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Glatfelter Corp (GLT)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 net sales were $320.4M with a GAAP loss from continuing operations of $8.6M; diluted EPS from continuing ops was $(0.19) and adjusted EPS $(0.04). Adjusted EBITDA was $25.1M, broadly in line with Q3 and management’s expectations .
  • Segment mix: Spunlace delivered a notable turnaround (EBITDA up 217% YoY to $5.7M; ~7.3% margin), Composite Fibers improved (EBITDA +19% YoY; ~9.5% margin), while Airlaid softened on European tabletop and feminine hygiene weakness and an extended Gatineau maintenance shutdown (EBITDA down 26% YoY) .
  • Non-GAAP adjustments included a $5M tornado insurance deductible linked to damage at a Tennessee Spunlace converting facility, excluded from adjusted earnings; Q4 adjusted EBITDA margin was communicated at approximately 8% .
  • 2024 guidance introduced: Adjusted EBITDA of $110–$120M; cash interest ~$70M, capex $35–$40M, cash taxes $15–$20M, working capital usage favorable by ~$10M, and ~$25M of non-operating cash costs tied to merger integration planning and other one-time items .
  • Strategic catalyst: pending merger with Berry Global’s HHNF business (announced Feb 7), creating a scaled specialty materials leader; management highlighted complementary product portfolios and improved leverage profile (pro forma adj. EBITDA ~$455M with synergies) .

What Went Well and What Went Wrong

What Went Well

  • “Our Spunlace segment had a particularly strong quarter, delivering improvements in volume and profitability compared to the prior quarter… generating approximately $9 million improvement in Adjusted EBITDA in twelve months.” — CEO Thomas Fahnemann .
  • Composite Fibers sustained operational improvements with EBITDA margins “approaching 10% in the second half of the year,” supported by positive price-cost gaps and higher inclined wire production .
  • Corporate cost discipline: unallocated operating expense ex-adjustments decreased YoY; adjusted corporate unallocated expenses improved to $(6.9)M vs $(8.8)M in Q4 2022 .

What Went Wrong

  • Airlaid faced pronounced headwinds: lower selling prices due to pass-through arrangements and lower energy surcharges; segment EBITDA fell $5.7M YoY, with additional ~$1.3M impact from extended Gatineau maintenance downtime and softer European tabletop demand .
  • Continued volume pressure across certain categories (feminine hygiene, European tabletop) with competitive substitution to lower-cost substrates, especially in Europe .
  • Elevated interest expense impacted consolidated results (Q4 interest expense $17.5M), contributing to a GAAP loss from continuing operations despite improving operations .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Net Sales ($USD Millions)$357.0 $329.9 $320.4
Net Loss from Continuing Operations ($USD Millions)$(36.6) $(19.7) $(8.6)
Diluted EPS - Continuing Ops ($USD)$(0.82) $(0.43) $(0.19)
Adjusted EPS ($USD)$(0.45) $(0.23) $(0.04)
Adjusted EBITDA ($USD Millions)$17.3 $25.5 $25.1

Segment breakdown (Net Sales, Operating Income, EBITDA; margins shown where provided):

SegmentQ4 2022Q3 2023Q4 2023
Airlaid Net Sales ($USD Millions)$154.0 $147.0 $127.5
Airlaid Operating Income ($USD Millions)$14.1 $11.2 $8.4
Airlaid EBITDA ($USD Millions)$21.6; 14.0% $18.7 $16.0; 12.5%
Composite Fibers Net Sales ($USD Millions)$136.4 $109.7 $115.5
Composite Fibers Operating Income ($USD Millions)$4.8 $7.3 $7.1
Composite Fibers EBITDA ($USD Millions)$9.2; 6.7% $11.2 $11.0; 9.5%
Spunlace Net Sales ($USD Millions)$83.5 $73.8 $78.0
Spunlace Operating Income (Loss) ($USD Millions)$(1.2) $(1.1) $2.3
Spunlace EBITDA ($USD Millions)$1.8; 2.2% $2.2 $5.7; 7.3%

KPIs (Tons shipped, selected cash/debt):

KPIQ4 2022Q3 2023Q4 2023
Airlaid Tons Shipped (metric)39,186 40,076 37,293
Composite Fibers Tons Shipped (metric)25,677 22,188 22,770
Spunlace Tons Shipped (metric)14,957 14,436 15,571
Cash & Equivalents ($USD Millions)—$52.7 (Sep 30) $50.3 (Dec 31)
Total Debt ($USD Millions)—$855.3 (Sep 30) $860.3 (Dec 31)
Net Debt ($USD Millions)—$802.6 (Sep 30) $810.1 (Dec 31)

