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SWM Schweitzer-Mauduit International

Participants
Mark Chekanow Director, Investor Relations
Jeff Kramer Chief Executive Officer
Andrew Wamser Chief Financial Officer
Chris McGinnis Sidoti & Company
Call transcript
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Operator

Welcome to SWM's Fourth Quarter and Full Year 2020 Earnings Conference Call. Hosting the call today from SWM is Dr. Jeff Kramer, Chief Executive Officer. He is joined by Andrew Wamser, Chief Financial Officer; and Mark Chekanow, Director of Investor Relations. Today's call is being recorded and will be available for replay later this afternoon. participants floor placed questions will presentation. all mode a following time, the and be this have in been listen-only the At open for Instructions] turn pleasure Mr. [Operator now over floor to to is It the my Chekanow. you Sir, begin. may

Mark Chekanow

Thank full Director Investor Chekanow, results. year you joining XXXX Relations am SWM's discuss thank of us And earnings you, to Good SWM. fourth Janica. I for Mark morning. at quarter and

you reports Actual extent the that scope call particular, Before quarterly may difficult continues the discussed which in included response reasons, XX-Q. on to our and to COVID-XX is we to Exchange pandemic filings, in factors begin, the conference statements. including and I'd on which to Securities detail in and of these a impact Commission the from include on materially including remind forward-looking the by Form the of comments our results like business actions depends differ are it. today's are suggested taken pandemic annual predict to number our and uncertain more our In and comments which evolving Form numerous XX-K results in for of duration report

Jeff. continuing non-GAAP discussed otherwise financial the included www.swmintl.com. closest and to operations. metric and operational comparisons Investor presentation to website the of financial are measures call available earnings to stated to Unless of the section release. our turn I'll call This relate the Reconciliations year during financial the this measures this earnings and Relations release prior the appendix GAAP now of period over are on these Some in measures. are are the measures presentation and

Jeff Kramer

and good morning Thank you Mark, everyone.

the results week, seen and strong have strength in delivered demonstrating resilience many challenges our already a may and our you portfolio. of pre-released uncertainties last global financial XXXX despite SWM As

are momentum XXXX. by equally carrying positive we are We encouraged into the

entire and the for Board global appreciation continue Before forth. again to express heartfelt efforts the our executives we get SWM the into incredible details, the of teams of put I'd like to Directors

not financial commitment this without Fourth achievements good to other's and off remarkable our possible with be safety year their capped the results do SWM served results for results each very year. Our a us resilient we the describe quarter lightly respect of would portfolio results this business. year our and balanced to We outstanding overall customers. service not and to diversified health term our our and believe use and well when

by with exceptional pandemic Our EP unaffected and demand had business an the uncertainties. year, related economic its

and areas Ultimately, regarding significantly enhanced manufacturing markets. provider of and growth back expected grew EPS softness EP outstanding profits. delever propel quarter. for in innovation, is quickly sheet. $X.XX annual our organic some bounced both year, EPS annual of towards we range. as the Scapa while We grew capabilities would delivered while we in outset solutions operating note cash billion expected balance Scapa of and best-in-class a sales XX% healthcare original profile. adjusted communicated announced the to of free $X.X offer sales today, abundance the business. mid-year that in to and the to an for million for we our Further, delivering Group, design in Bottom also and to growth shown industrial the At AMS continue adjusted AMS $XXX guidance fourth all flow While resilience our X% conviction line January, to caution time, the adjusted we increased an that within us of acquire the increase pandemic. I the we withdrew with late at

our during further look to after completion. updates to We quarter forward the and transaction close expect second providing

down hospital sales and support. like organic also Tekra excluding finished end of COVID-impacted portfolio end sales the for with for face see which sales that were our increased and mask was our led products demonstrates but increased transportation, challenging Filtration lower strength rebound our we increased construction overall organic by pleased X%. of fourth declined for markets believe of quarter. in market, year, all energy a in gains We the our each products. the the and diverse market, for the specialty organic small sales Infrastructure key year to with addition AMS, the the despite of of in transportation double-digits green continue many products. the backdrop, For sales the this sales materials applications, a specialty with to both medical which them sales and year. have lead and to Breaking XXXX actually by and I'd most highlight increased subsegment would air industrial packaging resilience and

