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    CLW
    Earnings call· Jun 2026(Q2 FY26)

    Clearwater Paper Q2 FY26 earnings call CLW

    Jul 28, 2026 Source

    Executive summary

    Clearwater Paper Q2 FY26 — Strong Shipment Growth Amidst Market Pricing Decline

    Clearwater Paper navigated Q2 FY26 with strong shipment growth and disciplined cost management, including a mill restructuring and SG&A control, despite a significant market pricing decline and geopolitical cost pressures. The company is actively diversifying its product portfolio and implementing price increases, anticipating an industry recovery and improved margins in the coming quarters. Refinancing efforts are underway to extend credit facility maturities.

    Highlights

    5

    • Shipment volumes were up 8% year-over-year in Q2 FY26.

    • Net debt was reduced by $59 million in the quarter and $50 million year-to-date.

    • SG&A expenses were 5.6% of net sales, remaining below the targeted 6% to 7% range.

    • Industry operating rates for SBS are forecast to improve from low 80% in Q1 to 88% in Q2 and over 90% by year-end.

    • Successful launch of Circa, a new CRB product line, diversifying the product portfolio.

    Concerns

    4

    • Adjusted EBITDA for the quarter was negative $8 million.

    • Market pricing declined 9% year-over-year, as reflected in the RISI index.

    • Higher-than-expected transportation and chemical costs due to the Iran conflict are expected to negatively impact the company by $20 million to $25 million for FY26.

    • Current margins are approximately 10% below the levels needed to support long-term investment in capital-intensive assets.

    Guidance & targets

    16
    CategoryTargetConfidence
    Iran conflict cost impact
    $3M to $5M additional impact
    medium materiality
    High
    Iran conflict total cost impact
    $20M to $25M negative impact
    high materiality
    High
    Adjusted EBITDA
    $20M to $30M
    high materiality
    High
    Paperboard shipments
    Roughly flat versus the second quarter
    medium materiality
    High
    Total direct cost of major maintenance outages
    $32M to $35M
    medium materiality
    High
    Augusta major maintenance outage cost
    $5M to $6M
    medium materiality
    High
    Augusta major maintenance outage remaining cost
    $10M to $11M
    medium materiality
    High
    Cypress Bend major maintenance outage cost
    $5M to $7M
    medium materiality
    High
    Revenue
    $1.4B to $1.5B
    high materiality
    High
    Shipment growth
    Modest growth
    medium materiality
    Medium
    Price improvements offset
    $10M to $20M
    high materiality
    High
    Capital expenditures
    $65M to $75M
    high materiality
    High
    Working capital improvements
    $20M to $30M
    medium materiality
    High
    SG&A as % of net sales
    Toward the bottom of 6% to 7%
    low materiality
    High
    Cross-cycle EBITDA margins
    13% to 14%
    high materiality
    High
    Annual free cash flow
    More than $100M
    high materiality
    High

    Operational metrics

    27
    Shipment volume growth
    8%YoY
    Q2 FY26

    Company-wide shipment volumes.

    Market pricing decline (RISI index)
    9%YoY
    Q2 FY26

    Decline in market pricing as reflected in the RISI index.

    Annualized cost reduction from Cypress Bend restructuring
    $8M to $12M
    Annualized

    Expected cost reduction from approximately 20% reduction of roles at the Cypress Bend mill.

    SG&A as % of net sales
    5.6%Below target range of 6% to 7%
    Q2 FY26

    SG&A expenses in the quarter.

    Shipment volume growth
    6%
    YTD FY26

    Company-wide shipment volumes year-to-date.

    Industry imports decline
    11%
    YTD FY26

    Industry imports decline year-to-date.

    SBS operating rate (RISI forecast)
    88%Up from low 80% range in Q1
    Q2 FY26

    RISI forecast for SBS operating rates.

    SBS operating rate (RISI forecast)
    Over 90%
    Year-end FY26

    RISI forecast for SBS operating rates by year-end.

    Price increase
    $60
    June announcement

    First price increase announced in June.

    Price increase
    $60
    August announcement

    Second price increase announced for August.