Notes:

  • Q4 adjusted earnings exclude a $5M tornado insurance deductible for the Tennessee Spunlace facility .
  • Q4 adjusted EBITDA margin communicated at approximately 8% .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAFY 2024N/A$110M–$120M Introduced
Cash InterestFY 2024N/A~$70M Introduced
Capital ExpendituresFY 2024N/A$35M–$40M Introduced
Cash TaxesFY 2024N/A$15M–$20M Introduced
Working Capital Cash UsageFY 2024N/AFavorable by ~$10M Introduced
Non-operating Cash Costs (integration, tornado deductible, turnaround, other)FY 2024N/A~$25M Introduced
Adjusted EBITDAFY 2023$100M–$110M (prior) Implied ~$95M (Q3 commentary); actual FY adj. EBITDA $92.6M Lowered in Q3; delivered below prior range

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Market demand/destockingBroad destocking across hygiene, tea, wipes; European consumers trading down; volumes mostly flat to down; managing fixed-cost absorption Destocking persisted; weakness in Europe; management cautious on 2024 visibility Ongoing softness, particularly in Europe; limited market visibility cited for 2024 Persistent headwind
Energy costs/hedgingEnergy as a higher cost share; Europe exposure; gradual normalization but still elevated vs pre-inflation Volatility risk; hedging layered for Europe; well-hedged into Q4 Continued macro volatility, especially in Europe referenced in guidance context Managed risk; volatile backdrop
Price-cost gapActions effective; lag from pulp/energy declines; aiming to sustain margins Price-cost gap turned positive in CF and Spunlace Positive gap supporting CF and Spunlace Q4 performance Improving
Spunlace turnaround/SontaraOperational improvements; headcount actions; conversion challenges Europe competition; portfolio rationalization; EBITDA up YoY EBITDA +217% YoY; ~7% margin; focus on critical cleaning/Sontara growth Structural improvement
Airlaid headwindsFort Smith fire; European tabletop weakness; pass-through price effects Weaker volumes; adverse price-cost gap; European competitive pressure Q4 EBITDA down; Gatineau extended maintenance; pressure in feminine hygiene/tabletop Soft; 2H 2024 expected improvement
Strategic portfolio actionsOber-Schmitten closure costs; site wind-down Ober-Schmitten sale completed; Costa Rica fiber operation sold Berry HHNF merger announced; regulatory milestones underway Transformational M&A
Financing/leverageBank covenant leverage 3.4x (Q2) Leverage 3.1x (Q3) Leverage 3.4x (Dec 31); available liquidity ~$135M (year-end) Stable compliance

Management Commentary

  • “Generated net sales of $320 million in Q4… Achieved Q4 Adjusted EBITDA of $25 million… Generating EBITDA margins of approximately 8% in Q4 amidst ongoing market softness.” — Earnings release .
  • “Spunlace… delivering improvements in volume and profitability compared to the prior quarter… approximately $9 million improvement in Adjusted EBITDA in twelve months.” — CEO .
  • “Market and competitive challenges persisted… most pronounced in our Airlaid business… extensive maintenance shutdown… continued pressure seen in feminine hygiene and European tabletop.” — CEO .
  • “We’re expecting 2024 EBITDA to be in the range of $110 million and $120 million… cash interest ~$70 million; capex $35–$40 million; cash taxes $15–$20 million; working capital favorable ~$10 million; nonoperating cash costs ~$25 million.” — CFO .
  • “Proposed plans to merge… Berry’s HH&S business… combined company… pro forma revenue ~$3.6B and pro forma adjusted EBITDA ~$455M, including expected synergies.” — CEO .

Q&A Highlights

  • Spunlace sustainability: Management views Q4 performance as a foundation with ~7% EBITDA margin; sees growth opportunity in Sontara critical cleaning, but cautioned against simply annualizing Q4 .
  • Airlaid regional dynamics: Europe materially weaker than U.S.; competitive pressure from lower-priced imports and substitution to cheaper substrates; expects 2H 2024 to improve vs 1H .
  • Merger financing and structure: NewCo to raise ~$1.5B; ~$1.0B dividend to Berry; ~$400M to retire GLT revolver and term loan; Glatfelter bonds to be guaranteed by domestic entities under NewCo credit facilities .
  • Capex cadence for HH&S: Historical 3%–6% of sales; forward expectation 2%–3% in near term, rising to 4%–5% longer term (management caveated it’s early) .
  • Guidance clarity: Q4 was tracking to revised FY 2023 guidance (~$95M implied); visibility supported by October trends and turnaround initiatives .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for GLT Q4 2023 were unavailable due to a data mapping issue; as a result, explicit beat/miss vs Wall Street consensus cannot be assessed at this time [SpgiEstimatesError from GetEstimates].
  • Given Adjusted EBITDA in Q4 ($25.1M) and prior commentary implying ~$27M was needed to reach ~$95M for FY 2023, performance was slightly below that implied figure yet consistent with in-line messaging; Adjusted EBITDA for FY 2023 ended at $92.6M .

