Verso Corp (NYSE:VRS) Q3 2018 Earnings Conference Call Transcript

Nov 07, 2018 • 03:00 pm ET


Verso Corp (NYSE:VRS) Q3 2018 Earnings Conference Call Transcript


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Good afternoon, and welcome to Verso Corporation's Third Quarter 2018 Earnings Conference Call. All participants are in a listen-only mode. There will be an opportunity for you to ask questions at the end of todays presentation. (Operator Instructions) Please note, this conference is being recorded. A replay of this call will be available on the investor page of Verso's website after 5 p.m. Eastern Time today.

At this time, I would like to turn the presentation over to Verso Treasurer, Tim Nusbaum. Please go ahead.

Tim Nusbaum

Thank you, and good afternoon. The third quarter 2018 financial results for Verso Corporation were announced this morning before the market opened. The earnings release as well as the set of slides that we'll refer to during the call, are available on the investors page of Verso's website at me on the call today is Chris DiSantis, CEO; Allen Campbell, SVP and CFO; and Mike Weinhold, President of Graphic and Specialty Papers.

(Forward-Looking Cautionary Statements)

At this point, I'd like to turn the call over to Chris DiSantis, our CEO.

Chris DiSantis

Thank you, Tim. I'm on the slide inside of market overview for graphic papers. So the US graphic industry operating rates remained strong due to a lot of the supply changes that we've seen. We're at 91% year-to-date operating rate for coated freesheet, 98% year-to-date for coated groundwood. And we expect the market to remain tight going into 2019.

If you look at the box on the right, you can see some specific statistics. These are year-to-date numbers, coated freesheet demand is down 6.5%; coated groundwood is down 6.4%. One thing I'll note is that the coated groundwood's only about 286,000 tons of our total system. It's part of the business we've been mixed managing that we expect to continue to reduce and move away from over time.

Commercial printing and catalog mailings have held up, better magazine ad pages has been a very difficult end market. That one's weighted heavily to coated groundwood. So these -- a variety of these end-use segments are still challenged but the operating rates are very strong. The pricing environment is very favorable, with increases realized within the quarter, and in the third quarter and entering into the fourth quarter. So, we have good momentum on all of the recent announcements that we made, good traction.

There is significant M&A in the paper space, which continues with Resolute's Catawba Mill and Catalyst's US assets changing hands. We can't speculate as to what they will do with those assets, but it is notable that the acquirers are containerBoard centric companies and investors.

The coated paper imports are filling the supply void that was created by much of the US capacity shuts. So if you look at the import data in the right, coated freesheet imports are up 5.6%, coated groundwood imports as a percentage of demand are up 34.8%. I've seen a lot of the product coming in from Europe and from Korean producers as well.

So flip the page.