Schweitzer-Mauduit (SWM) Tops Q2 EPS by 11c

Schweitzer-Mauduit (NYSE: SWM) reported Q2 EPS of $0.93, $0.11 better than the analyst estimate of $0.82. Revenue for the quarter came in at $217.3 million versus the consensus estimate of $209.5 million.

Frederic Villoutreix, Chairman of the Board and Chief Executive Officer, commented "Second quarter financial performance reflected continued cigarette paper momentum, encouraging signs regarding the stabilization of DelStar's sales, and contributions from Argotec. These positive factors were partially offset by evolving challenges in the Chinese tobacco industry. While currency translation impact on second quarter earnings was neutral, political events such as Brexit provide uncertainty regarding potential currency movements through the remainder of the year. Second quarter Adjusted EPS of $0.93 was slightly below last year's second quarter, however, last year included a $0.09 per share gain from sales of water rights. We continue to drive improvements across our business, with our segment margins reflecting the results of our strategic actions both internally and through the addition of Argotec."

"The Engineered Papers segment delivered strong volume performance, though as we had expected, LIP volume strength tapered off from the elevated levels we experienced in late 2015 and first part of 2016. A moderate year-over-year LIP volume decrease in the second quarter was more than offset by double digit growth in various other cigarette paper products, indicating strong share performance in the marketplace. In the second half of 2016, we expect our European LIP customers to have reduced order activity as built-up inventories move through the retail channel. Non-tobacco paper volumes were up significantly due to large orders of commodity-grade papers, however we are making good progress increasing the profitability of these typically low-margin products. Profit contributions from our Chinese JVs were lower versus last year due to a temporary production shutdown in our Chinese paper JV and a challenging overall tobacco environment that is hindering the volume ramp-up of our recon JV."

"Within our AMS segment, organic Net Sales were flattish excluding negative currency impacts, an encouraging result after several quarters of mid-single digit organic sales declines. Key drivers of this performance included continued growth in water filtration, which offset lower industrial sales, and mildly improved activity from filtration customers serving the oil, gas, and mining end-markets. Argotec continues to deliver solid results both on the top and bottom line, and furthering our efforts to create a more integrated AMS platform that leverages the production and commercial assets of DelStar and Argotec remains a top priority."

Mr. Villoutreix concluded, "Assessing our overall 2016 financial performance mid-year, we are executing generally as planned. Our year-to-date GAAP EPS is $1.54. Our year-to-date Adjusted EPS of $1.73 annualizes to a rate well above our guidance, consistent with the expectations that first half profits would be higher than second half. Looking longer term, we continue to execute on multiple strategic and operational initiatives intended to maximize the cash flow of our attractive tobacco franchise and drive top-line growth and margin expansion in AMS. These actions support our long-term strategy to rebalance our overall revenue and profit mix and reposition SWM as a more growth-oriented enterprise."

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