this those quarter, was with some Specifically pleased quarter year. signaled third our versus film had were of especially fourth we as seeing the our direct global transportation for and were year's the was call, we improvement sales grew fourth earlier materially optimism signs sales following organic growth We that XX% during justified of quarter. our choppiness resurgence and last

another performance year. expect sales profits in subsegments. our strong air organic to full this with to across across contributed good with key the growth the grow Tekra driver gains very X% strong market to back coupled get to by cost for ability our acquisition, the for levels. filtration normalized AMS as Double-digit we water, and Resilience continue sales process portfolio, for and growth several segment We quarters was the

we expected that chain challenges. Switching supply confidence exit back, markets good increased portfolio the execution Looking withstand to with as economic very Papers. quarter. periodic encouraged up a Engineered segment XXXX and momentum balanced the in with and long-term that The fourth had over well-positioned robust we our our end are various XXXX banner solid to wrapped were performed generally and we

service successfully to across the customer maintaining also facility, of During while business. volumes the the levels closed quarter, we sites, those Spotswood transitioning other high

our attrition de-emphasis product on volumes continued consistent continued a year, grew the lower-margin expectations global rate industry said, to That a year shift of portfolio products. another shifts as given still our delivered lines. toward higher-value and decreased For X%, we and price/mix Heat-not-Burn our positive with

benefited More operating associated that as segment range we notable recent we note importantly, but execution in Much benefited responding agile low our great the increased a will but a despite With flexible X% But year. or about year, the $XXX repeat. be were we million profits Andy. builds earning the running EP flows the $XX that, trusted to input for turn segment are third the I'll inventory have also in year profits needs from in performance strategic XXXX pleased of paper was had our customers' been call to jump that this quarter, an uncertain from million however, XXXX. discussed mid XXXX, years. told, to saw cash supplier temporary previously and had during from throughout to We site through XXXX and in customers. favorable our shutdowns and we to some over reputation to All difficult such our costs. strong early

Andrew Wamser

by Tekra the increased films, organic X% down closed the first decrease driven the full Jeff. of transaction and highlight mostly Beginning Consistent excluding our quarter. trends takeaways. on the the fourth X% sales only late and and million year was key The with year and in AMS in Thank were results with increased for XX% remainder Jeff's quarter Tekra portfolio sales I'll segments. the contributed we $XX largely aftermarket sales decline also of comments, actually focus the while year; the acquisition. recall, for the transportation you, X%.

and As XX% the increased increasing Jeff organic strong the over with the prior fourth for very year growth. sales transportation referenced, AMS was a XX% quarter from driving sales quarter

input costs, profits sales from films, modest XXX even in the offset profit more adjusted However, a for basis the Adjusted which sales operating combined decrease. have reflecting the as benefited decline. X%. organic grew from strong Tekra, organic the markets' year. excluding sales would well contracted been than organic other as growth that profit margin incremental transportation operating We X% increase our points AMS lower

margin organic quarter XXX was by adjusted rapid high-value an and transportation points. Tekra but of growth our products. For film the strong very the increased XX% the sales the again basis This and the growth with acquisition, expanding amplified the growth also profit benefit quarter, margin strong captures in fourth impressive operating

improvements Papers, and by noted. favorable Engineered offset was were down were points. year effects. sales towards price/mix products, and well lower with very year as was XXX full or For positive X% operating mix The multiyear trend high-value the strong above increased partially profit Lower volumes X% EP an operational by year our input costs. margins for profits recent basis segment currency. for Jeff Adjusted reflects ex the margin expansion the expanding X% shift impressive

strong price/mix profits which this versus operating primarily of and X%. year sales high-value was were ago, a negative comparison to of sales due fourth While fourth difficult a quarter quarter very the XXXX, lower created

