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SWM Schweitzer-Mauduit International

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

Welcome to SWM's First Quarter 2021 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 this afternoon. participant the been for floor following presentation. all listen-only in your time, the and mode, will this lines placed have a questions At be open floor now to [Operator my It Mr. is turn Instructions] the over to pleasure Chekanow. the Sir, is yours. floor Chekanow. Mark

Mark Chekanow

morning. joining Thank for Director of Thank to earnings results. discuss our Mark Investor you, I'm Chekanow, at Relations Tina. SWM. XXXX Good us you first quarter

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

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

Jeff Kramer

particularly a quarter our everyone. fastest and and business, to pleased strategic positive continuing key most growing the areas very Mark, good momentum We lines. were you, several in product Thank across strong of with morning report

challenges as the commend for nimble they again to operate our new I arise. normal, now staying we and global organization in adjusting As COVID want to

This logistics positive world varying as been to prices will supply of to And preserve around are inflation profitability. global to deal around and of economy our tight and the has improving polls areas with economy. ability this in we businesses confident related raise year, the many with excellent grapple quarter, it manage an the costs constraints chains while

We good execute confident operating another are to deliver the levels segments financial EPS organic integration year performance. scenes both ultimately drove service keep equally the AMS ability Bottom the of execution strong in the in despite in our $X.XX. to high, on line, lifting strong growth XX% and and adjusted behind to sales quarter heavy Scapa growth

our acquisition to exciting As XXth, on discussion, April saw, we accretion quarterly addition weeks the share. so earnings results. Scapa acquisition I expected typical as after of That the elaborate Scapa's our closed said, added quarter guidance we new and likely annual in to are finally capabilities financials you are with we on end, as in able Scapa, will well reflected the two overall none more

growth earnings in which this the joining accretion firms. expect Our immediate XXXX, we two mid single-digit from implies some guidance the high reflects annual to of year

for creation in have never Importantly, are we growth bottom we and better line longer-term the sustainable today. can a as as complete for looking and step activities. we that our our year accretion we top say significant following begin expect integration confidently value been up positioned I

furthering with continues to specialty our Our products expand, and well demonstrating our end portfolio of operations our being integrated demand, good and the markets supplier and of vision performance solutions services are applications. materials choice running of of are

we customers strength Tekra including as and protection growth seeing in were in sales and of transportation XX% over quarter. our In COVID between access restocking and recovery, and of across particularly to the encouraged overall the XX% business Despite paint current continue increase, demand with long-term. of especially are We see to end the this Global benefit high, consistent market the the XX% our transportation, acquisition, films, increased product by of growth the organic profitable increasingly Asia. the after for sales sales are over we some breadth in up in impacts to the while increased in demand returns are the continues overall as AMS, portfolio. XXXX. For XX% high consumer swings consumers choppy a the remains aware offering business becoming distribution normalized

XX% to disruptions, our growth. the business deliver invest are on across grower continued stay capabilities improving way another are XX% at the was quarter. of in from Again, Tekra over that year. Filtration plus the quarters, with came degree in technology and with demand of is have are and the capabilities led forefront and with past industry acquisition the benefits We the the to air the our customers last recovering also to filtration first starting several some to restocking the fundamentals COVID Consistent strong. added

referring growth products $XXX of annually materials share. Scapa. our in And business the are solid more we customer, medical, we for and win their well specialty and bandage will face our branding to arena is more applications given way, better other healthcare can quarter. like services this The broader across which packaging healthcare communications well filtration our we we Simply to increased aging includes are investor such as this things we as also do addition had triple to in but line need for a Scapa's marketplace, referred we traditional, and specialized excited great business, essentially By our existing as finger to about business, put the strong our given very with to the positioned applications going wallet the the attractive our had long-term manufacturing. be the performance million represent material our masks. business to well as capabilities. as We double digit specialty better entire forward in as as though more for healthcare demographics. semiconductor Importantly saw saw area previously as AMS's water product filtration as consumer-oriented

