Clearwater Paper Q1 Earnings Call Highlights

Key Points

• Clearwater Paper reported Q1 shipments up 5% but lower market pricing drove net sales down 5%, with an adjusted EBITDA of $2 million and a net loss of $13 million; results were impacted by roughly $15 million of weather disruption and included $17.5 million of insurance recoveries.
• Management said industry capacity began the year over 10% above demand but actions—including the Cypress Bend restructuring that cuts mill rolls about 20%—have reduced excess supply by ~50%, aligning production toward a target of ~1.2 million tons (versus ~1.4 million capacity) and supporting margins as operating rates approach ~90%.
• The company expects $3–5 million of quarterly input-cost headwinds tied to the Middle East and is pursuing pricing (a $60/ton increase on extruded products and $50/ton on non-extruded grades); Q2 adjusted EBITDA is guided to breakeven to -$10 million, full-year revenue is targeted at $1.4–1.5 billion, and management says there is a path to break even or positive free cash flow while planning near‑term debt refinancings.

Clearwater Paper NYSE: CLW reported first-quarter fiscal 2026 results that reflected higher shipment volumes but continued pricing pressure in the solid bleached sulfate (SBS) paperboard market, along with temporary operational disruptions tied to severe weather.

First-quarter results and operational impacts

President and CEO Arsen Kitch said shipment volumes increased 5% versus the prior-year period, but “lower market pricing” more than offset the volume gains, leading net sales to fall 5% year over year. The company posted adjusted EBITDA of $2 million, which Kitch said came in “slightly above our guidance of break even,” despite approximately $15 million in weather-related impacts at the company’s Augusta and Cypress Bend mills.

Chief Financial Officer Sherri Baker reported a net loss from continuing operations of $13 million, or $1.29 per diluted share. Net sales were $360 million. Baker also noted that SG&A as a percentage of sales remained below the company’s 6% to 7% target range, which she attributed to “continued cost discipline.”

Market conditions: supply, demand, and imports

Kitch described an SBS market where demand is holding up better than other paperboard categories. He said SBS shipments were “nearly flat” in the first quarter of 2026 versus the first quarter of 2025, while coated recycled board (CRB) and coated unbleached kraft (CUK) declined by around 3%. He added that SBS shipments are forecasted to grow by 4% in 2026.

On supply, Kitch said the year began with industry capacity exceeding demand by “more than 10%.” Following recent actions across the industry, including Clearwater Paper’s restructuring at Cypress Bend, he said the company believes excess industry supply has been reduced by about 50%. Kitch cited RISI forecasts calling for additional net capacity reductions by year-end and industry operating rates of around 90%, which he said should support margin improvement once operating rates exceed that threshold.

He also pointed to a decline in bleached imports, saying they were down 12% in 2025 versus 2024, driven by “higher tariffs and a weaker dollar.” Looking ahead, Kitch said RISI forecasts total bleached imports to decrease by another 12% in 2026 compared to 2025, while European producers face cost pressures tied to higher energy, chemical, and transportation costs amid conflict in the Middle East.

From a demand standpoint, Kitch said Clearwater Paper is seeing “stability in folding carton and strength in food service, particularly in cup and plate.” He said backlogs are strong across paper machines and that the company is “sold out on extruded products such as cup and poly-coated folding carton.”

Cypress Bend restructuring and cost actions

Management detailed a restructuring at the Cypress Bend, Arkansas facility that reduces rolls produced at the mill by about 20% and is expected to deliver cost reductions of roughly $8 million to $12 million on an annualized basis. Kitch said the mill will run at reduced operating rates “until industry conditions improve.”

In response to a question about the scale of Clearwater Paper’s supply response, Kitch said the company is now focused on producing and profitably selling about 1.2 million tons of SBS across its three mills versus its stated capacity of roughly 1.4 million tons. He added that after the Cypress Bend action, the company believes it will be “fully utilized for balance of the year,” aligning production with demand across its mill network.

The company also highlighted a new four-year labor agreement ratified at its Lewiston, Idaho mill. Kitch said the agreement combines “competitive wages and benefits” with “significant additional flexibility” in operating the facility.

