CHARLOTTE - Glatfelter slumped to a loss in its first quarter following the adverse impact of escalating raw material prices, energy price inflation and the Ukraine conflict.
The total loss from continuing operations for the first quarter of 2022 was US$108.3 million compared with net income of $8.4 million in the same period a year ago.
The 2021 results include the acquisitions of Georgia-Pacific’s U.S. nonwovens business and Jacob Holm as of May 13, 2021 and October 29, 2021, respectively.
Consolidated net sales for the three months ended March 31, 2022 and 2021, totaled $381.7 million and $225.7 million, respectively. Net sales for the Composite Fibers and Airlaid Materials (including Mount Holly) segments increased by 0.4% and 83.2%, respectively while the Spunlace segment, formed in connection with the Jacob Holm acquisition, had net sales of approximately $96.4 million.
The Russia/Ukraine military conflict and associated implications are expected to have a significant impact on the Dresden wallcover operations and the Composite Fibers segment. In addition, on April 8, 2022, wallcover base paper and tea filter products were placed on the European Union sanctions list, prohibiting export of these products into Russia for the foreseeable future.
As a result, Glatfelter recorded a non-cash asset impairment charge of $61.3 million related to its Dresden operations. Additionally, the company recognized a goodwill impairment charge of $56.1 million for the Composite Fibers segment related to the long-term fair value implication of the Russia/Ukraine conflict and the unprecedented energy prices in Europe. A $3.9 million partial write-down of Russia and Ukraine accounts receivable and inventory was also taken in the quarter.
“During the first quarter, we continued to combat escalating raw material and energy price inflation across our entire business but most significantly in our Composite Fibers segment, while actively implementing additional price increases,” said Dante C. Parrini, Chairman and Chief Executive Officer. “In addition, we are actively addressing the impacts of the ongoing Russia/Ukraine conflict, including actions recently taken by the EU to place wallcover and tea filter products on the list of sanctioned materials, by fully complying with export regulations and financial transactions within the banking system.”
Mr. Parrini continued: “In our recently acquired Spunlace business, our improvement initiatives are showing signs of progress. Volumes for the quarter were ahead of expectations and the team continues to implement measures to drive further efficiencies and aggressively manage costs. While input costs and energy prices remain a challenge, we are generating higher order volumes and expect our intensified integration efforts to return this segment to profitability in the second quarter.”
Elsewhere, shipments in Airlaid Materials were well ahead of last year with robust demand across nearly every product category. Mount Holly added $27 million in revenue and legacy Glatfelter volumes grew by 22%. While contractual cost pass-through agreements and customer price increases provided relief from raw material inflation, operating profit was constrained by higher energy prices in Europe.
