Clearwater Paper Q2 2025 slides: EBITDA hits $40M amid cost-cutting push

Clearwater Paper Corporation (NYSE:CLW) reported second-quarter 2025 results on July 29, showcasing significant year-over-year improvement in a challenging market environment. The paperboard-focused company delivered Adjusted EBITDA of $40 million, representing a 10% margin, while implementing strategic cost reduction initiatives and expanding its product portfolio.

Introduction & Market Context

Clearwater Paper is navigating what it describes as a cyclical downturn in the paperboard industry. According to the company’s presentation, industry solid bleached sulfate (SBS) shipments declined 3% in Q2 2025 compared to Q1, though unmade orders increased 14% during the same period. Industry operating rates stood at 83% in Q2, down from 84% in the year-ago quarter.

The company’s stock closed at $29.49 on the day of the earnings release, near the middle of its 52-week range of $22.58 to $56.73. Clearwater Paper has been executing a strategic transformation following its shift to become a paperboard-focused company, as highlighted in its previous earnings call.

Quarterly Performance Highlights

Clearwater Paper reported net sales of $392 million for Q2 2025, with net income from continuing operations of $4 million. The company’s Adjusted EBITDA of $40 million represented a substantial improvement from the negative $8.6 million reported in Q2 2024.

As shown in the following chart detailing the year-over-year EBITDA bridge:

The improvement was primarily driven by higher volumes (+$20 million impact) due to the Augusta acquisition, cost improvements (+$29.1 million), and lower SG&A expenses (+$4.4 million), which more than offset the negative impact of lower pricing (-$5 million).

Paperboard sales volumes increased 12% compared to Q2 2024, though this was partially offset by market-driven price decreases of 3%. The company maintained a strong balance sheet with a net leverage ratio of 1.9x and continued its share repurchase program, buying back $4 million in shares during the quarter.

The company’s financial summary highlights the key metrics from the quarter:

Sequential performance also showed improvement, with Adjusted EBITDA increasing from $29.8 million in Q1 2025 to $39.9 million in Q2. This growth was primarily driven by higher volumes, which contributed $19.6 million to the quarter-over-quarter improvement.

Strategic Initiatives

Clearwater Paper outlined several strategic initiatives aimed at improving performance across industry cycles. The company has set an Adjusted EBITDA margin target of 13-14% across the cycle, with a goal of delivering 40-50% Adjusted EBITDA to free cash flow conversion, or more than $100 million annually.

A key focus is the company’s cost reduction program, which targets $30-40 million in fixed cost reductions in 2025. Management noted that a 10% reduction in positions has already been implemented.

The company is also expanding its product portfolio to better serve North American converter customers. These initiatives include:

These product innovations aim to address market demands for more sustainable options and help Clearwater Paper diversify its offerings while supporting independent converters.

The company’s capital allocation strategy prioritizes maintaining assets, deleveraging the balance sheet to a 1-2x leverage ratio, evaluating strategic investments, and returning capital to shareholders through share buybacks:

Forward-Looking Statements

For Q3 2025, Clearwater Paper expects Adjusted EBITDA of $10-20 million, lower than Q2 due to a planned maintenance outage at its Lewiston facility. The company anticipates flat paperboard shipments compared to Q2, with lower production and cost absorption offset by continued benefits from fixed cost reduction efforts.

For the full year 2025, the company projects:

• Revenue of $1.5-1.6 billion
• Capacity utilization of approximately 85%
• Fixed cost reduction of $30-40 million in 2025
• Capital expenditures of $80-90 million
• $1-2 million of direct and indirect tariff impact

Competitive Industry Position

Clearwater Paper sees mixed signals in the paperboard market, with modest growth expected in 2025 and demand growth of approximately 3% projected for 2026. The company noted that bleached paperboard net exports are expected to improve in 2025, with imports forecasted to decrease by about 4% compared to 2024.

The company believes a balanced market will have utilization rates between 90-95%, compared to the current industry rate of 83%. This suggests potential for industry improvement if demand strengthens or capacity is rationalized.

Management remains optimistic about long-term value creation, highlighting the company’s well-invested asset base, strong sustainability legacy, and strategic focus on growing its position as a premier independent paperboard packaging supplier.

"We are sharply focused on improving and growing the paperboard business," stated Arsen Kitch, President and CEO, during the presentation. "With our meaningfully de-levered balance sheet from the tissue sale, we’re positioned to grow as a premier independent paperboard packaging supplier."

The company’s transformation into a paperboard-focused business appears to be gaining traction, with operational improvements and cost reduction initiatives helping to offset pricing headwinds in a challenging market environment. Investors will be watching closely to see if Clearwater Paper can maintain this momentum through the remainder of 2025 as it continues to implement its strategic initiatives.

Full presentation:

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