will to will will With the provide. importantly material have teams like increased offering present assistance the converting and customers. bring There customers, cross-sell greater opportunities a variety of to be proposition breadth which even we products and a value-added our far and goes we Scapa, and development, have coding, with our most our scale regulatory to combined formulations, current services capabilities packaging beyond and currently value perhaps through

for Marcellus well Shale first used materials farms. gas increased as controls focus the region, and the Lastly, in on quarter. activity construction industry in an in also as sales oil Higher the year-over-year increased gains drove solar perimeter

saw constructions and netting highway acquisition as we business gains our specialty will addition, grew In well-regarded infrastructure area to in for to construction our an also nicely. products, building its drive value the expect Further, bring projects we tapes we customers. also from Scapa other through to

it and global is think we I the pressures budding experience which expect also economy chain most important year during are the address seeing supply awakens. remainder to that industries the as the to of

COVID their material look by the customer we rebound. to ability our the in strong some demands Also demand by in across chain temporary chains' and inputs pressures, choppiness sales supply XX% shutdowns forward pressures, handle constraints key growth shipping continued in that We the with to global expected I in Switching confident XXXX many said, there inputs, our well due is results Engineered as as are our business profit although seeing just am have timing. and Papers, and hit and challenges manufacturers as segment drove may starting of first strength in demonstrated cost over XXXX. as With pressures quarter. been supply operating availability pricing meet and increased to the to be AMS performed adjusted to

key and had we Spotswood, that noted, sites. customers closed transitioning Jersey facility other in New As to recently made our previously begun products facility's we

in we this sales As to and part cost customer worked first contributing going is this which plan from impact realizing transition in through product, The new segment of the restocking legacy total quarter, before a transition inventories are now XX%. a initiative. of temporary decline with had savings that

specialty profit closure. With operating site customers volumes X% in from positive due the I'll reduced financials the despite adjusted performance sales of in note, these tobacco we and solid strong On that, declined our drive segment only Of good in heat-not-burn the sales to over lower the some savings to growth cost to manufacturing products. papers more call and side, continue as risk review turn the performance had detail. very to Andy

Andrew Wamser

the Jeff. Starting the with Tegra XXXX, quarter XX%. rather The you, entire with we partial organic assumed, Thank sales ownership. growth at organic for of owned than had calculation XX% growth period increased quarter AMS, first first

areas. end our of our Jeff we and discussed, in two margin transportation most had filtration, higher of demand strong particularly As markets,

par transportation adjusted organic sales entire The higher even polypropylene. Given input noteworthy highest and excellent have up business, higher our operational the margin, profitability. we improvements demonstrating points the first continued of of mainly it made expansion acquired. AMS of growth in first have we We strong strength still over the we without our the initial Despite the margin margin have despite with XX.X% substantial achieved led from been costs, XX% positive successful signaling was mix would basis businesses the sales is think swing to portfolio. market, also this efforts years about impacts the in for the end of integration on that costs, XXX quarter ever segment quarter resin

to costs input become more higher expected ahead, are Looking significant.

are the we actively However, raising an offset should into head provide prices which as third quarter. we

recapture of our most We our lines. signs ability key are product the by in to encouraged early higher the costs of

factors as For de-emphasis associated first customer continued XX% and margin Engineered drawdown, key site sales inventory products. down lower as were the being well transition quarter Spotswood of Papers, the with

the continue basis we and achieved pulp impacts to quarter, higher prices, the support to material from XXX the mostly in currency the a we quarter operating The initial of actions due offered On raw strong offset, to broader positive AMS, and though mainly to wood cost points reductions shutdown margin rising saw margins, slightly During segment cost XX.X%. expansion similar SG&A euro. of Spotswood still operating profitability.

