What Clearwater Paper (CLW) Said on Its Q3 Earnings Call

Clearwater Paper (NYSE:CLW) reported third-quarter adjusted EBITDA of $24 million, within its prior guidance range of $20 million to $30 million, as recently announced price increases began to benefit results. The company also completed a debt refinancing that extends its maturity profile to 2031, while addressing operational disruptions and additional maintenance needs at its Augusta mill.

The company reported a net loss from continuing operations of $2 million, or $0.10 per diluted share, for the quarter. Net sales totaled $385 million, down 4% from a year earlier, reflecting lower market-driven pricing. Shipments declined 1% year over year.

Chief Executive Officer Arsen Kitch said average selling prices increased by $34 per ton from the second quarter, contributing nearly $8 million during the quarter. Clearwater has fully implemented its first $60-per-ton price increase and is making progress on a second $60-per-ton increase.

Augusta Disruptions and Insurance Recoveries

Third-quarter results were helped by price increases and the absence of major maintenance outages, but were partially offset by higher costs tied to the Middle East conflict and operational problems at the Augusta mill.

Kitch said electrical and mechanical failures in the mill’s pulp, power and recovery areas occurred in late September and continued into October. Because of the interconnected nature of the kraft pulp manufacturing process, the events created downstream operational impacts. The company said it continues to work through the disruptions and expects to return the mill to normal production capability.

The problems also prevented Clearwater from completing planned maintenance work at Augusta in October. The company now expects to conduct a maintenance outage there in January 2027, at an estimated direct cost of $12 million to $15 million. It also anticipates additional Augusta downtime in the second or third quarter of 2027, expected to cost $7 million to $10 million.

Clearwater received a fourth and final representation-and-warranty insurance payment of $17.5 million in the third quarter, bringing total recoveries since the fourth quarter of 2025 to $73 million. The policy had a $105 million limit. Kitch said the recoveries relate to representations and warranties associated with the Augusta acquisition that Clearwater believes were incomplete or inaccurate, involving customer and commercial agreements as well as assets.

During the quarter, the company allocated $9.5 million of insurance recoveries to offset losses related to Augusta’s operational disruptions. Kitch said the mill has been operating about 10% to 15% below the production level it needs to achieve over recent quarters, based on its 600,000-ton capacity.

Industry Conditions and Pricing

Management said it is seeing signs of recovery in solid bleached sulfate, or SBS, paperboard. Year-to-date SBS shipments were up 6% through the second quarter, compared with declines of 2% to 3% for coated unbleached kraft, or CUK, and coated recycled board, or CRB.

According to Kitch, SBS has remained competitive on a per-square-foot basis because it can offer performance at lighter weights than CRB. The company estimated that annualized industry production has declined by roughly 800,000 tons since the end of last year due to a permanent paper-machine closure and temporary curtailments. Based on those assumptions, Clearwater expects industry operating rates for current capacity to exceed 90% by year-end.

Clearwater said cup-grade demand exceeds its capacity. Nearly 50% of its volume is linked to the RISI index, and the company typically takes several quarters to fully implement index-driven pricing. Management expects the first $60-per-ton increase to generate more than $70 million of annual benefit, with the impact beginning to flow through third-quarter results.

The company also cited a RISI forecast for an additional $100-per-ton increase in folding-carton grades by the end of 2027. If all anticipated increases materialize across Clearwater’s tons, Kitch said the company would expect its adjusted EBITDA run rate to improve by nearly $200 million.

Product Expansion and Capital Plans

Clearwater launched its Circa CRB offering in July through a partnership with Greenpaper. The company is trialing the product with customers and said early feedback has been positive, though it expects progress to be gradual given domestic CRB overcapacity. Management said the launch required no capital investment.

The company is also trialing a CUK folding-carton product made at its Cypress Bend mill and plans to formally launch the new product line by year-end. Clearwater is pursuing a lower-cost capital alternative of approximately $3 million to $5 million, rather than a full $60 million project that would allow the entire mill to shift to CUK production.

Kitch said the lower-cost option should allow Clearwater to produce a competitive CUK product, though with constraints on speed and available capacity versus the full-scale project. The company estimates addressable CUK demand at 300,000 to 400,000 tons and aims to capture 20% to 30% of that market. Cypress Bend would campaign between SBS and CUK grades, with the goal of fully utilizing its capacity of more than 300,000 tons.

Refinancing and Outlook

Chief Financial Officer Sherri Baker said Clearwater closed its refinancing in September with Farm Credit System partners. The company used proceeds from a new $275 million term loan to redeem its 2020 notes, which were redeemed Oct. 3. It also replaced its asset-based lending facility and term revolver with a new $200 million revolving facility, with $15 million outstanding at quarter-end.

The refinancing carries an effective interest rate of 8.25% as of the third quarter, based on a fixed base rate for a one-year term. Baker said annual interest expense should be about $25 million on a go-forward basis, while 2026 expense is expected to be closer to $20 million because the prior notes carried a lower rate for most of the year.

For the fourth quarter, Clearwater expects adjusted EBITDA of $10 million to $20 million. The company expects sequential declines in paperboard shipments and production due to normal seasonality and continuing Augusta challenges in October. Price increases are expected to add $8 million to $12 million sequentially, while a Cypress Bend maintenance outage is expected to cost $5 million to $7 million.

For full-year 2026, Clearwater expects approximately $1.5 billion in revenue, capital expenditures of $55 million to $60 million, and positive free cash flow. Baker also said she will leave the company in several weeks for a new opportunity in Texas.

About Clearwater Paper (NYSE:CLW)

Clearwater Paper Corporation is a manufacturer of bleached paperboard and pulp products. Its paperboard is used in packaging applications such as folding cartons, food and beverage packaging, and other consumer and industrial products. The company also produces pulp used in the manufacture of paper and tissue products.

Clearwater Paper primarily serves customers in North America, supplying packaging manufacturers, consumer-products companies, and other converters. Its operations have included paper mills in the United States, including facilities in Idaho and Arkansas, with products marketed to a range of food, beverage, household, and commercial markets.

The company was formed in 2008 through the separation of Potlatch Corporation’s pulp and paperboard businesses.