However, the a as mentioned, positive. full price/mix year was for net still

fourth Regarding the increase for XX% line unallocated quarter. Adjusted fourth expenses projects the for in diligence and These EBITDA quarter. incurred We several the year $X the consulting $X we increased respectively year in and unallocated million dollars X% X% basis, saw during operating have fourth would expenses XX%. of for increased million and XXXX a been XX% fourth quarter profit full and with an quarter, acquisition year increase. sales aside, approximately the On expenses, for million increased sales levels. generally increased for and for the and each the which consolidated of the accounted

versus versus deliver most Spotswood relate segment, economic an in markets. and our record year We material we details X% the Brazil and on EPS efforts strong to marking diversify other a EP up our mostly adjusted On basis growth. believe internal are due tables expenses $X.XX was restructuring strategic challenging both the our operating XXXX very We for relation establishing comparison towards assessments. was investments company's refer a consecutive for these Full the is track of the consistent tax and solid to non-GAAP shifted to environment. The and to in for pleased items. XXXX, to year $X.XX, results $X.XX. are with adjusted items and XXXX which portfolio Please EPS growth, XXXX shutdown to EPS, third GAAP these growth

restructuring EBITDA recall from certain operating rate, tax tax both that embedded in EPS laws. was $X.XX. growth to Fourth due EPS was related environments. to largely shutdown due this XXXX and decreased $X.XX of positive We slightly to challenging year both economic the XX.X% higher in and EPS Adjusted up adjusted changes have geographic The decreased calculation in earnings increased in mix expenses the XXXX the from a and from decrease profit quarter. quarter XXXX achieved to the due site. to during adjusted in rate changes Spotswood to $X.XX The full tax and $X.XX GAAP XX%,

For the full quarter, the adjusted low up last year's QX, XX.X% rate. was XXXX from was year embedded in quarter. tax XX.X%, reflect in in fourth fourth booked rate The EPS our rate to

normally would in are Scapa for some Panel understanding Group, maintain annual UK-based we we at directional compliance from this time, meantime, we the however, provide our pending regulations surrounding making adjusted comments EPS guidance We to our as the provide company. in certain offer While assist UK Takeover can, a community public forward-looking outlook. with comments, restricted investment

any First, to growth. adjusted acquisition, from would business expect pending financial deliver our another excluding to year continue impacts we of base the EPS

than profit our toward We expected believe more profit a normalized to expect organic strong this growth. have pullback revert multi-year its XXXX. we will anticipated trend AMS EP particularly offset from levels sales strong would in operating business be growth Second, after by to the

would quarter decrease fourth the nature a expenses of the of acquisition XXXX. consulting due to in expenses diligence non-repeating unallocated expect and Third, from we the

cash to none as frustration providing Lastly, the our forward-looking and point. we acknowledge annual this about expect make strong projects into substantial fully were including comments full business. But at our the the this XXXX closes guidance dramatically to XXXX, EPS be impact free impact cash we're guidance intend year pending capital we Scapa so flow. permitted a deferred some may to of for as flow history after our while provide transaction from of another adjusted acquisition year We given are

up and summarize, $XXX levels. cash capital. prudently was debt agreement. stand We adjusted both To million flow XXXX liquidity. generated XXXX flow free $XX from to flow and $XXX of of million Moving million operating we CapEx of to cash year cash our as expectations continue of we the currently the to terms our times for X.X EBITDA deploy initial below net credit in at for

at XXXX on post our just record were closed since of to after prior our perspective X.X acquisitions, we we year-end Post times have that track times the acquisitions. the acquiring acquisition and reached Tekra X.X was and showing net delevered point, in the Tekra. quarter following leverage of X.X For X.X first for we at at acquisition, have consistently the Conwed at XXXX delevering times delevered end times XXXX

of had of cash revolving and as we between credit year-end, Lastly, our hand approximately on facility. available $XXX million liquidity

the Of capital will look course, of different transaction. pending structure close Scapa our a successful upon

currently to the close, As expected we've of leverage the finance are financing of and X.X times week times. in which disclosed loan between already, term net Upon a we is be next to acquisition. we to close portion B expect a process X.X

Now to back Jeff.