Key Takeaways for Investors

  • Spunlace turnaround is gaining traction with sustained operational improvements and margin expansion; Sontara critical cleaning is a focus area for growth .
  • Composite Fibers’ positive price-cost dynamics and operational gains suggest improved resilience even amidst demand softness; margins near 10% in H2 .
  • Airlaid remains the pressure point due to European demand and competitive dynamics; management expects better utilization and mix in 2H 2024 following maintenance and innovation initiatives .
  • 2024 guide is conservative given macro volatility, but sets a clear earnings roadmap and cash cadence; monitor execution vs $110–$120M EBITDA and cash interest/capex targets .
  • The Berry HHNF merger is the key medium-term catalyst: scale, portfolio complementarity, and improved leverage profile could re-rate the equity upon closing; track regulatory milestones and shareholder approvals .
  • Balance sheet remains in covenant compliance (3.4x at year-end) with net debt of ~$810M; liquidity management and interest expense trajectory are important to near-term cash burn .
  • Without consensus estimates, position sizing should emphasize segment trajectory and merger optionality rather than a short-term “beat/miss” trade; watch quarterly updates for Airlaid recovery signals and Spunlace margin durability .
Citations: All tables and statements are sourced directly from Glatfelter’s 8-K earnings releases and earnings call transcripts:
- Q4 2023 8-K and press release: **[41719_0000041719-24-000003_glt-20240222.htm:1]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:0]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:1]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:2]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:3]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:4]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:5]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:6]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:7]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:8]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:9]** **[41719_0000041719-24-000003_q42023earningsreleaseex-991.htm:10]**
- Q4 2023 earnings call transcript: **[41719_GLT_3374562_1]** **[41719_GLT_3374562_2]** **[41719_GLT_3374562_3]** **[41719_GLT_3374562_4]** **[41719_GLT_3374562_5]** **[41719_GLT_3374562_6]** **[41719_GLT_3374562_7]** **[41719_GLT_3374562_8]** **[41719_GLT_3374562_9]**
- Q3 2023 8-K and transcript: **[41719_0000041719-23-000046_q32023earningsreleaseex-991.htm:0]** **[41719_0000041719-23-000046_q32023earningsreleaseex-991.htm:1]** **[41719_0000041719-23-000046_q32023earningsreleaseex-991.htm:2]** **[41719_0000041719-23-000046_q32023earningsreleaseex-991.htm:5]** **[41719_0000041719-23-000046_q32023earningsreleaseex-991.htm:6]** **[41719_0000041719-23-000046_q32023earningsreleaseex-991.htm:9]** **[41719_GLT_3363737_2]** **[41719_GLT_3363737_3]** **[41719_GLT_3363737_5]** **[41719_GLT_3363737_6]** **[41719_GLT_3363737_7]** **[41719_GLT_3363737_10]** **[41719_GLT_3363737_12]** **[41719_GLT_3363737_15]**
- Q2 2023 8-K and transcript: **[41719_0000041719-23-000030_q22023earningsreleaseex-991.htm:0]** **[41719_0000041719-23-000030_q22023earningsreleaseex-991.htm:2]** **[41719_0000041719-23-000030_q22023earningsreleaseex-991.htm:3]** **[41719_0000041719-23-000030_q22023earningsreleaseex-991.htm:5]** **[41719_0000041719-23-000030_q22023earningsreleaseex-991.htm:6]** **[41719_0000041719-23-000030_q22023earningsreleaseex-991.htm:9]** **[41719_GLT_3383726_2]** **[41719_GLT_3383726_5]** **[41719_GLT_3383726_10]** **[41719_GLT_3383726_11]**
- Merger update Q1 2024 8-K for added context: **[41719_0000041719-24-000015_q12024earningsreleaseex-991.htm:1]** **[41719_0000041719-24-000015_q12024earningsreleaseex-991.htm:4]** **[41719_0000041719-24-000015_q12024earningsreleaseex-991.htm:5]** **[41719_0000041719-24-000015_q12024earningsreleaseex-991.htm:7]**
- Estimates note: S&P Global consensus was unavailable due to tool mapping error (GetEstimates returned SpgiEstimatesError).