Glatfelter Q3 Loss Widens Y/Y Amid Cost Pressures, Sanctions

For the third quarter of 2024, Glatfelter Corporation GLT incurred an adjusted loss of 26 cents per share, wider than the prior-year quarter’s loss of 23 cents. The company reported net sales of $332 million, a modest increase over the $329.9 million reported in the third quarter of 2023. Consolidated gross profit declined from $44.5 million in the third quarter of 2023 to $35.5 million in the third quarter of 2024, driven by rising input costs, new sanctions on certain product categories, and ongoing market volatility.Adjusted EBITDA came in at $24.6 million, down slightly from $25.5 million in the third quarter of 2023. The decline in adjusted EBITDA, alongside the increase in selling, general and administrative expenses from $24.7 million to $32.5 million, indicates a heightened focus on strategic initiatives related to the upcoming merger with Berry Global’s HHNF segment to form Magnera. Strategic initiative costs included consulting and retention expenses, contributing to the widening net loss. Interest expenses also grew from $17.4 million to $18.4 million.Glatfelter's quarterly performance reveals resilience in certain core segments despite facing headwinds in others. The company’s strategic transformation to focus on engineered materials presents growth opportunities and challenges, highlighted by divergent performance across its segments, including Airlaid Materials, Composite Fibers, and Spunlace.Glatfelter Corporation Price, Consensus and EPS Surprise Glatfelter Corporation price-consensus-eps-surprise-chart | Glatfelter Corporation QuoteSegment AnalysisAirlaid MaterialsThe Airlaid Materials segment generated $138.3 million in net sales, a 5.9% decline compared to $147 million in the third quarter of 2023. The segment's EBITDA dropped to $18 million from $18.7 million, primarily due to a decrease in selling prices associated with cost pass-through agreements, as raw material costs were lower than in the prior year. Volume was down 2.5%, mainly in the hygiene category, driven by strategic pricing actions to maintain margins. Nevertheless, favorable currency impacts of $0.6 million provided a slight boost to this segment.Composite FibersComposite Fibers reported $113.7 million in net sales, a 3.6% increase from $109.7 million in the third quarter of 2023. This growth was largely attributed to increased shipments, especially in the composite laminates, food and beverage, and metallized segments. However, new sanctions affecting wallcover sales to Eastern Europe contributed to lower shipment volumes in that category. EBITDA for Composite Fibers decreased 9.5% year over year to $10.1 million, mainly impacted by unfavorable input costs, which the company was unable to fully offset due to lagging pass-through pricing adjustments. SpunlaceThe Spunlace segment demonstrated notable growth, achieving a 9% increase in net sales to $80.4 million from $73.8 million in the third quarter of 2023. This growth was primarily driven by strong Sontara sales, which have higher average selling prices than other categories in this segment. EBITDA doubled year-over-year to $4.8 million from $2.2 million due to favorable raw material costs and a strong product mix. Operations were bolstered by a $1 million increase in Sontara production, although the Asheville facility was impacted by Hurricane Helene, resulting in some production downtime.Financial Position (As of Sept. 30, 2024)Glatfelter held cash and cash equivalents of $41.6 million, down from $50.3 million at the end of 2023. Total assets stood at $1.5 billion, slightly lower than the $1.6 billion recorded as of Dec. 31, 2023.Total debt increased to $887.6 million from $860.3 million. Shareholders' equity declined sharply to $206.7 million from $256.9 million at 2023-end.Glatfelter’s operating activities used $8.4 million of cash in the first nine months ended Sept. 30, 2024, while it used $42 million of cash in operations in the prior-year comparable period. Adjusted free cash outflow stood at $15 million, which improved from the $50.9 million outflow recorded in the prior-year period.Other DevelopmentsGlatfelter completed significant divestiture actions this year, including the sale of its Ober-Schmitten facility in Germany, as part of its strategic shift towards becoming a focused engineered materials supplier. Additionally, during the third quarter, the company incurred expenses related to the transition toward Magnera, scheduled to close on Nov. 4, 2024, having met all necessary regulatory and shareholder approvals. This transition marks a pivotal shift as Glatfelter exits certain legacy operations, establishing a stronger foundation for its engineered materials focus under the Magnera brand.Research Chief Names "Single Best Pick to Double"From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. 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