Clearwater Paper (NYSE:CLW) management characterized 2025 as a “transformational year,” marking the company’s first full year operating as a paperboard-focused business following the separation of its tissue operations. On the company’s fourth-quarter earnings call, executives emphasized stronger execution and cost reductions against what they described as a difficult supply-demand backdrop in paperboard markets, particularly solid bleached sulfate (SBS).
2025 transition milestones and cost actions
President and CEO Arsen Kitch said the company completed the integration of the Augusta mill and the tissue separation “both ahead of schedule.” He highlighted a 12% increase in net sales year over year, driven by a 14% increase in shipments, “primarily from operating the Augusta Mill for a full year.”
Management also emphasized structural cost reductions. Kitch said Clearwater delivered more than $50 million in fixed cost reductions, including $16 million in SG&A savings. SG&A declined to 6.5% of net sales from 8.4% in 2024, which Kitch said positions Clearwater as an “industry leader” on that metric. In closing remarks, he added the company reduced its overall workforce by more than 10%, including about a 40% reduction in corporate SG&A headcount.
Clearwater repurchased $17 million of shares during the year and ended 2025 with more than $400 million in liquidity, with $79 million remaining under its authorization. Kitch said the company is evaluating options to maintain financial flexibility and optimize capital allocation, including refinancing its 2020 notes that become current in August 2027.
Paperboard market pressures and pricing headwinds
Kitch said paperboard markets continue to face challenging conditions, “particularly in SBS,” driven by muted packaging demand, a large increase in industry capacity, and lower operating rates. He cited AF&PA data indicating SBS industry shipments were “largely flat” year over year, with CRB and CUK down. He also pointed to lackluster consumer packaged goods (CPG) and quick-service restaurant (QSR) volumes, pressured by inflation and economic uncertainty, and referenced the “likely impact of GLP-1 drugs on consumption.”
On supply, Kitch said a competitor added more than 500,000 tons of new capacity in 2025—about a 10% increase in industry supply—which pushed operating rates into the low-80% range by the end of 2025 and created pricing and margin pressure. He said Clearwater does not believe it can generate sufficient long-term returns at current margin levels to reinvest in capital-intensive assets.
Kitch also described pricing dislocations across substrates. He said SBS is currently priced below CUK on a per-ton basis despite higher manufacturing costs and a superior print surface, and priced below CRB on a per-square-foot basis because a heavier-weight CRB is required to match SBS performance. He said the company is aware of CPG customers moving business from CRB to SBS and expects that trend to continue at current relative prices, though he noted in Q&A that the substitution trend is still in “early days” and not something that happens overnight.
RISI index impact, 2026 assumptions, and a new price increase
Kitch addressed recent RISI-reported pricing movements, saying RISI reported a $100-per-ton decrease in its SBS folding carton index during the fourth quarter. He said Clearwater’s realized price decline from Q3 to Q4 averaged $21 per ton, and he disagreed with the RISI figure, but said the company is still “faced with a $50 million price headwind as a result.”
Management said the Augusta acquisition increased Clearwater’s exposure to RISI indices, with about 40% of volume tied to the RISI folding carton index and 10% tied to the RISI cup index. Kitch said, in total, Clearwater expects an approximately $70 million pricing headwind in 2026 versus 2025 based on index movements.
Despite near-term pressure, Kitch cited RISI projections calling for SBS operating rates to improve to 90% and pricing to rise by $60 per ton in 2026, with a cumulative increase of $130 per ton by the end of 2027. He said if those projections hold, Clearwater’s margins would improve by more than 10% and move back toward cross-cycle returns and cash flows.
As a response to inflation and to support reinvestment, Kitch said Clearwater recently announced price increases of $60 per ton for cup grades and $50 per ton for all other products. He said the increases apply to about 50% of volume not tied to the RISI price index, while the remainder will move with industry pricing reflected in the index.
Fourth-quarter results and insurance settlement
CFO Sherri Baker reported fourth-quarter net income from continuing operations of $3 million, or $0.20 per diluted share, including $17 million of insurance proceeds. Net sales were $386 million, flat versus the prior-year quarter, as higher shipments were offset by lower pricing. Adjusted EBITDA from continuing operations was $20 million, above the midpoint of the company’s guidance range of $13 million to $23 million, driven by cost reductions and $6 million of insurance proceeds.
For the full year, Baker reported a net loss from continuing operations of $53 million, or $3.28 per diluted share, “primarily driven by a non-cash goodwill impairment.” Net sales were $1.6 billion, up 12% year over year, and adjusted EBITDA from continuing operations was $107 million.
On insurance recovery related to Augusta, Baker said Clearwater obtained representation and warranty insurance with a $105 million coverage limit. During integration, she said the company identified matters inconsistent with representations and notified insurers. In Q4, Clearwater received an initial settlement payment of $23 million, of which $6 million related to operating costs incurred in 2025. Baker said approximately $75 million remains under the coverage limit, and the company continues to work through the claims process.
Near-term outlook: weather disruption, break-even Q1, and supply balancing
For the first quarter, Baker said Clearwater expects adjusted EBITDA of approximately break-even. She said severe weather caused operational disruptions and higher costs at the Augusta and Cypress Bend facilities in January and February, resulting in an estimated $15 million to $20 million in incremental costs due to higher energy costs and production impacts. Baker said the company is “back to running normally” and the events are not expected to have long-term impacts to the assets.
Management expects flat to slightly lower paperboard shipments versus the fourth quarter, with $10 million to $12 million of lower pricing related to Q4 RISI movements and $11 million to $13 million of lower maintenance expense versus Q4 because there are no major outages in the quarter.
For 2026, Baker outlined key assumptions including revenue of $1.4 billion to $1.5 billion, flat to modest shipment growth, and the approximately $70 million pricing headwind from 2025 carryover. She said assumptions do not include any benefit from the recently announced price increases or RISI’s forecasted market recovery. The company expects net productivity to offset 2% to 3% of input cost inflation, capex of $65 million to $75 million, about $20 million of working-capital improvement (weighted to the back half of the year), and SG&A at 6% to 7% of net sales.
In Q&A, Kitch said Clearwater is considering extended curtailments to better balance supply and demand but has not made specific decisions. He said the company expects to have “a path forward by the end of Q2 and a strategy by the end of Q2,” and that management is looking at ways to “variabilize” costs if extended downtime becomes necessary.
Kitch reiterated longer-term targets, saying he remains confident the company can return to cross-cycle EBITDA margins of 13% to 14% and generate more than $100 million of annual free cash flow, while also emphasizing that current margins and cash flow levels are “not tenable” for an extended period.
About Clearwater Paper (NYSE:CLW)
Clearwater Paper Corporation is an independent manufacturer of premium tissue and pulp and paperboard products for private-label and commercial customers in North America. The company operates through two core segments: Consumer Products, which produces bathroom tissue, paper towels and other away-from-home tissue products under private-label contracts; and Pulp & Paperboard, which supplies bleached paperboard used in folding cartons, foodservice packaging and specialty paper applications.
The Consumer Products segment services retail grocers, warehouse clubs, online merchants and janitorial distributors, leveraging multiple converting facilities to produce roll and folded tissue items for both household and institutional use.