    RISI price increase (folding carton)
    $40
    July report

    RISI reported price increase.

    RISI price increase (cup)
    $60
    July report

    RISI reported price increase.

    Annual EBITDA improvement from price increases
    $50M to $60M
    Annualized

    Expected benefit from June price increase and July RISI index changes, not including second price increase or further RISI forecasts.

    Volume tied to RISI Index
    50%
    Current

    Percentage of company's volume tied to the RISI Index.

    Margin gap to target
    10%
    Current

    Margins are around 10% below where they need to be across the cycle to deliver required returns on capital.

    Fixed cost reduction
    More than $60M
    Since 2024

    Fixed costs removed from the system since 2024.

    Lewiston major maintenance outage direct cost
    $22M
    Q2 FY26

    Direct cost of the major maintenance outage at Lewiston facility, completed on time and on target.

    Cash tax refund
    $4M
    Q1 FY26

    Cash tax refund received in the first quarter.

    Cash tax refund
    $26M
    Q2 FY26

    Cash tax refund received in the second quarter.

    Cash tax refund
    $30M
    YTD FY26

    Total cash tax refund received year-to-date.

    Insurance proceeds (Augusta acquisition)
    $15M
    Q2 FY26

    Third settlement payment received related to representation and warranty insurance for the Augusta acquisition.

    Iran conflict cost impact
    $5Mvs Q1 FY26
    Q2 FY26

    Combined impact of chemical and transportation cost increases due to Iran conflict in Q2 compared to Q1.

    R&W insurance recovery (Augusta acquisition)
    $32.5M
    YTD FY26

    Total R&W insurance recovery year-to-date for Augusta acquisition.

    Total R&W insurance recovery (Augusta acquisition)
    $55.5M
    Cumulative

    Cumulative R&W insurance recovery for Augusta acquisition.

    R&W insurance policy limit remaining
    $25M
    Current

    Remaining amount on the $105 million R&W insurance policy limit.

    Average selling price per ton
    $1,077Down from $1,100/ton in Q1 FY26
    Q2 FY26

    Average price per ton in Q2.

    Average selling price per ton
    $1,100
    Q1 FY26

    Average price per ton in Q1.

    Industry KPIs

    5
    MetricValueDetails
    Net debt leverage$59M reductionUSD
    CAPEX capital program$65M to $75MUSD
    Volume production growth8%%
    End market demand driversGood growth
    Adjusted underlying EBITDA-$8MUSD

    Product announcements

    2
    ProductTypeDetails
    Circalaunch
    Veloralaunch

    Deals & partnerships

    1
    GreenpaperCollaboration for Circa CRB product line, with Greenpaper manufacturing and Clearwater Paper selling/distributing.

    Greenpaper is a global producer of 100% recycled paperboard in Monterrey, Mexico. This collaboration combines Clearwater Paper's market reach with Greenpaper's manufacturing capabilities to deliver a high-quality CRB solution to independent converters in North America.

    Capital programs

    5
    CUK product line development (lower cost solution)In trialsLess than $10M
    Funding: Within typical annual capital spend

    Benefit: Enable launch of CUK product line sooner, speed to market.

    Exploring a much lower cost capital alternative at Cypress Bend to accelerate market entry for CUK product line, sacrificing some speed and cost.

    CUK product line development (full capital solution)Engineering work completeApproximately $60M

    Benefit: Enable production of as much CUK as desired at Cypress Bend.

    Engineered solution for CUK production at Cypress Bend.

    Augusta major maintenance outageReduced scope
    Period spend: $5M to $6M

    Reduced scope for Q4 2026 portion of Augusta outage, with remaining work pushed to Q1 2027.

    Augusta major maintenance outagePlanned
    Period spend: $10M to $11M

    Remaining work from the Augusta outage, to be completed in Q1 2027.

    Cypress Bend major maintenance outagePlanned
    Period spend: $5M to $7M

    Planned maintenance outage at Cypress Bend facility in Q4 FY26.

