Clearwater Paper Corp (CLW)·Q4 2024 Earnings Summary

Executive Summary

• Clearwater Paper’s Q4 2024 was operationally weak (pricing pressure, Augusta outage, hurricane disruption) but optically strong on GAAP EPS due to a $307M gain on the tissue divestiture; Adjusted EBITDA fell sharply year over year and sequentially as SBS pricing remained under pressure and Augusta underwent a planned outage .
• Management executed two strategic transactions in 2024 (Augusta mill acquisition; tissue divestiture) and used ~$850M of proceeds to delever to ~1.1x net leverage; they also initiated a $100M buyback and repurchased ~$9–10M through early February 2025 .
• 2025 outlook: Q1 Adj. EBITDA targeted at $20–$30M; FY25 revenue ~$1.5–$1.6B with ~85% utilization, $30–$40M of fixed cost reductions (ramping through the year), $40–$50M major maintenance, and $80–$90M capex .
• Key potential stock catalysts: execution on cost takeout, ramp of a new long‑term supply agreement to fill 150–200k tons of open capacity at Augusta over several years, and tangible signs of SBS price stabilization/recovery as industry utilization normalizes .

What Went Well and What Went Wrong

• What Went Well

  • Strategic transformation completed: Acquired Augusta (adding ~70–75% capacity) and divested tissue for $1.06B; balance sheet delevered to ~1.1x net leverage and $204M net debt at year‑end .
  • Signed a major long‑term supply agreement expected to help fill Augusta’s 150–200k tons of open capacity over time; management incorporated volume into 2025 assumptions .
  • Clear cost program: Eliminated >10% of positions; targeting $30–$40M fixed cost reduction in 2025 and $40–$50M run‑rate benefit thereafter .

• What Went Wrong

  • Market/pricing headwinds: Paperboard ASP down 9% YoY in Q4; adjusted EBITDA total fell to ~$21M from ~$63M YoY; pricing decline a ~$36M YoY headwind in Q4 and ~$90M FY .
  • Operations disruptions: Hurricane Helene impacted Augusta, followed by a planned major maintenance at Augusta; Q4 costs elevated; sequential Adj. EBITDA fell from ~$63.5M in Q3 to ~$21.2M .
  • Continuing operations posted a GAAP loss (−$1.17 diluted EPS) despite optical GAAP EPS boost from the tissue sale gain; underscores the gap between core earnings and headline EPS .

Financial Results

Headline metrics (Total Operations; oldest → newest):

Notes: S&P Global consensus estimates were unavailable at time of retrieval; results vs estimates cannot be assessed.

Continuing operations snapshots:

• Net sales (continuing) were $387.1M in Q4 vs $393M in Q3; GAAP diluted EPS (continuing) was -$1.17 in Q4 and -$0.64 in Q3 .

Sales volumes and pricing (Paperboard; oldest → newest):

Balance sheet and leverage:

Drivers and deltas:

• YoY: Q4 total net sales -6%; Adj. EBITDA fell to ~$21M; ASP -9%; volumes +63% on Augusta acquisition .
• QoQ: Adj. EBITDA fell from ~$64M to ~$21M on Augusta outage, hurricane, and weaker mix, partly offset by volume .

Guidance Changes

Management notes they cannot reconcile Adj. EBITDA outlook to GAAP without unreasonable efforts .

Earnings Call Themes & Trends

Management Commentary

• Strategic focus: “2024 was a transformational year… We acquired [Augusta]… and divested our tissue business for $1.06 billion… used the proceeds to de-lever our balance sheet” .
• Market backdrop: “We continue to experience challenging SBS industry conditions, with supply exceeding demand” .
• Cost actions: “Reducing fixed costs, including eliminating more than 10% of all positions… deliver $30 to $40 million in cost savings in 2025” .
• Volume ramp: “Signed a major long‑term supply agreement… incorporated this volume into our 2025 assumptions… Augusta had ~150,000 to 200,000 tons of open capacity” .
• 2025 planning: “Q1 2025: $20 to $30M of Adjusted EBITDA… internal utilization ~85%… revenue ~$1.5 to $1.6B… $40–$50M major maintenance… $80–$90M capex” .

Q&A Highlights

• Long‑term agreement magnitude and ramp: Expected to fill Augusta’s open capacity (150–200k tons) over several years; included in 2025 volume assumptions .
• Cost savings cadence: Modest impact in Q1; ramps in Q2 with majority in H2 2025 .
• Tariffs/macro: Potential Canada/EU tariffs would likely raise input costs (chemicals/pulp); company would try to pass through to customers; primarily domestic supplier .
• Buybacks: Opportunistic when shares trade at a discount to intrinsic value; priority remains asset investment and balance sheet strength .
• Demand color: Customer conversations positive; food service more robust than folding carton; certain extruded SKUs close to sold out .

Estimates Context

• Wall Street consensus (S&P Global) for revenue/EPS was unavailable at time of retrieval; thus we cannot assess beats/misses for Q4. Future revisions may need to adjust for: (i) lower realized ASP trajectory, (ii) cost‑out ramp timing (H2‑weighted), (iii) volume ramp from the new long‑term agreement, and (iv) outage and energy cost cadence in 2025 .

Key Takeaways for Investors

• Core earnings remain pressured despite headline Q4 GAAP EPS strength; focus on continuing operations and Adj. EBITDA (Q4 total $21M) to assess underlying trajectory .
• The 2025 playbook hinges on cost reduction delivery ($30–$40M) and volume capture from the new agreement to offset pricing/inflation—watch H2 ramp .
• SBS pricing pressure appears to be moderating sequentially (ASP $1,216 → $1,192 → $1,177), but broader recovery requires industry utilization to move toward 90–95% .
• Balance sheet is now an asset (net debt ~$204M; ~1.1x leverage) enabling optionality for portfolio expansion and buybacks within a 1–2x framework .
• Near‑term print likely choppy: Q1 Adj. EBITDA $20–$30M with higher seasonal energy, no major outages; sequential improvements should come as cost savings and volumes ramp .
• Monitor execution at Augusta (operational stability post‑outage/hurricane) and timing of maintenance at Cypress Bend (Q2), Lewiston (Q3), Augusta (Q4) .
• Potential upside: faster demand recovery (food service strength), synergy capture, and tighter industry supply/demand; risks include further pricing pressure and macro/tariff‑driven input cost inflation .

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Additional Supporting Detail

• Q4 mix/operating impacts: Hurricane Helene damage at Augusta followed by planned outage created cost headwinds; Augusta back on track by year‑end .
• FY pricing impact: ~$90M negative impact on Adj. EBITDA from lower paperboard pricing vs 2023 .
• Q4 YoY bridge: Tissue divestiture (11/1) lowered contribution; price/mix -$36.3M; costs/other -$11.5M; volume +$10.9M .
• Net sales (continuing) Q4 $387.1M vs Q3 $393M; Q4 diluted EPS (continuing) -$1.17; total net income includes $307.2M gain (pre‑tax) from tissue sale .