Orchids Paper Products’ Adjusted EBITDA margin decreased to 6.5% in 2Q2017

Orchids Paper Products reported 2.5% decrease of net sales and 70.2% decrease of Adjusted EBITDA in 2Q2017 y-o-y. According to the announcement, the company’s revenues accounted for USD 38.4 million, generating Adjusted EBITDA of USD 2.5 million (8% margin vs 20.9% in the same quarter of 2016) in the period.

In January-June, the company’s Adjusted EBITDA accounted for USD 5.6 million amid  net sales of USD 73.8 million.

Jeff Schoen, President and Chief Executive Officer, commented:

“As expected, the second quarter was not a good one, financially speaking. Sales volumes continued at relatively low historical levels through May, and then in June the previously announced new business with its resultant revenues kicked-in. The June sales volume equates to an ongoing annualized rate in the USD 180 million to USD 190 million range and a case sales rate of 12 million to 13 million cases. Effectively, we recovered the sales volumes lost in 2016 to competitors’ activity. The challenges for Orchids now are to sell out the company’s newly increased paper capacity, gained through the introduction of the Barnwell, South Carolina, facility and to optimize the company’s total cost structure. The cost structure will be improved through a combination of increases in capacity utilization, operating efficiencies, reassessments and realignments of costs with production requirements, and specific identified cost reduction projects.

The paper machine at Barnwell, SC, was completed in June and remains on its start-up curve and meeting quality expectations. Our cost of sales is too high reflecting, in part, the inefficiencies of starting-up Barnwell; however, we expect, that as sell out all of the Company’s existing capacity, operating costs per ton will decline significantly. In June we saw the average cost per unit produced decrease, however the bottom-line impact of this reduction was offset by a liquidation of older higher-cost inventory. We expect to optimize both quality and cost by the end of 2017, which will increase our competitiveness in the ultra-premium and premium product channels.

The new capacity at Barnwell represents about 35,000 tons of ultra-premium and premium tissue paper. Combined with our existing conventional capacity, the total available paper capacity for the Company now represents about 135,000 tons. We continue to engage in new private-label bids, market our new innovative brands, and work toward growing market share in the premium and ultra-premium segments with new customers to broaden and diversify our customer base.”

In 1Q2017 Orchids Paper Products’ Adjusted EBITDA margin decreased to 8%. Check other wood business-related companies 2Q2017 schedules for financial and operating results.

Earlier Orchids Paper started production a its new paper machine in the US.

About Orchids Paper Products Company:

The company is a customer-focused, national supplier of high-quality consumer tissue products primarily serving the at home private label consumer market. It produces a full line of tissue products, including paper towels, bathroom tissue and paper napkins, to serve the value through ultra-premium quality market segments from its operations in northeast Oklahoma and Mexicali, Mexico. The Company provides these products primarily to retail chains throughout the United States.

Source: Woodbizforum