    Risks & headwinds

    4
    Iran Conflict Impact on CostsQ2 FY26, Q3 FY26, FY26

    Approximately $5 million impact in Q2 FY26 vs. Q1 FY26; expected additional $3 million to $5 million impact in Q3 FY26; total negative impact of $20 million to $25 million for FY26.

    Mitigation: Expects some improvement in Q4 FY26 as supply chains adjust to the new reality in the Middle East.

    Sub-optimal Industry MarginsAcross the cycle

    Margins are around 10% below where they need to be across the cycle.

    Mitigation: Focused on reducing costs, maintaining share, and disciplined pricing actions. Removed over $60 million in fixed costs since 2024, including Cypress Bend restructuring saving $8 million to $12 million annually.

    Refinancing RiskPrior to credit facilities going current

    Not quantified.

    Mitigation: Working with existing bank partners to find the best solution balancing cost, liquidity, and maturities; maintaining ample liquidity on the balance sheet.

    Tariff Impact on Canadian ProductsCurrent/Ongoing

    Not quantified.

    Mitigation: Monitoring USMCA negotiations and potential retaliation from Canada for products coming from the U.S.

    What to watch in Q3 FY26

    5

    Adjusted EBITDA

    Next quarter (Q3 FY26)
    Current-$8M (Q2 FY26)
    Target$20M to $30M (Q3 FY26)

    Why it matters

    Indicates the effectiveness of price increases and cost reduction efforts in improving profitability.

    Turning now to our outlook for the third quarter. We expect adjusted EBITDA of $20 million to $30 million.

    Q&A highlights

    6

    What is the free cash flow outlook for the year, given Q2 momentum and pricing?

    Sherri Baker stated that free cash flow is expected to be positive, driven by $33 million in R&W insurance proceeds, $30 million in tax refunds year-to-date, and a targeted $20 million to $30 million working capital improvement, offsetting capital and interest estimates.

    “We do believe that we have a clear line of sight to positive free cash flow this year.”

    asked by George Staphos · answered by Sherri Baker

    2 min read5 chapters

    Detailed Narrative

    01

    Industry Conditions and Price Increases

    The SBS industry is showing "meaningful green shoots" with Clearwater Paper's shipment volumes up 6% year-to-date and industry imports down 11%. RISI forecasts SBS operating rates to improve from the low 80% range in Q1 FY26 to 88% in Q2 FY26 and over 90% by year-end. The company has announced two $60 per ton price increases, with the first expected to contribute $50 million to $60 million annually to EBITDA, not including the second increase or further RISI forecasts for 2027.

    02

    Cost Reduction and Margin Improvement

    Clearwater Paper has removed over $60 million in fixed costs from its system since 2024, including restructuring all mills and lowering SG&A as a percentage of sales. The restructuring of the Cypress Bend facility resulted in a 20% reduction of roles, driving an expected annual cost reduction of $8 million to $12 million. These actions limit network production to approximately 1.2 million tons per year, balancing supply with current demand, and are expected to improve margins and cash flow as the industry recovers.

    03

    Product Portfolio Diversification

    The company launched Circa, a new CRB product line, in collaboration with Greenpaper, to offer a broader product range to North American converter customers without channel conflict. This follows the earlier launch of Velora, a lightweight paperboard product. Clearwater Paper is also exploring a lower-cost capital alternative, estimated at less than $10 million, to produce CUK at its Cypress Bend facility, with trials currently underway to accelerate market entry.

    04

    Iran Conflict Impact on Costs

    The Iran conflict is causing upward pressure on both chemical and transportation costs, particularly polyethylene and fuel prices. This is expected to result in an additional $3 million to $5 million impact in Q3 FY26, contributing to a total negative impact of $20 million to $25 million for the full year 2026. The company anticipates some improvement in Q4 FY26 as supply chains adjust.

    05

    Refinancing and Liquidity Management

    Clearwater Paper is actively working with its existing bank partners to extend credit facility maturities before they go current. The company aims for a solution that balances cost, liquidity, and maturities. It currently maintains ample liquidity, which is higher than historical averages, following the Tissue Divestiture and ongoing deleveraging efforts, demonstrating a commitment to a strong balance sheet.

    AI-generated summary of the company’s earnings call. Not investment advice.