Orchids Paper Products’ Adjusted EBITDA margin decreased to 8% in 1Q2017

Orchids Paper Products reported 27% decrease of net sales and 76% decrease of Adjusted EBITDA in 1Q2017 y-o-y. According to the announcement, the company’s revenues accounted for USD 35.4 million, generating Adjusted EBITDA of USD 2.8 million (8% margin vs 24.5% in the same quarter of 2016) in the period.

Jeff Schoen, President and Chief Executive Officer, commented:

“As we expected, the first half of 2017 was going to be a challenging period until the new business awarded started to be produced and shipped. Sales were negatively impacted in January and February by one-time inventory reductions in preparation for a restage of private label programs that started to ship in March. Costs were negatively impacted by the continued effect of start-up costs for our Barnwell, South Carolina plant. Looking to the second quarter, production of the new volume that we announced in January, representing 3.0MM cases or more of new business, has begun, which we expect to be fully implemented by the beginning of third quarter. As previously stated, we expect the new volume to generate in the area of USD 15 million to USD 20 million of EBITDA and to attain a run rate of USD 50 million to USD 60 million of EBITDA when our new capacity is sold out.

Operating cash flow less changes in working capital provided USD 7.4 million in the first quarter of 2017, relative to USD 6.8 million the fourth quarter of 2016. We avoided stock-piling inventory and were able to exit some rented warehouse space. Despite spending USD 18.0 million on capital projects, we only increased financings by USD 11.5 million.

Regarding the Barnwell, South Carolina, project, the two converting lines are ramping-up to meet the new demand, and the paper mill is scheduled to be in production in June and to be immediately capable of making and selling parent roll capacity in excess of that required for converted product sales. The ramp-up of the paper mill is expected to continue throughout the third quarter.”

In 4Q2016 Orchids Paper Products’ Adjusted EBITDA margin decreased to 16.6%. Check other wood business-related companies 1Q2017 schedules for financial and operating results.

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