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Industrial Paper Co. Raises Prices to Offset Inflation
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Clearwater Paper Corp. shares traded 22.5% higher after the company reported Q1/22 financial results that included a 15% increase in YoY net sales. The firm said it sees continued strength in its paperboard business along with improvements in its parent roll tissue business and has been able to command higher prices to offset higher raw materials and transportation costs.

After U.S. markets closed for trading yesterday, bleached paperboard and consumer and parent roll tissue manufacturer and supplier Clearwater Paper Corp. (CLW:NYSE), announced financial results for the first quarter of 2022 ended March 31, 2022.

Clearwater Paper's President and CEO Arsen Kitch stated, "Our performance in the first quarter exceeded our expectations due to strong operational execution and improved pricing in both businesses…Our paperboard business continued to experience strong demand and pricing, and we were able to produce and sell more volume than anticipated. Our tissue volumes stabilized, and pricing improved, which drove performance improvement relative to the fourth quarter of last year."

The company indicated that net sales in Q1/22 increased by 15% to $488.2 million, compared to $425.9 million in Q1/21.

The firm advised that for Q1/22 it recorded net income of $16.6 million, or $0.97 per diluted share, versus net income of $12.1 million, or $0.71 per diluted share in Q1/21, and indicated that during the same period it registered non-GAAP adjusted net income of $17.5 million, or $1.03 per diluted share, compared to $11.7 million, or $0.69 per diluted share in the prior year's corresponding quarter.

The company provided some additional detail by business line and advised that during Q1/22 net sales in its Pulp and Paperboard Products segment were up 21% year-over-year to $266 million, compared to $220 million in Q1/21. The company indicated that operating income generated in this segment had doubled versus the prior year which it stated was attributed to higher sales prices that were offset by inflation, and in particular was related to chemicals, freight and energy.

The firm reported that overall Paperboard Sales volumes in Q1/22 decreased by about 3% y-o-y to 201,356 tons, but the volume decrease was offset by a 23% increase in net selling prices to $1,263 per ton, versus the $1,028 per ton average in Q1/21.

Clearwater Paper listed that in Q1/22 net sales in its Consumer Products segment rose by 7% y-o-y to $223 million, compared to $208 million in Q1/21.

The company advised that Q1/22 operating income in its Consumer Products segment decreased measurably to $1 million, compared to $18 million in Q1/21. The firm explained that the decline was due to higher inflation-related input costs pertaining to both pulp and transportation costs.

Clearwater Paper noted that during the most recent quarter, retail tissue volumes increased by 7% y-o-y to 75,426 tons, up from 70,762 tons in the prior year's quarter and retail tissue selling prices increased 4% to $2,872 per ton, compared to $2,758 per ton in Q1/21. The company stated that the volume and price increases served to offset some of the higher pulp and shipping costs incurred.

CEO Kitch did not offer any specific forward business guidance, but commented, "Our first quarter performance represents a strong start to 2022. Inflationary pressures are expected to persist in 2022, which we are offsetting with higher sales prices that were previously announced and operational improvements. Given our strong performance and improved outlook for the year, we are on track to achieve our leverage ratio sooner than anticipated and are resuming our previously approved stock repurchase program."

Clearwater Paper is based in Spokane, Wash. and is a private brand tissue manufacturer and producer of bleached paperboard products. The company sell its private brand tissue to large grocery, member club and other discount stores. In addition to its parent roll tissue business, the firm makes high-quality paperboard for the packaging industry used by quality-conscious printers and packaging converters.

Clearwater Paper started the day with a market cap of around $461.4 million with approximately 16.81 million shares outstanding and a short interest of about 1.6%. CLW shares opened 9.5% higher today at $30.06 (+$2.61, +9.51%) over yesterday's $27.45 closing price. The stock has traded today between $30.01 and $33.94 per share and is currently trading at $33.62 (+$6.17, +22.48%).

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