
industry environment
industry pricing
industry rate
insurance proceeds
integration
investment
movement
option
outage spending
outlook assumption
paperboard demand
point
price increase
pricing RISI
pricing headwind
rate end
representation
return cash
sale shipment
schedule
shipment pricing
ton capacity
volume RISI
CLW Transcript
Clearwater Paper Corporation (CLW) Q4 2025 Earnings Call Transcript
Unknown2-18
The earnings call presents a mixed sentiment. While there is a positive increase in net sales and adjusted EBITDA, the net loss and noncash goodwill impairment are concerning. The Q&A reveals uncertainty around demand improvements and extended curtailments, which adds risk. The share repurchase is a positive, but the lack of concrete decisions and unclear management responses temper enthusiasm. Overall, the sentiment balances out, leading to a neutral prediction for the stock price movement.
Clearwater Paper Corporation (CLW) Q3 2025 Earnings Call Transcript
Unknown10-28
The earnings call presents a mixed picture. Financial performance shows improvement in EBITDA and cost savings, but a net loss due to goodwill impairment and cautious guidance for Q4. Product development is progressing, but strategic growth plans are delayed. Market strategy remains cautious with a focus on maintaining a strong balance sheet. Shareholder return is limited with modest buybacks. The Q&A section highlights management's caution and uncertainty in market conditions. Overall, the sentiment is neutral with balanced positive and negative elements.
Clearwater Paper Corporation (CLW) Q2 2025 Earnings Call Transcript
Unknown7-29
The earnings call indicates mixed signals. Positive aspects include a 14% YoY net sales increase and improved EBITDA from a loss last year, driven by cost reductions. However, the company's high CapEx, cost inflation headwinds, and soft industry forecasts pose concerns. The Q&A highlighted management's uncertainty around demand and reluctance to specify future pricing trends. The share repurchase plan is positive, but limited free cash flow may restrict further buybacks. These factors, coupled with economic uncertainties, suggest a neutral stock price movement in the short term.
Earnings call transcript: Clearwater Paper’s Q1 2025 results show growth
Positive4-29
The earnings call highlights a strong financial performance with a significant increase in EBITDA and net sales due to the Augusta acquisition. The company has also initiated a substantial share buyback program, which is generally viewed positively by investors. While there are challenges like input cost inflation and a net loss, the optimistic guidance on cost savings and free cash flow provides a positive outlook. The Q&A session reveals management's confidence in achieving cost synergies and handling tariffs, supporting a positive sentiment.
CLW Slides
CLW Report
Frequently Asked Questions
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They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
