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Clearwater Paper Corporation (NYSE:CLW) reported first quarter 2025 results on April 29, showcasing the impact of its strategic transformation into a focused paperboard packaging supplier. The company posted $30 million in adjusted EBITDA, representing significant improvement from both the previous quarter and year-ago period, despite ongoing pricing challenges in the paperboard market.
Executive Summary
Clearwater Paper reported net sales from continuing operations of $378.2 million in Q1 2025, with a net loss of $6 million. Adjusted EBITDA reached $30 million, resulting in an 8% margin that landed at the top end of the company’s guidance range. The quarter’s results reflect the company’s successful strategic pivot following the sale of its tissue business in November 2024 and the acquisition of the Augusta paperboard mill in May 2024.
"2024 was a transformational year for Clearwater Paper," said Arsen Kitch, President and CEO. "We’ve positioned ourselves as a leading independent paperboard packaging supplier to North American converters, with a stronger balance sheet and improved operational performance."
The company highlighted a 46% increase in paperboard sales volume compared to Q1 2024, primarily due to the Augusta acquisition, which was partially offset by a 4% decrease in average pricing. Clearwater Paper has also been actively repurchasing shares, with $11 million in buybacks during Q1 2025, bringing the total to $15 million since the new $100 million authorization in November 2024.
Quarterly Performance Highlights
Clearwater Paper’s Q1 2025 adjusted EBITDA of $29.8 million represented a significant improvement from both Q1 2024 ($14.2 million) and Q4 2024 ($9.5 million). The company attributed this growth to stronger operational performance, higher volumes, and an improved cost structure.
The following chart illustrates the key factors driving the year-over-year improvement in adjusted EBITDA:
While lower paperboard market pricing resulted in a $4.4 million decrease, this was more than offset by a $6.8 million increase from higher sales volume (primarily from the Augusta acquisition) and a $14.1 million improvement in costs and other factors due to better operating performance and cost structure.
The sequential improvement from Q4 2024 was even more pronounced, with adjusted EBITDA more than tripling:
The company’s balance sheet has also strengthened considerably, with a net leverage ratio of 1.5x, within the target range of 1-2x across the business cycle. This improvement follows the strategic use of approximately $850 million in net proceeds from the tissue business sale to pay down debt.
Strategic Transformation
Clearwater Paper completed several transformative actions in 2024 that have reshaped the company’s business model and financial profile. The acquisition of the Augusta paperboard mill for $700 million increased the company’s total Solid Bleached Sulfate (SBS) capacity to approximately 1.4 million tons, while the sale of the tissue business for $1.06 billion provided substantial proceeds for debt reduction.
"We’ve transformed Clearwater into a leading paperboard packaging supplier with a strong balance sheet," noted Sherri Baker, Senior Vice President and CFO. "We’ve paid down all credit facilities except $275 million of 2028 notes with an interest rate of 4.75%, giving us significant financial flexibility."
The company is also exploring options to expand its product offerings to North American converter customers, with several initiatives in various stages of development:
These product innovations aim to address growing market demands for sustainable packaging solutions and provide alternatives to imported products, strengthening Clearwater Paper’s competitive position in the North American market.
Industry Position & Outlook
Clearwater Paper operates in a cyclical industry driven by supply and demand dynamics. The company reported that SBS paperboard shipments improved in Q1 2025, up approximately 1% compared to Q4 2024, with industry operating rates at 88% versus 84% in Q1 2024.
For Q2 2025, Clearwater Paper projects adjusted EBITDA of $35-45 million, representing continued sequential improvement. This outlook is based on approximately 5% growth in sales and production volumes compared to Q1, additional benefits from fixed cost reduction efforts, and $6 million lower energy expenses due to seasonality. These positive factors will be partially offset by $7-9 million in planned major maintenance costs at the Cypress Bend, Arkansas mill.
For the full year 2025, the company expects:
- Capacity utilization of approximately 85%
- Revenue of $1.5-1.6 billion
- Fixed cost reduction of $30-40 million in 2025 ($40-50 million annual run rate)
- Total (EPA:TTEF) direct major maintenance costs of $45-50 million
- Capital expenditures of $80-90 million
"We’re focused on value creation across the cycle," said Kitch. "While we’re currently operating in a challenging pricing environment, we’re taking decisive actions to reduce our fixed cost structure and improve operational performance."
Long-term Strategy
Clearwater Paper has outlined a clear strategy for long-term value creation, targeting different adjusted EBITDA margins based on industry conditions:
The company aims to deliver a 40-50% adjusted EBITDA to free cash flow conversion rate, equivalent to over $100 million per year. This will be supported by ongoing cost reduction initiatives, including a 10% reduction in positions announced in early 2025.
Clearwater Paper’s capital allocation approach prioritizes maintaining long-term asset performance, with expected annual maintenance capital expenditures of $70-80 million. The company will also evaluate strategic investments to diversify its product portfolio and pursue opportunistic acquisitions that support its strategic priorities.
"We’re optimistic about our long-term value creation potential," concluded Kitch. "With our well-invested asset base, strong sustainability focus, and strategic capital deployment, we believe we’re well-positioned to deliver value to our shareholders across industry cycles."
The market responded positively to Clearwater Paper’s Q1 2025 results, with the stock closing at $25.03 on April 29, up 2.33% for the day. The shares have traded between $22.58 and $57.13 over the past 52 weeks, reflecting the significant changes in the company’s business model and market conditions.
Full presentation:
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