our to pulp we raising and to timing contracts some price increases will where ability are avenues recapture customers we possible of price with limit our some prices. Although contracts, multiple large our have higher on offset exploring costs where higher of

an during of expenses, million timing approximately allocated quarter, we $X saw on administrative Regarding the to expenses. increase mostly adjusted due of

all organic versus prior related year a The Scapa that close as essentially percentage of an with other expenses consolidated advisory, acquisition. total the to out profit the financials. quarter increased adjusted and for quarters, and to as X% However, we our related costs expenses from included basis. XX%. XX% adjusted exclude were XX% we will operating prepared sales or a unchanged In upcoming also we diligence Adjusted the the to the and adjusted On EBITDA will sales book on one-time were due quarter. additional deal, which basis, transaction increased increased

a to press $X.XX. within First our operating but XX-Q GAAP price share the items the of to the currency expenses, details XXXX most time Scapa EPS the was unallocated topic. and the $X.XX lock announced. the included expenses additional in when the versus The and relate which pound both of our for impact material refer deal to quarter hedge totaled per negative $X.XX was acquisition release profits, on British this also at comparison Please

adjusted per adjusted $X.XX items of Brazil versus $X.XX, EPS EPS. tax as typical a those backed the quarter expenses, XX% non-cash accounting was last favorable We the first which well was also in purchase to settlement year's up our as also quarter. for Normalizing booked assessments, related out from share gain

first in rate JV EPS our the income an XX slightly XX.X%, to improvement profits, tax tax growth higher operating in our was slightly addition basis and last rate quarter versus year's adjusted In embedded as point lower well. was first The was strong quarter.

annual normally restrictions we acquisition with so that results, February EPS that do of based conjunction company, unable time. due in adjusted in were to recall While related regulatory Scapa, to guidance provide UK at to our public we year-end a

to $X.XX Scapa transaction acquisition, the XXXX will issued expected from three of the own EPS with which we includes However, This quarters. $X.XX adjusted accretion guidance $X.XX. we of for approximately essentially had closed, guidance

after the performance. XXXX. sales in growth EPS in by more strong beyond the rise Unfortunately, a in operating we costs toward least levels. comments back expected the mid-$XXX business Consistent be in positive otherwise very more end the more estimate much of our next achievable XXXX. we $X.XX business is represent this growth adjusted Looking is to pre-COVID to We and believe tempering as raw will outcome. at multi-year normalized toward returns cost the anticipated XXXX. would with in accretive XX% year, Scapa be AMS to our EP certainly have that positive the We significantly the believe profit would accretion a offset year levels revert range strong due expect will this top pullback what certain trend rapid February, headwinds, earnings outlook million than profit particularly organic range unexpected believe and implied material for of the at been We a

term offers our not more numbers what Jeff forma a X to Slide and perspective of is accretion GBPX.XX approximately exchange acquired expected We is meant improve to EBITDA frame including aspects million at these exchange our deal help financed financial Scapa's debt pound a recent are industrial XXXX in points loan announcement. fiscal B rounded I'd we well million EBITDA of on for We table ended just compatibility. our as as fiscal reflected recap Before of like with rates, year of British shown illustrative be $XX XXXX. Pro agreement, Please both pre-COVID. and Scapa, XXXX X.X in revolving to Scapa $XXX strategic our a of and today's periods based of adjusted times in accretion. performance credit debt. healthcare balance the and some on the on the financial close March Scapa on some and and approximate The impacted approximately as rate At March for all and reflect intended in note the range million the transaction Scapa's in in and which to $XXX line closing though, XXst in to in generated with XXXX covenants segments $XXX pandemic sheet. expected million at approximately our as refer key which credit new XXXX, sales net time its The was ended of the the to our facility results, net March. course,

consumers business elective While been activities with delayed elective surgeries is and lifestyles, healthcare remains increase, to world somewhat business and procedures. have clinic they visits sales believe the backlog recover the in as surgeries industrial the more We to recovering, return and minimize fulfilled. vaccinations medical challenged around the hospital steadily normalized opting will as steadily consumers of postpone

took that reduce thinking. to you the to expect want costs improve during despite conservative thus XXXX, However, in headwinds. remain for lingering to margins see we our We note Scapa pandemic actions sales

related in in the modeling represents good a realization cost to XXXX, we than estimate million and accretion level given higher at expense high the in the for In $X execute addition, cost we've identified and would mid Scapa margins our million lower of be can sales range we of a guidance When in of pre-COVID public months not note low assume a position tax on we assumed, that base standpoint, and cost do accretion. of nine $X.XX exceed share, at in our approximately synergies transaction would near-term and XXXX $XX per interest we $X.XX road. down the estimate faster potential Scapa's recovery more From the considering this full and to towards XXXX had administrative and we to XXXX synergies levels million the accompany ownership. XX% $XX for for synergies. Also rate. that back arrive we meaningfully $X.XX ramp assume accretion sales If savings