Jeff Kramer

Thanks, Andy.

about strategy. I'd outlook to some perspective XXXX So like highlights limitations to and positive share and some albeit conclude, some with our reiterate key on

our challenges without who keeping our operations from to the for together great our flexing achieved definitely meet safe to are work happen. providing still make solutions results proud of finding service in We to year the demand high order and to employees XXXX customers, product not people that The certain lines. while we ranging was to in

Our a volatile in difficult we believe and and even of financial are environment. resilience I was capable operating firmly in year performance solid have this hopefully, truly results delivered. we demonstrate of XXXX our tested And

its continue expectations fourth opportunities portfolio, business for despite a paper once flow. expand. quarter and growth mid-year poised end well in cash our profit plus robust us consider had strong generated is rebounded again diverse year when headwinds, Our XXXX. our believe that and we provide should as balance and free organic sharply we the our delivering $XXX meaningful the to of million growth AMS exceeded in stability, And serve overall growth good markets we first

of to when I'd our also reiterate acquisition like Scapa. investor we from expansion, of Speaking themes some the call, announced pending

to comprehensive solutions us customers. our as direction. to offerings in and adds our expands strategy, more another bring advances Broadening solutions. competencies, is and suite customers, customers' would acquisition enables value-added And a our to our capabilities forward solve of significant step Scapa our this help our technologies new First, it value-added successful strategic mark challenges support core long-term our capabilities

their adhesive Scapa medical sales and technologies to in regulatory immediate $XXX design million will space, on and converting between approvals. critical skin-friendly us. packaging and Their and product and Second, end-to-end us innovative, finished in give growing through annualized with compliance offerings focus from the formulations approximately materials products mass extends range

several Scapa add certainly with capabilities And already also least, an construction. with as sales. addition importantly, AMS Third, groups division, transportation highly billion talent. billion expected sales we towards such significant to we would towards come $X complementary of and both not most and overlaps industrial serve push of and people end annualized SWM is markets $X.X with but Last, the

Bottom and enhance growing sales expect in of industrial. -- So, profile. generated filtration, company were nearly and construction segments the be as such long-term XX% combined growth generated transportation, infrastructure would will transaction line, medical, this we SWM's

strategic about on please comment at transaction yet Andy cannot the That remarks. we our open our excited and sharing line items, the While our many for our questions. are base to business point. we and we other forward outlook, outlook to on closing efforts concludes details financial look than referenced, the XXXX that directional Janica, grow

Operator

comes Our the Chris Instructions] first of [Operator line Sidoti & McGinnis question from of Company.

Chris McGinnis

year? about much [Technical Thanks get it that you seeing just Just can and Difficulty] of morning. obviously of normalized taking the part start -- just Maybe, more is the a that's to of a very, of organic trying you're Do within was to in And bit of of sense in nice if back strength the mean, think, in you Good know half talked a pent-up it, that I you I demand in that for but could the the feel little and growth. strong maybe that get big question quarter AMS you around growth transportation trend. quarter. maybe you very a just near-term, waiting? that how my was that obviously.

Jeff Kramer

to part fourth and try was to in happy said, we strength Certainly, you the be like the you I'll that you color with quarter, of hard exact to some give demand. had it's the Chris. back-up sure, incredible Yes as give -- interpretation.

So, reduced. the indicated many consumption a as about bit their normal. year as chains had everybody supply in earlier And was returned was we suppliers of of to then, rapidly how I surprised lowered the the our think some marketplace

quite bit If fast you market marketplace recall, a of is that growing recovered in that earlier. and China

And trying so chains. we a fill supply rapid saw people increase in to

overall, always have our that at all. I of one with and fastest-growing this don't those said think said, Now markets trend have we lines is changed

supply continue of levels long-term restocking seeing combination So normal opportunities we a to marketplace. of of bit bit see growth you're I and a chains think strong this little for both little to then

Chris McGinnis

Very cost to highlight at Thanks on in just guess, for pressures XXXX, cost side about when materials? helpful. the Great. for that. thinking out I raw look anything you And

Jeff Kramer

Yeah.

