Glatfelter (NYSE: GLT) reported Q4 EPS of $0.34, $0.02 better than the analyst estimate of $0.32. Revenue for the quarter came in at $399 million versus the consensus estimate of $391.99 million.

“Our fourth-quarter operating performance reflects continued strength of our engineered materials businesses,” said Dante C. Parrini, Chairman and Chief Executive Officer. “Composite Fibers delivered a 22% increase in operating income compared with the fourth quarter of 2016. Earnings were driven by strong volume growth of 18%, as well as improved operating efficiencies and cost optimization initiatives. Advanced Airlaid Materials grew operating profit by 9% over the fourth quarter a year ago with shipments up 2%. Demand for our airlaid products remains strong as this business brings new capacity to the market, with shipments from Fort Smith, Arkansas on schedule for the first quarter. Our fourth quarter’s results, on an adjusted earnings basis, also benefited from an unusually low effective tax rate of 6.7%.”

Mr. Parrini said, “Our Specialty Papers business continued to face challenging market conditions which, when coupled with operating inefficiencies, led to lower profitability during the quarter. We are encouraged by recent announcements of price increases and additional industry capacity being taken out of the market which should be constructive for the business going forward. Our focus remains on aggressively pursuing cost efficiencies and process improvements to improve profitability.

“As we look ahead into 2018, we expect our cash flow profile to improve significantly with the completion of our major capital programs. For our Airlaid business, we are in the process of completing customer qualifications and product testing for our new Fort Smith facility which is on schedule for commercial shipments later in the first quarter. We expect to deliver 10% to 15% volume growth in 2018 as a result of this new capacity. For Composite Fibers, we expect solid shipment growth as demand remains strong. For Specialty Papers, we are encouraged by recently announced price increases in uncoated free sheet and carbonless products while we remain focused on operational factors that are in our control.”

Mr. Parrini concluded, “Our Board of Directors and management team regularly evaluate opportunities to enhance shareholder value and have decided to explore a range of potential strategic alternatives for Specialty Papers. Our strategic review process reflects a strong commitment to maximizing shareholder value by accelerating the growth potential for Composite Fibers and Advanced Airlaid Materials, and determining the best option for Specialty Papers.”

A possible outcome of the strategic review process may include, but is not limited to, the sale of the Specialty Papers business. At this time, the Company’s Board has not set a timetable for the completion of the process nor has it made any decisions related to any specific strategic alternatives. There can be no assurance that the review of strategic alternatives will result in a particular outcome. The Company does not intend to provide any updates unless or until it determines that further disclosure is appropriate or necessary. The Company has retained Credit Suisse as its financial advisor to assist in the review of strategic alternatives for the Specialty Papers business.

Outlook

Composite Fibers’ shipping volumes in the first quarter of 2018 are expected to be in line with the fourth quarter. Selling prices and raw material and energy prices are expected to be slightly higher compared with the fourth quarter.

Advanced Airlaid Materials’ shipping volumes in the first quarter of 2018 are expected to be approximately 5% higher than the fourth quarter due to commencement of commercial shipments from the Fort Smith, Arkansas facility and overall higher customer demand. For the full year 2018, we continue to anticipate shipping volumes to be 10% to 15% higher than 2017 driven by the start-up of the Fort Smith facility. Selling prices and raw material and energy prices are expected to increase slightly compared with the fourth quarter.

Specialty Papers’ shipping volumes in the first quarter of 2018 are expected to be relatively flat compared with the fourth quarter of 2017. Average selling prices are expected to increase by approximately $20 per ton while raw material and energy prices are expected to increase by approximately $2 million compared to the fourth quarter. Operational challenges in the first quarter are expected to impact profitability in a magnitude similar as was experienced in the fourth quarter. The first quarter will also reflect higher seasonal energy consumption.

Corporate costs are expected to increase approximately $1 million in the first quarter of 2018 when compared to the fourth quarter of 2017.

Start-up costs associated with Advanced Airlaid Materials’ capacity expansion are expected to be approximately $3 million, after tax, incurred primarily in the first half of 2018.

Interest expense is expected to total approximately $22 million for the full year 2018.

Consolidated capital expenditures are expected to total approximately $67 million to $72 million in 2018.

The effective tax rate on adjusted earnings is expected to be approximately 33% for the full year 2018.

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