Pricing actions and Middle East-related cost headwinds

Kitch and Baker both addressed new input cost pressures tied to conflict in the Middle East, citing chemicals, wood, and transportation as key areas of impact. Kitch said the company is projecting $3 million to $5 million of quarterly headwinds from these cost increases until conditions normalize. In the Q&A, he clarified that estimate is sequential versus costs “a month or two ago before the conflict started,” and noted that wood costs are also affected because a portion is tied to transportation costs for harvesting.

To offset cost pressures, the company is pursuing pricing actions and cost reductions. Kitch said Clearwater Paper revised its previously announced price increase on cup and other extruded products to $60 per ton, effective in May. He said the increase affects about 70,000 tons of extruded business not tied to the RISI price index, while roughly 150,000 tons will move “within a couple of quarters” of any change to the RISI index.

Separately, the company announced a $50 per ton increase on non-extruded grades such as folding carton and plate in March, though Kitch said implementation has been “challenging given our industry's current oversupply position.” He said the company believes margins on those grades “aren’t sustainable in the long run” and it will continue seeking ways to recover cost pressure experienced over the past couple of years.

Insurance recoveries, cash flow priorities, and outlook

Baker reported that the first-quarter results included $17.5 million of representation and warranty insurance proceeds related to the company’s Augusta acquisition. She said Clearwater Paper received an initial settlement payment of $23 million in the fourth quarter, including about $6 million related to direct operating costs incurred in 2025. In the first quarter, the company received a second settlement payment of more than $17 million, of which approximately $6 million related to direct operating costs incurred in the quarter. Baker said about $50 million of the $105 million policy limit remained as of March 31 and the company is “actively pursuing” recovery of the remaining claim amount.

For the second quarter, Baker guided to adjusted EBITDA in the range of breakeven to negative $10 million, driven primarily by a planned major maintenance outage at the Lewiston facility with direct costs of $22 million to $24 million. She also cited $5 million to $7 million of higher input costs, partially offset by cost reduction initiatives and a seasonal increase in shipment volumes.

For the full year, Baker reiterated key assumptions including revenue of $1.4 billion to $1.5 billion, flat to modest shipment growth, capital expenditures of $65 million to $75 million, and a targeted working capital improvement of $20 million to $30 million. She noted the Cypress Bend outage was moved from the second quarter to the fourth quarter and included an estimated $6 million benefit tied to the Cypress Bend restructuring.

Baker said management believes it has “a path to break even or better free cash flow for the year,” citing cost actions, insurance recoveries, an ожидаемый tax refund, and working capital reductions. In response to an analyst question, she said the tax refund totals about $27 million to $28 million for the year, with $4 million received in the first quarter and about $23 million remaining.

On the balance sheet, Baker said the company has “ample liquidity” and is keeping overall debt levels “relatively flat.” She said the company intends to extend or refinance both its 2020 notes, which go current in the second half of 2027, and its asset-based lending facility, which goes current later in 2026. She added the company is in active discussions with banking partners. Addressing a Moody’s downgrade question, Baker said it would be more applicable to “any future refinancings” than to current borrowing costs.

Kitch closed by reiterating priorities for the remainder of the year, including operating efficiency and cost reductions, protecting share with strategic customers, aiming to be cash-flow neutral, and refinancing or extending debt maturities. He said management remains confident the cycle will turn and that over time the company expects to return to cross-cycle adjusted EBITDA margins of 13% to 14% and generate more than $100 million of annual free cash flow.

About Clearwater Paper NYSE: CLW

Clearwater Paper Corporation is an independent manufacturer of premium tissue and pulp and paperboard products for private-label and commercial customers in North America. The company operates through two core segments: Consumer Products, which produces bathroom tissue, paper towels and other away-from-home tissue products under private-label contracts; and Pulp & Paperboard, which supplies bleached paperboard used in folding cartons, foodservice packaging and specialty paper applications.

The Consumer Products segment services retail grocers, warehouse clubs, online merchants and janitorial distributors, leveraging multiple converting facilities to produce roll and folded tissue items for both household and institutional use.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.