I But think, the on increase I'm some of rapid of a help of the activities pricing. effects. We're we everybody reporting have industries. everybody's the else course, is that's sure throughout headwinds to same polypropylene the of that number those those first mitigate place seeing thing mind in is

from that's things cetera. other We're operations So doing contractual efficiency around everything increases. scrap on increases also of price to et price the side reduction types

globally of have the amount that, the certainly most year, would we way start numerous it's this wanted beginning unexpected. people you programs to been has the So say because of but of is not polypropylene offset the I to rise think –

our seeing the our to and cost that of resin the of pressures those to not think are industry, I the costs is on we're continue resins. for types films, thermoplastic emphasize those transportation other point majority though polyurethane

Chris McGinnis

the you can't year sounds was acquisition, more XXXX half? it And as any can so you much demand Is what's the that as impact, Okay. as year, know you you year out of anything or about Thanks or at How trends? year think guess, pending in playing that for – just guess about because different about think I but in go the the think be about you for just And the talk should I back there you growth given say for forward-loaded is the cadence manageable I that. growth out? terms more you for of that And least. expectation highlighted?

Andrew Wamser

Sure.

first I'll stab that. the take So, at

a The highlight is kind and just it's and this is a always would we first reemphasize thing, portfolio I effect. of portfolio that,

mentioning it was And what So takes. We medical say, look have just significantly. market would was say air. roared we're we now back of and I quarter Water the fourth in Jeff up sort in let's and at would like all pretty a weaker been in like of even that the in really specifically. year, quarter. fourth quarter for happened year was bit water the It a and little up filtration in last had the And now really outlook. then still that sort puts high-growth and bullish fourth year,

So you saying, long-winded I'm really a really a giving portfolio it's answer effect. of

look so in XX% it the mentioned bullish for at was growth say I fourth up we're XXXX, that, we the lines And transportation would exceptionally I on. when quarter.

strong Now Air that's growth still tough but have expect to really should expect really We segment. that filtration a not water will sustainable, it grow, still but year. strong we be next comparison. in

able And of really still films. I you about about, about optimistic year. more at growth. get we'll a growth UK We're to our of when percentage So of because really us. about of to we know Scapa limitations color filtration. and for QX hear because we range drivers are – call more specific for We're talk love about some we'll the key outlook the the certainly transportation hopefully into would sort We're medical. be our color, of end optimistic markets takeover provide optimistic close sort we something panel, or of that really kind But,

Chris McGinnis

side, for maybe and EP, and there. of the color for thought understand change portfolio set just that playing I talked demand the process the the trend against, I appreciate AMS, outlook guess up price walk different you're how know profit maybe But little side, you just obviously in mix a XXXX? turning year? -- to Can just think you, the just out regulations, the our but versus in I through for you and a you technical. given margin to do

Andrew Wamser

years. growth last going Yeah. much past really I a two line on even versus continue number. you've think -- it's here, I mean, top over been change. creep we that's that's seen the been years, effort probably our the to over conscious to the And more continue we've where why don't of and margin focused profit up couple

is I were tracking fairly significantly thing think the you see from moderate, through one XXXX rate XXXX. to from did from the that attrition where note, we XXXX

changes of be of to that lot expect Recon, how the So in that products rate whether it's a is good seen products. the still all high-value those But our there. at a LIP continue and are the really XXXX. have end day, Remains continue the business wrapper tempered. we focus to really products, the we binder papers, to And Heat-not-Burn, stable to high-value on solid

Chris McGinnis

QX. Great. appreciate of for, working the I best And luck color,

Andrew Wamser

Chris. Thanks, Great.

Operator

at further And over call are I'll the Jeff, closing And to time, now for queue. remarks. questions this there in back no turn

Jeff Kramer

Janica. We that about, Okay. people say story. positive everyone, our for Thank of in with I make many contributions the you and Well the close to our people. times just you, share again to listening comments tuning difference. want again, thank

absolute I is of global I'm saw teams, these you But proud our our really for I'm impossible have think results. of results. proud global Without even proof more year it team. us to achieved this that. the of

So to again. everyone. I you. And in Thank forward QX. And thank information want them look more to thank sharing

Operator

concludes This conference call. today's

may You now disconnect.