Glatfelter (NYSE: GLT) reported Q2 EPS of ($0.10), $0.05 worse than the analyst estimate of ($0.05). Revenue for the quarter came in at $406.72 million versus the consensus estimate of $418.43 million.

“Significantly higher input costs, and operational challenges in Specialty Papers, led to second-quarter results that were below our expectations,” said Dante C. Parrini, Chairman and Chief Executive Officer. “During the quarter, higher purchased pulp prices adversely impacted our results by $9 million. While selling prices increased in all of our businesses, this was not sufficient to offset increases in raw material prices, particularly in Composite Fibers. However, Advanced Airlaid Materials volume and net sales grew 6% and 16%, respectively, over last year. The additional capacity from the new Fort Smith facility is ramping up and enabling us to meet demand from key customers who serve the growing North American wipes market.”

Mr. Parrini said, “In addition to higher pulp prices, Specialty Papers’ results were adversely affected by increased costs of the annual maintenance outages and cost penalties from a slower than expected restart. However, the business unit successfully capitalized on an improving pricing environment, achieving a nearly $40 per ton increase in average selling prices compared with the first quarter of 2018. With the maintenance outages now complete, we anticipate volumes and operating income to improve on the heels of strong industry operating rates and pricing momentum heading into the second half of the year.”

Mr. Parrini concluded, “While our second-quarter financial performance was weaker than expected, we are confident our engineered materials platform continues to represent significant opportunity for Glatfelter and value for our shareholders. Our Advanced Airlaid Materials business is positioned to accelerate its growth as utilization of the new capacity increases. In addition, we anticipate closing on our announced acquisition of Georgia-Pacific’s European nonwovens business during the fourth quarter, pending regulatory approval. This transaction is expected to be immediately accretive, and we look forward to adding its complementary products to our Airlaid Materials portfolio. Composite Fibers will continue to face competitive market conditions and raw material cost challenges in the near term; nonetheless, we remain a leader in the end-markets served and continue to be optimistic about the market growth potential.”

Outlook

Composite Fibers’ shipping volumes in the third quarter of 2018 are expected to be approximately 8% higher than the second quarter. Selling prices as well as raw material and energy prices are expected to increase slightly.

Advanced Airlaid Materials’ shipping volumes in the third quarter of 2018 are expected to be in-line with the second quarter of 2018, and selling, raw material and energy prices are expected to increase slightly. For the full-year 2018, we anticipate shipping volumes to be 6% to 8% higher than 2017 as the ramp-up of new volumes has been delayed slightly by qualification processes. We anticipate taking downtime in the third quarter to align supply with demand, resulting in an adverse impact to operating income of approximately $1 million.

Specialty Papers’ shipping volumes in the third quarter are expected to be 8% higher than the second quarter of 2018. Average selling prices are expected to increase by approximately $20 per ton and we expect raw material and energy prices to increase slightly.

Consolidated capital expenditures for the year are expected to be between $60 million and $62 million.

The effective tax rate on adjusted earnings is expected to be approximately 35% in the second half of 2018.

For earnings history and earnings-related data on Glatfelter (GLT) click here.