05.03.22
Glatfelter Corporation reported a loss from continuing operations for the first quarter of 2022 of $108.3 million, compared with net income of $8.4 million in the same period a year ago. The 2021 results include the acquisitions of Georgia-Pacific’s U.S. nonwovens business (“Mount Holly”) and Jacob Holm ("Spunlace") as of May 13, 2021, and October 29, 2021, respectively.
Consolidated net sales for the three months ended March 31, 2022 and 2021, totaled $381.7 million and $225.7 million, respectively. On a constant currency basis, net sales for the Composite Fibers and Airlaid Materials (including Mount Holly) segments increased by 0.4% and 83.2%, respectively. The Spunlace segment, formed in connection with the Jacob Holm acquisition, had net sales of approximately $96.4 million.
The Russia/Ukraine military conflict and associated implications are expected to have a significant impact on the Dresden wallcover operations and the Composite Fibers segment. In addition, on April 8, 2022, wallcover base paper and tea filter products were placed on the European Union sanctions list, prohibiting export of these products into Russia for the foreseeable future. As a result, Glatfelter recorded a non-cash asset impairment charge of $61.3 million related to its Dresden operations. Additionally, the company recognized a goodwill impairment charge of $56.1 million for the Composite Fibers segment related to the long-term fair value implication of the Russia/Ukraine conflict and the unprecedented energy prices in Europe. A $3.9 million partial write-down of Russia and Ukraine accounts receivable and inventory was also taken in the quarter.
“During the first quarter, we continued to combat escalating raw material and energy price inflation across our entire business but most significantly in our Composite Fibers segment, while actively implementing additional price increases,” says Dante C. Parrini, chairman and CEO. “By the end of the quarter, we converted 35% of our Composite Fibers revenue base to a dynamic cost pass-through pricing model and implemented price increases for many other customers. In addition, we are actively addressing the impacts of the ongoing Russia/Ukraine conflict, including actions recently taken by the EU to place wallcover and tea filter products on the list of sanctioned materials, by fully complying with export regulations and financial transactions within the banking system.”
Parrini continues, “In our recently acquired Spunlace business, our improvement initiatives are showing signs of progress. Volumes for the quarter were ahead of expectations and the team continues to implement measures to drive further efficiencies and aggressively manage costs. While input costs and energy prices remain a challenge, we are generating higher order volumes and expect our intensified integration efforts to return this segment to profitability in the second quarter.”
Spunlace shipments for the first quarter were approximately 10% higher than expectations based on the two-month run rate from the previous quarter under Glatfelter ownership. An operating loss of $1.6 million was approximately $0.4 million favorable compared to the company’s expectations, mainly driven by higher shipments in the consumer wipes category positively impacting results by approximately $0.8 million. Higher raw material and energy costs unfavorably impacted earnings by $2.9 million and were only partially offset by higher selling prices and energy surcharges of $2.3 million. All other costs combined were $0.5 million higher compared to the previous quarter.
Meanwhile, Airlaid Materials’ net sales increased $65 million in the year-over-year comparison driven by the Mount Holly acquisition, higher shipments in all major product categories, and higher selling prices from cost-pass-through arrangements with customers. Shipments were 49.2% higher driven by strong growth in the tabletop, wipes, and hygiene product categories. Currency translation was $5.2 million unfavorable.
Parrini adds, “Shipments in Airlaid Materials were well ahead of last year with robust demand across nearly every product category. Mount Holly added $27 million in revenue and legacy Glatfelter volumes grew by 22%. While our contractual cost pass-through agreements and customer price increases provided relief from raw material inflation, operating profit was constrained by higher energy prices in Europe. Overall, this segment continues to perform very well as a leader in the industry.”
Consolidated net sales for the three months ended March 31, 2022 and 2021, totaled $381.7 million and $225.7 million, respectively. On a constant currency basis, net sales for the Composite Fibers and Airlaid Materials (including Mount Holly) segments increased by 0.4% and 83.2%, respectively. The Spunlace segment, formed in connection with the Jacob Holm acquisition, had net sales of approximately $96.4 million.
The Russia/Ukraine military conflict and associated implications are expected to have a significant impact on the Dresden wallcover operations and the Composite Fibers segment. In addition, on April 8, 2022, wallcover base paper and tea filter products were placed on the European Union sanctions list, prohibiting export of these products into Russia for the foreseeable future. As a result, Glatfelter recorded a non-cash asset impairment charge of $61.3 million related to its Dresden operations. Additionally, the company recognized a goodwill impairment charge of $56.1 million for the Composite Fibers segment related to the long-term fair value implication of the Russia/Ukraine conflict and the unprecedented energy prices in Europe. A $3.9 million partial write-down of Russia and Ukraine accounts receivable and inventory was also taken in the quarter.
“During the first quarter, we continued to combat escalating raw material and energy price inflation across our entire business but most significantly in our Composite Fibers segment, while actively implementing additional price increases,” says Dante C. Parrini, chairman and CEO. “By the end of the quarter, we converted 35% of our Composite Fibers revenue base to a dynamic cost pass-through pricing model and implemented price increases for many other customers. In addition, we are actively addressing the impacts of the ongoing Russia/Ukraine conflict, including actions recently taken by the EU to place wallcover and tea filter products on the list of sanctioned materials, by fully complying with export regulations and financial transactions within the banking system.”
Parrini continues, “In our recently acquired Spunlace business, our improvement initiatives are showing signs of progress. Volumes for the quarter were ahead of expectations and the team continues to implement measures to drive further efficiencies and aggressively manage costs. While input costs and energy prices remain a challenge, we are generating higher order volumes and expect our intensified integration efforts to return this segment to profitability in the second quarter.”
Spunlace shipments for the first quarter were approximately 10% higher than expectations based on the two-month run rate from the previous quarter under Glatfelter ownership. An operating loss of $1.6 million was approximately $0.4 million favorable compared to the company’s expectations, mainly driven by higher shipments in the consumer wipes category positively impacting results by approximately $0.8 million. Higher raw material and energy costs unfavorably impacted earnings by $2.9 million and were only partially offset by higher selling prices and energy surcharges of $2.3 million. All other costs combined were $0.5 million higher compared to the previous quarter.
Meanwhile, Airlaid Materials’ net sales increased $65 million in the year-over-year comparison driven by the Mount Holly acquisition, higher shipments in all major product categories, and higher selling prices from cost-pass-through arrangements with customers. Shipments were 49.2% higher driven by strong growth in the tabletop, wipes, and hygiene product categories. Currency translation was $5.2 million unfavorable.
Parrini adds, “Shipments in Airlaid Materials were well ahead of last year with robust demand across nearly every product category. Mount Holly added $27 million in revenue and legacy Glatfelter volumes grew by 22%. While our contractual cost pass-through agreements and customer price increases provided relief from raw material inflation, operating profit was constrained by higher energy prices in Europe. Overall, this segment continues to perform very well as a leader in the industry.”
