First Quarter Highlights
*Record net sales of $284.8 million, up 25 percent from the prior year, reflecting selling price actions to recover input costs and higher volume in both segments. Excluding the effects of the April 2021 Itasa acquisition and a facility closure, net sales were 12 percent higher.
*Record net sales in Technical Products of $185.6 million were 28 percent higher than the prior year period. Excluding the effects of Itasa and the facility closure, net sales were 6 percent higher.
*Net sales in Fine Paper and Packaging of $99.2 million, up 21 percent from the prior year, with strong organic growth in all categories.
*As expected, operating income remained pressured by unprecedented increases in input and distribution costs and labor shortages. EBIT declined from $13.6 million in the first quarter of 2021 to $12.2 million this quarter. Excluding $12.5 million of unusual items in 2021 and $6.5 million in 2022, Adjusted EBITDA this quarter was $30.3 million compared to $35.7 million in the prior year.
*Earnings per diluted common share of $0.34 compared to $0.49 in the first quarter of 2021. Adjusted earnings per share of $0.63 this quarter compared to $1.04 in the prior year.
*In January, a fire occurred at our Brownville, New York manufacturing facility. Operations were fully restored before quarter-end, but the impact of repair costs and margin from lost sales was approximately $2 million.
*Neenah reaffirms its full-year 2022 earnings guidance of $135-145 million Adjusted EBITDA, an increase of 15-25% over prior year.
*On March 28, Neenah announced it has entered into a definitive all-stock merger of equals agreement with Schweitzer-Mauduit International, Inc. (NYSE: SWM). The combination is expected to form a global leader in specialty materials with combined annual revenues of approximately $3 billion and generate highly achievable, initial cost synergies of $65 million. The Form S-4 is planned to be filed by SWM shortly, and the transaction is on track to close in the second half of 2022.
Adjusted earnings per share and Adjusted EBITDA are non-GAAP measures used to enhance understanding and comparability of year-on-year results. Details of adjusting items and a reconciliation to comparable GAAP measures are included later in this release.
“We started 2022 from a position of strength, with record sales supported by strong demand in our growth platforms of Filtration, Specialty Coatings, Packaging and Industrial Solutions. We took an aggressive commercial approach to drive price, improve mix and ensure continuity of supply for our customers,” said Julie Schertell, Chief Executive Officer. “Our pricing actions have now begun to offset input costs, with benefits expected to continue to expand over the course of the year. Our operational excellence program is also delivering value to help counterweigh some of the macroeconomic challenges. Manufacturing costs improved sequentially throughout the quarter, but still remain above our historical levels due to the Brownville fire and inefficiencies related to supply chain challenges and new operating labor. Importantly, despite these near-term headwinds, we expect to see the gradual improvements in our operating rates in the upcoming quarters.”
Ms. Schertell added, “As we head into the second quarter, we continue to aggressively implement actions to offset the rising raw materials, energy and chemical costs. We have announced additional pricing initiatives that will be effective in the second quarter, as well as R&D reformulations that will enable us to utilize different chemistries for our products, offsetting some of the supply and chemical shortages in the market. We are also pleased that our acquisition and expansion into the release liner market has demonstrated a continued pace of record performance ahead of our expectations. Our strategy is clear, and we are delivering on the core elements of our plan.”
Ms. Schertell concluded, “During the quarter, we also took a significant step in realizing our long-term growth strategy with the announced merger with SWM, which will create a global leader in specialty materials. This merger amplifies our strategy with complimentary manufacturing capabilities, product portfolios, and geographies, and also accelerates growth, delivers compelling synergies and provides increased scale to create value for our shareholders. Once completed, we look forward to integrating our teams and capturing the significant synergies, while focusing on strong cash generation that supports a meaningful dividend and provides an expedited path to deleveraging.”
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