Clearwater Paper (CLW) Stifel 2024 Cross Sector Insight Conference summary

Business overview and market trends

• Operates two main businesses: private-branded tissue and SBS paperboard, each about $1 billion in size before the Augusta acquisition.

• Private-branded tissue market share has grown from around 20% to 36% over the past decade, with further growth potential seen by comparing to European markets.

• Retailers are increasingly developing their own brands to differentiate and attract consumers, with national retailers relying on multiple suppliers for private label products.

• Tissue manufacturing is supported by a national footprint, high utilization rates, and the ability to supply all quality tiers and product categories.

• The tissue industry has seen net capacity reductions, leading to high utilization rates and improved margins.

Competitive advantages and operations

• National manufacturing and distribution network enables supply to retailers across the country.

• Ability to produce a full range of tissue products, from premium to value, across all categories.

• High utilization rates, with the industry operating at 96% in early 2024.

• Raw material sourcing for tissue is primarily virgin pulp, with global supply chains and cyclical pricing influenced by demand, especially from China.

• Paperboard business focuses on supplying converters, not downstream converting, with a reputation for quality and service.

Market dynamics and pricing

• Tissue demand grows at about 1% annually, with the industry requiring new capacity to match growth.

• Paperboard market is cyclical, with recent years marked by inventory-driven demand swings and price declines.

• About 35-40% of paperboard volume is tied to the RISI price index, with the remainder market-driven.

• Recent price decreases in paperboard: $80 in late 2023, $60 in early 2024, with expectations for normalization as utilization rates recover.

• Inventory management and cost control have helped maintain healthy margins despite price pressures.