Now back Jeff. to

Jeff Kramer

may made creation AMS. of some acquisitions Thanks, strategic XXXX the SWM comments. and to set key have first and of series out Scapa our of we closing growth reposition now strategic expansion before diversify highly reiterate a back in Andy. and I'd in for the to acquisition highlights We like

than set business We exposures, have market product acquisitions our of execution challenges. track performance is end designed other suite capabilities this product an goal of our have established solve performance while expanded we to a and materials and even their Along the a way offering high integration full strategy. built design good applications. pressing record for diversified a customers extension and all of an acceleration help solutions and our for million offering with vision the and Scapa larger $XXX customers on simply the specialty most of

advanced fulfilling overlap more innovation, construction, and well believed continuing capabilities a more with it extensive with chemical coding took the have a function increase more customers. converting significant in we Scapa and downstream bring solutions as as when product and converting transportation added acquired significant industrial provider. to capabilities offerings as vision. far customers as we forward we We first and healthcare, coding, evolution Recall, in Scapa broadening as bring our in represents service full platform solutions we capabilities when downstream our exposures formulations, step to our Tegra and full want packaging, upstream a now We comes design step and to

business our the earlier, note to position said can can harnesses to also more business. more product leadership earn customer, with Scapa's portfolio the the business nearly continues a a that outlook mean opportunities help, quality on towards end do lines. growth I about Scapa SWM's it are key I sizable talked generated for Scapa two our lot construction consumer shift want short of just given thirds is believe scale capabilities increased performance? healthcare has name have set serving organic financial stronger electrical a and a to the profile. long-term these we specialty is our in what their service like As application, expanding ways wraps, diverse bring to a I we our better customer SWM, And and also we larger and all for a we of built And reputation while I'd focus the base, like in markets, few. for SWM, a tapes, growth being it attractive automotive, to products, of does improves of number end our for just markets, that to many new in cable answer

sustainable organization. We our drive positive our please are of results. Scapa concludes better earnings than another to look line solid course to and open remarks. the growth, long-term ever Tina, global positioned of into questions. welcoming execution, We year for That forward

Operator

from Our question Chris Sidoti and is first Instructions] McGinnis [Operator Company. with

Chris McGinnis

start to questions morning. Thanks nice for and Good Yes. year. taking the my

Jeff Kramer

Chris. Thanks,

Chris McGinnis

of start talk is just maybe still How quarter? little a – of pent-up you demand components demand of that you of exited filtration on you about some some rebounding we the just those economy? as Also know. versus much that trend think kind Can that Thanks. at double-digit end Can or with bit those products? do the you increase about in the it – drove in the did markets rate talk you

Jeff Kramer

Yes.

have So, really Chris, one to be it's of going things, just confidence to high a that confident a couple even COVID we're before that. continues be going still do those is grower segments it's Yes, in we to for us. It's that. of performer that to a long-term been continue and filtration great

the exiting as as quarter discussed it's strong results. think I in as the it's – we

that And demand there. is so have I confidence that

is a answer. it but pent-up demand of Some bit hard question a I think, to of little it's

increases in normal to going think instance, strong I the for our that see. water back that we demand water, is

I that demand trend isn't for going change. think et that to purity, cetera,

to filtration the going to to think increase. is been has demand days. the of positioned we're think advantage market there I go that. in well think fundamental don't change to take going we're back old air And I a where I

the material mask remain some on you'll less will filtration think see think strong. the I I but material, demand

filtration automotive, back process goes into our cetera. is that industrial, et overall, snapping So fluids because

of think I liked year. for we strong the and remain remainder to the So it's going that position

Chris McGinnis

a Great. sense. appreciate lot of that, I makes

improving. Just on it's the been obviously, transportation,

for You as expectations, given at just just that? this can your kind throughout had that on think the about of it year, impact we Or the talk COVID year it growth? I go last stays year, the guess, on you

