Appvion recorded second quarter operating income of $5.1 million compared to operating income of $3.9 million for second quarter 2016. The improved earnings in second quarter 2017 were driven by volume growth for the Company’s tag, label and entertainment (TLE) products and carbonless papers segment. Continued execution of profit improvement initiatives, improved manufacturing performance, and lower selling, general, and administrative (SG&A) expenses also contributed to the earnings improvement. Those results were partially offset by the impact of lower net sales caused by lower market prices for the Company’s thermal receipt paper and unfavorable product mix in the carbonless papers segment. Total company shipment volume was relatively flat compared to second quarter 2016.
Appvion’s second quarter 2017 net sales of $164.0 million were $9.6 million lower than second quarter 2016. Year-to-date net sales of $330.7 million were $23.4 million, or 6.6%, lower compared to the same period in 2016, largely as a result of lower prices for thermal paper products as well as lower shipment volume and unfavorable product mix. Total company shipment volume was down approximately 2% compared to first half 2016. Thermal shipment volume declined more than 3%, while carbonless increased less than 1%.
Year-to-date operating income was $11.7 million compared to $13.5 million reported for the same period of 2016. While Company results benefited from improved manufacturing performance, the impact of completed profit improvement projects, and lower SG&A costs, those factors were more than offset by the negative impact of unfavorable product price and mix and slightly lower shipment volume. The chart below explains operating income variances for second quarter and first half 2017 compared to the same periods in 2016:
Kevin Gilligan, Appvion’s chief executive officer, said Appvion relied on continued improvements to manufacturing performance, execution of profit improvement projects and ongoing growth of its specialty papers line to counter the negative impact to earnings of sustained downward pressure on market prices for thermal and carbonless papers.
Unfavorable pricing and product mix during second quarter 2017 caused a nearly $11 million decline in earnings compared to second quarter 2016. Almost $6 million of that decline occurred in the Company’s thermal papers segment where intensive competitive pressures drove prices for thermal receipt paper to historic lows during second quarter 2017 and caused the Company to delay implementation of its previously announced price increase until July 1.
Product mix for Appvion’s carbonless papers segment was negatively affected by reduced sales of carbonless sheet products and a greater percentage of sales of carbonless products to international markets. However, improved product mix for the thermal papers segment led by a 4% increase in shipment volume for thermal TLE products offset nearly half the negative impact to earnings from the mix for carbonless papers segment. A nearly 21% increase in shipment volume for the Company’s specialty papers product line helped drive volume for the carbonless segment approximately 3% higher than segment volume for second quarter 2016. Specialty papers volume has increased in three of the last four quarters, and grew nearly 5% on a sequential basis.
Gilligan said the improved performance by the Company’s manufacturing operations combined with positive impact of lower raw material, freight and distribution costs, and lower SG&A expenses more than offset the negative impact to earnings of price and product mix combined with relatively flat shipment volume compared to second quarter 2016.
The improvement to manufacturing operations was led by the carbonless papers segment. The financial performance of those operations during second quarter 2017 benefited from the Company’s decision to change the schedule for the maintenance shutdown at the Roaring Spring Mill from annual to every 18 months. As a result, the Company deferred the shutdown from second quarter to fourth quarter 2017 and the approximately $4 million charge associated with the shutdown is expected to affect fourth quarter results. The Company will not conduct a planned maintenance shutdown in fiscal 2018.
more detail at: http://appvion.com/en-us/investors/Documents/Investors/Appvion-Q2-2017-earnings-announcement-08-07-2017.pdf