Jeff Kramer

that lot. another that's area like we Again, transportation Yes. whole marketplace a

one a my now. for has still lot protection play mentioned in up one and long-term industry surface comments we positioned I a we think of transportation that paint retention It's growth. with think that well a think XX% marketplace well lot component that we whole a little into the the that demand, of bit of is penetration for that seeing long-term we're probably And it double-digit as but high protection saw a growth. I is

Chris McGinnis

guess just Last on of of a your bit out you maybe how around a then year. remainder though. played for the the little could year Spotswood? impact little weaker, EP, And down about talk I the was Great. quarter, the just that thoughts And

could you on you year how help way us the in the side. think about remainder If for the on any that volume of

Jeff Kramer

sure. Yes,

to smooth, you product, that One, the have So, you you we going smooth in The a major that business new a inventory down. work announced facility, and ensure really that case. – up transition always close transition a to one transition – when the is that by decrease build for for normal in always but just we inventory for just XX% you driven move segment, a was just but factors. material two

And on LIP-type materials. so our that's some had pressure

The had a for a as drop-off of printing business filler. second papers, is low we in use margin a which us. volume It's material we

a same had way. but didn't it wise, a the profitability material have impact, wise it in volume impact So big

why versus that's bottom terms we still the So top line had line. leverage of in

to a was that's we're builds our seeing. expected in part extraordinary that people comments consistent. or cash as the handling think, in that EP we've long-term that inventory were flows, been We that last year to think normal very over profitability. revert the – to chain it we business consistent what very supply trend said, material and is five we we've part reverting very constraints I to years, results think shown the build and four Last consistent was just I of the

Chris McGinnis

go how with a early, to Scapa the numbers, you you're it, Okay, how your is and and the How in-filling providing change market healthcare? on know maybe thanks on that changes? it medical that couple very about I as million $XXX XXXX? great. in strategy? One, just rebounds on closing accretion does Thanks. can guess the in deck improve just but the for Scapa. talk there of it's it confidence one, revenue renaming $X.XX especially I And then And does just just that slide how the leeway much Congrats that. things

Andrew Wamser

Yes.

of address think So It's don't at let our I a it changes an things. our couple me strategy strategy. all. of evolution

the need are So right, company, have of type bring been custom to us. that we a solutions to which we we always provide means things to doing, – more performance problems that our customers

our And bring. reinforce bring customers to solutions so, us strategy capabilities has been that and additional that are our orientation to always asking

established So overlaps. strong Scapa as very used our in is had relationships through lot leading very position healthcare exactly customer that. to we business. has always with the a outsourcing for company call a industry a We've medical Scapa strong what of itself

the they been so, bring on And that healthcare leverage. medical business has to medical additional to I strategy And capabilities our side. our going able think to that we're be

look and the we about you complementary side, knowledge many industrial the at bring us and their it On talk but our ability that Scapa marketplaces. to adhesive don't capabilities of skills to highly industrial and markets much, as if brings

asking us markets exposure customers. additional consistent capabilities our a that giving to additional us strategy customers So the additional bringing and them to again, bring and of very with then are greater to

that. about excited very I'm So,

skis our accretion our I we tries in, we're in a of terms In think, tend giving forecast. not to optimistic, out to over but company be, estimates, get that

confidence think surgeries we think, to mentioned, think back great And what we a is get there down, coming as Andy starts if that is COVID some have you we settle I I upside So to in. see elective that number. can forecast

Chris McGinnis

in my good luck taking for and questions Thanks Great. QX.

Andrew Wamser

Chris. Thanks,

Operator

Dr. turn questions. And over closing to further remarks. for call I'll now have no the we back Kramer

Jeff Kramer

you want thank welcome want you Well, team. to they appreciate everyone. right. a Scapa to thank employees us. global want us I that the as everything into to again, we team. my with, join to I All support close do I

best to can execute to counting positively to globally. add You grow you our this going do to organically. And to continue we're and tell valuable company we're on us contributions

thank So much. very you

Operator

Thank you us does conclude joining presentation. again today. today's for This

now may You disconnect.